Document:

CAPITAL GOLD CORPORATION

                                       and

                     AMERICAN STOCK TRANSFER & TRUST COMPANY

                                RIGHTS AGREEMENT

                           Dated as of August 15, 2006

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                                TABLE OF CONTENTS

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Section 1.        Definitions....................................................................................1

Section 2.        Appointment of Rights Agent....................................................................5

Section 3.        Issue of Right Certificates....................................................................5

Section 4.        Form of Right Certificates.....................................................................6

Section 5.        Countersignature and Registration..............................................................7

Section 6.        Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated,
                  Destroyed, Lost or Stolen Right Certificates...................................................7

Section 7.        Exercise of Rights; Purchase Price; Expiration Date of Rights..................................8

Section 8.        Cancellation and Destruction of Right Certificates.............................................9

Section 9.        Availability of Series B Shares................................................................9

Section 10.       Series B Shares Record Date...................................................................10

Section 11.       Adjustment of Purchase Price, Number of Shares or Number of Rights............................10

Section 12.       Certificate of Adjusted Purchase Price or Number of Shares....................................17

Section 13.       Consolidation, Merger or Sale or Transfer of Assets or Earning Power..........................17

Section 14.       Fractional Rights and Fractional Shares.......................................................18

Section 15.       Rights of Action..............................................................................19

Section 16.       Agreement of Right Holders....................................................................19

Section 17.       Right Certificate Holder Not Deemed a Stockholder.............................................20

Section 18.       Concerning the Rights Agent...................................................................20

Section 19.       Merger or Consolidation or Change of Name of Rights Agent.....................................21

Section 20.       Duties of Rights Agent........................................................................21

Section 21.       Change of Rights Agent........................................................................23

Section 22.       Issuance of New Right Certificates............................................................24

Section 23.       Redemption....................................................................................24

Section 24.       Exchange......................................................................................25

Section 25.       Notice of Certain Events......................................................................26

Section 26.       Notices.......................................................................................26

Section 27.       Supplements and Amendments....................................................................27

Section 28.       Successors....................................................................................27

Section 29.       Benefits of This Agreement....................................................................27
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                                TABLE OF CONTENTS
                                   (continued)

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Section 30.       Severability..................................................................................29

Section 31.       Governing Law.................................................................................29

Section 32.       Counterparts..................................................................................29

Section 33.       Descriptive Headings..........................................................................29

Section 34.       Effective Date................................................................................29

Section 35.       Determinations and Actions by the Board of Directors..........................................29

Exhibit A         -        Form of Certificate of Designations

Exhibit B         -        Form of Right Certificate

Exhibit C         -        Summary of Rights to Purchase Series B Shares
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                                      -ii-
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      Agreement, dated as of August 15, 2006, between Capital Gold Corporation,
a Delaware corporation (the "Company"), and American Stock Transfer & Trust
Company, as rights agent (the "Rights Agent").

      The Board of Directors of the Company has authorized and declared a
dividend of one Series B common stock purchase right (a "Right") for each Common
Share (as hereinafter defined) of the Company outstanding on August 14, 2006
(the "Record Date"), each Right representing the right to purchase one
one-thousandth of a Series B Share (as hereinafter defined), upon the terms and
subject to the conditions herein set forth, and has further authorized and
directed the issuance of one Right with respect to each Common Share that shall
become outstanding between the Record Date and the earliest of the Distribution
Date, the Redemption Date and the Final Expiration Date (as such terms are
hereinafter defined).

      Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:

      Section 1. Definitions. For purposes of this Agreement, the following
terms have the meanings indicated:

      (a) "Acquiring Person" shall mean any Person who or which, together with
all Affiliates and Associates of such Person, shall be the Beneficial Owner of
20% or more of the Common Shares of the Company then outstanding, but shall not
include (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee
benefit plan of the Company or any Subsidiary of the Company or any entity
holding Common Shares for or pursuant to the terms of any such plan or (iv) any
Person who is, as of the date of this Agreement, the Beneficial Owner of 20% or
more of the Common Shares of the Company then outstanding, but only so long as
such Person thereafter does not, at any time while the Beneficial Owner of 20%
or more of the Common Shares of the Company then outstanding, acquire Beneficial
Ownership of any additional Common Shares (other than upon the exercise of any
rights hereunder or pursuant to a stock dividend or distribution or similar
action by the Company); provided, however, that such Person shall cease to be
excluded from the definition of Acquiring Person pursuant to this clause (iv)
immediately at such time as such Person ceases to be the Beneficial Owner of 20%
or more of the Common Shares of the Company then outstanding. Notwithstanding
the foregoing, no Person shall become an "Acquiring Person" as the result of an
acquisition of Common Shares by the Company which, by reducing the number of
Common Shares of the Company outstanding, increases the proportionate number of
Common Shares of the Company beneficially owned by such Person to 20% or more of
the Common Shares of the Company then outstanding; provided, however, that, if a
Person shall become the Beneficial Owner of 20% or more of the Common Shares of
the Company then outstanding by reason of share purchases by the Company and
shall, after such share purchases by the Company, become the Beneficial Owner of
any additional Common Shares of the Company, then such Person shall be deemed to
be an "Acquiring Person." Notwithstanding the foregoing, if the Board of
Directors of the Company determines in good faith that a Person who would
otherwise be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this paragraph (a), has become such inadvertently, and such Person
divests as promptly as practicable a sufficient number of Common Shares so that
such Person would no longer be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this paragraph (a), then such Person shall not be deemed
to be an "Acquiring Person" for any purposes of this Agreement.

<PAGE>

      (b) "Affiliate" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations under the Exchange Act as in effect on the
date of this Agreement.

      (c) "Associate" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations under the Exchange Act as in effect on the
date of this Agreement.

      (d) A Person shall be deemed the "Beneficial Owner" of and shall be deemed
to "beneficially own" any securities:

      (i) which such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly;

      (ii) which such Person or any of such Person's Affiliates or Associates
has (A) the right to acquire (whether such right is exercisable immediately or
only after the passage of time) pursuant to any agreement, arrangement or
understanding (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of
securities), or upon the exercise of conversion rights, exchange rights, rights
(other than these Rights), warrants or options, or otherwise; provided, however,
that a Person shall not be deemed the Beneficial Owner of, or to beneficially
own, securities tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person's Affiliates or Associates until
such tendered securities are accepted for purchase or exchange; or (B) the right
to vote pursuant to any agreement, arrangement or understanding; provided,
however, that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, any security if the agreement, arrangement or understanding to
vote such security (1) arises solely from a revocable proxy or consent given to
such Person in response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable rules and regulations promulgated
under the Exchange Act and (2) is not also then reportable on Schedule 13D under
the Exchange Act (or any comparable or successor report); or

                                        2
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      (iii) which are beneficially owned, directly or indirectly, by any other
Person with which such Person or any of such Person's Affiliates or Associates
has any agreement, arrangement or understanding (other than customary agreements
with and between underwriters and selling group members with respect to a bona
fide public offering of securities) for the purpose of acquiring, holding,
voting (except to the extent contemplated by the proviso to Section 1(d)(ii)(B)
hereof) or disposing of any securities of the Company.

      Notwithstanding anything in this definition of Beneficial Ownership to the
contrary, the phrase "then outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Company, shall mean the number of such
securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder.

      (e) "Business Day" shall mean any day other than a Saturday, a Sunday, or
a day on which banking institutions in New York State are authorized or
obligated by law or executive order to close.

      (f) "Close of Business" on any given date shall mean 5:00 P.M., New York,
New York time, on such date; provided, however, that, if such date is not a
Business Day, it shall mean 5:00 P.M., New York, New York time, on the next
succeeding Business Day.

      (g) "Common Shares" when used with reference to the Company shall mean the
shares of common stock, par value $0.0001 per share, of the Company, other than
the Series B Shares. "Common Shares" when used with reference to any Person
other than the Company shall mean the capital stock (or equity interest) with
the greatest voting power of such other Person or, if such other Person is a
Subsidiary of another Person, the Person or Persons which ultimately control
such first-mentioned Person.

      (h) "Distribution Date" shall have the meaning set forth in Section 3(a)
hereof.

      (i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

      (j) "Exchange Ratio" shall have the meaning set forth in Section 24(a)
hereof.

      (k) "Final Expiration Date" shall have the meaning set forth in Section
7(a) hereof.

      (l) "NASDAQ" shall mean the National Association of Securities Dealers,
Inc. Automated Quotation System.

      (m) "Person" shall mean any individual, firm, corporation or other entity,
and shall include any successor (by merger or otherwise) of such entity.

      (n) "Series B Shares" shall mean shares of Series B Common Stock, par
value $0.0001 per share, of the Company having the rights and preferences set
forth in the Form of Certificate of Designations attached to this Agreement as
Exhibit A.

                                        3
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      (o) "Purchase Price" shall have the meaning set forth in Section 4 hereof.

      (p) "Record Date" shall have the meaning set forth in the second paragraph
hereof.

      (q) "Redemption Date" shall have the meaning set forth in Section 7(a)
hereof.

      (r) "Redemption Price" shall have the meaning set forth in Section 23(a)
hereof.

      (s) "Right" shall have the meaning set forth in the second paragraph
hereof.

      (t) "Right Certificate" shall have the meaning set forth in Section 3(a)
hereof.

      (u) "Shares Acquisition Date" shall mean the first date of public
announcement by the Company or an Acquiring Person that an Acquiring Person has
become such.

      (v) "Subsidiary" of any Person shall mean any corporation or other entity
of which a majority of the voting power of the voting equity securities or
equity interest is owned, directly or indirectly, by such Person.

      (w) "Summary of Rights" shall have the meaning set forth in Section 3(b)
hereof.

      (x) "Trading Day" shall have the meaning set forth in Section 11(d)
hereof.

                                        4
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      Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable. The Rights Agent shall have no duty to supervise, and in
no event shall be liable for the acts or omissions of any such co-Rights Agent.

      Section 3. Issue of Right Certificates. (a) Until the earlier of (i) the
tenth day after the Shares Acquisition Date or (ii) the tenth Business Day (or
such later date as may be determined by action of the Board of Directors of the
Company prior to such time as any Person becomes an Acquiring Person) after the
date of the commencement by any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any Subsidiary of
the Company or any entity holding Common Shares of the Company for or pursuant
to the terms of any such plan) of a tender or exchange offer the consummation of
which would result in any Person becoming the Beneficial Owner of Common Shares
of the Company aggregating 20% or more of the then outstanding Common Shares of
the Company (including any such date which is after the date of this Agreement
and prior to the issuance of the Rights; the earlier of such dates being herein
referred to as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of Section 3(b) hereof) by the certificates for
Common Shares of the Company registered in the names of the holders thereof
(which certificates shall also be deemed to be Right Certificates) and not by
separate Right Certificates, and (y) the right to receive Right Certificates
will be transferable only in connection with the transfer of Common Shares of
the Company. As soon as practicable after the Distribution Date, the Company
will prepare and execute, the Rights Agent will countersign, and the Company
will send or cause to be sent (and the Rights Agent will, if requested and
provided with the necessary information, send) by first-class, insured,
postage-prepaid mail, to each record holder of Common Shares of the Company as
of the Close of Business on the Distribution Date, at the address of such holder
shown on the records of the Company, a Right Certificate, in substantially the
form of Exhibit B hereto (a "Right Certificate"), evidencing one Right for each
Common Share so held. As of the Distribution Date, the Rights will be evidenced
solely by such Right Certificates.

      (b) On the Record Date, or as soon as practicable thereafter, the Company
will send a copy of a Summary of Rights to Purchase Series B Shares, in
substantially the form of Exhibit C hereto (the "Summary of Rights"), by
first-class, postage-prepaid mail, to each record holder of Common Shares as of
the Close of Business on the Record Date, at the address of such holder shown on
the records of the Company. With respect to certificates for Common Shares of
the Company outstanding as of the Record Date, until the Distribution Date, the
Rights will be evidenced by such certificates registered in the names of the
holders thereof together with a copy of the Summary of Rights attached thereto.
Until the Distribution Date (or the earlier of the Redemption Date or the Final
Expiration Date), the surrender for transfer of any certificate for Common
Shares of the Company outstanding on the Record Date, with or without a copy of
the Summary of Rights attached thereto, shall also constitute the transfer of
the Rights associated with the Common Shares of the Company represented thereby.

                                        5
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      (c) Certificates for Common Shares which become outstanding (including,
without limitation, reacquired Common Shares referred to in the last sentence of
this paragraph (c)) after the Record Date but prior to the earliest of the
Distribution Date, the Redemption Date or the Final Expiration Date shall have
impressed on, printed on, written on or otherwise affixed to them the following
legend:

      This certificate also evidences and entitles the holder hereof to certain
      Rights as set forth in the Rights Agreement between Capital Gold
      Corporation (the "Company") and American Stock Transfer & Trust Company
      (the "Rights Agent"), dated as of August 15, 2006, as it may be amended
      from time to time (the "Rights Agreement"), the terms of which are hereby
      incorporated herein by reference and a copy of which is on file at the
      principal offices of the Company. Under certain circumstances, as set
      forth in the Rights Agreement, such Rights will be evidenced by separate
      certificates and will no longer be evidenced by this certificate. The
      Company will mail to the holder of this certificate a copy of the Rights
      Agreement, as in effect on the date of mailing, without charge promptly
      after receipt of a written request therefor. As set forth in the Rights
      Agreement, Rights beneficially owned by any Person (as defined in the
      Rights Agreement) who becomes an Acquiring Person (as defined in the
      Agreement) become null and void.

With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares of the Company
represented by such certificates shall be evidenced by such certificates alone,
and the surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares of the Company
represented thereby. In the event that the Company purchases or acquires any
Common Shares of the Company after the Record Date but prior to the Distribution
Date, any Rights associated with such Common Shares of the Company shall be
deemed cancelled and retired so that the Company shall not be entitled to
exercise any Rights associated with the Common Shares of the Company which are
no longer outstanding.

      Section 4. Form of Right Certificates. The Right Certificates (and the
forms of election to purchase Series B Shares and of assignment to be printed on
the reverse thereof) shall be substantially the same as Exhibit B hereto, and
may have such marks of identification or designation and such legends, summaries
or endorsements printed thereon as the Company may deem appropriate (but which
do not affect the duties, rights or responsibilities of the Rights Agent) and as
are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any applicable rule or
regulation made pursuant thereto or with any applicable rule or regulation of
any stock exchange or the National Association of Securities Dealers, Inc., or
to conform to usage. Subject to the provisions of Section 22 hereof, the Right
Certificates shall entitle the holders thereof to purchase such number of one
one-thousandths of a Series B Share as shall be set forth therein at the price
per one one-thousandth of a Series B Share set forth therein (the "Purchase
Price"), but the number of such one one-thousandths of a Series B Share and the
Purchase Price shall be subject to adjustment as provided herein.

                                        6
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      Section 5. Countersignature and Registration. The Right Certificates shall
be executed on behalf of the Company by its Chairman of the Board, its Chief
Executive Officer, its President, any of its Vice Presidents or its Treasurer,
either manually or by facsimile signature, shall have affixed thereto the
Company's seal or a facsimile thereof, and shall be attested by the Secretary or
an Assistant Secretary of the Company, either manually or by facsimile
signature. The Right Certificates shall be manually countersigned by the Rights
Agent and shall not be valid for any purpose unless countersigned. In case any
officer of the Company who shall have signed any of the Right Certificates shall
cease to be such officer of the Company before countersignature by the Rights
Agent and issuance and delivery by the Company, such Right Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and delivered
by the Company with the same force and effect as though the individual who
signed such Right Certificates had not ceased to be such officer of the Company;
and any Right Certificate may be signed on behalf of the Company by any
individual who, at the actual date of the execution of such Right Certificate,
shall be a proper officer of the Company to sign such Right Certificate,
although at the date of the execution of this Agreement any such individual was
not such an officer.

      Following the Distribution Date, and receipt by the Rights Agent of all
necessary information, the Rights Agent will keep or cause to be kept, at its
office designated for such purpose (the "Designated Office"), books for
registration and transfer of the Right Certificates issued hereunder. Such books
shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.

      Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject
to the provisions of Section 14 hereof, at any time after the Close of Business
on the Distribution Date, and at or prior to the Close of Business on the
earlier of the Redemption Date or the Final Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates representing
Rights that have become void pursuant to Section 11(a)(ii) hereof or that have
been exchanged pursuant to Section 24 hereof) may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates
entitling the registered holder to purchase a like number of one one-thousandths
of a Series B Share as the Right Certificate or Right Certificates surrendered
then entitled such holder to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Right Certificate or Right
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the Designated Office of the
Rights Agent. Thereupon the Rights Agent shall countersign and deliver to the
Person entitled thereto a Right Certificate or Right Certificates, as the case
may be, as so requested. The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Right Certificates. The Rights
Agent shall have no duty or obligation under this Section 6 unless and until it
is reasonably satisfied that all such taxes and/or charges have been paid.

                                        7
<PAGE>

      Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security satisfactory to them, and, at the Company's request, reimbursement to
the Company and the Rights Agent of all reasonable expenses incidental thereto,
and upon surrender to the Rights Agent and cancellation of the Right Certificate
if mutilated, the Company will make and deliver a new Right Certificate of like
tenor to the Rights Agent for delivery to the registered holder in lieu of the
Right Certificate so lost, stolen, destroyed or mutilated.

      Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a)Subject to Section 34 hereof, the registered holder of any Right Certificate
may exercise the Rights evidenced thereby (except as otherwise provided herein),
in whole or in part, at any time after the Distribution Date, upon surrender of
the Right Certificate, with the form of election to purchase on the reverse side
thereof properly and duly executed, to the Rights Agent at the Designated Office
of the Rights Agent, together with payment of the Purchase Price for each one
one-thousandth of a Series B Share as to which the Rights are exercised, at or
prior to the earliest of (i) the Close of Business on August 15, 2016 (the
"Final Expiration Date"), (ii) the time at which the Rights are redeemed as
provided in Section 23 hereof (the "Redemption Date"), or (iii) the time at
which such Rights are exchanged as provided in Section 24 hereof.

      (b) The Purchase Price for each one one-thousandth of a Series B Share
purchasable pursuant to the exercise of a Right shall initially be $3.00, and
shall be subject to adjustment from time to time as provided in Section 11 or 13
hereof, and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) below.

      (c) Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase properly and duly executed, accompanied by
payment of the Purchase Price for the shares to be purchased and an amount equal
to any applicable tax or charge required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof by certified check, cashier's
check or money order payable to the order of the Company, the Rights Agent shall
thereupon promptly (i) (A) requisition from any transfer agent of the Series B
Shares certificates for the number of Series B Shares to be purchased and the
Company hereby irrevocably authorizes any such transfer agent to comply with all
such requests, or (B) requisition from the depositary agent depositary receipts
representing such number of one one-thousandths of a Series B Share as are to be
purchased (in which case certificates for the Series B Shares represented by
such receipts shall be deposited by the transfer agent of the Series B Shares
with such depositary agent) and the Company hereby directs such depositary agent
to comply with such request; (ii) when appropriate, requisition from the Company
the amount of cash to be paid in lieu of issuance of fractional shares in
accordance with Section 14 hereof; (iii) promptly after receipt of such
certificates or depositary receipts, cause the same to be delivered to or upon
the order of the registered holder of such Right Certificate, registered in such
name or names as may be designated by such holder; and (iv) when appropriate,
after receipt, promptly deliver such cash to or upon the order of the registered
holder of such Right Certificate.

      (d) In case the registered holder of any Right Certificate shall exercise
less than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent to the registered holder of such Right Certificate or to such
holder's duly authorized assigns, subject to the provisions of Section 14
hereof.

                                        8
<PAGE>

      Section 8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Right Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Right Certificates to the Company, or shall, at the written request of
the Company, destroy such cancelled Right Certificates, and, in such case, shall
deliver a certificate of destruction thereof to the Company.

      Section 9. Availability of Series B Shares. The Company covenants and
agrees that it will cause to be reserved and kept available out of its
authorized and unissued Series B Shares or any Series B Shares held in its
treasury the number of Series B Shares that will be sufficient to permit the
exercise in full of all outstanding Rights in accordance with Section 7 hereof.
The Company covenants and agrees that it will take all such action as may be
necessary to ensure that all Series B Shares delivered upon exercise of Rights
shall, at the time of delivery of the certificates for such Series B Shares
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable shares.

      The Company further covenants and agrees that it will pay when due and
payable any and all taxes and charges which may be payable in respect of the
issuance or delivery of the Right Certificates or of any Series B Shares upon
the exercise of Rights. The Company shall not, however, be required to pay any
tax or charge which may be payable in respect of any transfer or delivery of
Right Certificates to a Person other than, or the issuance or delivery of
certificates or depositary receipts for the Series B Shares in a name other than
that of, the registered holder of the Right Certificate evidencing Rights
surrendered for exercise or to issue or to deliver any certificates or
depositary receipts for Series B Shares upon the exercise of any Rights until
any such tax or charge shall have been paid (any such tax or charge being
payable by the holder of such Right Certificate at the time of surrender) or
until it has been established to the Company's reasonable satisfaction that no
such tax or charge is due.

                                        9
<PAGE>

      Section 10. Series B Shares Record Date. Each Person in whose name any
certificate for Series B Shares is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Series B
Shares represented thereby on, and such certificate shall be dated, the date
upon which the Right Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and any applicable tax or charge) was made;
provided, however, that, if the date of such surrender and payment is a date
upon which the Series B Shares transfer books of the Company are closed, such
Person shall be deemed to have become the record holder of such shares on, and
such certificate shall be dated, the next succeeding Business Day on which the
Series B Shares transfer books of the Company are open. Prior to the exercise of
the Rights evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a holder of Series B Shares for which the Rights shall
be exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.

      Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights. The Purchase Price, the number of Series B Shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.

      (a) (i) In the event the Company shall at any time after the date of this
Agreement (A) declare a dividend on the Series B Shares payable in Series B
Shares, (B) subdivide the outstanding Series B Shares, (C) combine the
outstanding Series B Shares into a smaller number of Series B Shares or (D)
issue any shares of its capital stock in a reclassification of the Series B
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a), the Purchase Price in effect
at the time of the record date for such dividend or of the effective date of
such subdivision, combination or reclassification, and the number and kind of
shares of capital stock issuable on such date, shall be proportionately adjusted
so that the holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and at a time when the
Series B Shares transfer books of the Company were open, such holder would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right.

                                       10
<PAGE>

      (ii) Subject to Section 24 hereof, in the event any Person becomes an
Acquiring Person, each holder of a Right shall thereafter have a right to
receive, upon exercise thereof at a price equal to the then current Purchase
Price multiplied by the number of one one-thousandths of a Series B Share for
which a Right is then exercisable, in accordance with the terms of this
Agreement and in lieu of Series B Shares, such number of Common Shares of the
Company as shall equal the result obtained by (A) multiplying the then current
Purchase Price by the number of one one-thousandths of a Series B Share for
which a Right is then exercisable and dividing that product by (B) 50% of the
then current per share market price of the Common Shares of the Company
(determined pursuant to Section 11(d) hereof) on the date of the occurrence of
such event. In the event that any Person shall become an Acquiring Person and
the Rights shall then be outstanding, the Company shall not take any action
which would eliminate or diminish the benefits intended to be afforded by the
Rights.

      From and after the occurrence of such event, any Rights that are or were
acquired or beneficially owned by any Acquiring Person (or any Associate or
Affiliate of such Acquiring Person) shall be null and void, and any holder of
such Rights shall thereafter have no right to exercise such Rights under any
provision of this Agreement. No Right Certificate shall be issued pursuant to
Section 3 hereof that represents Rights beneficially owned by an Acquiring
Person whose Rights would be null and void pursuant to the preceding sentence or
any Associate or Affiliate thereof; no Right Certificate shall be issued at any
time upon the transfer of any Rights to an Acquiring Person whose Rights would
be null and void pursuant to the preceding sentence or any Associate or
Affiliate thereof or to any nominee of such Acquiring Person, Associate or
Affiliate; and any Right Certificate delivered to the Rights Agent for transfer
to an Acquiring Person whose Rights would be null and void pursuant to the
preceding sentence shall be cancelled.

      (iii) In the event that there shall not be sufficient Common Shares issued
but not outstanding or authorized but unissued to permit the exercise in full of
the Rights in accordance with subparagraph (ii) above, the Company shall take
all such action as may be necessary to authorize additional Common Shares for
issuance upon exercise of the Rights. In the event the Company shall, after good
faith effort, be unable to take all such action as may be necessary to authorize
such additional Common Shares, the Company shall substitute, for each Common
Share that would otherwise be issuable upon exercise of a Right, a number of
Series B Shares or fraction thereof such that the current per share market price
of one Series B Share multiplied by such number or fraction is equal to the
current per share market price of one Common Share as of the date of issuance of
such Series B Shares or fraction thereof.

                                       11
<PAGE>

      (b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Series B Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Series B Shares (or shares having the same rights,
privileges and preferences as the Series B Shares ("equivalent shares")) or
securities convertible into Series B Shares or equivalent shares at a price per
Series B Share or equivalent share (or having a conversion price per share, if a
security convertible into Series B Shares or equivalent shares) less than the
then current per share market price (as defined in Section 11(d)) of the Series
B Shares on such record date, the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of Series B Shares outstanding on such record date plus the
number of Series B Shares which the aggregate offering price of the total number
of Series B Shares and/or equivalent shares so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current market price and the denominator of
which shall be the number of Series B Shares outstanding on such record date
plus the number of additional Series B Shares and/or equivalent shares to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible); provided, however, that in no event
shall the consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company issuable
upon exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and holders
of the Rights. Series B Shares owned by or held for the account of the Company
shall not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed; and,
in the event that such rights, options or warrants are not so issued, the
Purchase Price shall be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.

      (c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Series B Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Series B Shares) or subscription rights or warrants (excluding those referred to
in Section 11(b) hereof), the Purchase Price to be in effect after such record
date shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
then-current per share market price of the Series B Shares on such record date,
less the fair market value (as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and holders
of the Rights) of the portion of the assets or evidences of indebtedness so to
be distributed or of such subscription rights or warrants applicable to one
Series B Share and the denominator of which shall be such then-current per share
market price of the Series B Shares on such record date; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
to be issued upon exercise of one Right. Such adjustments shall be made
successively whenever such a record date is fixed; and, in the event that such
distribution is not so made, the Purchase Price shall again be adjusted to be
the Purchase Price which would then be in effect if such record date had not
been fixed.

                                       12
<PAGE>

      (d) (i) For the purpose of any computation hereunder, the "current per
share market price" of any security (a "Security" for the purpose of this
Section 11(d)(i)) on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the 30 consecutive Trading Days
immediately prior to but not including such date; provided, however, that, in
the event that the current per share market price of the Security is determined
during a period following the announcement by the issuer of such Security of (A)
a dividend or distribution on such Security payable in shares of such Security
or Securities convertible into such shares, or (B) any subdivision, combination
or reclassification of such Security and prior to the expiration of 30 Trading
Days after but not including the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to reflect the current market price per
share equivalent of such Security. The closing price for each day shall be the
last sale price, regular way, reported at or prior to 4:00 P.M. Eastern time or,
in case no such sale takes place on such day, the average of the bid and asked
prices, regular way, reported as of 4:00 P.M. Eastern time, in either case, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
Security is listed or admitted to trading or, if the Security is not listed or
admitted to trading on any national securities exchange, the last quoted price
reported at or prior to 4:00 P.M. Eastern time or, if not so quoted, the average
of the high bid and low asked prices in the over-the-counter market, as reported
as of 4:00 P.M. Eastern time by NASDAQ or such other system then in use, or, if
on any such date the Security is not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Security selected by the Board of Directors
of the Company. The term "Trading Day" shall mean a day on which the principal
national securities exchange on which the Security is listed or admitted to
trading is open for the transaction of business, or, if the Security is not
listed or admitted to trading on any national securities exchange, a Business
Day.

      (ii) For the purpose of any computation hereunder, the "current per share
market price" of the Series B Shares shall be determined in accordance with the
method set forth in Section 11(d)(i). If the Series B Shares are not publicly
traded, the "current per share market price" of the Series B Shares shall be
conclusively deemed to be the current per share market price of the Common
Shares as determined pursuant to Section 11(d)(i) hereof (appropriately adjusted
to reflect any stock split, stock dividend or similar transaction occurring
after the date hereof), multiplied by one thousand. If neither the Common Shares
nor the Series B Shares are publicly held or so listed or traded, "current per
share market price" shall mean the fair value per share as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent.

                                       13
<PAGE>

      (e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest one one-millionth of a
Series B Share or one ten-thousandth of any other share or security as the case
may be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
years from the date of the transaction which requires such adjustment or (ii)
the date of the expiration of the right to exercise any Rights.

      (f) If, as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Series B Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the Series
B Shares contained in Section 11(a) through (c) hereof, inclusive, and the
provisions of Sections 7, 9, 10 and 13 hereof with respect to the Series B
Shares shall apply on like terms to any such other shares.

      (g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of a
Series B Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.

      (h) Unless the Company shall have exercised its election as provided in
Section 11(i) hereof, upon each adjustment of the Purchase Price as a result of
the calculations made in Sections 11(b) and (c) hereof, each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price, that number of one
one-thousandths of a Series B Share (calculated to the nearest one one-millionth
of a Series B Share) obtained by (A) multiplying (x) the number of one
one-thousandths of a share covered by a Right immediately prior to this
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (B) dividing the product so obtained by the
Purchase Price in effect immediately after such adjustment of the Purchase
Price.

                                       14
<PAGE>

      (i) The Company may elect, on or after the date of any adjustment of the
Purchase Price, to adjust the number of Rights in substitution for any
adjustment in the number of one one-thousandths of a Series B Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-thousandths of a Series B Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement (with prompt notice thereof to the
Rights Agent) of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Right Certificates have
been issued, shall be at least 10 days later than the date of the public
announcement. If Right Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein, and shall be registered in
the names of the holders of record of Right Certificates on the record date
specified in the public announcement.

