Exhibit 10.1

 

EXECUTION VERSION

 

SECOND AMENDED AND RESTATED TERM LOAN AGREEMENT

 

dated as of

 

November 21, 2016

 

among

 

GOLDEN QUEEN MINING CO. LTD., as Borrower,

 

and

 

THE LANDON T. CLAY 2009 IRREVOCABLE TRUST DATED MARCH 6, 2009

EHT, LLC,

 

and

 

THE CLAY FAMILY 2009 IRREVOCABLE TRUST DATED APRIL 14, 2009,

as Lenders

 

  

  

 

SECTION I       DEFINITIONS 1 1.1 Definitions 1 1.2 Rules of Interpretation 10
SECTION II         DESCRIPTION OF LOAN 11 2.1 The Loan 11 2.2 Interest Rates and
Payments of Interest 11 2.3 Closing Fee 12 2.4 Repayment of Loan 12 2.5
Prepayments 12 2.6 Method of Payments 13 2.7 Computation of Interest and Fees 13
2.8 Taxes 13 SECTION III       CONDITIONS OF LENDING 14 3.1 Closing Deliverables
14 3.2 Indebtedness 15 3.3 Litigation; Investigations 15 3.4 Accuracy of
Representations and Warranties 15 3.5 No Default 15 3.6 No Change in Law 16 3.7
Payments 16 3.8 Existing Notes 16 SECTION IV         REPRESENTATIONS AND
 WARRANTIES 16 4.1 Existence, Qualification and Power 16 4.2 Authorization; No
Contravention 16 4.3 Governmental Authorization; Other Consents; Corrupt
Practices 17 4.4 Binding Effect 17 4.5 Financial Statements 17 4.6 Litigation 18
4.7 No Default 18 4.8 Ownership of Property; Encumbrances 18 4.9 Environmental
Compliance 18 4.10 Insurance 18

 

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4.11 Taxes 18 4.12 Subsidiaries; Equity Interests 19 4.14 Compliance with Laws
19 4.15 Solvency 19 4.16 Compliance with OFAC Rules and Regulations 19 4.17
Foreign Assets Control Regulations, Etc. 19 SECTION V         AFFIRMATIVE
COVENANTS 20 5.1 Financial Statements 20 5.2 Conduct of Business 21 5.3 Taxes 21
5.4 Inspection Rights 21 5.5 Maintenance of Books and Records 21 5.6 Use of
Proceeds 22 5.7 Further Assurances 22 5.8 Notification Requirements 22 5.9
Environmental Compliance 22 5.10 Subsidiary Guaranties 23 SECTION VI        
NEGATIVE COVENANTS 23 6.1 Indebtedness 23 6.2 Contingent Liabilities 24 6.3
Encumbrances 24 6.4 Merger; Dispositions; Liquidation 24 6.5 Restricted Payments
24 6.6 Investments; Purchases of Assets 25 6.7 Transactions with Affiliates 25
6.8 Fiscal Year 25 SECTION VII         25 DEFAULTS   7.1 Events of Default 25
7.2 Remedies upon Event of Default 27 SECTION VIII         GENERAL 28 8.1
Notices 28 8.2 Successors and Assigns 30

 

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8.3 Expenses 30 8.4 Indemnification 30 8.5 Survival of Covenants, Etc. 31 8.6 No
Waivers 31 8.7 Amendments, Waivers, etc. 31 8.8 Lost Note, Etc 31 8.9 Captions;
Counterparts 32 8.10 Entire Agreement, Etc. 32 8.11 Waiver of Jury Trial 32 8.12
Governing Law 32 8.13 Jurisdiction; Consent to Service of Process 33 8.14
Judgment Currency 33 8.15 Severability 34 8.16 Effect of Amendment and
Restatement 34

 

EXHIBITS

 

Form of

 

A-1 Second Amended and Restated LTC Note A-2 Second Amended and Restated EHT
Note A-3 Amended and Restated CFT Note B Warrants

 

SCHEDULES

 

2.1(a) Allocations 4.2 No Conflict 4.3 Governmental Authorizations 4.6
Litigation 4.7 No Default 4.12 Subsidiaries; Loan Parties 6.1(e) Existing
Indebtedness

 

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second AMENDED AND RESTATED TERM LOAN AGREEMENT

 

THIS SECOND AMENDED AND RESTATED TERM LOAN AGREEMENT is made as of November 21,
2016, among GOLDEN QUEEN MINING CO. LTD., a British Columbia corporation, (the
“Borrower”), THE LANDON T. CLAY 2009 IRREVOCABLE TRUST DATED MARCH 6, 2009 (“LTC
Lender”), EHT, LLC (“EHT Lender”), and THE CLAY FAMILY 2009 IRREVOCABLE TRUST
DATED APRIL 14, 2009 (“CFT Lender” and, together with LTC Lender and EHT Lender,
the “Lenders”).

 

WHEREAS, the Borrower, LTC Lender and EHT Lender (as assignee in interest of
Harris Clay) are parties to that certain Amended and Restated Term Loan
Agreement, dated June 8, 2015, as amended (the “Existing Agreement”).

 

WHEREAS, the parties to the Existing Agreement wish to amend and restate the
Existing Agreement as set forth herein.

 

WHEREAS, on the Closing Date (defined below) the Borrower will make a prepayment
of the Loan under (and as defined in) the Existing Agreement to reduce the
outstanding principal balance thereof to $31,000,000 and the Lenders will waive
the “prepayment fee” under the Existing Agreement with respect to such payment.

 

NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree that the Existing Agreement is hereby amended and restated
in its entirety as follows:

 

SECTION I

 

DEFINITIONS

1.1           Definitions.

 

All capitalized terms used in this Agreement or in the Notes or in any
certificate, report or other document made or delivered pursuant to this
Agreement (unless otherwise defined therein) shall have the meanings assigned to
them below:

 

Affiliate. With reference to any Person, (i) any director or officer of that
Person, or (ii) another Person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control with the
Person specified. For the purposes hereof, no Lender shall be deemed to be an
Affiliate of the Borrower.

 

Agreement. This Second Amended and Restated Term Loan Agreement, including the
Exhibits and Schedules hereto, as the same may be amended, restated,
supplemented or otherwise modified from time to time.

 

Attributable Indebtedness. On any date, in respect of any Capitalized Lease of
any Person, the capitalized amount thereof that would appear on a balance sheet
of such Person prepared as of such date in accordance with GAAP.

 

  

  

 

BC Subco. Golden Queen Mining Canada Ltd., a British Columbia corporation.

 

Borrower. See the Preamble.

 

Borrower’s Accountants. PricewaterhouseCoopers LLP, Chartered Accountants, or
such other independent certified public accountants as are selected by the
Borrower and reasonably acceptable to the Lenders.

 

Business Day. Any day other than a Saturday, Sunday or legal holiday on which
banks in New York City, New York are open for the conduct of a substantial part
of their commercial banking business.

 

Capital Expenditures. With respect to any Person for any period, any expenditure
in respect of the purchase or other acquisition of any fixed or capital asset
(excluding normal replacements and maintenance which are properly charged to
current operations).

 

Capitalized Leases. All leases that have been or should be, in accordance with
GAAP recorded as capitalized leases.

 

Cash Equivalents. (a) Securities issued or unconditionally guaranteed by the
Federal Government of Canada or the United States of America, or by any agency
or autonomous government entity of the same countries, provided that such
securities have maturities of not more than one year from the date acquired; (b)
certificates of deposit with maturities of not more than one year from the date
acquired issued by a United States Federal or state chartered commercial bank of
recognized standing, or a commercial bank organized under the laws of any other
country which is a member of the Organisation for Economic Cooperation and
Development, or a political subdivision of any such country, acting through a
branch or agency, which bank has capital and unimpaired surplus in excess of
$500,000,000 and which bank or its holding company has a short term commercial
paper rating of at least A-2 or the equivalent by S&P or at least P-2 or the
equivalent by Moody’s; (c) reverse repurchase agreements with terms of not more
than seven days from the date acquired, for securities of the type described in
clause (a) above and entered into only with commercial banks having the
qualifications described in clause (b) above; (d) commercial paper issued by any
Person incorporated under the laws of the United States of America or any State
thereof and rated at least A-2 or the equivalent thereof by S&P or at least P-2
or the equivalent thereof by Moody’s, in each case with maturities of not more
than one year from the date acquired; (e) commercial paper issued by any Person
that is incorporated or organized under the laws of Canada or any Province
thereof, which is rated at least A-2 by S&P or at least P-2 by Moody’s, or any
Canadian affiliate of the same rating agencies, in each case with maturities of
not more than one year from the date acquired; and (f) investments in money
market funds registered under the Investment Company Act of 1940, as amended,
which have net assets of at least $500,000,000, and at least 85% of whose assets
consist of securities and other obligations of the type described in clauses (a)
through (e) above.

 

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CFT Lender. See the Preamble.

 

Change of Control. (a) The acquisition of ownership or voting control, directly
or indirectly, beneficially (within the meaning of Rules 13d-3 and 13d-5 of the
Securities Exchange Act of 1934, as then in effect) directly or indirectly, on
or after the Closing Date, by any Person or group (within the meaning of
Sections 13d and 14d of the Securities Exchange Act of 1934, as then in effect)
other than a Lender, an Affiliate of a Lender, or any Clay Family Member, of
Equity Interests representing more than 35% percent of the aggregate ordinary
voting power represented by the issued and outstanding Equity Interests of the
Borrower; or (b) the occupation of a majority of the seats (other than vacant
seats) on the board of directors of the Borrower by Persons who were not
(i) directors of the Borrower on the Closing Date, (ii) appointed or nominated
by the board of directors or other governing body of the Borrower (which
constituted the board of directors or such other governing body on the Closing
Date), or (iii) appointed or nominated by directors so nominated.

 

Clay Family. (i) Landon Clay, (ii) any lineal descendant (including adoptive
relationships) of Landon Clay or Harris Clay, (iii) any trust primarily for the
benefit of, or the estate of, one or more of the Persons described in the
foregoing clauses (i) and (ii), and (iv) any partnership, corporation, joint
venture, limited liability company, limited liability partnership, business
trust, cooperative, association or other entity the entire beneficial ownership
of which is held by one or more of the Persons described in the foregoing
clauses (i), (ii) and (iii).

 

Clay Family Member. Any Person in the Clay Family.

 

Closing Date. The first date on which the conditions set forth in Section 3.1
have been satisfied.

 

Closing Fee. See Section 2.3.

 

Code. The Internal Revenue Code of 1986 and the rules and regulations
thereunder, collectively, as the same may from time to time be supplemented or
amended and remain in effect.

 

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

 

Corrupt Practices Laws. (i) The Foreign Corrupt Practices Act of 1977 (15 U.S.C.
§§ 78dd-1, et seq.), as amended, and (ii) any other law, regulation, order,
decree, or directive having the force of law in any applicable jurisdiction and
relating to bribery, kick-backs, or similar business practices.

 

Default. An Event of Default or event or condition that, but for the requirement
that time elapse or notice be given, or both, would constitute an Event of
Default.

 

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

 

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Dollars or $. United States dollars.

 

EHT Lender. See the Preamble.

