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Exhibit 10.10

 
[***] Represents material which has been redacted and filed separately with the
Commission pursuant to a request for confidential treatment pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
 
GOLDEN PHOENIX MINERALS, INC.
 
as Borrower
 

 
THE GUARANTORS
 
FROM TIME TO TIME PARTY HERETO
 
as Guarantors
 

 
and
 

 
WATERTON GLOBAL VALUE, L.P., BY THE GENERAL PARTNER OF ITS GENERAL PARTNER,
CORTLEIGH LIMITED
 
as Lender
 

 

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SENIOR SECURED GOLD STREAM CREDIT AGREEMENT
 
September 26, 2011
 

 
as an amendment and restatement of that certain
 
BRIDGE LOAN AGREEMENT
 
Dated August 3, 2011
 

 

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TABLE OF CONTENTS
 
 

 
ARTICLE 1 INTERPRETATION
2
Section 1.1
Defined Terms
2
Section 1.2
Other Usages
17
Section 1.3
Gender and Number
17
Section 1.4
Headings, etc
18
Section 1.5
Currency
18
Section 1.6
Meaning of certain terms
18
Section 1.7
Certain Phrases, etc
18
Section 1.8
Accounting Terms
18
Section 1.9
Incorporation of Schedules
18
Section 1.10
Conflict
19
Section 1.11
Certificates
19
ARTICLE 2 LOAN
19
Section 2.1
Fees
19
Section 2.2
Advances of the Loan
19
Section 2.3
Borrowing Procedure
20
Section 2.4
Repayment
20
Section 2.5
Use of Proceeds
20
Section 2.6
Lender’s Loan Records
21
ARTICLE 3 PROCEDURE AND PAYMENTS
21
Section 3.1
Payments
21
ARTICLE 4 PREPAYMENTS
22
Section 4.1
Mandatory Prepayments
22
Section 4.2
Change of Control or Exercise of Option Agreement
22
Section 4.3
Voluntary Prepayments
23
ARTICLE 5 PAYMENTS UNDER THIS AGREEMENT
24
Section 5.1
Payments
24
ARTICLE 6 CONDITIONS OF LENDING
25
Section 6.1
Conditions Precedent for Advance of Loans
25
Section 6.2
No Waiver
31
ARTICLE 7 REPRESENTATIONS AND WARRANTIES
31
Section 7.1
Representations and Warranties
31
Section 7.2
Survival of Representations and Warranties
40

 
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Article 8 COVENANTS OF THE BORROWER
40
Section 8.1
Affirmative Covenants
40
Section 8.2
Negative Covenants
45
ARTICLE 9 EVENTS OF DEFAULT
47
Section 9.1
Events of Default
47
Section 9.2
Acceleration
50
Section 9.3
Remedies
50
ARTICLE 10 MISCELLANEOUS
51
Section 10.1
Amendments, etc
51
Section 10.2
Waiver
51
Section 10.3
Evidence of Debt and Borrowing Notices
51
Section 10.4
Notices, etc
51
Section 10.5
Costs, Expenses General Indemnity and Environmental Indemnity
52
Section 10.6
Release
54
Section 10.7
Taxes and Other Taxes
55
Section 10.8
Successors and Assigns
56
Section 10.9
Right of Set-off
56
Section 10.10
Judgment Currency
57
Section 10.11
Interest on Amounts
57
Section 10.12
Governing Law and Waiver of Jury Trial
57
Section 10.13
Counterparts
58
Section 10.14
Severability
58
Section 10.15
Governing Language
58
Section 10.16
Survival of Representations and Warranties
58
Section 10.17
Entire Agreement; Schedules and Exhibits
58
Section 10.18
Credit Party Joint and Several Liability
59
Section 10.19
Further Assurances
59
Section 10.20
Acknowledgements
59
Section 10.21
Amendment and Restatement
59

 
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TABLE OF SCHEDULES AND EXHIBITS

 
SCHEDULES
   
Schedule 1.1(a)
Leases, Mineral Ridge Project, Mining Properties, Mining Claims, Santa Rosa
Project
Schedule 1.1(b)
Repayment Schedule
Schedule 1.1(c)
Santa Rosa Acquisition Agreement
Schedule 1.1(e)
Material Contracts
Schedule 1.1(f)
Liens
Schedule 6.1(g)
Financial Statements
Schedule 7.1(a)
Jurisdictions of Incorporation
Schedule 7.1(w)
Tax Liability
Schedule 7.1(x)
Corporate Structure
Schedule 7.1(aa)
Debt
Schedule 7.1(cc)
Litigation
Schedule 7.1(dd)(i)
Other Jurisdictions
Schedule 7.1(dd)(ii)
Authorizations
Schedule 7.1(dd)(iii)
Trademarks, Trade names, Copyrights and Patents
Schedule 7.1(dd)(iv)
Actions, Suits, Arbitrations or Proceedings
Schedule 7.1(dd)(v)
Contracts with Potential Material Adverse Effect
Schedule 7.1(dd)(vi)
Labour Agreements
Schedule 7.1(dd)(vii)
Bank Account Details
Schedule 7.1(gg)
Broker’s Fees
Schedule 7.1(jj)
Permitted Affiliate Transactions
Schedule 7.1(ll)
Project Permits
Schedule 8.1(m)
Insurance

 

 

 
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EXHIBITS
 
Exhibit A
Form of Borrowing Notice
Exhibit B
Form of Compliance Certificate
Exhibit C
Form of Gold Supply Agreement
Exhibit D
Form of Omnibus Certificate
Exhibit E
Form of Solvency Certificate

 

 

 

 
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SENIOR SECURED GOLD STREAM CREDIT AGREEMENT
 

 
This SENIOR SECURED GOLD STREAM CREDIT AGREEMENT is dated September 26, 2011
(the “Effective Date”) and entered into by and between GOLDEN PHOENIX MINERALS,
INC., a corporation incorporated pursuant to the laws of the State of Nevada, as
the borrower (the “Borrower”), each person that accedes to the terms of this
Agreement from time to time by executing a Guarantee, as a guarantor (each a
“Guarantor” and, collectively, the “Guarantors”) and WATERTON GLOBAL VALUE,
L.P. by the general partner of its general partner, Cortleigh Limited, as the
lender (the “Lender”).
 

 
RECITALS
 
A.           The Lender and the Borrower entered into that certain Bridge Loan
Agreement dated as of August 3, 2011 (the “Existing Agreement”), whereby the
Lender agreed to loan up to U.S. One Million Dollars ($1,000,000) to the
Borrower on the terms and conditions set forth therein (with any and all loans
outstanding as of the date of this Agreement being referred to as the “Existing
Loan”).
 
B.           The Borrower desires to amend, restate, modify, extend and continue
the Existing Agreement, and the Borrower desires that the Lender make available
a senior secured non-revolving loan up to an aggregate amount of U.S. Fifteen
Million Five Hundred Thousand Dollars ($15,500,000), in five separate tranches,
upon the terms hereof and subject to the satisfaction of the conditions
precedent contained herein (the “Loan”).  The Existing Loan shall remain and
continue as a Loan under this Agreement.  The Borrower shall use the proceeds of
the Loan as set forth herein.
 
C.           The Borrower shall use the proceeds of the Loan to acquire,
maintain, develop and advance its interest in the Santa Rosa Project (defined
below) located in Panama, including the payment of amounts due in order to
obtain and maintain the Borrower’s interest therein.
 
D.           This Agreement and the Loan are secured by the Security Documents
and Liens on the Collateral in favour of the Lender, which Liens, and the
associated Security Documents, shall be ratified, continued and affirmed, and
the Borrower shall provide additional security on and over the Santa Rosa
Project in Panama, which the Borrower shall acquire using proceeds of the
Loan.  The Borrower and the Guarantor shall remain liable for the payment and
performance of all obligations hereunder and under the other Credit Documents.
 
E.           Until the Effective Date, the Existing Agreement shall remain in
full force and effect in accordance with its terms and this Agreement shall have
no effect.
 
F.           Effective as of the Effective Date, the Existing Agreement is
amended, modified, continued and restated in its entirety as set forth in this
Agreement, and this Agreement shall be in full force and effect.
 
NOW, THEREFORE, in consideration of the premises and the agreements, provisions
and covenants herein contained and other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties hereby
agree as follows:
 

 
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Article 1
 
INTERPRETATION
 
Section 1.1                      Defined Terms.
 
As used in this Agreement, the following terms have the following meanings:
 
“Additional Guarantor” means any Person which becomes a Guarantor in accordance
with Section 8.1(w).
 
“Advances” means advances of a Loan made by the Lender pursuant to Section 2.2
and “Advance” means any one of such advances.
 
“Affairs” means the business, affairs, operations, undertaking, property,
assets, liabilities, condition (financial or otherwise), prospects, performance
and results of operations of a specified Person.
 
“Affiliate” means an affiliated body corporate and, for the purposes of this
Agreement, (i) one body corporate is affiliated with another body corporate if
one such body corporate is the subsidiary of the other or both are subsidiaries
of the same body corporate or each of them is Controlled by the same Person and
(ii) if two bodies corporate are affiliated with the same body corporate at the
same time, they are deemed to be affiliated with each other.
 
“Agreed Priority” means, with respect to a Security Document and a Lien made in
favour of the Lender, a senior first priority Lien in favour of the Lender,
meaning that such Security Document and Lien are prior in right to any other
Lien in, on or to the Collateral which is purported to be covered thereby,
subject only, in each case, to Permitted Liens.  For the avoidance of doubt, the
Loan and the Obligations shall be secured by a first ranking perfected
encumbrance over (i) all real property and personal property of the Borrower;
(ii) 100% of the shares or Equity Interests of Mineral Ridge LLC owned by the
Borrower; and (iii) all of Borrower’s right, title and interest in and to the
Santa Rosa Subsidiary and the Santa Rosa Project, as hereafter acquired.
 
“Agreement” means this senior secured gold stream credit agreement, which
amends, restates and replaces the Existing Agreement, and all schedules and
instruments in amendment or confirmation of it; and the expressions “Article”,
“Section”, “Subsection” and “paragraph” followed by a number mean and refer to
the specified Article, Section, Subsection or paragraph of this Agreement.
 
“Applicable Law” means any international treaty, any domestic or foreign
constitution or any supranational, national, regional, federal, provincial,
territorial, state, municipal, tribal or local statute, law, ordinance, code,
rule, regulation, order (including any consent decree or administrative order),
applicable to, or any directive, guideline, policy or Authorization of any
Governmental Entity having jurisdiction with respect to any specified Person,
property, transaction or event or any of such Person’s Affairs, and any order,
judgment, award or decree of any Governmental Entity, or arbitrator in any
proceeding or action to which the Person in question is a party or by which such
Person or any of its Affairs is bound.
 
“Applicable Securities Legislation” means, at any time, all securities laws and
the respective rules and regulations under such laws together with applicable
published fee schedules, prescribed forms, policy statements, national or
multilateral instruments, orders, blanket rulings and other applicable
regulatory instruments of the securities regulatory authorities applicable to
the Borrower or to which it is subject.
 

 
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“Authorization” means any authorization, approval, consent, exemption, licence,
permit, franchise, certification, registration or no-action letter from any
Governmental Entity having jurisdiction with respect to any specified Person,
property, transaction or event, or any of such Person’s Affairs or from any
Person in connection with any easements or contractual rights.
 
“Availability Period” means the period starting on the Effective Date and ending
on the day immediately preceding the first day of the Repayment Period.
 
“Bankruptcy Code” shall mean the Bankruptcy Code in Title 11 of the United
States Code, as amended, modified, succeeded or replaced from time to time.
 
“Bankruptcy Laws” shall mean the Bankruptcy Code and all other Applicable Laws
pertaining or applicable to bankruptcy, insolvency, debtor relief, debtor
protection, liquidation, reorganization, winding up, arrangement, receivership,
administration, moratorium, assignment for the benefit of creditors or other
similar laws applicable in the United States, Canada or other applicable
jurisdictions as in effect from time to time.
 
“Borrower” means Golden Phoenix Minerals, Inc., a corporation incorporated and
existing under the laws of the State of Nevada, and its successors and permitted
assigns.
 
“Borrower Control Agreement” means an account control agreement relating to the
Borrower’s bank accounts to be entered into among the Lender, the Borrower and
the Borrower’s bank or financial institution.
 
“Borrower’s Account” means, collectively, each bank account or other deposit
account owned or held by the Borrower or for the benefit of the Borrower.
 
“Borrowing Notice” means a written request by the Borrower for a Loan pursuant
to Section 2.3, which shall include all of the information referenced in Section
2.3 and a certification from the Borrower, substantially in the form of Exhibit
A hereto.
 
“Buildings and Fixtures” means all plant, buildings, structures, erections,
improvements, appurtenances and fixtures (including fixed machinery and fixed
equipment) situate on any of the Subject Properties.
 
“Business” means the business of the Borrower as conducted as at the date
hereof.
 