      (j) Irrespective of any adjustment or change in the Purchase Price or in
the number of one one-thousandths of a Series B Share issuable upon the exercise
of the Rights, the Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price and the number of one one-thousandths of
a Series B Share which were expressed in the initial Right Certificates issued
hereunder.

      (k) Before taking any action that would cause an adjustment reducing the
Purchase Price below one one-thousandth of the then par value, if any, of the
Series B Shares issuable upon exercise of the Rights, the Company shall take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and nonassessable
Series B Shares at such adjusted Purchase Price.

                                       15
<PAGE>

      (l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer (with prompt notice thereof to the Rights
Agent) until the occurrence of such event the issuing to the holder of any Right
exercised after such record date of the Series B Shares and other capital stock
or securities of the Company, if any, issuable upon such exercise over and above
the Series B Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise on the basis of the Purchase Price in effect
prior to such adjustment; provided, however, that the Company shall deliver to
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares upon the occurrence of the event
requiring such adjustment.

      (m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it, in its sole discretion, shall determine to be advisable in
order that any consolidation or subdivision of the Series B Shares, issuance
wholly for cash of any Series B Shares at less than the current market price,
issuance wholly for cash of Series B Shares or securities which by their terms
are convertible into or exchangeable for Series B Shares, dividends on Series B
Shares payable in Series B Shares or issuance of rights, options or warrants
referred to in Section 11(b) hereof, hereafter made by the Company to holders of
the Series B Shares shall not be taxable to such stockholders.

      (n) In the event that, at any time after the date of this Agreement and
prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Shares payable in Common Shares, or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then, in any such case, (A)
the number of one one-thousandths of a Series B Share purchasable after such
event upon proper exercise of each Right shall be determined by multiplying the
number of one one-thousandths of a Series B Share so purchasable immediately
prior to such event by a fraction, the numerator of which is the number of
Common Shares outstanding immediately before such event and the denominator of
which is the number of Common Shares outstanding immediately after such event,
and (B) each Common Share outstanding immediately after such event shall have
issued with respect to it that number of Rights which each Common Share
outstanding immediately prior to such event had issued with respect to it. The
adjustments provided for in this Section 11(n) shall be made successively
whenever such a dividend is declared or paid or such a subdivision, combination
or consolidation is effected.

                                       16
<PAGE>

      Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 or 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth the amount of the
adjustment and a brief statement of the facts and computations accounting for
such adjustment (including, without limitation, the record date for the
adjustment), (b) file with the Rights Agent and with each transfer agent for the
Common Shares or the Series B Shares and the Securities and Exchange Commission
a copy of such certificate and (c) if such adjustment occurs at any time after
the Distribution Date, mail a brief summary thereof to each holder of a Right
Certificate in accordance with Section 25 hereof. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment therein
contained and shall have no duty with respect to and shall not be deemed to have
knowledge of any such adjustment unless and until it shall have received such
certificate.

      Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power. In the event, directly or indirectly, at any time after a Person has
become an Acquiring Person, (a) the Company shall consolidate with, or merge
with and into, any other Person, (b) any Person shall consolidate with the
Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger and, in connection with such
merger, all or part of the Common Shares shall be changed into or exchanged for
stock or other securities of any other Person (or the Company) or cash or any
other property, or (c) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person other than the Company or one or more of its wholly-owned
Subsidiaries, then, and in each such case, proper provision shall be made so
that (i) each holder of a Right (except as otherwise provided herein) shall
thereafter have the right to receive, upon the exercise thereof at a price equal
to the then current Purchase Price multiplied by the number of one
one-thousandths of a Series B Share for which a Right is then exercisable, in
accordance with the terms of this Agreement and in lieu of Series B Shares, such
number of Common Shares of such other Person (including the Company as successor
thereto or as the surviving corporation) as shall equal the result obtained by
(A) multiplying the then current Purchase Price by the number of one
one-thousandths of a Series B Share for which a Right is then exercisable and
dividing that product by (B) 50% of the then current per share market price of
the Common Shares of such other Person (determined pursuant to Section 11(d)
hereof) on the date of consummation of such consolidation, merger, sale or
transfer; (ii) the issuer of such Common Shares shall thereafter be liable for,
and shall assume, by virtue of such consolidation, merger, sale or transfer, all
the obligations and duties of the Company pursuant to this Agreement; (iii) the
term "Company" shall thereafter be deemed to refer to such issuer; and (iv) such
issuer shall take such steps (including, but not limited to, the reservation of
a sufficient number of its Common Shares in accordance with Section 9 hereof) in
connection with such consummation as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to the Common Shares or Series B Shares of the Company
thereafter deliverable upon the exercise of the Rights. The Company shall not
consummate any such consolidation, merger, sale or transfer unless, prior
thereto, the Company and such issuer shall have executed and delivered to the
Rights Agent a supplemental agreement so providing. The Company shall not enter
into any transaction of the kind referred to in this Section 13 if at the time
of such transaction there are any rights, warrants, instruments or securities
outstanding or any agreements or arrangements which, as a result of the
consummation of such transaction, would eliminate or substantially diminish the
benefits intended to be afforded by the Rights. The provisions of this Section
13 shall similarly apply to successive mergers or consolidations or sales or
other transfers.

                                       17
<PAGE>

      Section 14. Fractional Rights and Fractional Shares. (a) The Company shall
not be required to issue fractions of Rights or to distribute Right Certificates
which evidence fractional Rights. In lieu of such fractional Rights, there shall
be paid to the registered holders of the Right Certificates with regard to which
such fractional Rights would otherwise be issuable, an amount in cash equal to
the same fraction of the current market value of a whole Right. For the purposes
of this Section 14(a), the current market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately prior to the date on
which such fractional Rights would have been otherwise issuable. The closing
price for any day shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Rights are listed or admitted to
trading or, if the Rights are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported by
NASDAQ or such other system then in use or, if on any such date the Rights are
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the Rights
selected by the Board of Directors of the Company. If on any such date no such
market maker is making a market in the Rights, the fair value of the Rights on
such date as determined in good faith by the Board of Directors of the Company
shall be used.

      (b) The Company shall not be required to issue fractions of Series B
Shares (other than fractions which are integral multiples of one one-thousandth
of a Series B Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Series B Shares (other than fractions which are
integral multiples of one one-thousandth of a Series B Share). Fractions of
Series B Shares in integral multiples of one one-thousandth of a Series B Share
may, at the election of the Company, be evidenced by depositary receipts,
pursuant to an appropriate agreement between the Company and a depositary
selected by it; provided, that such agreement shall provide that the holders of
such depositary receipts shall have all the rights, privileges and preferences
to which they are entitled as beneficial owners of the Series B Shares
represented by such depositary receipts. In lieu of fractional Series B Shares
that are not integral multiples of one one-thousandth of a Series B Share, the
Company shall pay to the registered holders of Right Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one Series B Share. For the purposes of
this Section 14(b), the current market value of a Series B Share shall be the
closing price of a Series B Share (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
such exercise.

      (c) The holder of a Right, by the acceptance of the Right, expressly
waives such holder's right to receive any fractional Rights or any fractional
shares upon exercise of a Right (except as provided above). The Rights Agent
shall have no duty or obligation with respect to this Section 14 and Section
24(d) unless and until it has received specific instructions (and sufficient
cash, if required) from the Company with respect to its duties and obligations
under such Sections.

                                       18
<PAGE>

      Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action expressly given to the Rights Agent
under Section 18 hereof, are vested in the respective registered holders of the
Right Certificates (and, prior to the Distribution Date, the registered holders
of the Common Shares); and any registered holder of any Right Certificate (or,
prior to the Distribution Date, of the Common Shares), without the consent of
the Rights Agent or of the holder of any other Right Certificate (or, prior to
the Distribution Date, of the Common Shares), may, in such holder's own behalf
and for such holder's own benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Company to enforce, or otherwise act in
respect of, such holder's right to exercise the Rights evidenced by such Right
Certificate in the manner provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement, and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of the obligations of
any Person subject to, this Agreement.

      Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:

      (a) prior to the Distribution Date, the Rights will be transferable only
in connection with the transfer of the Common Shares;

      (b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the Designated
Office of the Rights Agent, duly endorsed or accompanied by a proper instrument
of transfer; and

      (c) the Company and the Rights Agent may deem and treat the person in
whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificate or the associated Common Shares
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.

                                       19
<PAGE>

      Section 17. Right Certificate Holder Not Deemed a Stockholder. No holder,
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the Series B Shares or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.

      Section 18. Concerning the Rights Agent. The Company agrees to pay to the
Rights Agent reasonable compensation for all services rendered by it hereunder,
and, from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the administration of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, damage, judgment, fine, penalty, claim, demand, settlement,
cost or expense incurred without gross negligence, bad faith or willful
misconduct on the part of the Rights Agent, for any action taken, suffered or
omitted by the Rights Agent in connection with the acceptance, amendment and
administration of this Agreement, including without limitation the costs and
expenses of defending against any claim of liability arising therefrom directly
or indirectly in the premises.

      The Rights Agent shall be authorized and protected and shall incur no
liability for, or in respect of any action taken, suffered or omitted by it in
connection with, its administration of this Agreement in reliance upon any Right
Certificate or certificate for the Series B Shares or Common Shares or for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper person or persons, or otherwise upon the advice of counsel as set
forth in Section 20 hereof.
                                       20
<PAGE>

      Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any
Person into which the Rights Agent or any successor Rights Agent may be merged
or with which it may be consolidated, or any Person resulting from any merger or
consolidation to which the Rights Agent or any successor Rights Agent shall be a
party, or any Person succeeding to the shareholder services business of the
Rights Agent or any successor Rights Agent, shall be the successor to the Rights
Agent under this Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided that such Person
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor Rights Agent
shall succeed to the agency created by this Agreement, any of the Right
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of the predecessor Rights Agent and
deliver such Right Certificates so countersigned; and, in case at that time any
of the Right Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Right Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and, in
all such cases, such Right Certificates shall have the full force provided in
the Right Certificates and in this Agreement.

      In case at any time the name of the Rights Agent shall be changed and at
such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and, in case at that time any
of the Right Certificates shall not have been countersigned, the Rights Agent
may countersign such Right Certificates either in its prior name or in its
changed name; and, in all such cases, such Right Certificates shall have the
full force provided in the Right Certificates and in this Agreement.

      Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties
and obligations expressly imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:

      (a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the advice or opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken, suffered or omitted by it in accordance with such advice or
opinion.

      (b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking, suffering or omitting any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the President, any Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization and protection to the Rights Agent for any action
taken or suffered or omitted by it under the provisions of this Agreement in
reliance upon such certificate.

                                       21
<PAGE>

      (c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own gross negligence, bad faith or willful misconduct.

      (d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.

      (e) The Rights Agent shall not be under any liability or responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible or liable for any breach by the Company of
any covenant or condition contained in this Agreement or in any Right
Certificate; nor shall it be responsible or liable for any change in the
exercisability of the Rights (including the Rights becoming null and void
pursuant to Section 11(a)(ii) hereof) or any adjustment in the terms of the
Rights (including the manner, method or amount thereof) provided for in Section
3, 11, 13, 23 or 24 hereof, or the ascertaining of the existence of facts that
would require any such change or adjustment (except with respect to the exercise
of Rights evidenced by Right Certificates after actual notice that such change
or adjustment is required); nor shall it by any act hereunder be deemed to make
any representation or warranty as to the authorization or reservation of any
Series B Shares to be issued pursuant to this Agreement or any Right Certificate
or as to whether any Series B Shares will, when issued, be validly authorized
and issued, fully paid and nonassessable.

      (f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.

      (g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Secretary or the Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered or omitted by it in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions.

      (h) The Rights Agent and any stockholder, director, affiliate, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other Person.

                                       22
<PAGE>

      (i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided that reasonable care was exercised in the
selection and continued employment thereof.

      Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares or Series B Shares by registered or certified mail, and to
the holders of the Right Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Shares or Series B Shares by
registered or certified mail, and to the holders of the Right Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of 30 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (which holder
shall, with such notice, submit such holder's Right Certificate for inspection
by the Company), then the registered holder of any Right Certificate may apply
to any court of competent jurisdiction for the appointment of a new Rights
Agent. Any successor Rights Agent, whether appointed by the Company or by such a
court, shall be (i) a Person organized and doing business and in good standing
under the laws of any state of the United States, so long as such Person is
authorized under such laws to exercise all of the duties of the Rights Agent
under this Agreement and is subject to supervision or examination by federal or
state authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50 million or (ii) an Affiliate of
such Person. After appointment, the successor Rights Agent shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares or Series B Shares, and mail a notice thereof in writing to
the registered holders of the Right Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.

                                       23
<PAGE>

      Section 22. Issuance of New Right Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Right Certificates evidencing Rights in such form as
may be approved by the Board of Directors of the Company to reflect any
adjustment or change in the Purchase Price and the number or kind or class of
shares or other securities or property purchasable under the Right Certificates
made in accordance with the provisions of this Agreement.

      Section 23. Redemption. (a) The Board of Directors of the Company may, at
its option, at any time prior to such time as any Person becomes an Acquiring
Person, redeem all but not less than all the then outstanding Rights at a
redemption price of $0.001 per Right, appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the "Redemption
Price"). The redemption of the Rights by the Board of Directors of the Company
may be made effective at such time, on such basis and with such conditions as
the Board of Directors of the Company, in its sole discretion, may establish.

      (b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights pursuant to paragraph (a) of this Section
23, and without any further action and without any notice, the right to exercise
the Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price. The Company shall promptly give public
notice of any such redemption; provided, however, that the failure to give, or
any defect in, any such notice shall not affect the validity of such redemption.
Within 10 days after such action of the Board of Directors of the Company
ordering the redemption of the Rights, the Company shall mail a notice of
redemption to all the holders of the then outstanding Rights at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Shares. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made. Neither the Company nor any of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at any time in any manner other
than that specifically set forth in this Section 23 or in Section 24 hereof, and
other than in connection with the purchase of Common Shares prior to the
Distribution Date.

                                       24
<PAGE>

      Section 24. Exchange. (a) The Board of Directors of the Company may, at
its option, at any time after any Person becomes an Acquiring Person, exchange
all or part of the then outstanding and exercisable Rights (which shall not
include Rights that have become null and void pursuant to the provisions of
Section 11(a)(ii) hereof) for Common Shares at an exchange ratio of one Common
Share per Right, appropriately adjusted to reflect any adjustment in the number
of Rights pursuant to Section 11(i) (such exchange ratio being hereinafter
referred to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board
of Directors of the Company shall not be empowered to effect such exchange at
any time after any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or any such Subsidiary, or any
entity holding Common Shares for or pursuant to the terms of any such plan),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Shares then outstanding.

      (b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24
and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of the holders of such
Rights shall be to receive that number of Common Shares equal to the number of
such Rights held by such holder multiplied by the Exchange Ratio. The Company
shall promptly give public notice of any such exchange; provided, however, that
the failure to give, or any defect in, such notice shall not affect the validity
of such exchange. The Company promptly shall mail a notice of any such exchange
to the Rights Agent and to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of exchange will state the
method by which the exchange of the Common Shares for Rights will be effected,
and, in the event of any partial exchange, the number of Rights which will be
exchanged. Any partial exchange shall be effected pro rata based on the number
of Rights (other than Rights which have become null and void pursuant to the
provisions of Section 11(a)(ii) hereof) held by each holder of Rights.

      (c) In the event that there shall not be sufficient Common Shares issued
but not outstanding or authorized but unissued to permit any exchange of Rights
as contemplated in accordance with this Section 24, the Company shall take all
such action as may be necessary to authorize additional Common Shares for
issuance upon exchange of the Rights. In the event the Company shall, after good
faith effort, be unable to take all such action as may be necessary to authorize
such additional Common Shares, the Company shall substitute, for each Common
Share that would otherwise be issuable upon exchange of a Right, a number of
Series B Shares or fraction thereof such that the current per share market price
of one Series B Share multiplied by such number or fraction is equal to the
current per share market price of one Common Share as of the date of issuance of
such Series B Shares or fraction thereof.

      (d) The Company shall not be required to issue fractions of Common Shares
or to distribute certificates which evidence fractional Common Shares. In lieu
of such fractional Common Shares, the Company shall pay to the registered
holders of the Right Certificates with regard to which such fractional Common
Shares would otherwise be issuable an amount in cash equal to the same fraction
of the current market value of a whole Common Share. For the purposes of this
paragraph (d), the current market value of a whole Common Share shall be the
closing price of a Common Share (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
exchange pursuant to this Section 24.

                                       25
<PAGE>

      Section 25. Notice of Certain Events. (a) In case the Company shall, at
any time after the Distribution Date, propose (i) to pay any dividend payable in
stock of any class to the holders of the Series B Shares or to make any other
distribution to the holders of the Series B Shares (other than a regular
quarterly cash dividend), (ii) to offer to the holders of the Series B Shares
rights or warrants to subscribe for or to purchase any additional Series B
Shares or shares of stock of any class or any other securities, rights or
options, (iii) to effect any reclassification of the Series B Shares (other than
a reclassification involving only the subdivision of outstanding Series B
Shares), (iv) to effect any consolidation or merger into or with, or to effect
any sale or other transfer (or to permit one or more of its Subsidiaries to
effect any sale or other transfer), in one or more transactions, of 50% or more
of the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to, any other Person, (v) to effect the liquidation, dissolution or
winding up of the Company, or (vi) to declare or pay any dividend on the Common
Shares payable in Common Shares or to effect a subdivision, combination or
consolidation of the Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares), then, in each such case, the Company
shall give to the Rights Agent and to each holder of a Right Certificate, in
accordance with Section 26 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, or distribution
of rights or warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution, or winding up
is to take place and the date of participation therein by the holders of the
Common Shares and/or Series B Shares, if any such date is to be fixed, and such
notice shall be so given in the case of any action covered by clause (i) or (ii)
above at least 10 days prior to the record date for determining holders of the
Series B Shares for purposes of such action, and, in the case of any such other
action, at least 10 days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of the Common Shares and/or
Series B Shares, whichever shall be the earlier.

      (b) In case the event set forth in Section 11(a)(ii) hereof shall occur,
then the Company shall, as soon as practicable thereafter, give to each holder
of a Right Certificate, in accordance with Section 26 hereof, a notice of the
occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii) hereof.

      Section 26. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:

                  Capital Gold Corporation
                  76 Beaver Street
                  New York, NY 10005
                  Attention: Gifford Dieterle

                                       26
<PAGE>

Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:

                  American Stock Transfer & Trust Company
                  59 Maiden Lane
                  New York, New York 10038
                  Attention: Herbert J. Lemmer

Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.

      Section 27. Supplements and Amendments. The Company, by action of its
Board of Directors, may from time to time supplement or amend this Agreement
without the approval of any holders of Right Certificates in order to cure any
ambiguity, to correct or supplement any provision contained herein which may be
defective or inconsistent with any other provisions herein, or to make any other
changes or provisions that the Board of Directors may deem necessary or
desirable, any such supplement or amendment to be evidenced by a writing signed
by the Company and the Rights Agent; provided, however, that, from and after
such time as any Person becomes an Acquiring Person, this Agreement shall not be
amended in any manner which would adversely affect the interests of the holders
of Rights (other than Rights that have become null and void pursuant to Section
11(a)(ii) hereof).

      Section 28. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.

      Section 29. Benefits of This Agreement. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Shares) any legal or equitable right, remedy or claim under
this Agreement; but this Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Shares).

                                       27
<PAGE>

      Section 30. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.

      Section 31. Governing Law. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such state applicable to contracts to be made and
performed entirely within such state.

      Section 32. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.

      Section 33. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.

      Section 34. Effective Date. This Agreement is effective and in full force
and effect in accordance with its terms as of and after the date hereof. If this
Agreement is not ratified by resolution passed by a majority of the votes cast
by stockholders present or represented by proxy at a meeting of stockholders of
the Company held on or prior to February 4, 2007, or any other applicable
stockholder ratification requirement of the Toronto Stock Exchange is not
satisfied at such meeting, then this Agreement and any then outstanding Rights
shall, without further formality, be terminated and of no further force or
effect as at the earlier of February 4, 2007 and the close of the meeting of
stockholders at which this Agreement is not ratified; provided, however, that
termination shall not occur if an event of the nature contemplated by Section
11(a)(ii) has occurred prior to the date upon which this Agreement would
otherwise terminate pursuant to this Section 34.

      Section 35. Determinations and Actions by the Board of Directors. Except
as otherwise specifically provided herein, the Board of Directors shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board of Directors or to the
Company hereunder, or as may be necessary or advisable in the administration of
this Agreement, including, without limitation, the right and power (a) to
interpret the provisions of this Agreement and (b) to make all determinations
deemed necessary or advisable for the administration of this Agreement. All such
actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) which
are done or made by the Board of Directors shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights and all
other parties and (y) not subject the Board of Directors or any member thereof
to any liability to the holders of the Rights.

                                       28
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and attested, all as of the day and year first above written.

<TABLE>

<S>                                                          <C>
Attest:                                                      CAPITAL GOLD CORPORATION

By  /s/ Jeffrey W. Pritchard                                 By  /s/ Gifford A. Dieterle
   --------------------------------------------------           -------------------------------------
Name:   Jeffrey W. Pritchard                                 Name:  Gifford A. Dieterle
Title:  Vice President and Assistant Secretary               Title: Chairman

Attest:                                                      AMERICAN STOCK TRANSFER & TRUST COMPANY

By  /s/ Carlos Pinto                                         By  /s/ Herbert J. Lemmer
   --------------------------------------------------           -------------------------------------
Name:   Carlos Pinto                                         Name:  Herbert J. Lemmer
Title:  Vice President                                       Title: Vice President
</TABLE>

                                       29
<PAGE>

                                                                       Exhibit A

                                      FORM

                                       of

                           CERTIFICATE OF DESIGNATIONS

                                       of

                              SERIES B COMMON STOCK

                                       of

                            CAPITAL GOLD CORPORATION

                         (Pursuant to Section 151 of the
                        Delaware General Corporation Law)

                              --------------------

      Capital Gold Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware (hereinafter called the
"Corporation"), hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation as required by Section 151 of the
General Corporation Law at a meeting duly called and held on August 14, 2006:

      RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Certificate
of Incorporation, the Board of Directors hereby creates a new series of common
stock, par value $0.0001 per share, of the Corporation, and hereby states the
designation and number of shares, and fixes the relative rights, preferences,
and limitations thereof as follows:

      Section 1. Designation and Amount. The shares of such series shall be
designated as "Series B Common Stock" (the "Series B Stock") and the number of
shares constituting the Series B Stock shall be 200,000. Such number of shares
may be increased or decreased by resolution of the Board of Directors; provided,
that no decrease shall reduce the number of shares of Series B Stock to a number
less than the number of shares then outstanding plus the number of shares
reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities issued by the
Corporation convertible into Series B Stock.

                                       A-1
<PAGE>

      Section 2. Dividends and Distributions.

            (A) Subject to the rights of the holders of any shares of any series
      of preferred stock ("Preferred Stock") (or any similar stock) ranking
      prior and superior to the Series B Stock with respect to dividends, the
      holders of shares of Series B Stock, in preference to the holders of the
      existing Common Stock, par value $0.0001 per share (the "Existing Common
      Stock"), of the Corporation, and of any other junior stock, shall be
      entitled to receive, when, as and if declared by the Board of Directors
      out of funds legally available for the purpose, quarterly dividends
      payable in cash on the first day of March, June, September and December in
      each year (each such date being referred to herein as a "Quarterly
      Dividend Payment Date"), commencing on the first Quarterly Dividend
      Payment Date after the first issuance of a share or fraction of a share of
      Series B Stock, in an amount per share (rounded to the nearest cent) equal
      to the greater of (a) $1 or (b) subject to the provision for adjustment
      hereinafter set forth, 1,000 times the aggregate per share amount of all
      cash dividends, and 1,000 times the aggregate per share amount (payable in
      kind) of all non-cash dividends or other distributions, other than a
      dividend payable in shares of Existing Common Stock or a subdivision of
      the outstanding shares of Existing Common Stock (by reclassification or
      otherwise), declared on the Existing Common Stock since the immediately
      preceding Quarterly Dividend Payment Date or, with respect to the first
      Quarterly Dividend Payment Date, since the first issuance of any share or
      fraction of a share of Series B Stock. In the event the Corporation shall
      at any time declare or pay any dividend on the Existing Common Stock
      payable in shares of Existing Common Stock, or effect a subdivision or
      combination or consolidation of the outstanding shares of Existing Common
      Stock (by reclassification or otherwise than by payment of a dividend in
      shares of Existing Common Stock) into a greater or lesser number of shares
      of Existing Common Stock, then in each such case the amount to which
      holders of shares of Series B Stock were entitled immediately prior to
      such event under clause (b) of the preceding sentence shall be adjusted by
      multiplying such amount by a fraction, the numerator of which is the
      number of shares of Existing Common Stock outstanding immediately after
      such event and the denominator of which is the number of shares of
      Existing Common Stock that were outstanding immediately prior to such
      event.

            (B) The Corporation shall declare a dividend or distribution on the
      Series B Stock as provided in paragraph (A) of this Section immediately
      after it declares a dividend or distribution on the Existing Common Stock
      (other than a dividend payable in shares of Existing Common Stock);
      provided that, in the event no dividend or distribution shall have been
      declared on the Existing Common Stock during the period between any
      Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend
      Payment Date, a dividend of $1 per share on the Series B Stock shall
      nevertheless be payable on such subsequent Quarterly Dividend Payment
      Date.

            (C) Dividends shall begin to accrue and be cumulative on outstanding
      shares of Series B Stock from the Quarterly Dividend Payment Date next
      preceding the date of issue of such shares, unless the date of issue of
      such shares is prior to the record date for the first Quarterly Dividend
      Payment Date, in which case dividends on such shares shall begin to accrue
      from the date of issue of such shares, or unless the date of issue is a
      Quarterly Dividend Payment Date or is a date after the record date for the
      determination of holders of shares of Series B Stock entitled to receive a
      quarterly dividend and before such Quarterly Dividend Payment Date, in
      either of which events such dividends shall begin to accrue and be
      cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
      dividends shall not bear interest. Dividends paid on the shares of Series
      B Stock in an amount less than the total amount of such dividends at the
      time accrued and payable on such shares shall be allocated pro rata on a
      share-by-share basis among all such shares at the time outstanding. The
      Board of Directors may fix a record date for the determination of holders
      of shares of Series B Stock entitled to receive payment of a dividend or
      distribution declared thereon, which record date shall be not more than 60
      days prior to the date fixed for the payment thereof.

                                       A-2
<PAGE>

      Section 3. Voting Rights. The holders of shares of Series B Stock shall
have the following voting rights:

            (A) Subject to the provision for adjustment hereinafter set forth
      and the terms of the Certificate of Incorporation, each share of Series B
      Stock shall entitle the holder thereof to one vote on all matters
      submitted to a vote of the stockholders of the Corporation. In the event
      the Corporation shall at any time declare or pay any dividend on the
      Existing Common Stock payable in shares of Existing Common Stock, or
      effect a subdivision or combination or consolidation of the outstanding
      shares of Existing Common Stock (by reclassification or otherwise than by
      payment of a dividend in shares of Existing Common Stock) into a greater
      or lesser number of shares of Existing Common Stock, then in each such
      case the number of votes per share to which holders of shares of Series B
      Stock were entitled immediately prior to such event shall be adjusted by
      multiplying such number by a fraction, the numerator of which is the
      number of shares of Existing Common Stock outstanding immediately after
      such event and the denominator of which is the number of shares of
      Existing Common Stock that were outstanding immediately prior to such
      event.

            (B) Except as otherwise provided herein, in any other Certificate of
      Designations creating a series of Preferred Stock or any similar stock, or
      by law, the holders of shares of Series B Stock and the holders of shares
      of Existing Common Stock and any other capital stock of the Corporation
      having general voting rights shall vote together as one class on all
      matters submitted to a vote of stockholders of the Corporation.

            (C) Except as set forth herein, or as otherwise provided by law,
      holders of Series B Stock shall have no special voting rights and their
      consent shall not be required (except to the extent they are entitled to
      vote with holders of Existing Common Stock as set forth herein) for taking
      any corporate action.

      Section 4. Certain Restrictions.

            (A) Whenever quarterly dividends or other dividends or distributions
      payable on the Series B Stock as provided in Section 2 are in arrears,
      thereafter and until all accrued and unpaid dividends and distributions,
      whether or not declared, on shares of Series B Stock outstanding shall
      have been paid in full, the Corporation shall not:

                  (i) declare or pay dividends, or make any other distributions,
            on any shares of stock ranking junior (either as to dividends or
            upon liquidation, dissolution or winding up) to the Series B Stock;

                                       A-3
<PAGE>

                  (ii) declare or pay dividends, or make any other
            distributions, on any shares of stock ranking on a parity (either as
            to dividends or upon liquidation, dissolution or winding up) with
            the Series B Stock, except dividends paid ratably on the Series B
            Stock and all such parity stock on which dividends are payable or in
            arrears in proportion to the total amounts to which the holders of
            all such shares are then entitled;

                  (iii) redeem or purchase or otherwise acquire for
            consideration shares of any stock ranking junior (either as to
            dividends or upon liquidation, dissolution or winding up) to the
            Series B Stock, provided that the Corporation may at any time
            redeem, purchase or otherwise acquire shares of any such junior
            stock in exchange for shares of any stock of the Corporation ranking
            junior (either as to dividends or upon dissolution, liquidation or
            winding up) to the Series B Stock; or

                  (iv) redeem or purchase or otherwise acquire for consideration
            any shares of Series B Stock, or any shares of stock ranking on a
            parity with the Series B Stock, except in accordance with a purchase
            offer made in writing or by publication (as determined by the Board
            of Directors) to all holders of such shares upon such terms as the
            Board of Directors, after consideration of the respective annual
            dividend rates and other relative rights and preferences of the
            respective series and classes, shall determine in good faith will
            result in fair and equitable treatment among the respective series
            or classes.