 

Encumbrances. See Section 6.3.

 

Environmental Laws. All provisions of law (including the common law), statutes,
ordinances, codes, rules, guidelines, policies, procedures, orders-in-council,
regulations, permits, licenses, judgments, writs, injunctions, decrees, orders,
awards and standards promulgated by a Governmental Authority or by any court,
agency, instrumentality, regulatory authority or commission of any of the
foregoing concerning environmental health or safety and protection of, or
regulation of the discharge of substances into, the environment.

 

Equity Interests. With respect to any Person, all of the shares of capital stock
of (or other ownership or profit interests in) such Person, all of the warrants,
options or other rights for the purchase or acquisition from such Person of
shares of capital stock of (or other ownership or profit interests in) such
Person, all of the securities convertible into or exchangeable for shares of
capital stock of (or other ownership or profit interests in) such Person or
warrants, rights or options for the purchase or acquisition from such Person of
such shares (or such other interests), and all of the other ownership or profit
interests in such Person (including partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares, warrants,
options, rights or other interests are outstanding on any date of determination.

 

Event of Default. Any event described in Section 7.1.

 

Extraordinary Receipt. Any cash received by or paid to or for the account of any
Person not in the ordinary course of business, including tax refunds, pension
plan reversions, proceeds of insurance (other than proceeds of business
interruption insurance to the extent such proceeds constitute compensation for
lost earnings), condemnation and eminent domain awards (and payments in lieu
thereof), indemnity payments and any purchase price adjustments.

 

Fiscal Quarter. Each quarterly accounting period of the Borrower in any Fiscal
Year.

 

Fiscal Year. The accounting year of the Borrower, commencing on January 1 and
ending on December 31 in each calendar year.

 

Fixed Rate. 8% per annum.

 

GAAP. Generally accepted accounting principles in the United States of America
as in effect from time to time, consistently applied.

 

Gauss. Gauss LLC, a Delaware limited liability company.

 

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

 

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GQ California. Golden Queen Mining Company, LLC, a California limited liability
company (formerly known as Golden Queen Mining Co., Inc., a California
corporation).

 

GQ California Consent. That certain Amended and Restated Consent dated June 8,
2015 under the GQ California LLC Agreement, as amended, restated, supplemented
or otherwise modified from time to time.

 

GQ California LLC Agreement. That certain Amended and Restated Limited Liability
Company Agreement of GQ California, dated as of September 15, 2014.

 

Guarantees. As applied to the Borrower, all guarantees, endorsements or other
contingent or surety obligations with respect to obligations of others, whether
or not reflected on the balance sheet of the Borrower, including any obligation
to furnish funds, directly or indirectly (whether by virtue of partnership
arrangements, by agreement to keep-well or otherwise), through the purchase of
goods, supplies or services, or by way of stock purchase, capital contribution,
advance or loan, or to enter into a contract for any of the foregoing, for the
purpose of payment of obligations of any other Person.

 

Holdings. Golden Queen Mining Holdings, Inc., a California corporation.

 

Indebtedness. As to any Person at a particular time, without duplication, all of
the following, whether or not included as indebtedness or liabilities in
accordance with GAAP: (a) all obligations of such Person for borrowed money and
all obligations of such Person evidenced by bonds, debentures, notes, loan
agreements or other similar instruments; (b) the maximum amount of all direct or
contingent obligations of such Person arising under letters of credit (including
standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and
similar instruments; (c) net obligations of such Person under any swap
agreement; (d) all obligations of such Person to pay the deferred purchase price
of property or services (other than trade accounts payable in the ordinary
course of business and not past due for more than 60 days after the date on
which such trade account was created); (e) indebtedness (excluding prepaid
interest thereon) secured by an Encumbrance on property owned or being purchased
by such Person (including indebtedness arising under conditional sales or other
title retention agreements), whether or not such indebtedness shall have been
assumed by such Person or is limited in recourse; (f) all Attributable
Indebtedness in respect of Capitalized Leases; (g) all obligations of such
Person to purchase, redeem, retire, defease or otherwise make any payment in
respect of any Equity Interest in such Person or any other Person or any
warrant, right or option to acquire such Equity Interest, valued, in the case of
a redeemable preferred interest, at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends; and (h) all Guarantees
of such Person in respect of any of the foregoing. For all purposes hereof, the
Indebtedness of any Person shall include the Indebtedness of any partnership or
joint venture (other than a joint venture that is itself a corporation or
limited liability company) in which such Person is a general partner or a joint
venturer, unless such Indebtedness is expressly made non-recourse to such
Person.

 

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Investment. As applied to the Borrower, the purchase or acquisition of any
Equity Interests of any other Person, any loan, advance or extension of credit
(excluding accounts receivable arising in the ordinary course of business) to,
or contribution to the capital of, any other Person, any real estate held for
sale or investment, any securities or commodities futures contracts held, any
other investment in any other Person, and the making of any commitment or
acquisition of any option to make an Investment.

 

LTC Lender. See the Preamble.

 

Lenders. LTC Lender, EHT Lender, CFT Lender and each other Person that may after
the date hereof become an assignee of LTC Lender’s, EHT Lender’s or CFT Lender’s
rights and obligations hereunder in accordance with the terms hereof and,
thereby a party to this Agreement as a Lender hereunder, but from and after the
effective date that any Person shall have assigned the entirety of its rights
and obligations hereunder pursuant to Section 8.2(b), “Lenders” shall no longer
include such Person.

 

Loan Documents. This Agreement, the Notes, the Subsidiary Guaranty and the
Pledge Agreement, together with any agreements, instruments or documents
executed and delivered pursuant to or in connection with any of the foregoing.

 

Loan Parties. Collectively, the Borrower and each Subsidiary Guarantor.

 

Loan. See Section 2.1(a).

 

LUK Holdco. Gauss Holdings LLC, a Delaware limited liability company.

 

Material Adverse Effect. Any of (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, liabilities (actual
or contingent) or condition (financial or otherwise) of the Borrower; (b) a
material impairment of the rights and remedies of the Lenders under any Loan
Document, or of the ability of any Loan Party to perform its material
obligations under any Loan Document to which it is a party; or (c) a material
adverse effect upon the legality, validity, binding effect or enforceability
against any Loan Party of any Loan Document to which it is a party; provided
that the term “Material Adverse Effect” shall not include any change, effect or
circumstance to the extent resulting from (x) changes in general economic,
financial market or geopolitical conditions, or (y) any failure by any Loan
Party to meet any published analyst estimates or expectations of their
respective revenue, earnings or other financial performance or results of
operations for any period, in and of itself, or any failure thereby to meet its
respective internal or published projections, budgets, plans or forecasts of its
revenues, earnings or other financial performance or results of operations, in
and of itself and whether or not the same was delivered to the Lenders pursuant
to the provisions hereof (it being understood that the facts or occurrences
giving rise or contributing to such failure that are not otherwise excluded from
this definition of a “Material Adverse Effect” may be taken into account in
determining whether there has been a Material Adverse Effect); provided further
that, in the case of the immediately preceding clause (x), such changes, effects
or circumstances do not affect the relevant Loan Parties disproportionately
relative to other companies operating in the same industry.

 

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Maturity Date. May 21, 2019.

 

Moody’s. Moody’s Investors Service, Inc. and its successors.

 

Net Cash Proceeds. With respect to:

 

(a)          any Disposition by the Borrower, or any Extraordinary Receipt
received or paid to the account of the Borrower, the excess, if any, of (i) the
sum of cash and Cash Equivalents received in connection with such transaction
(including any cash or Cash Equivalents received by way of deferred payment
pursuant to, or by monetization of, a note receivable or otherwise, but only as
and when so received) over (ii) the sum of (A) the principal amount of any
Indebtedness that is secured by the applicable asset and that is required to be
repaid in connection with such transaction (other than Indebtedness under the
Loan Documents), (B) the reasonable and customary out-of-pocket expenses
incurred by the Borrower and its agents, advisors and representatives (including
fees and expenses of financial advisors, market consultants and legal counsel)
in connection with such transaction and (C) income taxes reasonably estimated to
be actually payable within two years of the date of the relevant transaction as
a result of any gain recognized in connection therewith; provided that, if the
amount of any estimated taxes pursuant to subclause (C) exceeds the amount of
taxes actually required to be paid in cash in respect of such Disposition, the
aggregate amount of such excess shall constitute Net Cash Proceeds; and

 

(b)          the sale or issuance after the date of this Agreement of any Equity
Interest by the Borrower, or the incurrence or issuance of any Indebtedness by
the Borrower other than Indebtedness permitted by Section 6.1, the excess of (i)
the sum of the cash and Cash Equivalents received in connection with such
transaction over (ii) the underwriting discounts and commissions, and other
reasonable and customary out-of-pocket expenses, incurred by the Borrower and
its agents, advisors and representatives (including fees and expenses of
financial advisors, market consultants and legal counsel) in connection
therewith.

 

Note Record. Any internal record, including a computer record, maintained by a
Lender with respect to the Loan.

 

Notes. See Section 2.1(b).

 

Obligations. The following:

 

(a)          the due and punctual payment and satisfaction by the Borrower of
(i) the principal of and interest (including interest accruing during the
pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding) on
the Loan, when and as due, whether at maturity, by acceleration, upon one or
more dates set for prepayment or otherwise and (ii) all other obligations of the
Borrower under this Agreement and under the other Loan Documents, including
obligations to pay fees, expense reimbursement obligations and indemnification
obligations, whether primary, secondary, direct, contingent, fixed or otherwise,
arising under the Loan Documents (including monetary obligations incurred during
the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding), and

 

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(b)          the due and punctual payment and satisfaction of all the
obligations of each other Loan Party under or pursuant to this Agreement and
each of the other Loan Documents.

 

OFAC. The U.S. Department of the Treasury’s Office of Foreign Assets Control.

 

Option Agreement. That certain Amended and Restated Option Agreement among the
Lenders and LUK Holdco dated June 8, 2015, as amended, restated, supplemented or
otherwise modified from time to time;

 

Other Taxes. All present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies arising from any payment
made hereunder or under any other Loan Document or from the execution, delivery
or enforcement of, or otherwise with respect to, this Agreement or any other
Loan Document.

 

Permitted Encumbrances. See Section 6.3.

 

Person. Any individual, corporation, partnership, trust, unincorporated
association, business or other legal entity, and any government or governmental
agency or political subdivision thereof.

 

Pledge Agreement. That certain Amended and Restated Pledge Agreement dated June
8, 2015, by the Borrower, Holdings and BC Subco in favor of the Lenders, as
amended, restated, supplemented or otherwise modified from time to time.

 

Public Official. Any individual who, even transitorily or without payment, holds
a public office or official position in any Governmental Authority, any public
company controlled by a Governmental Authority or any company in which a
Governmental Authority participates in a material respect its affairs, as well
as political parties.