“Business Day” means any day of the year, other than a Saturday, Sunday or any
day on which major banks are closed for business in Toronto, Ontario.
 
“Capital Lease” means, with respect to a Person, a lease or other arrangement in
respect of real or personal property that is required to be classified and
accounted for as a capital lease or debt obligation on a balance sheet of the
Person in accordance with GAAP.
 
“Capital Lease Obligation” means, with respect to a Person, the obligation of
the Person to pay rent or other amounts under a Capital Lease and for the
purposes of this definition, the amount of such obligation at any date shall be
the capitalized amount of such obligation at such date as determined in
accordance with GAAP.
 
“Cash Payment Amount” means [***].
 

 
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“Change of Control” means the occurrence of any of the following events:
 
 
(a)
Any “person” or “persons acting jointly or in concert” as defined under
applicable securities laws or regulations becomes the record or beneficial owner
of more than fifty percent (50%) of the total voting power attached to all
Voting Shares of the Borrower then outstanding;

 
 
(b)
there is consummated any amalgamation, consolidation, statutory arrangement
(involving a business combination) or merger of a Credit Party (1) in which the
Credit Party is not the continuing or surviving corporation or (2) pursuant to
which any Voting Shares of a Credit Party would be reclassified, changed or
converted into or exchanged for cash, securities or other property, other than
(in each case) an amalgamation, consolidation, statutory arrangement or merger
of a Credit Party in which the holders of the Voting Shares of such Credit Party
immediately prior to the amalgamation, consolidation, statutory arrangement or
merger have, directly or indirectly, more than 50% of the Voting Shares of the
continuing or surviving corporation immediately after such transaction; or

 
 
(c)
any Person or group of Persons shall succeed in having a sufficient number of
its nominees elected as Directors such that such nominees, when added to any
existing Directors after such election who was a nominee of or is an Affiliate
or related Person of such Person or group of Persons, will constitute a majority
of the Directors.

 
“Collateral” means any and all real and personal property, assets, rights,
titles and interests in respect of which the Lender has or will have a Lien
pursuant to a Security Document, whether tangible or intangible, presently held
or hereafter acquired, and all products and proceeds of the foregoing, including
insurance proceeds related to the foregoing.
 
“Commitment Amount” means US Fifteen Million Five Hundred Thousand Dollars
($15,500,000).
 
“Common Shares” means the common shares in the capital of a Person.
 
“Compliance Certificate” means a certificate of the Borrower substantially in
(i) the form of Exhibit B, signed on its behalf by its chief financial officer
or any other officer acceptable to the Lender or (ii) such other form as the
Lender may determine.
 
“Consent” means that certain Consent, Waiver and Subordination dated August 3,
2011 among the Borrower, the Lender, Mineral Ridge LLC and Scorpio Gold (US)
Corporation, together with all amendments, modifications, supplements and
revisions thereof in accordance with its terms.
 
“Contaminant” means any solid, liquid, gas, odour, heat, sound, vibration,
radiation or combination of any of them that may (i) injure or damage property
or plant or animal life, (ii) harm or cause a nuisance to any Person, (iii)
adversely affect the health of any individual, (iv) impair the safety, of any
individual, (v) render any property or plant or animal life unfit for use by
humans, (vi) cause loss of enjoyment of normal use of property, or (vii)
interfere with the normal course of business, and includes any “Contaminant”
within the meaning assigned to such term (or any similar term) in any
Environmental Law applicable to the Mining Properties or the Borrower.
 
“Contingent Liability” means, with respect to a Person, any agreement,
undertaking or arrangement by which the Person guarantees, endorses or otherwise
becomes or is contingently liable upon (by direct or indirect agreement,
contingent or otherwise, to provide funds for payment, to supply funds to, or
otherwise to invest in a debtor, or otherwise to assure a creditor against loss)
the obligation, debt or other liability of any other Person or guarantees the
payment of dividends or other distributions upon the shares of any Person.  The
amount of any contingent liability will, subject to any limitation contained
therein, be deemed to be the outstanding principal amount (or maximum principal
amount, if larger) of the obligation, debt or other liability to which the
contingent liability is related.
 

 
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“Control” of any Person means:
 
 
(a)
the power (whether by way of ownership of shares, proxy, contract, agency or
otherwise) to:

 
 
(i)
cast, or control the casting of, more than 50% of the maximum number of votes
that might be cast at a general meeting of such Person; or

 
 
(ii)
appoint or remove all, or the majority, of the directors or other equivalent
officers of such Person; or

 
 
(iii)
give directions with respect to the operating and financial policies of such
Person with which the directors or other equivalent officers of such Person are
obliged to comply; and/or

 
 
(b)
the holding beneficially of more than 50% of the issued share capital of such
Person.

 
“Credit Documents” means this Agreement, the Security Documents, the Guarantees,
each Borrowing Notice, each Compliance Certificate, the Supply Agreement, and
each other Instrument executed by the Borrower or other Credit Party in
connection with this Agreement, the Existing Agreement or any of the foregoing
Instruments, whether or not specifically identified in this clause, as any of
the foregoing may be amended, modified, supplemented, extended or restated from
time to time in accordance with their respective terms.
 
“Credit Parties” means, collectively, the Borrower and each Guarantor, and
“Credit Party” means any of them, together with their permitted successors and
assigns.
 
“Debt” of any Person means:
 
 
(a)
all obligations of the Person for borrowed money, including debentures, notes or
similar instruments and other financial instruments and obligations with respect
to bankers’ acceptances and contingent reimbursement obligations relating to
letters of credit;

 
 
(b)
all Financial Instrument Obligations of the Person;

 
 
(c)
all Capital Lease Obligations and Purchase Money Obligations of the Person;

 
 
(d)
all obligations to pay the deferred and unpaid purchase price of property or
services, which purchase price is due and payable more than six months after the
date of placing such property or service or taking delivery at the completion of
such services;

 
 
(e)
all indebtedness of any Person secured by a Lien on any assets of such Person;

 
 
(f)
all obligations to repurchase, redeem or repay any shares of such Person; and

 

 
5

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(g)
all Contingent Liabilities of the Person with respect to obligations of another
Person if such obligations are of the type referred to in paragraphs (a) to (g).

 
“Default” means an event which, with the giving of notice or passage of time, or
the making of any determination or any combination of the foregoing, would
constitute an Event of Default.
 
“Direct Agreement” means a direct agreement entered into by a Credit Party, the
counterparty to a Material Contract and the Lender in respect of the assignment
of the rights of the Borrower, and the exercise of step-in rights by the Lender
under, such Material Contract, in form and substance satisfactory to the Lender,
acting reasonably.
 
“Director” means a director of a Credit Party and “Directors” means the board of
directors of a Credit Party or, whenever duly empowered, a committee of the
board of directors of a Credit Party, and reference to action by the Directors
means action by the directors as a board or action by such a committee of the
board as a committee.
 
“Disposal” means a sale, lease, release, abandonment, licence, exchange,
transfer, loan, grant, option or other disposal by a Person of any asset,
undertaking or business (whether by a voluntary or involuntary single
transaction or series of transactions) and “Dispose” shall have a corresponding
meaning.
 
“Disposal Proceeds” means, the consideration receivable by a Credit Party for
any Disposal made by such Credit Party, after deducting any reasonable expenses
which are incurred by the Credit Party with respect to such Disposal.
 
“Distribution” has the meaning specified in Section 8.2(g).
 
“Dollars” and “$” means lawful money of the United States of America.
 
“Effective Date” means September 26, 2011 or such other date as the parties may
agree.
 
“Environmental Claims” means, all liabilities, (including costs of remedial
actions, natural resource damages and costs and expenses of investigation and
feasibility studies, including the cost of environmental consultants and cost of
legal fees) that may be imposed on, incurred by, or asserted against a Credit
Party as a result of, or related to, any claim, suit, action, investigation,
proceeding or demand by any Person, whether based in contract, tort, implied or
express warranty, strict liability, criminal or civil statute or common law or
otherwise, arising under any Environmental Law, any Release or threatened
Release of Hazardous Materials, or in connection with any environmental, health
or safety condition and resulting from the ownership, lease, sublease or the
operation or occupation of property by any Credit Party whether on, prior or
after the date hereof.
 
“Environmental Laws” means any Applicable Law relating to pollution or
protection of the environment, ecology or public health or safety and the Mining
Properties, including, Applicable Laws relating to emissions, discharges,
Releases or threatened Releases of Hazardous Materials or other pollutants,
Contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including, ambient air, surface water, ground water, land
surface or subsurface strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials, pollutants, Contaminants, chemicals or
industrial, toxic or hazardous substances or wastes.
 

 
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“Equity Financing Transaction” means an equity issuance of common shares of the
Borrower for net cash proceeds of at least $8,000,000.00.
 
“Equity Interest Pledge Agreement” means (i) that certain Pledge Agreement dated
August 3, 2011, from the Borrower to and in favor of the Lender with respect to
the Borrower’s 30% interest in Mineral Ridge LLC, as amended and restated by
that certain Amended and Restated Pledge Agreement of even date herewith (ii)
the pledge, public deed, notarial deed or other Instrument with respect to
Borrower’s ownership of Santa Rosa Subsidiary, (iii) a pledge agreement from the
Borrower to and in favor of the Lender with respect to the Borrower’s ownership
of Ra Resources Ltd., and (iv) any other Instruments given or to be given by a
Credit Party for the benefit of the Lender that creates a Lien on and with
respect to the Equity Interests of a Credit Party or other Person in order to
secure the Obligations, together, in each case, with all amendments,
modifications, supplements and revisions thereof in accordance with its terms,
together with all other Instruments now or hereafter filed, recorded or
delivered to formalize, authorize and perfect the security interests granted
therein.
 
“Equity Interests” means, with respect to any Person, shares of capital stock of
(or other ownership or profit interests in) such Person, 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,
securities convertible into or exchangeable for shares of capital stock of (or
other ownership or profit interests in) such Person or warrants, rights or
options for the purchase or acquisition from such Person of such shares (or such
other interests), and all of the other ownership or profit interests in such
Person (including, without limitation, partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares, warrants,
options, rights or other interests are outstanding on any date of determination.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, and the rules
and regulations thereunder, each as amended or modified from time to time.
 
“Event of Default” has the meaning specified in Section 9.1.
 
“Exchange” means the OTC:BB or any other stock exchange on which the Borrower’s
securities may be listed from time to time.
 
“Existing Agreement” shall have the meaning given thereto in the Recitals.
 
“Existing Loan” shall have the meaning given thereto in the Recitals.
 
“Expropriation Event” means the appropriation, confiscation, expropriation,
cancellation, seizure or nationalization (by Applicable Law, intervention, court
order, condemnation, exercise of eminent domain or other action or form of
taking) of ownership or control of a Credit Party or any of its Subsidiaries or
of a Mining Property, or any substantial portion thereof, or any substantial
portion of the rights related thereto, or any substantial portion of the
economic value thereof, or which prevents or materially interferes with the
ability of a Person to own or operate the property subject to such action,
including by the imposition of any Tax, fee, charge or royalty.
 
“Fees” means the Structuring Fee and all other fees (if any) payable by the
Borrower under this Agreement.
 

 
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“Financial Instrument Obligations” means, with respect to any Person,
obligations arising under:
 
 
(a)
any interest rate swap agreement, forward rate agreement, floor, cap or collar
agreement, future or option, insurance or other similar agreement or
arrangement, or any combination thereof, entered into or guaranteed by the
Person where the subject matter thereof is interest rates or the price, value or
amount payable thereunder is dependent or based upon interest rates or
fluctuations in interest rates in effect from time to time (but excluding
non-speculative conventional floating rate indebtedness);

 
 
(b)
any currency swap agreement, cross-currency agreement, forward agreement, floor,
cap or collar agreement, future or option, insurance or other similar agreement
or arrangement, or any combination thereof, entered into or guaranteed by the
Person where the subject matter thereof is currency exchange rates or the price,
value or amount payable thereunder is dependent or based upon currency exchange
rates or fluctuations in currency exchange rates in effect from time to time; or

 
 
(c)
any agreement for the making or taking of any commodity, swap agreement, floor,
cap or collar agreement or commodity future or option or other similar agreement
or arrangement, or any combination thereof, entered into or guaranteed by the
Person where the subject matter thereof is any commodity or the price, value or
amount payable thereunder is dependent or based upon the price or fluctuations
in the price of any commodity;

 
or any other similar transaction, including any option to enter into any of the
foregoing, or any combination of the foregoing, in each case to the extent of
the net amount due or accruing due by the Person under the obligations
determined by marking the obligations to market in accordance with their terms.
 
“Financial Assistance” has the meaning specified in Section 8.2(h).
 
“Financial Quarter” means, a period of three consecutive months in each
Financial Year ending on March 31, June 30, September 30 and December 31, as the
case may be, of such year.
 
“Financial Year” means, in relation to the Borrower, its financial year
commencing on January 1 of each calendar year and ending on December 31 of such
year.
 
“Full Prepayment Amount” means, at any time, [***].
 