            (B) The Corporation shall not permit any subsidiary of the
      Corporation to purchase or otherwise acquire for consideration any shares
      of stock of the Corporation unless the Corporation could, under paragraph
      (A) of this Section 4, purchase or otherwise acquire such shares at such
      time and in such manner.

      Section 5. Reacquired Shares. Any shares of Series B Stock purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and cancelled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of common stock and may
be reissued as part of a new series of common stock subject to the conditions
and restrictions on issuance set forth herein, in the Certificate of
Incorporation, or in any other Certificate of Designations creating a series of
common stock or any similar stock or as otherwise required by law.

      Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (1)
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series B Stock unless, prior
thereto, the holders of shares of Series B Stock shall have received $1,000 per
share, plus an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment, provided that the
holders of shares of Series B Stock shall be entitled to receive an aggregate
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 1,000 times the aggregate amount to be distributed per share to holders
of shares of Existing Common Stock, or (2) to the holders of shares of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series B Stock, except distributions made proportionally on
the Series B Stock and all such parity stock in proportion to the total amounts
to which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event the Corporation shall at any time
declare or pay any dividend on the Existing Common Stock payable in shares of
Existing Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Existing Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Existing Common Stock) into
a greater or lesser number of shares of Existing Common Stock, then in each such
case the aggregate amount to which holders of shares of Series B Stock were
entitled immediately prior to such event under the proviso in clause (1) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Existing Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Existing Common Stock that were outstanding immediately
prior to such event.

                                       A-4
<PAGE>

      Section 7. Consolidation, Merger, Etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Existing Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series B Stock shall at the same time be similarly exchanged or changed into an
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 1,000 times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of Existing Common Stock is changed or exchanged. In the event the
Corporation shall at any time declare or pay any dividend on the Existing Common
Stock payable in shares of Existing Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Existing Common Stock
(by reclassification or otherwise than by payment of a dividend in shares of
Existing Common Stock) into a greater or lesser number of shares of Existing
Common Stock, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series B Stock
shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Existing Common Stock outstanding immediately
after such event and the denominator of which is the number of shares of
Existing Common Stock that were outstanding immediately prior to such event.

      Section 8. No Redemption. The shares of Series B Stock shall not be
redeemable.

      Section 9. Rank. The Series B Stock shall rank, with respect to the
payment of dividends and the distribution of assets, senior to the Existing
Common Stock and junior to all series of any other class of the Corporation's
Preferred Stock.

      Section 10. Amendment. The Certificate of Incorporation of the Corporation
shall not be amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series B Stock so as to affect them
adversely without the affirmative vote of the holders of at least two-thirds of
the outstanding shares of Series B Stock, voting together as a single class.

      IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf
of the Corporation by its Chairman of the Board and attested by its Assistant
Secretary this 15th day of August, 2006.

                                    --------------------------------------------
                                    Chairman

Attest:

------------------------------------
       Assistant Secretary

                                       A-5
<PAGE>

                                                                       Exhibit B

                            Form of Right Certificate

Certificate No. R-                                                  _____ Rights

            NOT EXERCISABLE AFTER AUGUST 15, 2016 OR EARLIER IF REDEMPTION OR
            EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $0.001 PER
            RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE AGREEMENT.

                                Right Certificate

                            CAPITAL GOLD CORPORATION

      This certifies that _______, or registered assigns, is the registered
owner of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Agreement, dated
as of August 15, 2006 (the "Agreement"), between Capital Gold Corporation, a
Delaware corporation (the "Company"), and American Stock Transfer & Trust
Company (the "Rights Agent"), to purchase from the Company at any time after the
Distribution Date (as such term is defined in the Agreement) and prior to 5:00
P.M., New York City time, on August 15, 2016 at the designated office of the
Rights Agent, or at the office of its successor as Rights Agent, one
one-thousandth of a fully paid non-assessable share of Series B Common Stock,
par value $0.0001 per share, of the Company (the "Series B Shares"), at a
purchase price of $3.00 per one one-thousandth of a Series B Share (the
"Purchase Price"), upon presentation and surrender of this Right Certificate
with the Form of Election to Purchase duly executed. The number of Rights
evidenced by this Right Certificate (and the number of one one-thousandths of a
Series B Share which may be purchased upon exercise hereof) set forth above, and
the Purchase Price set forth above, are the number and Purchase Price as of
August 15, 2006, based on the Series B Shares as constituted at such date. As
provided in the Agreement, the Purchase Price and the number of one
one-thousandth of a Series B Share which may be purchased upon the exercise of
the Rights evidenced by this Right Certificate are subject to modification and
adjustment upon the happening of certain events.

      This Right Certificate is subject to all of the terms, provisions and
conditions of the Agreement, which terms, provisions and conditions are hereby
incorporated herein by reference and made a part hereof and to which Agreement
reference is hereby made for a full description of the rights, limitations of
rights, obligations, duties and immunities hereunder of the Rights Agent, the
Company and the holders of the Right Certificates. Copies of the Agreement are
on file at the principal executive offices of the Company and the offices of the
Rights Agent.

      This Right Certificate, with or without other Right Certificates, upon
surrender at the designated office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Series B Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.

                                       B-1
<PAGE>

      Subject to the provisions of the Agreement, the Rights evidenced by this
Right Certificate (i) may be redeemed by the Company at a redemption price of
$0.001 per Right or (ii) may be exchanged in whole or in part for Series B
Shares or shares of the Company's Common Stock, par value $0.0001 per share.

      No fractional Series B Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth of a Series B Share, which may, at the election
of the Company, be evidenced by depositary receipts), but, in lieu thereof, a
cash payment will be made, as provided in the Agreement.

      No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Series B Shares or of
any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Agreement or herein be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in the Agreement), or
to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by this Right Certificate shall have been exercised as provided
in the Agreement.

      This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.

      WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of ____, _____.

ATTEST:                                     CAPITAL GOLD CORPORATION

                                            By
---------------------------------------       ----------------------------------
Name:                                          Name:
Title:                                         Title:
Countersigned:

AMERICAN STOCK TRANSFER & TRUST COMPANY

By
   ------------------------------------
    Name:
    Title:

                                       B-2
<PAGE>

                    Form of Reverse Side of Right Certificate

                               FORM OF ASSIGNMENT

                (To be executed by the registered holder if such
               holder desires to transfer the Right Certificate.)

   FOR VALUE RECEIVED _______________ hereby sells, assigns and transfers unto

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                  (Please print name and address of transferee)

this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint _____ Attorney, to transfer the
within Right Certificate on the books of the within-named Company, with full
power of substitution.

Dated:
      ---------------------

                                    --------------------------------------
                                    Signature

Signature Guaranteed:

      All Guarantees must be made by a financial institution (such as a bank or
broker) which is a participant in the Securities Transfer Agents Medallion
Program ("STAMP"), the New York Stock Exchange, Inc. Medallion Signature Program
("MSP"), or the Stock Exchanges Medallion Program ("SEMP") and must not be
dated. Guarantees by a notary public are not acceptable.

      The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Agreement).

                                    --------------------------------------
                                    Signature

              Form of Reverse Side of Right Certificate - continued

                                       B-3
<PAGE>

                          FORM OF ELECTION TO PURCHASE

                  (To be executed if holder desires to exercise
                  Rights represented by the Right Certificate.)

To: CAPITAL GOLD CORPORATION

      The undersigned hereby irrevocably elects to exercise _________ Rights
represented by this Right Certificate to purchase the Series B Shares issuable
upon the exercise of such Rights and requests that certificates for such Series
B Shares be issued in the name of:

      Please insert social security or other identifying number

--------------------------------------------------------------------------------
                         (Please print name and address)

--------------------------------------------------------------------------------

If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:

Please insert social security or other identifying number

--------------------------------------------------------------------------------
                         (Please print name and address)

--------------------------------------------------------------------------------

Dated:_____________________________

                                    -------------------------------------
                                    Signature

Signature Guaranteed:

      All Guarantees must be made by a financial institution (such as a bank or
broker) which is a participant in the Securities Transfer Agents Medallion
Program ("STAMP"), the New York Stock Exchange, Inc. Medallion Signature Program
("MSP"), or the Stock Exchanges Medallion Program ("SEMP") and must not be
dated. Guarantees by a notary public are not acceptable.

      The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Agreement).

                                    ---------------------------------------
                                    Signature

                                       B-4
<PAGE>

                                     NOTICE

      The signature in the Form of Assignment or Form of Election to Purchase,
as the case may be, must conform to the name as written upon the face of this
Right Certificate in every particular, without alteration or enlargement or any
change whatsoever.

      In the event the certification set forth above in the Form of Assignment
or the Form of Election to Purchase, as the case may be, is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Agreement) and such Assignment or Election
to Purchase will not be honored.

                                       B-5
<PAGE>

                                                                       Exhibit C

                  SUMMARY OF RIGHTS TO PURCHASE SERIES B SHARES

Introduction

      On August 14, 2006, the Board of Directors of our Company, Capital Gold
Corporation, a Delaware corporation, declared a dividend of one Series B common
purchase right (a "Right") for each outstanding share of common stock, par value
$0.0001 per share. The dividend is payable to the stockholders of record on
August 14, 2006.

      In general terms, the Rights Agreement imposes a significant penalty upon
any person or group that acquires 20% or more of our outstanding common stock
without the approval of our Board. The Rights Agreement should not interfere
with any merger or other business combination approved by our Board.

      For those interested in the specific terms of the Rights Agreement as made
between our Company and American Stock Transfer & Trust Company, as the Rights
Agent, on August 15, 2006, we provide the following summary description. Please
note, however, that this description is only a summary, and is not complete, and
should be read together with the entire Rights Agreement, which has been filed
with the Securities and Exchange Commission as an exhibit to a Registration
Statement on Form 8-A dated August 16, 2006. A copy of the agreement is
available free of charge from our Company.

      The Rights. Our Board authorized the issuance of a Right with respect to
each outstanding share of common stock on August 14, 2006. The Rights will
initially trade with, and will be inseparable from, the common stock. The Rights
are evidenced only by certificates that represent shares of common stock. New
Rights will accompany any new shares of common stock we issue until the
Distribution Date described below.

      Exercise Price. Each Right will allow its holder to purchase from our
Company one one-thousandth of a share of Series B Common Stock ("Series B
Share") for $3.00, once the Rights become exercisable. This portion of a Series
B Share will give the stockholder dividend and liquidation rights that are
senior, but generally similar to, those carried by one share of common stock,
and one one-thousandth of the voting rights of one share of common stock. Prior
to exercise, the Right does not give its holder any dividend, voting or
liquidation rights.

      Exercisability. The Rights will not be exercisable until

      o     10 days after the public announcement that a person or group has
            become an "Acquiring Person" by obtaining beneficial ownership of
            20% or more of our existing outstanding common stock, or, if
            earlier,

      o     10 business days (or a later date determined by our Board before any
            person or group becomes an Acquiring Person) after a person or group
            begins a tender or exchange offer which, if completed, would result
            in that person or group becoming an Acquiring Person.

                                       C-1
<PAGE>

      We refer to the date when the Rights become exercisable as the
"Distribution Date." Until that date, the common stock certificates will also
evidence the Rights, and any transfer of shares of common stock will constitute
a transfer of Rights. After that date, the Rights will separate from the common
stock and be evidenced by book-entry credits or by Rights certificates that we
will mail to all eligible holders of common stock. Any Rights held by an
Acquiring Person are void and may not be exercised.

      Consequences Of A Person Or Group Becoming An Acquiring Person.

      o     Flip In. If a person or group becomes an Acquiring Person, all
            holders of Rights except the Acquiring Person may, for $3.00,
            purchase shares of our common stock with a market value of $6.00,
            based on the market price of the common stock prior to such
            acquisition.

      o     Flip Over. If our Company is later acquired in a merger or similar
            transaction after the Distribution Date, all holders of Rights
            except the Acquiring Person may, for $3.00, purchase shares of the
            acquiring corporation with a market value of $6.00, based on the
            market price of the acquiring corporation's stock, prior to such
            merger.

Series B Share Provisions.

      Each one one-thousandth of a Series B Share, if issued:

      o     will not be redeemable.

      o     will entitle holders to quarterly dividend payments of $0.001 per
            share, or an amount equal to the dividend paid on one share of our
            existing common stock, whichever is greater.

      o     will entitle holders upon liquidation either to receive $1 per share
            or an amount equal to the payment made on one share of our existing
            common stock, whichever is greater.

      o     will have one one-thousandth of the voting power of one share of
            common stock.

      o     if shares of our common stock are exchanged via merger,
            consolidation, or a similar transaction, will entitle holders to a
            per share payment equal to the payment made on one share of common
            stock.

      The value of one one-thousandth interest in a Series B Share should be
roughly approximate to the value of one share of common stock.

      Expiration. The Rights will expire on August 15, 2016.

      Redemption. Our Board may redeem the Rights for $0.001 per Right at any
time before any person or group becomes an Acquiring Person. If our Board
redeems any Rights, it must redeem all of the Rights. Once the Rights are
redeemed, the only right of the holders of Rights will be to receive the
redemption price of $0.001 per Right. The redemption price will be adjusted if
we have a stock split or stock dividends of our common stock.

                                       C-2
<PAGE>

      Exchange. After a person or group becomes an Acquiring Person, but before
an Acquiring Person owns 50% or more of our outstanding common stock, our Board
may extinguish the Rights by exchanging one share of our existing common stock
or an equivalent security for each Right, other than Rights held by the
Acquiring Person.

      Anti-Dilution Provisions. Our Board may adjust the purchase price of the
Series B Shares, the number of Series B Shares issuable and the number of
outstanding Rights to prevent dilution that may occur from a stock dividend, a
stock split, a reclassification of the Series B Shares or common stock. No
adjustments to the Exercise Price of less than 1% will be made.

      Amendments. The terms of the Rights Agreement may be amended by our Board
without the consent of the holders of the Rights. After a person or group
becomes an Acquiring Person, our Board may not amend the agreement in a way that
adversely affects holders of the Rights.

      Stockholder Approval. The Rights Agreement is effective immediately, but
will be terminated if not approved by a majority of our stockholders, and any
other applicable stockholder ratification requirements of the Toronto Stock
Exchange are satisfied, at a meeting held on or prior to February 4, 2007.

                                       C-3================================================================================

                                                               Execution Version

                                CREDIT AGREEMENT

                           Dated as of August 15, 2006

                                      among

                      MINERA SANTA RITA S. DE R.L. DE C.V.,

                                       and

                        ORO DE ALTAR S. DE R.L. DE C.V.,
                                as the Borrowers

                            CAPITAL GOLD CORPORATION,

                                as the Guarantor

                               STANDARD BANK PLC,

                                  as the Lender

                                       and

                               STANDARD BANK PLC,

                         as the Offshore Account Holder

================================================================================

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

Section                                                                                                        Page
-------                                                                                                        ----
<S>               <C>                                                                                           <C>
                                    ARTICLE I
                        DEFINITIONS AND ACCOUNTING TERMS

Section 1.01      Defined Terms...................................................................................1
Section 1.02      Other Interpretive Provisions..................................................................25
Section 1.03      Accounting Terms...............................................................................26
Section 1.04      Rounding.......................................................................................26
Section 1.05      Intentionally Omitted..........................................................................26
Section 1.06      Currency of Coverage Ratios....................................................................26
Section 1.07      Updates of Life of Mine Plan and Financial Model...............................................27
Section 1.08      Determination of Material Adverse Effect, Etc..................................................27

                                   ARTICLE II
                       THE COMMITMENTS AND THE BORROWINGS

Section 2.01      The Loans......................................................................................27
Section 2.02      Borrowings.....................................................................................27
Section 2.03      Prepayments....................................................................................28
Section 2.04      Termination or Reduction of Commitment.........................................................29
Section 2.05      Repayment of Loans.............................................................................30
Section 2.06      Interest.......................................................................................31
Section 2.07      Fees...........................................................................................31
Section 2.08      Computation of Interest and Fees...............................................................32
Section 2.09      Evidence of Indebtedness.......................................................................32
Section 2.10      Payments Generally.............................................................................33

                                   ARTICLE III
                     TAXES, YIELD PROTECTION AND ILLEGALITY

Section 3.01      Taxes..........................................................................................33
Section 3.02      Illegality.....................................................................................34
Section 3.03      Increased Costs; Reserves on Loans.............................................................34
Section 3.04      Compensation for Losses........................................................................35

                                   ARTICLE IV
                              CONDITIONS PRECEDENT

Section 4.01      Conditions Precedent to Closing Date...........................................................36
Section 4.02      Conditions Precedent to Initial Borrowing......................................................39
Section 4.03      Conditions Precedent to All Borrowings.........................................................41
Section 4.04      Conditions Precedent to Physical Completion....................................................42
Section 4.05      Conditions Precedent to Economic Completion....................................................44
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
<S>               <C>                                                                                           <C>
                                    ARTICLE V
                         REPRESENTATIONS AND WARRANTIES

Section 5.01      Representations and Warranties of the Borrowers................................................45
Section 5.02      Representations of the Guarantor...............................................................54

                                   ARTICLE VI
                                    ACCOUNTS

Section 6.01      Creation of the Accounts.......................................................................56
Section 6.02      Onshore Accounts...............................................................................57
Section 6.03      Subaccounts....................................................................................57
Section 6.04      Deposits or Credits............................................................................57
Section 6.05      Transfers to and Withdrawals from Offshore Revenues and Disbursement Accounts Pre-Default......58
Section 6.06      Transfers and Withdrawals from Accounts During the Continuance of a Default....................60
Section 6.07      Transfers and Withdrawals from Offshore Operating Account......................................60
Section 6.08      Estimated Payment Certificate..................................................................61
Section 6.09      Secured Obligation Payment Notices.............................................................61
Section 6.10      Restricted Payment Notices.....................................................................61
Section 6.11      Transfers and Withdrawals from Offshore and Onshore Operating Accounts.........................61
Section 6.12      Debt Service Reserve Account...................................................................62
Section 6.13      Insurance Proceeds Account.....................................................................63
Section 6.14      Reports and Certifications.....................................................................63
Section 6.15      Books and Accounts.............................................................................63
Section 6.16      Offshore Account Holder Undertakings...........................................................63

                                   ARTICLE VII
                              AFFIRMATIVE COVENANTS

Section 7.01      Affirmative Covenants..........................................................................65

                                  ARTICLE VIII
                               NEGATIVE COVENANTS

Section 8.01      Negative Covenants.............................................................................69

                                   ARTICLE IX
                               FINANCIAL COVENANTS

Section 9.01      Borrowers' Financial Covenants.................................................................73
Section 9.02      Guarantor's Financial Covenants................................................................73
</TABLE>

                                       ii

<PAGE>

<TABLE>
<CAPTION>
<S>               <C>                                                                                            <C>
                                    ARTICLE X
                 REPORTING, NOTICE AND CALCULATION REQUIREMENTS

Section 10.01     Reporting Requirements.........................................................................74
Section 10.02     Preparation of Environmental Reports...........................................................79
Section 10.03     Calculation of Financial Ratios................................................................80
Section 10.04     Translations...................................................................................80

                                   ARTICLE XI
                                    INSURANCE

Section 11.01     Required Insurance  ...........................................................................80
Section 11.02     Application of Insurance Proceeds..............................................................80

                                   ARTICLE XII
                             [INTENTIONALLY OMITTED]

                                  ARTICLE XIII
                         EVENTS OF DEFAULT AND REMEDIES

Section 13.01     Events of Default..............................................................................81
Section 13.02     Remedies upon Default..........................................................................83
Section 13.03     Right of Setoff................................................................................84

                                   ARTICLE XIV
                             [INTENTIONALLY OMITTED]

                                   ARTICLE XV
                                  MISCELLANEOUS

Section 15.01     Amendments, Etc................................................................................84
Section 15.02     Notices and Other Communications; Facsimile Copies.............................................84
Section 15.03     No Waiver; Cumulative Remedies.................................................................85
Section 15.04     Expenses; Indemnity; Damage Waiver.............................................................85
Section 15.05     Payments Set Aside.............................................................................86
Section 15.06     Successors and Assigns.........................................................................86
Section 15.07     Treatment of Certain Information; Confidentiality..............................................88
Section 15.08     Right of Setoff................................................................................89
Section 15.09     Counterparts; Effectiveness....................................................................89
Section 15.10     Survival.......................................................................................89
Section 15.11     Severability...................................................................................90
Section 15.12     Consultants....................................................................................90
Section 15.13     Benefits of Agreement..........................................................................91
Section 15.14     Judgment Currency..............................................................................91
Section 15.15     Language; Spanish Translation..................................................................91
Section 15.16     USA PATRIOT Act Notice.........................................................................92
Section 15.17     Governing Law; Jurisdiction; Etc...............................................................92
Section 15.18     WAIVER OF JURY TRIAL...........................................................................93
Section 15.19     Joint and Several Liability....................................................................93
</TABLE>

                                      iii

<PAGE>

SCHEDULES

     Schedule 1.01(a)    Mining Concessions
     Schedule 1.01(b)    Liens of Record
     Schedule 4.05(a)    Economic Completion Tests and Conditions
     Schedule 5.01(c)    Project Approvals
     Schedule 5.01(e)    Agreement Approvals
     Schedule 5.01(n)    Affiliate Contracts
     Schedule 5.01(q)    Environmental Conditions
     Schedule 5.01(v)    Borrower Indebtedness
     Schedule 5.01(cc)   Existing Insurance
     Schedule 11.01      Required Insurance
     Schedule 15.02      Notice Information

                  EXHIBITS

     Exhibit A                [Intentionally Omitted]
     Exhibit B                Form of Guaranty
     Exhibit C                Form of Compliance Certificate
     Exhibit D                Form of Warrant Agreement
     Exhibit E                [Intentionally Omitted]
     Exhibit F                Form of Estimated Payment Certificate
     Exhibit G                [Intentionally Omitted]
     Exhibit H                Form of Loan Notice
     Exhibit I                Form of Note
     Exhibit J-1              Form of Legal Opinion of Davis Graham & Stubbs
                              LLP, counsel to the Loan Parties
     Exhibit J-2              Form of Legal Opinion of Lizarraga, Robles,
                              Tapia y Cabrera S.C., special Mexican counsel
                              to the Loan Parties
     Exhibit K-1              Form of Mortgage
     Exhibit K-2              Form of Equity Pledge Agreements
     Exhibit K-3              Form of Movable Assets Pledges
     Exhibit K-4              Form of Account Pledge Agreement
     Exhibit L                [Intentionally Omitted]
     Exhibit M                Form of IE Construction Report
     Exhibit N-1              Form of Independent Engineer Physical
                              Completion Certificate

     Exhibit N-2              Form of Borrower Physical Completion Certificate
     Exhibit O-1              Form of Independent Engineer Economic

                              Completion Certificate

     Exhibit O-2              Form of Borrower Economic Completion Certificate

                                       iv

<PAGE>

                                CREDIT AGREEMENT

This CREDIT AGREEMENT ("Agreement") is entered into as of August 15, 2006, among
MINERA SANTA RITA S. DE R.L. DE C.V., a Mexican company ("MSR"), ORO DE ALTAR S.
DE R.L. DE C.V., a Mexican company ("Oro de Altar" and together with MSR, the
"Borrowers" and each individually, a "Borrower"), CAPITAL GOLD CORPORATION, a
Delaware corporation (the "Guarantor"), STANDARD BANK PLC, a bank organized
under the laws of England and Wales (the "Lender") and STANDARD BANK PLC, a bank
organized under the laws of England and Wales ("Offshore Account Holder") not in
its individual capacity except as expressly set forth herein but solely in its
capacity as Offshore Account Holder.

                             PRELIMINARY STATEMENTS

The Borrowers have undertaken to design, construct, finance, furnish, install,
test, commission, own, operate and maintain a gold mine (the "Mine") to enable
the production of Gold, located in the State of Sonora, Mexico (collectively,
the "Project").

In order to finance the Project, the Borrowers have requested that the Lender
(a) establish a senior secured non-revolving term credit facility (the "Loan
Facility") in the aggregate amount of U.S.$12,500,000 in favor of the Borrowers,
and (b) enter into certain hedging arrangements with the Borrowers in order to
limit the Borrowers' exposure to price fluctuations in respect of Gold and
interest rate fluctuations. The Lender has indicated its willingness to provide
such financing and enter into such hedging arrangements, respectively, on the
terms and conditions of this Agreement and the other Loan Documents. In order to
guaranty the payment and performance of the Secured Obligations, the Guarantor
has agreed to issue and deliver its Guaranty to the Lender.

Each of the Loan Parties has authorized the execution and delivery of each
document to which it is a party or is to be a party, including, as the case may
be, this Agreement, the Guaranty and the Collateral Documents to undertake
specified obligations to induce the Lender to provide the Loan Facility and to
enter into the Secured Hedge Agreements.

In consideration of the mutual covenants and agreements herein contained, the
parties hereto covenant and agree as follows:

                                    ARTICLE I

                        DEFINITIONS AND ACCOUNTING TERMS

      Section 1.01 Defined Terms.

      (a) As used in this Agreement, the following terms shall have the meanings
set forth below:

      "Abandonment" means a period of forty-five (45) consecutive days during
which there has been no or substantially no construction or operation and
maintenance activities of the Mine, other than by reason of the occurrence and
continuance of an Event of Force Majeure.

      "Account Direction" has the meaning specified in Section 6.16(e).

<PAGE>

      "Account Pledge Agreement" has the meaning specified in Section
4.02(a)(vii).

      "Accounts" means, collectively, the Onshore Operating Account and the
Offshore Accounts; each, individually, an "Account".

      "Act" has the meaning specified in Section 15.16.

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

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

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

      "Agreement" has the meaning specified in the introductory paragraph
hereto.

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

      "Anglo NSR Payments" means the net smelter return royalty payable to
AngloGold pursuant to the Stock Purchase Agreement.

      "Annual Period" means in the case of any determination of the Projected
Debt Service Coverage Ratio, the period consisting of four (4) consecutive
Quarterly Periods including the Quarterly Period in which such determination is
made and each of the next succeeding three (3) Quarterly Periods; provided that
for any Calculation Date on which less than three (3) succeeding Quarterly
Periods remain, "Annual Period" shall mean the period consisting of the
Quarterly Period in which such Calculation Date occurs and each remaining
Quarterly Period (if any).

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

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

                                        2
<PAGE>

      "Applicable Margin" means 4.00% per annum.

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

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

      "Assignment and Transfer" means an assignment and transfer agreement
assigning all or a portion of a Lender's interests, rights and obligations under
this Agreement pursuant to Section 15.06(d).

      "Availability Period" means the period from and including the Initial
Funding Date to the earliest to occur of (a) the Economic Completion Date, (b)
the Scheduled Economic Completion Date, and (c) the date of termination of the
Commitments in full pursuant to Section 13.02(a).

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

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

      "Borrowing" means a borrowing consisting of Loans having the same Interest
Period made by the Lender pursuant to Section 2.01.

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

      "Business Interruption Insurance Proceeds" means any and all proceeds of
any insurance, indemnity, warranty or guaranty payable from time to time with
respect to the partial or complete interruption of the operation of the Mine.

      "Calculation Date" means the last Business Day of each March, June,
September and December, commencing with the first such day after Economic
Completion.

                                        3
<PAGE>

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

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

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

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

      "Cash Trap Subaccount" has the meaning specified in Section 6.01(a)(i).

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

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

                                        4
<PAGE>

      "Closing Date" means the first date all the conditions precedent in
Section 4.01 are satisfied or waived in accordance with Section 15.01.

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

      "Collateral Documents" means, collectively, the Equity Pledge Agreements,
the Mexican Collateral Documents, and any other similar agreements, instruments
or documents delivered to the Lender pursuant to the terms of this Agreement or
any other Loan Document that creates or purports to create a Lien in favor of
the Lender.

      "Commitment" means the Lender's obligation to make Loans to the Borrowers
pursuant to Section 2.01 in an aggregate principal amount at any one time
outstanding not to exceed $12,500,000, as such amount may be adjusted from time
to time in accordance with this Agreement.

      "Compliance Certificate" means a certificate substantially in the form of
Exhibit C.

      "Constituent Documents" means (a) with respect to each of the Borrowers,
the acta constitutiva of such Borrower, the estatutos sociales of such Borrower
and any certificate of designation or instrument relating to the rights of
preferred shareholders or other holders of Equity Interests in such Borrower and
any shareholder rights agreement or other similar agreement relating to such
Borrower, as the case may be, duly registered before the corresponding public
registry of commerce of the jurisdiction where such Borrower is domiciled, and
(b) with respect to any other Person, (i) to the extent such other Person is a
corporation, the certificate or articles of incorporation and the bylaws (or
equivalent or comparable constitutive documents with respect to any non-U.S.
jurisdiction), (ii) to the extent such other Person is a limited liability
company, the certificate of formation or articles of formation or organization
and operating agreement, and (iii) to the extent such other Person is a
partnership, joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation or
organization and any agreement, instrument, filing or notice with respect
thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such Person.

      "Construction Budget" means the budget of the Borrowers for the
development and construction of the Mine in accordance with the Life of Mine
Plan through Economic Completion, detailing the Borrowers' quantitative monthly
projections for Project Costs on an individual line item basis and the sources
and uses of funds, projected timetable sequencing, critical path schedule and
milestones applicable to the development and construction of the mine and
supporting qualitative information, as updated and revised from time to time.

      "Construction Contractor" means M3 Mexicana, S. de R.L. de C.V.

                                        5
<PAGE>

      "Construction Contract" means the Agreement for Engineering, Procurement,
Construction and Construction Management Services dated June 1, 2006 between MSR
and the Construction Contractor.

