EXHIBIT 10.1
 

 
AGENCY AGREEMENT

Effective November 14, 2011

Gryphon Gold Corporation
611 N Nevada Street
Carson City, Nevada
89703

Attention:              Mr. John L. Key
Chief Executive Officer

Re:           Issue and Sale of Units

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Acumen Capital Finance Partners Limited (the "Lead Agent") and Roth Capital
Partners, LLC (the "U.S. Agent") (the Lead Agent and the U.S. Agent together
being, the "Agents" and individually the "Agent") understand that Gryphon Gold
Corporation (the "Corporation") proposes to issue and sell, by way of private
placement, 5,000 units of the Corporation ("Units") at a price of $1,000.00 Cdn
per Unit for aggregate gross proceeds of $5,000,000 Cdn, subject to the terms
and conditions as set out below (the "Offering").  Each Unit will be comprised
of 2011 Series B 10% subordinated secured notes (a "Debenture"), each with a
principal face value of $1,000 Cdn, and 750 warrants ("Warrants"), each Warrant
entitling the holder thereof to acquire one Common Share (as hereinafter
defined) of the Corporation (a "Warrant Share") at a price of $0.40 US for a
period of 18 months from the Closing Date (as hereinafter defined).  The
Debentures and the Warrants comprising the Units offered hereby are collectively
referred to as the "Offered Securities".
 
Subject to the terms and conditions hereof, the Agents agree to act as, and the
Corporation agrees to appoint the Agents as the exclusive agents of the
Corporation to offer the Units for sale on the Closing Date in the Selling
Jurisdictions (as hereinafter defined) on a private placement basis at the price
of $1,000.00 Cdn per Unit and to use their commercially reasonable efforts to
secure subscriptions therefor.  The Corporation acknowledges and agrees that the
Agents may, but are not obligated to, purchase any of the Units as principal.
 
The Offered Securities comprising the Units may be issued and sold pursuant to
exemptions under Applicable Securities Laws (as hereinafter defined) in the
Selling Jurisdictions including to "accredited investors" pursuant to National
Instrument 45-106 - Prospectus and Registration Exemptions and to Accredited
Investors (as hereinafter defined) in accordance with the provisions
hereof.  The Agents will offer the Units for sale directly by the Corporation in
compliance with Rule 506 of Regulation D (as hereinafter defined) and/or Section
4(2) (as hereinafter defined).
 
In connection with the Offering, the Agents shall be entitled to retain as
sub-agents other registered securities dealers and may receive (for delivery to
the Corporation at the Closing Time (as hereinafter defined)) subscriptions for
Units from other registered securities dealers.  The fee
 

 
 

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- 2 -

payable to such sub-agents shall be for the account of the Agents and shall not
exceed the fee payable to the Agents hereunder. The Agents shall, however, be
under no obligation to engage any sub-agent.
 
In consideration for its services hereunder, including, but not limited to, the
ancillary service of acting as financial advisor to the Corporation in respect
of the issue of the Offered Securities and advising on the terms and conditions
of the Offering, the Agents shall be entitled to: the fee provided for in
Section 9, which fee shall be payable from the proceeds of the Offering at the
Closing Time upon the sale of the Units.  For greater certainty, the services
provided by the Agents pursuant to this Agreement will not be subject to the
Goods and Services Tax provided for in the Excise Tax Act (Canada) and taxable
supplies will be incidental to the exempt financial services provided.
 
The following are the further terms and conditions of this Agreement:
 
1.
Definitions

 
As used in this Agreement, including the paragraphs prior to this definitional
section and any amendments hereto, unless the context otherwise requires:
 
 
(a)
"Accredited Investor" means "accredited investor", as such term is defined in
Rule 501(a) of Regulation D;

 
 
(b)
"affiliate" has the meaning ascribed thereto in the BCBCA and, for the purposes
of Section 28 of this Agreement, shall have the meaning ascribed to it in Rule
405 under the U.S. Securities Act;

 
 
(c)
"Agents' counsel" means Blake, Cassels & Graydon LLP, or such other legal
counsel as the Agents, with the consent of the Corporation, may retain;

 
 
(d)
"Agreement" means this agreement and not any particular Article, Section or
Subsection or other portion except as may be specified, and words such as
"hereto", "herein" and "hereby" refer to this Agreement as the context requires;

 
 
(e)
"Applicable Securities Laws" includes, without limitation, all applicable
securities and corporate laws, rules, regulations, instruments, notices, blanket
orders, decision documents, statements, circulars, procedures and policies in
the Selling Jurisdictions including, without limitation, the policies and
by-laws of the Exchange;

 
 
(f)
"BCBCA" means the Business Corporations Act (British Columbia), as amended,
including the regulations promulgated thereunder;

 
 
(g)
"business day" means a day which is not Saturday, Sunday or a legal holiday in
Calgary, Alberta;

 
 
(h)
"Closing Date" means November 22, 2011, or such other date or dates as the
Agents and the Corporation may agree in writing;

 

 
 

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- 3 -

 
(i)
"Closing Time" means 10:00 a.m. (Calgary time), or such other time on the
Closing Date as the Agents and the Corporation may agree;

 
 
(j)
"Common Shares" means the shares of common stock in the capital of the
Corporation and, where appropriate in the context, includes the Warrant Shares;

 
 
(k)
"Corporation" means Gryphon Gold Corporation, a corporation duly formed pursuant
to the laws of the state of Nevada and, when the context requires or permits,
includes its Subsidiary;

 
 
(l)
"Corporation's Canadian counsel" means Borden Ladner Gervais LLP, or such other
legal counsel as the Corporation, with the consent of the Agents, may appoint;

 
 
(m)
"Corporation's US counsel" means Dorsey & Whitney LLP, or such other legal
counsel as the Corporation, with the consent of the Agents may appoint;

 
 
(n)
"Debenture Certificates" means the certificates representing the Debentures
which certificates shall be governed by the terms and conditions set forth in
the Trust Indenture and shall be in form and substance satisfactory to the
Corporation and the Agents, acting reasonably.

 
 
(o)
"Documents" means, collectively:

 
 
(i)
The Annual Report on Form 10-K (including all Exhibits) of the Corporation for
the year ended March 31, 2011 filed with the United States Securities and
Exchange Commission on June 30, 2011;

 
 
(ii)
the Financial Statements;

 
 
(iii)
the Technical Report;

 
 
(iv)
the Current Reports on Form 8-K (including all Exhibits) of the Corporation
filed with the United States Securities and Exchange Commission since March 31,
2011;

 
 
(v)
the material change reports of the Corporation subsequent to March 31, 2011;

 
 
(vi)
the press releases of the Corporation subsequent to March 31, 2011; and

 
 
(vii)
the management proxy statement and information circular of the Corporation dated
July 19, 2011 relating to the annual meeting of shareholders on September 8,
2011;

 
 
(p)
"Due Diligence Session" has the meaning ascribed thereto in Section 2(f) hereof;

 

 
 

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- 4 -

 
(q)
"Due Diligence Session Responses" means the responses provided by the
Corporation, as given by any director or senior officer of the Corporation, at a
Due Diligence Session, excluding the portion of such responses which are
forward-looking or relate to projections or forecasts but including the portion
of such responses which relate to the properties and resources of the
Corporation;

 
 
(r)
"Exchange" means the Toronto Stock  Exchange or any successor thereto;

 
 
(s)
"Expert" means John D. Welsh, P.E.;

 
 
(t)
"Expiry Date" means the date that is 18 months from the Closing Date;

 
 
(u)
"Expiry Time" means 5:00 p.m. (Pacific time) on the Expiry Date;

 
 
(v)
"Financial Statements" means, collectively: (i) the audited consolidated
financial statements of the Corporation as at and for the years ended March 31,
2011 and 2010, together with the report of the Corporation's auditors thereon
and the notes thereto including, in each instance, management's discussion and
analysis of the Corporation's financial condition and results of operations
related thereto; and (ii) the unaudited interim financial statements of the
Corporation for the three and six month periods ended September 30, 2011,
together with the notes thereto and the management's discussion and analysis of
the Corporation's financial condition and results of operations related thereto;

 
 
(w)
"General Solicitation" and "General Advertising" mean "general solicitation" and
"general advertising", respectively, as used in Rule 502(c) under the U.S.
Securities Act, including, but not limited to, advertisements, articles, notices
or other communications published in any newspaper, magazine or similar media or
broadcast over radio or television, disseminated over the Internet, or any
seminar or meeting whose attendees had been invited by general solicitation or
general advertising;

 
 
(x)
"July Debentures" means the 10% subordinated secured debentures of the
Corporation with a maturity date of July 28, 2012, issued July 27, 2011;

 
 
(y)
"July Documents" means collectively the July Debentures, the July Pledge and
Security Agreement and the July Trust Indenture;

 
 
(z)
"July Pledge and Security Agreement" means the pledge and security agreement
dated as of July 27, 2011 by and among the Corporation and the Trustee, as
trustee to the purchasers of the July Debentures;

 
 
(aa)
"July Trust Indenture" means the Note Indenture dated July 27, 2011 between the
Corporation and the Trustee;

 
 
(bb)
"Lead Agent" means Acumen Capital Finance Partners Limited;

 

 
 

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- 5 -

 
(cc)
"NI 43-101" means National Instrument 43-101 - Standards of Disclosure for
Mineral Projects;

 
 
(dd)
"Pledge and Security Agreement" means the pledge and security agreement to be
dated as of the Closing Date by and among the Corporation and the Trustee, as
trustee to the Purchasers, substantially in the form attached as Exhibit D to
the Purchase Agreements;

 
 
(ee)
"Public Record" means all information filed by or on behalf of the Corporation
with the Securities Commissions, including, without limitation, the Documents
and any other information filed with any Securities Commission in compliance, or
intended compliance, with any Applicable Securities Laws;

 
 
(ff)
"Purchase Agreements" means the note and warrant purchase agreements, including
the Schedules thereto, to be entered into at closing between the Corporation and
each of the Purchasers setting out the contractual relationship between the
Corporation and the Purchasers, in form and substance satisfactory to the
Corporation and the Agents;

 
 
(gg)
"Purchaser" means a person resident in the Selling Jurisdictions who subscribes
for Units;

 
 
(hh)
"Regulation D" means Regulation D adopted by the SEC under the U.S. Securities
Act;

 
 
(ii)
"SEC" means the United States Securities and Exchange Commission;

 
 
(jj)
"Section 4(2)" means Section 4(2) of the U.S. Securities Act;

 
 
(kk)
"Securities Commissions" means, collectively, the securities commissions or
similar regulatory authorities in each of the Selling Jurisdictions and
"Securities Commission" means any of them;

 
 
(ll)
"SEDAR" means the system for electronic document analysis and retrieval;

 
 
(mm)
"Selling Dealer Group" means the dealers and brokers, other than the Agents, who
participate in the offer and sale of the Offered Securities pursuant to this
Agreement;

 
 
(nn)
"Selling Jurisdictions" means the provinces of British Columbia, Alberta,
Saskatchewan, and Ontario and the United States and other eligible foreign
jurisdictions as may be agreed by the Agents and the Corporation prior to the
Closing Date as evidenced by the Corporation's acceptance of a Purchase
Agreement with respect thereto;

 
 
(oo)
"Subordination Agreement" means the subordination agreement to be dated as of
the Closing Date, by and among the Corporation, the Trustee and each of the

 

 
 

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- 6 -

 
Purchasers substantially in the form attached as Exhibit E to the Purchase
Agreements;

 
 
(pp)
"Subsidiary" means Borealis Mining Company;

 
 
(qq)
"Swaps" means any transaction which is a rate swap transaction, basis swap,
forward rate transaction, commodity swap, commodity option, equity or equity
index swap, equity or equity index option, bond option, interest rate option,
foreign exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate swap transaction,
currency option, forward sale, exchange traded futures contract or any other
similar transaction (including any option with respect to any of these
transactions or any combination of these transactions);

 
 
(rr)
"Technical Report" means the report dated April 25, 2011 prepared by the Expert
entitled "NI 43-101 Pre-Feasibility Study Update of the Mineral Resources of the
Borealis Gold Project located in Mineral county, Nevada, USA", as filed on
SEDAR;

 
 
(ss)
"Transaction Documents" means the Trust Indenture, the Debenture Certificates,
the Pledge and Security Agreement, the Warrant Certificates, the Subordination
Agreement and the Purchase Agreements;

 
 
(tt)
"Trust Indenture" means the Note Indenture to be dated as of the Closing Date
between the Corporation and the Trustee substantially in the form attached as
Exhibit B to the Purchase Agreements;

 
 
(uu)
"Trustee" means Computershare Trust Company of Canada;

 
 
(vv)
"United States" means the United States of America, its territories and
possessions, any State of the United States, and the District of Columbia;

 
 
(ww)
"U.S. Agent" means Roth Capital Partners, LLC;

 
 
(xx)
"U.S. Exchange Act" means the United States Securities Exchange Act of 1934, as
amended;

 
 
(yy)
"U.S. Securities Act" means the United States Securities Act of 1933, as
amended;

 
 
(zz)
"Warrant Certificates" means the certificates representing the Warrants held by
Purchasers of Units, which certificates shall govern the terms and conditions of
the Warrants and shall be substantially in the form attached as Exhibit C to the
Purchase Agreements;

 
 
(aaa)
"Warrant Shares" means the Common Shares issuable to the holders of Warrants
upon the due and proper exercise of the Warrants in accordance with their terms;
and

 

 
 

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- 7 -

 
"misrepresentation", "material change" and "material fact" shall have the
meanings ascribed thereto under the Applicable Securities Laws of the Selling
Jurisdictions; "distribution" means "distribution" or "distribution to the
public", as the case may be, as defined under the Applicable Securities Laws of
the Selling Jurisdictions; and "distribute" has a corresponding meaning. In this
Agreement, words importing the singular include the plural and words importing
gender include all genders.