“GAAP” means generally accepted accounting principles in the United States of
America, consistently applied.
 
“Gold” means gold of a purity of at least .995 fine, and otherwise of grade and
quality conforming to the stated requirements for good delivery in the London
Bullion Market Association.
 
“Governmental Entity” means any, (i) multinational, national, federal,
provincial, state,  territorial, municipal, local, tribal, aboriginal, native or
other government, governmental or public department, central bank, court,
commission, board, bureau, agency, instrumentality or regulatory authority,
domestic or foreign, (ii) any subdivision or authority of any of the foregoing,
or (iii) any quasi-governmental or private body exercising any regulatory,
judicial, expropriation or taxing authority under or for the account of any of
the above.
 

 
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“Guarantees” means the Guarantee from any Guarantor to and in favour of the
Lender and each other guarantee by a Guarantor in favour of the Lender to be
delivered in connection with this Agreement and any other Credit Document or any
of the transactions contemplated herein or therein, together with all
amendments, modifications, supplements, extensions and restatements thereof in
accordance with its terms.
 
“Guarantors” means each Person that accedes to the terms of this Agreement from
time to time by executing a Guarantee, and each Additional Guarantor, and
“Guarantor” means any one of them.
 
“Hazardous Material” means any substance or mixture of substances, or any
pollutant or Contaminant, toxic or dangerous waste or hazardous material, as
defined or listed in, or otherwise classified pursuant to, or give rise to
liability under, any Environmental Law or applicable regulations, including any
“hazardous substance”, “hazardous material”, “hazardous waste”, “toxic
substance”, “Contaminant”, “pollutant” or any other similar formulation intended
to define, list or classify substances by reason of deleterious properties such
as ignitability, corrosiveness, reactivity, carcinogenicity, toxicity or
dangerousness.
 
“Hedging Agreement” means (i) any currency exchange or interest rate swap
agreement, currency exchange or interest rate cap agreement or currency exchange
or interest rate collar agreements between any Credit Party and any other Person
and (ii) all net forward sale, put/call options, spot deferred sale or other
similar arrangement or agreement relating to the sale or purchase of any
commodity.
 
“Indemnified Person” has the meaning specified in Section 10.5(1).
 
“Instrument” means any contract, agreement, undertaking, indenture, mortgage,
certificate, document or writing (whether formal agreement, letter or otherwise)
under which any obligation, duty, covenant, agreement, affirmation, undertaking
or liability is evidenced, assumed or undertaken, or any right or Lien (or right
or interest therein) is granted, authenticated, notarized, authorized or
perfected, and any notice, registration, recordation or filing associated with
or required by any of the foregoing.
 
“Insurance Proceeds” means the proceeds of any insurance claim under any
insurance maintained by any Credit Party.
 
“Leased Properties” means, collectively, the real properties forming the subject
matter of the Leases.
 
“Leases” means the mineral concessions, surface concessions, leases, subleases,
rights to occupy, rights to use and exploit, and licences of real property or
Buildings and Fixtures, to which any Credit Party is a party (i) at the date of
this Agreement, as listed and described in Schedule 1.1(a), or (ii) after the
date of this Agreement as notified to the Lender pursuant to a Compliance
Certificate.
 
“Lender” means Waterton Global Value, L.P., its successors and assigns.
 
“Lender’s Gold Account” shall mean the account of the Lender at Johnson Matthey
Inc., [***], or with such other institution or such other account as designated
by the Lender in writing from time to time.
 
“Lien” means any mortgage, deed of trust, lien, pledge, charge, security
interest, hypothecation, indenture, preferential right, assignment, option,
production payment or other lien, encumbrance or collateral security Instrument
in, on or to, or any right or interest, or the title of any vendor, lessor, the
Lender or other secured party to, or interest or title of any Person under any
conditional sale or other title retention agreement or capital lease with
respect to, any property or asset owned or held by such Person, the signing of
any mortgage, deed of trust, pledge, charge, security agreement, hypothecation,
indenture, assignment or similar instrument, or the signing or filing of a
financing statement, personal property security act filing or other similar
Instrument, which names such Person as debtor, or the signing of any security
agreement or other similar Instrument authorizing any other party as the secured
party thereunder to file any financing statement, personal property security act
filing or other similar Instrument or any other arrangement, encumbrance or
condition that in substance secures payment or performance of an obligation.
 

 
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“Loan” shall mean the aggregate of the Tranche One Loan, the Tranche Two Loan,
the Tranche Three Loan, the Tranche Four Loan and the Tranche Five Loan.
 
“Mandatory Prepayment Amount” shall have the meaning given thereto in Section
4.1(1).
 
“Material Adverse Effect” means a material adverse effect (or a series of
adverse effects, none of which is material in and of itself but which
cumulatively result in a material adverse effect) on (i) the Mining Properties,
(ii) the business, operations, results of operations, prospects, assets,
performance, prospects, liabilities or the condition (financial or otherwise) of
any Credit Party, (iii) any of the rights or remedies of the Lender or (iv) the
ability of any Credit Party to perform its obligations to the Lender under any
of the Credit Documents.
 
“Material Contracts” means, collectively, the agreements set out in Schedule
1.1(e), and any other agreement to which any Credit Party is a party and which
is deemed material by the Lender (acting reasonably) to the Business or the
operation of the Mining Properties.
 
“Mineral Ridge LLC” means Mineral Ridge Gold LLC, a Nevada limited liability
company, its successors and assigns.
 
“Mineral Ridge Project” means the Mineral Ridge Project, located in Esmeralda
County, Nevada, which is owned and operated by Mineral Ridge LLC, as further
described on Schedule 1.1(a) hereto.
 
“Mining Properties” means all surface, subsurface and mineral rights, and all
surface, subsurface and mineral leases, concessions, licenses, claims, rights,
titles or interests owned, leased, held or controlled by a Credit Party, or, in
the case of the Santa Rosa Project, to be owned, leased, held or controlled by a
Credit Party, and all related, associated or appurtenant rights, in each case
howsoever characterized or designated, that are owned, leased, held, or
controlled, directly or indirectly, by a Credit Party, with such rights, titles
and interests (including the Santa Rosa Project) described in Schedule 1.1(a).
 
“Monthly Repayment Amount” means, in relation to any Repayment Date, the monthly
amortization instalment amount for such Repayment Date set forth on Schedule
1.1(b) hereto, as such Schedule 1.1(b) may be revised and replaced by the Lender
from time to time based on the actual amount Advanced to the Borrower in respect
of any Tranche; the Lender shall promptly provide the Borrower with any
subsequent, replacement Schedule 1.1(b).
 
“Monthly Repayment Ounces” means [***].
 
“Obligations”  means all duties, covenants, agreements, liabilities,
indebtedness and obligations of the Borrower and each Guarantor with respect to
the repayment, payment or performance of all Indebtedness, liabilities and
obligations (monetary or otherwise) of the Borrower and each Guarantor (if
applicable), whenever arising, whether primary, secondary, direct, contingent,
fixed or otherwise and whether joint, several, or joint and several, established
by or arising under or in connection with this Agreement, the Existing Agreement
and each other Credit Document, including, in each case, the payment of
principal, interest, fees, expenses, reimbursements and indemnification
obligations.
 

 
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“Option Agreement” means that certain Option Agreement dated August 3, 2011 from
the Borrower to and in favour of the Lender.
 
“Original Currency” has the meaning specified in Section 10.10(1).
 
 “Other Currency” has the meaning specified in Section 10.10(1).
 
“Other Taxes” has the meaning specified in Section 10.7(2).
 
“Owned Properties” means, collectively, (i) the Mining Properties, and (ii)
after the date of this Agreement, the additional lands and premises notified to
the Lender pursuant to each Compliance Certificate.
 
“Partial Prepayment Amount” has the meaning specified in Section 4.3(3).
 
“Pension Laws” means ERISA and all Applicable Laws governing the registration,
administration, funding and investment of Pension Plans, including the
applicable provisions of the Income Tax Act (Canada) and any other similar
legislation.
 
“Pension Plan” means any plan or arrangement, whether funded or unfunded,
registered or not registered, that provides defined benefit pensions or
term-certain annuities in respect of any employees, former employees or retirees
of any Credit Party.
 
“Permitted Affiliate Transactions” has the meaning specified in Section 7.1(jj).
 
“Permitted Debt” means, in respect of any Person, the following:
 
 
(a)
Debt under any of the Credit Documents;

 
 
(b)
Debt to the extent secured by Liens pursuant to paragraphs (a), (b) or (c) of
the definition of Permitted Liens;

 
 
(c)
amounts payable arising in the ordinary course of business for the purchase of
goods and services, provided (i) such amounts are not overdue in excess of 90
days; and (ii) such amounts, in the aggregate, do not exceed $100,000 at any
time, except for such previously incurred obligations set forth in Schedule
1.1(e); and

 
 
(d)
unsecured obligations to pay the deferred and unpaid purchase price with respect
to the Company’s interests being acquired under those certain option and
acquisition agreements set forth in Schedule 1.1(e), provided (i) such amounts
are not overdue in excess of 90 days; and (ii) such amounts, in the aggregate,
do not exceed $100,000 at any time, except for such previously incurred
obligations set forth in Schedule 1.1(e).

 
“Permitted Liens” means, in respect of any Person, any one or more of the
following:
 
 
(a)
Liens for taxes, assessments or governmental charges or levies if the same shall
not at the time be delinquent or thereafter can be paid without penalty, or are
being contested in good faith and by appropriate proceedings, so long as such
contested Liens could not have a Material Adverse Effect;

 

 
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(b)
Liens imposed by law, such as carriers, warehousemen and mechanics’ liens and
other similar liens arising in the ordinary course of business associated with
amounts not yet due and payable, provided that such Liens are not registered
against title to any assets of the Person and in respect of which adequate
holdbacks are being maintained as required by Applicable Law or such Liens are
being contested in good faith by appropriate proceedings and in respect of which
there has been set aside a reserve (segregated to the extent required by GAAP)
in an adequate amount and provided further that such Liens could not have a
Material Adverse Effect;

 
 
(c)
Liens of purchase money mortgages and other security interests on equipment
acquired, leased or held by the Borrower (including equipment held by any such
Person as lessee under leveraged leases) in the ordinary course of business to
secure the purchase price of or rental payments with respect to such equipment
or to secure indebtedness incurred solely for the purpose of financing the
acquisition (including acquisition as lessee under leveraged leases),
construction or improvement of any such equipment to be subject to such
mortgages or security interests, or mortgages or other security interests
existing on any such equipment at the time of such acquisition, or extensions,
renewals or replacements of any of the foregoing for the same or a lesser
amount, provided that no such mortgage or other security interest shall extend
to or cover any equipment other than the equipment being acquired, constructed
or improved, and no such extension, renewal or replacement shall extend to or
cover any property not theretofore subject to the mortgage or security interest
being extended, renewed or replaced, provided, further, that such Liens shall
not exceed $100,000 in the aggregate;

 
 
(d)
Liens outstanding on the date hereof and described in Schedule 1.1(f) hereto;

 
 
(e)
Liens arising under the Security Documents;

 
 
(f)
Cash or governmental obligations deposited in the ordinary course of business in
connection with contracts, bids, tenders or to secure workmen’s compensation,
unemployment insurance, surety or appeal bonds, costs of litigation, when
required by law, public and statutory obligations, Liens or claims incidental to
current construction, mechanics’, warehousemen’s, carriers’ and other similar
Liens; and

 
 
(g)
Liens given in the ordinary course of business to a public utility or any
municipality or governmental or other public authority when required by such
utility or municipality or governmental or other authority in connection with
the operations of the Borrower.

 
“Person” means a natural person, partnership, limited liability company,
corporation, joint stock company, trust, unincorporated association, joint
venture or other entity or Governmental Entity, and pronouns have a similarly
extended meaning.
 
“Prepayment Notice” has the meaning specified in Section 4.3(1).
 
“Prior Day Price” means:
 

 
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(a)
In relation to any Repayment Date, the settlement per ounce price of Gold on the
London Bullion Market Association, PM Fix (Bloomberg: GoldLNPM) on the Business
Day immediately preceding such Repayment Date; and

 
 
(b)
In relation to any prepayment date, the settlement per ounce price of Gold on
the London Bullion Market Association, PM Fix (Bloomberg: GoldLNPM) on the
Business Day immediately preceding such prepayment date.

 
“Profit Participation Amount” means: [***].
 
“Project Mortgages” means a mortgage, deed of trust, public deed, notarial deed
or other Instrument by which the Lender obtains a Lien on and to the Mining
Properties and any other Instrument by which the Lender obtains a Lien in or on
any real property or Mining Properties of a Credit Party to secure the
Obligations, together with all amendments, modifications, supplements,
extensions and restatements thereof in accordance with its terms.
 
“Project Permits” means those Authorizations for the development and operation
of the Santa Rosa Project, as defined in Section 7.1(ll).
 