      "Construction Progress Report" has the meaning specified in Section
10.01(a).

      "Consultant" means any of the Independent Engineer, the Insurance
Consultant or any Replacement Consultant.

      "Contest" means, with respect to any matter or claim involving any Person,
that such Person is contesting such matter or claim in good faith and by
appropriate proceedings timely instituted; provided that the following
conditions are satisfied: (a) such Person has posted a bond or other security
acceptable to the Lender or has established adequate reserves with respect to
the contested items in accordance with Applicable GAAP; (b) during the period of
such contest, the enforcement of any contested item is effectively stayed; (c)
neither such Person nor any of its officers, directors or employees nor the
Lender or its respective officers, directors or employees is, or could
reasonably be expected to become, subject to any criminal liability or sanction
in connection with such contested items; and (d) such contest and any resultant
failure to pay or discharge the claimed or assessed amount does not, and could
not reasonably be expected to involve a risk of the sale, forfeiture or loss of,
or the creation, existence or imposition of any Lien on, any of the Collateral,
that would have a Material Adverse Effect.

      "Continuance" or "Continuing" means with respect to a Prospective Event of
Default or an Event of Default, that the event or condition that constitutes
such Prospective Event of Default or Event of Default has occurred and is
continuing and that such Prospective Event of Default or Event of Default that
has occurred or would, with the giving of notice or passage of time, or both,
occur, has not been remedied or waived.

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

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

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

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

      "Debt Service Reserve Account" has the meaning specified in Section
6.01(a)(ii).

                                        6
<PAGE>

      "Debt Service Reserve Deficiency" means, on any day after the Economic
Completion Date, the amount, if any, by which the balance of the Debt Service
Reserve Account is less than the Debt Service Reserve Requirement for such day.

      "Debt Service Reserve Requirement" means, as of the Economic Completion
Date, U.S.$900,000 and thereafter, U.S.$1,800,000.

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

      "Default Rate" means an interest rate equal to 2.0% per annum plus the
LIBO Rate plus the Applicable Margin.

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

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

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

      "Economic Completion" has the meaning specified in Section 4.05(a).

      "Economic Completion Date" means the day on which Economic Completion
occurs.

      "Eligible Assignee" means (i) a commercial bank organized under the laws
of the United States, or any State thereof, having total assets in excess of
$500,000,000.00 or any commercial finance or asset based lending affiliate of
any such commercial bank; (ii) a savings and loan association or savings bank
organized under the laws of the United States, or any State thereof, having a
net worth of at least $250,000,000.00 calculated in accordance with GAAP; and
(iii) any Affiliate of the Lender.

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

                                        7
<PAGE>

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

      "Environmental Management Plan" means the Environmental Management Plan
for the Project dated March 2006 prepared for the Borrowers by Alan Czarnowsky,
as amended, modified and changed from time to time, which has been reviewed and
approved by the Independent Engineer.

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

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

      "Equity Pledge Agreements" has the meaning specified in Section
4.02(a)(v).

      "ERISA" means the Employee Retirement Income Security Act of 1974.

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

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

      "Estimated Payment Certificate" means a certificate delivered by the
Borrowers in accordance with Section 6.08 in substantially the form of Exhibit
F, which shall contain (a) prior to Economic Completion, the total amount of
Approved Project Costs, broken down by relevant category, expected to be due and
payable in the forty-five (45) day period following the relevant Funds Transfer
Date, approved by the Independent Engineer in accordance with Section 6.08, and
(b) on and after the Economic Completion Date, the total amount of Operating
Costs, broken down by relevant category, expected to be due and payable in the
forty-five (45) day period following the relevant Funds Transfer Date.

                                        8
<PAGE>

      "Event of Default" has the meaning specified in Section 13.01.

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

      "Excess Cash Flow" means, for any period (without duplication) the excess
of Cash Flow Available for Debt Service (based on amounts actually received and
paid for such period) less the amount of Debt Service paid by the Borrowers
during such period less any amounts transferred to the Debt Service Reserve
Account pursuant to priority sixth of Section 6.05 and pursuant to Section 6.06
during such period.

      "Excess Cash Flow Payment Date" means the tenth (10th) Business Day
following each Calculation Date, beginning with the first such date following
the Economic Completion Date.

      "Excluded Taxes" means, with respect to the Lender, (a) taxes imposed on
or measured by its overall net income (however denominated), and franchise taxes
imposed on it (in lieu of net income taxes), by the jurisdiction (or any
political subdivision thereof) under the laws of which such recipient is
organized or in which its principal office is located; (b) any branch profits
taxes imposed by the United States or any similar tax imposed by any other
jurisdiction in which the Borrowers are located; and (c) any withholding tax
that is attributable to the Lender's failure or inability (other than as a
result of a Change in Law) to comply with Section 3.01(e), except to the extent
that the Lender was entitled, at the time of designation of a new lending
office, to receive additional amounts from the Borrowers with respect to such
withholding tax pursuant to Section 3.01(a).

                                        9
<PAGE>

      "Expropriatory Event" means any action, series of actions, omissions or
series of omissions by any Governmental Authority (a) to appropriate,
confiscate, condemn, expropriate, nationalize, seize or otherwise take all or a
substantial portion of the Mine or the property or assets of the Borrowers or of
any Equity Interests in the Borrowers, (b) to assume custody or control of the
property or other assets or business operations of the Borrowers or any Equity
Interests in the Borrowers, (c) that results in the dissolution or
disestablishment of either of the Borrowers, (d) that prevents the Borrowers
from carrying on the business or operations of the Mine or a substantial portion
thereof substantially in accordance with the Life of Mine Plan, or (e) that
deprives or impairs the exercise by the Lender of any material right granted
under or by the Collateral Documents or otherwise in respect of the Collateral.

      "Federal Book Entry Regulations" means (a) the federal regulations
contained in Subpart B ("Treasury/Reserve Automated Debt Entry System (TRADES)")
governing book-entry securities consisting of U.S. Treasury bills, notes and
bonds and Subpart D ("Additional Provisions") of 31 C.F.R. Part 357, 31 C.F.R.
ss. 357.2, ss. 357.10 through ss. 357.15 and ss. 357.40 through ss. 357.45 and
(b) to the extent substantially identical to the federal regulations referred to
in clause (a) above (as in effect from time to time), the federal regulations
governing other book-entry securities.

      "Financial Model" means the pro forma financial statements and projections
of revenue and expenses and cash flows with respect to the Project and the
Borrowers for each of the computation calendar years 2006 through 2012,
consistent with the Life of Mine Plan, and including projections with respect to
projected compliance with the financial covenants set forth in Article IX, in
form and substance reasonably satisfactory to the Lender, as amended or modified
from time to time in accordance with Section 1.07 or pursuant to any updated
Financial Model delivered and approved in accordance with Section 10.01(c) from
time to time.

      "Foreign Government Scheme or Arrangement" has the meaning specified in
Section 5.01(t)(ii).

      "Foreign Plan" has the meaning specified in Section 5.01(t)(ii).

      "FRB" means the Board of Governors of the Federal Reserve System of the
United States.

      "Funds Transfer Date" means the first Business Day of each calendar month.

      "GAAP" means, with respect to any jurisdiction, generally accepted
accounting principles as may be adopted or endorsed by a significant segment of
the accounting profession in the relevant jurisdiction, that are applicable to
the circumstances as of any date of determination consistently applied.

      "Gold" means gold of a purity of at least 0.995 fine in a form readily
tradable with members of the London Bullion Market Association.

                                       10
<PAGE>

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

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

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

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

      "Guarantor Shares" has the meaning specified in Section 2.07(c).

      "Guarantor Warrants" has the meaning specified in Section 2.07(d).

      "Guaranty" means the Guaranty made by the Guarantor in favor of the
Lender, substantially in the form of Exhibit B.

      "Hazardous Materials" means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including sodium cyanide, petroleum or petroleum distillates, asbestos or
asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious
or medical wastes and all other substances or wastes of any nature regulated
pursuant to any Environmental Law.

                                       11
<PAGE>

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

      "IE Construction Report means a report from the Independent Engineer
substantially in the form of Exhibit M hereto which shall be due to the Lender
no later than twenty-five (25) days after the end of each month prior to
Physical Completion, which shall certify (a) that the information relating to
the construction of the Mine contained in the most recently delivered
Construction Progress Report is true and complete in all material respects, (b)
that there have been no events, conditions or changes that have occurred since
the delivery of the last IE Construction Report that the Independent Engineer
believes could reasonably be expected to (i) have a Material Adverse Effect,
(ii) cause Physical Completion to occur later than the Scheduled Physical
Completion Date or (iii) cause Economic Completion to occur later than the
Scheduled Economic Completion Date, (c) that payments have been made to the
Construction Contractor substantially in accordance with the Construction
Contract and (d) such other matters or conditions as reasonably requested by the
Lender.

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

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

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

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

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

                                       12
<PAGE>

            (e) indebtedness (excluding prepaid interest thereon) secured by a
      Lien on property owned or being purchased by such Person (including
      indebtedness arising under conditional sales or other title retention
      agreements), whether or not such indebtedness shall have been assumed by
      such Person or is limited in recourse;

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

            (g) all obligations of such Person to purchase, redeem, retire,
      defease or otherwise make any payment in respect of any Equity Interests
      in such Person or any other Person or any warrants, rights or options to
      acquire such Equity Interests, valued, in the case of redeemable preferred
      interests, at the greater of its voluntary or involuntary liquidation
      preference plus accrued and unpaid dividends; and

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

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

      "Indemnified Taxes" means Taxes other than Excluded Taxes.

      "Indemnitee" has the meaning specified in Section 15.04(b).

      "Independent Engineer" means SRK Consulting or any other engineering
consultant firm selected by the Lender which is reasonably acceptable to the
Borrowers (provided that such condition shall not apply during the Continuance
of a Prospective Event of Default or Event of Default) to advise the Lender in
connection with the Project from time to time.

      "Information" has the meaning specified in Section 15.07.

      "Initial Funding Date" means the date on which the conditions precedent
set forth in Sections 4.02 and 4.03 are satisfied and initial disbursement of
the Loans shall occur.

                                       13
<PAGE>

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

      "Insurance Consultant" means Moore-McNeil, LLC or any other insurance
consultant firm selected by the Lender to advise the Lender in connection with
insurance matters relating to the Project from time to time.

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

      "Insurance Proceeds Account" has the meaning set forth in Section
6.01(a)(iii).

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

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

                                       14
<PAGE>

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

      "Investment Company Act" means the United States Investment Company Act of
1940.

      "Judgment Currency" has the meaning specified in Section 15.14(a).

      "Judgment Currency Conversion Date" has the meaning specified in Section
15.14(a).

      "Lender" has the meaning set forth in the first paragraph of this
Agreement.

      "LIBO Rate" means, for any Interest Period:

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

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

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

                                       15
<PAGE>

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

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

      "Loan" has the meaning specified in Section 2.01.

      "Loan Documents" means, collectively, (a) this Agreement, (b) the Notes,
(c) the Guaranty, (d) the Collateral Documents, (e) the Secured Hedge
Agreements, and (f) any ancillary documents, including any fee letters with the
Lender and all certificates delivered under or in connection with the documents
referred to in clauses (a) through (e).

      "Loan Facility" has the meaning specified in the preliminary statements to
this Agreement.

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

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

      "Loan Parties" means, collectively, the Borrowers and the Guarantor.

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

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

                                       16
<PAGE>

      "Material Project Agreement" means each Project Agreement and each
Additional Project Agreement.

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

      "Maturity Date" means the fourteenth Principal Repayment Date.

      "Mexican Collateral Document" means each of the Equity Pledge Agreements
and the Mortgage.

      "Mexican GAAP" means GAAP as in effect in Mexico.

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

      "Mexico" means the United Mexican States.

      "Mine" has the meaning specified in the preliminary statements to this
Agreement.

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

      "Mining Concession" means each of the titulos de concesion listed on
Schedule 1.01(a).

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

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

      "Mining Services Contract" means that certain Mining Contract, dated [ ]
between MSR and Caborca Industrial, S.A. de C.V.

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

      "Mortgage" has the meaning specified in Section 4.02(a)(iv).

      "Movable Assets Pledges" has the meaning specified in Section 4.01(a)(vi).

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

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

                                       17
<PAGE>

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

      "NPI Acquisition" means the acquisition by MSR of the net profits interest
payable pursuant to the Termination Agreement on substantially those terms and
conditions disclosed in writing to the Lender as of the date hereof, which is
scheduled to be consummated within 30 days following the Closing Date.

      "NPI Borrowing" means any Borrowing by the Borrowers of a Loan in the
aggregate principal amount not to exceed $500,000 to the extent such Borrowing
is to be used by MSR for the NPI Acquisition.

      "Obligation Currency" has the meaning specified in Section 15.14.

      "Officer's Certificate" means, with respect to any Person, a certificate
signed by a Responsible Officer of such Person.

      "Offshore Account" means each of the Offshore Revenues and Disbursement
Account, the Debt Service Reserve Account, the Insurance Proceeds Account, the
Offshore Operating Account and any Subaccount of any thereof.

      "Offshore Account Holder" means Standard Bank Plc in its capacity as
offshore account holder.

      "Offshore Operating Account" has the meaning specified in Section
6.01(a)(iv).

      "Offshore Revenues and Disbursement Account" has the meaning specified in
Section 6.01(a)(i).

      "Onshore Account Holder" means HSBC or such other bank nominated by the
Company and approved by Lender.

      "Onshore Operating Accounts" has the meaning specified in Section 6.02(a).

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

                                       18
<PAGE>

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

      "Oro de Altar" has the meaning specified in the preliminary statements to
this Agreement.

      "Other Taxes" means all present or future stamp or documentary duties or
taxes, registration fees, filing costs or any other excise or property taxes,
charges or similar levies arising from any payment made hereunder or under any
other Loan Document or from the execution, delivery, filing, recording,
perfection, admissibility in evidence or enforcement of, or otherwise with
respect to, this Agreement or any other Loan Document.

      "Ounce" means a fine troy ounce.

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

      "Payment Date" means the last day of each Interest Period, each Quarterly
Date, and each Excess Cash Flow Payment Date.

      "PBGC" means the Pension Benefit Guaranty Corporation.

      "Permitted Liens" means each of the following as to which no enforcement,
collection, execution, levy or foreclosure proceeding shall have been commenced:
(a) Liens for taxes, not yet due or which are subject to Contest; (b) carriers',
warehousemen's, mechanics', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business which are not overdue for a period of
more than 60 days or which are subject to Contest and in either case,
individually or together with all other Permitted Liens outstanding on any date
of determination do not materially adversely affect the use of the property to
which they relate; (c) pledges or deposits in the ordinary course of business
under worker's compensation laws or similar legislation, unemployment insurance
or other types of social security or employment security other than any Lien
imposed by ERISA or any similar Foreign Government Scheme or Arrangement which
could be reasonably expected to have a Material Adverse Effect; (d) pledges or
deposits to secure the performance of reclamation, remediation, trade contracts
and leases (other than Indebtedness), statutory obligations, surety bonds (other
than bonds related to judgments or litigation), performance bonds and other
obligations of a like nature incurred in the ordinary course of business; (e)
easements, rights of way, rights of use, restrictions and other similar
encumbrances affecting real property which, in the aggregate, are not
substantial in amount, and which do not in any case materially detract from the
value of the property subject thereto; (f) Liens securing judgments for the
payment of money not constituting an Event of Default under Section 13.01(f) or
securing appeal or other surety bonds related to such judgments; (g) Liens of
record or otherwise registered with the applicable Governmental Authorities in
Mexico as set forth on Schedule 1.01(b); and (h) any Liens created in favor of
the Lender under or pursuant to the Loan Documents.

                                       19
<PAGE>

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

      "Peso" or "P$" means the lawful currency of Mexico.

      "Peso Withholding Subaccount" has the meaning specified in Section
6.02(a).

      "Physical Completion" has the meaning specified in Section 4.04(a).

      "Physical Completion Date" means the day on which Physical Completion
occurs.

      "Pledgor" means Leadville Mining & Milling Holding Corporation.

      "Principal Repayment Date" means each Quarterly Date commencing on the
earlier of (i) the first Quarterly Date occurring after the Economic Completion
Date and (ii) the Scheduled Economic Completion Date.

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

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

      "Project Agreements" means the Construction Contracts, the Real Estate
Rights Agreements, the Mining Services Contract and the Mining Contract.

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

                                       20
<PAGE>

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

      "Project Life Coverage Ratio" means, as of any date of determination, the
ratio of (a) Net Present Value of Future Cash Flow for the period commencing
with such date of determination and ending on the expected date of mine closure
contemplated by the then-effective Life of Mine Plan to (b) the Outstanding
Amount on such date of determination.

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

      "Projected Debt Service" means, on any date of determination and for any
Annual Period, the amount of Debt Service projected to be payable by the
Borrowers during such period calculated as of such date of determination using
the Financial Model as then in effect.

      "Projected Debt Service Coverage Ratio" means, as of any date of
determination and for any Annual Period, the ratio of (a) Cash Flow Available
for Debt Service projected to be received by the Borrowers during such period as
calculated using the Financial Model as then in effect, to (b) Projected Debt
Service for such period.

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

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

                                       21
<PAGE>

      "Quarterly Date" means March 31st, June 30th, September 30th and December
31st of each calendar year.

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

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

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

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

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

      "Replacement Consultant" has the meaning specified in Section 15.12(a).

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

      "Required Insurance" means the insurance coverage described in Section
11.01.

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

      "Restricted Payments" means any payment to the Unrestricted Account in
accordance with Section 6.05.

      "Scheduled Economic Completion Date" means July 1, 2008.

      "Scheduled Physical Completion Date" means July 1, 2007.

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

      "Secured Hedge Agreement" means any Hedge Agreement that the Borrowers are
permitted to enter into pursuant to Section 8.01(n).

                                       22
<PAGE>

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

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

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

      "Subaccount" has the meaning specified in Section 6.03(a).

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

      "Subsidiary" of a Person means a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the
shares of securities or other interests having ordinary voting power for the
election of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise
controlled, directly or indirectly, through one or more intermediaries, or both,
by such Person.

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

                                       23
<PAGE>

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

      "Termination Agreement" means that Termination Agreement between MSR and
Grupo Minero FG S.A. de C.V., dated effective March 31, 2004.

      "Threshold Amount" means U.S.$250,000.

      "Total Funding Available" means, as of any date of determination, the
total amount of funds actually available to the Borrowers on such date of
determination for the payment of Project Costs, including funds deposited in the
Offshore Revenues and Disbursement Account, the Offshore Operating Account and
the Onshore Operating Account and all committed and available but undrawn funds
under the Loan Facility.

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

      "UCC" means the Uniform Commercial Code as in effect, from time to time,
in the State of New York.

      "United States" and "U.S." mean the United States of America.

      "Unrestricted Account" means an account of either of the Borrowers
maintained outside of Mexico that is not an Account, and does not constitute
Collateral and is not otherwise subject to the provisions applicable to Accounts
under the Loan Documents as notified by the Borrowers to the Lender from time to
time.

      "Up-Front Fee" has the meaning specified in Section 2.07(b).

      "U.S. GAAP" means generally accepted accounting principles in the United
States set forth in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or such other
principles as may be approved by a significant segment of the accounting
profession in the United States, that are applicable to the circumstances as of
the date of determination, consistently applied.

            (b) Unless otherwise defined in this Agreement, terms defined in
      Article 8 or 9 of the UCC and/or in the Federal Book Entry Regulations are
      used in this Agreement as such terms are defined in such Article 8 or 9
      and/or the Federal Book Entry Regulations.

                                       24
<PAGE>

      Section 1.02 Other Interpretive Provisions. With reference to this
Agreement and each other Loan Document, unless otherwise specified herein or in
such other Loan Document:

            (a) The words "herein," "hereto," "hereof" and "hereunder" and words
      of similar import when used in any Loan Document shall refer to such Loan
      Document as a whole and not to any particular provision thereof.

            (b) Article, section, clause, schedule, exhibit, annex and appendix
      references are to the Loan Document in which such reference appears.

            (c) The term "including" is by way of example and not limitation.

            (d) The word "or" is not exclusive.

            (e) The term "documents" includes any and all instruments,
      documents, agreements, certificates, notices, reports, financial
      statements and other writings, however evidenced, whether in physical or
      electronic form.

            (f) In computation of periods of time from a specified date to a
      later specified date, the word "from" means "from and including," the
      words "to" and "until" each mean "to but excluding" and the word "through"
      means "to and including."

            (g) The table of contents and headings set forth herein and in the
      other Loan Documents are included for convenience of reference only and
      shall not affect the interpretation of this Agreement or any other Loan
      Document.

            (h) References to any Constituent Document, any Agreement Approval,
      any Project Approval, any Environmental Permit, any agreement (including
      any Loan Document or any other Transaction Document) and any other
      contractual instrument shall be deemed to include (i) all schedules,
      exhibits, annexes, appendices or other attachments thereto and (ii) all
      subsequent amendments, restatements, extensions, supplements and other
      modifications thereto, but only to the extent that such amendments,
      restatements, extensions, supplements and other modifications are not
      prohibited by any Loan Document.

            (i) References to any law shall include all statutory and regulatory
      provisions consolidating, amending, replacing, supplementing or
      interpreting such law.

            (j) References to any Person shall include such Person's successors
      and permitted assigns (and in the case of any Governmental Authority, any
      Person succeeding to such Governmental Authority's functions and
      capacities).

            (k) References to "days" shall mean calendar days, unless the term
      "Business Days" shall be used. References to a time of day shall mean such
      time in New York City, New York, unless otherwise specified.

            (l) With respect to any term that is defined by reference to any
      Transaction Document, such term shall continue to have the original
      definition of such term in such Transaction Document notwithstanding any
      termination, expiration or modification of such Transaction Document
      except to the extent the Lender and the Borrowers may otherwise agree.

                                       25
<PAGE>

      Section 1.03 Accounting Terms.

      (a) Generally. All accounting terms not specifically or completely defined
herein shall be construed in conformity with, and all financial data (including
financial ratios and other financial calculations) required to be submitted
pursuant to this Agreement or any other Loan Document shall be prepared in
English and in conformity with, Applicable GAAP reconciled to U.S. GAAP
(including principles of consolidation where appropriate) applied on a
consistent basis, as in effect from time to time.

      (b) Changes in Applicable GAAP or U.S. GAAP. If at any time any change in
Applicable GAAP or U.S. GAAP, as the case may be, would affect the computation
of any financial ratio or requirement set forth in any Loan Document, and either
of the Borrowers or the Lender shall so request, the Lender and the Borrowers
shall negotiate in good faith to amend such ratio or requirement to preserve the
original intent thereof in light of such change in Applicable GAAP or U.S. GAAP,
as the case may be; provided that, until so amended, (i) such ratio or
requirement shall continue to be computed in accordance with Applicable GAAP or
U.S. GAAP, as the case may be, prior to such change therein and (ii) the
Borrowers shall provide to the Lender financial statements and other documents
required under this Agreement or as reasonably requested hereunder setting forth
a reconciliation between calculations of such ratio or requirement made before
and after giving effect to such change in Applicable GAAP or U.S. GAAP, as the
case may be.

      Section 1.04 Rounding. Any financial ratios required to be maintained by
the Borrowers pursuant to this Agreement shall be calculated by dividing the
appropriate component by the other component, carrying the result to one place
more than the number of places by which such ratio is expressed herein and
rounding the result up or down to the nearest number (with a rounding-up if
there is no nearest number).

      Section 1.05 Intentionally Omitted.

      Section 1.06 Currency of Coverage Ratios. For purposes of the Loan
Documents, the Debt Service Coverage Ratio, the Projected Debt Service Coverage
Ratio, the Loan Life Coverage Ratio and the Project Life Coverage Ratio shall
each be expressed in Dollars, as follows:

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

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

                                       26
<PAGE>

      Section 1.07 Updates of Life of Mine Plan and Financial Model.

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

      (b) In the event that the Borrowers (on the one hand) and the Lender (on
the other hand) are unable to agree as to the adjustment to the Financial Model
and the Life of Mine Plan in accordance with this Section 1.07, either the
Borrowers or the Lender may refer such dispute to the Independent Engineer for
resolution. The findings of the Independent Engineer with respect to any
adjustments to the Financial Model and the Life of Mine Plan so presented to it
for resolution hereunder shall be binding upon the parties.

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

      Section 1.08 Determination of Material Adverse Effect, Etc. To the extent
that any provision herein or in any other Loan Document requires that the
Borrowers or any other Person be in compliance in all material respects with
Applicable Laws, Project Approvals, Agreement Approvals, any Material Project
Agreement or any other agreement or contractual instrument, the Lender shall
have the right to make its own determination as to whether such compliance has
been achieved by the Borrowers or such other Person.

                                   ARTICLE II
                       THE COMMITMENTS AND THE BORROWINGS

      Section 2.01 The Loans. Subject to the terms and conditions set forth
herein, the Lender agrees to make loans (each such loan, a "Loan") to the
Borrowers from time to time, on any Business Day during the Availability Period,
in an aggregate amount not to exceed at any time outstanding the amount of the
Commitment. Amounts borrowed under this Section 2.01 and repaid or prepaid may
not be reborrowed.

      Section 2.02 Borrowings.

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

                                       27
<PAGE>

      (b) Funding. Following receipt of a Loan Notice, and upon satisfaction of
the applicable conditions set forth in Sections 4.01, 4.02, and 4.03, as
applicable, the Lender shall make the principal amount specified in such Loan
Notice available to the Borrowers in immediately available funds by causing such
funds to be credited to, or deposited into, the Offshore Revenues and
Disbursement Account not later than 1:00 p.m. on the Business Day specified in
the applicable Loan Notice (other than the NPI Borrowing, which shall be
deposited directly to the Onshore Operating Account).

      Section 2.03 Prepayments. (a) Optional. The Borrowers may, upon notice to
the Lender, at any time after the Economic Completion Date, voluntarily prepay
Loans in whole or in part without premium or penalty; provided that (i) such
notice must be received by the Lender not later than 11:00 a.m. three (3)
Business Days prior to any date of prepayment; and (ii) any prepayment shall be
in a principal amount of at least U.S.$250,000 or a whole multiple of
U.S.$50,000 in excess thereof or, if less, the entire principal amount thereof
then outstanding. Each such notice shall specify the date and amount of such
prepayment. If such notice is given by the Borrowers, the Borrowers shall make
such prepayment and the payment amount specified in such notice shall be due and
payable on the date specified therein.

      (b) Mandatory. The Borrowers shall prepay the outstanding Loans as
follows:

            (i) On or prior to each Excess Cash Flow Payment Date occurring
      after the Economic Completion Date, provided that the balance in the Debt
      Service Reserve Account equals or exceeds the Debt Service Reserve
      Requirement as of such date, the Borrowers shall prepay an aggregate
      principal amount of Loans equal to the product of (A) the Excess Cash Flow
      as determined in respect of the Quarterly Period ending immediately prior
      to such Excess Cash Flow Payment Date, and (B) 50%.

            (ii) On each Quarterly Date, the Borrowers shall prepay an aggregate
      principal amount of the Loans equal to the amount of any Insurance
      Proceeds received by the Borrowers or the Lender that are not permitted to
      be applied to repair, reconstruct or replace any of the damaged property
      as contemplated by Section 11.02(c).

      (c) Prepayments Generally. (i) Each prepayment of Loans pursuant to this
Section 2.03 or Section 6.05 shall be applied to the principal repayment
installments thereof in inverse order of maturity.

                                       28
<PAGE>

            (ii) Each prepayment under this Section 2.03 or Section 6.05 shall
      be accompanied by all accrued interest thereon, together with any
      additional amounts required pursuant to Section 3.04. Any amounts required
      to be applied to prepay the Loans pursuant to Section 2.03(b) or Section
      6.05 shall be applied solely to the repayment of principal, interest and
      breakage costs for the account of the Borrower.

      Section 2.04 Termination or Reduction of Commitment.

      (a) Mandatory.

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

            (ii) Any unused portion of the Commitment shall be automatically and
      permanently reduced on the last day of the Availability Period (after
      giving effect to any Loans to be made on such day).

      (b) Application of Commitment Reductions. Each reduction of the unused
portion of the Commitment pursuant to Section 2.04(a) shall be applied to the
principal repayment installments thereof in inverse order of maturity. All fees
accrued pursuant to Section 2.07(a) until the effective date of any termination
or reduction of the Commitment pursuant to this Section 2.04 shall be paid on
the effective date of such termination or reduction.

                                       29
<PAGE>

      Section 2.05 Repayment of Loans. The Borrowers shall repay to the Lender
the aggregate principal amount of all Loans outstanding on each of the Principal
Repayment Dates in the respective amounts set forth opposite such dates (which
amounts shall be reduced as a result of the application of prepayments or
Commitment reductions in accordance with the order of priority set forth in
Section 2.03(c) or 2.04(b), as applicable) as follows:

                      Principal
                    Repayment Date                    Amount
            --------------------------------- ----------------------
                          1                   $1,000,000
            --------------------------------- ----------------------
                          2                   $1,125,000
            --------------------------------- ----------------------
                          3                   $1,250,000
            --------------------------------- ----------------------
                          4                   $750,000
            --------------------------------- ----------------------
                          5                   $750,000
            --------------------------------- ----------------------
                          6                   $750,000
            --------------------------------- ----------------------
                          7                   $750,000
            --------------------------------- ----------------------
                          8                   $875,000
            --------------------------------- ----------------------
                          9                   $875,000
            --------------------------------- ----------------------
                          10                  $875,000
            --------------------------------- ----------------------
                          11                  $875,000
            --------------------------------- ----------------------
                          12                  $875,000
            --------------------------------- ----------------------
                          13                  $875,000
            --------------------------------- ----------------------
                          14                  $875,000
            --------------------------------- ----------------------

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

                                       30
<PAGE>

      Section 2.06 Interest.

