Exhibit 10.2

 

THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS DEBENTURE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.

 

STAR MOUNTAIN RESOURCES, INC.

 

SENIOR SECURED, CONVERTIBLE, REDEEMABLE DEBENTURE

 

Dated as of: March 31, 2016   Principal Amount: $3,000,000.00 Effective Date:
June 28, 2016     Maturity Date: June 28, 2017    

 

This SENIOR SECURED, CONVERTIBLE REDEEMABLE DEBENTURE (the “Debenture”) is
issued, dated as of March 31, 2016 and effective as of June 28, 2016 (the
“Effective Date”), by STAR MOUNTAIN RESOURCES, INC., a corporation incorporated
under the laws of the State of Nevada (the “Company”), to TCA GLOBAL CREDIT
MASTER FUND, LP, a limited partnership organized and existing under the laws of
the Cayman Islands (together with its permitted successors and assigns, the
“Holder”) pursuant to exemptions from registration under the Securities Act of
1933, as amended. This Debenture is issued in connection with that certain
Securities Purchase Agreement, dated as of the date hereof, by and between the
Company and the Holder (the “Purchase Agreement”). All capitalized terms used in
this Debenture and not otherwise defined herein shall have the meanings assigned
to them in the Purchase Agreement.

 

ARTICLE I

 

Section 1.01 Principal and Interest. For value received, the Company hereby
promises to pay to the order of the Holder, by no later than June 28, 2017 (the
“Maturity Date”), in immediately available and lawful money of the United States
of America, Three Million and No/100 United States Dollars ($3,000,000.00),
together with interest on the outstanding principal amount under this Debenture,
at the rate of eighteen percent (18%) per annum simple interest (the “Interest
Rate”) from the Effective Date, until paid, as more specifically provided below.

 

 1 

   

 

Section 1.02 Optional Redemption Prior to Maturity. The Company, at its option,
shall have the right to redeem this Debenture in full and for cash, at any time
prior to the Maturity Date, with three (3) business days advance written notice
(the “Redemption Notice”) to the Holder. The amount required to redeem this
Debenture in full pursuant to this Section 1.02 shall be equal to: (i) the
aggregate principal amount then outstanding under this Debenture; plus all
accrued and unpaid interest due under this Debenture as of the redemption date;
plus (ii) all other costs, fees and charges due and payable hereunder or under
any other “Transaction Documents” (as hereinafter defined), including, but not
limited to, any prepayment penalties provided for in the Purchase Agreement
(collectively, the “Redemption Amount”). The Company shall deliver the
Redemption Amount to the Holder on the third (3rd) business day after the date
of the Redemption Notice.

 

Section 1.03 Mandatory Redemption at Maturity. On the Maturity Date, the Company
shall redeem this Debenture for the Redemption Amount, which Redemption Amount
shall be due and payable to the Holder by no later than 2:00 P.M., EST, on the
Maturity Date.

 

Section 1.04 Payments.

 

(1) Monthly Payments. The Company shall make monthly payments of principal and
interest to the Holder provided the first two monthly payments shall consist of
interest only but no principal, while this Debenture is outstanding, until the
Maturity Date, based on the payment and amortization schedule attached hereto as
Schedule A. In the event such day is not a Business Day, then said payment shall
be due on the first Business Day thereafter occurring.

 

(2) Interest Calculations; Payment Application. Interest shall be calculated on
the basis of a 360-day year, and shall accrue daily on the outstanding principal
amount outstanding from time to time for the actual number of days elapsed,
commencing on the Effective Date until payment in full of the outstanding
principal, together with all accrued and unpaid interest and other amounts which
may become due hereunder or under any Transaction Documents, has been made. All
payments received and actually collected by Holder hereunder shall be applied
first to any costs and expenses due or incurred hereunder or under any other
Transaction Documents, second to accrued and unpaid interest hereunder, and last
to reduce the outstanding principal balance of this Debenture.

 

(3) Late Fee. If all or any portion of the payments of principal, interest or
other charges due hereunder are not received by the Holder within five (5) days
of the date such payment is due, then the Company shall pay to the Holder a late
charge (in addition to any other remedies that Holder may have) equal to five
percent (5%) of each such unpaid payment or sum. Any payments returned to Holder
for any reason must be covered by wire transfer of immediately available funds
to an account designated by Holder, plus a $100.00 administrative fee charge.
Holder shall have no responsibility or liability for payments purportedly made
hereunder but not actually received by Holder; and the Company shall not be
discharged from the obligation to make such payments due to loss of same in the
mails or due to any other excuse or justification ultimately involving facts
where such payments were not actually received by Holder.

 

 2 

   

 

Section 1.05. Manner of Payments. All sums payable to the order of Holder
hereunder shall be payable by ACH transfer of lawful dollars of the United
States of America to the ACH instructions set forth below, or at such place as
Holder, from time to time, may designate in writing. ACH Instructions for all
sums due and payable hereunder are as follows:

 

Bank Name: Bank of America Bank Address: 100 W. 33rd Street, New York, NY 10001
Beneficiary Account Name: TCA Fund Mgmt Group Beneficiary Account Number:
898052439174 ACH Transfer/Routing Number: 063100277 SWIFT: BOFAUS3N

 

ARTICLE II

 

Section 2.01 Secured Nature of Debenture. This Debenture is being issued in
connection with the Purchase Agreement. The indebtedness evidenced by this
Debenture is also secured by all of the assets and property of the Credit
Parties and various other instruments and documents referred to in the Purchase
Agreement as the “Transaction Documents”. All of the agreements, conditions,
covenants, provisions, representations, warranties and stipulations contained in
any of the Transaction Documents which are to be kept and performed by the
Credit Parties are hereby made a part of this Debenture to the same extent and
with the same force and effect as if they were fully set forth herein, and the
Company covenants and agrees to keep and perform them, or cause them to be kept
or performed, strictly in accordance with their terms.