“Prudent Mining Industry Practices” means those practices, standards, methods,
techniques and specifications, as they may evolve, change and modify from time
to time that (a) are commonly used and generally accepted in the mining industry
as good, safe and prudent operational, administrative and engineering practices
in connection with the design, construction, operation, maintenance, repair or
use of mining projects, mining facilities, mining infrastructure, mining
equipment or other components of a mining operation, (b) conform in all material
respects to Applicable Laws, (c) conform in all material respects to operational
and maintenance guidelines and requirements suggested by applicable
manufacturers, suppliers and insurance providers (taking into account the size,
age, service and type of asset), and (d) are commercially reasonable based on
the nature of the Mining Properties.
 
“Purchase Money Obligation” means, in relation to any Person, indebtedness of
such Person issued, incurred or assumed to finance all or part of the cost of
acquiring any asset for such Person.
 
“Related Party” means in respect of any Credit Party (i) a Person which alone or
in combination with others holds a sufficient number of securities or has
contractual rights sufficient to affect materially the Control of such Credit
Party, (ii) a Person which alone or in combination with others holds a
sufficient number of securities or has contractual rights sufficient to affect
materially the Control of such Credit Party, (iii) a Person who beneficially
owns, directly or indirectly, voting securities of a Credit Party or who
exercises Control or direction over voting securities of such Credit Party or a
combination of both carrying more than 10% of the voting rights attached to all
voting securities of such Credit Party for the time being outstanding, (iv) a
director or senior officer of a Credit Party or Related Party of any Credit
Party, or (v) an Affiliate of any of the foregoing.
 
“Release” means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, leeching or migration of any
element or compound in or into the indoor or outdoor environment (including the
abandonment or disposal of any barrels, tanks, containers or receptacles
containing any Contaminant), or in, into or out of any vessel or facility,
including the movement of any substance through the air, soil, subsoil, surface,
water, groundwater, rock formation or otherwise.
 

 
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“Repayment Date” means the last Business Day of each calendar month during the
Repayment Period and any date on which the Lender accelerates the due date of
the Loan by reason of an Event of Default pursuant to Section 9.2.
 
“Repayment Period” means the eighteen-month period commencing on the last
Business Day of March 2012 and ending on the last Business Day of August 2013.
 
“Santa Rosa Acquisition Agreement” means that certain definitive Acquisition
Agreement dated September 16, 2011, by and between the Borrower and Silver
Global, S.A., a corporation formed under the laws of the Republic of Panama,
whereby the Borrower will acquire its interest in the Santa Rosa Project, a
final, executed copy of which is attached hereto as Schedule 1.1(c).
 
“Santa Rosa Project” means the Santa Rosa mine (Minas Santa Rosa), consisting of
the Santa Rosa gold deposit, the Alto de la Mina gold deposit and all associated
Mining Properties,  Buildings and Fixtures, assets, properties  and equipment,
located near the village of Canazas in Veraguas Province, Panama, situated
approximately 300 kilometres southwest of Panama City, Panama, all as further
described on Schedule 1.1(a) hereto.
 
“Santa Rosa Subsidiary” means Golden Phoenix Panama, S.A., a corporation formed
under the laws of the Republic of Panama, formed for the purpose of owning,
managing, operating and administering the Santa Rosa Project, and through which
Borrower will acquire an interest in the Santa Rosa Project.
 
“Security” means, at any time, the charges, mortgages, pledges, assignments,
security interests and other encumbrances in favour of the Lender in the assets
and properties of the Credit Parties securing their obligations under this
Agreement and the other Credit Documents.
 
“Security Agreements” means (i) the Security Agreement dated as of August 3,
2011 between the Borrower and the Lender, as amended and restated by that
certain Amended and Restated Security Agreement of even date herewith, and (ii)
any other security agreement or other Instrument by which the Lender obtains a
Lien in or on any personal property or assets of a Credit Party to secure the
Obligations, together with all amendments, modifications, supplements,
extensions and restatements thereof in accordance with its terms.
 
“Security Documents” means each of the Guarantees, the Security Agreements, the
Project Mortgages, the Equity Interest Pledge Agreements, the Borrower Control
Agreement, each of the agreements described in Schedule 1.1(d) and all public
deeds, notarial deeds, Instruments and any other security granted to the Lender
by any Credit Party, as security for the payment and performance of the
Obligations, in each case, with all modifications, supplements, amendments,
extensions or restatements thereto or thereof in accordance with their
respective terms, all schedules and exhibits attached thereto and all financing
statements, personal property security act filings and other Instruments
required to be filed or recorded or notices required to be given in order to
authenticate, establish and perfect the Liens created by the foregoing.
 
“Spot Price” means, in relation to any date, either of the following prices (as
selected by the Borrower in its sole discretion) [***].
 
“Structuring Fees” means the structuring fees described in Section 2.1.
 
“Subject Properties” means, collectively, the Mining Properties and all other
Owned Properties and Leased Properties.
 

 
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“Subsidiaries” means the subsidiaries of a Credit Party.
 
“subsidiary” means with respect to any Person (the “parent”) at any date, (i)
any corporation, limited liability company, association or other business entity
of which securities or other ownership interests representing more than 50% of
the voting power of all equity interests entitled to vote in the election of the
board of directors thereof are, as of such date, held by the parent and/or one
or more subsidiaries of the parent, (ii) any partnership, (x) the sole general
partner or the managing general partner of which is the parent and/or one or
more subsidiaries of the parent or (y) the only general partners of which are
the parent and/or one or more subsidiaries of the parent and (iii) any other
Person that is otherwise Controlled by the parent and/or one or more
subsidiaries of the parent.
 
“Supply Agreement” means the Gold Supply Agreement given by the Borrower and the
Santa Rosa Subsidiary for the benefit of the Lender, substantially in the form
of Exhibit C hereto, whereby the Lender shall have the right to acquire all gold
produced at and from the Santa Rosa Project for the life of the Santa Rosa
Project on the terms and conditions set forth therein, together with all
amendments, modifications, supplements, extensions and restatements thereof in
accordance with its terms, to be acknowledged, notarized and recorded as a
public deed in the applicable official public records in Panama, to the extent
that recording is legally available.
 
“Taxes” has the meaning specified in Section 10.7(1).
 
“Total Principal Balance” means the aggregate total amount of all Tranches of
Loans made to the Borrower.
 
“Tranche” shall mean any one of the Tranche One Loan, the Tranche Two Loan, the
Tranche Three Loan, the Tranche Four Loan or the Tranche Five Loan, and
“Tranches” shall refer to more than one of the foregoing.
 
“Tranche One Loan” means an amount up to $1,750,000 (which shall include the
continuation of the Existing Loan), available upon the Effective Date, subject
to satisfaction of applicable conditions precedent.
 
“Tranche Two Loan” means an amount equal to the Borrower’s next payment due
under the Santa Rosa Acquisition Agreement, up to $4,250,000, available on the
date such payment is due pursuant to the Santa Rosa Acquisition Agreement,
subject to satisfaction of the conditions precedent thereto.
 
“Tranche Three Loan” means an amount equal to the Borrower’s next payment due
under the Santa Rosa Acquisition Agreement, up to $3,000,000, available on the
date such payment is due pursuant to the Santa Rosa Acquisition Agreement,
subject to satisfaction of the conditions precedent thereto.
 
“Tranche Four Loan” means an amount up to $1,500,000, available upon
satisfaction of the conditions precedent thereto.
 
“Tranche Five Loan” means an amount up to $5,000,000, available upon
satisfaction of the conditions precedent thereto.
 
“Voting Shares” means shares of capital stock of any class of any corporation
carrying voting rights under all circumstances, provided that, for the purposes
of such definition, shares which only carry the right to vote conditionally on
the happening of any event shall not be considered Voting Shares, whether or not
such event shall have occurred, nor shall any shares be deemed to cease to be
Voting Shares solely by reason of a right to vote accruing to shares of another
class or classes by reason of the happening of such event.
 

 
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“Waste” means ashes, garbage and refuse and includes domestic waste, industrial
waste, municipal refuse or such other wastes as are designated as such under any
Environmental Law.
 
Section 1.2                      Other Usages.
 
References to “this Agreement”, “the agreement”, “hereof”, “herein”, “hereto”
and like references refer to this Agreement and not to any particular Article,
Section, Subsection, paragraph or other subdivision of this Agreement.  Any
references herein to any agreements or documents shall mean such agreements or
documents as amended, supplemented, restated or otherwise modified from time to
time in accordance with the terms hereof and thereof.
 
Section 1.3                      Gender and Number.
 
Any reference in the Credit Documents to gender includes all genders and words
importing the singular number only include the plural and vice versa.
 
Section 1.4                      Headings, etc.
 
The provision of a Table of Contents, the division of this Agreement into
Articles and Sections and the insertion of headings are for convenient reference
only and are not to affect the interpretation of this Agreement.
 
Section 1.5                      Currency.
 
All references in the Credit Documents to dollars, unless otherwise specifically
indicated, are expressed in United States currency.
 
Section 1.6                      Meaning of certain terms
 
Any reference in this Agreement to:
 
 
(a)
a Default being “continuing” means that such Default has not been waived or
remedied and an Event of Default being “continuing” means that such Event of
Default has not been waived;

 
 
(b)
unless otherwise indicated, a “Credit Document” or any other agreement or
instrument is a reference to that Credit Document or other agreement or
instrument as amended, modified, novated, supplemented, extended or restated;

 
 
(c)
“indebtedness” includes any obligation (whether incurred as principal or as
surety) for the payment or repayment of money, whether present or future, actual
or contingent;

 
 
(d)
“knowledge” of any Person shall be deemed to mean such knowledge after due and
diligent inquiry; and

 
 
(e)
“repay” (or any derivative form thereof) shall, subject to any contrary
indication, be construed to include “prepay” (as, as the case may be, the
corresponding derivative form thereof).

 

 
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Section 1.7                    Certain Phrases, etc.
 
In any Credit Document (i) (x) the words “including” and “includes” mean
“including (or includes) without limitation”, and does not create or denote a
limitation, (y) the phrase “the aggregate of”, “the total of”, “the sum of”, or
a phrase of similar meaning means “the aggregate (or total or sum), without
duplication, of”, and (z) the word “asset” includes present and future
properties, revenues and rights of every description, and (ii) in the
computation of periods of time from a specified date to a later specified date,
unless otherwise expressly stated, the word “from” means “from and including”
and the words “to” and “until” each mean “to but excluding”.
 
Section 1.8                      Accounting Terms.
 
All accounting terms not specifically defined in this Agreement shall be
interpreted in accordance with GAAP.
 
Section 1.9                      Incorporation of Schedules.
 
The schedules and exhibits attached to this Agreement shall, for all purposes of
this Agreement, form an integral part of it.
 
Section 1.10                      Conflict.
 
The provisions of this Agreement prevail in the event of any conflict or
inconsistency between its provisions and the provisions of any of the other
Credit Documents.
 
Section 1.11                      Certificates.
 
Whenever the delivery of a certificate is a condition precedent to the taking of
any action by the Lender or the occurrence of any event hereunder, the truth and
accuracy of the facts and the diligent and good faith determination of the
opinions stated in such certificate shall in each case be conditions precedent
to have such action taken, and any certificate executed by any Credit Party
shall be deemed to represent and warrant that the facts stated in such
certificate are true and accurate in all respects.
 
ARTICLE 2
LOAN
 
Section 2.1                      Fees.
 
The Borrower shall pay to the Lender a one-time structuring fee in an amount
equal to two percent (2%) of the Commitment Amount (the “Structuring Fee”), with
one percent (1%) of the Structuring Fee to be paid to the Lender on the
Effective Date and the remaining one percent (1%) of the Structuring Fee due to
the Lender on or prior to the advance of the Tranche Two Loan, provided, that in
the event the Tranche Two Loan is not advanced on or before the date that is
sixty (60) days from the Effective Date, the remaining amount due as the
Structuring Fee shall be immediately due and payable.  No portion of the
Structuring Fee is refundable to the Borrower, in whole or in part, under any
circumstances.
 
Section 2.2                      Advances of the Loan.
 
Subject to all of the terms and conditions of this Agreement, the Lender shall
Advance each of the Tranches upon satisfaction of the applicable conditions
precedent, as follows:
 

 
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(1)
Tranche One Loan.  Upon satisfaction of the Tranche One Loan conditions
precedent set forth in Article 6, the Lender shall Advance the Tranche One Loan
to the Borrower.  The Tranche One Loan shall be Advanced in one Advance, with
such Advance to be made to the Borrower’s Account.  Upon Advance, the commitment
of the Lender to make the Tranche One Loan shall expire.  The Existing Loan
outstanding as of the Effective Date shall convert into and continue as part of
the Tranche One Loan hereunder for all purposes (including for purposes of
determining the amount of the Commitment available to the Borrower).

 
(2)
Tranche Two Loan.  Upon satisfaction of the Tranche Two Loan conditions
precedent set forth in Article 6, the Lender shall Advance the Tranche Two Loan
to the Borrower.  The Tranche Two Loan shall be Advanced in one Advance, with
such Advance to be made to the Borrower’s Account.  Upon Advance, the commitment
of the Lender to make the Tranche Two Loan shall expire.