 
2.
Corporation's Covenants as to Issuance

 
The Corporation agrees:
 
 
(a)
that the Offered Securities will be duly and validly created, authorized and,
upon receipt of full payment therefore shall be legal, valid and binding
obligations of the Corporation enforceable against the Corporation in accordance
with their terms, subject to applicable bankruptcy, insolvency or similar laws
and general equitable principles;

 
 
(b)
to comply with all covenants of the Corporation set forth in this Agreement and
the Transaction Documents and to duly, punctually and faithfully perform all the
obligations to be performed by it under this Agreement and the Transaction
Documents;

 
 
(c)
to deliver to the Agents as many copies of the Documents as the Agents may
reasonably request and such delivery shall constitute the Corporation's
authorization for the Agents to use the Documents in connection with the
Offering of the Offered Securities for sale in the Selling Jurisdictions;

 
 
(d)
to file all necessary forms and reports with the appropriate Securities
Commissions and other regulatory authorities in connection with the issuance of
the Offered Securities;

 
 
(e)
as soon as reasonably possible, and in any event by the Closing Date, to take
all such steps as may reasonably be necessary to enable the Units, including the
Offered Securities, to be offered for sale and sold on a private placement basis
in the Selling Jurisdictions through the Agents or any other investment dealers
or brokers registered in the Selling Jurisdictions by way of the exemptions
under Applicable Securities Laws as contemplated hereby; and

 
 
(f)
prior to the Closing Date and during the period from the effective date hereof
until the completion of the distribution of the Units, to allow the Agents to
conduct all due diligence which the Agents may reasonably require in order to:
(i) confirm the Public Record is accurate, current and complete in all material
respects; and (ii) fulfill the Agents' obligations as agents, and will provide
to the Agents and their counsel and consultants reasonable access to the
Corporation's properties, senior management personnel and corporate, financial
and other records for the purposes of conducting such due diligence reviews.
Without limiting the generality of the foregoing, the Corporation shall make
available its directors,

 

 
 

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- 8 -

 
senior management, auditors, legal counsel and independent engineers to answer
any reasonable questions which the Agents may have and to participate in one or
more due diligence sessions to be held prior to the Closing Time (collectively,
the "Due Diligence Session").  The Agents shall distribute a list of written
questions to be answered in advance of such Due Diligence Session and the
Corporation shall provide oral responses to such questions and shall use its
commercially reasonable efforts to have its auditors, legal counsel and
independent engineers provide oral responses to such questions in advance of the
Due Diligence Session.

 
3.
Corporation's Covenants as to Changes

 
The Corporation agrees that:
 
 
(a)
during the period commencing with the date hereof and ending at the Closing
Time, the Corporation will promptly inform the Agents of the full particulars
of:

 
 
(i)
any material change (actual, anticipated or threatened) in the assets,
liabilities (absolute, accrued, contingent or otherwise), business, operations,
capital or condition (financial or otherwise) of the Corporation and its
Subsidiary (taken as a whole), including but not limited to any legal or
regulatory changes that may reasonably affect the assets, liabilities (absolute,
accrued, contingent or otherwise), business, operations, capital or condition
(financial or otherwise) of the Corporation or the Subsidiary; or

 
 
(ii)
any change in any material fact contained or referred to in the Public Record;

 
 
(iii)
the occurrence or discovery of, or change in, a material fact or event which, in
any such case, is, or may be, of such a nature as to: (A) render any statement
in the Public Record untrue, false or misleading in a material respect in light
of the circumstances in which it was made; (B) result in a misrepresentation in
any part of the Public Record; or (C) result in any part of the Public Record
not complying with Applicable Securities Laws; or

 
 
(iv)
the discovery by the Corporation of any misrepresentation in any part of the
Public Record or in any information regarding the Corporation previously
provided to the Agents by the Corporation;

 
provided that if the Corporation is uncertain as to whether a material change of
the nature referred to in this subsection has occurred, the Corporation shall
promptly inform the Agents of the full particulars of the material change giving
rise to the uncertainty and shall consult with the Agents to determine whether a
material change has occurred;
 

 
 

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- 9 -

 
 
(b)
during the period commencing with the date hereof and ending on the Closing
Date, the Corporation will promptly inform the Agents of the full particulars
of:

 
 
(i)
any request of any Securities Commission or other securities commission or
similar regulatory authority for any amendment to any part of the Public Record
or for any additional information which may be material to the distribution of
the Offered Securities or the Warrant Shares;

 
 
(ii)
the issuance by any Securities Commission or other securities commission or
similar regulatory authority, the Exchange or by any other competent authority
of any order to cease or suspend trading of any securities of the Corporation or
of the institution or threat of institution of any proceedings for that purpose;
or

 
 
(iii)
the receipt by the Corporation of any communication from any Securities
Commission or other securities commission or similar regulatory authority, the
Exchange or any other competent authority relating to any part of the Public
Record or the distribution of the Offered Securities or the Warrant Shares;

 
and except as otherwise agreed by the Agents, acting reasonably, the Corporation
will use its reasonable best efforts to prevent the issuance of any such cease
trading order or suspension order and, if issued, to obtain the withdrawal
thereof as soon as possible;

 
(c)
during the period commencing on the date hereof and ending on the date which is
30 days after the Closing Date, the Corporation will promptly provide to the
Agents, for review by the Agents and the Agents' counsel, prior to the
publication, filing or issuance thereof, any press release (subject to the
Corporation's obligations under Applicable Securities Laws to make timely
disclosure of material information); and

 
 
(d)
the Corporation shall promptly comply, to the reasonable satisfaction of the
Agents and the Agents' counsel, with all applicable filing and other
requirements under Applicable Securities Laws with respect to any material
change, change, occurrence or event of the nature referred to or contemplated in
Section 3(a) or Section 3(b) and shall provide an opportunity for the prior
review and approval thereof by the Agents, acting reasonably, prior to the
filing of any such amendment.

 
4.
Corporation's Other Covenants

 
The Corporation agrees that:
 
 
(a)
the Corporation shall not take any action that would prevent the Corporation and
the Agents from relying on the exemptions from the prospectus and registration

 

 
 

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requirements of Applicable Securities Laws as contemplated by the Purchase
Agreements;

 
 
(b)
the Corporation will use the proceeds from the issuance and sale of the Units
for working capital and general corporate purposes;

 
 
(c)
the Corporation shall not, until the Maturity Date (as such term is defined in
the Trust Indenture) enter into any Senior Creditor Transaction (as such term is
defined in the Trust Indenture);

 
 
(d)
the Corporation will allow the Agents and the Agents' counsel, acting
reasonably, to participate fully in the preparation of the Transaction
Documents;

 
 
(e)
the Corporation will make available at reasonable times and places its senior
management persons to meet with potential investors if so requested by the
Agents;

 
 
(f)
the Corporation will use its commercially reasonable efforts to obtain all
necessary approvals of the Exchange for the issuance of and the listing and
posting of the Warrant Shares for trading on the Exchange, subject only to the
filing of required documents and payment of applicable fees which cannot
reasonably be filed until after the Closing Time;

 
 
(g)
the Corporation shall use its commercially reasonable efforts to maintain its
(or any successors') status as a reporting issuer not in default of any
Applicable Securities Laws in the Selling Jurisdictions in Canada in which it is
a reporting issuer or in which it becomes a reporting issuer until 180 days
after the Closing Date;

 
 
(h)
the Corporation will carry on its business in a prudent manner in accordance
with industry standards and good business practice and will keep or cause to be
kept proper books of accounts in accordance with applicable law; and

 
 
(i)
the Corporation will file all necessary forms and reports in connection with the
issuance of the Offered Securities and the Warrant Shares with the appropriate
Securities Commissions and other regulatory authorities.

 
5.
Agents' Covenants

 
Each of the Agents covenants and agrees with the Corporation that it will:
 
 
(a)
conduct its activities in connection with the proposed offer and sale of the
Units in compliance with this Agreement and all Applicable Securities Laws and
cause each member of the Selling Dealer Group established in connection with the
distribution of the Offered Securities to acknowledge its agreement to be bound
by the provisions of this Agreement;

 

 
 

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- 11 -

 
(b)
comply with the applicable United States offering restrictions imposed by the
laws of the United States and comply with the offering procedures set forth in
Section 29 hereof;

 
 
(c)
not solicit subscriptions for Offered Securities, trade in Units or otherwise do
any act in furtherance of a trade of Offered Securities outside of the Selling
Jurisdictions except in any other jurisdiction in compliance with the applicable
laws thereof, and provided that the Agents may so solicit, trade or act within
such jurisdiction only with the express written consent of the Corporation and
if such solicitation, trade or act is in compliance with applicable securities
laws in such jurisdiction and does not: (i) obligate the Corporation to take any
action to qualify or register any of its securities or any trade of any of its
securities (including the distribution of the Offered Securities) in such
jurisdiction; (ii) obligate the Corporation to establish or maintain any office
or director or officer in such jurisdiction; or (iii) subject the Corporation to
any reporting or other requirement in such jurisdiction;

 
 
(d)
obtain from each Purchaser an executed Purchase Agreement and all applicable
undertakings, questionnaires and other forms required under Applicable
Securities Laws or requirements of the Exchange and supplied to the Agents by
the Corporation for completion in connection with the distribution of the
Offered Securities; and

 
 
(e)
not advertise the proposed offering or sale of the Units in printed media of
general and regular paid circulation, radio, television or telecommunications,
including electronic display, nor provide or make available to prospective
purchasers of Units any document or material which would constitute or require
the Corporation to prepare an offering memorandum, registration statement or
prospectus as defined under Applicable Securities Laws.

 
6.
Representations and Warranties of the Corporation

 
The Corporation represents and warrants to the Agents and the Purchasers, and
acknowledges that the Agents and the Purchasers are relying upon such
representations and warranties, as follows:
 
 
(a)
Due Incorporation. The Corporation has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Nevada, with full corporate power and authority to own, lease and operate its
properties and conduct its business, to execute and deliver this Agreement and
to issue, sell and deliver the Offered Securities as contemplated herein.

 
 
(b)
Foreign Qualifications. The Corporation is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
ownership or leasing of its properties or the conduct of its business requires
such qualification, except where the failure to be so qualified and in good
standing would not, individually or in the aggregate, be reasonably expected to
(i) have a

 

 
 

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- 12 -

 
material adverse effect on the business, prospects, properties, management,
financial condition or results of operations of the Corporation and the
Subsidiary, taken as a whole, or (ii) prevent or interfere with consummation of
the transactions contemplated hereunder or in connection herewith (the
occurrence of any such effect or any such prevention or interference or any such
result described in the foregoing clauses (i) and (ii) being herein referred to
as a "Material Adverse Effect").

 
 
(c)
Subsidiaries. The Corporation does not have any subsidiaries other than the
Subsidiary; all of the issued and outstanding shares of common stock or other
voting stock of the Subsidiary are owned or held directly by the Corporation,
are registered in the Corporation's name and are validly issued as fully paid
and non-assessable, and the Corporation holds all such shares of common stock
with valid and marketable title thereto free and clear of any liens, pledges,
charges, encumbrances, security interests or other adverse claims whatsoever
(other than pursuant to the Trust Indenture, the Pledge and Security Agreement
and the July Documents), the Corporation is not "affiliated" with, or a "holding
corporation" of, any other body corporate (within the meaning of those terms in
the BCBCA), nor is it a partner of any partnerships (other than participating in
industry partnerships in the ordinary course of business) or limited
partnerships, and the Corporation has no material shareholdings in any other
corporation or business organization.

 
 
(d)
Public Record.  The information and statements set forth in the Public Record
were true, correct, and complete and did not contain any misrepresentations, as
of the date of such information or statement, and were prepared in accordance
with and complied with Applicable Securities Laws and the Corporation has not
filed any confidential material change reports still maintained on a
confidential basis.

 
 
(e)
Description of Capital Stock.  The authorized capital of the Corporation
consists of 250,000,000 Common Shares and 15,000,000 shares of preferred stock,
of which 194,103,382 Common Shares and nil shares of preferred stock are
currently issued and outstanding, each of which shares is validly issued as full
paid and non assessable.

 
 
(f)
Authorization, Issuance. The Corporation has the corporate power and authority
to enter into this Agreement and to authorize, issue and sell the Offered
Securities as contemplated by this Agreement. All corporate action required to
be taken by the Corporation for the authorization, issuance and sale of the
Offered Securities has been duly and validly taken. The Offered Securities have
been duly and validly authorized. When the Offered Securities have been issued
and delivered against payment therefor as provided herein, the Offered
Securities, when so issued and sold, will be legal, valid and binding
obligations of the Corporation, enforceable against the Corporation in
accordance with their terms, subject to applicable bankruptcy, insolvency or
similar laws and general equitable principles and free of all statutory and
contractual preemptive rights, resale rights, rights of first refusal and
similar rights and will be free of any restriction upon the voting

 

 
 

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- 13 -

 
or transfer thereof pursuant to Applicable Securities Laws or the Corporation's
charter or by-laws or any agreement or other instrument to which the Corporation
is a party.