 

ARTICLE III

 

Section 3.01 Events of Default. The occurrence of any of the following events
shall constitute an “Event of Default” hereunder: (i) the Company shall fail to
pay any interest, principal or other charges due under this Debenture or any
other Transaction Documents on the date when any such payment shall be due and
payable; (ii) the Company makes an assignment for the benefit of creditors;
(iii) any order or decree is rendered by a court which appoints or requires the
appointment of a receiver, liquidator or trustee for the Company, and the order
or decree is not vacated within thirty (30) days from the date of entry thereof;
(iv) any order or decree is rendered by a court adjudicating the Company
insolvent, and the order or decree is not vacated within thirty (30) days from
the date of entry thereof; (v) the Company files a petition in bankruptcy under
the provisions of any bankruptcy law or any insolvency act; (vi) the Company
admits, in writing, its inability to pay its debts as they become due; (vii) a
proceeding or petition in bankruptcy is filed against the Company and such
proceeding or petition is not dismissed within thirty (30) days from the date it
is filed; (viii) the Company files a petition or answer seeking reorganization
or arrangement under the bankruptcy laws or any law or statute of the United
States or any other foreign country or state; (ix) any written warranty,
representation, certificate or statement of the Company and/or Guarantors in
this Debenture, the Purchase Agreement or any other Transaction Document or any
other agreement with Holder shall be false or misleading in any material respect
when made or deemed made; and (x) the Company shall fail to perform, comply with
or abide by any of the stipulations, agreements, conditions and/or covenants
contained in this Debenture, the Purchase Agreement or any of the other
Transaction Documents on the part of the Company to be performed complied with
or abided by, and such failure continues or remains uncured for ten (10) days
following written notice from the Holder to the Company.

 

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Section 3.02 Remedies. Upon the occurrence of an Event of Default that is not
timely cured within an applicable cure period hereunder, the interest on this
Debenture shall immediately accrue at an interest rate equal to the lesser of
(i) twenty-two percent (22%) per annum or (ii) the maximum interest rate
allowable by law, and, in addition to all other rights or remedies the Holder
may have, at law or in equity, the Holder may, in its sole discretion,
accelerate full repayment of all principal amounts outstanding hereunder,
together with accrued interest thereon, together with all attorneys’ fees,
paralegals’ fees and costs and expenses incurred by the Holder in collecting or
enforcing payment hereof (whether such fees, costs or expenses are incurred in
negotiations, all trial and appellate levels, administrative proceedings,
bankruptcy proceedings or otherwise), and together with all other sums due by
the Company hereunder and under the Transaction Documents, all without any
relief whatsoever from any valuation or appraisement laws, and payment thereof
may be enforced and recovered in whole or in part at any time by one or more of
the remedies provided to the Holder at law, in equity, or under this Debenture
or any of the other Transaction Documents. In connection with the Holder’s
rights hereunder upon an Event of Default, the Holder need not provide, and the
Company hereby waives, any presentment, demand, protest or other notice of any
kind, and the Holder may immediately enforce any and all of its rights and
remedies hereunder and all other remedies available to it in equity or under
applicable law.

 

ARTICLE IV

 

Section 4.01 Usury Savings Clause. Notwithstanding any provision in this
Debenture or the other Transaction Documents to the contrary, the total
liability for payments of interest and payments in the nature of interest,
including, without limitation, all charges, fees, exactions, or other sums which
may at any time be deemed to be interest, shall not exceed the limit imposed by
the usury laws of the jurisdiction governing this Debenture or any other
applicable law. In the event the total liability of payments of interest and
payments in the nature of interest, including, without limitation, all charges,
fees, exactions or other sums which may at any time be deemed to be interest,
shall, for any reason whatsoever, result in an effective rate of interest, which
for any month or other interest payment period exceeds the limit imposed by the
usury laws of the jurisdiction governing this Debenture, all sums in excess of
those lawfully collectible as interest for the period in question shall, without
further agreement or notice by, between, or to any party hereto, be applied to
the reduction of the outstanding principal balance due hereunder immediately
upon receipt of such sums by the Holder hereof, with the same force and effect
as though the Company had specifically designated such excess sums to be so
applied to the reduction of the principal balance then outstanding, and the
Holder hereof had agreed to accept such sums as a penalty-free payment of
principal; provided, however, that the Holder may, at any time and from time to
time, elect, by notice in writing to the Company, to waive, reduce, or limit the
collection of any sums in excess of those lawfully collectible as interest,
rather than accept such sums as a prepayment of the principal balance then
outstanding. It is the intention of the parties that the Company does not intend
or expect to pay, nor does the Holder intend or expect to charge or collect any
interest under this Debenture greater than the highest non-usurious rate of
interest which may be charged under applicable law.