 
(3)
Tranche Three Loan.  Upon satisfaction of the Tranche Three Loan conditions
precedent set forth in Article 6, the Lender shall Advance the Tranche Three
Loan to the Borrower.  The Tranche Three Loan shall be Advanced in one Advance,
with such Advance to be made to the Borrower’s Account.  Upon Advance, the
commitment of the Lender to make the Tranche Three Loan shall expire.

 
(4)
Tranche Four Loan.  Upon satisfaction of the Tranche Four Loan conditions
precedent set forth in Article 6, the Lender shall Advance the Tranche Four Loan
to the Borrower.  The Tranche Four Loan shall be Advanced in one Advance, with
such Advance to be made to the Borrower’s Account.  Upon Advance, the commitment
of the Lender to make the Tranche Four Loan shall expire.

 
(5)
Tranche Five Loan.  Upon satisfaction of the Tranche Five Loan conditions
precedent set forth in Article 6, the Lender shall Advance the Tranche Five Loan
to the Borrower.  The Tranche Five Loan shall be Advanced in one Advance, with
such Advance to be made to the Borrower’s Account.  Upon Advance, the commitment
of the Lender to make the Tranche Five Loan shall expire.

 
(6)
General.  Any part of a Tranche that has been repaid by the Borrower may not be
re-borrowed and shall not be re-advanced to the Borrower.  At no time shall the
aggregate principal amount of all Tranches exceed the Commitment Amount.

 
Section 2.3                      Borrowing Procedure.
 
The Borrower shall request the borrowing of a Loan by delivering to the Lender a
written Borrowing Notice signed by the Borrower, which shall be delivered to the
Lender by no later than fifteen (15) days (or such shorter period as may be
agreed by the Lender) prior to the date of the requested borrowing.  Each
Borrowing Notice shall be irrevocable and shall specify (i) the Tranche that is
requested by the Borrower, (ii) the date of the requested borrowing (which shall
be a Business Day not less than fifteen (15) days after delivery, or such
shorter period as may be agreed by the Lender), (iii) the aggregate principal
amount of the Tranche to be borrowed, (iv) the specific purposes to which the
proceeds of such Loan shall be applied (as permitted by Section 2.5 below), and
(v) such other information and certifications as set forth in the form of
Borrowing Notice and as the Lender shall otherwise have reasonably
requested.  Each submittal of a Borrowing Notice by the Borrower to the Lender
shall constitute a separate representation, warranty and covenant by the
Borrower that the conditions precedent thereto have been satisfied and that the
Borrower shall use and apply the proceeds of the Loan solely as set forth in
such Borrowing Notice.  No Tranche shall be advanced if a Default or Event of
Default has occurred and is continuing (unless the Lender has waived the
relevant Default or Event of Default for the purpose of advancing the Loan).
 

 
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Section 2.4                      Repayment.
 
The principal amount of the Loan shall be due and payable on each Repayment Date
as set forth herein and in full on acceleration of the due date of the Loan by
reason of an Event of Default pursuant to Section 9.2.  The Borrower covenants
and agrees to repay the Loan in accordance with the terms of this Agreement.
 
Section 2.5                      Use of Proceeds.
 
The Borrower will utilize the Loan to fund the acquisition, development and
advancement of the Santa Rosa Project, together with other costs and expenses
incidental thereto, with the proceeds of the Tranche Two Loan and the Tranche
Three Loan to be used to make the then-due payments under the Santa Rosa
Acquisition Agreement in order to maintain such agreement in full force and
effect.  The Borrower will use proceeds of the Loan only as specifically
provided herein and as approved in writing by the Lender.
 
Section 2.6                      Lender’s Loan Records.
 
The Lender shall maintain accounts and records evidencing all Loan made
hereunder and all payments received hereunder, which accounts and records shall
constitute, in the absence of manifest error, prima facie evidence thereof.
 
ARTICLE 3
PROCEDURE AND PAYMENTS
 
Section 3.1                      Payments.
 
(1)
Generally.  The Borrower shall make all payments of principal on or before the
date when due, whether on a Repayment Date or by prepayment, by either (a) the
delivery of physical ounces of Gold to the Lender at the Lender’s Gold Account,
or (b) cash in immediately available funds deposited to an account designated by
the Lender.  The Lender may request, in its sole discretion, that any payment
made on a Repayment Date shall be made in cash in which case the Borrower shall
pay to the Lender the Cash Payment Amount in immediately available funds.

 
(2)
Payment in Gold.  The Borrower represents and warrants, and covenants and
agrees, that all Gold delivered to the Lender as payment of any amount due
hereunder shall be owned by the Borrower, with good and marketable title
thereto, free and clear of all Liens and adverse claims of any nature or
description, and upon delivery to the Lender’s Gold Account, the Borrower shall
convey and transfer to the Lender good and marketable title thereto, free and
clear of all Liens and adverse claims of any nature or description.  The
Borrower agrees to convey and properly transfer all legal and beneficial right,
interest and title in all Gold delivered to the Lender, and upon each delivery
of Gold pursuant to this Agreement, all legal and beneficial right, title and
interest in and to such Gold will pass irrevocably from the Borrower to the
Lender free and clear of any Liens and adverse claims of any nature or
description.  All costs, charges or expenses associated with the production,
transport, refining, conveyance, transfer and delivery of any Gold by the
Borrower to the Lender shall be borne and paid by the Borrower.  Until delivery
of Gold has occurred, all costs of transport, warehousing (including insurance),
storage, customs, export and import licences and Taxes and any other related
costs and expenses shall be borne by the Borrower.  The Borrower will have and
bear all risk of loss of, or damage to, any Gold to be delivered by the Borrower
to the Lender pursuant hereto until such Gold has been delivered to the Lender
at the Lender’s Gold Account, at which time the risk of loss or damage thereto
shall transfer to the Lender.  The Lender shall have the right to reject any
gold that does not conform to the definition of Gold, as defined herein.  Any
such rejected gold shall not be considered delivered by the Borrower and the
payment amount associated therewith shall not be considered paid by the
Borrower.

 

 
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(3)
Payments Due.   The Borrower shall pay to the Lender each of the following
amounts:

 
 
(a)
on each Repayment Date, the Cash Payment Amount or the Monthly Repayment Ounces,
as applicable, relating to such Repayment Date; and

 
 
(b)
on each Repayment Date, the Profit Participation Amount relating to such
Repayment Date.

 
ARTICLE 4
PREPAYMENTS
 
Section 4.1                      Mandatory Prepayments.
 
(1)
The Borrower shall, and shall ensure that each Credit Party shall, prepay
Advances in the following amounts (each, a “Mandatory Prepayment Amount”) and at
the following times:

 
 
(a)
the amount of all Disposal Proceeds (other than Disposal Proceeds generated
through the Disposal permitted under Section 8.2(d)), within five Business Days
of receipt (for greater certainty, for the purposes of this Section 4.1(a) and
Section 8.2(d), a Disposal shall not include any equity issuances by the
Borrower from its treasury); and

 
 
(b)
the amount of all Insurance Proceeds received by or on behalf of any Credit
Party, within five Business Days, other than Insurance Proceeds for which the
Borrower indicates to the Lender in writing, within such five Business Day
period, shall be re-invested in replacement assets, and which are actually
reinvested in such replacement assets within thirty days of receipt of such
proceeds (or such other period as may be agreed upon by the Borrower and the
Lender), failing which, the Loan shall immediately be prepaid in an amount equal
to such Insurance Proceeds;

 
and, on the day any such prepayment is made, the Loan shall be deemed repaid in
an amount equal to [***].
 
(2)
The Borrower shall, in addition to and at the same time as the Borrower makes
any prepayment required under Section 4.1(1), pay to the Lender an amount equal
to the Profit Participation Amount relating to such prepayment.

 
Section 4.2                      Change of Control or Exercise of Option
Agreement.
 
(1)
In the event that a Change of Control occurs, the Lender may, in its sole
discretion, by written notice to the Borrower, require the Borrower to repay the
Loan in full.  If the Lender requires the Borrower to repay the Loan in full,
the Borrower shall do so by paying to the Lender an amount in cash equal to the
aggregate of the following payments:

 

 
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(a)
an amount equal to [***]; and

 
 
(b)
the Profit Participation Amount relating to such prepayment,

 
together with all other fees, charges and costs and other amounts payable
hereunder.
 
(2)
In the event that the Lender exercises its option under the Option Agreement,
the Borrower shall repay the Loan in full, whereupon the Lender’s obligation to
Advance Loans under this Agreement shall terminate.  The Borrower shall repay
the Loan by paying to the Lender an amount in cash equal to the aggregate of the
following payments:

 
 
(a)

 
 
(i)
if the Lender exercises its option under the Option Agreement prior to December
31, 2012, an amount equal to [***]; or

 
 
(ii)
if the Lender exercises its option under the Option Agreement after December 31,
2012, an amount equal to [***];

and
 
 
(b)
the Profit Participation Amount relating to such prepayment,

 
together with all other fees, charges and costs and other amounts payable
hereunder.  In the event of an exercise of the Option Agreement, the Lender
shall set off the amount due to the Lender under this Agreement against payment
of the purchase price set forth in the Option Agreement.
 
Section 4.3                      Voluntary Prepayments.
 
(1)
The Borrower may prepay the Loan (in whole or in part) at any time on five (5)
Business Days prior written notice to the Lender (each, a “Prepayment Notice”).

 
(2)
The Borrower shall make such prepayment no later than five Business Days
following delivery of the Prepayment Notice, together with all other costs, or
charges then due.

 
(3)
Each Prepayment Notice shall be irrevocable and shall state whether the
prepayment contemplated therein is for the full amount outstanding hereunder or
for a part of the amount outstanding hereunder.  In the event such prepayment is
a partial prepayment, the Prepayment Notice shall stipulate the amount of such
proposed prepayment (the “Partial Prepayment Amount”).  In any case, such
prepayment shall be made as follows:

 
 
(a)
if such prepayment is of the entire outstanding amount of the Loan the Borrower
shall pay to the Lender an amount in cash equal to the aggregate of the
following payments:

 
 
(i)
an amount equal to [***]; and

 
 
(ii)
the Profit Participation Amount relating to such prepayment.

 
 
(b)
if such prepayment is a partial prepayment of the Loan, the Borrower shall pay
to the Lender an amount in cash equal to the aggregate of the following
payments:

 
 
(i)
the Partial Prepayment Amount; and

 

 
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(ii)
the Profit Participation Amount relating to such prepayment,

 
and, on the day any such partial prepayment is made, the Loan shall be deemed
repaid in an amount equal to [***].
 
ARTICLE 5
PAYMENTS UNDER THIS AGREEMENT
 
Section 5.1                      Payments.
 
(1)
The Borrower shall make any payment required to be made by it to the Lender
without set-off, deduction, withholding, or counterclaim or cross-claim, by: (a)
delivering the Monthly Repayment Ounces or other amount of Gold that is then due
to the Lender’s Gold Account or (b) depositing the Cash Payment Amount or other
amount of cash then due (including with respect to each Profit Participation
Amount) with the Lender, in each case by not later than 12:00 a.m. (Toronto
time) on the date the payment is due, to an account designated by the
Lender.  The Borrower shall make each such payment in either Gold or immediately
available funds as required by this Agreement.

 
(2)
Unless otherwise expressly provided in this Agreement, the Lender shall make
Advances and other payments to the Borrower under this Agreement by crediting
the Borrower’s Account (or causing the Borrower’s Account to be credited) with
the amount of the payment not later than 3:00 p.m. (Toronto time) on the date
the payment is to be made.

 
(3)
Any prepayment under this Agreement shall be made together with payment of all
interest and fees then due and payable and any and all other amounts which may
then be due and payable under any other provision hereof.

 
(4)
The Lender and the Borrower acknowledge and agree that the payment of all
amounts and other costs payable hereunder and any further consideration to the
Lender is a fair payment based on the business terms of this transaction.  The
Lender and the Borrower acknowledge and agree that it is their express intention
and desire that in no event shall the total payment to the Lender exceed
applicable usury laws.  In the event that any provision of this Agreement would
oblige the Borrower to make any other payment which is construed by a court of
competent jurisdiction to be interest in an amount or calculated at a rate which
would be prohibited by law or would result in a receipt by the Lender of
interest at a criminal rate, then, notwithstanding such provision, such amount
or rate shall be deemed to have been adjusted nunc pro tunc to the maximum
amount or rate of interest, as the case may be, as would not be so prohibited by
law or so result in a receipt by the Lender of interest at a criminal rate, such
adjustment to be effected, to the extent necessary.

 
(5)
Whenever any payment or delivery to be made hereunder shall be stated to be due
on a day that is not a Business Day, the payment may be made on the next
succeeding Business Day.

 

 
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Article 6
CONDITIONS OF LENDING
 
Section 6.1                      Conditions Precedent for Advance of Loans.
 