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

      (b) Default Interest.

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

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

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

      (d) Interest Periods. (i) Borrowers may not at any time have outstanding
more than an aggregate of eight (8) different Interest Periods relating to
outstanding Loans and each such Interest Period shall be in respect of a
principal amount of Loans of not less than Two Hundred Fifty Thousand and No/100
Dollars ($250,000); and (ii) Borrowers may contact Lender at any time prior to
the end of an Interest Period for a quotation of the LIBO Rates in effect at
such time for given Interest Periods, and Lender shall provide such quotation
promptly upon request. If Borrowers fail to notify Lender of the next Interest
Period for any Loan at least three (3) Business Days prior to the end of the
then current Interest Period, such Loan shall automatically continue with the
same Interest Period at the close of business on the last day of the then
current Interest Period therefor, unless such Interest Period would extend
beyond the applicable Maturity Date, in which case Lender shall choose an
Interest Period that is closest in duration to the remainder of the term of the
Loans. Lender shall as soon as practicable (and, in any case, within three (3)
Business Days) notify Borrowers of each determination of the interest rate
applicable to each Loan.

      Section 2.07 Fees.

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

                                       31
<PAGE>

      (b) Up-Front Fee. Borrowers shall pay Lender a non-refundable up-front fee
of Two Hundred Thousand and No/100 Dollars ($200,000.00) (the "Up-Front Fee"),
payable and fully earned upon the Closing Date.

      (c) Guarantor Shares. Borrowers shall cause 1,150,000 common shares in the
Guarantor (the "Guarantor Shares") to be issued and delivered to Lender on the
Closing Date.

      (d) Guarantor Warrants. Borrowers shall cause 12,600,000 common share
warrants in the Guarantor (the "Guarantor Warrants") to be issued and delivered
to the Lender on the Closing Date, in the form of Exhibit D hereto.

      Section 2.08 Computation of Interest and Fees. All computations of fees
and interest shall be made on the basis of a 360-day year and actual days
elapsed (including the first day but excluding the last day) occurring in the
period for which such fees or interest are payable. Interest shall accrue on
each Loan for the day on which the Loan is made, and shall not accrue on a Loan,
or any portion thereof, for the day on which the Loan or such portion is paid.
Each determination by the Lender of an interest rate or fee hereunder shall be
conclusive and binding for all purposes, absent manifest error.

      Section 2.09 Evidence of Indebtedness.

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

      (b) Notes. The Borrowers agree that, in addition to such accounts or
records set forth in Section 2.09(a), to evidence their obligation to repay each
Loan made hereunder, with interest accrued thereon, it shall issue and deliver
to the Lender on the Closing Date a Note payable to the Lender in the aggregate
principal amount of the Commitment. The Lender may attach schedules to its Note
and endorse thereon the date, amount and maturity of its Loans and payments with
respect thereto. In the event that any amount hereunder or under any Note is not
paid by the Borrowers when due (whether at the stated maturity, by acceleration
or otherwise), the Lender may take all such actions as it sees fit to recover
such amount, including, without limitation, the commencement and maintenance of
proceedings in the State of New York, United States of America.

      (c) Effect of Account Entries. Entries made in good faith by the Lender in
its account or accounts pursuant to Section 2.09(a), shall be prima facie
evidence of the amount of principal and interest due and payable or to become
due and payable from the Borrowers to the Lender, under this Agreement and the
other Loan Documents, absent manifest error; provided that the failure of the
Lender to make an entry, or any finding that an entry is incorrect, in such
account or accounts shall not limit or otherwise affect the obligations of the
Borrowers under this Agreement and the other Loan Documents.

                                       32
<PAGE>

      Section 2.10 Payments Generally. All payments to be made by the Borrowers
shall be made without condition or deduction for any counterclaim, defense,
recoupment or setoff. Except as otherwise expressly provided herein, all
payments by the Borrowers hereunder shall be made to the Lender in Dollars and
in immediately available funds not later than 2:00 p.m. on the date specified
herein. All payments received by the Lender after 2:00 p.m. shall be deemed
received on the next succeeding Business Day and any applicable interest or fee
shall continue to accrue.

                                   ARTICLE III
                     TAXES, YIELD PROTECTION AND ILLEGALITY

      Section 3.01 Taxes.

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

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

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

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

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

                                       33
<PAGE>

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

      Section 3.03 Increased Costs; Reserves on Loans.

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

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

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

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

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

                                       34
<PAGE>

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

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

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

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

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

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

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

                                       35
<PAGE>

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

                                   ARTICLE IV
                              CONDITIONS PRECEDENT

      Section 4.01 Conditions Precedent to Closing Date. This Agreement shall
become effective on the first Business Day (the "Closing Date") on which the
following conditions precedent, as determined by the Lender have been met or
waived:

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

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

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

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

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

                                       36
<PAGE>

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

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

            (vii) the following legal opinions in the English language (with
      sufficient copies thereof for each addressee):

                                       37
<PAGE>

                  (A) the opinion of Davis Graham & Stubbs LLP, counsel to the
            Loan Parties, addressed to the Lender, substantially in the form of
            Exhibit J-1; and

                  (B) the opinion of Lizarraga, Robles, Tapia y Cabrera S.C.,
            Mexican counsel to the Loan Parties, addressed to the Lender,
            substantially in the form of Exhibit J-2.

            (viii) a copy of the Life of Mine Plan accompanied by an Officer's
      Certificate of a Borrower stating that the Life of Mine Plan and all
      components thereof (1) were prepared in good faith by the Borrowers or at
      the direction of the Borrowers, (2) are based upon assumptions that are
      consistent with the requirements of the Transaction Documents, the
      Agreement Approvals, the Project Approvals and the Applicable Law and
      which the Borrowers consider to be reasonable in light of the conditions
      existing as of the Closing Date, and (3) in the Borrower's reasonable
      judgment, represent the Borrowers' best estimate of the information set
      forth therein as of the Closing Date;

            (ix) a hard copy of, and an electronic copy containing, the
      Financial Model accompanied by an Officer's Certificate of a Borrower
      stating that the Financial Model and its underlying models and assumptions
      (I) were prepared in good faith by the Borrowers, (II) are based on
      assumptions that are consistent with the requirements of the Life of Mine
      Plan, the Transaction Documents, the Agreement Approvals, the Project
      Approvals and Applicable Law and that the Borrowers consider to be
      reasonable in light of the conditions existing as of the Closing Date and
      (III) in the Borrowers' reasonable judgment, represent their best estimate
      of the information set forth therein as of the Closing Date;

            (x) a copy of the Environmental Management Plan;

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

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

            (xiii) copies of each Hedge Agreement in effect as of the Closing
      Date.

                                       38
<PAGE>

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

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

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

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

      (f) Material Adverse Effect. Since July 31, 2005, there shall not have
occurred any event which has had or could be reasonably expected to have, either
individually or in the aggregate, a Material Adverse Effect.

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

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

      Section 4.02 Conditions Precedent to Initial Borrowing. The obligation of
the Lender to make its initial Loan shall be subject to the fulfillment or
waiver in writing of the following conditions precedent as determined by the
Lender prior to the initial Borrowing:

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

                                       39
<PAGE>

            (i) an Officer's Certificate of a Borrower, (A) providing a
      reasonably detailed breakdown of Project Costs incurred by or on behalf of
      the Borrowers as of the Initial Funding Date and paid for with funds
      received from the Guarantor consisting of the proceeds of the sale of
      Guarantor's Equity Interests in an amount at least equal to $1,000,000,
      and (B) including invoices for not less than 95% of the amount of such
      equity and in respect of any Project Cost in excess of U.S.$10,000; with
      such certificate to be reviewed and approved by the Independent Engineer,
      including confirmation that all costs set forth in the invoices referred
      to therein constitute Project Costs;

            (ii) written notice from the Offshore Account Holder that all of the
      Accounts required to be established hereunder have been established,
      together with the account numbers for each such Account;

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

            (iv) a mortgage, in substantially the form of Exhibit K-1 hereto (as
      amended, the "Mortgage"), duly authorized and executed by each Person
      party thereto before a notary public in Mexico, together with evidence of
      the completion of all actions, recordings and filings of or with respect
      to the Mortgage that the Lender may deem necessary or desirable in order
      to create, perfect and protect a first priority lien, mortgage and
      encumbrance over the real property and assets described therein,
      including, without limitation, the filing of the Mortgage in the relevant
      public registries in connection therewith;

            (v) pledge agreements, in substantially the form of Exhibit K-2
      hereto (together with any pledge agreement supplement delivered in
      connection therewith pursuant to the terms of the Loan Documents, in each
      case as amended, the "Equity Pledge Agreements"), duly executed by the
      Guarantor and Pledgor, together with evidence of the completion of all
      other actions, recordings and filings of or with respect to such Equity
      Pledge Agreements that the Lender may deem necessary or desirable in order
      to perfect and protect the Liens created thereby;

                                       40
<PAGE>

            (vi) non-possessory pledges of movable assets agreement in
      substantially the form attached hereto as Exhibit K-3 (the "Movable Assets
      Pledges"), duly authorized and executed by each Person party thereto
      before a notary public in Mexico, together with evidence of the completion
      of all recordings and filings of and any other actions with respect to the
      Movable Assets Pledges that the Lender may deem necessary or appropriate
      in order to create, perfect and protect a first priority pledge, lien and
      encumbrance over the movable assets described therein as contemplated
      thereunder, including, without limitation, the filing of the Movable
      Assets Pledges in the relevant public registries in connection therewith;

            (vii) a non-possessory pledge of bank accounts agreement in
      substantially the form attached hereto as Exhibit K-4 (the "Account Pledge
      Agreement"), duly authorized and executed by each Person party thereto
      before a notary public in Mexico, together with evidence of the completion
      of all recordings and filings of and any other actions with respect to the
      Account Pledge Agreement that the Lender may deem necessary or appropriate
      in order to create, perfect and protect a first priority pledge, lien and
      encumbrance over the accounts as contemplated therein, including, without
      limitation, the filing of the Account Pledge Agreement in the relevant
      public registries in connection therewith; and

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

      Section 4.03 Conditions Precedent to All Borrowings. The obligations of
the Lender to make any Loan is subject to the fulfillment or waiver in writing
of the following conditions precedent as determined by the Lender prior to the
related Borrowing:

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

                                       41
<PAGE>

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

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

      (d) Material Adverse Effect. Since July 31, 2005, there shall not have
occurred any event which has had or could be reasonably expected to have, either
individually or in the aggregate, a Material Adverse Effect.

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

      (f) Compliance with Project Budget. The proceeds of the NPI Borrowing
shall be used for the NPI Acquisition and the proceeds of each other Borrowing
shall be used to pay Approved Project Costs due and payable within forty-five
(45) days of the date of such Borrowing.

      (g) Construction Progress Report. The Lender shall have received from the
Borrowers the most recently due Construction Progress Report.

      (h) Independent Engineer Report. The Lender shall have received from the
Independent Engineer the most recently due IE Construction Report.

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

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

      Section 4.04 Conditions Precedent to Physical Completion.

      (a) Occurrence of Physical Completion Date. "Physical Completion" shall
occur on the first date on which all of the following conditions precedent shall
have been satisfied:

            (i) The Mine shall have been constructed and become available for
      normal, safe and continuous operation in material compliance with all of
      the requirements and specifications of the Life of Mine Plan, the
      Environmental Management Plan, Applicable Law, all Project Approvals and
      Prudent Industry Practices.

                                       42
<PAGE>

            (ii) All equipment and infrastructure necessary for the complete,
      safe and reliable operation of the Mine has been properly constructed,
      installed and tested as an integrated and completed operating system and
      no defects or deficiencies exist in respect of the equipment and
      infrastructure of the Mine that could adversely affect in any material
      manner the performance of the Mine under the performance standards
      contemplated by the Life of Mine Plan and the Environmental Management
      Plan and in accordance with Applicable Law, all Project Approvals and
      Prudent Industry Practices.

            (iii) The Borrowers or the Mining Contractor have sufficient
      operational spare parts inventory and special tools available as necessary
      for the operation and maintenance of the Mine in accordance with the
      requirements and specifications of the Life of Mine Plan, the
      Environmental Management Plan, Applicable Law, all Project Approvals and
      Prudent Industry Practices.

            (iv) All payments required to be made under the Construction
      Contracts, any other Material Project Agreement and any other agreement,
      contract or subcontract entered into in connection with the development
      and construction of the Mine shall have been paid in full other than
      retainage and performance bonus retention or as otherwise provided in
      accordance with the terms and conditions thereof or with respect to those
      being Contested.

            (v) No Prospective Event of Default or Event of Default shall have
      occurred and be Continuing.

            (vi) All of the services and utilities necessary for the current
      operation of the Mine shall have been obtained in accordance with the Life
      of Mine Plan.

            (vii) All of the Required Insurance (including with respect to the
      operational phase of the Project) shall be in full force and effect in
      accordance with the terms of this Agreement and the Lender shall have
      received a report from the Insurance Consultant in form and substance
      reasonably satisfactory to the Lender confirming that such Required
      Insurance is in full force and effect in accordance with the terms of this
      Agreement and the Lender shall have received certificates of insurance
      evidencing the Required Insurance and that the Lender is an additional
      insured and loss payee with respect to the Required Insurance.

            (viii) Certificates. The Lender shall have received the following
      certificates:

                  (A) A certificate of the Independent Engineer in substantially
            the form attached hereto as Exhibit N-1; and

                  (B) A certificate of a Responsible Officer of a Borrower in
            substantially the form attached hereto as Exhibit N-2.

                                       43
<PAGE>

      (b) Confirmation of Occurrence of Physical Completion Date. Promptly upon
its receipt of the certificates referred to in Section 4.04(a)(viii), the Lender
shall deliver a notice to the Borrowers confirming the date on which Physical
Completion has occurred; provided that the failure of the Lender to deliver such
notice shall not in any way affect the occurrence of the Physical Completion
Date.

      Section 4.05 Conditions Precedent to Economic Completion.

      (a) Occurrence of Economic Completion Date. "Economic Completion" shall
occur on the first date on which all of the following conditions precedent shall
have been satisfied:

            (i) Physical Completion shall have occurred.

            (ii) The tests and conditions set forth in Schedule 4.05(a) hereto
      shall have been satisfied for a period of 120 consecutive days and are
      believed to be sustainable over the life of the Mine, as certified by the
      Borrowers and the Independent Engineer in the certificates delivered
      pursuant to Section 4.05(a)(x) below.

            (iii) All payments required to be made by such date under the
      Construction Contracts, any other Material Project Agreement or any other
      agreement or contract entered into in connection with the construction of
      the Mine, shall have been paid in full in accordance with the terms and
      conditions thereof, other than those being Contested.

            (iv) The Borrowers shall have delivered to the Lender evidence of
      payment of amounts due under the Construction Contract in accordance with
      its terms, other than any remaining retainage or performance bonus
      retention or with respect to those being Contested.

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

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

                                       44
<PAGE>

            (vii) No Prospective Event of Default or Event of Default shall have
      occurred and be Continuing.

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

            (ix) The balance in the Debt Service Reserve Account shall equal or
      exceed $900,000.

            (x) Certificates. The Lender shall have received the following
      certificates:

                  (A) A certificate of the Independent Engineer in substantially
            the form attached hereto as Exhibit O-1; and

                  (B) A certificate of a Responsible Officer of a Borrower in
            substantially the form attached hereto as Exhibit O-2.

      (b) Confirmation of Occurrence of Economic Completion Date. Promptly upon
its receipt of the certificates referred to in Section 4.05(a)(x), the Lender
shall deliver a notice to the Borrowers confirming the date on which Economic
Completion has occurred; provided that the failure of the Lender to deliver such
notice shall not in any way affect the occurrence of the Economic Completion
Date.

                                    ARTICLE V
                         REPRESENTATIONS AND WARRANTIES

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

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

                                       45
<PAGE>

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

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

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

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

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

                                       46
<PAGE>

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

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

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

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

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

                                       47
<PAGE>

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

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

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

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

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

                                       48
<PAGE>

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

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

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

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

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

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

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

                                       49
<PAGE>

      (k) Payment of Taxes.

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

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

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

      (l) Taxes, Fees and Duties.

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

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

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

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

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

                                       50
<PAGE>

      (o) Material Project Agreements, Etc.

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

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

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

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

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

      (q) Environmental Compliance.

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

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

                                       51
<PAGE>

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

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

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

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

      (t) ERISA, Etc.

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

                                       52
<PAGE>

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

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

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

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

      (u) Use of Proceeds. The proceeds of the NPI Borrowing shall be used for
the NPI Acquisition and the proceeds of all other Loans will be used solely to
pay Approved Project Costs.

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

      (w) Investments and Subsidiaries.

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

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

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

                                       53
<PAGE>

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

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

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

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

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

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

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

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

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

                                       54
<PAGE>

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

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

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

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

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

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

                                       55
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                                   ARTICLE VI
                                    ACCOUNTS

      Section 6.01 Creation of the Accounts.

      (a) Establishment of Accounts. The Offshore Account Holder is hereby
directed to cause to be established on or before the Initial Funding Date, in
the name of the Lender and dominion of the Lender and subject to the terms of
this Agreement, the following segregated Dollar-denominated offshore accounts
and subaccounts thereof:

            (i) a Dollar revenues and disbursement account (the "Offshore
      Revenues and Disbursement Account") and a cash trap account related to, or
      subaccount of, the Offshore Revenues and Disbursement Account (the "Cash
      Trap Subaccount");

            (i) a debt service reserve account (the "Debt Service Reserve
      Account");

            (ii) an Insurance Proceeds account (the "Insurance Proceeds
      Account"); and

            (iii) an offshore operating account (the "Offshore Operating
      Account").

      (b) Lender Control. Commencing with the Initial Funding Date and until all
amounts due or to become due in respect of any of the Secured Obligations have
been paid in full in cash, each Offshore Account shall be maintained in the name
of and, subject to Sections 6.07 and 6.11 and any other relevant provisions
hereof or of any Contractual Obligation establishing such accounts, under the
sole dominion and control of the Lender. Each of the Offshore Accounts shall be
separate from all other accounts under the control or dominion of the Lender.
The Borrowers irrevocably confirm the authority of (and direct and authorize)
the Lender to, and the Lender agrees to, deposit into, or credit to, and
transfer funds from the Offshore Accounts in accordance with this Agreement or
the other Loan Documents or as otherwise agreed between the Lender and the
Borrowers. The Offshore Accounts shall be subject to Applicable Laws of any
applicable Governmental Authority, as may now or hereafter be in effect.

      (c) Limited Borrower Rights. The Borrowers shall not have any rights
against or to moneys on deposit in, or credited to, the Offshore Accounts, as
third-party beneficiary or otherwise, except the right of the Borrowers to
receive or make requisitions of moneys on deposit in, or credited to, the
Offshore Accounts, as permitted by this Agreement or the other Loan Documents.
In no event shall any amounts deposited into, or credited to, any Offshore
Account, be registered in the name of the Borrowers, payable to the order of the
Borrowers, or specially endorsed to the Borrowers, except to the extent that the
foregoing have been specially endorsed to the Lender or endorsed in blank.

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      Section 6.02 Onshore Accounts. Any accounts maintained by the Borrowers in
Mexico (the "Onshore Operating Accounts") shall be subject to the lien of the
Account Pledge Agreement and the Lenders shall have the right to direct payments
from the Onshore Operating Accounts in accordance with the terms of the Account
Pledge Agreement.

      Section 6.03 Subaccounts.

      (a) Generally. In addition to the Cash Trap Subaccount or other subaccount
specified in Section 6.01(a), each Offshore Account may include one or more
securities subaccounts (each such account or subaccount of an Onshore Account or
an Offshore Account, a "Subaccount"), established and maintained by the Offshore
Account Holder, at its offices in London, United Kingdom, in the name of the
Lender in accordance with the instructions and directions of the Lender
following any request made from time to time by the Borrowers as provided in
this Section 6.03 and approved by the Lender pursuant to Section 6.03(e). Each
Subaccount shall be identified with the particular Account to which it relates
and shall be segregated from any other Subaccount.

      (b) Notice to Lender. The Borrowers shall give the Lender at least twenty
(20) days' prior notice of its intention to request the designation of a
Subaccount.

      (c) References to Accounts. Unless otherwise specified in this Agreement,
all references to any Account shall include references to all related
Subaccounts thereof and such Subaccounts shall be subject to the same
restrictions and limitations as the Accounts to which they relate.

      (d) No Second-Tier Subaccounts. No Subaccount may itself include another
Subaccount.

      (e) Required Lender Approval. Any Subaccount in addition to those
contemplated by Section 6.02(a) must be approved by the Lender.

      Section 6.04 Deposits or Credits.

      (a) Loan Proceeds. The proceeds of the NPI Borrowing shall be deposited
into the Onshore Operating Account and may be used by MSR at any time thereafter
for the NPI Acquisition. The proceeds of all other Loans advanced hereunder
shall be directly deposited into, or credited to, the Offshore Revenues and
Disbursement Account.

      (b) Insurance Proceeds. The Borrowers shall direct each Person from whom
they receive or are entitled to receive Insurance Proceeds to pay such Insurance
Proceeds directly to the Lender for deposit into, or credit to, the Insurance
Proceeds Account. If the Borrowers or any Affiliate shall receive any such
Insurance Proceeds, the Borrowers shall deliver, or shall cause such Affiliate
to deliver, such Insurance Proceeds in the exact form received (with any
necessary endorsement) to the Lender together with instructions that such
Insurance Proceeds be deposited into, or credited to, the Insurance Proceeds
Account. The Lender shall have the right to receive all Insurance Proceeds
directly from the Persons paying the same. All Insurance Proceeds received by
the Lender and identified as such shall be promptly deposited into, or credited
to, the Insurance Proceeds Account.

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<PAGE>

      (c) Offshore Revenues and Disbursement Account. Subject to Sections
6.04(a) and (b), the Borrowers shall irrevocably direct each Person from whom
they receive or are entitled to receive any Project Revenues or any other
amounts payable to the Borrowers, including, without limitation, (i) any
proceeds from the sale of any property or assets permitted under Section
8.01(f), (ii) any Business Interruption Proceeds, and (iii) all amounts payable
by the Lender under any Secured Hedge Agreement, to pay such Project Revenues or
other amounts to the Lender for deposit into, or credit to, the Offshore
Revenues and Disbursement Account. Upon the Continuance of a Prospective Event
of Default or an Event of Default, the Lender shall have the right to receive
all Project Revenues or other amounts payable to the Borrowers directly from the
Persons paying the same. If the Borrowers or any Affiliate shall receive any
Project Revenues or other amounts required to be deposited into, or credited to,
the Offshore Revenues and Disbursement Account pursuant to this clause (c), the
Borrowers shall deliver, or shall cause such Affiliate to deliver, such Project
Revenues or amounts in the exact form received (with any necessary endorsement)
to the Lender together with instructions that any such amounts be deposited
into, or credited to, the Offshore Revenues and Disbursement Account. Subject to
Sections 6.04(a) and (b), all Project Revenues or other amounts payable to the
Borrowers received by the Lender shall be promptly deposited into, or credited
to, the Offshore Revenues and Disbursement Account. Any unidentified funds
delivered to the Lender for the account of the Borrowers shall be deemed to be
Project Revenues and shall be deposited into the Offshore Revenues and
Disbursement Account for further application as provided herein, unless and
until the Lender receives further instructions with respect to such unidentified
funds from the Borrowers as provided herein.

      (d) Payments in Trust. If, notwithstanding the instructions required to be
given in accordance with this Section 6.04, any payments are remitted to the
Borrowers or another Person (other than the Offshore Account Holder or the
Onshore Operating Account Holder) in accordance with this Agreement (it being
the intent and understanding of the parties hereto that such payments are not to
be made directly to the Borrowers or any other Person but directly to the
Offshore Account Holder or the Onshore Operating Account Holder, as the case may
be, for deposit into, or credit to, the relevant Account for application in
accordance with this Article VI), then the Borrowers or such other Person shall
receive such payments into a constructive trust for the benefit of the Lender
and subject to the Lender's security interest, and shall (or shall use its
commercially reasonable efforts to cause the Person receiving such payments to)
promptly remit such payments, properly identified, to the Offshore Account
Holder or the Onshore Operating Account Holder for deposit into, or credit to,
the Account or Accounts designated by this Section 6.04.

      Section 6.05 Transfers to and Withdrawals from Offshore Revenues and
Disbursement Accounts Pre-Default. So long as no Prospective Event of Default or
Event of Default has occurred and is Continuing (or would occur after giving
effect to any application of funds contemplated hereby), the Offshore Account
Holder shall on each Funds Transfer Date transfer available funds on deposit in,
or credited to, the Offshore Revenues and Disbursement Account to the following
Accounts on the dates indicated in the following order of priority:

                  first, to the Offshore Operating Account, on each Funds
            Transfer Date occurring prior to the Economic Completion Date, the
            amount certified by the Borrowers in the relevant Estimated Payment
            Certificate to meet Approved Project Costs;

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<PAGE>

                  second, to the Offshore Operating Account, on each Funds
            Transfer Date occurring on or after the Economic Completion Date,
            the amount certified by the Borrowers in the relevant Estimated
            Payment Certificate to meet Operating Costs, Taxes imposed on or
            measured by income or receipts and any Anglo NSR Payments;

                  third, to the Lender, on each Payment Date or on any other
            Business Day on which the Lender has notified the Offshore Account
            Holder that any payments in respect of costs and expenses (including
            reasonable legal fees and expenses), indemnification payments and
            other amounts (other than any payments in respect of fees, interest,
            principal and settlements under any Secured Hedge Agreements) are
            due and payable by the Borrowers in respect of the Secured
            Obligations, an amount equal to all such amounts stated in any of
            the notices delivered pursuant to Section 6.09 to be then due and
            payable in respect of the Secured Obligations (other than any
            payments in respect of fees, interest and principal and settlements
            under any Secured Hedge Agreements);

                  fourth, on a pro rata basis as between the following clauses
            (i) and (ii), to (i) the Lender, on each Payment Date or on any
            other Business Day on which the Lender has notified the Offshore
            Account Holder that any payments in respect of fees or interest are
            due and payable by the Borrowers in respect of the Secured
            Obligations, an amount equal to such Secured Obligations as
            certified to the Offshore Account Holder on or prior to such date by
            any of the Borrowers or the Lender pursuant to Section 6.09 and (ii)
            to the Peso Withholding Subaccount, any Mexican withholding tax
            applicable to such amounts, in the amount certified to the Offshore
            Account Holder on or prior to such date by any of the Borrowers or
            the Lender pursuant to Section 6.09;

                  fifth, to the Lender, on each Payment Date or on any other
            Business Day on which the Lender has notified the Offshore Account
            Holder that any payments in respect of principal or settlements
            under any Secured Hedge Agreements are due and payable by the
            Borrowers in respect of the Secured Obligations, an amount equal to
            such Secured Obligations as certified to the Offshore Account Holder
            on or prior to such date by any of the Borrowers or the Lender
            pursuant to Section 6.09;

                  sixth, to the Debt Service Reserve Account, on each Quarterly
            Date occurring after the Economic Completion Date, the amount of any
            Debt Service Reserve Deficiency for such Quarterly Date, as
            certified on or prior to such Quarterly Date by either the Borrowers
            or the Lender;

                  seventh, to the Lender, on each Excess Cash Flow Payment Date,
            as a mandatory prepayment of the Loans, the amount of Excess Cash
            Flow specified in Section 2.03(b);

                  eighth, to the Lender, on the Business Day occurring two (2)
            Business Days prior to the date specified for any voluntary
            prepayment of the Loans by the Borrowers in any notice delivered by
            the Borrowers pursuant to Section 2.03(a), an amount equal to the
            amount of the relevant voluntary prepayment of the Secured
            Obligations as specified in such notice in respect of such voluntary
            prepayment payable by the Borrowers as a result of such prepayment,
            as certified to the Offshore Account Holder on or prior to such date
            by any of the Borrowers or the Lender;

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<PAGE>

                  ninth, to the Cash Trap Subaccount on each Excess Cash Flow
            Payment Date, all Excess Cash Flow remaining after the payments
            pursuant to clauses sixth through eighth above if the Debt Service
            Coverage Ratio or the Projected Debt Service Coverage Ratio for the
            relevant Annual Period on the immediately preceding Calculation Date
            is not at least 1.5:1.0;

                  tenth, to the Lender, as a prepayment of the Loans, on each
            Excess Cash Flow Payment Date, if the Debt Service Coverage Ratio or
            the Projected Debt Service Coverage Ratio for the relevant Annual
            Period has been less than 1.5:1.0 for the immediately preceding
            three (3) Quarterly Periods, an aggregate principal amount of the
            Loans equal to all Excess Cash Flow including those funds on deposit
            in the Cash Trap Subaccount; provided that as of any Excess Cash
            Flow Payment Date on which the Debt Service Coverage Ratio and the
            Projected Debt Service Coverage Ratio for the relevant Annual Period
            has reached at least 1.5:1.0 for two (2) consecutive Quarterly
            Periods, any such Excess Cash Flow shall be available to be paid
            pursuant to clause eleventh below;

                  eleventh, to the Unrestricted Account, on any Excess Cash Flow
            Payment Date, an amount equal to any Restricted Payment requested by
            the Borrowers in a notice delivered pursuant to Section 6.10.

            Funds not transferred pursuant to the foregoing provisions shall
            remain in the Offshore Revenues and Disbursement Account. Any
            prepayment of the Loans pursuant to clause tenth above shall be
            applied to the principal repayment installments thereof in inverse
            order of maturity.

      Section 6.06 Transfers and Withdrawals from Accounts During the
Continuance of a Default.