 
 
(g)
Due Authorization. This Agreement has been duly authorized, executed and
delivered by the Corporation and constitutes a valid, legal and binding
obligation of the Corporation, enforceable against the Corporation in accordance
with its terms, except as rights to indemnity hereunder may be limited by
Applicable Securities Laws and except (i) as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization or similar laws of general
applicability affecting the rights of creditors generally, (ii) as
enforceability of any indemnification or contribution provision may be limited
under the federal and state securities laws in the United States or by federal
and provincial laws in Canada, and (iii) that the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to the
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.

 
 
(h)
No Violation. Neither the Corporation nor the Subsidiary is in breach or
violation of or in default under (nor has any event occurred which would
constitute any event which, with notice, lapse of time or both, would result in
any breach or violation of or constitute a default under or give rise to any
right of termination, cancellation or acceleration under) (A) its articles of
incorporation or by-laws, or (B) any indenture, mortgage, deed of trust, bank
loan or credit agreement or other evidence of indebtedness, or any license,
lease, contract or other agreement or instrument to which it is a party or by
which it or any of its properties may be bound or affected, or (C) any federal,
state, provincial, local or foreign law, regulation or rule, or (D) any rule or
regulation of any self-regulatory organization or other non-governmental
regulatory authority (including, without limitation, any applicable rules and
regulations of the OTC Bulletin Board (the "OTCBB") or the Exchange), or (E) any
decree, judgment or order applicable to it or any of its properties; except, in
the cases of clause (B), (C), (D) and (E), where such occurrence would not,
individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect.

 
 
(i)
No Conflict. The execution, delivery and performance of this Agreement, the
issuance and sale of the Offered Securities and the consummation of the
transactions contemplated hereby will not conflict with, result in any breach or
violation of or constitute a default under (nor constitute any event which, with
notice, lapse of time or both, would result in any breach or violation of or
constitute a default under or give rise to any right of termination,
cancellation or acceleration under) (or result in the creation or imposition of
a lien, charge or encumbrance on any property or assets of the Corporation or
the Subsidiary pursuant to) (A) the articles of incorporation or by-laws of the
Corporation or the Subsidiary, or (B) any indenture, mortgage, deed of trust,
bank loan or credit agreement or other evidence of indebtedness, or any license,
lease, contract or other agreement or instrument to which the Corporation or the
Subsidiary is a

 

 
 

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- 14 -

 
party or by which any of them or any of their respective properties may be bound
o affected, or (C) any federal, state, provincial, local or foreign law,
regulation or rule, or (D) any rule or regulation of any self-regulatory
organization or other non-governmental regulatory authority (including, without
limitation, any applicable rules and regulations of the OTCBB or the Exchange),
or (E) any decree, judgment or order applicable to the Corporation or the
Subsidiary or any of their respective properties; except, in the cases of clause
(B), (C), (D) and (E), where such occurrence would not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect.

 
 
(j)
No Consents Required. No approval, authorization, consent or order of or filing
with any federal, state, provincial, local or foreign governmental or regulatory
commission, board, body, authority or agency, or of or with any self-regulatory
organization or other non-governmental regulatory authority, or approval of the
shareholders of the Corporation, is required in connection with the issuance and
sale of the Offered Securities or the consummation by the Corporation of the
transactions contemplated hereby, other than any necessary approvals under the
listing requirements of the Exchange.

 
 
(k)
No Rights. (i) Other than 16,198,892 warrants to purchase Common Shares and
options to purchase up to 6,127,500 Common Shares issued no person has the
right, contractual or otherwise, to cause the Corporation to issue or sell to
such person any Common Shares or shares of any other capital stock or other
equity interests of the Corporation, (ii) no person has any preemptive rights,
resale rights, rights of first refusal or other rights to purchase any Common
Shares or shares of any other capital stock of or other equity interests in the
Corporation, (iii) no person has the right to act as an agent or as a financial
advisor to the Corporation in connection with the offer and sale of the Offered
Securities, and (iv) no person has the right, contractual or otherwise, to cause
the Corporation to register under the U.S. Securities Act any Common Shares or
shares of any other capital stock of, or other equity interests or securities
in, the Corporation, other than the registration rights of the purchasers in the
Corporation's private placement of units of the Corporation which closed in
January, 2011.

 
 
(l)
Permits. Each of the Corporation and the Subsidiary has all necessary licenses,
authorizations, consents and approvals and has made all necessary filings
required under any applicable law, regulation or rule, and has obtained all
necessary licenses, authorizations, consents and approvals from other persons,
in order to conduct their respective businesses, except where the failure to
have or obtain such licenses, authorizations, consents and approvals would not,
individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect; neither the Corporation nor the Subsidiary is in violation of,
or in default under, or has received notice of any proceedings relating to
revocation or modification of, any such license, authorization, consent or
approval or any federal, state, provincial, local or foreign law, regulation or
rule or any decree, order or judgment applicable to the Corporation or the
Subsidiary, except where such violation,

 

 
 

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- 15

 
default, revocation or modification would not, individually or in the aggregate,
be reasonably expected to have a Material Adverse Effect.

 
 
(m)
Mining Rights.

 
 
(i)
Either the Corporation or the Subsidiary holds Mining Rights (as defined below)
in respect of all of the Mineral Properties (defined below).  "Mining Rights"
means marketable title, freehold title, leases, mining concessions, mining
claims, licenses of occupation, participating interests or other conventional
property or proprietary interests or rights recognized in the jurisdiction in
which a particular property is located, in respect of the ore bodies and
minerals located therein under valid, subsisting and enforceable title
documents, or other recognized and enforceable agreements or instruments,
sufficient to permit the Corporation or the Subsidiary to explore for mineral
deposits relating thereto, free and clear of any liens, charges or
encumbrances.  "Mineral Properties" means the material mineral properties of the
Corporation as disclosed in the Documents, including, without limitation, the
"Borealis Property" located along the Aurora-Bodie trend in the State of Nevada.

 
 
(ii)
All material Mining Rights in which the Corporation or the Subsidiary holds an
interest or right have been validly registered and recorded in accordance with
all applicable laws and are valid and subsisting, and each of the Mining Rights
and each of the documents, agreements and instruments and obligations relating
thereto is currently in good standing in the name of the Corporation or the
Subsidiary.

 
 
(iii)
Neither the Corporation nor the Subsidiary has received any notice of the
revocation, adverse modification or cancellation of, or any intention to revoke,
adversely modify or cancel, any of the instruments conferring Mining Rights in
respect of the Mineral Properties.

 
 
(iv)
The disclosure regarding the Mineral Properties and Mining Rights of the
Corporation and the Subsidiary in the Documents, accurately describes all
material facts regarding the Mineral Properties and all material Mining Rights
held by the Corporation and the Subsidiary, and no other material property or
assets are necessary for the conduct of the business of the Corporation and the
Subsidiary as currently conducted; except as disclosed in the Documents the
Corporation does not know of any claim or the basis for any claim that might or
could materially and adversely affect the Corporation’s right to use, transfer
or explore for mineral deposits on such Mineral Properties and, except as
disclosed in the Documents the Corporation and the Subsidiary hold interests in
such Mineral Properties free and clear of any material liens, charges or
encumbrances and no material commission, royalty, license fee or similar payment
to any person with respect to the Mineral Properties is payable.

 

 
 

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- 16 -

 
(v)
All exploration activities on the Mineral Properties by the Corporation or its
Subsidiary have been conducted in all material respects in accordance with good
exploration practices and in compliance with all applicable laws, regulations
and policies in all material respects.

 
 
(n)
Technical Reports.

 
 
(i)
The Technical Report complied in all material respects with the requirements of
NI 43-101 at the time of filing thereof and the Technical Report reasonably
presents the quantity of mineral resources attributable to the properties
evaluated therein as of the date stated therein based upon information available
at the time the Technical Report was prepared; the Corporation made available to
the authors of the Technical Report, prior to the issuance thereof and for the
purpose of preparing such report, all information requested by them, which
information did not contain any misrepresentation at the time such information
was so provided.

 
 
(ii)
All of the material assumptions underlying the reserve and resource estimates in
the Technical Report are, to the extent known to the Corporation, reasonable and
appropriate.

 
 
(iii)
Each of the authors and consultants of the Technical Report was, at the time of
the Technical Report, "independent" (as such term is defined in NI 43-101). To
the Corporation’s knowledge, each such author continues to qualify as being
"independent" (as such term is defined in NI 43-101).

 
 
(iv)
The Corporation is in compliance in all material respects with the provisions of
NI 43-101 and has filed all technical reports required thereby and there has
been no change to the Technical Report or the properties evaluated therein of
which the Corporation is aware that would require the filing of new technical
reports under NI 43-101.

 
 
(o)
Legal Proceedings. There are no actions, suits, claims, investigations or
proceedings pending or, to the Corporation’s knowledge, threatened or
contemplated, to which the Corporation or the Subsidiary or any of their
respective directors or officers is or would be a party or of which any of their
respective properties is or would be subject at law or in equity, before or by
any federal, state, provincial, local or foreign governmental or regulatory
commission, board, body, authority or agency, or before or by any
self-regulatory organization or other non-governmental regulatory authority or
the OTCBB or the Exchange, except any such action, suit, claim, investigation or
proceeding which, if resolved adversely to the Corporation or the Subsidiary,
would not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect.

 
 
(p)
Independent Accountants.  DeCoria Maichel & Teague, is an independent registered
public accountant with respect to the Corporation as required by the Applicable
Securities Laws, and by the rules of the Public Company Accounting

 

 
 

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- 17 -

 
Oversight Board and, to the best of the Corporation's knowledge, is registered
as such.

 
 
(q)
Financial Statements. The Financial Statements, together with the related notes
and schedules, present fairly in all material respects the consolidated
financial position of the Corporation and the Subsidiary as of the dates
indicated and the consolidated results of operations, cash flows and changes in
shareholders’ equity of the Corporation for the periods specified have been
prepared in compliance with the applicable requirements of the U.S. Securities
Act and the U.S. Exchange Act and in conformity with U.S. generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved.

 
 
(r)
Absence of Material Changes.  Subsequent to the respective date of the Financial
Statements there has not been (i) any event or occurrence that, individually or
in the aggregate, has resulted in or may result in a Material Adverse Effect,
(ii) any obligation or liability, direct or contingent (including any
off-balance sheet obligations), incurred by the Corporation or the Subsidiary,
which, individually or in the aggregate, has resulted in or may result in a
Material Adverse Effect, (iii) any change in the capital stock of the
Corporation, except for the issuance of stock pursuant to the exercise of stock
options or warrants outstanding, or pursuant to the equity incentive plans of
the Corporation then in effect, or outstanding indebtedness of the Corporation
or the Subsidiary, or (iv) any dividend or distribution of any kind declared,
paid or made on the capital stock of the Corporation or the Subsidiary.

 
 
(s)
Not an Investment Company. Neither the Corporation nor the Subsidiary is, and,
after giving effect to the offering and sale of the Offered Securities and the
application of the proceeds thereof, none of them will be, an "investment
company" or an entity "controlled" by an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act").

 
 
(t)
Good Title to Property.  The Corporation and the Subsidiary have good and
marketable title to all of their respective properties, free and clear of all
liens, claims, security interests or other encumbrances, except as described in
the Documents such as would not individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect; all of the properties held under
lease by the Corporation or the Subsidiary are held thereby under valid,
subsisting and enforceable leases except such as would not, individually or in
the aggregate, be reasonably expected to have a Material Adverse Effect.

 
 
(u)
Material Contracts. Except such as would not, individually or in the aggregate,
be reasonably expected to have a Material Adverse Effect, each material
contract, agreement and license, to which the Corporation or its Subsidiary is
bound (all of which are set forth in Schedule D hereto), is legal, valid,
binding, enforceable and in full force and effect against the Corporation or the
Subsidiary, as applicable, and, to the knowledge of the Corporation, each other
party thereto, except to the

 

 
 

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- 18 -

 
extent such enforceability is subject to (i) laws of general application
relating to bankruptcy, insolvency, moratorium and the relief of debtors and
(ii) the availability of specific performance, injunctive relief and other
equitable remedies. Neither the Corporation nor its Subsidiary nor, to the
Corporation's knowledge, any other party, is in material breach or default with
respect to any such contract, agreement or license. To the Corporation's
knowledge, no event has occurred which with notice or lapse of time would
constitute a material breach or default, or permit termination, modification, or
acceleration, under any such contract, agreement or license. No party has
repudiated any material provision of any such contract, agreement or license.

 
 
(v)
Intellectual Property. The Corporation and the Subsidiary own, or have obtained
valid and enforceable licenses for, or other rights to use, the inventions,
patent applications, patents, trademarks (both registered and unregistered),
trade names, service names, copyrights, trade secrets and other proprietary
information described in the Documents, as being owned or licensed by them or
which are necessary for the conduct of their respective businesses as currently
conducted or as proposed to be conducted except such as would not, individually
or in the aggregate, be reasonably expected to have a Material Adverse Effect
(collectively, "Intellectual Property"); to the Corporation's knowledge, there
are no third parties who have, or will be able to establish, rights to any
Intellectual Property, except for, and to the extent of, the ownership rights of
the owners of the Intellectual Property which is licensed to the Corporation and
the license rights of any third parties to which the Intellectual Property is
licensed; to the knowledge of the Corporation, there is no infringement by third
parties of any material Intellectual Property; there is no pending or, to the
Corporation's knowledge, threatened, action, suit, proceeding or claim by any
third party challenging the Corporation's rights in or to any material
Intellectual Property, and the Corporation is unaware of any facts which could
form a reasonable basis for any such action, suit, proceeding or claim; there is
no pending or, to the Corporation's knowledge, threatened, action, suit,
proceeding or claim by others challenging the validity, enforceability or scope
of any material Intellectual Property, and the Corporation is unaware of any
facts which could form a reasonable basis for any such action, suit, proceeding
or claim; there is no pending or, to the Corporation’s knowledge, threatened,
action, suit, proceeding or claim by others that the Corporation or the
Subsidiary infringes or otherwise violates, any patent, trademark, trade name,
service name, copyright, trade secret or other proprietary rights of others, and
the Corporation is unaware of any facts which could form a reasonable basis for
any such action, suit, proceeding or claim; the Corporation and the Subsidiary
have complied in all material respects with the terms of each agreement pursuant
to which any material Intellectual Property has been licensed to the Corporation
or the Subsidiary, and all such agreements are in full force and effect except
such as would not, individually or in the aggregate, be reasonably expected to
have a Material Adverse Effect; to the knowledge of the Corporation, there is no
patent or patent application that contains claims that interfere with the issued
or pending claims of any material Intellectual Property or that challenges

 

 
 

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

 
- 19 -

 
the validity, enforceability or scope of any material Intellectual Property; to
the nowledge of the Corporation, there is no prior art that may render any
patent application within the Intellectual Property unpatentable that has not
been disclosed to the U.S. Patent and Trademark Office.