 

Qualified Investments. As applied to the Borrower, investments in (i) notes,
bonds or other obligations of the United States of America or any agency thereof
that as to principal and interest constitute direct obligations of or are
guaranteed by the United States of America and that have maturity dates not more
than one year from the date of acquisition; (ii) notes, bonds or other
obligations of the Federal Government of Canada or any agency thereof that as to
principal and interest constitute direct obligations of or are guaranteed by the
Federal Government of Canada and that have maturity dates not more than one year
from the date of acquisition; (iii) certificates of deposit, demand deposit
accounts or other deposit instruments or accounts maintained in the ordinary
course of business with banks or trust companies organized under the laws of the
United States or any state thereof that have capital and surplus of at least
$500,000,000 which certificates of deposit and other deposit instruments, if not
payable on demand, have maturities of not more than one year from the date of
acquisition; (iv) certificates of deposit, demand deposit accounts or other
deposit instruments or accounts maintained in the ordinary course of business
with banks or trust companies organized under the laws of Canada or any province
thereof that have capital and surplus of at least $500,000,000 which
certificates of deposit and other deposit instruments, if not payable on demand,
have maturities of not more than one year from the date of acquisition; (iv)
commercial paper issued by any Person that is incorporated under the laws of the
United States of America or any state thereof and rated at least A-2 by S&P or
at least P-2 by Moody’s that is rated not less than P-2 or A-2 or their
equivalents by Moody’s or S&P, respectively, or their successors, and in each
case maturing not more than one year from the date of acquisition; (v)
commercial paper issued by any Person that is incorporated or organized under
the laws of Canada or any Province thereof, which is rated at least A-2 by S&P
or at least P-2 by Moody’s, or any Canadian affiliate of the same rating
agencies, in each case with maturities of not more than one year from the date
acquired; or (vi) any repurchase agreement secured by any one or more of the
foregoing.

 

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Registration Rights Agreement. That certain Amended and Restated Registration
Rights Agreement dated June 8, 2015 by and among the Borrower and the Clay
Family Members party thereto, as amended, restated, supplemented or otherwise
modified from time to time.

 

Responsible Officer. The chief executive officer, president, vice-president,
chief financial officer, treasurer (or assistant treasurer, if applicable), or
secretary (or assistant secretary, if applicable), controller or administrators
of any Loan Party or any attorney-in-fact with powers to deliver documents on
behalf of a Loan Party in connection with the Loan Documents. Any document
delivered hereunder that is signed by a Responsible Officer of a Loan Party
shall be conclusively presumed to have been authorized by all necessary
corporate, partnership and/or other action on the part of such Loan Party and
such Responsible Officer shall be conclusively presumed to have acted on behalf
of such Loan Party.

 

Restricted Payment. Any of the following: (a) any dividend, distribution, loan,
advance, guaranty, extension of credit or other payment, whether in cash or
property, to or for the benefit of any Person who holds an Equity Interest in
the Borrower, whether or not such Interest is evidenced by a security; (b) any
purchase, redemption, retirement or other acquisition for value of any Equity
Interest of the Borrower, whether now or hereafter outstanding, or of any
options, warrants or similar rights to purchase such Equity Interest or any
security convertible into or exchangeable for such Equity Interest and (c) any
payment or prepayment of any kind, whether in cash or property, to or for the
benefit of any Person (other than the Borrower) that is an Affiliate of the
Borrower.

 

Sanctioned Country. A country subject to a sanctions program identified on the
list maintained by OFAC and available at
http://www.treasury.gov/resource-center/sanctions/Programs/Pages/Programs.aspx,
or as otherwise published from time to time.

 

Sanctioned Person. Any of the following: (i) a Person named on the list of
“Specially Designated Nationals and Blocked Persons” maintained by OFAC
available at http://www.treasury.gov/ofac/downloads/t11sdn.pdf, or as otherwise
published from time to time, or (ii) (A) an agency of the government of a
Sanctioned Country, (B) an organization controlled by a Sanctioned Country, or
(C) a person resident in a Sanctioned Country, to the extent subject to a
sanctions program administered by OFAC.

 

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Solvent and Solvency. With respect to any Person on any date of determination,
that on such date (a) the fair value of the property of such Person is greater
than the total amount of liabilities, including contingent liabilities, of such
Person, (b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person’s ability to pay such debts and liabilities as they mature,
(d) such Person is not engaged in business or a transaction, and is not about to
engage in business or a transaction, for which such Person’s property would
constitute an unreasonably small capital, and (e) such Person is able to pay its
debts and liabilities, contingent obligations and other commitments as they
mature in the ordinary course of business. The amount of contingent liabilities
at any time shall be computed as the amount that, in the light of all the facts
and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.

 

S&P. Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies,
Inc., and its successors.

 

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

 

Subsidiary Guarantor. Holdings, BC Subco and each Subsidiary of the Borrower
existing as of the Closing Date or acquired or created by the Borrower after the
Closing Date, in each case party to the Subsidiary Guaranty. For the avoidance
of doubt, GQ California is not and shall not become a Subsidiary Guarantor.

 

Subsidiary Guaranty. That certain Amended and Restated Guaranty dated as of the
June 8, 2015 by the Subsidiary Guarantors in favor of the Lenders, as amended,
restated, supplemented or otherwise modified from time to time.

 

Taxes. All present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any Governmental
Authority, including any interest, additions to tax or penalties applicable
thereto.

 

1.2           Rules of Interpretation.

 

(a)          All terms of an accounting character used herein but not defined
herein shall have the meanings assigned thereto by GAAP and in each case applied
on a consistent basis.

 

(b)          A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented and in effect from
time to time in accordance with its terms and the terms of this Agreement.

 

(c)          The singular includes the plural and the plural includes the
singular. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms.

 

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(d)          A reference to any Person includes its permitted successors and
permitted assigns.

 

(e)          The words “include”, “includes” and “including” are not limiting.

 

(f)          The words “herein”, “hereof”, “hereunder” and words of like import
shall refer to this Agreement as a whole and not to any particular section or
subdivision of this Agreement.

 

(g)          All terms not specifically defined herein or by GAAP which terms
are defined in the Uniform Commercial Code as in effect in The State of New
York, shall have the meanings assigned to them in such Uniform Commercial Code.

 

SECTION II

 

DESCRIPTION OF LOAN

2.1          The Loan.

 

(a)          Term Loan. Upon the terms and subject to the conditions of this
Agreement, and in reliance upon the representations, warranties and covenants of
the Borrower herein, the Lenders agree on the Closing Date to continue the term
loan made to the Borrower under the Existing Agreement in the principal amount
of Thirty One Million Dollars ($31,000,000) (the “Loan”). Each Lender shall hold
its respective portion of the Loan pursuant to the allocations set forth on
Schedule 2.1(a).

 

(b)          The Notes. The Loan shall be evidenced by promissory notes dated as
of the Closing Date in the aggregate principal amount equal to the amount of the
Loan, such notes to be in substantially the form of Exhibit A-1, Exhibit A-2 and
Exhibit A-3 hereto (together, the “Notes”).

 

2.2          Interest Rates and Payments of Interest.

 

(a)          The Loan shall bear interest at a rate per annum equal to the Fixed
Rate. Such interest shall be payable quarterly in arrears on the first Business
Day of each calendar quarter, commencing January 1, 2017. For interest payments
due in calendar year 2017, the Borrower may elect, by notice to the Lenders
prior to the due date for payment of interest, to pay interest in kind by adding
such interest payment to the unpaid principal balance outstanding under the
Loan, provided, that the total amount of interest so added to the principal
balance of the Loan shall be due and payable in full on January 1, 2018.

 

(b)          If an Event of Default shall occur, then the unpaid balance of the
Loan shall bear interest, to the extent permitted by law, compounded daily at an
interest rate equal to 2% per annum above the Fixed Rate, until such Event of
Default is cured or waived.

 

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(c)          All agreements between or among the Borrower and the Lenders are
hereby expressly limited so that in no contingency or event whatsoever, whether
by reason of acceleration of maturity of the Obligations or otherwise, shall the
amount paid or agreed to be paid to the Lenders for the use or the forbearance
of the Obligations exceed the maximum permissible under applicable law. As used
herein, the term “applicable law” shall mean the law in effect as of the date
hereof provided, however, that in the event there is a change in the law which
results in a higher permissible rate of interest, then the Loan Documents shall
be governed by such new law as of its effective date. In this regard, it is
expressly agreed that it is the intent of the Borrower and the Lenders in the
execution, delivery and acceptance of the Loan Documents to contract in strict
compliance with the laws of The State of New York from time to time in effect.
If, under or from any circumstances whatsoever, fulfillment of any provision of
any of the Loan Documents at the time of performance of such provision shall be
due, shall involve transcending the limit of such validity prescribed by
applicable law, then the Obligations to be fulfilled shall automatically be
reduced to the limits of such validity, and if under or from circumstances
whatsoever the Lenders should ever receive as interest an amount which would
exceed the highest lawful rate, such amount which would be excessive interest
shall be applied to the reduction of the principal balance of the Obligations
and not to the payment of interest. This provision shall control every other
provision of all Loan Documents.

 

2.3          Closing Fee. The Borrower shall pay to the Lenders on the Closing
Date a closing fee in the amount of Nine Hundred Thirty Thousand Dollars
($930,000) (the “Closing Fee”), to be allocated among the Lenders in accordance
with their respective percentages as set forth on Schedule 2.1(a).

 

2.4          Repayment of Loan. The Borrower shall repay the principal amount of
the Loan (a) in equal quarterly installments of $2,500,000 on the first day of
each calendar quarter, commencing January 1, 2018, and (b) on the Maturity Date
in an amount equal to the aggregate unpaid principal amount of the Loan,
together with all accrued and unpaid interest, fees and other charges hereunder.

 

2.5          Prepayments.

 

(a)          Mandatory.

 

(i)          If the Borrower Disposes of any property (other than any
Disposition of any property permitted by Section 6.4(b)) which results in the
realization by the Borrower of Net Cash Proceeds in excess of $500,000, the
Borrower shall prepay an aggregate principal amount of the Loan equal to 100% of
such Net Cash Proceeds immediately upon receipt thereof by the Borrower.

 

(ii)         Upon any Extraordinary Receipt received by or paid to or for the
account of the Borrower in excess of $500,000, and not otherwise included in
clause (i) of this Section 2.5(b), the Borrower shall prepay an aggregate
principal amount of the Loan equal to 100% of all Net Cash Proceeds received
therefrom immediately upon receipt thereof by the Borrower.

 

- 12 - 

  

 

(iii)        Principal and accrued unpaid interest shall become immediately due
and payable five days after GQ California has incurred cumulative debt in a
principal amount greater than $5,000,000 (excluding mobile equipment financing
and short term financing with or on behalf of one or more refineries in
connection with their purchases of GQ California’s gold and silver doré bars),
unless all representatives of Holdings, other than Clay Family Members, on GQ
California’s board of managers vote against GQ California incurring such debt.

 

(b)          Voluntary. The Borrower may prepay the Loan in whole or in part at
any time prior to the Maturity Date without premium, penalty or prepayment fee.