      (a) Notice from Lender. If any Prospective Event of Default or Event of
Default shall have occurred and be Continuing, the Lender may notify the
Offshore Account Holder that a Prospective Event of Default or an Event of
Default, as the case may be, has occurred and is Continuing and the Offshore
Account Holder shall no longer accept instructions from the Borrowers with
respect to the transfer and investment of funds, on deposit in, or credited to,
the Accounts, and thereafter only shall accept instructions for the investment
or transfer of funds in such Accounts solely from the Lender (or such Person or
Persons as the Lender may designate).

      (b) Investments; Transfers and Withdrawals. Upon the occurrence and during
the Continuance of any Prospective Event of Default or Event of Default, the
Lender shall be entitled to request the Offshore Account Holder to make, and the
Offshore Account Holder shall make, payments from the Accounts to the Lender for
application in accordance with the terms of the Loan Documents.

      Section 6.07 Transfers and Withdrawals from Offshore Operating Account. So
long as no Prospective Event of Default or Event of Default has occurred and is
Continuing (or would occur after giving effect to any application of funds
contemplated hereby), the Borrowers may withdraw or transfer amounts from the
Offshore Operating Account, and such withdrawals and transfers shall be effected
by the Offshore Account Holder on the demand of the Borrowers in the same manner
usual and customary for such withdrawals or transfers. The Borrowers may
withdraw or transfer amounts from the Offshore Operating Account solely and in
such amounts as may be required in the ordinary course of business to make
payments of Project Costs or Operating Costs, as the case may be, as and when
due to third parties to the extent such Project Costs or Operating Costs, as the
case may be, were included in any previously delivered Estimated Payment
Certificate.

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      Section 6.08 Estimated Payment Certificate. Concurrently with the delivery
of the initial Loan Notice (excluding any Loan Notice delivered in respect of
the NPI Borrowing) and in each calendar month occurring thereafter, at least
seven (7) Business Days prior to the Funds Transfer Date for such calendar
month, the Borrowers shall deliver to the Lender, the Independent Engineer and
the Offshore Account Holder an Estimated Payment Certificate in respect of the
next-occurring or anticipated Funds Transfer Date. Within five (5) Business Days
after delivery of such Estimated Payment Certificate, the Lender shall have
received from the Independent Engineer an approved and acknowledged copy of such
Estimated Payment Certificate, which approval shall state that the amounts set
forth in the Estimated Payment Certificate will be necessary to pay Approved
Project Costs due and payable within forty-five (45) days of the relevant Funds
Transfer Date and are substantially in accordance with the Construction Budget
and the Life of Mine Plan and the aggregate amount of costs projected to be
incurred in achieving Economic Completion by the Scheduled Economic Completion
Date does not exceed Total Funding Available (after giving pro forma effect to
such Borrowing and payment of any Approved Project Costs to be made with the
proceeds of such Borrowing). The Offshore Account Holder may conclusively rely
upon the contents of any Estimated Payment Certificate that has been approved by
the Independent Engineer absent manifest error.

      Section 6.09 Secured Obligation Payment Notices. The Lender agrees that at
least ten (10) Business Days before each Quarterly Date or on any other day that
any amounts may be due and payable (other than pursuant to Section 2.03 and
clause tenth of Section 6.05) by the Borrowers in respect of the Secured
Obligations, it shall deliver to the Offshore Account Holder and the Onshore
Account Holder a certificate setting forth the aggregate amount of Debt Service
that is due and payable to the Lender under this Agreement and under any Secured
Hedge Agreement to which it is a party, in each case on the relevant day on
which payment is due.

      Section 6.10 Restricted Payment Notices. If the Borrowers wish to make a
Restricted Payment, they shall, not less than five (5) Business Days prior to
the applicable Excess Cash Flow Payment Date, notify the Lender and the Offshore
Account Holder thereof.

      Section 6.11 Transfers and Withdrawals from Offshore and Onshore Operating
Accounts.

      (a) Onshore and Offshore Operating Account Pre-Default.

            (i) So long as no Prospective Event of Default or Event of Default
      has occurred and is Continuing (or would occur after giving effect to any
      application of funds contemplated hereby), the Borrowers may transfer
      funds on deposit in, or credited to, the Offshore Operating Account or the
      Onshore Operating Account, as the case may be, as provided in this Section
      6.11. Funds may be transferred from the Offshore Operating Account to the
      Onshore Operating Account and from the Onshore Operating Account to the
      Offshore Operating Account at any time in accordance with such direction;
      provided that the Borrowers may transfer funds from the Offshore Operating
      Account to the Onshore Operating Account only to the extent that there are
      insufficient funds on deposit in, or credited to, the Onshore Operating
      Account to pay Project Costs or Operating Costs, as the case may be, that
      will become payable in Mexico in Pesos up to and including the subsequent
      Funds Transfer Date and such insufficiency has been certified by the
      Borrowers and the Independent Engineer to the Offshore Account Holder and
      the Lender.

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<PAGE>

            (ii) So long as no Prospective Event of Default or Event of Default
      has occurred and is Continuing (or would occur after giving effect to any
      application of funds contemplated hereby), funds on deposit in, or
      credited to, the Onshore Operating Account shall be applied to pay Project
      Costs or Operating Costs, as the case may be, set forth in the applicable
      Estimated Payment Certificate as and when due to third parties or to pay
      any amounts due to any Mexican Governmental Authorities as Taxes in
      connection with any payment of the Secured Obligations, as notified by the
      Borrowers to the Onshore Account Holder from time to time; provided that
      if the Borrowers shall fail to instruct the Onshore Account Holder to make
      any such payment when due, the Lender may deliver an instruction to the
      Onshore Account Holder instructing the Onshore Account Holder to make such
      payment .

      (b) Notwithstanding anything in this Section 6.11 to the contrary, if any
Prospective Event of Default or Event of Default shall have occurred and be
Continuing, the Offshore Account Holder will act in accordance with the
instructions of the Lender as provided in Section 6.06(a).

      Section 6.12 Debt Service Reserve Account.

      (a) Funds in the Debt Service Reserve Account may be transferred only as
follows:

            (i) So long as no Prospective Event of Default or Event of Default
      has occurred and is Continuing (or would occur after giving effect to any
      application of funds contemplated hereby), on any date if the funds
      transferred to the Lender pursuant to priorities third through fifth of
      Section 6.05 or pursuant to Section 6.06(b), as applicable, are less than
      the amount of Secured Obligations required to be transferred on such date
      pursuant to such priorities, the Offshore Account Holder shall transfer to
      the Lender from the Debt Service Reserve Account the amount of any such
      deficiency.

            (ii) Upon the occurrence of any Prospective Event of Default or
      Event of Default, the Offshore Account Holder shall retain the funds on
      deposit in, or credited to, the Debt Service Reserve Account in such
      Account, and the Offshore Account Holder shall only shall accept
      instructions for the investment or transfer of funds in such Account
      solely from the Lender (or such Person or Persons as the Lender may
      designate).

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      Section 6.13 Insurance Proceeds Account. Amounts on deposit in, or
credited to, the Insurance Proceeds Account from time to time shall be applied
in accordance with Section 11.02.

      Section 6.14 Reports and Certifications.

      (a) Offshore Accounts. The Offshore Account Holder shall deliver to the
Borrowers and the Lender, no later than twenty (20) days after the end of each
month following the Initial Funding Date, copies of the account statements for
all Offshore Accounts (including all Subaccounts) for each month prepared or
compiled by the Offshore Account Holder. Such account statements shall indicate,
with respect to each such account, deposits, credits and transfers, investments
made and closing balances.

      (b) Onshore Accounts. The Borrowers shall deliver to the Lender, no later
than twenty (20) days after the end of each month following the Initial Funding
Date, copies of the account statements for all Onshore Accounts for each month
prepared or compiled by the Onshore Account Holder. Such account statements
shall indicate, with respect to each such account, deposits, credits and
transfers, investments made and closing balances.

      (c) Borrowers' Representation. Each time the Borrowers direct the Offshore
Account Holder or the Onshore Account Holder to make a transfer or withdrawal
from an Account, they shall be deemed to represent and warrant for the benefit
of the Lender that such transfer or withdrawal is being made in an amount, and
shall be applied solely for the purposes, permitted by this Agreement. The
Offshore Account Holder and the Onshore Account Holder may conclusively rely on,
and shall incur no liability in so relying on, any such direction.

      Section 6.15 Books and Accounts. The Offshore Account Holder shall
maintain all such accounts, books and records as may be necessary properly to
record all transactions carried out by it under this Agreement. The Offshore
Account Holder shall permit the Lender (subject to the confidentiality
provisions set forth in Section 15.07), the Borrowers and their authorized
representatives to examine such accounts, books and records; provided that any
such examination shall occur upon reasonable notice and during normal business
hours.

      Section 6.16 Offshore Account Holder Undertakings. The Borrowers and the
Offshore Account Holder represent and warrant to, and agree with, the Lender as
follows:

      (a) To the extent that funds are credited to any Offshore Account, such
Offshore Account is a deposit account; and to the extent that financial assets
are credited to any Offshore Account, such Offshore Account is a securities
account.

      (b) The Offshore Account Holder is (i) the bank with which each Offshore
Account that is a deposit account is maintained and (ii) the securities
intermediary with respect to financial assets held in any Offshore Account that
is a securities account.

      (c) The Lender is the entitlement holder with respect to the property
(including, without limitation, funds and financial assets) credited to any
Offshore Account.

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<PAGE>

      (d) The Borrowers and the Offshore Account Holder do not know of any claim
to or interest in any Offshore Account or any property (including, without
limitation, funds and financial assets) credited to any Offshore Account, except
for claims and interests of the Lender referred to in this Agreement.

      (e) The Offshore Account Holder will comply with (i) all instructions
directing disposition of the funds in any and all of the Offshore Accounts, (ii)
all notifications and entitlement orders that the Offshore Account Holder
receives directing it to transfer or redeem any financial asset in any and all
of the Offshore Accounts, and (iii) all other directions concerning any and all
of the Offshore Accounts, including, without limitation, directions to
distribute to the Lender proceeds of any such transfer or redemption or interest
or dividends on property in any and all of the Offshore Accounts (any such
instruction, notification or direction referred to in clause (i), (ii) and (iii)
above being an "Account Direction"), in each case of clauses (i), (ii) and (iii)
above originated by the Lender without further consent by the Borrowers or any
other Person.

      (f) Except as otherwise provided in this Article VI, the Offshore Account
Holder will comply with Account Directions and other directions concerning each
Account originated by the Borrowers without further consent by the Lender.

      (g) The Offshore Account Holder will not comply with any Account Direction
originated by the Borrowers that would require the Offshore Account Holder to
make a free delivery of any funds or financial asset to the Borrowers or any
other Person.

      (h) Upon and during the Continuance of a Prospective Event of Default or
Event of Default, the Offshore Account Holder will comply only with Account
Directions originated by the Lender and will cease complying with Account
Directions or other directions concerning the Offshore Accounts originated by
the Borrowers.

      (i) The Offshore Account Holder (i) is subordinated to the Lien granted in
favor of the Lender under the Collateral Documents any security interest, lien
or right of recoupment or setoff that the Offshore Account Holder may have, now
or in the future, against any Offshore Account or property (including, without
limitation, any funds and financial assets) credited to any Offshore Account and
(ii) agrees that it will not exercise any right in respect of any such security
interest or lien or any such right of recoupment or setoff until the Collateral
Documents are terminated, except, that the Offshore Account Holder (A) will
retain its prior security interest and lien on property credited to any Offshore
Account, (B) may exercise any right in respect of such security interest or
lien, and (C) may exercise any right of recoupment or setoff against any
Offshore Account, in the case of clauses (A), (B) and (C) above, to secure or to
satisfy, and only to secure or to satisfy, payment (x) for such property, (y)
for its customary fees and expenses for the routine maintenance and operation of
such Offshore Account, and (z) if such Offshore Account is a deposit account,
for the face amount of any items that have been credited to such Offshore
Account but are subsequently returned unpaid because of uncollected or
insufficient funds.

      (j) The Offshore Account Holder will not enter into any other agreement
with any Person relating to Account Directions or other directions with respect
to the Offshore Accounts.

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<PAGE>

      (k) When the Offshore Account Holder knows of any claim or interest in any
Offshore Account or any property (including, without limitation, funds and
financial assets) credited to any Offshore Account other than the claims and
interests of the Lender under this Agreement and the Collateral Documents, the
Offshore Account Holder will promptly notify the Lender and the Borrowers of
such claim or interest.

      (l) Except for permitting a withdrawal, delivery or payment in violation
of the terms of this Article VI, the Offshore Account Holder will not be liable
to the Lender for complying with Account Directions or other directions
concerning any Offshore Account from the Borrowers that are received by the
Offshore Account Holder before the Offshore Account Holder receives notice of
the occurrence of any Prospective Event of Default or Event of Default.

      (m) This Agreement does not create any obligation of the Offshore Account
Holder except for those expressly set forth in this Agreement and, in the case
of any Offshore Account that is a securities account, in Part 5 of Article 8 of
the UCC, and in the case of any Offshore Account that is a deposit account, in
Article 4 of the UCC.

      (n) The Offshore Account Holder agrees with the Lender and the Borrowers
that, to the fullest extent permitted by Applicable Law, all property (other
than funds) credited from time to time to any Offshore Account will be treated
as financial assets under Article 8 of the UCC.

      (o) The State of New York is, and will continue to be the Offshore Account
Holder's jurisdiction of organization for purposes of Section 8-110(e) of the
UCC.

                                   ARTICLE VII
                              AFFIRMATIVE COVENANTS

      Section 7.01 Affirmative Covenants. So long as the Lender shall have any
Commitment hereunder, any Secured Hedge Agreement shall be in effect or any Loan
or other Secured Obligation hereunder or under any other Loan Document which is
accrued and payable shall remain unpaid or unsatisfied, each of the Borrowers
and, with respect to subsections (a), (b), (d)(i), (e), (h) and (j) below, the
Guarantor, shall:

      (a) Compliance with Laws, Etc. Comply in all respects with all Applicable
Laws and all orders, writs, injunctions and decrees applicable to it or to its
business or property, except in such instances in which such requirement of
Applicable Law or order, writ, injunction or decree is subject to Contest or
where the failure to so comply could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.

      (b) Payment of Obligations. Pay and discharge as the same shall become due
and payable all of its obligations and liabilities unless the same are subject
to Contest, including (i) all tax liabilities, assessments and governmental
charges or levies upon it or its properties or assets, unless the same are
subject to Contest; (ii) all lawful claims that, if unpaid, would by law become
a Lien upon its properties, unless the same are subject to Contest; and (iii)
all Indebtedness as and when due and payable, but subject to any subordination
provisions contained in any instrument or agreement evidencing such
Indebtedness, unless the same are subject to Contest; except, in each case,
where the failure to so pay or discharge could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.

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      (c) Compliance with Environmental Laws, Etc. Except where the foregoing
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect (i) comply, and use commercially reasonable efforts to
cause each other Person operating or occupying its properties to comply, with
all applicable Environmental Laws (including any such Environmental Laws
relating to the discharge, release, transport, disposal and cleanup of Hazardous
Materials), Environmental Permits and the Environmental Management Plan; (ii)
obtain and renew all Environmental Permits necessary at such point in time for
its operation of the Mine; and (iii) conduct any investigation, study, sampling
and testing, and undertake any cleanup, removal, remedial or other action
necessary to mitigate or remediate Hazardous Materials at its properties, as
required in accordance with applicable Environmental Laws and the Environmental
Management Plan; provided, however, that the Borrowers shall not be required to
undertake any such cleanup, removal, remedial or other action to the extent that
its obligation to do so is subject to Contest.

      (d) Preservation of Existence, Etc. (i) Preserve, renew and maintain in
full force and effect its legal existence under the laws of its jurisdiction;
(ii) take all reasonable action to obtain and maintain in full force and effect
all Agreement Approvals, Project Approvals and all other rights, privileges,
permits, licenses and franchises necessary at such point in time for the
development and operation of the Mine in accordance with the Life of Mine Plan,
except to the extent that failure to do so could not reasonably be expected to
have a Material Adverse Effect; and (iii) preserve or renew all of its
registered patents, trademarks, trade names and service marks, the
non-preservation of which could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.

      (e) Books and Records. (i) Maintain proper books of record and account in
which full, true and correct entries in conformity with Applicable GAAP
consistently applied shall be made of all financial transactions and matters
involving its assets and business and (ii) maintain such books of record and
account in material conformity with applicable requirements of any Governmental
Authority having regulatory jurisdiction over it.

      (f) Inspection Rights. Permit representatives and independent contractors
of the Lender, including, without limitation, the Independent Engineer, to visit
and inspect any of its properties, to examine its corporate, financial and
operating records, and make copies thereof or abstracts therefrom, and to
discuss its affairs, finances and accounts with its directors, officers and
independent public accountants, all at such reasonable times during normal
business hours and as often as may be reasonably desired, upon reasonable
advance notice to such Borrower and subject to (a) conducting such inspections
in a manner that does not unreasonably disrupt the Borrowers' operations, (b)
the confidentiality provisions set forth in Section 15.07 and (c) applicable
health and safety laws and regulations and policies adopted by either Borrower;
provided, however that when an Event of Default exists the Lender (or any of its
respective representatives or independent contractors) may do any of the
foregoing at the expense of the Borrowers at any time during normal business
hours and without advance notice, but otherwise subject to the restrictions set
forth in this Section.

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      (g) Maintenance of Properties, Etc. (i) Maintain, preserve and protect all
its material properties and equipment necessary in the operation of the Mine in
good working order and condition, ordinary wear and tear excepted, and in
accordance with Prudent Industry Practices and (ii) make, or use commercially
reasonable efforts to cause to be made, all necessary repairs thereto and
renewals and replacements thereof, except, in each case, where the failure to do
so could not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.

      (h) Further Assurances. Promptly upon the request of the Lender, (i)
correct any material defect or error that may be discovered in any Loan Document
or in the execution, acknowledgment, filing or recordation thereof; and (ii) do,
execute, acknowledge, deliver, record, re-record, file, re-file, register and
re-register any and all such further acts, deeds, conveyances, pledge
agreements, mortgages, deeds of trust, trust deeds, assignments, financing
statements and continuations thereof, termination statements, notices of
assignment, transfers, certificates, assurances and other instruments as the
Lender may reasonably require from time to time in order to (A) carry out more
effectively the purposes of the Loan Documents, (B) to the fullest extent
permitted by Applicable Law, subject its properties, assets, rights or interests
to the Liens now or hereafter intended to be covered by any of the Collateral
Documents, (C) perfect and maintain the validity, effectiveness and priority of
any of the Collateral Documents and any of the Liens intended to be created
thereunder, subject to Permitted Liens and (D) assure, convey, grant, assign,
transfer, preserve and protect and confirm more effectively unto the Lender the
rights granted or now or hereafter intended to be granted, to the Lender under
any Loan Document or under any other instrument executed in connection with any
Loan Document to which it is or is to be a party.

      (i) Material Project Agreements and Real Estate Rights Agreements. (i)
Perform and observe in all material respects the terms and provisions of each
Material Project Agreement and Real Estate Rights Agreement to be performed or
observed by it, subject to those being Contested, (ii) maintain each Material
Project Agreement and any Support Instrument relating thereto and each Real
Estate Rights Agreement in full force and effect in accordance with its terms
and for the period of time covered thereby, (iii) exercise in all material
respects its rights, discretion and remedies under each Material Project
Agreement, related Support Instrument and each Real Estate Rights Agreement, in
accordance with their respective terms and in a manner consistent with (and
subject to) its obligations under the Loan Documents, and (iv) notify the Lender
of any proposed material amendment, termination, modification or waiver of any
Material Project Agreement.

      (j) Transactions with Affiliates. Conduct all transactions with any of its
Affiliates on terms that are commercially fair and reasonable and no less
favorable to it than it would obtain in a comparable arm's-length transaction
with a Person not an Affiliate.

      (k) Use of Proceeds. Use the proceeds of the NPI Borrowing (if any) for
the NPI Acquisition and the proceeds of all other Loans solely to pay Approved
Project Costs.

      (l) Ranking. Undertake that its Secured Obligations shall at all times
rank in right of payment and collateral security senior to all of its other
obligations or Indebtedness, other than to the extent (i) secured by a Permitted
Lien, (ii) pursuant to the Subordinated Royalty Payments and (iii) given
priority under Applicable Law.

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      (m) Construction and Operation of the Project. Use its commercially
reasonably efforts to cause the design, construction, completion and operation
of the Mine to be carried out and completed with due diligence and continuity
and in accordance with Applicable Law, sound, generally accepted construction
and engineering practices, the plans and specifications set forth in the Life of
Mine Plan and Prudent Industry Practices.

      (n) Translation of Loan Documents. Within sixty (60) days of the date of
this Agreement, deliver to the Lender copies of Spanish translations of this
Agreement, certified by a Mexican court-approved translator to be true, complete
and correct translations of each such Loan Document.

      (o) Covenant to Give Security. Upon the acquisition of any property which
is not already subject to a perfected first priority security interest in favor
of the Lender, at its own expense, (i) within ten (10) Business Days of such
acquisition, furnish to the Lender a description of the property so acquired,
(ii) within thirty (30) days of such acquisition, duly execute and deliver a
mortgage, pledge, assignment and other security agreements, as specified by and
in form and substance reasonably satisfactory to the Lender, securing payment of
all of the Secured Obligations and constituting Liens on all such properties,
(iii) within thirty (30) days of such acquisition, take whatever action
(including, without limitation, the recording of mortgages, the filing of
Uniform Commercial Code financing statements, the giving of notices and the
endorsement of notices on title documents) may be necessary or advisable in the
opinion of the Lender to vest in the Lender valid and subsisting Liens on the
properties purported to be subject to the mortgages, pledges, assignments and
security agreements delivered pursuant to this Section 7.01(p), enforceable
against all third parties in accordance with their terms, and (iv) within sixty
(60) days after such acquisition, deliver to the Lender, if the Lender so
requests, a signed copy of an opinion, addressed to the Lender, of counsel for
the Borrowers reasonably acceptable to the Lender as to the matters contained in
clauses (ii) and (iii) above, as to such mortgages, pledges, assignments and
security agreements being legal, valid and binding obligations of the Borrowers
enforceable in accordance with their terms, as to the matters contained in
clause (iii) above, and to such recordings, filings, notices, endorsements and
other actions being sufficient to create valid perfected Liens on such
properties, and as to such other matters as the Lender may reasonably request.

      (p) Hedge Agreements.

            (i) Maintain at all times thereafter with the Lender the Gold Hedge
      Agreements or other gold Hedge Agreements with a counterparty reasonably
      acceptable to the Lender covering the aggregate scheduled monthly
      production of Gold that would have been covered at such time by the Gold
      Hedge Agreement as in effect on the date hereof.

            (ii) Without duplication of the Hedge Agreements contemplated by
      clause (i), enter into on or prior to the Initial Funding Date, and
      maintain at all times thereafter with the Lender pursuant to a Master
      Agreement, on terms and conditions reasonably satisfactory to the Lender
      interest rate Hedge Agreements which effectively enable the Borrowers, as
      at any date, to protect the Borrowers against London interbank offered
      rates in a manner and to the extent reasonably satisfactory to Lender.

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      (q) Maintenance of Supplies. Maintain at all times, or cause the Mining
Contractor to maintain at all times an adequate supply of spare parts and
consumables or maintain at all times, or cause the Mining Contractor to maintain
at all times in full force and effect contracts providing for an adequate supply
of spare parts and consumables, in each case as may be necessary for the
Project.

                                  ARTICLE VIII
                               NEGATIVE COVENANTS

      Section 8.01 Negative Covenants. So long as the Lender shall have any
Commitment, any Secured Hedge Agreement shall be in effect or any Loan or other
Secured Obligation hereunder or under any other Loan Document which is accrued
and payable shall remain unpaid or unsatisfied, each of the Borrowers and, with
respect to subsections (a), (b), (e), (f), (g), (h), (l)-(n), (q)(iv) and (r)
below, the Guarantor, shall not directly or indirectly:

      (a) Limitation on Liens. Other than Permitted Liens and in the case of the
Guarantor, Liens incurred in the ordinary course of its business that do not
secure assets in excess of $1,000,000, (i) create, incur, assume or suffer to
exist any Lien upon any of its properties, assets or revenues, whether now owned
or hereafter acquired, (ii) sign or file or suffer to exist, under the
Applicable Laws of any jurisdiction (including the Uniform Commercial Code of
any jurisdiction), a financing statement that names it as debtor or sign or
suffer to exist any security agreement authorizing any secured party thereunder
to file such financing statement, (iii) file or suffer to exist any agreement in
respect of its properties assets or revenues on file with the Recorder of Deeds
in the District of Columbia, United States of America or with any public
registry of property and commerce located in Mexico or (iv) assign any accounts
or other right to receive income.

      (b) Limitation on Indebtedness. Create, incur, assume or suffer to exist
any Indebtedness other than:

            (i) Indebtedness under the Loan Documents;

            (ii) obligations (contingent or otherwise) existing or arising under
      any Hedge Agreement entered into by it in accordance with Section 7.01(q);

            (iii) Indebtedness existing as of the Closing Date as referenced in
      the financial statements delivered to the Lender and set out more
      specifically in Schedule 8.01(b)(iii) hereto;

            (iv) Indebtedness consisting of Capitalized Leases or Indebtedness
      incurred to provide all or a portion of the purchase price of furniture,
      fixtures and equipment, provided that (i) such Indebtedness when incurred
      shall not exceed the purchase price or cost of construction of such
      furniture, fixture or equipment, (ii) no such Indebtedness shall be
      refinanced for a principal amount in excess of the principal balance
      outstanding thereon at the time of such refinancing and (iii) the total
      amount of all such Indebtedness shall not exceed $250,000 at any time
      outstanding;

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<PAGE>

            (v) Indebtedness (a) incurred in the ordinary course of business in
      connection with Project Costs or Operating Costs associated with the
      purchase or acquisition of equipment, property and assets (by way of open
      accounts and credit extended by suppliers on normal trade terms in
      connection with purchases of goods and services) (b) owing under
      documentary letters of credit for the purchase of goods or other
      merchandise generally made in the ordinary course of business and (c)
      reclamation, performance, surety, bid, appeal or similar bonds or deposits
      arising in the ordinary course of business, provided that the total amount
      of all such Indebtedness shall not exceed $3,000,000 at any time
      outstanding;

            (vi) unsecured intercompany Indebtedness among the Loan Parties, so
      long as such Indebtedness is expressly subordinated to the Loan Facility;

            (vii) Indebtedness in respect of Taxes, assessments or charges of
      Governmental Authorities, and Indebtedness in respect of amounts accrued
      and payable in connection with employment, materials or supplies; and

            (viii) in the case of the Guarantor, Indebtedness incurred in the
      ordinary course of business provided that the total amount of all such
      Indebtedness shall not exceed $1,000,000 at any time outstanding.

      (c) Change in Nature of Business or Project.

            (i) Engage in any business other than the current business of the
      Borrowers, including development and operation of the Project and
      activities related thereto or associated therewith.

            (ii) Change the purpose, nature or scope of the Project from that
      described in the Life of Mine Plan.

      (d) Principal Place of Business. Maintain any place of business outside of
Mexico.

      (e) Mergers, Etc. Merge, dissolve, liquidate, consolidate with or into any
Person or otherwise Dispose of (whether in one transaction or a series of
transactions) all or substantially all of its properties or assets (whether now
or hereafter acquired) to or in favor of any Person or acquire all or
substantially all of the assets of any Person, except for, in the case of the
Guarantor, mergers with another Person where the Guarantor is the surviving
party and acquisitions of all or substantially all the assets of another Person,
in each case so long as the aggregate consideration paid by the Guarantor does
not exceed $3,000,000 per year.

      (f) Disposition. Make any Disposition or enter into any agreement to make
any Disposition, except:

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            (i) Dispositions of Gold or other minerals in the ordinary course of
      business;

            (ii) Dispositions of obsolete or worn out property, whether now
      owned or hereafter acquired, in the ordinary course of business;

            (iii) Dispositions of or reductions in or diminution of mining land
      or other Real Property Interests or abandonment of or desisting from
      mining claims or other Real Property Interests, when such right, title or
      interest is not necessary for the development of the Project in accordance
      with the Life of Mine Plan and such Disposition, abandonment, reduction or
      desistment could not reasonably be expected to have a Material Adverse
      Effect; and

            (iv) in the case of the Guarantor, Dispositions of property provided
      that the total amount of all such Dispositions shall not exceed $1,000,000
      in the aggregate per year.

      (g) Investments. Make or hold any Investments in any Person except for (i)
Investments consisting of extensions of credit in the nature of accounts
receivable or notes receivable arising from the grant of trade credit in the
ordinary course of business, (ii) Investments received in satisfaction or
partial satisfaction thereof from financially troubled account debtors to the
extent reasonably necessary in order to prevent or limit loss, (iii) cash or
Cash Equivalents, (iv) Investments made by a Loan Party in or to another Loan
Party, or (v) in the case of the Guarantor, Investments not exceeding $5,000,000
in the aggregate per year.

      (h) Amendments of Constituent Documents. Amend in any material respect any
of its Constituent Documents.

      (i) Accounting Changes, Etc. Make any change in (i) accounting policies or
reporting practices, except as required by Mexican GAAP or (ii) its fiscal year.

      (j) Prepayments, Etc., of Indebtedness. Prepay, redeem, purchase, defease
or otherwise satisfy prior to the scheduled maturity thereof in any manner, or
make any payment in violation of any subordination terms of, any Indebtedness,
except prepayments of the Secured Obligations.