 
 
(w)
Labor Matters. Neither the Corporation nor the Subsidiary is engaged in any
unfair labor practice; except for matters which would not, individually or in
the aggregate, be reasonably expected to have a Material Adverse Effect, (i)
there is (A) no unfair labor practice complaint pending or, to the Corporation's
knowledge, threatened against the Corporation or the Subsidiary before the
National Labor Relations Board, and no grievance or arbitration proceeding
arising out of or under collective bargaining agreements is pending or, to the
Corporation’s knowledge, threatened, (B) no strike, labor dispute, slowdown or
stoppage pending or, to the Corporation’s knowledge, threatened against the
Corporation or the Subsidiary and (C) no union representation dispute currently
existing concerning the employees of the Corporation or the Subsidiary; (ii) to
the Corporation's knowledge, no union organizing activities are currently taking
place concerning the employees of the Corporation or the Subsidiary; and (iii)
there has been no violation of any federal, state, provincial, local or foreign
law relating to discrimination in the hiring, promotion or pay of employees, any
applicable wage or hour laws, any provision of the Worker Adjustment and
Retraining Notification Act of 1988, as amended ("WARN Act"), or the WARN Act’s
state, provincial, foreign or local equivalent, or any provision of the Employee
Retirement Income Security Act of 1974 ("ERISA"), or the rules and regulations
promulgated thereunder concerning the employees of the Corporation or the
Subsidiary; the Corporation and the Subsidiary are in compliance with all
presently applicable provisions of ERISA, except where such non-compliance would
not be reasonably expected to result in a Material Adverse Effect; no
"reportable event" (as defined in ERISA) has occurred with respect to any
"pension plan" (as defined in ERISA) to which the Corporation or the Subsidiary
contributes or which the Corporation or the Subsidiary maintains; the
Corporation and the Subsidiary has not incurred and does not expect to incur
liability under (x) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (y) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for which the
Corporation or the Subsidiary would have any liability that is intended to be
qualified under Section 401(a) of the Code is so qualified and nothing has
occurred, whether by action or by failure to act, which would cause the loss of
such qualification.

 
 
(x)
Compliance with Environmental Laws. Except as disclosed in the Documents, the
Corporation and the Subsidiary and their respective properties, assets and
operations are in compliance with, and the Corporation and the Subsidiary hold
all permits, authorizations and approvals required under, Environmental Laws (as
defined below), except to the extent that failure to so comply or to hold such
permits, authorizations or approvals would not, individually or in the
aggregate,

 

 
 

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- 20 -

 
be reasonably expected to have a Material Adverse Effect; there are no past,
present or, to the Corporation’s knowledge, reasonably anticipated future,
events, conditions, circumstances, activities, practices, actions, omissions or
plans that could reasonably be expected to give rise to any material costs or
liabilities to the Corporation or the Subsidiary under, or to interfere with or
prevent compliance by the Corporation or the Subsidiary with, Environmental
Laws; except as would not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect or as disclosed in the Documents,
neither the Corporation nor the Subsidiary (i) is the subject of any
investigation, (ii) has received any notice or claim, (iii) is a party to or
affected by any pending or, to the Corporation’s knowledge, threatened, action,
suit or proceeding, (iv) is bound by any judgment, decree or order or (v) has
entered into any agreement, in each case relating to any alleged violation of
any Environmental Law or any actual or alleged release or threatened release or
cleanup at any location of any Hazardous Materials (as defined below) (as used
herein, "Environmental Law" means any federal, state, provincial, local or
foreign law, statute, ordinance, rule, regulation, order, decree, judgment,
injunction, permit, license, authorization or other binding requirement, or
common law, relating to health, safety or the protection, cleanup or restoration
of the environment or natural resources, including those relating to the
distribution, processing, generation, treatment, storage, disposal,
transportation, other handling or release or threatened release of Hazardous
Materials, and "Hazardous Materials" means any material (including, without
limitation, pollutants, contaminants, hazardous or toxic substances or wastes)
that is regulated by or may give rise to liability under any Environmental Law).

 
 
(y)
Taxes. The Corporation and its Subsidiary have paid all federal, state, local,
provincial and foreign taxes and filed all tax returns required to be filed
through the date hereof (except for (i) any taxes that are being disputed in
good faith by appropriate proceedings and for which the Corporation or the
Subsidiary, as appropriate, holds adequate reserves in accordance with GAAP and
(ii) those returns for which a request for extension has been filed); and there
is no material tax deficiency that has been, or could reasonably be expected to
be, asserted against the Corporation or the Subsidiary or any of their
respective properties or assets.

 
 
(z)
Insurance. The Corporation and the Subsidiary maintain insurance covering their
respective properties, operations, personnel and businesses as the Corporation
reasonably deems adequate; such insurance insures against such losses and risks
to an extent which is adequate in accordance with customary industry practice to
protect the Corporation and the Subsidiary and their respective businesses; all
such insurance is fully in force on the date hereof and will be fully in force
at the Closing Time, as applicable; neither the Corporation nor any Subsidiary
has reason to believe that it will not be able to renew any such insurance as
and when such insurance expires.

 
 
(aa)
 

 

 
 

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- 21 -

 
 
(aa)
Termination of Contracts. Neither the Corporation nor the Subsidiary has sent or
received any communication regarding termination of, or intent not to renew,
any of the contracts or agreements referred to or described in the Documents,
and no such termination or non-renewal has been threatened by the Corporation or
the Subsidiary or, to the Corporation’s knowledge, any other party to any such
contract or agreement, except for such terminations or non-renewals which would
not, individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect.

 
 
(bb)
Accounting Controls. The Corporation and the Subsidiary maintain a system of
internal accounting controls sufficient to provide reasonable assurance that:
(i) transactions are executed in accordance with management’s general or
specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

 
 
(cc)
Disclosure Controls; Sarbanes-Oxley Act. The Corporation has established and
maintains and evaluates "disclosure controls and procedures" (as such term is
defined in Rules 13a-15(e) and 15d-15(e) under the U.S. Exchange Act) and
"internal control over financial reporting" (as such term is defined in Rules
13a-15(f) and 15d-15(f) under the U.S. Exchange Act); such disclosure controls
and procedures are designed to ensure that material information relating to the
Corporation, including its consolidated subsidiaries, is made known to the
Corporation's Chief Executive Officer and its Chief Financial Officer by others
within those entities, and, except as disclosed in the Corporation’s filings
with the SEC, and as of the date of the Corporation’s most recent evaluation,
such disclosure controls and procedures are effective to perform the functions
for which they were established; to the Corporation's knowledge, the
Corporation's independent auditors and the Audit Committee of the Board of
Directors of the Corporation have been advised of: (i) all significant
deficiencies, if any, in the design or operation of internal control over
financial reporting which could adversely affect the Corporation's ability to
record, process, summarize and report financial data; and (ii) all fraud, if
any, whether or not material, that involves management or other employees who
have a role in the Corporation's internal control over financial reporting; all
material weaknesses, if any, in internal control over financial reporting have
been identified to the Corporation's independent auditors; since the date of the
most recent evaluation of such disclosure controls and procedures and internal
control over financial reporting, there have been no significant changes in
internal control over financial reporting or in other factors that could be
reasonably expected to significantly affect internal control over financial
reporting, including any corrective actions with regard to significant
deficiencies and material weaknesses, except for those that are disclosed in the
Corporation's filings with the SEC or those that are intended to remediate or

 

 
 

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- 22 -

 
otherwise improve upon the Corporation's disclosure controls and procedures and
internal control over financial reporting; the principal executive officers (or
their equivalents) and principal financial officers (or their equivalents) of
the Corporation have made all certifications required by the Sarbanes-Oxley Act
of 2002 (the "Sarbanes-Oxley Act") and any related rules and regulations
promulgated by the SEC, and the statements contained in each such
certifications, are complete and correct in all material respects as of the
dates such certifications were made; the Corporation, the Subsidiary and the
Corporation's directors and officers are each in compliance in all material
respects with all applicable effective provisions of the Sarbanes-Oxley Act and
the rules and regulations of the SEC promulgated thereunder.

 
 
(dd)
Forward-Looking Statements. Each "forward-looking statement" (within the meaning
of Section 27A of the U.S. Securities Act or Section 21E of the U.S. Exchange
Act) contained in the Documents, if any, has been made or reaffirmed with a
reasonable basis and in good faith.

 
 
(ee)
Statistical and Market-Related Data. All statistical or market-related data
included or incorporated by reference in the Documents, are based on or derived
from sources that the Corporation reasonably believes to be reliable and
accurate, and the Corporation has obtained the written consent to the use of
such data from such sources to the extent required.

 
 
(ff)
Corrupt Practices. Neither the Corporation nor the Subsidiary nor, to the
knowledge of the Corporation, any director, officer, agent, employee,
representative or affiliate of the Corporation or the Subsidiary is aware of or
has taken any action, directly or indirectly, that would result in a violation
by such persons of the Foreign Corrupt Practices Act of 1977, as amended, and
the rules and regulations thereunder; and the Corporation, the Subsidiary and,
to the knowledge of the Corporation, its affiliates, have taken all steps
reasonably necessary to ensure continued compliance therewith.

 
 
(gg)
Money Laundering Laws. The operations of the Corporation and the Subsidiary are
and have been conducted at all times in compliance in all material respects with
applicable financial recordkeeping and reporting requirements of the Currency
and Foreign Transactions Reporting Act of 1970, as amended, and the applicable
and material money laundering statutes of all jurisdictions in which the
Corporation operates or has operated and the rules and regulations thereunder
(collectively, "Money Laundering Laws"); and no action, suit or proceeding by or
before any court or governmental agency, authority or body or any arbitrator or
non-governmental authority involving the Corporation or the Subsidiary with
respect to Money Laundering Laws is pending or, to the Corporation’s knowledge,
threatened.

 
 
(hh)
OFAC. Neither the Corporation nor the Subsidiary nor, to the knowledge of the
Corporation, any director, officer, agent, employee or affiliate of the
Corporation or the Subsidiary is currently subject to any U.S. sanctions
administered by the

 

 
 

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- 23 -

 
Office of Foreign Assets Control of the U.S. Treasury Department ("OFAC"); and
the Corporation will not, directly or indirectly, use the proceeds of the
offering of the Offered Securities contemplated hereby, or lend, contribute or
otherwise make available such proceeds to the Subsidiary, joint venture partner
or other person or entity for the purpose of financing the activities of any
person currently subject to any U.S. sanctions administered by OFAC.

 
 
(ii)
Dividends. The Subsidiary is not currently prohibited, directly or indirectly,
from paying any dividends to the Corporation, from making any other distribution
on the Subsidiary’s capital stock, from repaying to the Corporation any loans or
advances to the Subsidiary from the Corporation or from transferring any of the
Subsidiary’s property or assets to the Corporation.

 
 
(jj)
Preemptive Rights. The issuance and sale of the Offered Securities as
contemplated hereby will not cause any holder of any shares of capital stock,
securities convertible into or exchangeable or exercisable for capital stock or
options, warrants or other rights to purchase capital stock or any other
securities of the Corporation to have any right to acquire any shares of
preferred stock of the Corporation.

 
 
(kk)
U.S. Exchange Act Registration. The Common Shares are registered pursuant to
Section 12(g) of the U.S. Exchange Act, the Common Shares are quoted for trading
on the OTCBB and listed on the Exchange, and the Corporation has taken no action
designed to, or likely to have the effect of, terminating the registration of
the Common Shares under the U.S. Exchange Act, ending quotations of the Common
Shares on the OTCBB or delisting the Common Shares from the Exchange, nor has
the Corporation received any notification that the SEC, the OTCBB or the
Exchange is contemplating terminating such quotation, registration or listing.

 
 
(ll)
Brokers Fees. Except pursuant to this Agreement, neither the Corporation nor the
Subsidiary has incurred any liability for any finder’s or broker’s fee or
agent’s commission in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.

 
 
(mm)
No Price Stabilization. Neither the Corporation nor the Subsidiary nor any of
their respective directors, officers or, to the knowledge of the Corporation,
any of their affiliates or controlling persons, has taken, directly or
indirectly, any action designed to, or which has constituted or might reasonably
be expected to, cause or result in the stabilization or manipulation of the
price of any security of the Corporation to facilitate the sale or resale of the
Offered Securities.