 

 4 

   

 

ARTICLE V

 

Section 5.01 No Exemption. The Company hereby waives and releases all benefit
that might accrue to the Company by virtue of any present or future laws
exempting any property that may serve as security for this Debenture, or any
other property, real or personal, or any part of the proceeds arising from any
sale of any such property, from attachment, levy, or sale under execution,
exemption from civil process, or extension of time for payment; and the Company
agrees that any property that may be levied upon pursuant to a judgment obtained
by virtue hereof, on any writ of execution issued thereon, may be sold upon any
such writ in whole or in part in any order or manner desired by Holder.

 

Section 5.02 Exercise of Remedies. The remedies of the Holder as provided herein
and in any of the other Transaction Documents shall be cumulative and concurrent
and may be pursued singly, successively or together, at the sole discretion of
the Holder, and may be exercised as often as occasion therefor shall occur; and
the failure to exercise any such right or remedy shall in no event be construed
as a waiver or release thereof.

 

Section 5.03 Waivers. The Company and all others who are, or may become liable
for the payment hereof: (i) severally waive presentment for payment, demand,
notice of nonpayment or dishonor, protest and notice of protest of this
Debenture or any other Transaction Documents, and all other notices in
connection with the delivery, acceptance, performance, default, or enforcement
of the payment of this Debenture and the other Transaction Documents, except as
specifically provided in this Debenture or any other Transaction Document; (ii)
expressly consent to all extensions of time, renewals or postponements of time
of payment of this Debenture and any other Transaction Documents from time to
time prior to or after the maturity of this Debenture without notice, consent or
further consideration to any of the foregoing; (iii) expressly agree that the
Holder shall not be required first to institute any suit, or to exhaust its
remedies against the Company or any other person or party to become liable
hereunder or against any collateral that may secure this Debenture in order to
enforce the payment of this Debenture; and (iv) expressly agree that,
notwithstanding the occurrence of any of the foregoing (except the express
written release by the Holder of any such person), the undersigned shall be and
remain, directly and primarily liable for all sums due under this Debenture.

 

Section 5.04 No Waiver. Holder shall not be deemed, by any act of omission or
commission, to have waived any of its rights or remedies hereunder unless such
waiver is in writing and signed by Holder, and then only to the extent
specifically set forth in the writing. A waiver on one event shall not be
construed as continuing or as a bar to or waiver of any right or remedy to a
subsequent event.

 

 5 

   

 

ARTICLE VI

 

Section 6.01 Notice. Any notices, consents, waivers, or other communications
required or permitted to be given under the terms of this Debenture must be in
writing and in each case properly addressed to the party to receive the same in
accordance with the information below, and will be deemed to have been
delivered: (i) if mailed by certified mail, return receipt requested, postage
prepaid and properly addressed to the address below, then three (3) business
days after deposit of same in a regularly maintained U.S. Mail receptacle; or
(ii) if mailed by Federal Express, UPS or other nationally recognized overnight
courier service, next business morning delivery, then one (1) business day after
deposit of same in a regularly maintained receptacle of such overnight courier;
or (iii) if hand delivered, then upon hand delivery thereof to the address
indicated on or prior to 5:00 p.m ., EST, on a business day. Any notice hand
delivered after 5:00 p.m., EST, shall be deemed delivered on the following
business day. Notwithstanding the foregoing, notice, consents, waivers or other
communications referred to in this Debenture may be sent by facsimile, e-mail,
or other method of delivery, but shall be deemed to have been delivered only
when the sending party has confirmed (by reply e-mail or some other form of
written confirmation from the receiving party) that the notice has been received
by the other party. The addresses and facsimile numbers for such communications
shall be as set forth below, unless such address or information is changed by a
notice conforming to the requirements hereof.

 

If to the Company: Star Mountain Resources, Inc.   8307 Shaffer Parkway, Suite
201   Littleton, CO 80127   Attention: Wayne Rich   E-Mail:
wrich@starmountainresources.com     With a copy to: Legal & Compliance LLC
(which shall not constitute notice) 330 Clematis Street, Suite 217   West Palm
Beach, FL 33401   Attention: Lazarus Rothstein, Esq.   E-Mail:
lrothstein@legalandcompliance.com     If to the Holder: TCA Global Credit Master
Fund, LP   3960 Howard Hughes Parkway, Suite 500   Las Vegas, NV 89196   Attn:
Mr. Robert Press   E-Mail: bpress@tcaglobalfund.com     With a copy to: Lucosky
Brookman LLP 101 Wood Avenue South, 5th Floor (which shall not constitute
notice) Woodbridge, NJ 08830   Attn: Seth A. Brookman, Esq.   E-Mail:
sbrookman@lucbro.com

 

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Section 6.02 Governing Law and Venue. The Company and Holder each irrevocably
agrees that any dispute arising under, relating to, or in connection with,
directly or indirectly, this Debenture or related to any matter which is the
subject of or incidental to this Debenture (whether or not such claim is based
upon breach of contract or tort) shall be subject to the exclusive jurisdiction
and venue of the state and/or federal courts located in Broward County, Florida;
provided, however, Holder may, at the Holder’s sole option, elect to bring any
action in any other jurisdiction. This provision is intended to be a “mandatory”
forum selection clause and governed by and interpreted consistent with Florida
law. The Company and Holder each hereby consents to the exclusive jurisdiction
and venue of any state or federal court having its situs in said county, and
each waives any objection based on forum non conveniens. The Company hereby
waives personal service of any and all process and consent that all such service
of process may be made by certified mail, return receipt requested, directed to
the Company, as set forth herein in the manner provided by applicable statute,
law, rule of court or otherwise. Except for the foregoing mandatory forum
selection clause, all terms and provisions hereof and the rights and obligations
of the Company and Holder hereunder shall be governed, construed and interpreted
in accordance with the laws of the State of Nevada, without reference to
conflict of laws principles.