 

2.6          Method of Payments.

 

(a)          All payments by the Borrower hereunder and under any of the other
Loan Documents shall be made in lawful money of the United States in immediately
available funds, and shall be deemed to have been made only when made in
compliance with this Section 2.6(a). All such payments shall be made without
set-off or counterclaim and free and clear of and without deduction for any
taxes, levies, imposts, duties, charges, fees, deductions, withholdings,
compulsory loans, restrictions or conditions of any nature now or hereafter
imposed or levied by any jurisdiction or any political subdivision thereof or
taxing or other authority therein unless the Borrower is compelled by law to
make such deduction or withholding. If any such obligation is imposed upon the
Borrower with respect to any amount payable by it hereunder or under any of the
other Loan Documents, the Borrower will pay to the Lenders such additional
amount in Dollars as shall be necessary to enable the Lenders to receive the
same net amount which the Lenders would have received on such due date had no
such obligation been imposed upon the Borrower. The Borrower will deliver
promptly to the Lenders certificates or other valid vouchers or other evidence
of payment reasonably satisfactory to the Lenders for all Taxes or other charges
deducted from or paid with respect to payments made by the Borrower hereunder or
under such other Loan Document.

 

(b)          All such payments shall be made at the applicable Lender’s office
or at such other location that each Lender may from time to time designate, in
each case in immediately available funds.

 

2.7          Computation of Interest and Fees. All computation of fees and
interest shall be made on the basis of a 360-day year and actual days elapsed.
If the due date for any payment of principal is extended by operation of law,
interest shall be payable for such extended time. If any payment required by
this Agreement becomes due on a day that is not a Business Day such payment may
be made on the next succeeding Business Day, and such extension shall be
included in computing interest in connection with such payment.

 

2.8          Taxes.

 

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

 

- 13 - 

  

 

(b)          Indemnification by the Borrower. The Borrower shall indemnify the
Lenders, within ten days after demand therefor, for the full amount of any Taxes
(including Taxes imposed or asserted on or attributable to amounts payable under
this Section 2.8) paid by the Lenders, as the case may be, and any penalties,
interest and reasonable expenses arising therefrom or with respect thereto,
whether or not such Taxes were correctly or legally imposed or asserted by the
relevant Governmental Authority. A certificate as to the amount of such payment
or liability delivered to the Borrower by the Lenders shall be conclusive absent
manifest error.

 

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

 

SECTION III

 

CONDITIONS OF LENDING

 

The agreement of the Lenders to make the Loan is subject to the satisfaction of
the following conditions precedent on or prior to the Closing Date:

 

3.1          Closing Deliverables. The Lenders shall have received the
following, each of which shall be originals, “pdfs” or telecopies (followed
promptly by originals) unless otherwise specified, each properly executed by a
Responsible Officer of the signing Loan Party, each dated the Closing Date (or,
in the case of certificates of governmental officials, a recent date before the
Closing Date) and each in form and substance satisfactory to the Lenders:

 

(a)          an executed counterpart of this Agreement;

 

(b)          the Notes executed by the Borrower in favor of the Lenders;

 

(c)          Warrants substantially in the form of Exhibit B attached hereto to
purchase an aggregate of 8,000,000 shares of common stock of the Borrower; such
warrants to be allocated among and issued to the Lenders in accordance with
their respective percentages as set forth on Schedule 2.1(a) attached hereto;

 

(d)          a reaffirmation of the Subsidiary Guaranty and the Pledge
Agreement;

 

(e)          an amended and restated indemnity agreement executed by the
Borrower;

 

- 14 - 

  

 

(f)         evidence satisfactory to the Lenders that all approvals, consents,
exemptions, authorizations, notices to or filings with any Governmental
Authority or other Person set forth on Schedule 4.3 have been obtained or made
by the Borrower or its applicable Subsidiary or Affiliate;

 

(g)         such certificates of resolutions or other action, incumbency
certificates and/or other certificates of Responsible Officers of each Loan
Party as the Lenders may require evidencing the authority of each Loan Party to
consummate the transactions contemplated hereby and the identity, authority and
capacity of each Responsible Officer thereof authorized to act as a Responsible
Officer in connection with this Agreement and the other Loan Documents to which
such Loan Party is a party or is to be a party;

 

(h)          such documents and certifications as the Lenders may reasonably
require to evidence that each Loan Party is duly organized or formed; is validly
existing and is in good standing and qualified to engage in business in each
jurisdiction where its ownership, lease or operation of properties or the
conduct of its business requires such qualification, except to the extent that
failure to do so could not reasonably be expected to have a Material Adverse
Effect;

 

(i)          a certificate signed by a Responsible Officer of the Borrower
certifying that the conditions specified in Sections 3.2, 3.3, 3.4, and 3.5 have
been satisfied;

 

(j)          certificates attesting to the Solvency of each Loan Party, from
such Loan Party’s chief financial officer, treasurer, controller, administrator
or other officer of equivalent responsibility; and

 

(k)          such other assurances, certificates, documents, consents and
opinions as the Lenders reasonably may require.

 

3.2          Indebtedness. The Borrower shall not have outstanding any
Indebtedness for money borrowed other than the Loan and any other Indebtedness
permitted by Section 6.1 including the Indebtedness set forth on Schedule
6.1(e).

 

3.3          Litigation; Investigations. No litigation, arbitration, proceeding
or investigation shall be pending or, to the knowledge of the Borrower,
threatened in writing which questions the validity or legality of the
transactions contemplated by any Loan Document or seeks a restraining order,
injunction or damages in connection therewith, or which, in the reasonable
judgment of the Lenders, would reasonably be expected to adversely affect the
transactions contemplated hereby or thereby.

 

3.4          Accuracy of Representations and Warranties. The representations and
warranties contained in Section IV hereof and all representations and warranties
made by the Borrower and each other Loan Party under any other Loan Document
shall be true and accurate in all material respects on and as of the Closing
Date.

 

3.5          No Default. No Default or Event of Default shall have occurred and
be continuing.

 

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3.6          No Change in Law. No change shall have occurred in any law or
regulation or interpretation thereof that, in the reasonable opinion of counsel
for the Lenders, would make it illegal or against the formally adopted and
published policy of any Governmental Authority for the Lenders to make the Loan
hereunder.

 

3.7          Payments.

 

(a)          The Borrower shall have paid the Closing Fee.

 

(b)          The Borrower shall have made a prepayment of the Loan under (and as
defined in) the Existing Agreement in the aggregate amount of $10,658,535.

 

3.8          Existing Notes. The Borrower shall have received each Note issued
in connection with the Existing Agreement from the Lenders within 30 days of the
Closing Date.

 

SECTION IV

REPRESENTATIONS AND WARRANTIES

 

The Borrower represents and warrants to the Lenders as of the Closing Date and,
if different, the date on which the Loan is made to the Borrower that:

 

4.1          Existence, Qualification and Power. Each Loan Party (a) is duly
organized or formed, validly existing and, as applicable, in good standing under
the laws of the jurisdiction of its incorporation, organization or formation,
(b) has all requisite power and authority and all requisite governmental
licenses, authorizations, consents and approvals to (i) own or lease its assets
and carry on its business and (ii) execute, deliver and perform its obligations
under the Loan Documents to which it is a party and (c) is duly qualified and is
licensed and, as applicable, in good standing under the laws of each
jurisdiction where its ownership, lease or operation of properties or the
conduct of its business requires such qualification or license; except in each
case referred to in clause (b)(i) or (c), to the extent that failure to do so
could not reasonably be expected to have a Material Adverse Effect.

 

4.2          Authorization; No Contravention. The execution, delivery and
performance by each Loan Party of each Loan Document to which such Person is or
is to be a party have been duly authorized by all necessary corporate or other
organizational action, and, except as disclosed on Schedule 4.2, do not and will
not (a) contravene the terms of any of such Person’s organizational documents;
(b) conflict with or result in any breach or contravention of, or the creation
of any Encumbrance under, or require any payment to be made under (i) any
contractual obligation to which such Person is a party or affecting such Person
or the properties of such Person or any of its Subsidiaries or (ii) any order,
injunction, writ or decree of any Governmental Authority or any arbitral award
to which such Person or its property is subject; or (c) violate any law, rule or
regulation, except in each case referred to in clause (b)(i) or clause (c) to
the extent any such conflict or violation could not reasonably be expected to
have a Material Adverse Effect.

 

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4.3           Governmental Authorization; Other Consents; Corrupt Practices.
Except as disclosed on Schedule 4.3:

 

(a)          no approval, consent, exemption, authorization, or other action by,
or notice to, or filing with, any Governmental Authority or any other Person is
necessary or required in connection with (i) the execution, delivery or
performance by, or enforcement against, any Loan Party of this Agreement or any
other Loan Document, or (ii) the exercise by a Lender of its rights under the
Loan Documents.

 

(b)          The Borrower and its officers, directors, employees, and agents
have complied in all material respects with all applicable Corrupt Practices
Laws in obtaining any Governmental Approvals, consents, licenses, approvals,
permits, authorizations, rights, and privileges in respect of the Borrower’s
business, and are otherwise conducting the business of the Borrower in
compliance in all material respects with applicable Corrupt Practices Laws, the
Borrower declares that at no time in the course of its business has the Borrower
or its officers, directors, employees or agents offered or promised any undue
advantage, directly or indirectly, to a Public Official, with the objective of
influencing him or her to perform, omit or delay an official act, or to obtain
improper business advantage for themselves or for the Borrower. (For purposes of
this Agreement, “undue advantage” is not limited to payments or financial
benefits, but consists of anything that has value to a Public Official.);

 

(c)          The Borrower’s internal management and accounting practices and
controls are adequate to ensure compliance in all material respects with
applicable Corrupt Practices Laws.

 

4.4           Binding Effect. This Agreement has been, and each other Loan
Document, when delivered hereunder, will have been, duly executed and delivered
by each Loan Party that is party thereto. This Agreement constitutes, and each
other Loan Document when so delivered will constitute, a legal, valid and
binding obligation of such Loan Party, enforceable against each Loan Party that
is party thereto in accordance with its terms except as limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors’ rights generally, and except as the remedy of specific performance
or of injunctive relief is subject to the discretion of the court before which
any proceeding therefor may be brought.

 

4.5           Financial Statements. The audited financial statements of the
Borrower and its Subsidiaries for the fiscal year of the Borrower ended December
31, 2015, furnished to the Lenders, are true and complete in all material
respects, have been prepared in accordance with GAAP, and fairly present the
financial condition of the Borrower and its Subsidiaries as of the date of such
financial statements and the results of their operations for the period then
ending. Since the date of such statements, there has been no material change in
any Company’s accounting procedures. Since the delivery to the Lenders of the
most recently audited financial statements of the Borrower, there has been no
material adverse change in the Borrower or its Subsidiaries’ financial
condition, properties or business, taken as a whole.

 

 - 17 - 

 

 

4.6           Litigation. There are no actions, suits, proceedings, claims or
disputes pending or, to the knowledge of the Borrower, threatened in writing, at
law, in equity, in arbitration or before any Governmental Authority, by or
against the Loan Parties or against any of their properties or revenues that (a)
purport to affect or pertain to this Agreement or any other Loan Document, or
(b) except as set forth on Schedule 4.6, either individually or in the
aggregate, if determined adversely, could reasonably be expected to have a
Material Adverse Effect.