 
 
(nn)
Corporate Records. The minute books of the Corporation and the Subsidiary
representing all existing records of all meetings and actions of the board of
directors (including all committees of the board of directors) and stockholders
of the Corporation and the Subsidiary (collectively, the "Corporate Records")
through the date of the latest meeting and action have been furnished to the

 

 
 

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- 24 -

 
Agents. All such Corporate Records are complete and accurately reflect, in all
material respects, all transactions referred to in such Corporate Records. There
are no material transactions, agreements or other actions that have been
consummated by the Corporation or the Subsidiary that are not properly approved
and/or recorded in the Corporate Records of the Corporation and the Subsidiary.

 
 
(oo)
Federal Reserve Board. Neither the Corporation nor the Subsidiary owns any
"margin securities" as that term is defined in Regulation U of the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"), and none
of the proceeds of the sale of the Offered Securities will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin security, for
the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose which
might cause any of the Offered Securities to be considered a "purpose credit"
within the meanings of Regulation T, U or X of the Federal Reserve Board.

 
 
(pp)
Rating Organization. As of the date of this Agreement there were not, and as of
the Closing Time, there will not be, any securities of or guaranteed by the
Corporation or the Subsidiary that are rated by a "nationally recognized
statistical rating organization," as that term is defined in Rule 436(g)(2)
promulgated under the U.S. Securities Act.

 
 
(qq)
U.S. Exchange Act Requirements. The Corporation has filed in a timely manner all
reports required to be filed pursuant to Sections 13(a), 13(e), 14 and 15(d) of
the U.S. Exchange Act during the preceding twelve (12) months.

 
 
(rr)
Transfer Agent.  Computershare Trust Company of Canada at its principal offices
in the City of Vancouver, British Columbia is the duly appointed registrar and
transfer agent of the Corporation with respect to its Common Shares and the
trustee pursuant to the Trust Indenture.

 
 
(ss)
Reporting Issuer in Canada. The Corporation is a "reporting issuer" in each of
British Columbia, Alberta, Saskatchewan and Ontario within the meaning of the
Applicable Securities Laws in such provinces and is not in default of any
requirement of Canadian Securities Laws, except such as would not, individually
or in the aggregate, be reasonably expected to have a Material Adverse Effect.

 
 
(tt)
Representations and Warranties.  The representations and warranties made by the
Corporation in the Purchase Agreements will be true and correct as of the date
at which they are made.

 
 
(uu)
Warrants. The Corporation has the corporate power and authority to issue the
Warrants and to perform its obligations thereunder. The Warrants have been duly
authorized and constitute valid and binding obligations of the Corporation,
enforceable against the Corporation in accordance with their terms except (i) as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or similar laws of general applicability affecting the rights of

 

 
 

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- 25 -

 
creditors generally, and (ii) as enforceability of any indemnification or
contribution provision may be limited under the federal and state securities
laws in the United States or under the Canadian Securities Laws in Canada. The
Warrant Shares have been duly authorized and reserved for issuance, and when
issued to the holder(s) of the Warrants in accordance with the terms of the
Warrants against payment therefor, will be validly issued, fully paid and
nonassessable. The Warrant Shares when issued upon exercise of the Warrants will
be free of statutory and contractual preemptive rights, resale rights, rights of
first refusal and restrictions upon voting and transfer (except for applicable
transfer restrictions under the U.S. Securities Act and any applicable state
securities laws). The offering and issuance of the Warrants and the Warrant
Shares are pursuant to an exemption from the registration requirements of the
U.S. Securities Act.

 
In addition to the foregoing representations and warranties, any certificate
signed by any officer of the Corporation or the Subsidiary and delivered to the
Agents in connection with the Offering shall be deemed to be a representation
and warranty by the Corporation to the Agents as to the matters covered thereby.
 
7.
Conditions

 
The obligations of the Agents hereunder shall be conditional upon the Agents
receiving, and the Agents shall have the right on the Closing Date on behalf of
Purchasers to withdraw all Purchase Agreements delivered and not previously
withdrawn by Purchasers unless the Agents receive, at the Closing Time:
 
 
(a)
a legal opinion of the Corporation's Canadian counsel (addressed to the Agents,
the Purchasers and the Agents' counsel) in form and substance satisfactory to
the Agents, acting reasonably, relating to the offering, issuance and sale of
the Offered Securities and the issuance of the Warrant Shares, including,
without limitation, the matters set forth in Schedule A and as to all other
legal matters, including compliance with Applicable Securities Laws in the
Selling Jurisdictions in Canada, in any way connected with the offering,
issuance, sale and delivery of the Offered Securities and the issuance of the
Debentures, Warrants and Warrant Shares as the Agents may reasonably request.

 
It is understood that the Corporation's Canadian counsel may rely on the
opinions of local counsel acceptable to them as to matters governed by the laws
of jurisdictions other than British Columbia, Alberta and Ontario and on
certificates of officers of the Corporation, the transfer agent of the Common
Shares and the auditors of the Corporation as to relevant matters of fact.
 
 
(b)
a legal opinion of the Corporation's US counsel (addressed to the Agents, the
Agents' Counsel and the Purchasers), in form and substance satisfactory to the
Agents, acting reasonably, relating to the matters set forth in Schedule B and
as to all other legal matters as the Agents may reasonably request;

 
 
 

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

 
- 26 -

 
 
(c)
a legal opinion of the Corporation's counsel in Nevada (addressed to the Agents,
the Purchasers and the Agents' counsel) in form and substance satisfactory to
the Agents, acting reasonably, relating to the matters set forth in Schedule C
and as to all other legal matters as the Agents may reasonably request;

 
 
(d)
a certificate of the Corporation dated the Closing Date, addressed to the Agents
and the Purchasers and signed on the Corporation's behalf by any two senior
officers or directors of the Corporation satisfactory to the Agents, acting
reasonably, certifying that:

 
 
(i)
the Corporation has complied with and satisfied all terms and conditions of the
Transaction Documents on its part to be complied with or satisfied at or prior
to the Closing Time, other than those which have been waived in writing by the
Agents;

 
 
(ii)
the representations and warranties of the Corporation set forth in the
Transaction Documents are true and correct, in all material respects, at the
Closing Time, as if made at such time;

 
 
(iii)
no event of a nature referred to in Subsection 12(a), (b), (d) or (e) has
occurred or to the knowledge of such officers is pending, contemplated or
threatened;

 
 
(iv)
the Corporation has made and/or obtained, on or prior to the Closing Time, all
necessary filings, approvals, consents and acceptances of applicable regulatory
authorities, and under any applicable agreement or document to which the
Corporation is a party or by which it is bound, required for the execution and
delivery of the Transaction Documents, the offering and sale of the Offered
Securities and the issuance of the Warrant Shares in the Selling Jurisdictions
and the consummation of the other transactions contemplated hereby (subject to
completion of filings with, and the payment of fees to, certain regulatory
authorities following the Closing Date);

 
 
(v)
there have been no material changes to the Due Diligence Session Responses; and

 
 
(vi)
such other matters as may be reasonably requested by the Agents or the Agents'
counsel;

 
and the Agents shall have no knowledge to the contrary;
 
 
(e)
evidence satisfactory to the Agents, acting reasonably, that the Corporation has
obtained all necessary approvals of the Exchange for the issuance of the Offered
Securities and the Warrant Shares;

 
 
 

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

 
- 27 -

 
 
(f)
definitive certificates representing, in the aggregate, all of the Offered
Securities subscribed for or purchased registered in such name or names as the
Agents shall notify the Corporation in writing not less than 24 hours prior to
the Closing Time, provided such certificates registered in such names may,
subject to receipt by the Corporation and the Trustee of a satisfactory
indemnity, be delivered in advance of the Closing Date to the Agents or such
other parties in such locations as the Agents may direct and the Agents and the
Corporation may agree;

 

 
(g)
executed copies of this Agreement and the Transaction Documents, each in form
and substance reasonably satisfactory to the Agents and the Agents' counsel;

 
 
(h)
evidence of registration of security interests created pursuant to the
Transaction Documents in form and substance satisfactory to the Agents and the
Agents' counsel;

 
 
(i)
such further and other documentation as may be contemplated by this Agreement or
the Transaction Documents that may reasonably be requested by the Agents or the
Agents' counsel; and

 
 
(j)
the Agents having completed due diligence with respect to the Corporation and
its Subsidiary that is satisfactory to the Agents, acting reasonably.

 
The foregoing conditions are for the sole benefit of the Agents and may be
waived in whole or in part by the Agents at any time and, without limitation,
the Agents shall have the right, prior to the Closing Time, on behalf of
potential subscribers, to withdraw all Purchase Agreements delivered and not
previously withdrawn or rescinded by such persons. If any of the foregoing
conditions are not met, the Agents may terminate their obligations under this
Agreement without prejudice to any other remedies they may have.
 
8.
Closing

 
The issue and sale of the Offered Securities shall be completed at the Closing
Time at the offices of the Corporation's Canadian Counsel in Toronto or at such
other place as the Corporation and the Agents may agree. Subject to the
conditions set forth in Section 7, the Agents, on the Closing Date, shall
deliver to the Corporation:
 
 
(a)
all completed Purchase Agreements duly executed by the Purchasers (including any
applicable documents and schedules specifically referred to in the Purchase
Agreements), in form and substance reasonably satisfactory to the Corporation
and the Corporation's counsel; and

 
 
(b)
a wire transfer of funds to the Corporation in an amount equal to the aggregate
of all subscriptions for Offered Securities delivered to and accepted by the
Corporation;

 

 
 

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

 
- 28 -

 
against delivery by the Corporation of:

 
(c)
definitive certificates referred to in Subsection 7(f) representing, in the
aggregate, all of the Offered Securities subscribed for; and

 
 
(d)
such further documentation as may be contemplated by this Agreement or that may
reasonably be requested by the Agents' counsel.

 
The Corporation may not reject any properly completed Purchase Agreement which
is in compliance with Applicable Securities Laws, unless the number of Offered
Securities subscribed for or purchased pursuant to all Purchase Agreements
tendered by the Agents exceeds the maximum number of Offered Securities to be
sold under this Agreement, in which case Purchase Agreements representing the
over-allotment shall, in consultation with the Agents, be rejected or accepted,
unless the acceptance of such Purchase Agreement may breach or violate any
Applicable Securities Laws.
 
9.
Fees

 
In consideration for the Agents' services hereunder, the Corporation agrees to
pay to the Agents a fee equal to the amount of 6.5% of the aggregate gross
proceeds of the sale of the Units, and for which the subscription is accepted by
the Corporation, which aggregate fee of up to $325,000 shall be payable on the
Closing Date.
 
The foregoing fee referred to in this Section 9 may, at the sole option of the
Agents, be deducted from the aggregate gross proceeds of the sale of the Offered
Securities and withheld for the account of the Agents.
 
10.
Expenses

 
Whether or not the transactions contemplated herein shall be completed, all
costs and expenses of or incidental to the creation, issue, sale or distribution
of the Offered Securities shall be borne by the Corporation, including, without
limitation, all costs and expenses of or incidental to the private placement of
the Offered Securities, the fees and expenses of the Corporation's counsel,
agent counsel retained by the Corporation's counsel, the Corporation's auditors,
the Corporation's engineers, the Trustee, the reasonable out-of-pocket expenses
of the Agents, including, but not limited to, travel and road show expenses and
the Agents' legal fees (to a maximum of $35,000, exclusive of taxes) and
expenses, and all other costs and expenses relating to the transactions
contemplated herein.
 
The foregoing fees referred to in this Section 10 may, at the sole option of the
Lead Agent, be deducted from the aggregate gross proceeds of the sale of the
Offered Securities and withheld for the account of the Agents.
 
11.
Waiver

 
The Agents may, in respect of the Corporation, waive in whole or in part any
breach of, default under or non-compliance with any representation, warranty,
covenant, term or condition hereof, or extend the time for compliance therewith,
without prejudice to any of its rights in respect of any other representation,
warranty, covenant, term or condition hereof or any other
 

 
 

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

 
- 29 -

breach of, default under or non-compliance with any other representation,
warranty, covenant, term or condition hereof, provided that any such waiver or
extension shall be binding on the Agents only if the same is in writing.
 