 

Section 6.03 Severability. In the event any one or more of the provisions of
this Debenture shall for any reason be held to be invalid, illegal, or
unenforceable, in whole or in part, in any respect, or in the event that any one
or more of the provisions of this Debenture operates or would prospectively
operate to invalidate this Debenture, then and in any of those events, only such
provision or provisions shall be deemed null and void and shall not affect any
other provision of this Debenture. The remaining provisions of this Debenture
shall remain operative and in full force and effect and shall in no way be
affected, prejudiced, or disturbed thereby.

 

Section 6.04 Entire Agreement and Amendments. This Debenture, together with the
other Transaction Documents represents the entire agreement between the parties
hereto with respect to the subject matter hereof and thereof, and there are no
representations, warranties or commitments, except as set forth herein and
therein. This Debenture may be amended only by an instrument in writing executed
by the parties hereto.

 

Section 6.05 Binding Effect. This Debenture shall be binding upon the Company
and the successors and assigns of the Company and shall inure to the benefit of
the Holder and the successors and assigns of the Holder.

 

Section 6.06 Assignment. The Holder may from time to time sell or assign, in
whole or in part, or grant participations in, this Debenture and/or the
obligations evidenced hereby without the consent of the Company. The holder of
any such sale, assignment or participation, if the applicable agreement between
Holder and such holder o provides, shall be: (i) entitled to all of the rights
obligations and benefits of Holder (to the extent of such holder’s interest or
pa1ticipation); and (ii) deemed to hold and may exercise the rights of setoff or
banker’s lien with respect to any and all obligations of such holder to the
Company (to the extent of such holder s interest or participation), in each case
as fully as though the Company was directly indebted to such holder. Holder may
in its discretion give notice to the Company of such sale, assignment or
participation; however, the failure to give such notice shall not affect any of
Holder’s or such holder’s rights hereunder.

 

 7 

   

 

Section 6.07 Lost or Mutilated Debenture. If this Debenture shall be mutilated,
lost, stolen or destroyed the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Debenture or in lieu of or
in substitution for a lost, stolen or destroyed Debenture a new Debenture for
the principal amount of this Debenture so mutilated, lost stolen or destroyed,
but only upon receipt of evidence of such loss, theft or destruction of such
Debenture, and of the ownership hereof, reasonably satisfactory to the Company.

 

Section 6.08 WAIVER OF JURY TRIAL. THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY AND IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY WITH RESPECT
TO ANY LITIGATION BASED ON THIS DEBENTURE, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH, THIS DEBENTURE OR ANY OTHER TRANSACTION DOCUMENTS, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF OR BETWEEN ANY PARTY HERETO, AND THE COMPANY AGREES AND CONSENTS TO
THE GRANTING TO HOLDER OF RELIEF FROM ANY STAY ORDER WHICH MIGHT BE ENTERED BY
ANY COURT AGAINST HOLDER AND TO ASSIST HOLDER IN OBTAINING SUCH RELIEF. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR HOLDER ACCEPTING THIS DEBENTURE FROM THE
COMPANY. THE COMPANY’S REASONABLE RELIANCE UPON SUCH INDUCEMENT I HEREBY
ACKNOWLEDGED.

 

Section 6.09 NON-US STATUS. THE HOLDER IS A NON-US PERSON AS THAT TERM IS
DEFINED IN THE UNITED STATES INTERNAL REVENUE CODE. IT IS HEREBY AGREED AND
UNDERSTOOD THAT THE OBLIGATIONS HEREUNDER MAY BE SOLD ONLY TO NON-U.S. PERSON.
THE INTEREST PAYABLE HEREUNDER IS PAYABLE ONLY OUTSIDE THE UNITED STATES. ANY
U.S. PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE
UNITED STATES INCOME TAX LAW. BY ACCEPTING THIS OBLIGATION, THE HOLDER
REPRESENTS AND WARRANT THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN
EXEMPT RECIPIENT DESCRIBED IN SEC 6049(8)(4) OF THE INTERNAL REVENUE CODE AND
REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED
STATE PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SEC. 6049(B)(4) OF THE
INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).

 

ARTICLE VII

 

Section 7.01 Conversion of Debenture. At any time and from time to time while
this Debenture is outstanding on or after the Closing Date, during the period of
time when an Event of Default has occurred and remains uncured and at the sole
option of the Holder, this Debenture may be, convertible into shares of the
Company’s common stock, $0.001 par value per share (the “Common Stock”) in
accordance with the terms and conditions set forth in this Article VII.

 

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(1) Voluntary Conversion. At any time while this Debenture is outstanding on or
after the Closing Date, during the period of time when an Event of Default has
occurred and remains uncured, the Holder may convert all or any portion of the
outstanding principal, accrued and unpaid interest, and any other sums due and
payable hereunder or under any of the other Transaction Documents (such total
amount, the “Conversion Amount”) into shares of Common Stock of the Company (the
“Conversion Shares”) at a price equal to: (i) the Conversion Amount (the
numerator); divided by (ii) eighty-five percent (85%) of the lowest of the
volume weighted average price of the Company’s Common Stock during the five (5)
trading days immediately prior to the Conversion Date (as defined below), as
indicated in the conversion notice (in the form attached hereto as Exhibit “B”
the “Conversion Notice”) (the denominator) (the “Conversion Price”). The Holder
shall submit a Conversion Notice indicating the amount of the Debenture being
converted and the number of Conversion Shares issuable upon such conversion, and
where the Conversion Shares should be delivered.