 

4.7           No Default. Except as set forth on Schedule 4.7, the Borrower is
not in default under or with respect to, or a party to, any contractual
obligation that would, either individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. No Default has occurred and is
continuing or would result from the consummation of the transactions
contemplated by this Agreement or any other Loan Document.

 

4.8           Ownership of Property; Encumbrances. The Borrower has good record
and sufficient title to its material properties, including all real property
necessary for the ordinary conduct of its business, except for such defects in
title as could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. The Borrower’s properties are not subject to any
Encumbrances, except for Permitted Encumbrances.

 

4.9           Environmental Compliance. The Borrower and its Subsidiaries have
duly complied with, and its business, operations, assets, equipment, property,
leaseholds, and other facilities are in compliance with, the provisions of all
applicable Environmental Laws, except as any noncompliance therewith could not
reasonably be expected to have a Material Adverse Effect. The Borrower and its
Subsidiaries have (a) been issued and will maintain all required consents,
permits, licenses, certificates, authorizations, and approvals relating to, and
(b) received no complaint, order, directive, claim, citation, or notice by any
Governmental Authority or any other Person with respect to, any and all
Environmental Laws, except as any such failure to have issued or maintained or
any such receipt in each case could not reasonably be expected to have a
Material Adverse Effect.

 

4.10         Insurance. The properties of the Borrower and its Subsidiaries
necessary for the ordinary conduct of their business are insured with
financially sound and reputable insurance companies not Affiliates of the
Borrower, in such amounts, with such deductibles and covering such risks as are
customarily carried by companies engaged in similar businesses and owning
similar properties in localities where the applicable Borrower or Subsidiary
operates and as required by applicable Governmental Authorities.

 

4.11         Taxes. The Borrower and its Subsidiaries have filed all federal,
state, provincial, and all material local tax returns and reports required by
law to be filed in respect of the income, business, properties, and employees of
the Borrower and its Subsidiaries, and have paid all Taxes, assessments, fees
and other charges levied or imposed by any Governmental Authority upon them or
their properties, income or assets otherwise due and payable, except those which
are being contested in good faith by appropriate proceedings diligently
conducted and for which adequate reserves have been provided in accordance with
GAAP. There is no proposed Tax assessment against the Borrower or its
Subsidiaries that is not being challenged by appropriate proceedings with
adequate reserves made therefor that would, if made, have a Material Adverse
Effect.

 

 - 18 - 

 

 

4.12         Subsidiaries; Equity Interests. Schedule 4.12 sets forth a complete
and accurate list of all Subsidiaries of the Borrower, showing as of the Closing
Date (as to each Subsidiary) the jurisdiction of its incorporation, the address
of its principal place of business and its U.S. taxpayer identification number
or, in the case of any non-U.S. party that does not have a U.S. taxpayer
identification number, its unique identification number issued to it by the
jurisdiction of its incorporation.

 

4.13         Margin Regulations; Investment Company Act.

 

(a)          The Borrower has not engaged nor will engage, principally or as one
of its important activities, in the business of purchasing or carrying margin
stock (within the meaning of Regulation U issued by the FRB), or extending
credit for the purpose of purchasing or carrying margin stock.

 

(b)          None of the Borrower or any Subsidiary of the Borrower is or is
required to be registered as an “investment company” under the Investment
Company Act of 1940.

 

4.14         Compliance with Laws. The Borrower and each of its Subsidiaries is
in compliance in all material respects with the requirements of all laws, rules
and regulations and all orders, writs, injunctions and decrees applicable to it
or to its properties, except where the failure to comply therewith, either
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.

 

4.15         Solvency. Each of the Borrower and its Subsidiaries is Solvent.

 

4.16         Compliance with OFAC Rules and Regulations. Neither the Borrower,
nor any Affiliate of the Borrower (i) is a Sanctioned Person, (ii) has any
assets in Sanctioned Countries, or (iii) derives any of its operating income
from investments in, or transactions with Sanctioned Countries or with one or
more Persons whom it knows to be a Sanctioned Person. No part of the proceeds of
the Loan will be used directly or indirectly to fund any operations in, finance
any investments or activities in or make any payments to, a Sanctioned Person or
a Sanctioned Country.

 

4.17         Foreign Assets Control Regulations, Etc. The Borrower is not an
“enemy” or an “ally of the enemy” within the meaning of Section 2 of the Trading
with the Enemy Act of the United States of America (50 U.S.C. App. §§ 1 et
seq.), as amended. The Borrower is not in violation of (a) the Trading with the
Enemy Act, as amended, (b) any of the foreign assets control regulations of the
United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or
any enabling legislation or executive order relating thereto or (c) the USA
Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).
The Borrower is not (i) is a blocked person described in Section 1 of the
Executive Order 13224 issued on September 24, 2001 or (ii) to the Borrower’s
knowledge, engages in any dealings or transactions, or is otherwise associated,
with any such blocked person.

 

 - 19 - 

 

 

SECTION V

AFFIRMATIVE COVENANTS

 

The Borrower covenants that so long as the Loan or any other Obligation remains
outstanding:

 

5.1           Financial Statements. The Borrower shall furnish to the Lenders:

 

(a)          as soon as available to the Borrower, but in any event within 120
days after the end of each Fiscal Year, the balance sheet of the Borrower and
its Subsidiaries as of the end of such year and related statements of income,
retained earnings and cash flow of the Borrower and its Subsidiaries for such
year, prepared in accordance with GAAP and audited and certified without
qualification by the Borrower’s Accountants; and, concurrently with such
financial statements, a copy of the Borrower’s Accountants management report and
a written statement by the Borrower’s Accountants that in the making of the
audit necessary for their report and opinion upon such financial statements,
they have obtained no knowledge of any Default or, if in the opinion of such
accountants any such Default exists, they shall disclose in such written
statement the nature and status thereof; provided that the Borrower shall be
deemed to be in compliance with its delivery obligations pursuant to this
Section 5.1(a) with respect to any material or information set forth in this
Section 5.1(a) to the extent such material or information is publicly filed via
the Securities and Exchange Commission’s Electronic Data Gathering, Analysis and
Retrieval System (EDGAR) or any public electronic filing system successor
thereto;

 

(b)          as soon as available to the Borrower, but in any event within 60
days after the end of each Fiscal Quarter of each Fiscal Year, a balance sheet
of the Borrower and its Subsidiaries as of the end of, and related statements of
income, retained earnings and cash flow of the Borrower and its Subsidiaries for
the Fiscal Quarter then ended and the portion of the Fiscal Year then ended,
prepared in accordance with GAAP and certified by the chief financial officer or
other officer of equivalent responsibility of the Borrower, subject to normal,
recurring year-end adjustments that shall not in the aggregate be material in
amount; provided that the Borrower shall be deemed to be in compliance with its
delivery obligations pursuant to this Section 5.1(b) with respect to any
material or information set forth in this Section 5.1(b) to the extent such
material or information is publicly filed via the Securities and Exchange
Commission’s Electronic Data Gathering, Analysis and Retrieval System (EDGAR) or
any public electronic filing system successor thereto;

 

(c)          concurrently with their filing, true and correct copies of the
Borrower’s and its Subsidiaries’ Tax returns and each amendment thereto;

 

(d)          promptly after the receipt thereof by the Borrower, copies of any
reports (including any so-called management letters) submitted to the Borrower
by independent public accountants in connection with any annual or interim
review of the accounts of the Borrower or its Subsidiaries made by such
accountants;

 

 - 20 - 

 

 

(e)          promptly after the same are delivered or filed, copies of all
financial statements and reports as the Borrower shall send to owners of its
Equity Interests or as the Borrower may file with any Governmental Authority at
any time; provided that the Borrower shall be deemed to be in compliance with
its delivery obligations pursuant to this Section 5.1(e) with respect to any
material or information set forth in this Section 5.1(e) to the extent such
material or information is publicly filed via the Securities and Exchange
Commission’s Electronic Data Gathering, Analysis and Retrieval System (EDGAR) or
any public electronic filing system successor thereto; and

 

(f)          from time to time, such other financial data and information about
the Borrower as the Lenders may reasonably request.

 

5.2           Conduct of Business.

 

(a)          The Borrower shall duly observe and comply in all material respects
with all material contracts and with all applicable laws, regulations, decrees,
orders, judgments and valid requirements of any Governmental Authority
applicable to its corporate existence, rights and franchises, to the conduct of
its business and to its property and assets (including without limitation all
Environmental Laws and Corrupt Practices Laws), except in any case where the
failure to observe and comply would not reasonably be expected to have a
Material Adverse Effect and shall maintain and keep in full force and effect and
comply in all material respects with all licenses and permits necessary to the
proper conduct of its business.

 

(b)          The Borrower shall maintain its legal existence, comply with its
organizational documents, and observe all legally necessary or contractually
required formalities in its governance. The Borrower shall and remain or engage
in substantially the same business as that in which it is now engaged.

 

5.3           Taxes. The Borrower shall pay or cause to be paid all Taxes on or
against it or its properties on or prior to the time when they become
delinquent; except for any Tax or charge that is being contested in good faith
by appropriate proceedings and with respect to which adequate reserves have been
established and are being maintained in accordance with GAAP, if no Encumbrance
shall have been filed (the enforcement of which shall not have been stayed
within 30 days of the filing thereof) to secure such Tax, assessment or charge.

 

5.4           Inspection Rights. The Borrower shall permit any authorized
representatives designated by a Lender to visit and inspect any of the
properties of the Borrower, to inspect, copy and take extracts from its
financial and accounting records, and to discuss its affairs, finances and
accounts with its officers and independent public accountants, all upon
reasonable notice and at such reasonable times during normal business hours. The
reasonable out-of-pocket expenses of the Lenders in connection with such
inspections shall be payable by the Borrower.

 

5.5           Maintenance of Books and Records. The Borrower shall keep adequate
books and records of account, in which true and complete entries will be made
reflecting all of its business and financial transactions, and such entries will
be made in accordance with GAAP, in each case consistently applied and
applicable law. The Borrower shall keep internal management and accounting
practices and controls that are adequate to ensure compliance with applicable
Corrupt Practices Laws.

 

 - 21 - 

 

 

5.6           Use of Proceeds.

 

(a)          The Borrower will use the proceeds of the Loan for general
corporate purposes of the Borrower.

 

(b)          No portion of the Loan shall be used for the “purpose of purchasing
or carrying” any “margin stock” or “margin security” as such terms are used in
Regulations T, U and X of the Board of Governors of the Federal Reserve System,
or otherwise in violation of such regulations.

 

5.7           Further Assurances. At any time and from time to time the Borrower
shall execute and deliver such further documents and take such further action as
may reasonably be requested by the Lenders to effect the purposes of the Loan
Documents.

 

5.8           Notification Requirements. The Borrower shall furnish to the
Lenders:

 

(a)          promptly upon becoming aware of the existence of any condition or
event that constitutes a Default, written notice thereof specifying the nature
and duration thereof and the action being or proposed to be taken with respect
thereto;

 

(b)          promptly upon becoming aware of any investigative proceedings by a
Governmental Authority or of any litigation commenced or threatened in writing
against the Borrower or any of its Subsidiaries of which it has notice, the
outcome of which could reasonably be expected to have a Material Adverse Effect,
written notice thereof and the action being or proposed to be taken with respect
thereto; and

 

(c)          promptly after becoming aware of any occurrence or any condition
affecting the Borrower or any of its Subsidiaries which could reasonably be
expected to have a Material Adverse Effect, written notice thereof.