12.
Termination Events

 
Each of the Agents may terminate their obligations hereunder, without any
liability on such Agent's part, by written notice to the Corporation, in the
event that after the date hereof and at or prior to the Closing Time:
 
 
(a)
any order to cease or suspend trading in any securities of the Corporation, or
prohibiting or restricting the distribution of the Offered Securities or the
Warrant Shares is made, or proceedings are announced, commenced or threatened
for the making of any such order, by any securities commission or similar
regulatory authority, the Exchange or by any other competent authority, and the
same has not been rescinded, revoked or withdrawn;

 
 
(b)
any inquiry, investigation or other proceeding (whether formal or informal) in
relation to the Corporation or any of its directors or officers is announced or
commenced by any securities commission or similar regulatory authority, the
Exchange or by any other competent authority or any order is issued under or
pursuant to any statute of Canada or of any of the provinces of Canada, or any
other applicable law or regulatory authority (unless based on the activities or
alleged activities of the Agent or its agents), or there is any change of law,
regulation or policy or the interpretation or administration thereof, which, in
the sole opinion of the Agent, acting reasonably, materially adversely affects,
or may materially adversely affect, the Corporation, the trading in the Common
Shares or the distribution of the Offered Securities or the Warrant Shares;

 
 
(c)
there should develop, occur or come into effect or existence any event, action,
state, condition (including, without limitation, terrorism or accident) or major
financial occurrence of national or international consequence, or any action by
government, law or regulation, or any other such occurrence of any nature
whatsoever, which, in the sole opinion of the Agent, acting reasonably,
materially adversely affects or involves, or might be expected to materially
adversely affect or involve, the financial markets or the business, operations
or affairs of the Corporation;

 
 
(d)
there should occur any change, event, fact or circumstance (actual, contemplated
or threatened) of a nature referred to in Subsection 3(a) hereof or any
development that could result in such a change, event, fact or circumstance, any
of which, in the opinion of the Agent, as determined by the Agent in its sole
discretion, acting reasonably, could reasonably be expected to have a material
adverse effect on the business, operations or affairs of the Corporation or the
market price or value or the marketability of the Offered Securities or the
Warrant Shares;

 

 
 

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

 
- 30 -

 
(e)
the Agent, acting reasonably, determines that the Corporation shall be in breach
of, default under or non-compliance with any material representation, warranty,
covenant, term or condition of this Agreement or the Purchase Agreements;

 
 
(f)
the Agent shall become aware, as a result of its due diligence review (including
the Due Diligence Session) or otherwise, of any adverse material information,
fact or change (determined solely by the Agent, acting reasonably) with respect
to the Corporation which had not been publicly disclosed or disclosed in writing
to the Agent prior to the date hereof or which occurred after the effective date
hereof but prior to the Closing Time; or

 
 
(g)
the state of the financial markets in Canada or the United States becomes such
that the Units cannot, in the opinion of the Agent, acting reasonably, be
profitably marketed,

 
in any of which cases, the Agent shall be entitled, at its option, to terminate
and cancel its obligations to the Corporation under this Agreement and the
obligations of any Purchaser under any Purchase Agreement.
 
13.
Continuation of Termination Right

 
Each of the Agents may exercise any or all of the rights provided for in Section
7, Section 11 or Section 12 notwithstanding any material change, change, event
or state of facts and notwithstanding any act or thing taken or done by the
Agent or any inaction by the Agent, whether before or after the occurrence of
any material change, change, event or state of facts including, without
limitation, any act of the Agent related to the offering or continued offering
of the sale of the Offered Securities.  An Agent shall only be considered to
have waived or be estopped from exercising or relying upon any of its rights
under or pursuant to Section 7, Section 11 or Section 12 if such waiver or
estoppel is in writing and specifically waives or estops such exercise or
reliance.
 
14.
Exercise of Termination Right

 
Any termination pursuant to the terms of this Agreement shall be effected by
notice in writing delivered to the Corporation, with a copy to the other Agent,
prior to the Closing Time, provided that no termination shall discharge or
otherwise affect any obligation of the Corporation under Section 10, Section 15,
Section 16, Section 17, Section 18 or Section 19.  The rights of the Agents to
terminate their obligations hereunder are in addition to, and without prejudice
to, any other remedies they may have.
 
15.
Survival

 
All representations, warranties, covenants, terms and conditions herein or
contained in certificates or documents submitted pursuant to or in connection
with the transactions contemplated herein shall survive the payment by the
Agents for the Offered Securities and the issuance of the Offered Securities and
shall continue in full force and effect for the benefit of the
 

 
 

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- 31 -

Agents and the Purchasers regardless of any investigation by or on behalf of the
Agents with respect thereto.
 
16.
Indemnity

 
The Corporation (the "Indemnitor") shall indemnify and save harmless the Agents
and their respective affiliates, shareholders, directors, officers, partners,
employees and agents (collectively, the "Indemnified Parties") from and against
all actual or threatened claims, demands, actions, suits, investigations and
proceedings (collectively, "Proceedings") and all losses (other than loss of
profits), costs, expenses, fees, damages, obligations, payments and liabilities
(collectively, "Liabilities") (including, without limitation, all statutory
duties and obligations, and, subject to Section 18, all amounts paid to
investigate, defend and settle any action or to satisfy any judgment or award
and all legal fees and disbursements actually incurred) which now or any time
hereafter are suffered or incurred by reason of any event, act or omission in
any way caused by, or arising directly or indirectly from or in consequence of:
 
 
(a)
any information or statement contained in any part of the Public Record (other
than any information or statement relating solely to the Agents and furnished to
the Corporation by the Agents in writing expressly for inclusion in any part of
the Public Record) or contained in this Agreement or any certificate or other
document delivered by or on behalf of the Corporation to the Agents hereunder
which is or is alleged to be untrue or any omission or alleged omission to
provide any information or state any fact the omission of which makes or is
alleged to make any such information or statement untrue or misleading in light
of the circumstances in which it was made;

 
 
(b)
any misrepresentation or alleged misrepresentation (except a misrepresentation
which is based upon information relating to the Agents and furnished to the
Corporation by the Agents in writing expressly for inclusion in the Public
Record) contained in the Public Record;

 
 
(c)
any prohibition or restriction of trading in the securities of the Corporation
or any prohibition or restriction affecting the distribution of the Offered
Securities, the Warrants or the Warrant Shares (not based upon the activities or
the alleged activities of the Agents or the Selling Dealer Group members, if
any) imposed by any of the Securities Commissions, the SEC or any other
competent authority;

 
 
(d)
any order made or any inquiry, investigation (whether formal or informal) or
other proceeding commenced or threatened by any of the Securities Commissions or
any other one or more competent authorities (not based upon the activities or
the alleged activities of the Agents or the Selling Dealer Group members, if
any) into the affairs of the Corporation or its Subsidiary or any of its
directors, officers or principal shareholders or relating to or affecting the
trading or distribution of the Offered Securities, the Warrants or the Warrant
Shares;

 
 
(e)
any breach of, default under or non-compliance by the Corporation with any
representation, warranty, term or condition of the Transaction Documents or any

 

 
 

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- 32 -

 
certificate or document, delivered pursuant thereto or any requirement of
Applicable Securities Laws; or

 
 
(f)
the exercise by any purchaser of Offered Securities of any contractual or
statutory right of rescission in connection with the purchase thereof,

 
provided that in the event and to the extent that a court of competent
jurisdiction in a final judgment from which no appeal can be made or a
regulatory authority in a final ruling from which no appeal can be made shall
determine that such Proceedings or Liabilities resulted solely from the
negligence, fraud or wilful misconduct of any Indemnified Party claiming
indemnity, this indemnity shall not apply to such Proceeding or Liability.
 
The Corporation hereby waives its right to recover contribution from the Agents
with respect to any liability of the Corporation by reason of or arising out of
any misrepresentation in the Documents or any part of the Public Record
provided, however, that such waiver shall not apply in respect of liability
caused or incurred by reason of or arising out of: (i) any misrepresentation
which is based upon information relating solely to the Agents contained in such
document and furnished in writing to the Corporation by the Agents expressly for
inclusion in such document; or (ii) any failure by the Agents to provide to
prospective purchasers of Offered Securities any document which the Corporation
is required to provide to such prospective purchasers and which the Corporation
has provided to the Agents to forward to such prospective purchasers.
 
17.
Notice of Indemnity Claim

 
If any Proceeding is brought, instituted or threatened in respect of any
Indemnified Party which may result in a claim for indemnification under this
Agreement, such Indemnified Party shall promptly after receiving notice thereof
notify the Corporation of the nature of such claim  and the Corporation shall be
entitled (but not required) to assume conduct of the defence thereof and retain
counsel on behalf of the Indemnified Party who is satisfactory to the
Indemnified Party, acting reasonably, to represent the Indemnified Party in such
Proceeding and the Corporation shall pay the fees and disbursements of such
counsel and all other expenses of the Indemnified Party relating to such
Proceeding as incurred.  Failure to so notify the Corporation shall not relieve
the Corporation from liability except and only to the extent that the failure
materially prejudices the Corporation.  If the Corporation assumes conduct of
the defence for an Indemnified Party, the Indemnified Party shall fully
cooperate in the defence including without limitation the provision of
documents, appropriate officers and employees to give witness statements, attend
examinations for discovery, make affidavits, meet with counsel, testify and
divulge all information reasonably required to defend or prosecute the
Proceedings.
 
In any such Proceeding the Indemnified Party shall have the right to employ
separate counsel and to participate in the defence thereof if:
 
 
(a)
the Indemnified Party has been advised in writing by counsel that there may be a
reasonable legal defense available to the Indemnified Party that is different
from or in addition to those available to the Corporation or that a conflict of
interest exists or reasonably may exist which makes representation by counsel
chosen by

 

 
 

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- 33 -

 
the Corporation not advisable (in which case the Corporation shall not have the
right to assume the defense of such proceedings on behalf of the Indemnified
Person);

 
 
(b)
the Indemnitor shall not have undertaken the defense of such proceedings, or
indicated its intent to do so, and employed counsel within ten days after notice
of commencement of such proceedings; or

 
 
(c)
the employment of such counsel has been authorized by the Corporation in
connection with the defense of such proceeding;

 
in which event the fees and disbursements of such counsel (on a solicitor and
his client basis) shall be paid by the Corporation.  It being understood,
however, that the Corporation shall not, in connection with any one such action
or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate law firm
(in addition to any local counsel) in each jurisdiction for all such Indemnified
Parties.
 
18.
Admission of Liability

 
No admission of liability and no settlement of any Proceeding shall be made by
the Corporation without the prior written consent of the Indemnified Parties
affected, such consent not to be unreasonably withheld.  No admission of
liability and no settlement of any Proceeding shall be made by an Indemnified
Party without the prior written consent of the Corporation and the other
Indemnified Parties affected, such consent not to be unreasonably withheld.
 
19.
Right of Contribution

 
In order to provide for just and equitable contribution in circumstances in
which the indemnification provided for in this Agreement is due in accordance
with its terms but is (in whole or in part), for any reason, held by a court to
be unavailable from the Corporation on grounds of policy or otherwise, each of
the Corporation and the party or parties seeking indemnification shall
contribute to the aggregate Liabilities (or Proceedings in respect thereof) to
which they may be subject or which they may suffer or incur:
 
 
(a)
in such proportion as is appropriate to reflect the relative benefit received by
the Corporation on the one hand and by the Agent on the other hand from the
offering of the Offered Securities; or

 
 
(b)
if the allocation provided by Subsection 19(a) is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in Subsection 19(a) but also to reflect the relative fault
of the party or parties seeking indemnity, on the one hand, and the parties from
whom indemnity is sought, on the other hand, in connection with the statement,
omission, misrepresentation or alleged misrepresentation, order, inquiry,
investigation or other matter or thing which resulted in such Liabilities, as
well as any other relevant equitable considerations.

 

 
 

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- 34 -

The relative benefits received by the Corporation, on the one hand, and the
Agent, on the other hand, shall be deemed to be in the same proportion that the
total proceeds of the Offering received by the Corporation (net of fees but
before deducting expenses) bear to the fees received by the Agent.
 
The amount paid or payable by the Indemnitor as a result of any Proceedings or
Liabilities shall, without limitation, include any legal or other expenses
reasonably incurred by the Indemnified Person in connection with investigating
or defending such Liabilities (or Proceedings in respect thereof), whether or
not resulting in any action, suit, proceeding or claim.
 
The Corporation agrees that it would not be just and equitable if contributions
pursuant to this Agreement were determined by pro rata allocation or by any
other method of allocation which does not take into account the equitable
considerations referred to in the immediately preceding sections.
 
Any liability of an Agent under this Section 19 shall be limited to the amount
paid to such Agent pursuant to Section 9(a).
 
The rights to indemnity and right of contribution provided in the foregoing
sections shall be in addition to, and without prejudice to and not in derogation
of, any other right to contribution which the Indemnified Parties may have by
statute or otherwise at law or in equity.  Subject to Section 16, the Indemnitor
waives all rights of contribution that it may have against any Indemnified Party
relating to any Liability in respect of which the Indemnitor has agreed to
indemnify the Indemnified Parties hereunder.
 
It is the intention of the Corporation to constitute the Agents as trustee for
the Indemnified Parties for the purposes of Section 15, Section 16, Section 17,
Section 18 and Section 19 and the Agents shall be entitled, as trustee, to
enforce such covenants on behalf of any other Indemnified Parties and the Agents
agree to accept such trust and to hold and enforce such covenants on behalf of
such persons.
 
If any Proceeding is brought in connection with the transactions contemplated by
this Agreement and an Indemnified Party or other representative of the Agents is
required to testify in connection therewith or is required to respond to
procedures designed to discover information relating thereto, the Agents will
have the right to employ their own counsel in connection therewith, and the
reasonable fees and disbursements of such counsel in connection therewith as
well as its reasonable fees at the normal per diem rate for its directors,
officers, employees and agents involved in preparation for and attendance at
such Proceeding or in so responding and any other reasonable costs and
out-of-pocket expenses incurred by them in connection therewith will be paid by
the Corporation as they are incurred.
 
The obligations under the indemnity and right of contribution provided herein
shall apply whether or not the transactions contemplated by this Agreement are
completed and shall survive the completion of the transactions contemplated
under this Agreement and the termination of this Agreement.
 

 
 

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- 35-

 
20.
Entire Agreement

 
It is understood that the terms and conditions of this Agreement supersede any
previous verbal or written agreement between the Agents and the Corporation with
respect to the issuance of securities by the Corporation and including, without
limitation, the agreement constituted by the acceptance of the letter dated
November 14, 2011 from the Agents to the Corporation.
 
21.
Authority to Bind Agents

 
The Corporation shall be entitled to and shall act on any notice, waiver,
extension or communication given by or on behalf of the Agents by the Lead
Agent, which shall represent the Agents and which shall have the authority to
bind the Agents in respect of all matters hereunder, except in respect of any
settlement under Sections 16, 17, 18 or 19 or any matter referred to in Sections
12, 13 or 14.
 