 

(2) The Holder’s Conversion Limitations. The Company shall not affect any
conversion of this Debenture, and the Holder shall not have the right to convert
any portion of this Debenture, to the extent that after giving effect to the
conversion set forth on the Conversion Notice submitted by the Holder, the
Holder (together with the Holder’s affiliates (as defined herein) and any
Persons acting as a group together with the Holder or any of the Holder’s
affiliates) would beneficially own in excess of the Beneficial Ownership
Limitation (as defined herein). To ensure compliance with this restriction,
prior to delivery of any Conversion Notice, the Holder shall have the right to
request that the Company provide to the Holder a written statement of the
percentage ownership of the Company’s Common Stock that would by beneficially
owned by the Holder and its affiliates in the Company if the Holder converted
such portion of this Debenture then intended to be converted by Holder. The
Company shall, within two (2) business days of such request, provide Holder with
the requested information in a written statement, and the Holder shall be
entitled to rely on such written statement from the Company in issuing its
Conversion Notice and ensuring that its ownership of the Company’s Common Stock
is not in excess of the Beneficial Ownership Limitation. The restriction
described in this Section may be waived by Holder, in whole or in part, upon
notice from the Holder to the Company. For purposes of this Debenture, the
“Beneficial Ownership Limitation” shall be 4.99% of the number of shares of
Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock issuable upon conversion of this Debenture. The
limitations contained in this Section shall apply to any successor holder of
this Debenture. For purposes of this Debenture, “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization or a government or any department or
agency thereof.

 

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(3) Mechanics of Conversion. The conversion of this Debenture shall be conducted
in the following manner:

 

(a) Holder’s Delivery Requirements. To convert this Debenture into shares of
Common Stock on any date set forth in the Conversion Notice by the Holder (the
“Conversion Date”), the Holder shall transmit by facsimile or electronic mail
(or otherwise deliver) a copy of the fully executed Conversion Notice to the
Company (or, under certain circumstances as set forth below, by delivery of the
Conversion Notice to the Company’s transfer agent).

 

(b) Company’s Response. Upon receipt by the Company of a copy of a Conversion
Notice, the Company shall as soon as practicable, but in no event later than two
(2) Business Days after receipt of such Conversion Notice, send, via facsimile
or electronic mail (or otherwise deliver) a confirmation of receipt of such
Conversion Notice (the “Conversion Confirmation”) to the Holder indicating that
the Company will process such Conversion Notice in accordance with the terms
herein. In the event the Company fails to issue its Conversion Confirmation
within said two (2) Business Day time period, the Holder shall have the absolute
and irrevocable right and authority to deliver the fully executed Conversion
Notice to the Company’s transfer agent, and pursuant to the terms of the
Purchase Agreement, the Company’s transfer agent shall issue the applicable
Conversion Shares to Holder as hereby provided. Within five (5) Business Days
after the date of the Conversion Confirmation (or the date of the Conversion
Notice, if the Company fails to issue the Conversion Confirmation), provided
that the Company’s transfer agent is participating in the Depository Trust
Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, the Company
shall cause the transfer agent to (or, if for any reason the Company fails to
instruct or cause its transfer agent to so act, then pursuant to the Purchase
Agreement, the Holder may request and require the Company’s transfer agent to)
electronically transmit the applicable Conversion Shares to which the Holder
shall be entitled by crediting the account of the Holder’s prime broker with DTC
through its Deposit Withdrawal Agent Commission (“DWAC”) system, and provide
proof satisfactory to the Holder of such delivery. In the event that the
Company’s transfer agent is not participating in the DTC FAST program and is not
otherwise DWAC eligible (or in the event the Holder otherwise requests), within
five (5) Business Days after the date of the Conversion Confirmation (or the
date of the Conversion Notice, if the Company fails to issue the Conversion
Confirmation), the Company shall instruct and cause its transfer agent to (or,
if for any reason the Company fails to instruct or cause its transfer agent to
so act, then pursuant to the Purchase Agreement, the Holder may request and
require the Company’s transfer agent to) issue and surrender to a nationally
recognized overnight courier for delivery to the address specified in the
Conversion Notice, a certificate, registered in the name of the Holder or its
nominee, for the number of Conversion Shares to which the Holder shall be
entitled. To effect conversions hereunder, the Holder shall not be required to
physically surrender this Debenture to the Company unless the entire principal
amount of this Debenture, plus all accrued and unpaid interest thereon and other
sums due hereunder, has been so converted. Conversions hereunder shall have the
effect of lowering the outstanding principal amount of this Debenture in an
amount equal to the applicable Conversion Amount. The Holder and the Company
shall maintain records showing the principal amount(s) converted and the date of
such conversion(s). The Holder, and any assignee by acceptance of this
Debenture, acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of a portion of this Debenture, the unpaid and
unconverted principal amount of this Debenture may be less than the amount
stated on the face hereof.

 

(c) Record Holder. The Person(s) entitled to receive the shares of Common Stock
issuable upon a conversion of this Debenture shall be treated for all purposes
as the record holder(s) of such shares of Common Stock as of the Conversion
Date.