(1)
Conditions Precedent to the Tranche One Loan.  The obligation of the Lender to
Advance the Tranche One Loan (and each subsequent Tranche) is subject to
satisfaction (or waiver by the Lender in its sole discretion) of each of the
following conditions precedent.

 
 
(a)
The Lender or its counsel shall have received the following, with each
Instrument dated the date of this Agreement (or as otherwise agreed by the
Lender), and in form and substance as shall be satisfactory to the Lender:

 
 
(i)
this Agreement, duly executed by the Borrower;

 
 
(ii)
each of the Security Documents (or each amendment, amendment and restatement or
confirmation thereof), each duly executed by the Borrower or other applicable
Credit Party, together with any UCC filings, PPSA filings or other Instruments
for filing or registration, notarizations thereof, notices with respect thereto
or other Instruments determined by the Lender to be necessary or desirable to
establish and perfect the Liens established pursuant to the Security Documents;

 
 
(iii)
to the extent not specifically referenced, each other Credit Document, duly
executed by the Borrower or the Credit Party that is party thereto;

 
 
(iv)
an Omnibus Certificate for each Credit Party, duly executed by officers thereof
substantially in the form of Exhibit D hereto, together with each Credit Party’s
articles of incorporation, bylaws, resolutions, certificates of good standing
and certification of incumbency;

 
 
(v)
certificates of issuing insurance companies or brokers, confirming compliance by
the Borrower with the insurance requirements set forth in Section 8.1(m);

 
 
(vi)
accurate and complete copies of the most recent financial statements of the
Credit Parties;

 
 
(vii)
delivery of a solvency certificate from the chief financial officer of the
Borrower in the form of Exhibit E, certifying that the Borrower (i) is not
legally prohibited or restricted from entering into and performing its
obligations under the Credit Documents to which it is a party, (ii) is able to
pay its debts as they become due in the ordinary course of business, (iii) will
not be rendered insolvent by virtue of any Advance to be made hereunder, (iv)
will not be left with an unreasonably small amount of capital, and (v) has not
incurred debt which cannot be satisfied on a timely basis;

 
 
(viii)
delivery of a certificate of an officer of the Borrower certifying that all
necessary Authorizations relating to the development and operation of the Mining
Properties have been obtained and none have been rescinded, cancelled or
otherwise terminated in any respect;

 

 
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(ix)
evidence satisfactory to the Lender confirming the validity of the Security
Documents and their application to the Loan and the Obligations as well as the
validity and perfection of the Liens granted by such Security Documents with the
Agreed Priority;

 
 
(x)
opinions of legal counsel for the Credit Parties, dated the Closing Date and
addressed to the Lender in form and substance reasonably acceptable to the
Lender; and

 
 
(xi)
all such other approvals, opinions, documents or Instruments as the Lender may
reasonably request.

 
 
(b)
all representations and warranties made by the Credit Parties herein, in any
other Credit Documents shall be true and correct on the Closing Date;

 
 
(c)
the Borrower shall have paid one-half of the Structuring Fee in accordance with
Section 2.1 and all other fees, costs and expenses then due on and as of the
date of this Agreement;

 
 
(d)
no Default or Event of Default has occurred and is continuing or would occur as
a result of the making of the Loan or the use of the proceeds thereof;

 
 
(e)
all Authorizations of Governmental Entities, the shareholders of Borrower or
other Persons required in connection with this Agreement and the other Credit
Documents shall have been obtained and remain in effect;

 
 
(f)
there is no pending or threatened action or proceeding before any Governmental
Entity against or affecting any Credit Party or any Mineral Property, which
could reasonably be expected to have a Material Adverse Effect on any Credit
Party;

 
 
(g)
since December 31, 2010, the date of the Borrower’s most recent audited
financial statements, a copy of which is attached in Schedule 6.1(g) attached
hereto, there shall have been no change, event or occurrence that has had, or
could reasonably be expected to have, a Material Adverse Effect on any Credit
Party;

 
 
(h)
all data, reports, maps, surveys, financial statements, Instruments and other
information requested by the Lender for its due diligence, including searches of
all Lien filings, registrations and records deemed necessary by the Lender, and
copies of any documents, filings and Instruments on file in such jurisdictions,
shall have been provided, and the Lender shall have completed its technical,
legal, financial, permitting, environmental and other due diligence
investigation of the Credit Parties and the Mining Properties in scope, and with
results, satisfactory to the Lender;

 
 
(i)
the Lender shall be satisfied with the form of the Credit Documents;

 
 
(j)
the Lender shall have received evidence that all Liens granted to the Lender
pursuant to the Security Documents have been duly notarized, perfected,
registered or recorded in all relevant jurisdictions deemed necessary by the
Lender and constitute valid Liens having the Agreed Priority, with priority over
all other Liens, subject only to Permitted Liens;

 
 
(k)
the Consent and the Option Agreement shall remain in full force and effect; and

 

 
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(l)
each Credit Party has performed and complied with all agreements and conditions
herein and in the other Credit Documents required to be performed and complied
with on or prior to the date of the proposed Loan, except those agreements and
conditions waived by the Lender.

 
(2)
Conditions Precedent to the Tranche Two Loan.  The obligation of the Lender to
Advance the Tranche Two Loan is subject to satisfaction (or waiver by the Lender
in its sole discretion) of each of the following conditions precedent:

 
 
(a)
the Lender or its counsel shall have received each of the Credit Documents to be
executed and delivered by a Credit Party together with all such other approvals,
opinions, documents or Instruments as the Lender may reasonably request;

 
 
(b)
all conditions set forth in Section 2.2 and Section 2.3, including delivery of
an executed Borrowing Notice, shall have been satisfied, and all of the
conditions set forth in Section 6.1(1) shall have been, and shall remain,
satisfied;

 
 
(c)
the Tranche One Loan shall have been advanced to the Borrower;

 
 
(d)
the Santa Rosa Acquisition Agreement shall remain in full force and effect,
without any default in performance thereunder, and the proceeds of the Tranche
Two Loan will be used to make the payment necessary to maintain the Santa Rosa
Acquisition Agreement in full force and effect;

 
 
(e)
the Borrower shall have entered into a definitive joint venture operating
agreement per the terms of the Santa Rosa Acquisition Agreement and shall have
delivered a copy of the same to the Lender; and

 
 
(f)
the Borrower shall have paid the second half of the Structuring Fee in
accordance with Section 2.1 and all other fees, costs and expenses then due on
and as of the date of this Agreement.

 
(3)
Conditions Precedent to the Tranche Three Loan.  The obligation of the Lender to
Advance the Tranche Three Loan is subject to satisfaction (or waiver by the
Lender in its sole discretion) of each of the following conditions precedent:

 
 
(a)
The Lender or its counsel shall have received each of the Credit Documents to be
executed and delivered by a Credit Party together with all such other approvals,
opinions, documents or Instruments as the Lender may reasonably request;

 
 
(b)
all conditions set forth in Section 2.2 and Section 2.3, including delivery of
an executed Borrowing Notice, shall have been satisfied, and all of the
conditions set forth in Section 6.1(1) shall have been, and shall remain,
satisfied;

 
 
(c)
the Tranche One Loan and the Tranche Two Loan shall have been Advanced to the
Borrower;

 
 
(d)
the Santa Rosa Acquisition Agreement shall remain in full force and effect,
without any default in performance thereunder, and the proceeds of the Tranche
Three Loan will be used to make the payment necessary to maintain the Santa Rosa
Acquisition Agreement in full force and effect; and

 

 
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(e)
the following Tranche Three Operational Milestone shall have been performed and
completed to the satisfaction of the Lender:

 
 
(i)
immediately prior to the Borrower’s request for the Tranche Three Loan and with
respect to the Mineral Ridge Project, the Mineral Ridge LLC shall have achieved
“Commercial Production”, as that term is defined in that certain Operating
Agreement of the Mineral Ridge LLC dated March 10, 2010, as amended;

 
 
(ii)
with respect to the Mineral Ridge Project, the Mineral Ridge LLC shall be
producing gold from the Mineral Ridge Project resulting in average net revenue
of not less than $600 per ounce of gold during each of the 6 months prior to the
date of Advance of the Tranche Three Loan, with such net revenue to be
calculated based on average on-site cash operating costs per ounce of gold and
the average sales price per ounce of gold, in each of such months during such
period, all as calculated in accordance with Prudent Mining Industry Practices;
and

 
 
(iii)
with respect to the Santa Rosa Project, the Santa Rosa Subsidiary shall have
completed and delivered a National Instrument 43-101 compliant report and
mineral resource estimate that reflects at least 600,000 inferred ounces of gold
being present at the Santa Rosa Project.

 
(4)
Conditions Precedent to the Tranche Four Loan.  The obligation of the Lender to
Advance the Tranche Four Loan is subject to satisfaction (or waiver by the
Lender in its sole discretion) of each of the following conditions precedent:

 
 
(a)
the Lender or its counsel shall have received each of the Credit Documents to be
executed and delivered by a Credit Party together with all such other approvals,
opinions, documents or Instruments as the Lender may reasonably request;

 
 
(b)
all conditions set forth in Section 2.2 and Section 2.3, including delivery of
an executed Borrowing Notice, shall have been satisfied, and all of the
conditions set forth in Section 6.1(1) shall have been, and shall remain,
satisfied;

 
 
(c)
the Tranche One Loan, the Tranche Two Loan and the Tranche Three Loan shall have
been Advanced to the Borrower;

 
 
(d)
the Santa Rosa Acquisition Agreement shall remain in full force and effect,
without any default in performance thereunder;

 
 
(e)
the Borrower shall have closed an Equity Financing Transaction and received the
proceeds therefrom;

 
 
(f)
the Borrower shall have delivered the Supply Agreement; and

 
 
(g)
the following Tranche Four Operational Milestone shall have been performed and
completed to the satisfaction of the Lender:

 
 
(i)
immediately prior to the Borrower’s request for the Tranche Four Loan and with
respect to the Mineral Ridge Project, the Mineral Ridge LLC shall be in
“Commercial Production”, as that term is defined in that certain Operating
Agreement of the Mineral Ridge LLC dated March 10, 2010, as amended;

 

 
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(ii)
with respect to the Mineral Ridge Project, the Mineral Ridge LLC shall be
producing gold from the Mineral Ridge Project resulting in average net revenue
of not less than $600 per ounce of gold during each of the 6 months prior to the
date of Advance of the Tranche Four Loan, with such net revenue to be calculated
based on average on-site cash operating costs per ounce of gold and the average
sales price per ounce of gold, in each of such months during such period, all as
calculated in accordance with Prudent Mining Industry Practices; and

 
 
(iii)
with respect to the Santa Rosa Project, the Santa Rosa Subsidiary shall have
completed and delivered a bankable feasibility study in form and of a scope
generally acceptable (based on past precedent and transactions) to reputable
Canadian “Schedule 1” financial institutions that provide financing to the
mining industry.

 
(5)
Conditions Precedent to the Tranche Five Loan.  The obligation of the Lender to
Advance the Tranche Five Loan is subject to satisfaction (or waiver by the
Lender in its sole discretion) of each of the following conditions precedent:

 
 
(a)
the Lender or its counsel shall have received each of the Credit Documents to be
executed and delivered by a Credit Party together with all such other approvals,
opinions, documents or Instruments as the Lender may reasonably request;

 
 
(b)
all conditions set forth in Section 2.2 and Section 2.3, including delivery of
an executed Borrowing Notice, shall have been satisfied, and all of the
conditions set forth in Section 6.1(1) shall have been, and shall remain,
satisfied;

 
 
(c)
the Tranche One Loan, the Tranche Two Loan, the Tranche Three Loan and the
Tranche Four Loan shall have been Advanced to the Borrower;

 
 
(d)
the Santa Rosa Acquisition Agreement shall remain in full force and effect,
without any default in performance thereunder;

 
 
(e)
at least twelve months shall have elapsed since the Effective Date;

 
 
(f)
the Mineral Ridge Project shall have produced not less than 4,000 ounces of gold
per month for the four consecutive calendar months prior to the Borrower’s
request for the Tranche Five Loan; and

 
 
(g)
the following Tranche Five Operational Milestone shall have been performed and
completed to the satisfaction of the Lender:

 
 
(i)
with respect to the Mineral Ridge Project, the Mineral Ridge LLC shall be
producing gold from the Mineral Ridge Project resulting in average net revenue
of not less than $600 per ounce of gold during each of the 6 months prior to the
date of Advance of the Tranche Five Loan, with such net revenue to be calculated
based on average on-site cash operating costs per ounce of gold and the average
sales price per ounce of gold, in each of such months during such period, all as
calculated in accordance with Prudent Mining Industry Practices; and

 

 
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(ii)
with respect to the Santa Rosa Project, the Santa Rosa Subsidiary shall have
completed and obtained, or shall have provided evidence satisfactory to the
Lender in its sole discretion of binding commitments for, the funding necessary
to bring the Santa Rosa Project into commercial production as determined in
accordance with Prudent Mining Industry Practices.