22.
Notices

 
Any notice or other communication to be given hereunder shall, in the case of
notice to be given to the Corporation, be addressed to:
 
Gryphon Gold Corporation
611 N Nevada Street
Carson City, NV
89703
Attention:                      John L. Key
Telecopy No.:               (604) 608-3262
 
with a copy to:
 
Borden Ladner Gravis LLP
40 King Street West
44th Floor
Toronto, Ontario
M5H 3Y4
Attention:                      Philippe Tardif
Telecopy No.:               (416) 367-6749
 
with a copy to:
 
Dorsey & Whitney LLP
1400 Wewatta Street, Suite 400
Denver, Colorado
80202
Attention:                      Kenneth Sam
Telecopy No.:               (303) 629-3450
 

 
 

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- 35 -

and, in the case of notice to be given to the Agents, be addressed to:
 
Acumen Capital Finance Partners Limited.
Suite 700, 404 – 6th Avenue S.W.
Calgary, Alberta
T2P 0R9
Attention:                      Kelly Hughes
Telecopy No.:                (403) 571-0310

and to:

Roth Capital Partners, LLC
24 Corporate Plaza Drive,
Newport Beach, California
92660
Attention:                      John Dalphonsi
Telecopy No.:       (310) 445-5864

with a copy to:
 
Blake, Cassels & Graydon LLP
Suite 3500, Bankers Hall East
855 – 2nd Street S.W.
Calgary, Alberta
T2P 4J8
Attention:                      William Van Horne
Telecopy No.:               (403) 260-9700
 
or to such other address as the party may designate by notice given to the
others. Each communication shall be personally delivered to the addressee or
sent by facsimile transmission to the addressee, and:
 
 
(a)
a communication which is personally delivered shall, if delivered before 4:30
p.m. (local time) on a business day, be deemed to be given and received on that
day and, in any other case be deemed to be given and received on the first
business day following the day on which it is delivered; and

 
 
(b)
a communication which is sent by facsimile transmission shall, if sent on a
business day before 4:30 p.m. (local time), be deemed to be given and received
on that day and, in any other case, be deemed to be given and received on the
first business day following the day on which it is sent.

 
23.
Trust

 
The Corporation hereby constitutes the Agents as trustee for the Purchasers in
respect of the benefit of the representations, warranties and covenants of the
Corporation set forth in this Agreement, and the Agents shall be entitled, as
trustee, in addition to any rights of the
 

 
 

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

 
- 37 -

Purchasers, to enforce such representations, warranties and covenants on behalf
of the Purchasers.
 
24.
Acknowledgement and Consent

 
The Corporation: (i) acknowledges and agrees that the Agents have certain
statutory obligations as a registrant under the Applicable Securities Laws and
have relationships with their clients; and (ii) consents to the Agents acting
hereunder while continuing to act for their clients. To the extent that the
Agents' statutory obligations as a registrant under Applicable Securities Laws
or relationships with their clients conflict with their obligations hereunder,
the Agents shall be entitled to fulfil their statutory obligations as a
registrant under Applicable Securities Laws and their duties to their
clients.  Nothing in this Agreement shall be interpreted to prevent the Agents
from fulfilling their statutory obligations as a registrant under Applicable
Securities Laws or to act for their clients.
 
25.
Severance

 
If one or more of the provisions contained herein shall, for any reason, be held
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement, but this Agreement shall be construed as if such invalid, illegal or
unenforceable provision or provisions had never been contained herein.
 
26.
Governing Law

 
This Agreement shall be governed by and construed in accordance with the laws of
the Province of British Columbia and the laws of Canada applicable therein.
 
27.
Time of the Essence

 
Time shall be of the essence of this Agreement.
 
28.
Counterpart Execution

 
This Agreement may be executed in one or more counterparts each of which so
executed shall constitute an original and all of which together shall constitute
one and the same agreement.
 
29.
U.S. Securities Law Matters

 
Each Agent, severally and not jointly, and the Corporation agree as follows:
 
 
(a)
The Agents acknowledge that none of the Offered Securities or Warrant Shares
have been or will be registered with the SEC under the U.S. Securities Act or
the securities laws of any state of the United States. Each Agent represents and
warrants that the Offered Securities are being offered and sold pursuant to the
exemption from the registration requirements of the U.S. Securities Act provided
by Section 4(2) and Rule 506 of Regulation D thereunder and in accordance with
any applicable state securities laws of the United States.  Each Agent
represents

 

 
 

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- 38 -

 
and warrants that it has not offered and will not offer any of the Offered
Securities except in compliance with this Section 29.

 
 
(b)
Each Agent shall require each Selling Dealer Group member to agree, for the
benefit of the Corporation, to comply with, and shall use its best efforts to
ensure that each Selling Dealer Group member complies with, the applicable
provisions of this Section 29 as if such provisions applied to the Selling
Dealer Group member.

 
 
(c)
Each Agent represents and agrees that neither the Agent, nor its affiliates nor
any person acting on its or their behalf has taken or will take any action that
would constitute a violation of Regulation M under the U.S. Exchange Act in
connection with the offer and sale of the Offered Securities.

 
 
(d)
Each Agent agrees that all offers and solicitations of offers in the United
States shall be made by the U.S. Agent in compliance with all applicable federal
and state laws and regulations governing the registration and conduct of
broker-dealers and that the U.S. Agent was, is and will be, at the time of any
such offer and subsequent sale by the Corporation, duly registered as a
broker-dealer pursuant to Section 15(b) of the U.S. Exchange Act and under the
laws of each applicable state of the United States (unless exempted from the
respective state's broker-dealer registration requirements), and in good
standing with the Financial Industry Regulatory Authority, Inc.

 
 
(e)
The Corporation and the Agents agree that the Offered Securities may be offered
by the Agents and sold directly by the Corporation pursuant to Section 4(2) and
Rule 506 of Regulation D thereunder (and similar exemptions under applicable
state securities laws), and only to persons whom the Agents had a reasonable
basis to believe and do believe to be Accredited Investors and, in each case, on
the Closing Date, continue to believe are Accredited Investors.

 
 
(f)
The Agents agree not to offer or sell, or to solicit any offer to buy, Offered
Securities by any form of General Solicitation or General Advertising or in any
manner involving a public offering within the meaning of Section 4(2) of the
U.S. Securities Act.

 
 
(g)
The Agents agree that offers to sell, solicitations of offers to buy and sales
of the Offered Securities in the United States shall be made only by the U.S.
Agent in accordance with the registration or qualification requirements of
applicable U.S. state securities ("Blue Sky") laws, in accordance with the
applicable U.S. federal and state requirements relating to the registration of
brokers and dealers.

 
 
(h)
The Agents agree that offers to sell, solicitations of offers to buy and sales
of the Offered Securities shall be made only to persons reasonably believed to
be Accredited Investors who, prior to the sale and delivery of the Offered
Securities

 

 
 

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- 39 -

 
to them, execute and deliver a Purchase Agreement in the form agreed upon by the
Corporation and the Agents.

 
 
(i)
The Agents agree to inform each Purchaser that the Offered Securities and
Warrant Shares have not been and will not be registered under the U.S.
Securities Act or the securities laws of any state in the United States and that
the Offered Securities are being offered and sold in reliance upon exemptions
from the registration requirement of Section 5 of the U.S. Securities Act
provided by Section 4(2) of the U.S. Securities Act and Rule 506 of Regulation D
thereunder and in accordance with applicable state securities laws.

 
 
(j)
The Corporation represents and agrees that none of it, its affiliates, or any
person acting on behalf of it or its affiliates (other than the Agents and any
person acting on any of their behalf as to which the Corporation makes no
representation or agreement):

 
 
(i)
has taken or will take any action that would (A) cause the exemptions from
registration afforded by Section 4(2) and Rule 506 of Regulation D thereunder to
be unavailable for offers and sales of the Offered Securities pursuant to this
Agreement; or (B) constitute a violation of Regulation M under the U.S. Exchange
Act in connection with the offer and sale of the Offered Securities; and

 
 
(ii)
has engaged or will engage in any General Solicitation or General Advertising or
has acted or will act in any manner involving a public offering under the
meaning of Section 4(2) of the U.S. Securities Act.

 
 
(k)
Within the six-month period prior to the commencement of the Offering through
the six-month period following the Closing Date, the Corporation has not offered
or sold, and will not offer or sell, as applicable, any Offered Securities or
other securities of the Corporation in a manner that would be integrated with
the offer and sale of Offered Securities and would cause the exemption from
registration set forth in Section 4(2) and Rule 506 of Regulation D thereunder
to become unavailable with respect to any offers and sales of Offered Securities
pursuant to this Agreement.

 
 
(l)
None of the Corporation or any of its predecessors or affiliates has had the
registration of a class of securities under the U.S. Exchange Act revoked by the
SEC pursuant to Section 12(j) of the U.S. Exchange Act and any rules or
regulations promulgated thereunder.

 
 
(m)
None of the Corporation or any of its predecessors or affiliates has been
subject to any order, judgment or decree of any court of competent jurisdiction
temporarily, preliminarily or permanently enjoining such person for failure to
comply with Rule 503 of Regulation D.

 

 
 

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- 40 -

 
(n)
The Corporation shall duly prepare and file with the SEC a Form D within 15 days
after the first sale of Offered Securities, and will also file, within the
prescribed time periods, such notices and any other documents as are required to
be filed under the state securities or "blue sky" laws of the states in which
the Offered Securities are sold to satisfy the requirements of applicable
exemptions from registration or qualification of the Offered Securities under
such laws.

 
 
(o)
The Lead Agent has not entered, and will not enter, into any contractual
arrangements with respect to the distribution of the Offered Securities in the
United States other than with the U.S. Agent, or with the prior consent of the
Corporation.

 
 
(p)
The Agents will deliver to all offerees and Purchasers of the Offered Securities
the same information relating to the Corporation (which information may include
the Transaction Documents and the Documents) and the Agents agree that they have
not and will not use any written material other than such documents in
connection therewith.

 
 
(q)
At least one business day prior to the Closing Date, the Agents shall provide
the Corporation with a list of all purchasers of Offered Securities in the
United States and all purchasers who were offered Offered Securities in the
United States.

 
 
(r)
Each Agent acknowledges that until 40 days after the commencement of the
Offering, an offer or sale of the Offered Securities within the United States by
any dealer (whether or not participating in the Offering) may violate the
registration requirements of the U.S. Securities Act if such offer or sale is
made otherwise than in accordance with an exemption from the registration
requirements of the U.S. Securities Act.

 
 
(s)
Notwithstanding the foregoing provisions of this section, an Agent will not be
liable to the Corporation under this section with respect to a violation by
another Agent of the provisions of this section if the former Agent is not
itself also in violation.

 

 

 
 

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- 41 -

If the foregoing is in accordance with your understanding and is agreed to by
you, please confirm your acceptance by signing the enclosed copies of this
letter at the place indicated and by returning the same to Kelly Hughes at
Acumen Capital Finance Partners Limited.
 
 

 
ACUMEN CAPITAL FINANCE PARTNERS LIMITED
      Per:                        Name:  Kelly Hughes   Title:   
Vice-President, Investment Banking          
ROTH CAPITAL PARNTERS, LLC
      Per:                       
Name:  John Dalfonsi
Title:    Managing Director, Investment Banking
   

 
 
ACCEPTED AND AGREED to effective as of the 14th day of November, 2011.
 

 
GRYPHON GOLD CORPORATION
      Per:                        Name:  John L. Key   Title:    Chief Executive
Officer    

 
 

 
 

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SCHEDULE A

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

1.
Based on the provisions of the Tax Act and the Regulations thereunder in force
as of the date hereof and the Proposed Amendments, provided the common shares in
the capital of the Company are listed on a designated stock exchange (which
currently includes the Toronto Stock Exchange), in respect of trusts governed by
registered retirement savings plans, registered retirement income funds,
deferred profit sharing plans, registered education savings plans, registered
disability savings plans and tax free savings accounts (collectively the
“Registered Plans”):

 
 
 
(a)
the Debentures are qualified investments under the Tax Act and the Regulations
thereunder, other than for a deferred profit sharing plan under which the
Company or a person or partnership with which the Company does not deal at arm’s
length is an employer; and

 
 
(b)
the Warrants are qualified investments under the Tax Act and the Regulations
thereunder, provided that the Company deals at arm’s length with each person who
is an annuitant, a beneficiary, an employer or a subscriber under, or a holder
of, the Registered Plan.

 
2.
The offering, sale and issuance of the Securities through the Agents are exempt
from the prospectus requirements of the Securities Laws, and the only filings,
proceedings, approvals, permits, consents or authorizations required to be made,
taken or obtained under the Securities Laws are the filings with the applicable
provincial securities regulatory authority within the prescribed time periods,
of:

 
(a)           a report in Form 45-106F1, as prescribed by NI 45-106; and
 
(b)           a report in Form 45-106F6, as prescribed by NI 45-106,
 
prepared and executed in accordance with applicable Securities Laws, together
with the requisite filing fees, assuming distribution by registrants who comply
with the relevant provisions of such applicable Securities Laws.
 
3.
The issuance and delivery of the Warrant Shares upon the exercise of the
Warrants in accordance with the terms of the Warrant Certificate, are exempt
from the prospectus requirements of the Securities Laws and no prospectus is
required, nor are any other documents required to be filed, no proceeding is
required to be taken and no approval, permit, consent, order or authorization of
any regulatory authority is required to be obtained under the Securities Laws to
permit such exercises and issuances.