 

 10 

   

 

(d) Failure to Deliver Certificates. If in the case of any Conversion Notice,
the certificate or certificates are not delivered to or as directed by the
Holder by the date required hereby, the Holder shall be entitled to elect by
written notice to the Company at any time on or before its receipt of such
certificate or certificates, to rescind such Conversion Notice, in which event
the Company shall promptly return to the Holder any original Debenture delivered
to the Company and the Holder shall promptly return to the Company the Common
Stock certificates representing the principal amount of this Debenture
unsuccessfully tendered for conversion to the Company.

 

(e) Obligation Absolute; Partial Liquidated Damages. The Company’s obligations
to issue and deliver the Conversion Shares upon conversion of this Debenture in
accordance with the terms hereof are absolute and unconditional, irrespective of
any action or inaction by the Holder to enforce the same, any waiver or consent
with respect to any provision hereof, the recovery of any judgment against any
person or entity or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other person or entity of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other person or
entity, and irrespective of any other circumstance which might otherwise limit
such obligation of the Company to the Holder in connection with the issuance of
such Conversion Shares; provided, however, that such delivery shall not operate
as a waiver by the Company of any such action the Company may have against the
Holder . In the event the Holder of this Debenture shall elect to convert any or
all of the outstanding principal amount hereof and accrued but unpaid interest
thereon in accordance with the terms of this Debenture, the Company may not
refuse conversion based on any claim that the Holder or anyone associated or
affiliated with the Holder has been engaged in any violation of law, agreement
or for any other reason, unless an injunction from a court, on notice to Holder,
restraining and or enjoining conversion of all or part of this Debenture shall
have been sought and obtained, and the Company posts a surety bond for the
benefit of the Holder in the amount of 150% of the outstanding principal amount
of this Debenture being converted, which is subject to the injunction, which
bond shall remain in effect until the completion of arbitration/litigation of
the underlying dispute and the proceeds of which shall be payable to such Holder
to the extent it obtains judgment. In the absence of such injunction, the
Company shall issue Conversion Shares upon a properly noticed conversion. If the
Company fails for any reason to deliver to the Holder such certificate or
certificates representing Conversion Shares pursuant to timing and delivery
requirements of this Debenture, the Company shall pay to such Holder, in cash,
as liquidated damages and not as a penalty, for each $1,000 of principal amount
being converted, $1.00 per day for each day after the date by which such
certificates should have been delivered until such certificates are delivered.
Nothing herein shall limit a Holder’s right to pursue actual damages or declare
an Event of Default pursuant to this Debenture or any agreement securing the
indebtedness under this Debenture for the Company’s failure to deliver
Conversion Shares within the period specified herein and such Holder shall have
the right to pursue all remedies available to it hereunder, at law or in equity,
including, without limitation, a decree of specific performance and/or
injunctive relief. The exercise of any such rights shall not prohibit the Holder
from seeking to enforce damages pursuant to any other Section hereof or under
applicable law. Nothing herein shall prevent the Holder from having the
Conversion Shares issued directly by the Company’s transfer agent in accordance
with the Purchase Agreement, in the event for any reason the Company fails to
issue or deliver, or cause its transfer agent to issue and deliver, the
Conversion Shares to the Holder upon exercise of Holder’s conversion rights
hereunder.

 

 11 

   

 

(f) Transfer Taxes. The issuance of certificates for shares of the Common Stock
on conversion of this Debenture shall be made without charge to the Holder
hereof for any documentary stamp or similar taxes, or any other issuance or
transfer fees of any nature or kind that may be payable in respect of the issue
or delivery of such certificates, any such taxes or fees, if payable, to be paid
by the Company.

 

(4) Reservation of Common Stock. The Company shall take all action necessary to
at all times have authorized, and reserved for the purpose of issuance, three
(3) times such number of shares of Common Stock as shall be necessary to effect
the full conversion of the Debenture in accordance with its terms (the “Share
Reserve”). If upon receipt of a conversion notice from the Holder, the Share
Reserve is insufficient to effect the full conversion of the Debenture then
outstanding, the Company shall increase the Share Reserve accordingly. If the
Company does not have sufficient authorized and unissued shares of Common Stock
available to increase the Share Reserve, the Company shall cause its authorized
and unissued shares to be increased within forty-five (45) days to an amount of
shares equal to three (3) times the Conversion Shares. The Company’s management
shall recommend to the shareholders to vote in favor of increasing the number of
shares of Common Stock authorized.

 