 
(6)
Conditions Precedent Relating to the Mineral Ridge Project.  To the extent that
the Lender exercises its option under the Option Agreement with respect to the
Mineral Ridge Project, and this Agreement remains in effect, the conditions
precedent pertaining to operational milestones associated with the Mineral Ridge
Project shall not be applicable.

 
(7)
Conditions Precedent to All Loans.  The obligation of the Lender to make any
Loan hereunder is subject to the satisfaction of the following conditions
precedent on the date of making such Loan:

 
 
(a)
the representations and warranties made by the Credit Parties herein, in the
Security Documents or which are contained in any certificate furnished at any
time under or in connection herewith shall be true and correct on and as of the
date of such Loan as if made on and as of such date, except for representations
and warranties expressly stated to relate to a specific earlier date;

 
 
(b)
no Default or Event of Default shall have occurred and be continuing on such
date or after giving effect to such Loan;

 
 
(c)
immediately after giving effect to the making of any such Loan (and the
application of the proceeds thereof), the aggregate sum of all outstanding
Tranches shall not exceed the Commitment;

 
 
(d)
there shall not exist any litigation, investigation, bankruptcy or insolvency,
injunction, order or claim affecting or relating to any Credit Party or any of
its Subsidiaries, or any Project, which has had, or could reasonably be expected
to have, a Material Adverse Effect, or which could reasonably be expected to
affect the legality, validity or enforceability of this Agreement or any other
Credit Document, that has not been settled, dismissed, vacated, discharged or
terminated;

 
 
(e)
no Borrower, Credit Party or Mineral Property shall have suffered a Material
Adverse Effect and the Lender has not become aware of any facts which, in the
Lender’s opinion, could have a Material Adverse Effect; and

 
 
(f)
all conditions set forth in Section 2.2,  Section 2.3 (including delivery of an
executed Borrowing Notice) and Section 6.1, shall have been, and shall remain,
satisfied to the satisfaction of the Lender in its sole discretion; the
Borrower’s delivery of a Borrowing Notice shall constitute the Borrower’s
representation and warranty that all such conditions precedent have been, and
remain, satisfied.

 
Each Borrower request for a Loan shall be deemed to constitute a representation
and warranty by the Borrower as of the date of such Loan that the applicable
conditions in paragraphs (a) through (f) of this Section have been, and remain,
satisfied.
 

 
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Section 6.2                      No Waiver.
 
The making of an Advance of any Loan or otherwise giving effect to any Borrowing
Notice, without the fulfilment of one or more conditions set forth herein, shall
not constitute a waiver of any condition and the Lender reserves the right to
require fulfilment of such condition in connection with any subsequent Borrowing
Notice or Advance of a Loan.
 
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
 
Section 7.1                      Representations and Warranties.
 
Each of the Credit Parties, for itself and on behalf of each of its
Subsidiaries, hereby represents and warrants to the Lender, acknowledging and
confirming that the Lender is relying on such representations and warranties
without independent inquiry in entering into this Agreement and Advancing any
Loan that:
 
 
(a)
Incorporation and Qualification.  The Borrower is a corporation duly
incorporated, organized and validly existing under the laws of the State of
Nevada.  Each other Credit Party is a corporation duly incorporated, organized
and validly existing under the laws of its jurisdiction of incorporation as set
forth in Schedule 7.1(a).  Each of the Credit Parties is qualified, licensed or
registered to carry on business under the Applicable Laws in all jurisdictions
in which such qualification, licensing or registration is necessary.

 
 
(b)
Corporate Power.  Each of the Credit Parties has all requisite corporate power
and authority to (i) own, lease and operate its properties and assets (including
the Mining Properties) and to carry on its business as now being conducted by
it, and (ii) enter into and perform its obligations under the Credit Documents
to which it is a party.

 
 
(c)
Conflict with Other Instruments.  The execution and delivery by the Credit
Parties and the performance of its obligations under, and compliance with the
terms, conditions and provisions of, the Credit Documents to which they are a
party, will not (i) conflict with or result in a breach of any of the terms or
conditions of (w) its constating documents or by-laws, (x) any Applicable Law,
(y) any Instrument or contractual restriction binding on or affecting it or its
properties, or (z) any judgment, injunction, determination or award which is
binding on it, or (ii) result in, require or permit (x) the imposition of any
Lien in, on or with respect to any of its assets or properties (except in favour
of the Lender), (y) the acceleration of the maturity of any Debt binding on or
affecting any Credit Party, or (z) any third party to terminate or acquire
material rights under any Material Contract.

 
 
(d)
Corporate Action, Governmental Approvals, etc.  The execution and delivery of
each of the Credit Documents by each Credit Party and the performance by each
Credit Party of its obligations under the Credit Documents, have been duly
authorized by all necessary corporate action including, without limitation, the
obtaining of all necessary shareholder consents.  No authorization, consent,
approval, registration, qualification, designation, declaration or filing with
any Governmental Entity or other Person is or was necessary in connection with
the execution, delivery and performance of the obligations under the Credit
Documents except as are in full force and effect, unamended, at the date of this
Agreement.

 

 
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(e)
Execution and Binding Obligation.  This Agreement and the other Credit Documents
have been duly executed and delivered by each of the Credit Parties which is a
party thereto and constitute legal, valid and binding obligations of such Credit
Party enforceable against it in accordance with their respective terms, subject
only to any limitation under Applicable Laws relating to (i) bankruptcy,
insolvency, arrangement or creditors’ rights generally, and (ii) the discretion
that a court may exercise in the granting of equitable remedies.

 
 
(f)
No Default or Event of Default.  No Default or Event of Default has occurred
which is continuing.  As of the Effective Date, no Default or Event of Default
has occurred and is continuing under the Existing Agreement.

 
 
(g)
All Authorizations Obtained and Registrations Made.  The Security Documents are
effective to create in favour of the Lender, a legal, valid and  perfected Lien
in the Collateral with the Agreed Priority and the proceeds thereof enforceable
against third parties and any trustee in bankruptcy and/or any other similar
official. All Authorizations and registrations necessary or of advantage to
permit each Credit Party to (i) execute, deliver and perform each Credit
Document to which it is a party, (ii) create senior first priority perfected
Liens (enforceable against third parties and any trustee in bankruptcy and/or
any other similar official) in the Collateral and the proceeds thereof, (iii)
consummate the transactions contemplated by the Credit Documents, (iv) own its
undertaking, property and assets, and (v) carry on its business (including
Authorizations and registrations necessary or of advantage to permit the
Borrower to carry on the Business), have been obtained or effected and are in
full force and effect.  Each Credit Party is in compliance with the requirements
of all such Authorizations and registrations and there are no investigations or
proceedings existing, pending or, to the Borrower’s knowledge, threatened which
could result in the revocation, cancellation, suspension or any adverse
modification of any of such Authorizations and registrations.  The Security
Documents constitute a fully perfected security interest or fixed charge on all
right, title and interest of each Credit Party in the assets and/or property
described therein as security for the obligations specified therein in each case
prior and superior in right to any other Person, with the Agreed Priority, other
than Permitted Liens.

 
 
(h)
Compliance with Contracts.  The Borrower is in material compliance with, and has
at all times complied in all material respects, with each of the contractual
obligations (including those under each Material Contract) owing by it to its
customers, suppliers and other Persons.  No contract or other Instrument to
which the Borrower is a party is in material default nor has any counterparty
thereto claimed or asserted a material default or breach thereof.

 
 
(i)
Material Contracts.  Each Material Contract has been duly executed and delivered
by each Credit Party and each other Person party thereto and constitutes a
legal, valid and binding obligation of such Credit Party and the counterparty
thereto enforceable against it in accordance with its respective terms, subject
only to any limitation under Applicable Law relating to (i) bankruptcy,
insolvency, arrangement or creditors’ rights generally, and (ii) the discretion
that a court may exercise in the granting of equitable remedies.  Each Material
Contract is in full force and effect and no default on the part of any party
thereto has occurred thereunder.  All Authorizations necessary to permit each
party to perform its obligations under each Material Contract and consummate the
transactions contemplated thereby are and will continue to be in full force and
effect and there are no investigations or proceedings existing, pending or
threatened which could result in the revocation, cancellation, suspension or
adverse modification of such Authorization.

 

 
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(j)
Ownership and Use of Property.

 
 
(i)
Schedule 1.1(a) accurately and completely sets forth and describes all real
property owned, held or controlled by the Borrower, including all concessions,
fee interests, patented mining claims, unpatented mining claims, unpatented
millsite claims, leases and other real property interests;

 
 
(ii)
Except as set forth in Schedule 1.1(a), the Borrower has good and marketable
title to all fee lands, patented mining claims, and unpatented mining claims and
millsite claims set forth on Schedule 1.1(a), which title is, subject to
Permitted Liens, superior and paramount to any adverse claim or right of title
which may be asserted, subject only to the paramount title of the United States
as to any unpatented mining claims and millsite claims and the rights of third
parties to the lands within such unpatented mining claims pursuant to the
Multiple Mineral Development Act of 1954 and the Surface Resources and Multiple
Use Act of 1955;

 
 
(iii)
With respect to the unpatented mining claims and unpatented millsite claims
listed on the attached Schedule 1.1(a) and except as specifically set forth
therein: (A) the Borrower is in exclusive possession thereof, free and clear of
all Liens, claims, encumbrances or other burdens on production, other than
Permitted Liens; (B) all such claims were located, staked, filed and recorded on
available public domain land in compliance with all applicable state and federal
laws and regulations; (C) assessment work, intended in good faith to satisfy the
requirements of state and federal laws and regulations and generally regarded in
the mining industry as sufficient, for all assessment years up to and including
the assessment year ending September 1, 1992, was timely and properly performed
on or for the benefit of the claims, and affidavits evidencing such work were
timely recorded; (D) claim rental and maintenance fees required to be paid under
federal law in lieu of the performance of assessment work, in order to maintain
the claims commencing with the assessment year ending on September 1, 1993 and
through the assessment year ending on September 1, 2010, have been timely and
properly paid, and affidavits or other notices evidencing such payments and
required under federal or state laws or regulation have been timely and properly
filed and recorded; (E) all filings with the BLM with respect to such claims
which are required under FLPMA have been timely and properly made; and (F) there
are no actions or administrative or other proceedings pending or to the best of
the Borrower’s knowledge threatened against or affecting any of the
claims.  Nothing herein shall be deemed a representation that any unpatented
mining claim contains a discovery of valuable minerals or that any unpatented
millsite claim is located on non-mineral land.  In addition, with respect to
each of the unpatented mining claims listed on Schedule 1.1(a), the Borrower
represents that, to its knowledge, such unpatented mining claims have been
relocated or remonumented as necessary, and that evidence of such relocation or
remonumentation has been timely and properly recorded, all in compliance with
the provisions of N.R.S. Chapter 517;

 

 
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(iv)
As to the patented mining claims listed on Schedule 1.1(a), except as set forth
therein: (A) the Borrower owns such claims free and clear of all Liens, claims,
encumbrances, royalties or other burdens on production, except for Permitted
Liens; (B) the Borrower is in exclusive possession of those claims; and (C)
there are no actions or administrative or other proceedings pending or to the
Borrower’s knowledge threatened against those claims;

 
 
(v)
Each Credit Party, and each Subsidiary thereof, has good and marketable title to
its owned real property and has valid and effective rights to its leased
property, free and clear of Liens, except for Permitted Liens;

 
 
(vi)
All taxes, charges, rates, levies and assessments that, if unpaid, would create
a Lien or charge on any Mining Property or any portion thereof, have been paid
in full and will be paid in full;

 
 
(vii)
To the Borrower’s Knowledge, all contractors, subcontractors, agents and other
Persons providing services, materials or labor on or for the benefit of any
Mining Property have been paid in a timely manner for all work performed or
services, goods or labor provided, on or with respect thereto, except where such
payments are subject to a bona fide dispute, which is being diligently pursued
by a Credit Party pursuant to appropriate procedures; and

 
 
(viii)
The Security Documents create, or upon their execution and delivery they will
create, valid and effective Liens in and on the Collateral purported to be
covered thereby, which Liens are currently (or will be upon the filing of
appropriate Instruments with appropriate Governmental Authorities) perfected
Liens with the Agreed Priority.

 
 
(k)
Ownership of Subject Properties.  None of the Borrower or any of the other
Credit Parties (i) owns any real property other than the Owned Properties, (ii)
is bound by any agreement to own or lease any real property other than the
Leases, or (iii) has leased any of its Owned Properties.

 
 
(l)
Leased Properties.  Each Lease is in good standing and all amounts owing under
each Lease have been paid by the Borrower, or a Credit Party as applicable.

 
 
(m)
Work Orders.  There are no outstanding work orders, enforcement orders,
compliance orders or other similar notices or requirements by or from a
Governmental Entity relating to any of the Subject Properties, nor does any of
the Credit Parties have notice of any possible impending or future work order,
enforcement orders, compliance orders or other similar notices or requirements.