 

5.9           Environmental Compliance.

 

(a)          Except as could not reasonably be expected to have a Material
Adverse Effect, (i) the Borrower shall, and shall cause its Subsidiaries to,
comply with, and shall conduct its business, operations, assets, equipment,
property, leaseholds, and other facilities in compliance with, the provisions of
all Environmental Laws; (ii) the Borrower shall, and shall cause its
Subsidiaries to, maintain in full force and effect all required permits,
licenses, certificates, authorizations and approvals relating to Environmental
Laws; and (iii) the business of the Borrower and its Subsidiaries shall be
operated in a manner that will not pose any an unreasonable risk to public
health or the environment.

 

(b)          The Borrower shall provide the Lenders upon either Lender’s request
with information related to Borrower’s and its Subsidiaries’ compliance with
those Environmental Laws that are reasonably necessary to the ordinary conduct
of its business within ten days as of the receipt by a Responsible Officer of
the Borrower of such request.

 

 - 22 - 

 

 

(c)          The Borrower shall promptly inform the Lenders of the receipt of
any (i) notice of violation of any environmental permits, licenses, certificates
and authorizations (ii) notice of violation of any Environmental Laws, the
violation of which could reasonably be expected to be material and adverse to
the ordinary conduct of the Borrower’s or any of its Subsidiaries’ business.

 

5.10         Subsidiary Guaranties. Each Subsidiary of the Borrower created,
acquired or held on any date subsequent to the Closing Date, shall as promptly
as possible but in any event within thirty (30) days (or such later date as may
be agreed upon by the Lenders) of such date, execute and deliver to the Lenders,
a joinder to the Subsidiary Guaranty, along with any corporate governance and
authorization documents.

 

SECTION VI

NEGATIVE COVENANTS

 

The Borrower covenants that so long as the Loan or any other Obligation remains
outstanding:

 

6.1           Indebtedness. The Borrower shall not create, incur, assume,
guarantee or be or remain liable with respect to any Indebtedness other than the
following:

 

(a)          Obligations;

 

(b)          Indebtedness for Taxes to the extent that payment therefor shall at
the time not be required to be made in accordance with Section 5.3;

 

(c)          current liabilities on open account for the purchase price of
services, materials and supplies incurred by the Borrower in the ordinary course
of business (not as a result of borrowing), so long as all of such open account
current liabilities shall be promptly paid and discharged in conformity with
customary trade terms and practices, except for any such open account
Indebtedness which is being contested in good faith by the Borrower, as to which
adequate reserves required by GAAP, as applicable, have been established and are
being maintained and as to which no Encumbrance has been placed on any property
of the Borrower (other than Permitted Encumbrances);

 

(d)          Guarantees permitted under Section 6.2 hereof;

 

(e)          Indebtedness existing as of the date of this Agreement and
disclosed on Schedule 6.1(e), together with any renewals, extensions or
refinancing thereof, provided that the amount of such resulting Indebtedness
shall not exceed the amount of Indebtedness originally being renewed, extended
or refinanced; and

 

 - 23 - 

 

 

(f)          endorsements of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business.

 

6.2           Contingent Liabilities. The Borrower shall not create, incur,
assume, guarantee or be or remain liable with respect to any Guarantees other
than Guarantees resulting from the endorsement of negotiable instruments for
deposit or collection in the ordinary course of business.

 

6.3           Encumbrances. The Borrower shall not create, grant, incur, assume
or suffer to exist any direct or indirect mortgage, pledge, security interest,
lien or other charge or encumbrance of any kind, including any negative pledge
or any lien or retained security title of a conditional vendor, upon or with
respect to any of its property or assets (“Encumbrances”), or assign or
otherwise convey any right to receive income, including the sale or discount of
accounts receivable with or without recourse, except the following (“Permitted
Encumbrances”):

 

(a)          liens for Taxes to the extent that payment of the same may be
postponed or is not required in accordance with the provisions of Section 5.3;
and

 

(b)          any Encumbrances arising by mandatory provision of law securing
obligations incurred in the ordinary course of business that (i) do not
interfere with the ordinary conduct of the business of the Borrower, (ii) are
not yet more than 90 days overdue or that are being contested or litigated in
good faith, including (A) Encumbrances of carriers, warehousemen, mechanics,
laborers, and materialmen incurred in the ordinary course of business for sums
not yet due, (B) Encumbrances on real estate for real estate taxes not yet
delinquent, (C) Encumbrances incurred in the ordinary course of business in
connection with worker's compensation and unemployment insurance, (D) easements,
rights-of-way, restrictions, and other similar encumbrances on the use of real
property approved in advance by the Lenders, and (E) employee claims regarding
wages and benefits.

 

6.4           Merger; Dispositions; Liquidation.

 

(a)          The Borrower may not merge into or consolidate with any other
Person, or permit any other Person to merge into or consolidate with it, or
liquidate or dissolve, except that, if at the time thereof and immediately after
giving effect thereto no Event of Default shall have occurred and be continuing
any Subsidiary of the Borrower that is a Loan Party may merge into the Borrower
in a transaction in which the Borrower is the surviving corporation.

 

(b)          The Borrower shall not Dispose of any assets or properties
reasonably necessary to the ordinary conduct of its business, other than sales
of Qualified Investments in the ordinary course of business and consistent with
past practices.

 

6.5           Restricted Payments. The Borrower shall not make any Restricted
Payments, except that:

 

(a)          So long as no Event of Default, including but not limited to the
occurrence of a Change of Control, has occurred and is continuing, the Borrower
may make such Restricted Payments that are unanimously approved by its board of
directors or by a committee thereof whose members have been unanimously approved
by its board of directors;

 

 - 24 - 

 

 

(b)          The Borrower may declare and pay dividends and make other
distributions and payments with respect to its Equity Interests if payable
solely in its Equity Interests; and

 

(c)          The Borrower may purchase or otherwise acquire Equity Interests in
any Subsidiary of the Borrower using additional shares of its Equity Interests.

 

6.6           Investments; Purchases of Assets. The Borrower shall not make or
maintain any Investments or purchase or otherwise acquire any material amount of
assets other than:

 

(a)          Qualified Investments;

 

(b)          Subsidiaries created, acquired, or held in accordance with the
terms of this Agreement; and

 

(c)          to the extent permitted by applicable law, loans or other
extensions of credit to officers, directors and employees of the Borrower in the
ordinary course of business, for travel, entertainment, relocation and analogous
ordinary business purposes, which Investments shall not exceed at any time
$200,000 in the aggregate.

 

6.7           Transactions with Affiliates. The Borrower will not directly or
indirectly, enter into any purchase, sale, lease or other transaction with any
Affiliate except transactions on terms that are no less favorable to the
Borrower than those which might be obtained at the time in a comparable
arm’s-length transaction with any Person who is not an Affiliate; except any
such transaction (i) unanimously approved by the board of directors of the
Borrower or by a committee of its board of directors whose members have been
unanimously appointed by its board of directors; or (ii) between the Borrower
and any a Lender, an Affiliate of a Lender, or a Clay Family Member.

 

6.8           Fiscal Year. The Borrower shall not change its Fiscal Year without
at least 90 days’ prior written notice to the Lenders.

 

SECTION VII

DEFAULTS

 

7.1           Events of Default. Any of the following shall constitute an Event
of Default:

 

(a)          Non-Payment. The Borrower or any other Loan Party fails to (i) pay
when and as required to be paid herein, any amount of principal of the Loan, or
(ii) pay within three (3) days after the same becomes due, any interest on the
Loan or any fee due hereunder, or (iii) pay within ten (10) days after the same
becomes due, any other amount payable hereunder or under any other Loan
Document; or

 

 - 25 - 

 

 

(b)          Specific Covenants. (i) The Borrower fails to perform or observe
any term, covenant or agreement contained in any of Sections 5.1(a), (b), or
(c), Sections 5.2(b), 5.4, 5.6, 5.7, 5.8, or 5.10, or Section VI, (ii) a
Subsidiary Guarantor violates or fails to perform or observe any term, covenant
or agreement contained in the Subsidiary Guaranty, or (iii) the Borrower or
Holdings violates or fails to perform or observe any term, covenant or agreement
contained in the Pledge Agreement; or

 

(c)          Other Defaults. Any Loan Party fails to perform or observe any
other covenant or agreement (not specified in Section 7.1(a) or 7.1(b) above)
contained in any Loan Document on its part to be performed or observed and such
failure continues for 30 days; or

 

(d)          Representations and Warranties. Any representation, warranty,
certification or statement of fact made or deemed made by or on behalf of the
Borrower or any other Loan Party herein, in any other Loan Document, or in any
document delivered in connection herewith or therewith shall be materially
incorrect or misleading when made or deemed made; or

 

(e)          Cross-Default. (i) The Borrower (A) shall fail to make any payment
when due (whether by scheduled maturity, required prepayment, acceleration,
demand, or otherwise) in respect of any Indebtedness or Guarantee (other than
Indebtedness hereunder) having an aggregate principal amount (including undrawn
committed or available amounts and including amounts owing to all creditors
under any combined or syndicated credit arrangement) of more than $50,000, or
(B) shall fail to observe or perform any other agreement or condition relating
to any such Indebtedness or Guarantee or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event occurs,
the effect of which default or other event is to cause, or to permit the holder
or holders of such Indebtedness or the beneficiary or beneficiaries of such
Guarantee (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, with the giving of notice if required,
such Indebtedness to be demanded or to become due or to be repurchased, prepaid,
defeased or redeemed (automatically or otherwise), or an offer to repurchase,
prepay, defease or redeem such Indebtedness to be made, prior to its stated
maturity, or such Guarantee to become payable or cash collateral in respect
thereof to be demanded; or (ii) the Borrower shall fail to pay when due (after
any applicable period of grace) any amount payable under one or more agreements
for the use of real or personal property requiring aggregate payments in excess
of $100,000 in any twelve month period, or fails to observe or perform any term,
covenant or agreement or relating to such agreement(s) for the use of real or
personal property, and the result of any such failure is to permit any other
party to such agreement(s) to exercise remedies under or terminate such
agreement(s) prior to the expiration date thereof; or (iii) a default under the
Subsidiary Guaranty shall have occurred and be continuing; or

 

(f)          Insolvency Proceedings, Etc. Any Loan Party institutes or consents
to the institution of any proceeding under any bankruptcy, insolvency,
reorganization, receivership or other debtor relief law, or makes a general
assignment for the benefit of creditors; or applies for or consents to the
appointment of any receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer for it or for all or any material part of its
property; or any receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer is appointed without the application or consent
of such Person and the appointment continues undischarged or unstayed for 60
calendar days; or any proceeding under any bankruptcy, insolvency,
reorganization, receivership or other debtor relief law relating to any such
Person or to all or any material part of its property is instituted without the
consent of such Person and continues undismissed or unstayed for 60 calendar
days, or an order for relief is entered in any such proceeding; or

 

 - 26 - 

 

 

(g)          Inability to Pay Debts; Attachment. (i) Any Loan Party becomes
unable or admits in writing its inability or fails generally to pay its debts as
they become due, or (ii) any writ or warrant of attachment or execution or
similar process is issued or levied against all or any material part of the
property of any such Person and is not released, vacated or fully bonded within
45 days after its issue or levy; or

 

(h)          Judgments. There is entered against the Borrower (i) except as
disclosed on Schedule 4.6, one or more final judgments or orders for the payment
of money in an aggregate amount (as to all such judgments and orders) exceeding
$50,000 (to the extent not covered by independent third-party insurance as to
which the insurer is rated at least “A” by A.M. Best Company, has been notified
of the potential claim and does not dispute coverage), or (ii) any one or more
non-monetary final judgments that have, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect and, in either case,
(A) enforcement proceedings are commenced by any creditor upon such judgment or
order, or (B) there is a period of 30 consecutive days while such judgment shall
not have been discharged during which a stay of enforcement of such judgment, by
reason of a pending appeal or otherwise, is not in effect; or

 

(i)          Invalidity of Loan Documents. Any material provision of any Loan
Document, at any time after its execution and delivery and for any reason other
than as expressly permitted hereunder or thereunder or satisfaction in full of
all the Obligations, ceases to be in full force and effect; or any Loan Party
contests in any manner the validity or enforceability of any provision of any
Loan Document; or any Loan Party denies that it has any or further liability or
obligation under any provision of any Loan Document, or purports to revoke,
terminate or rescind any provision of any Loan Document; or

 

(j)          Change of Control. There occurs any Change of Control.