(5) Make-Whole Rights. Upon liquidation by the Holder of Conversion Shares
issued pursuant to a Conversion Notice, provided that the Holder realizes a net
amount from such liquidation equal to less than the Conversion Amount specified
in the relevant Conversion Notice (such net realized amount, the “Realized
Amount”), the Company shall issue to the Holder additional shares of the
Company’s Common Stock equal to: (i) the Conversion Amount specified in the
relevant Conversion Notice; minus (ii) the Realized Amount, as evidenced by a
reconciliation statement from the Holder (a “Sale Reconciliation”) showing the
Realized Amount from the sale of the Conversion Shares; divided by (iii) the
average volume weighted average price of the Company’s Common Stock during the
five (5) Business Days immediately prior to the date upon which the Holder
delivers notice (the “Make-Whole Notice”) to the Company that such additional
shares are requested by the Holder (the “Make-Whole Stock Price”) (such number
of additional shares to be issued, the “Make-Whole Shares”). Upon receiving the
Make-Whole Notice and Sale Reconciliation evidencing the number of Make-Whole
Shares requested, the Company shall instruct its transfer agent to issue
certificates representing the Make-Whole Shares, which Make-Whole Shares shall
be issued and delivered in the same manner and within the same time frames as
set forth herein. The Make-Whole Shares, when issued, shall be deemed to be
validly issued, fully paid, and non-assessable shares of the Company’s Common
Stock. Following the sale of the Make-Whole Shares by the Holder: (i) in the
event that the Holder receives net proceeds from such sale which, when added to
the Realized Amount from the prior relevant Conversion Notice, is less than the
Conversion Amount specified in the relevant Conversion Notice, the Holder shall
deliver an additional Make-Whole Notice to the Company following the procedures
provided previously in this paragraph, and such procedures and the delivery of
Make-Whole Notices and issuance of Make-Whole Shares shall continue until the
Conversion Amount has been fully satisfied; and (ii) in the event that the
Holder received net proceeds from the sale of Make-Whole Shares in excess of the
Conversion Amount specified in the relevant Conversion Notice, such excess
amount shall be applied to satisfy any and all amounts owed hereunder in excess
of the Conversion Amount specified in the relevant Conversion Notice.

 

[signature page follows]

 

 12 

   

 

IN WITNESS WHEREOF with the intent to be legally bound hereby, the Company as
executed this Senior Secured, Convertible, Redeemable Debenture as of the date
first written above.

 

STAR MOUNTAIN RESOURCES, INC.

 

By: /s/ Wayne Rich   Name: Wayne Rich   Title: Chief Financial Officer  

 

STATE OF ________________ )     ) SS. COUNTY OF ________________ )  

 

The undersigned, a Notary Public in and for the said County, in the State
aforesaid, DO HEREBY CERTIFY that Wayne Rich, the Chief Financial Officer of
Star Mountain Resources, Inc., a Nevada corporation, who is personally known to
me to be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person and acknowledged that he/she signed and
delivered the said instrument as his/her own free and voluntary act and as the
free and voluntary act of said corporation, for the uses and purposes therein
set forth.

 

GIVEN under my hand and notarial seal this _____ day of ________________,
20____.

 

______________________________________

Notary Public

 

My Commission Expires:

 

______________________________________

 

 13 

   

 

CONSENT AND AGREEMENT

 

The undersigned is a Guarantor, as that term is defined in that certain
securities purchase agreement by and between the Company and the Holder and, as
such, the undersigned hereby consents and agrees to the payment of the amounts
contemplated in the senior secured, convertible, redeemable debenture, documents
contemplated thereby and to the provisions contained therein relating to
conditions to be fulfilled and obligations to be performed by the Company
pursuant to or in connection with said senior secured, convertible, redeemable
debenture secured redeemable debenture to the same extent as if the undersigned
were a party to said senior secured, convertible, redeemable debenture.

 

GUARANTOR:

 

BOLCAN MINING CORPORATION

 

By: /s/ Wayne Rich   Name: Wayne Rich   Title: Chief Financial Officer  

 

STATE OF ________________ )     ) SS. COUNTY OF ________________ )  

 

The undersigned, a Notary Public in and for the said County, in the State
aforesaid, DO HEREBY CERTIFY that Wayne Rich, the Chief Financial Officer of
Bolcan Mining Corporation, a Nevada corporation, who is personally known to me
to be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person and acknowledged that he/she signed and
delivered the said instrument as his/her own free and voluntary act and as the
free and voluntary act of said corporation, for the uses and purposes therein
set forth.

 

GIVEN under my hand and notarial seal this _____ day of ________________,
20____.

 

______________________________________

Notary Public

 

My Commission Expires:

 

______________________________________

 

 14 

   

 

CONSENT AND AGREEMENT

 

The undersigned is a Guarantor, as that term is defined in that certain
securities purchase agreement by and between the Company and the Holder and, as
such, the undersigned hereby consents and agrees to the payment of the amounts
contemplated in the senior secured, convertible, redeemable debenture, documents
contemplated thereby and to the provisions contained therein relating to
conditions to be fulfilled and obligations to be performed by the Company
pursuant to or in connection with said senior secured, convertible, redeemable
debenture secured redeemable debenture to the same extent as if the undersigned
were a party to said senior secured, convertible, redeemable debenture.

 

GUARANTOR:

 

BALMAT HOLDING CORP.

 

By: /s/ Mark Osterberg   Name: Mark Osterberg   Title: President  

 

STATE OF ________________ )     ) SS. COUNTY OF ______________ )  

 

The undersigned, a Notary Public in and for the said County, in the State
aforesaid, DO HEREBY CERTIFY that Mark Osterberg, the President of Bolcan Mining
Corp., a Nevada corporation, who is personally known to me to be the same person
whose name is subscribed to the foregoing instrument, appeared before me this
day in person and acknowledged that he/she signed and delivered the said
instrument as his/her own free and voluntary act and as the free and voluntary
act of said corporation, for the uses and purposes therein set forth.

 

GIVEN under my hand and notarial seal this _____ day of ________________,
20____.

 

______________________________________

Notary Public

 

My Commission Expires:

 

______________________________________

 

 15 

   

 

CONSENT AND AGREEMENT

 

The undersigned is a Guarantor, as that term is defined in that certain
securities purchase agreement by and between the Company and the Holder and, as
such, the undersigned hereby consents and agrees to the payment of the amounts
contemplated in the senior secured, convertible, redeemable debenture, documents
contemplated thereby and to the provisions contained therein relating to
conditions to be fulfilled and obligations to be performed by the Company
pursuant to or in connection with said senior secured, convertible, redeemable
debenture secured redeemable debenture to the same extent as if the undersigned
were a party to said senior secured, convertible, redeemable debenture.