      (k) Material Project Agreements, Etc. (i) Cancel or terminate any Material
Project Agreement or Real Estate Rights Agreement or consent to or accept any
cancellation or termination thereof, except in each case if such Contractual
Obligations terminate at the end of their term or approved in writing by Lender
(ii) amend, modify or change in any material manner any term or condition of any
Material Project Agreement, any Support Instrument related thereto or any Real
Estate Rights Agreement or give any material consent, waiver or approval
thereunder, (iii) waive any material defaults under or any material breach of
any term or condition of any Material Project Agreement, any Support Instrument
related thereto or any Real Estate Rights Agreement, or (iv) consent to any
assignment or transfer of material rights under any Material Project Agreement,
any Support Instrument related thereto or any Real Estate Rights Agreement,
Project Approval or Agreement Approval (other than as required by the Collateral
Documents), or (v) take any other action in connection with any Material Project
Agreement or any Support Instrument related thereto that would materially impair
the value of its interest or rights thereunder or that would impair the rights
or interests of the Lender.

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<PAGE>

      (l) Formation of Subsidiaries. Organize or invest in any Subsidiary.

      (m) Partnerships, Etc. Become a general or limited partner in any general
or limited partnership or party to any joint venture, except for exploration or
mining partnerships or joint ventures that require expenditures or Investments,
or the incurrence of liabilities or monetary obligations, by a Loan Party of no
more than $250,000 in the aggregate per year.

      (n) Hedge Transactions. (i) Enter into any Hedge Agreements covering more
than 70% of the scheduled monthly production of Gold from the Mine determined by
reference to the Life of the Mine Plan and (ii) novate the Gold Hedge Agreements
unless and until the condition precedents specified in Sections 4.02(a)(iv),
(v), (vi), (vii) and (viii) have been satisfied;

      (o) Capital Expenditures. Following the Economic Completion Date, make any
Capital Expenditures other than Capital Expenditures contemplated by the Life of
Mine Plan or the Operating Budget, or as otherwise approved by the Independent
Engineer or the Lender.

      (p) Additional Contracts. Enter into or permit to exist any Contractual
Obligation other than (i) the Loan Documents, (ii) the Project Agreements, (iii)
agreements, arrangements, understandings or dealings entered into in the
ordinary course of business and which could not reasonably be expected to result
in liability or cost to it of more than U.S.$250,000 in the aggregate in any
year, or (iv) to the extent reflected in or required by the Construction Budget,
the Operating Budget or the Life of Mine Plan; provided that (A) any such
Contractual Obligation that is entered into with any Affiliate complies with
Section 7.01(k), and (B) no such Contractual Obligation (other than this
Agreement or any other Loan Document) shall (1) limit its ability to create,
incur, assume or suffer to exist Liens on its property or assets, or (2) require
the grant of a Lien by it to secure such Contractual Obligation.

      (q) Equity Interests.

            (i) Issue or sell any additional Equity Interests in it other than
      additional issuances or sales to the Guarantor or the Pledgor of
      additional Equity Interests that are pledged to the Lender.

            (ii) Issue or authorize to be issued any certificates representing
      any of its Equity Interests.

            (iii) Permit any Person to become, after the date hereof, a holder
      of any Equity Interests in it other than the Guarantor and the Pledgor.

            (iv) with respect to the Guarantor only, cause or permit to be
      issued or sold any additional Equity Interests in the Pledgor or the
      Borrowers other than additional issuances or sales to the Guarantor or the
      Pledgor of additional Equity Interests that are pledged to the Lender.

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<PAGE>

      (r) Insolvency Proceedings. Commence or consent to any Insolvency
Proceeding in respect of itself.

      (s) ERISA. Maintain or contribute to (or have any obligation to contribute
to) or permit any ERISA Affiliate to maintain or contribute to (or have any
obligation to contribute to), any ERISA Plan.

      (t) Powers of Attorney. Execute or deliver any powers of attorney,
including, without limitation, any general powers of attorney for acts of domain
(poderes generales para actos de dominio), other than any such powers of
attorney necessary for the business of the Borrowers in the ordinary course of
business; provided, however, that such powers of attorney shall otherwise be
consistent with its obligations under this Agreement and the other Transaction
Documents.

      (u) Accounts. Maintain any deposit or security accounts other than the
Accounts or the Unrestricted Account.

                                   ARTICLE IX
                               FINANCIAL COVENANTS

      Section 9.01 Borrowers' Financial Covenants. So long as the Lender shall
have any Commitment hereunder, any Secured Hedge Agreement shall be in effect or
any Loan or other Secured Obligations hereunder or under any other Loan Document
which is accrued and payable shall remain unpaid or unsatisfied, the Borrowers,
shall:

      (a) Debt Service Coverage Ratio. Maintain as of any date of determination
a Debt Service Coverage Ratio of not less than 1.2:1.0.

      (b) Projected Debt Service Coverage Ratio. Maintain as of any date of
determination a Projected Debt Service Coverage Ratio of not less than 1.2:1.0
for the relevant Annual Period.

      (c) Loan Life Coverage Ratio. Maintain as of any date of determination, a
Loan Life Coverage Ratio of at least 1.6:1.0.

      (d) Project Life Coverage Ratio. Maintain as of any date of determination,
a Project Life Coverage Ratio of at least 2.0:1.0.

      (e) Minimum Reserve Tail. Maintain, as of any date of determination, a
Minimum Reserve Tail of at least 30%, which, for the avoidance of doubt, on the
date of this Agreement is 76,800 Ounces of Gold.

      Section 9.02 Guarantor's Financial Covenants. So long as the Lender shall
have any Commitment hereunder, any Secured Hedge Agreement shall be in effect or
any Loan or other Secured Obligations hereunder or under any other Loan Document
which is accrued and payable shall remain unpaid or unsatisfied, the Guarantor,
shall, (a) maintain a minimum liquidity of $1,000,000 at all times prior to
November 15, 2006, (b) maintain a minimum liquidity of $1,500,000 at all times
after November 15, 2006 to (but excluding) the Economic Completion Date and (c)
for each month on and after the Economic Completion Date, maintain an average
minimum liquidity of $500,000 for such month.

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                                    ARTICLE X
                              REPORTING, NOTICE AND
                            CALCULATION REQUIREMENTS

      Section 10.01 Reporting Requirements. So long as the Lender shall have any
Commitment hereunder, any Secured Hedge Agreement shall be in effect or any Loan
or other Secured Obligations hereunder or under any other Loan Document which is
accrued and payable shall remain unpaid or unsatisfied, the Borrowers shall:

      (a) Construction Progress Reports. Deliver to the Lender, no later than
tenth (10th) day of each calendar month prior to Physical Completion, a summary
of construction of the Mine during the immediately preceding calendar month
(each, a "Construction Progress Report"), describing (i) physical progress and
expenditures during such month, (ii) cumulative expenditures through the end of
such month, together with a comparison of the same against the Construction
Budget, (iii) the Borrowers' then current estimate of construction-related
expenditures by month through Physical Completion, (iv) the Borrowers' then
current estimates of total costs and construction-related expenditures
anticipated to be incurred prior to Physical Completion and the anticipated
Physical Completion Date and Economic Completion Date, (v) any material
non-compliance with the Environmental Management Plan, and (vi) any fact or
occurrence of which the Borrowers are aware that could reasonably be expected to
(A) increase the total capital costs of the Project above those set forth in the
Construction Budget, (B) delay the Physical Completion Date beyond the Scheduled
Physical Completion Date, (C) delay the Economic Completion Date beyond the
Scheduled Economic Completion Date or (D) have, either individually or in the
aggregate, a Material Adverse Effect.

      (b) Operating Reports. Deliver to the Lender, as soon as available, but in
any event no later than fifteen (15) days after the end of each calendar month
occurring after the first 5,000 tons of ore have been placed on the Project's
leach pad, a summary of operations for each such calendar month and a summary of
the calendar year-to-date operations, in each case including comparisons to the
Operating Budget and the Financial Model, including information in reasonable
detail concerning: (A) Mine production during such calendar month, (B) Hedge
Agreements in effect during such calendar month and any deliveries or payments
made thereunder, (C) any adjustments made to any pricing formula or component
thereof in any Hedge Agreement during such fiscal quarter, (D) the Borrowers'
inventory of Gold (i) on the leach pads, (ii) in solution, (iii) in the
adsorption-desorption-recovery plant or (iv) in dore, in each case at the end of
such calendar month, (E) the Ounces of Gold shipped from the Mine during such
calendar month, (F) Project Revenues received during such calendar month, (G)
Operating Costs paid during such calendar month, (H) any Capital Expenditures
paid during such calendar month, (I) the Borrowers' most recent cash planning
forecast by month covering at least the next six (6) months, (J) any material
developments that occurred during such calendar month in Mine operations which
have had or could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect, (K) a description of any material
noncompliance with Project Approvals and Agreement Approvals or the
Environmental Management Plan, and (L) without duplication of any of the
foregoing, a description of any defects or malfunctions at the Mine that have
had, or could reasonably be expected to have, either individually or in the
aggregate, a material adverse effect on actual or expected Operating Costs and
Project Revenues or on Mining Reserves.

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<PAGE>

      (c) Updated Life of Mine Plan and Financial Model.

            (i) On or prior to each February 28th, the Borrowers shall deliver
      to the Lender an updated Life of Mine Plan and Financial Model. Each
      updated Life of Mine Plan and Financial Model delivered pursuant to this
      clause (c) shall (A) set forth the expected economic life of the Mine, (B)
      update the Mining Reserves and estimate the expected Gold production of
      the Mine through the expected economic life of the Mine, (C) prior to the
      Physical Completion Date, include an update to the construction plan and
      Construction Budget, (D) subsequent to the Physical Completion Date,
      include an annual Operating Budget and operating plan, which shall consist
      of (1) fair and good faith reasonable Dollar- and Peso-denominated
      estimates of Project Revenues and Operating Costs on an individual line
      item basis and Debt Service and pro forma cash flow projections for each
      month covered by such Operating Budget, (2) a summary of the Mine's major
      maintenance schedule to the end of the then current long-term major
      maintenance cycle (and any related scheduled cessation of mining
      activities), (3) the Borrowers' fair and good faith reasonable estimates
      of the costs of such maintenance and its envisioned effect on the Mine's
      operations, and (4) the Project's program for spare parts (including the
      proposed suppliers thereof and prices therefor, inventory management and
      fuel supply management) and (5) such other information as may be
      reasonably requested by the Lender, (E) address any other matters
      associated with the Project as the Lender or the Independent Engineer may
      reasonably request, and (F) be accompanied by an Officer's Certificate of
      a Borrower stating that the updated Life of Mine Plan and the updated
      Financial Model, and its underlying models and assumptions, (1) were
      prepared in good faith by the Borrowers, (2) are based upon assumptions
      and projections that are consistent with the requirements of the
      Transaction Documents, the Agreement Approvals, the Project Approvals and
      Applicable Law and that the Borrowers consider to be reasonable in light
      of the conditions existing as of the delivery of such updated Life of Mine
      Plan and Financial Model, and (3) represent the Borrowers' best estimate
      of the information set forth therein as of the date of delivery.

            (ii) No later than thirty (30) days after receipt of the updated
      Life of Mine Plan and Financial Model, the Lender shall approve such Life
      of Mine Plan and Financial Model or shall advise the Borrowers of any
      changes thereto reasonably necessary for approval by the Lender. Until
      such time as the Lender has approved the updated Life of Mine Plan or
      Financial Model, the then existing Life of Mine Plan and Financial Model
      shall continue to apply for all purposes of this Agreement and the other
      Loan Documents. If the Lender objects to such updated Life of Mine Plan or
      Financial Model and the Borrowers and the Lender are unable to agree on
      revisions to the Life of Mine Plan or the Financial Model, then such
      dispute will be resolved as set forth in Section 1.07(b).

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<PAGE>

      (d) Financial Statements.

            (i) Deliver to the Lender, in form and detail satisfactory to the
      Lender, as soon as available, but in any event within forty-five (45) days
      after the end of each of the first three fiscal quarters of each fiscal
      year of the Loan Parties a consolidated balance sheet of each of the Loan
      Parties as at the close of such fiscal quarter period, and the related
      consolidated statements of income or operations, shareholders' equity and
      cash flows for such fiscal quarter and for the portion of such Loan
      Party's fiscal year then ended, setting forth in each case in comparative
      form the figures for the corresponding fiscal quarter of the previous
      fiscal year and the corresponding portion of the previous year, all in
      reasonable detail and certified by a Responsible Officer of such Loan
      Party as fairly presenting the financial condition, results of operations,
      shareholders' equity and cash flows of such Loan Party in accordance with
      Applicable GAAP and reconciled to U.S. GAAP, subject only to normal
      year-end audit adjustments and the absence of footnotes; and

            (ii) Deliver to the Lender, in form and detail satisfactory to the
      Lender, as soon as available, but in any event within one hundred twenty
      (120) days after the end of each fiscal year of the Loan Parties, a
      consolidated balance sheet of each of the Loan Parties as at the end of
      such fiscal year, and the related consolidated statements of income or
      operations, shareholders' equity and cash flows for such fiscal year,
      setting forth in each case in comparative form the figures for the
      previous fiscal year, all in reasonable detail and prepared in accordance
      with Applicable GAAP and reconciled to U.S. GAAP, audited, which opinion
      shall be prepared in accordance with generally accepted auditing standards
      and shall not be subject to any "going concern" or like qualification or
      exception or any qualification or exception as to the scope of such audit,
      together with an Officer's Certificate of such Loan Party to the effect
      that such statements are fairly stated in all material respects when
      considered in relation to the consolidated financial statements of such
      Loan Party.

      (e) Certificates; Other Information. Deliver to the Lender, in form and
detail satisfactory to it:

            (i) concurrently with the delivery of the financial statements
      referred to in Section 10.01(d)(i) and 10.01(d)(ii), a duly completed
      Compliance Certificate signed by a Responsible Officer of the relevant
      Loan Party and, in the event of any change in generally accepted
      accounting principles used in the preparation of such financial
      statements, the Borrowers shall also provide, if necessary for the
      determination of compliance with Section 9.01, a statement of
      reconciliation conforming such financial statements to Applicable GAAP;

            (ii) promptly after any request by the Lender, and subject to any
      applicable confidentiality restrictions, copies of any detailed audit
      reports, management letters or recommendations submitted to the board of
      managers (or the audit committee of the board of managers) of either of
      the Borrowers in connection with the accounts or books of such Borrower,
      or any audit of such Borrower;

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<PAGE>

            (iii) promptly after the same are available, copies of each annual
      report, proxy or financial statement or other report or communication sent
      to the stockholders of any of the Loan Parties, and copies of all annual,
      regular, periodic and special reports and registration statements which
      any of the Loan Parties may file or be required to file with any
      Governmental Authority, and in any case not otherwise required to be
      delivered to the Lender pursuant hereto;

            (iv) as soon as available and in any event within thirty (30) days
      after the end of each fiscal year, a report summarizing the insurance
      coverage (specifying type, amount and carrier) in effect for the Borrowers
      and containing such additional information as the Lender may reasonably
      specify;

            (v) promptly and in any event within five (5) Business Days after
      receipt thereof by the Borrowers, copies of each material notice or other
      material correspondence received from any Governmental Authority regarding
      the Borrowers or the Mine;

            (vi) promptly upon receipt thereof, copies of all material notices,
      requests and other documents received by the Borrowers under or pursuant
      to any Material Project Agreement, any Support Instrument related to any
      Material Project Agreement, Real Estate Rights Agreement, Affiliate
      Contract or other material instrument, indenture, loan or credit or
      similar agreement regarding or related to any breach or default by any
      party thereto or any other event that could materially impair the value of
      the interests or the rights of the Borrowers or otherwise have a Material
      Adverse Effect and copies of any amendment, modification or waiver of any
      Material Project Agreement, any Support Instrument related to any Material
      Project Agreement, Real Estate Rights Agreement, Affiliate Contract or
      other material instrument, indenture, loan or credit or similar agreement
      and, from time to time upon request by the Lender, such information and
      reports regarding the Material Project Agreements, the Support Instruments
      related to any such Material Project Agreements, Real Estate Rights
      Agreement, Affiliate Contracts or other material instrument, indenture,
      loan or credit or similar agreement as the Lender may reasonably request;

            (vii) promptly after the assertion or occurrence thereof, notice of
      any action, suit, demand, demand letter, claim, notice of non-compliance
      or violation, notice of liability or potential liability, investigation,
      proceeding, consent order or consent agreement received by the Borrowers
      and relating in any way to any applicable Environmental Law or
      Environmental Permit or to a release of Hazardous Material from, or threat
      to health and safety or the environment at, the Mine, including, without
      limitation, (a) by any Governmental Authority for enforcement, cleanup,
      removal, response, remedial or other actions or damages with respect to
      the Mine and (b) by any Governmental Authority or third party for damages,
      contribution, indemnification, cost recovery, compensation or injunctive
      relief against, or of any non-compliance by the Borrowers with, any
      applicable Environmental Law or Environmental Permit that could reasonably
      be expected to have a Material Adverse Effect; and

            (viii) promptly, such additional information regarding the business,
      financial, legal or corporate affairs of any Loan Party or any Subsidiary,
      or compliance with the terms of the Loan Documents, as the Lender may from
      time to time reasonably request.

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<PAGE>

      (f) Independent Engineer Reports. (i) Cooperate with the Independent
Engineer so that the Independent Engineer may review the Borrowers' Construction
Progress Report and prepare and provide the IE Construction Report to the Lender
no later than twenty-five (25) days after the end of each month, and (ii) from
time to time, deliver to the Independent Engineer any information or
documentation that the Independent Engineer may reasonably request.

      (g) Additional Project Agreements, Etc. Promptly after the execution and
delivery thereof, but in any event within five (5) Business Days, deliver to the
Lender copies of any Additional Project Agreement or any new Support Instrument,
Real Estate Rights Agreement or Hedge Agreement entered into from time to time
in accordance with this Agreement after the Closing Date (together with, as
promptly as practicable thereafter, an English translation of any document
originally delivered in a language other than English), accompanied in the case
of any Additional Project Agreement by an Officer's Certificate of a Borrower to
a similar effect to the Officer's Certificate delivered pursuant to Sections
4.01(a)(iv).

      (h) Agreement Approvals, Etc. Promptly upon receipt thereof, but in any
event within five (5) Business Days, deliver to the Lender copies of any
Agreement Approvals or Project Approvals or other material approvals,
franchises, licenses, permits, approvals, consents, easements, leases, rights of
way, other real property rights and other rights related to the Project,
including any amendments or supplements thereto or modifications thereof
(together with, as promptly as practicable thereafter, an English translation of
any document originally delivered in a language other than English), accompanied
by an Officer's Certificate of a Borrower to a similar effect to the Officer's
Certificate delivered pursuant to Section 4.01(a)(v).

            (i) Notices. Promptly notify the Lender of:

            (i) the occurrence of any Prospective Event of Default or Event of
      Default;

            (ii) any material default (including any payment default) under, or
      any material amendment or termination of, any Material Project Agreement;

            (iii) any action, suit, investigation, litigation or proceeding that
      is instituted or, to its knowledge threatened, against the Borrowers, any
      other Loan Party or Material Project Party that (A) could be reasonably
      expected to have, either individually or in the aggregate, a Material
      Adverse Effect, (B) purports to affect the Project or the ability of the
      Borrowers, any other Loan Party or Material Project Party to perform their
      respective obligations under any of the Transaction Documents, or (C)
      purports to affect the legality, validity or enforceability of any
      Transaction Document or the consummation of the transactions contemplated
      hereby or thereby;

            (iv) any deficiency in production of Gold in any three (3) month
      period which results in a production level for such three (3) month period
      which is less than 80% of the production level of Gold contemplated for
      such three (3) month period by the Life of Mine Plan;

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<PAGE>

            (v) the incurrence of Operating Costs in any three (3) month period
      to the extent such incurrence exceeds 120% of Operating Costs budgeted for
      such three month period pursuant to the then-applicable Operating Budget;

            (vi) the occurrence of any Casualty Event;

            (vii) any notice of cancellation of, threatened cancellation of, or
      change in, the insurance policies maintained by or on behalf of the
      Borrowers in respect of the Mine;

            (viii) any material change in accounting policies or financial
      reporting practices by the Borrowers;

            (ix) the receipt of any Insurance Proceeds;

            (x) the occurrence of any Expropriatory Event;

            (xi) the occurrence of any Insolvency Proceeding;

            (xii) the occurrence of any labor or employee issues with respect to
      the Borrowers or the Mine that could reasonably be expected to have a
      Material Adverse Effect;

            (xiii) the occurrence of any event which could reasonably be likely
      to delay either the Physical Completion Date or the Economic Completion
      Date from occurring on or prior to the Scheduled Physical Completion Date
      or the Scheduled Economic Completion Date; and

            (xiv) of any other matter that has resulted or could reasonably be
      expected to result in a Material Adverse Effect, including a breach or
      non-performance of, or any default under, a Contractual Obligation of a
      Borrower.

      Section 10.02 Preparation of Environmental Reports. The Borrowers shall,
at the reasonable request of the Lender from time to time (with such request to
be made no more than once per year unless an Event of Default has occurred and
is continuing), provide to the Lender within sixty (60) days after such request,
at the expense of the Borrowers, an environmental site assessment report for any
of its properties described in such request, prepared by an environmental
consulting firm acceptable to the Lender, indicating the presence or absence of
Hazardous Materials and the estimated cost of any compliance, removal or
remedial action in connection with any Hazardous Materials on such properties;
without limiting the generality of the foregoing, if the Lender determines at
any time that a material risk exists that any such report will not be provided
within the time referred to above, the Lender may retain an environmental
consulting firm to prepare such report at the expense of the Borrowers, and the
Borrowers hereby grant at the time of such request to the Lender, such firm and
any agents or representatives thereof an irrevocable non-exclusive license,
subject to the rights of tenants, to enter onto their respective properties to
undertake such an assessment, subject to the inspection conditions set forth in
Section 7.01(f).

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<PAGE>

      Section 10.03 Calculation of Financial Ratios. On each Calculation Date,
calculate the Projected Debt Service Coverage Ratio for the relevant Annual
Period, the Project Life Coverage Ratio and the Loan Life Coverage Ratio for the
relevant period, and the Debt Service Coverage Ratio and the Minimum Reserve
Tail as of such Calculation Date, which calculations shall be confirmed by the
Lender.

      Section 10.04 Translations. If any notice, certificate, instrument,
communication or other document required to be delivered to any Person pursuant
to this Article X is not originally executed, delivered or given in English, the
Borrowers shall concurrently with the delivery of such document, additionally
provide to such Person a certified English translation thereof.

                                   ARTICLE XI
                                    INSURANCE

      Section 11.01 Required Insurance The Borrowers shall procure or cause
others to procure at their own expense and maintain in full force and effect (a)
at all times on and after the Closing Date until the earlier of (i) one day
prior to the Initial Funding Date and (ii) one day prior to the novation of the
Gold Hedge Agreements, the insurance listed on Schedule 5.01(cc) and (b)
thereafter, such other insurance policies as may be reasonably required by the
Lender, it being understood that the Lender shall take into account the form and
amounts of insurance that are customarily provided for Borrowers and project
facilities of a similar type and scale and the availability and cost of such
coverage (including premiums, deductibles and exclusions) (the "Required
Insurance"). All Required Insurance shall name Lender as an additional insured
and as sole loss payee with respect to any claim payments.

      Section 11.02 Application of Insurance Proceeds. Insurance Proceeds shall
be applied as follows:

      (a) Third-Party Liability. Any sum paid, whether by an insurer or
otherwise, in settlement of a liability to a third party shall be paid to the
Person to whom the liability shall have been incurred or, if such liability
shall have been paid by the insured party, to, or to the order of, the insured
party.

      (b) Business Interruption Insurance Proceeds. Business Interruption
Insurance Proceeds shall be paid by the insurer or reinsurer to the Lender as
contemplated in Section 6.04(b) to be deposited into, or credited to, the
Offshore Revenues and Disbursement Account, for application as provided in
Article VI.

      (c) Insurance Proceeds. Any Insurance Proceeds shall be paid by the
insurer or reinsurer to the Lender as contemplated in Section 6.04(b), to be
deposited into, or credited to, the Insurance Proceeds Account for application
as follows:

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<PAGE>

            (i) if no Event of Default has occurred and is Continuing and the
      net proceeds received by the Lender in respect of any Casualty Event are
      less than U.S.$2,000,000, the Lender shall transfer portions of such sum
      from the Insurance Proceeds Account to the Offshore Operating Account from
      time to time upon the request of the Borrowers for the purpose of making
      payments required to finance the repair, reconstruction or replacement of
      the damaged property; and

            (ii) if (A) any Event of Default has occurred and is Continuing or
      (B) the net proceeds received by the Lender in respect of any Casualty
      Event are greater than or equal to U.S.$2,000,000, on the next occurring
      Quarterly Date, the Lender shall apply the funds as a mandatory prepayment
      of the Loans in accordance with Section 2.03; provided that if the Lender
      in its sole discretion determines that the Borrowers may repair,
      reconstruct or replace the damaged property, such amounts shall be made
      available to the Borrowers in accordance with clause (i) above.

            (iii) Control by Lender. Notwithstanding anything in this Section
      11.02 to the contrary, if any Prospective Event of Default or Event of
      Default shall have occurred and be Continuing, any funds on deposit in, or
      credited to, the Insurance Proceeds Account shall be applied in the sole
      discretion of the Lender.

                                   ARTICLE XII
                             [INTENTIONALLY OMITTED]

                                  ARTICLE XIII
                         EVENTS OF DEFAULT AND REMEDIES

      Section 13.01 Events of Default. Any of the following shall constitute an
"Event of Default":

      (a) Nonpayment. Any Borrower fails to pay (i) when and as required to be
paid herein, or pursuant to any Secured Hedge Agreement, any amount of principal
of any Loan or corresponding amount due under any Secured Hedge Agreement, or
(ii) (except as specified in Section 13.01(a)(i)) within three (3) days after
the same becomes due, any interest on any Loan or any fee or obligation due
hereunder or under any Secured Hedge Agreement, or (iii) within five (5) days
after the same becomes due, any other amount payable hereunder or under any
other Loan Document; or

      (b) Representations and Warranties. Any representation, warranty,
certification or statement of fact made or deemed made by or on behalf of the
Borrowers or any other Loan Party herein, in any other Transaction Document, or
in any document executed by the Borrowers and delivered in connection herewith
or therewith shall be incorrect or misleading in any material respect when made
or deemed to be made; or

      (c) Covenants. Any Loan Party fails to perform or observe any covenant or
agreement (not specified in Section 13.01(a)) contained in any Loan Document on
its part to be performed or observed and such failure continues for thirty (30)
days; or

      (d) Insolvency Proceedings. Any Insolvency Proceeding occurs with respect
to any of the Loan Parties; or

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<PAGE>

      (e) Cross-Default. Any Loan Party (i) fails to make any payment when due
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) in respect of any Indebtedness or Guarantee (other than Indebtedness
hereunder or under any Secured Hedge Agreement) having an aggregate principal
amount (including undrawn committed or available amounts and including amounts
owing to all creditors under any combined or syndicated credit arrangement) of
more than the Threshold Amount, or (ii) fails to observe or perform any other
agreement or condition relating to any such Indebtedness or Guarantee or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event occurs, the effect of which default or other event
is to cause, or to permit the holder or holders of such Indebtedness or the
beneficiary or beneficiaries of such Guarantee (or a trustee or agent on behalf
of such holder or holders or beneficiary or beneficiaries) to cause, with the
giving of notice if required, such Indebtedness to be demanded or to become due
or to be repurchased, prepaid, defeased or redeemed (automatically or
otherwise), or an offer to repurchase, prepay, defease or redeem such
Indebtedness to be made, prior to its stated maturity, or such Guarantee to
become payable or cash collateral in respect thereof to be demanded; or

      (f) Judgments. There is entered against either of the Borrowers or, the
Guarantor, (i) a judgment or order for the payment of money in an aggregate
amount exceeding the Threshold Amount (unless it is covered by insurance
provided by an insurer that complies with Article XI of this Agreement, such
insurer has been notified of the potential claim and has not disputed coverage
for a period in excess of 90 days), or (ii) any one or more non-monetary
judgments that have, or could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect and, in either case, such judgments are
not dismissed or discharged and (A) enforcement proceedings are commenced by any
creditor upon such judgment or order, or (B) there is a period of fifteen (15)
days during which a stay of enforcement of such judgment, by reason of a pending
appeal or otherwise, is not in effect; or

      (g) Invalidity of Loan Documents. Any material provision of any
Transaction Document, at any time after its execution and delivery and for any
reason other than as expressly permitted hereunder or thereunder or satisfaction
in full of all the Secured Obligations, ceases to be in full force and effect;
or any Loan Party or any other Person contests in any manner the validity or
enforceability of any material provision of any Transaction Document; or any
Loan Party or Material Project Party denies that it has any or further liability
or obligation under any Transaction Document, or purports to revoke, terminate
or rescind any Transaction Document; or

      (h) Change of Control. The Guarantor and the Pledgor (i) shall
collectively cease to own and control legally and beneficially, either directly
or indirectly, Equity Interests in each of the Borrowers representing 100% of
the combined voting power of all of the Equity Interests entitled to vote for
members of the board of managers or equivalent governing body of the Borrowers
on a fully-diluted basis (and taking into account all such Equity Interests that
such person or group has the right to acquire pursuant to any option right) or
(ii) shall have granted any contractual right of control to any Person over the
management or policies of, or Equity Interests in, the Borrowers; or

      (i) Collateral Document. Any Collateral Document after delivery thereof
pursuant to Section 4.02(a)(ii) through (iv) or 7.01(q) shall for any reason
(other than pursuant to the terms thereof) cease to create a valid and perfected
first priority lien on and security interest in the Collateral purported to be
covered thereby, other than Permitted Liens;

                                       82
<PAGE>

      (j) Material Adverse Effect. Any event or circumstance shall arise which
shall have a Material Adverse Effect; or

      (k) Material Project Agreements. (i) The Borrowers or any Material Project
Party fails to perform or observe, in any material respect, any material term,
covenant or agreement contained in any Material Project Agreement and, if such
failure to perform or observe is of a nature such that it can be remedied, such
failure to perform or observe shall continue unremedied beyond any applicable
cure period set forth therein, unless the same is subject to a Contest; or (ii)
any default or event of default shall have occurred and be continuing under any
Material Project Agreement and such default or event of default shall continue
unremedied beyond any applicable cure period set forth therein, unless the same
is subject to a Contest; or

      (l) Abandonment. Abandonment shall have occurred; or

      (m) Failure to Achieve Physical Completion. The Project shall fail to
achieve Physical Completion by the Scheduled Physical Completion Date; or

      (n) Failure to Achieve Economic Completion. The Project shall fail to
achieve Economic Completion by the Scheduled Economic Completion Date; or

      (o) Expropriation. An Expropriatory Event shall have occurred and such
event is not withdrawn, rescinded, revoked or reversed within thirty (30) days
thereof or is not subject to a stay pending appeal for a period of more than
thirty (30) days.