 

7.2           Remedies upon Event of Default. If any Event of Default occurs and
is continuing, the Lenders may take any or all of the following actions:

 

(a)          declare the unpaid principal amount of the Loan, all interest
accrued and unpaid thereon, and all other amounts owing or payable hereunder or
under any other Loan Document to be immediately due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrower; and

 

(b)          exercise on behalf of itself all rights and remedies available to
it under the Loan Documents and applicable laws;

 

 - 27 - 

 

 

provided, however, that upon the occurrence of an Event of Default specified in
Section 7.1(f), the unpaid principal amount of the Loan and all interest and
other amounts as aforesaid shall automatically become due and payable, without
further act of the Lenders.

 

SECTION VIII

GENERAL

 

8.1           Notices.

 

(a)          Notices Generally. Subject to Section 8.1(c), all notices, requests
and demands to or upon the respective parties hereto to be effective shall be in
writing (including by facsimile or .pdf), and, unless otherwise expressly
provided herein, shall be deemed to have been duly given or made (a) when
delivered by hand, (b) when transmitted via facsimile to the number set out
herein, (c) when delivered by electronic mail, when delivered, or (d) the second
Business Day following the day on which the same has been delivered prepaid to a
reputable national express air courier service, addressed as follows in the case
of the Borrower and the Lenders, or to such other address as may be hereafter
notified by the respective parties hereto:

 

If to the Borrower: Golden Queen Mining Co. Ltd.   2300 – 1066 West Hastings
Street   Vancouver, British Columbia, Canada V6E3X2   Attention: Andrée
St-Germain (Chief Financial     Officer)   Email: astgermain@goldenqueen.com    
with copies to: Morton Law LLP   1200 - 750 West Pender Street   Vancouver,
British Columbia   Canada, V6C 2T8   Attention: Edward L. Mayerhofer, Esq.  
Email: elm@mortonlaw.ca   Fax: (604) 681-9652       and       Dorsey & Whitney
LLP   1400 Wewatta Street, Suite 400   Denver, CO  80202   Attention: Kenneth
Sam, Esq.   Email: sam.kenneth@dorsey.com   Fax: (303) 629-3450   Facsimile:
(212) 755-7306     If to the Lenders: c/o East Hill Management Company   70 Main
Street   Suite 300   Petersborough, NH  03458   Email:
thomas.clay@easthillmgt.com   Fax: (603) 371-9034

 

 - 28 - 

 

 

with a copy to: Sullivan & Worcester LLP   One Post Office Square   Boston, MA
02109   Attention: William A. Levine, Esq.   Telephone: (617) 338-2921  
Facsimile: (617) 338-2880   E-mail: wlevine@sandw.com

 

(b)          Reliance by the Lenders. The Lenders shall be entitled to rely and
act upon any notices purportedly given by or on behalf of the Borrower even if
(i) such notices were not made in a manner specified herein, were incomplete or
were not preceded or followed by any other form of notice specified herein, or
(ii) the terms thereof, as understood by the recipient, varied from any
confirmation thereof. The Borrower shall indemnify each Lender from all losses,
costs, expenses and liabilities resulting from the reliance by a Lender on each
notice purportedly given by or on behalf of the Borrower, provided that such
indemnity shall not be available to the extent that such losses, costs, expenses
and liabilities have been determined in a final non-appealable judgment of a
court of competent jurisdiction to have resulted from the gross negligence or
willful misconduct of such Lender.

 

(c)          Telephone, Facsimile and E-mail Notices. Each Lender is authorized
to rely on and to act on any telephone, any facsimile-transmitted, or any e-mail
transmitted instructions concerning the transactions contemplated by the
Agreement which a Lender believes without any need to inquire or investigate as
to, or verify, the genuineness or authenticity of the instructions, to be from
the Borrower, and no Lender shall be liable to the Borrower or any third party
for so acting or refraining from acting, except in the case of gross negligence
or willful misconduct of such Lender. No Lender shall further be under any duty
to make any inquiry or investigation with respect to, or verification of, the
telephone, facsimile-transmitted or e-mail transmitted instructions, except to
confirm that its records show that the person purporting to be issuing the
instructions on behalf of the Borrower has authority to do so. No Lender shall
be under any duty or obligation to accept any telephone, facsimile, or e-mail
instructions from the Borrower, and each Lender may refuse to accept any such
instructions in its sole and absolute discretion. The Borrower shall at all
times indemnify, defend and hold each Lender, and its officers, directors,
employees, attorneys, agents, and Affiliates, harmless from all actions or
claims arising in connection with any action or failure to act with respect to
telephone, facsimile-transmitted, or e-mail transmitted instructions, except in
the case of gross negligence or willful misconduct of such Persons.

 

 - 29 - 

 

 

8.2           Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns permitted hereby, except that neither the Borrower nor
any other Loan Party may assign or otherwise transfer any of its rights or
obligations hereunder or the other Loan Documents without the prior written
consent of the Lenders. Each Lender may at any time assign all or a portion of
its rights and obligations under this Agreement. Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby)
any legal or equitable right, remedy or claim under or by reason of this
Agreement.

 

8.3           Expenses. Whether or not the transactions contemplated herein
shall be consummated, the Borrower shall:

 

(a)           reimburse the Lenders for all reasonable out-of-pocket fees,
disbursements and expenses (including all reasonable attorneys’ fees) incurred
or expended in connection with the preparation, negotiation, filing or recording
and interpretation of this Agreement and the other Loan Documents, or any
amendment, modification, approval, consent or waiver hereof or thereof, or in
connection with the enforcement of any Obligations or the satisfaction of any
Indebtedness of the Borrower hereunder or thereunder, or in connection with any
litigation, proceeding or dispute in any way related to the credit hereunder;
provided that all of the foregoing incurred in connection with this Agreement
and the transactions contemplated by Section III hereof shall not exceed
$100,000 without mutual consent.

 

(b)          reimburse LUK Holdco and Gauss for all reasonable out-of-pocket
fees, disbursements and expenses (including all reasonable attorneys’ fees)
incurred or expended in connection with the preparation, negotiation, filing or
recording and interpretation of any consents or waivers under or amendments to
that certain Transaction Agreement, dated June 8, 2014, among LUK Holdco, Gauss,
Auvergne, LLC, the Borrower and GQ California (the “Transaction Agreement”), and
any agreements related to the Transaction Agreement, provided that such
reimbursed expenses shall not exceed $15,000 without mutual consent.

 

The Borrower will pay any Taxes (including any interest and penalties in respect
thereof).

 

8.4           Indemnification. The Borrower agrees to indemnify and hold
harmless each Lender, as well as its shareholders, directors, offices, agents,
attorneys, subsidiaries and Affiliates, from and against all damages, losses,
settlement payments, obligations, liabilities, claims, suits, penalties,
assessments, citations, directives, demands, judgments, actions or causes of
action, whether statutorily created or under the common law, all reasonable
out-of-pocket costs and expenses (including, without limitation, reasonable fees
and disbursements of attorneys, engineers and consultants) and all other
liabilities whatsoever (including, without limitation, liabilities under
Environmental Laws) which shall at any time or times be incurred, suffered,
sustained or required to be paid by any such indemnified Person (except any of
the foregoing which result from the gross negligence or willful misconduct of
the indemnified Person) on account of or in relation to or any way in connection
with any of the arrangements or transactions contemplated by, associated with or
ancillary to this Agreement, the other Loan Documents or any other documents
executed or delivered in connection herewith or therewith, all as the same may
be amended from time to time, whether or not all or part of the transactions
contemplated by, associated with or ancillary to this Agreement, any of the Loan
Documents or any such other documents are ultimately consummated. In any
investigation, proceeding or litigation, or the preparation therefor, each
Lender shall select its own counsel and, in addition to the foregoing indemnity,
the Borrower agrees to pay promptly the reasonable fees and expenses of such
counsel. In the event of the commencement of any such proceeding or litigation,
the Borrower shall be entitled to participate in such proceeding or litigation
with counsel of its choice at its own expense, provided that such counsel shall
be reasonably satisfactory to each Lender. The Borrower authorizes each Lender
to charge any deposit account or Note Record which it may maintain with any of
them for any of the foregoing. The covenants of this Section 8.4 shall survive
payment or satisfaction of payment of all amounts owing with respect to the
Notes, any other Loan Document or any other Obligation.

 

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8.5           Survival of Covenants, Etc. All covenants, agreements,
representations and warranties made herein, in the other Loan Documents or in
any documents or other papers delivered by or on behalf of the Borrower pursuant
hereto shall be deemed to have been relied upon by the Lenders, notwithstanding
any investigation heretofore or hereafter made by it, and shall survive the
making by the Lenders of the Loan as herein contemplated, and shall continue in
full force and effect so long as any Obligation remains outstanding and unpaid
or a Lender has any obligations hereunder. All statements contained in any
certificate or other writing delivered by or on behalf of the Borrower pursuant
hereto or in connection with the transactions contemplated hereby shall
constitute representations and warranties by the Borrower hereunder.

 

8.6           No Waivers. No failure or delay by a Lender in exercising any
right, power or privilege hereunder, under the Notes or under any other Loan
Document shall operate as a waiver thereof; nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. No waiver shall extend to or affect any
Obligation not expressly waived or impair any right consequent thereon. No
course of dealing or omission on the part of a Lender in exercising any right
shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice
to or demand upon the Borrower shall entitle the Borrower to other or further
notice or demand in similar or other circumstances, except as otherwise
specifically provided in the Loan Documents. The rights and remedies herein and
in the Notes and the other Loan Documents are cumulative and not exclusive of
any rights or remedies otherwise provided by agreement or law.