 

GUARANTOR:

 

ST. LAWRENCE ZINC COMPANY, LLC

 

By: /s/ Wayne Rich   Name: Wayne Rich   Title: Chief Financial Officer  

 

 

STATE OF ________________ )     ) SS. COUNTY OF ________________ )  

 

The undersigned, a Notary Public in and for the said County, in the State
aforesaid, DO HEREBY CERTIFY that Wayne Rich, the Chief Financial Officer of St.
Lawrence Zinc Company, LLC, a Delaware limited liability company, who is
personally known to me to be the same person whose name is subscribed to the
foregoing instrument, appeared before me this day in person and acknowledged
that he/she signed and delivered the said instrument as his/her own free and
voluntary act and as the free and voluntary act of said corporation, for the
uses and purposes therein set forth.

 

GIVEN under my hand and notarial seal this _____ day of ________________,
20____.

 

______________________________________

Notary Public

 

My Commission Expires:

 

______________________________________

 

 16 

   

 

CONSENT AND AGREEMENT

 

The undersigned is a Guarantor, as that term is defined in that certain
securities purchase agreement by and between the Company and the Holder and, as
such, the undersigned hereby consents and agrees to the payment of the amounts
contemplated in the senior secured, convertible, redeemable debenture, documents
contemplated thereby and to the provisions contained therein relating to
conditions to be fulfilled and obligations to be performed by the Company
pursuant to or in connection with said senior secured, convertible, redeemable
debenture secured redeemable debenture to the same extent as if the undersigned
were a party to said senior secured, convertible, redeemable debenture.

 

GUARANTOR:

 

NORTHERN ZINC LLC

 

By: /s/ Wayne Rich   Name: Wayne Rich   Title: Chief Financial Officer  

 

STATE OF ________________ )     ) SS. COUNTY OF ______________ )  

 

The undersigned, a Notary Public in and for the said County, in the State
aforesaid, DO HEREBY CERTIFY that Wayne Rich, the Chief Financial Officer of
Northern Zinc LLC, a Delaware limited liability company, who is personally known
to me to be the same person whose name is subscribed to the foregoing
instrument, appeared before me this day in person and acknowledged that he/she
signed and delivered the said instrument as his/her own free and voluntary act
and as the free and voluntary act of said corporation, for the uses and purposes
therein set forth.

 

GIVEN under my hand and notarial seal this _____ day of ________________,
20____.

 

______________________________________

Notary Public

 

My Commission Expires:

 

______________________________________

 

 17 

   

 

SCHEDULE A

 

PAYMENT SCHEDULE

 

    Period   Principal Balance   Interest Payment   Principal Payment   Total
Interest   Redemption Premium   Total payment   Payment Due   6/15/2016       
                               (3,000,000.00)  7/15/2016    1    -  
 45,000.00    -    45,000.00        45,000.00    45,000.00   8/15/2016    2  
 -    45,000.00    -    90,000.00         90,000.00    45,000.00   9/15/2016  
 3    3,000,000.00    45,000.00    280,302.53    135,000.00         415,302.53  
 325,302.53   10/15/2016    4    2,719,697.47    40,795.46    284,507.07  
 175,795.46         740,605.07    325,302.53   11/15/2016    5    2,435,190.39  
 36,527.86    288,774.68    212,323.32         1,065,907.60    325,302.53 
 12/15/2016    6    2,146,415.72    32,196.24    293,106.30    244,519.55       
 1,391,210.13    325,302.53   1/15/2017    7    1,853,309.42    27,799.64  
 297,502.89    272,319.19         1,716,512.67    325,302.53   2/15/2017    8  
 1,555,806.53    23,337.10    301,965.44    295,656.29         2,041,815.20  
 325,302.53   3/15/2017    9    1,253,841.09    18,807.62    306,494.92  
 314,463.91         2,367,117.74    325,302.53   4/15/2017    10    947,346.17  
 14,210.19    311,092.34    328,674.10         2,692,420.27    325,302.53 
 5/15/2017    11    636,253.83    9,543.81    315,758.73    338,217.91       
 3,017,722.80    325,302.53   6/15/2017    12    320,495.11    4,807.43  
 320,495.11    343,025.34         3,343,025.34    325,302.53 

 

 18 

   

 

EXHIBIT B

 

NOTICE OF CONVERSION

 

The undersigned hereby elects to convert principal and/or interest under the
Senior Secured, Convertible, Redeemable Debenture (the “Debenture”) issued by
Star Mountain Resources, Inc., a corporation incorporated under the laws of the
State of Nevada (the “Company”), into shares of common stock, par value $0.001
per share (the “Common Shares”), of the Company in accordance with the
conditions of the Debenture, as of the date written below.

 

Based solely on information provided by the Company to Holder, the undersigned
represents and warrants to the Company that its ownership of the Common Shares
does not exceed the Beneficial Ownership Limitation as specified under the Note.

 

Conversion Calculations

Effective Date of Conversion:

    Principal Amount and/or Interest to be Converted:     Number of Common
Shares to be Issued:    

 

  [HOLDER]         By:           Name:           Title:           Address:      
 

 

 19