 
4.
The first trade of the Securities and Warrant Shares will be a distribution
subject to the prospectus requirements of the Securities Laws unless:

 

 
 

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

 

 
 
(i)
at the time of the trade, the Company is and has been a “reporting issuer”, as
defined in the Securities Laws, in a province or territory of Canada for the
four months immediately preceding the trade;

 
 
(ii)
at the time of the trade, at least four months have elapsed from the
“distribution date” (as such term is defined in National Instrument 45-102 -
Resale of Securities (“NI 45-102”));

 
 
(iii)
the certificates representing the Debentures, Warrants (and the Warrant Shares,
if issued within four months of the Closing Date) that are the subject of the
trade carry a legend in the form as set out in Section 2.5(2)3(i) of NI 45-102,
or if the certificate(s) representing the Debentures and Warrants (and the
Warrant Shares, if issued within four months of the Closing Date) is entered
into a direct registration or other electronic book-entry system or if the
Purchaser did not directly receive a certificate representing such securities,
the Purchaser received written notice containing the legend restriction notation
set out in Section 2.5(2)3(i) of NI 45-102;

 
 
(iv)
the trade is not a “control distribution” as defined in NI 45-102;

 
 
(v)
no unusual effort is made to prepare the market or create a demand for the
Securities that are the subject of the trade;

 
 
(vi)
no extraordinary commission or consideration is paid to a person or company in
respect of the trade; and

 
 
(vii)
if the Purchaser is an insider or officer of the Company at the time of the
trade, the Purchaser has no reasonable grounds to believe that the Company is in
default of securities legislation (as defined in National Instrument 14-101).

 
5.
The Company is:

 
 
(a)
a “reporting issuer” under the Securities Act (Alberta) and is not in default of
filing requirements concerning continuous disclosure obligations required by
that Act or the rules made under that Act;

 
 
(b)
a “reporting issuer” under the Securities Act (British Columbia) and is not in
default of filing requirements concerning continuous disclosure obligations
required by that Act or the rules made under that Act;

 
 
(c)
a “reporting issuer” under The Securities Act, 1988 (Saskatchewan) and is not
noted in default on the list of reporting issuers maintained by the SFSC
pursuant to Section 80.21 of that Act; and

 
 
(d)
a “reporting issuer” under the Securities Act (Ontario) and is not in default of
filing requirements concerning continuous disclosure obligations required by
that Act or the rules made under that Act.

 

 
 

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

 

6.
The Toronto Stock Exchange has confirmed that it has pre-cleared the form of the
Warrant Certificates.

 
7.
The Agency Agreement constitutes a valid and legally binding obligation of the
Company enforceable against the Company in accordance with its terms.

 
8.
The execution and delivery of the Agency Agreement and the fulfillment of the
terms thereof by the Company and the performance of and compliance with the
terms of the Agency Agreement by the Company does not and will not result in a
breach of, or constitute a default under, and does not and will not create a
state of facts which, after notice or lapse of time or both, will result in a
breach of or constitute a default under any applicable laws of the Province of
British Columbia or the federal laws of Canada applicable therein.

 

 
 

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

 

SCHEDULE B

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

 

1.
The Notes are in the form of the Note Certificate and the Warrants are in the
form of the Warrant Certificate and are consistent with the form of Note and
form of Warrant, respectively, approved in the Board Resolutions and described
in the Transaction Documents.

 
2.
The Note Certificates have been duly executed and issued by the Company and,
assuming they have been duly certified and authenticated by the Trustee and
validly issued, constitute valid and legally binding obligations of the Company,
enforceable against it in accordance with their terms.  All conditions precedent
provided for in the Trust Indenture relating to the authorization, execution,
issuance, certification and delivery of the Notes and all legal requirements in
connection with the issuance of the Notes have been complied with or satisfied
by the Company.

 
3.
Each of the Agency Agreement and Transaction Documents has been duly executed
and delivered by the Company, and each of the Transaction Documents constitutes
a legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.

 
4.
The execution and delivery of the Transaction Documents and the fulfillment of
the terms thereof by the Company and the performance of and compliance with the
terms of the Transaction Documents by the Company do not and will not result in
a breach of, or constitute a default under, and do not and will not create a
state of facts which, after notice or lapse of time or both, will result in a
breach of or constitute a default under, (i) any statute of the United States or
the State of New York or any rule or regulation of any governmental authority or
regulatory body of the United States or the State of New York, (ii) to our
knowledge, any resolutions of the directors (or any committee thereof) or
shareholders of the Company or the Subsidiary, (iii) to our knowledge, any
mortgage, note, indenture, contract, agreement (written or oral), instrument,
lease or other document to which the Company or Subsidiary is a party or by
which it is bound, or (iv) to our knowledge, any judgment, decree or order of
any court, governmental agency or body or regulatory authority of the State of
New York, which breach or default might reasonably be expected to materially
adversely affect the business, operations, capital or condition (financial or
otherwise) of the Company and its Subsidiary (taken as a whole).

 
5.
The rights, privileges, restrictions and conditions attached to the Offered
Securities conform in all material respects with the description thereof
contained in the Agency Agreement and the Purchase Agreement.

 
6.
The Pledge and Security Agreement creates a valid security interest in the
Collateral to the extent of the respective rights of the Company in such
Collateral. Under Article 9 of the UCC-New York and Article 9 of the UCC-Nevada,
the State of Nevada is the proper jurisdiction in which to file a financing
statement to perfect the Trustee’s security interest in the Collateral.

 

 
 

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

 

7.
The Financing Statement is sufficient in form for filing with the Nevada
Secretary of State and, upon such filing, will perfect the Trustee’s security
interest in the Collateral to the extent a security interest in the Collateral
may be perfected under the UCC-Nevada by filing financing statements with the
Nevada Secretary of State.

 
8.
Pursuant to Sections 9-301(b) and 9-305(a)(1) of the UCC-New York, the local law
of the jurisdiction where certificated securities are actually located governs
perfection of a possessory security interest in such securities.  Assuming the
Trustee takes delivery and retains possession (as those terms are used in
Section 8-301 and Section 9-313 of the UCC-New York) of the Borealis
Certificates representing the securities pledged to the Trustee pursuant to the
Security and Pledge Agreement (the “Pledged Securities”) and further assuming
the Pledged Securities are each duly indorsed to the Trustee or in blank by an
effective indorsement or are accompanied by undated stock powers with respect
thereto duly indorsed to the Trustee or in blank by an effective indorsement,
the Trustee’s security interest in the Pledged Securities will be perfected by
“control” (within the meaning of the UCC-New York).

 
9.
No consent, approval, authorization of, or registration or filing with, any
State of New York or federal governmental authority is required to be obtained
or made by the Company to make valid and legally binding the execution, delivery
and performance by the Company of its agreements under the Transaction Documents
to which the Company is a party, except such as have been obtained or made,
which includes the filing of the Financing Statements filed in connection with
the Security and Pledge Agreement.

 
10.
The issuance and sale of the Offered Securities in the Offering by the Company
and the offer of such Offered Securities by the Agents in the manner
contemplated by the Agency Agreement and the Transaction Documents does not
require registration under the U.S. Securities Act and, assuming the exercise of
the Warrants in the manner contemplated by the terms of the Warrants by the
original purchasers thereof from the Company at a time when such original
purchasers remain “accredited investors” as defined in Rule 501(a) of Regulation
D under the U.S. Securities Act, the issuance and sale of the Warrant Shares to
such original purchasers does not require registration under the U.S. Securities
Act.

 

 
 

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

 

SCHEDULE C

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

1.
The Corporation has been duly organized and is validly existing as a corporation
in good standing under the laws of the State of Nevada.

2.
Borealis Mining Company, a Nevada corporation, has been duly organized and is
validly existing as a corporation in good standing under the laws of the State
of Nevada.

3.
The Corporation has all requisite corporate power and capacity to conduct its
business as it is now carried on and to enter into and to perform its
obligations under the Agency Agreement, the Purchase Agreements and the
certificates representing the Warrants, and to create and issue the Offered
Securities and the Warrant Shares.  No approval by the security holders of the
Corporation is required pursuant to the Articles of Incorporation of the
Corporation in connection with the issuance and sale of the Offered Securities
and the Warrant Shares or with the consummation by the Corporation of the
transactions contemplated by the Transaction Documents.

4.
The Debentures, once duly executed and issued by the Corporation and certified
by the Trustee under the Indenture, will be validly issued.

5.
Each of the Transaction Documents has been duly authorized by the Corporation.

6.
The execution and delivery of the Transaction Documents, the fulfillment of the
terms thereof and the performance and compliance with the terms of them by the
Corporation, do not and will not result in a breach of, or constitute a default
under, and do not and will not create a state of facts which, after notice or
lapse of time or both, will result in a breach of or constitute a default under,
the Articles of Incorporation of the Corporation.

7.
The authorized capital of the Corporation consists of 250,000,000 Common Shares
and 15,000,000 of Preferred Stock.  Based solely on the Officer's Certificate
attached hereto, _________ Common Shares and no shares of Preferred Stock are
issued and outstanding.

8.
The Common Shares to be issued upon exercise of the Warrants are free of
preemptive rights, resale rights, rights of first refusal and restrictions upon
voting and transfer, in each event created by Nevada corporate statutes.

9.
The Warrants have been duly created and validly authorized.  The Warrant Shares
have been duly and validly created, reserved, allotted and authorized to be
issued as fully paid and nonassessable upon receipt by the Corporation of full
payment therefor.

 
 

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SCHEDULE D

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

MATERIAL CONTRACTS

 
1.
Assignment of Borealis Mining Lease, dated January 10, 2005, between Golden
Phoenix Mineral Company and Borealis Mining Company

 
 
2.
Agreement and Consent to Assignment of Borealis Mining Lease, entered into as of
January 26, 2005, between Richard J. Cavell, Hardrock Mining Company, John W.
Whitney, Golden Phoenix Minerals, Inc., Borealis Mining Company and Gryphon Gold
Corporation

 
 
3.
Escrow Agreement, dated January 10, 2005, between Borealis Mining Company,
Gryphon Gold Company and Lawyers Title Agency of Arizona

 
 
4.
Purchase Agreement dated January 10, 2005, as amended, Seller: Golden Phoenix
Minerals, Inc., Buyer: Borealis Mining Company and Guarantor: Gryphon Gold
Corporation

 
 
5.
Agreement between Golden Phoenix Minerals, Inc. and Borealis Mining Company
(Borealis Property, Mineral County, Nevada), dated July 21, 2003

 
 
6.
Membership Interest Purchase Agreement for Nevada Eagle Resources LLC Properties

 
 
7.
Employment Agreement between the Registrant and John L. Key, dated July 21, 2008

 
 
8.
Financial Services Agreement between the Registrant and Tony Ker, dated
September 1, 2008

 
 
9.
Transition Agreement between the Registrant and Tony Ker, dated July 21, 2008

 
 
10.
Option to Restructure Debt Agreement between the Registrant and Nevada Eagle
Resources, dated August 5, 2008

 
 
11.
Financial and Advisory Services Agreement between the Registrant and Matter &
Associates, dated October 1, 2008

 
 
12.
Option to Amend the Mining Lease on the Borealis Property, dated effective
August 22, 2008

 
 
13.
Termination of Financial Services Agreement between the Registrant and Tony Ker,
dated effective September 28, 2008

 
 
14.
Consulting Agreement between the Registrant and Steven Craig, dated November 1,
2008

 
 
15.
Consulting Agreement between the Registrant and Michael Longinotti, dated
November 12, 2008

 
 
16.
Interim Consulting Agreement between the Registrant and Mr. R. William Wilson,
dated January 6, 2010

 
 
17.
Amendment No. 1 to the Option Agreement between the Registrant, Gerald W. and
Fabiola Baughman, and Nevada Eagle Resources LLC, dated February 5, 2010

 
 

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

 

 
 
18.
Option Consideration Agreement between the Registrant and Gerald W. and Fabiola
Baughman, dated February 5, 2010

 
 
19.
Amendment No. 2 to the Option Agreement between the Registrant, Gerald W. and
Fabiola Baughman, and Nevada Eagle Resources LLC, dated February 12, 2010

 
 
20.
Binding Letter of Intent (between the Registrant and Sage Gold Inc., dated
February 23, 2010

 
 
21.
Option Agreement between the Registrant, Borealis Mining Company, and Sage Gold
Inc. dated March 5, 2010

 
 
22.
Amendment No. 1 to Option Agreement and Amendment No. 1 to Subscription
Agreement between the Registrant, Borealis Mining Company, and Sage Gold Inc.
dated March 26, 2010

 
 
23.
Amendment No. 1 to Option to Amend Mining Lease dated August 7, 2009

 
 
24.
Amendment No. 2 to Option to Amend Mining Lease dated February 12, 2010

 
 
25.
Amendment No. 3 to Option to Amend Mining Lease dated August 17, 2010

 
 
26.
Amendment No. 4 to Option to Amend Mining Lease dated February 22, 2010

 
 
27.
Amendment No. 2 to Option Agreement between the Registrant, Borealis Mining
Company and Sage Gold, dated April 19, 2010

 
 
28.
Membership Interest Purchase Agreement between the Registrant and Fronteer
Development (USA) Inc. dated April 23, 2010

 
 
29.
Amendment No. 3 to Option Agreement and Amendment No. 2 to Subscription
Agreement between the Registrant, Borealis Mining Company and Sage Gold, dated
April 19, 2010

 
 
30.
Amendment No. 4 to Option Agreement between the Registrant, Borealis Mining
Company and Sage Gold, dated June 15, 2010

 
 
31.
Amendment to Mining Lease dated effective May 20, 2011

 

 
 

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