 

8.7           Amendments, Waivers, etc. Neither this Agreement nor the Notes nor
any other Loan Document nor any provision hereof or thereof may be amended,
waived, discharged or terminated except by a written instrument signed by each
Lender, and, in the case of amendments, by the Borrower.

 

8.8           Lost Note, Etc. Upon receipt of an affidavit of a Lender as to the
loss, theft, destruction or mutilation of a Note and, in the case of any such
loss, theft, destruction or mutilation, upon cancellation of a Note, if
available, the Borrower will issue, in lieu thereof, a replacement Note in the
same principal amount thereof and otherwise of like tenor.

 

 - 31 - 

 

 

8.9           Captions; Counterparts. The captions in this Agreement are for
convenience of reference only and shall not define or limit the provisions
hereof. This Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when so
executed and delivered shall be an original, but all of which together shall
constitute one instrument. In proving this Agreement it shall not be necessary
to produce or account for more than one such counterpart signed by the party
against whom enforcement is sought. This Agreement shall become effective when
it shall have been executed by the Lenders and when the Lenders shall have
received counterparts hereof that, when taken together, bear the signatures of
each of the other parties hereto.

 

8.10         Entire Agreement, Etc. The Loan Documents and any other documents
executed in connection herewith or therewith express the entire understanding of
the parties with respect to the transactions contemplated hereby and supersede
all prior agreements with respect to the subject matter hereof.

 

8.11         Waiver of Jury Trial. THE BORROWER AND EACH LENDER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THEIR RIGHT TO A JURY TRIAL WITH
RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH
THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR
OBLIGATIONS HEREUNDER OR THEREUNDER, THE PERFORMANCE OF SUCH RIGHTS AND
OBLIGATIONS OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY INCLUDING, WITHOUT LIMITATION, ANY
COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF A LENDER
RELATING TO THE ADMINISTRATION OR ENFORCEMENT OF THE LOAN AND THE LOAN
DOCUMENTS, AND AGREE THAT THEY WILL NOT SEEK TO CONSOLIDATE ANY SUCH ACTION WITH
ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.

 

EXCEPT AS PROHIBITED BY LAW, THE BORROWER AND EACH LENDER HEREBY WAIVE ANY RIGHT
THEY MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING
SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY
DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.

 

THE BORROWER (a) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF A LENDER
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT ANY LENDER WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (b) ACKNOWLEDGES THAT
EACH LENDER HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS TO WHICH EACH IS A PARTY BECAUSE OF, AMONG OTHER THINGS, THE
BORROWER’S WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.

 

8.12         Governing Law. This Agreement and each of the other Loan Documents
are contracts under the laws of the State of New York and shall for all purposes
be construed in accordance with and governed by the laws of said State without
reference to its conflict or choice of laws principles (other than Sections
5-1401 and 5-1402 of the New York General Obligations Law, which shall apply to
this Agreement).

 

 - 32 - 

 

 

8.13         Jurisdiction; Consent to Service of Process. (a) The Borrower
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of the Supreme Court of the State of New York
sitting in New York County and of the United States District Court for the
Southern District of New York, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to any Loan Document, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final, non-appealed judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement or any other Loan Document shall affect any right that the Borrower or
the Lenders may otherwise have to bring any action or proceeding relating to
this Agreement or any other Loan Document against any other party hereto or
their properties in the courts of any jurisdiction.

 

(b)          The Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or any other Loan Document in any
court referred to in paragraph (a) of this Section 8.13. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.

 

(c)          Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 8.1. Nothing in this
Agreement or any other Loan Document will affect the right of any party to this
Agreement to serve process in any other manner permitted by law. The Borrower
hereby appoints Holdings as its authorized agent solely to receive for and on
its behalf service of summons or other legal process in any action, suit or
proceeding in any court specified in this Section.

 

(d)          By its execution hereof, the Borrower irrevocably designates and
appoints Holdings as its agent for service of process as its authorized to
receive, accept, and forward on its behalf service of process in any such
proceeding; and by its execution of an acknowledgment hereto, Holdings accepts
such appointment. Service of process, writ, judgment, or other notice of legal
process upon Holdings shall be deemed and held in every respect to be effective
personal service upon the Borrower. The Borrower shall maintain such appointment
(or that of a successor satisfactory to the Lenders) continuously in effect at
all times while the Borrower is obligated hereunder or under the Notes or any
other Loan Document. Nothing herein shall affect the Lenders’ right to serve
process in any other manner permitted by applicable law.

 

 - 33 - 

 

 

8.14         Judgment Currency. This is an international loan transaction in
which the specification of Dollars is of the essence, and such currency shall be
the currency of account in all events. The payment obligations of the Borrower
hereunder and under the Notes or any other Loan Document shall not be discharged
by an amount paid in another currency, whether pursuant to a judgment or
otherwise, to the extent that the amount so paid on prompt conversion to Dollars
in the United States of America under normal banking procedures does not yield
the amount of Dollars then due. In the event that any payment by the Borrower,
whether pursuant to a judgment or otherwise, upon conversion and transfer, does
not result in the payment of such amount of Dollars at the place such amount is
due, the Lenders shall be entitled to demand immediate payment of, and shall
have a separate cause of action against the Borrower for, the additional amount
necessary to yield the amount of Dollars then due. In the event the Lenders,
upon the conversion of such judgment into Dollars, shall receive (as a result of
currency exchange rate fluctuations) an amount greater than that to which it was
entitled, the Borrower shall be entitled to immediate reimbursement of the
excess amount.

 

8.15         Severability. The provisions of this Agreement are severable and if
any one clause or provision hereof shall be held invalid or unenforceable in
whole or in part in any jurisdiction, then such invalidity or unenforceability
shall affect only such clause or provision, or part thereof, in such
jurisdiction, and shall not in any manner affect such clause or provision in any
other jurisdiction, or any other clause or provision of this Agreement in any
jurisdiction.

 

8.16         Effect of Amendment and Restatement. As of the Closing Date, this
Agreement shall amend and restate the Existing Agreement, and the rights and
obligations of the parties under the Existing Agreement shall be subsumed within
and be governed by this Agreement; provided, however, that (1) all obligations
and other liabilities of the Loan Parties under the Existing Agreement shall
remain outstanding hereunder, shall constitute continuing Obligations, and this
Agreement shall not be deemed to evidence or result in a novation or repayment
and reborrowing of such Obligations and other liabilities and (2) this Agreement
shall not in any way impair or otherwise affect the rights or obligations of the
parties thereunder (including with respect to the Loans and the representations
and warranties made thereunder) except as such rights or obligations are amended
or modified hereby. The Existing Agreement as amended and restated hereby shall
be deemed to be a continuing agreement among the parties, and all documents,
instruments and agreements delivered pursuant to or in connection with the
Existing Agreement not amended and restated in connection with the entry of the
parties into this Agreement shall remain in full force and effect, each in
accordance with its terms.

 

 - 34 - 

 

 

IN WITNESS WHEREOF, the undersigned have duly executed this Agreement under seal
as of the date first above written.

 

  BORROWER:         GOLDEN QUEEN MINING CO. LTD.         By: /s/ Brenda Dayton  
  Name: Brenda Dayton     Title: Corporate Secretary

 

  ACKNOWLEDGED AND AGREED FOR
PURPOSES OF SECTION 8.13:         GOLDEN QUEEN MINING HOLDINGS, INC.        
By:   /s/ Andrée St-Germain     Name: Andrée St-Germain     Title: Chief
Financial Officer

  

[Signature page to Amended and Restated Term Loan Agreement]

 

 

  LENDERS:         THE LANDON T. CLAY 2009   IRREVOCABLE TRUST DATED   MARCH 6,
2009         By: /s/ Thomas M. Clay     Thomas M. Clay, Trustee

 

  EHT, LLC         By: /s/ Jonathan C. Clay      Jonathan C. Clay, Manager

 

  THE CLAY FAMILY 2009
IRREVOCABLE TRUST DATED
APRIL 14, 2009         By:   /s/ Thomas M. Clay     Thomas M. Clay, Trustee

 

[Signature page to Amended and Restated Term Loan Agreement]

 

 

Schedule 2.1(a)

 

Loan Allocation

 

Name of Lender   Percentage   LTC Lender   59.67 % EHT Lender   25 % CFT Lender
  15.33 % Total:   100 %

 

 

 

 

Schedule 4.2

 

No Conflict

 

None.

 

 

 

 

Schedule 4.3

 

Governmental Authorizations

 

None.

 

 

 

 

Schedule 4.6

 

Litigation

 

None.

 

 

 

 

Schedule 4.7

 

No Defaults

 

Under Section 4.12 of the Transaction Agreement dated June 8, 2014, among Gauss
Holdings LLC, Auvergne, LLC, Gauss LLC, Golden Queen Mining Company, Inc. and
Golden Queen Mining Co. Ltd., the Borrower was to commence a rights offering by
filing a registration statement with the United States Securities and Exchange
Commission no later than 30 days following the Closing Date (September 15,
2014). The Borrow has not commenced the rights offering.

 

Under Section 5(a)(iv) of the Standby Purchase Agreement dated June 8, 2014,
among Gauss Holdings LLC, Auvergne, LLC and Golden Queen Mining Co. Ltd., the
Borrower was to file a registration statement with the United States Securities
and Exchange Commission related to a rights offering no later than 30 days
following the Closing Date (September 15, 2014). The Borrow has not commenced
the rights offering.

 

 

 

 

Schedule 4.12

 

Subsidiaries; Loan Parties

 

  Ownership
Interest   EIN/Corp. Number

Golden Queen Mining Company, LLC, a California limited liability company

 

15772 K Street

Mojave, California, 93501 

 

50%

(indirect)

 

Federal Employer Identification Number: 47-1904841

California Taxpayer Identification Number: 026-1672-0

Secretary Of State Entity Number: 201425310169

 

Golden Queen Mining Holdings, Inc., a California corporation

 

15772 K Street

Mojave, California, 93501

 

  100% (indirect)  

CALIFORNIA CORPORATE NUMBER: C3698788

 

Golden Queen Mining Canada Ltd., a British Columbia corporation

 

1200-750 West Pender Street

Vancouver, BC, V6C 2T8

 

100%

 

  Incorporation certificate number: BC1024587

 

 

 

 

Schedule 6.1(e)

 

Existing Indebtedness

 

1.Golden Queen Mining Co. Ltd. (the “Company”) is party to a Corporate Guaranty
in the amount of $891,831 in favour of Atlas Copco Customer Finance USA LLC
(“Atlas”), in connection with a Loan and Security Agreement entered into between
Golden Queen Mining Company, LLC (“GQM LLC”) and Atlas.  The Company is a party
to a second Corporate Guaranty in the amount of $1,002,285 in favour of Atlas in
connection with a loan and security agreement entered into between GQM LLC and
Atlas in November, 2016.

 

2.The Company is a guarantor of surety bonds of GQM LLC in the amounts of
$1,210,889 and $278,240 in favour of the Lahontan Regional Water Quality Control
Board for closure and reclamation costs, and in the amount of $1,464,592 in
favour of the Department of Conservation Office of Mine Reclamation and the
Country of Kern.