      Section 13.02 Remedies upon Default.

      (a) Acceleration, Etc. If any Event of Default occurs and is Continuing,
the Lender may take any or all of the following actions:

            (i) declare the Commitment to make Loans to be terminated, whereupon
      such Commitment and obligations shall be terminated; and

            (ii) declare the unpaid principal amount of all outstanding Loans,
      all interest accrued and unpaid thereon, and all other amounts owing or
      payable hereunder or under any other Loan Document to be immediately due
      and payable, without presentment, demand, protest or other notice of any
      kind, all of which are hereby expressly waived by the Borrowers;

provided, however, that upon the occurrence of any Insolvency Proceeding with
respect to either of the Borrowers, the obligation of the Lender to make Loans
shall automatically terminate, and the unpaid principal amount of all
outstanding Loans and all interest and other amounts as aforesaid shall
automatically become due and payable.

                                       83
<PAGE>

      (b) Actions with Respect to the Accounts. If any Prospective Event of
Default occurs and is Continuing, the Offshore Account Holder and the Borrowers,
at the direction of the Lender (or such Person or Persons as the Lender may
designate), shall take the actions in respect of the Accounts required by
Section 6.06(b);

      (c) Operation and Maintenance. The Lender shall have the right (but not
the obligation) to allow the management of the Borrowers to continue performing
their respective duties or to require the Borrowers to appoint a manager on
terms and conditions acceptable to the Lender, for the purpose of performing
such services for, and rendering such assistance on behalf of, the Borrowers as
is required by the Lender. In the latter case, the manager may be a Person who
shall become an employee of, or consultant to, the Borrowers or may be another
Person which enters into a management or operations contract with the Borrowers.

      Section 13.03 Right of Setoff. The Borrowers hereby authorizes the Lender,
if and to the extent payment owed to the Lender is not made when due hereunder
or under any other Loan Document, to charge from time to time against any or all
of the Borrowers' accounts with the Lender any amount so due.

                                   ARTICLE XIV
                             [INTENTIONALLY OMITTED]

                                   ARTICLE XV
                                  MISCELLANEOUS

      Section 15.01 Amendments, Etc. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent to any departure by
the Borrowers or any other Loan Party therefrom, shall be effective unless in
writing signed by the Lender and the applicable Loan Party and each such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.

      Section 15.02 Notices and Other Communications; Facsimile Copies.

      (a) Except in the case of notices and other communications expressly
permitted to be given by telephone, all notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail or sent by
telecopier to the address, telecopier number or electronic mail address, as
applicable, specified for such Person on Schedule 15.02, and all notices and
other communications expressly permitted hereunder to be given by telephone
shall be made to the applicable telephone number specified for such Person on
Schedule 15.02.

      (b) Notices sent by hand or overnight courier service, or mailed by
certified or registered mail, shall be deemed to have been given when received;
notices sent by telecopier shall be deemed to have been given when sent (except
that, if not given during normal business hours for the recipient, shall be
deemed to have been given at the opening of business on the next business day
for the recipient).

      (c) Reliance by Lender. The Lender shall be entitled to rely and act upon
any notices purportedly given by or on behalf of the Borrowers even if (i) such
notices were not made in a manner specified herein, were incomplete or were not
preceded or followed by any other form of notice specified herein, or (ii) the
terms thereof, as understood by the recipient, varied from any confirmation
thereof. The Borrowers shall indemnify the Lender and its Related Parties from
all losses, costs, expenses and liabilities resulting from the reliance by such
Person on each notice purportedly given by or on behalf of the Borrowers if
given in accordance with this Agreement. All telephonic notices to and other
telephonic communications with the Lender may be recorded by the Lender, and
each of the parties hereto hereby consents to such recording.

                                       84
<PAGE>

      Section 15.03 No Waiver; Cumulative Remedies. No failure by the Lender to
exercise, and no delay by any such Person in exercising, any right, remedy,
power or privilege hereunder or any other Loan Document shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided, and provided under each other
Loan Document, are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.

      Section 15.04 Expenses; Indemnity; Damage Waiver.

      (a) Costs and Expenses. The Borrowers shall pay (i) all reasonable
out-of-pocket expenses incurred by the Lender and its Affiliates (including the
reasonable fees, charges and disbursements of counsel for the Lender), in
connection with the preparation, negotiation, execution, delivery and
administration of this Agreement and the other Loan Documents or any amendments,
modifications or waivers of the provisions hereof or thereof (whether or not the
transactions contemplated hereby or thereby shall be consummated), and (ii) all
out-of-pocket expenses incurred by the Lender (including the fees, charges and
disbursements of any counsel for the Lender, and shall pay all fees and time
charges for attorneys who may be employees of the Lender and of the Independent
Engineer, in connection with the enforcement or protection of its rights in
connection with this Agreement and the other Loan Documents, including its
rights under this Section 15.04, including in connection with any workout,
restructuring or negotiations in respect of the Loans. After the Closing Date,
the Borrowers shall pay or reimburse Lender for the reasonable out-of-pocket
costs and expenses of an annual site visit to the Project by a maximum of two
(2) people or by the Independent Engineer prior to or after Economic Completion
in connection with this Agreement.

      (b) Indemnification by the Borrowers. The Borrowers shall indemnify the
Lender and its Related Parties (each such Person being called an "Indemnitee")
against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses (including the reasonable fees,
charges and disbursements of any counsel for any Indemnitee), and shall
indemnify and hold harmless each Indemnitee from all reasonable fees and time
charges and disbursements for attorneys who may be employees of any Indemnitee,
incurred by any Indemnitee or asserted against any Indemnitee by any third party
or by any Loan Party arising out of, in connection with, or as a result of (i)
the execution or delivery of this Agreement, any other Loan Document or any
agreement or instrument contemplated hereby or thereby, the performance by the
parties hereto of their respective obligations hereunder or thereunder or the
consummation of the transactions contemplated hereby or thereby, (ii) any Loan
or the use or proposed use of the proceeds therefrom, (iii) any actual or
alleged presence or release of Hazardous Materials on or from any property owned
or operated by the Borrowers, or any Environmental Liability related in any way
to the Borrowers, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory, whether brought by a third party or by any
Loan Party or any of such Loan Party's directors, shareholders or creditors, and
regardless of whether any Indemnitee is a party thereto and whether or not any
of the transactions contemplated hereunder or under any of the other Loan
Documents is consummated, in all cases, whether or not caused by or arising, in
whole or in part, out of the comparative, contributory or sole negligence of the
Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related expenses (A) are determined by a court of competent jurisdiction by
final and non-appealable judgment to have resulted from the gross negligence or
willful misconduct of such Indemnitee or (B) result from a claim brought by any
Loan Party against an Indemnitee for breach in bad faith of such Indemnitee's
obligations hereunder or under any other Loan Document, if such Loan Party has
obtained a final and non-appealable judgment in its favor on such claim as
determined by a court of competent jurisdiction; provided, further, that (i)
each Indemnitee shall notify the Borrowers in writing upon becoming aware of the
initiation of any claims against it, (ii) the Borrowers shall be entitled to
participate in the defense of any such claim and, if the Borrowers so chooses,
to assume the defense, at the Borrowers' expense, of any such claim with counsel
selected by the Borrowers (it being understood that any Indemnitee shall have
the right to participate in such defense and employ counsel separate from the
counsel employed by the Borrowers, and that such counsel shall be at the expense
of such Indemnitee unless such Indemnitee shall have been advised by counsel
that there may be legal defenses available to it that are inconsistent with or
in addition to those available to the Borrowers, in which case the reasonable
fees and expenses of such counsel shall be at the Borrowers' expense) and (iii)
no Indemnitee shall settle any such claim without the Borrowers' prior written
consent (such consent not to be unreasonably withheld).

                                       85
<PAGE>

      (c) Waiver of Consequential Damages, Etc. To the fullest extent permitted
by Applicable Law, the Borrowers shall not assert, and hereby waive, any claim
against any Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages)
arising out of, in connection with, or as a result of, this Agreement, any other
Loan Document or any agreement or instrument contemplated hereby, the
transactions contemplated hereby or thereby, any Loan or the use of the proceeds
thereof. No Indemnitee referred to in subsection (b) above shall be liable for
any damages arising from the use by unintended recipients of any information or
other materials distributed by it through telecommunications, electronic or
other information transmission systems in connection with this Agreement or the
other Loan Documents or the transactions contemplated hereby or thereby.

      (d) Payments. All amounts due under this Section 15.04 shall be payable
not later than ten (10) Business Days after demand therefor.

      Section 15.05 Payments Set Aside. To the extent that any payment by or on
behalf of the Borrowers is made to the Lender, or the Lender exercises its right
of setoff, and such payment or the proceeds of such setoff or any part thereof
is subsequently invalidated, declared to be fraudulent or preferential, set
aside or required (including pursuant to any settlement entered into by the
Lender in its discretion) to be repaid to a trustee, receiver or any other
party, in connection with any Insolvency Proceeding or otherwise, then to the
extent of such recovery, the obligation or part thereof originally intended to
be satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such setoff had not occurred.

      Section 15.06 Successors and Assigns.

      (a) Successors and Assigns Generally. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that none of the Loan
Parties may assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of the Lender. Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, their respective successors and assigns
permitted hereby, Participants to the extent provided in subsection (b) of this
Section 15.06 and, to the extent expressly contemplated hereby, the Related
Parties of the Lender) any legal or equitable right, remedy or claim under or by
reason of this Agreement.

      (b) Participations. The Lender may at any time, without the consent of, or
notice to, the Borrowers, sell participations to any Person (other than a
natural person or the Borrowers or any of the Borrowers' Affiliates) (each, a
"Participant") in all or a portion of the Lender's rights and/or obligations
under this Agreement (including all or a portion of its Commitment and/or the
Loans owing to it); provided that (i) the Lender's obligations under this
Agreement shall remain unchanged, (ii) the Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) the Borrowers shall continue to deal solely and directly with the
Lender in connection with the Lender's rights and obligations under this
Agreement. Any agreement or instrument pursuant to which the Lender sells such a
participation shall provide that the Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement. The Borrowers agree that each Participant shall
be entitled to the benefits of Sections 3.01, 3.03, 3.04 and 15.08 to the same
extent as if it were the Lender.

      (c) Certain Pledges. The Lender may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement
(including under its Note, if any) to secure obligations of the Lender,
including any pledge or assignment to secure obligations to a Federal Reserve
Bank; provided that no such pledge or assignment shall release the Lender from
any of its obligations hereunder or substitute any such pledgee or assignee for
the Lender as a party hereto.

                                       86
<PAGE>

      (d) Assignments. The Lender may, with the consent of the Borrowers, assign
to one or more Eligible Assignees all or a portion of its interests, rights and
obligations under this Agreement; provided, however, that (i) each such
assignment shall be of a constant, and not a varying, percentage of all the
Lender's rights and obligations under this Agreement, (ii) the parties to each
such assignment shall execute and deliver to the Lender an Assignment and
Transfer, together with any Note or Notes subject to such assignment and (iii)
such assignment shall not, without the consent of such Borrower, require a
Borrower to file a registration statement with the Securities and Exchange
Commission or apply to or qualify the Loans or the Notes under the blue sky laws
of any state. Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and Transfer, which
effective date shall be at least five (5) Business Days after the execution
thereof, (x) the assignee thereunder shall be a party hereto and, to the extent
provided in such Assignment and Transfer, have the rights and obligations of a
Lender hereunder, and (y) the Lender assignor thereunder shall, to the extent
provided in such assignment, be released from its obligations under this
Agreement. By executing and delivering an Assignment and Transfer, the Lender
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than the representation
and warranty that it is the legal and beneficial owner of the interest being
assigned thereby free and clear of any adverse claim, such Lender assignor makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto or with respect to the financial condition of any
Borrower or the performance or observance by any Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (ii) such assignee confirms that it has received a copy of this
Agreement and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into such Assignment and
Transfer; (iii) such assignee will, independently and without reliance upon the
Lender assignor, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (iv) such assignee confirms that it is
an Eligible Assignee; (v) such assignee appoints and authorizes the Initial
Lender to take such action as agent on its behalf and to exercise such powers
under this Agreement and the other Loan Documents as are delegated to the Lender
by the terms hereof and thereof, together with such powers as are reasonably
incidental thereto; and (vi) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.

                                       87
<PAGE>

      Section 15.07 Treatment of Certain Information; Confidentiality. The
Lender agrees to maintain the confidentiality of the Information, except that
Information may be disclosed (a) to its Affiliates and to its Affiliates'
respective partners, directors, officers, employees, agents, advisors and
representatives (it being understood that the Persons to whom such disclosure is
made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential); (b) to the extent requested
by any regulatory authority purporting to have jurisdiction over it; (c) to the
extent required by Applicable Law or regulations or by any subpoena or similar
legal process; (d) to any other party to this Agreement; (e) in connection with
the exercise of any remedies hereunder or any suit, action or proceeding
relating to this Agreement or the enforcement of rights hereunder; (f) subject
to an agreement containing provisions substantially the same as those of this
Section 15.07, to (i) any Participant in any of its rights or obligations under
this Agreement or (ii) any direct or indirect contractual counterparty or
prospective counterparty (or such contractual counterparty's or prospective
counterparty's professional advisor) to any credit derivative transaction
relating to obligations of the Loan Parties; (g) with the consent of the
Borrowers; (h) to the extent such Information (i) becomes publicly available
other than as a result of a breach of this Section 15.07 or (ii) becomes
available to the Lender or any of its Affiliates on a nonconfidential basis from
a source other than the Borrowers; (i) to any state, federal or foreign
authority or examiner (including the National Association of Insurance
Commissioners or any other similar organization) regulating the Lender; or (j)
to any rating agency when required by it (it being understood that, prior to any
such disclosure, such rating agency shall undertake to preserve the
confidentiality of any Information relating to the Loan Parties received by it
from the Lender). In addition, the Lender may disclose the existence of this
Agreement and information about this Agreement to market data collectors,
similar service providers to the lending industry, and service providers to the
Lender in connection with the administration and management of this Agreement,
the other Loan Documents, the Commitments, and the Borrowings. For the purposes
of this Section 15.07, "Information" means all information received from any
Loan Party relating to any Loan Party or its business, other than any such
information that is available to the Lender on a non-confidential basis prior to
disclosure by any Loan Party. Any Person required to maintain the
confidentiality of Information as provided in this Section 15.07 shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.

                                       88
<PAGE>

      Section 15.08 Right of Setoff. If an Event of Default shall have occurred
and be Continuing, the Lender and each of its Affiliates is hereby authorized at
any time and from time to time, to the fullest extent permitted by Applicable
Law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final, in whatever currency) at any time held and other
obligations (in whatever currency) at any time owing by the Lender or any such
Affiliate to or for the credit or the account of any Loan Party against any and
all of the obligations of such Loan Party now or hereafter existing under this
Agreement or any other Loan Document to the Lender, irrespective of whether or
not the Lender shall have made any demand under this Agreement or any other Loan
Document and although such obligations of the Loan Party may be contingent or
unmatured or are owed to a branch or office of the Lender different from the
branch or office holding such deposit or obligated on such indebtedness. The
rights of the Lender and its Affiliates under this Section 15.08 are in addition
to other rights and remedies (including other rights of setoff) that the Lender
or its Affiliates may have. The Lender agrees to notify the Borrowers promptly
after any such setoff and application; provided that the failure to give such
notice shall not affect the validity of such setoff and application.

      Section 15.09 Counterparts; Effectiveness. This Agreement may be executed
in counterparts (and by different parties hereto in different counterparts),
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract. Except as provided in Section 4.01, this
Agreement shall become effective when it shall have been executed by the Lender
and when the Lender shall have received counterparts hereof that, when taken
together, bear the signatures of each of the other parties hereto. Delivery of
an executed counterpart of a signature page of this Agreement by telecopy shall
be effective as delivery of a manually executed counterpart of this Agreement.

      Section 15.10 Survival. Notwithstanding anything in this Agreement to the
contrary, Article III, Sections 15.04, 15.14, 15.17, 15.18 and 15.19 shall
survive any termination of this Agreement. In addition, each representation and
warranty made hereunder and in any other Loan Document or other document
delivered pursuant hereto or thereto or in connection herewith or therewith
shall survive the execution and delivery hereof and thereof. Such
representations and warranties have been or will be relied upon by the Lender,
regardless of any investigation made by the Lender or on its behalf and
notwithstanding that the Lender may have had notice or knowledge of any
Prospective Event of Default or Event of Default at the time of any Borrowing,
and shall continue in full force and effect as long as any Loan or any other
Secured Obligation hereunder or under any other Loan Document shall remain
unpaid or unsatisfied.

                                       89
<PAGE>

      Section 15.11 Severability. If any provision of this Agreement or the
other Loan Documents is held to be illegal, invalid or unenforceable, (a) the
legality, validity and enforceability of the remaining provisions of this
Agreement and the other Loan Documents shall not be affected or impaired thereby
and (b) the parties shall endeavor in good faith negotiations to replace the
illegal, invalid or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the illegal, invalid or
unenforceable provisions. The invalidity of a provision in a particular
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

      Section 15.12 Consultants.

      (a) Removal of Consultants. The Lender may, in its sole discretion, remove
any of the Consultants. If any of the Consultants is removed or resigns and
thereby ceases to act for purposes of this Agreement and the other Loan
Documents, the Lender may designate a replacement firm (each, a "Replacement
Consultant") with the prior consent of the Borrowers, not to be unreasonably
withheld (such consent not to be required during the continuance of a
Prospective Event of Default or Event of Default).

      (b) Consultants' Fees and Expenses. The Borrowers shall reimburse each of
the Consultants for the reasonable fees and documented expenses of such
Consultant retained on behalf of the Lender pursuant to this Section 15.12,
including, without limitation, the semiannual and annual reports to be provided
by any of the Consultants as contemplated by Sections 10.01(f) and 10.01(g) and
any dispute resolution provided by the Independent Engineer pursuant to Section
1.07(b).

      (c) Certifications by Consultants. In all cases in which this Agreement
provides for any Consultant to "agree," "approve," "certify" or "confirm" any
report or other document or any fact or circumstance, such Consultant may make
the determinations and evaluations required in connection therewith based upon
information provided by the Borrowers or other sources reasonably believed by
such Consultant, to be knowledgeable and responsible, without independently
verifying such information; provided that, notwithstanding the foregoing, such
Consultant shall engage in such independent investigations or findings as it may
from time to time deem necessary in its reasonable discretion to support the
determinations and evaluations required of it.

                                       90
<PAGE>

      Section 15.13 Benefits of Agreement. Nothing in this Agreement or any
other Loan Document, express or implied, shall give to any Person, other than
the parties hereto, and each of their successors and permitted assigns under
this Agreement or any other Loan Document, any benefit or any legal or equitable
right or remedy under this Agreement.

      Section 15.14 Judgment Currency.

      (a) Obligation to Pay in Dollars. The Borrowers' obligations under this
Agreement or any of the other Loan Documents to make payment in Dollars (the
"Obligation Currency"), shall not be discharged or satisfied by any tender or
recovery pursuant to any judgment expressed in or converted into any currency
other than the Obligation Currency, except to the extent that such tender or
recovery results in the effective receipt of the full amount of the Obligation
Currency expressed to be payable under this Agreement or the other Loan
Documents. If, for the purpose of obtaining or enforcing judgment against the
Borrowers in any court or in any jurisdiction, it becomes necessary to convert
into or from any currency other than the Obligation Currency (such other
currency being hereinafter referred to as the "Judgment Currency") an amount due
in the Obligation Currency, the conversion shall be made at the rate of exchange
at which the Lender could purchase Dollars with such Judgment Currency in
accordance with normal banking procedures in New York City, State of New York,
United States, with respect to Dollars as of the day (or, if such day is not a
Business Day, on the next succeeding Business Day) on which the judgment is
given (such Business Day being hereinafter referred to as the "Judgment Currency
Conversion Date").

      (b) Additional Amounts. If there is a change in the rate of exchange
prevailing between the Judgment Currency Conversion Date and the date of actual
payment of the amount due from the Borrowers, the Borrowers covenant to pay, or
cause to be paid, such additional amounts, if any (but, in any event, not a
lesser amount), as may be necessary to ensure that the amount paid in the
Judgment Currency, when converted at the applicable rate of exchange prevailing
on the date of payment, will produce the amount of the Obligation Currency that
could have been purchased with the amount of Judgment Currency stipulated in the
judgment or judicial award against it at the rate of exchange prevailing on the
Judgment Currency Conversion Date. If there is a change in the rate of exchange
prevailing between the Judgment Currency Conversion Date and the date of actual
payment of the amount due that results in the Borrowers paying an amount in
excess of that necessary to discharge or satisfy any judgment against it, the
Lender shall transfer or cause to be transferred to the Borrowers the amount of
such excess (net of any Taxes and reasonable and customary costs incurred in
connection therewith).

      (c) Determination of Amount. For purposes of determining the applicable
currency equivalent or other rate of exchange under this Section 15.14, such
amount shall include any premium and costs payable in connection with the
purchase of the Obligation Currency.

      Section 15.15 Language; Spanish Translation. The Spanish translation of
this Agreement and any other Loan Document prepared by the Borrowers and
delivered pursuant to Section 7.01(o) shall be the agreed Spanish translation
hereof for all purposes. Such translation and no other shall be used in any
proceeding in Mexico. For all purposes, the English language version hereof
shall be the original instrument and, in case of a conflict between the English
and the Spanish versions, the English version shall control.

                                       91
<PAGE>

      Section 15.16 USA PATRIOT Act Notice. The Lender hereby notifies the
Borrowers that pursuant to the requirements of the USA Patriot Act (Title III of
Pub. L. 107-56 (signed into law October 26, 2001)) (the "Act"), it is required
to obtain, verify and record information that identifies the Borrowers, which
information includes the name and address of the Borrowers and other information
that will allow the Lender to identify the Borrowers in accordance with the Act.

      Section 15.17 Governing Law; Jurisdiction; Etc.

      (a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, UNITED STATES.

      (b) SUBMISSION TO JURISDICTION. EACH PARTY HERETO IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO (I) THE NON-EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY
AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK,
OR (II) THE COURTS OF ITS DOMICILE, AND ANY APPELLATE COURT FROM ANY THEREOF, IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH
OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT; EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, THE JURISDICTION OF ANY OTHER COURTS TO SUCH ACTION
OR PROCEEDING; EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY
SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.

      (c) WAIVER OF VENUE. THE LOAN PARTIES IRREVOCABLY AND UNCONDITIONALLY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT
THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (b) OF THIS SECTION 15.17. EACH
OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

      (d) Appointment of Process Agent and Service of Process. (i) The Offshore
Account Holder hereby irrevocably appoints CT Corporation System with an office
on the date hereof at 111 Eighth Avenue, 13th Floor, New York, New York 10011,
United States of America, as its agent to receive on behalf of itself and its
property services of copies of the summons and complaint and any other process
which may be served in any such action or proceeding. Such service may be made
by mailing or delivering a copy of such process to the Offshore Account Holder
in care of the Process Agent at the Process Agent's above address, and the
Offshore Account Holder irrevocably authorizes and directs the Process Agent to
accept such service on its behalf. (ii) Each of the Borrowers hereby irrevocably
appoints the Guarantor with an office on the date hereof at 76 Beaver Street,
26th Floor, New York, New York 10005, United States of America, as its agent to
receive on behalf of itself and its property services of copies of the summons
and complaint and any other process which may be served in any such action or
proceeding. Such service may be made by mailing or delivering a copy of such
process to the Borrowers in care of the Guarantor at the Guarantor's above
address, and each of the Borrowers irrevocably authorizes and directs the
Guarantor to accept such service on its behalf.

                                       92
<PAGE>

      (e) Immunity. To the extent that either of the Borrowers has or hereafter
may acquire any immunity from jurisdiction of any court or from any legal
process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to itself
or its property, such Borrower hereby irrevocably and unconditionally waives
such immunity in respect of its obligations under the Loan Documents and,
without limiting the generality of the foregoing, agrees that the waivers set
forth in this Section 15.17(e) shall have the fullest scope permitted under the
Foreign Sovereign Immunities Act of 1976 of the United States and are intended
to be irrevocable for purposes of such Act.

      Section 15.18 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 15.18.

      Section 15.19 Joint and Several Liability. Each of the Borrowers
acknowledges that (i) it is a co-borrower hereunder and shall be jointly and
severally, with the other Borrower, directly and primarily liable for the
Secured Obligations regardless of which Borrower actually receives Loans or
other extensions of credit hereunder or the amount of such Loans or other
extensions of credit received or the manner in which the Lender accounts for
such Loans or other extensions of credit on its books and records, (ii) each of
the Secured Obligations shall be secured by all of the Borrowers' collateral,
(iii) each of the Borrowers shall have the obligations of co-maker and shall be
primary obligors with respect to the Loans, the Notes, and the other Secured
Obligations, it being agreed that the Loans to each Borrower inure to the
benefit of both Borrowers, and (iv) the Lender is relying on such joint and
several liability of the Borrowers as co-makers in extending the Loans and the
other extensions of credit under the Loan Documents. Each Borrower's Secured
Obligations with respect to Loans and other extensions of credit made to it, and
each Borrower's Secured Obligations arising as a result of the joint and several
liability of the Borrowers hereunder, with respect to Loans and other extensions
of credit made to the other Borrower hereunder, shall be separate and distinct
obligations, but all such Secured Obligations shall be primary obligations of
each Borrower. Each Borrower hereby unconditionally and irrevocably agrees that
upon default in the payment when due (whether at stated maturity, by
acceleration or otherwise) of any principal of, or interest on, any Loan or
other Secured Obligation payable by it to the Lender, it will forthwith pay the
same, without notice of demand. Notwithstanding anything to the contrary
contained in this Agreement, the Lender shall be entitled to rely upon any Loan
Notice or other request, notice or other communication received by it from any
Borrower on behalf of both Borrowers, and shall be entitled to treat its giving
of any notice hereunder pursuant to Section 15.02 hereof as notice to each and
all Borrowers.

                                       93
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.

                                  MINERA SANTA RITA S. DE R.L. DE C.V.

                                  By:  /s/ Gifford A. Dieterle
                                      -----------------------------------------
                                  Name:  Gifford A. Dieterle
                                  Title: Director General (CEO)

                                  ORO DE ALTAR S. DE R.L. DE C.V.

                                  By:  /s/ Gifford A. Dieterle
                                      -----------------------------------------
                                  Name: Gifford A. Dieterle
                                  Title: President

                                  CAPITAL GOLD CORPORATION

                                  By:  /s/ Jeffrey W. Pritchard
                                      -----------------------------------------
                                  Name: Jeffrey W. Pritchard
                                  Title: Vice President

                                  STANDARD BANK PLC

                                  By:  /s/ PC Stevens
                                      -----------------------------------------
                                  Name: PC Stevens
                                  Title: Senior Manager

                                  By:  /s/ Colin Wilson
                                      -----------------------------------------
                                  Name: Colin Wilson
                                  Title: Senior Manager

                                  STANDARD BANK PLC, as Offshore Account Holder

                                  By:  /s/ PC Stevens
                                      -----------------------------------------
                                  Name: PC Stevens
                                  Title: Senior Manager

                                  By:  /s/ Colin Wilson
                                      -----------------------------------------
                                  Name: Colin Wilson
                                  Title: Senior Manager

<PAGE>

                                  BORROWERS:
                                  ----------

                                  MINERA SANTA RITA S. DE R.L. DE C.V.

                                  By:  /s/ Jeffrey W. Pritchard
                                      -----------------------------------------
                                  Name: Jeffrey W. Pritchard
                                  Title: Vice President

                                  By:  /s/ Gifford A. Dieterle
                                      -----------------------------------------
                                  Name: Gifford A. Dieterle
                                  Title:

                                  Address for Notices:

                                  Minera Santa Rita S. de R.L. de C.V.
                                  c/o Capital Gold Corporation
                                  76 Beaver Street, 26th Floor
                                  New York, NY 10005
                                  Attn: Jeff Pritchard

                                  ORO DE ALTAR S. DE R.L. DE C.V.

                                  By:  /s/ Jeffrey W. Pritchard
                                      -----------------------------------------
                                  Name: Jeffrey W. Pritchard
                                  Title: Vice President

                                  By:  /s/ Gifford A. Dieterle
                                      -----------------------------------------
                                  Name: Gifford A. Dieterle
                                  Title:

                                  Oro de Altar S. de R.L. de C.V.
                                  c/o Capital Gold Corporation
                                  76 Beaver Street, 26th Floor
                                  New York, NY 10005
                                  Attn: Jeff Pritchard

<PAGE>

      IN WITNESS WHEREOF, the Company has caused this Warranty to be duly
executed by its authorized officer as of the date first indicated above.

                                  CAPITAL GOLD CORPORATION

                                  By:  /s/ Jeffrey W. Pritchard
                                      -----------------------------------------
                                  Name: Jeffrey W. Pritchard
                                  Title: Vice President

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