 
 
(n)
Expropriation.  No part of any of the Subject Properties or the Buildings and
Fixtures located on the Subject Properties has been subject to an Expropriation
Event, no written notice or proceeding in respect of an Expropriation Event has
been given or commenced, nor is any Credit Party aware of any intent or proposal
to give any such notice or commence any proceedings.

 
 
(o)
Encroachments.  The Buildings and Fixtures located at each of the Subject
Properties are located entirely within such Subject Property and are in
conformity with all Applicable Laws, including zoning, building, and set-back
codes and coverage requirements.  There are no encroachments upon any of the
Subject Properties.

 

 
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(p)
Compliance with Laws.  Each Credit Party is in compliance in all material
respects with all Applicable Laws.  Each of the Mining Properties has been used,
explored and operated by the Borrower and each of the other Credit Parties in
compliance in all material respects with all Applicable Laws.

 
 
(q)
No Default.  None of the Credit Parties is in violation of any of its constating
documents, by-laws or any shareholders’ agreement applicable to it.

 
 
(r)
No Material Adverse Agreements.  None of the Credit Parties is a party to any
agreement or instrument or subject to any restriction (including any restriction
set forth in its constating documents, by-laws or any shareholders’ agreement
applicable to it) which has had, or to the best of its knowledge in the future
may have, a Material Adverse Effect.

 
 
(s)
Environmental Compliance.

 
 
(i)
the Mining Properties have been owned, developed, operated, leased, reclaimed
and utilized in material compliance with all Applicable Laws, including
Environmental Laws;

 
 
(ii)
there are no outstanding or pending consent decrees, clean-up orders, mitigation
orders, compliance orders, remediation orders or other material orders, decrees,
judgments or other administrative or judicial requirements outstanding under any
Environmental Law with respect to any Mining Property;

 
 
(iii)
no Credit Party or any Subsidiary thereof has received any written or actual
notice of: material violation, alleged material violation, material
non-compliance, investigation, liability or potential liability, or request for
information, with respect to Environmental Laws, Hazardous Materials or other
environmental matters with regard to any Mining Property, nor does any Credit
Party have knowledge or reason to believe that any such notice will be received
or is being threatened; and

 
 
(iv)
with respect to the Mining Properties, there have been no past, and there are no
pending or threatened, lawsuits, claims, complaints, injunctions, or any other
governmental or judicial actions or proceedings with respect to any alleged
material violation of any Applicable Laws, including Environmental Laws, or any
Release or alleged Release of Hazardous Materials.

 
 
(t)
Pension Plans.  None of the Credit Parties maintains any Pension Plan or has any
liability or threatened liability under or pursuant to a Pension Plan.

 
 
(u)
Labour Matters.  There are no existing or threatened strikes, lock-outs or other
disputes relating to any collective bargaining agreement to which any Credit
Party is a party.  No Credit Party is subject to or party to a collective
bargaining agreement with respect to any employees.

 
 
(v)
Books and Records.  All books and records of the Credit Parties have been fully,
properly and accurately kept and completed and there are no inaccuracies or
discrepancies of any kind contained or reflected therein.  Each of the Credit
Parties’ books and records and other data and information are available to it in
the ordinary course of its business.

 

 
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(w)
Tax Liability.  Each of the Credit Parties has filed all tax and information
returns which are required to be filed.  Except as set forth in Schedule 7.1(w),
each of the Credit Parties has paid all taxes, interest and penalties, if any,
which have become due pursuant to such returns or pursuant to any assessment
received by it other than those in respect of which liability based on such
returns is being contested in good faith and by appropriate proceedings where
adequate reserves have been established in accordance with GAAP.  Adequate
provision for payment has been made for taxes not yet due.  There are no tax
disputes existing or pending involving any of the Credit Parties or the
Business.

 
 
(x)
Corporate Structure.  Except as set forth in Schedule 7.1(x), at the date of
this Agreement:

 
 
(i)
the Borrower has no subsidiaries;

 
 
(ii)
there are no outstanding warrants, options or other agreements which require or
may require the issuance of any equity interests of the Borrower or the issuance
of any debt or securities convertible into equity interests of the Borrower and
there are no outstanding debt or securities convertible into equity interests of
the Borrower; and

 
 
(iii)
the Borrower is not, directly or indirectly, a member of, or a partner or
participant in, any partnership, joint venture or syndicate.

 
 
(y)
Subsidiaries, etc.  Each of the Credit Parties is a corporation.  None of the
shareholders of the Credit Parties are party to any shareholder’s, voting or
other agreement relating to shares of any of the Credit Parties owned by such
shareholder.

 
 
(z)
Financial Statements.  The December 31, 2010 audited financial statements of the
Borrower, copies of which have been furnished to the Lender prior to the date
hereof, fairly present the consolidated financial position of the Borrower at
such date and the consolidated results of the operations and changes in
financial position of the Borrower for such period, all in accordance with GAAP.

 
 
(aa)
Debt.  Except as set forth in Schedule 7.1(aa), no Credit Party has any Debt
except as permitted pursuant to Section 8.2(a) of this Agreement.  There exists
no default under the provisions of any instrument evidencing such Debt or of any
agreement relating thereto.

 
 
(bb)
Insurance.  The Credit Parties maintain insurance of types and in amounts which
are customarily maintained by other companies applying Prudent Mining Industry
Practices, and the Credit Parties otherwise have and maintains insurance for
their Business and the Mining Properties in compliance with Section 8.1(m).

 
 
(cc)
No Litigation.  Except as set forth in Schedule 7.1(cc), there are no actions,
suits or proceedings pending, taken or, to the knowledge of any Credit Party,
threatened, before or by any Governmental Entity or by or against any elected or
appointed public official or private person in any jurisdiction, which (i)
challenges, or to the knowledge of any Credit Party has been threatened, the
validity or propriety of the transactions contemplated under the Credit
Documents or the documents, instruments and agreements executed or delivered in
connection therewith or related thereto, (ii) alleges the violation of any
Applicable Law, (iii) involves any Material Contract, (iv) challenges or
threatens the validity of all or any portion of any Mining Claim or any Credit
Party’s ownership thereof or claim thereto, or (v)  could reasonably be expected
to result, either in any case or in the aggregate, in a Material Adverse Effect.

 

 
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(dd)
Schedule Disclosure.  At the date of this Agreement:

 
 
(i)
Schedule 7.1(dd)(i) is a list of all jurisdictions (or registration districts
within such jurisdictions) in which each Credit Party (i) has its chief
executive office, head office, registered office and chief place of business,
(ii) carries on business, (iii) has any account debtors, or (iv) stores any
tangible personal property (except for goods in transit in the ordinary course
of business);

 
 
(ii)
Schedule 7.1(dd)(ii) is a list of all Authorizations which are material or
necessary to any of the Credit Parties or the ownership, management and
operation of the Mining Properties;

 
 
(iii)
Schedule 7.1(dd)(iii) is a list of all trademarks, tradenames, copyrights and
patents (and the registration particulars thereof) which are material or
necessary to any the Credit Parties;

 
 
(iv)
Schedule 7.1(dd)(iv) is a list of all actions, suits, arbitrations or
proceedings pending, taken or to the Borrower’s knowledge, threatened, before or
by any Governmental Entity or other Person affecting any of the Credit Parties;

 
 
(v)
Schedule 7.1(dd)(v) contains a list of all agreements, contracts or similar
instruments to which a Credit Party is a party or to which any of their property
or assets could be subject, for which breach, non-performance, cancellation or
failure to renew could have a Material Adverse Effect;

 
 
(vi)
Schedule 7.1(dd)(vi) contains a list of all labour agreements to which a Credit
Party is a party;

 
 
(vii)
Schedule 7.1(dd)(vii) shows the complete bank account details for the Borrower.

 
 
(ee)
Insolvency.  No Credit Party has:

 
 
(i)
not generally paid its debts as they become due;

 
 
(ii)
admitted its inability to pay its debts generally;

 
 
(iii)
made a general assignment for the benefit of creditors;

 
 
(iv)
committed an act of bankruptcy (within the meaning of the Bankruptcy Code
(United States), the Bankruptcy and Insolvency Act (Canada) or any similar
legislation or Applicable Law);

 
 
(v)
instituted any proceedings, or had instituted any proceedings against it
(x) seeking to adjudicate it a bankrupt or insolvent or (y) seeking liquidation,
winding-up, reorganization, compromise, arrangement, adjustment, protection,
relief or composition of it or of its debts under any Applicable Law relating to
bankruptcy, insolvency or reorganization or relief of debtors or other similar
matters or (z) seeking the appointment of a receiver, manager, receiver and
manager, trustee, custodian or other similar official for it or for any part of
its undertaking, property or assets; or

 
 
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(vi)
taken any corporate action to authorize any of the actions set forth above in
this Section 7.1(ee).

 
 
(ff)
No Liabilities.  Except as reflected or reserved against in the balance sheet of
the December 31, 2010 audited financial statements and the June 30, 2011
quarterly unaudited financial statements, none of the Credit Parties has
liabilities or obligations of any nature (whether absolute, accrued, contingent
or otherwise) except for current liabilities incurred in the ordinary course
since December 31, 2010.

 
 
(gg)
Broker’s Fees. Except as set forth in Schedule 7.1(gg), no broker’s or finder’s
fee or commissions will be payable by reason of any action of the Borrower with
respect to any of the transactions contemplated hereby.

 
 
(hh)
Counter-Terrorism Regulations and Anti-Money Laundering.  The Borrower is and
will remain in compliance with all applicable economic sanctions laws and all
applicable anti-money laundering and counter-terrorism financing laws, including
the provisions of the Proceeds of Crime (Money Laundering) and Terrorist
Financing Act (Canada), the Criminal Code (Canada), the United Nations Act
(Canada), the Trading with the Enemy Act, and each of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B Chapter
V, as amended) and any other enabling legislation or executive order relating
thereto, the Patriot Act (United States), and other Applicable Laws relating to
“know your customer” and anti-money laundering rules and regulation which apply
to it.  None of the Credit Parties are (i) a Person designated by the Canadian
government or the United States government on any list set out in the United
Nations, Al-Qaida and Taliban Regulations, the Regulations Implementing the
United Nations Resolutions on the Suppression of Terrorism or the Criminal Code
(collectively, the “Terrorist Lists”) with which a Person cannot deal with or
otherwise engage in business transactions, (ii) is a Person who is otherwise the
target of United States or Canadian economic sanctions laws or (iii) is
controlled by (including without limitation by virtue of such person being a
director or owning voting shares or interests), or acts, directly or indirectly,
for or on behalf of, any person or entity on any Terrorist List or a foreign
government that is the target of United States or Canadian economic sanctions
prohibitions such that the entry into, or performance under, this Agreement or
any other Credit Document would be prohibited under Applicable Law.  No part of
the proceeds of any Advance will be used directly or indirectly for any payments
to any government official or employee, political party, official of a political
party, candidate for political office, or anyone else acting in an official
capacity, in order to obtain, retain or direct business or obtain any improper
advantage, in violation of any Applicable Law.

 
 
(ii)
No Cease Trade Orders.  No order or ruling suspending the sale or ceasing the
trading in any securities of the Borrower has been issued by any securities
regulatory authority and is continuing in effect and no proceedings for that
purpose have been instituted or, to the best knowledge of the Borrower, are
pending, contemplated or threatened by any regulatory authority.

 

 
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(jj)
Affiliate Transactions.  The Borrower is not conducting, permitting or suffering
to be conducted, any transaction with any Affiliate except as set forth on
Schedule 7.1(jj) (collectively, the “Permitted Affiliate Transactions”).

 
 
(kk)
Operation of Projects.  The Credit Parties have heretofore made available to the
Lender all feasibility studies and geological, reserve, resource, metallurgical,
engineering and financial data and evaluations of each Mineral Property prepared
by or for the benefit of any Credit Party or otherwise in the possession of any
Credit Party.  The Credit Parties are not aware of any material inaccuracy or
omission in such information which has not been disclosed to the Lender in
writing.

 
 
(ll)
Project Permits.  Except for Authorizations which are to be obtained by a Credit
Party from time to time in the ordinary course of business and the absence or
delay of which will not materially interfere with or delay development and
operation of a Mineral Property, all Authorizations of Governmental Authorities
which are necessary to develop and operate the Mining Properties and to
undertake and conduct the business of the Credit Parties or any Subsidiary
thereof as it is currently being conducted are identified in Schedule 7.1(ll)
hereto (collectively, the “Project Permits”).  The Borrower has obtained all
Project Permits necessary to conduct mining operations at the Mining Properties
and all such Project Permits are in full force and effect in accordance with
their terms, free of material defaults.  Except as set forth in Schedule
7.1(ll), all Project Permits necessary to develop, build and operate the Santa
Rosa Project have been obtained and are in full force and effect in accordance
with their terms, free of material defaults, and no written notice alleging a
breach or default under any of the Project Permits or challenging or questioning
the validity of any such Project Permit has been delivered, except to the extent
disclosed to the Lender in Schedule 7.1(ll).  The Credit Parties have
sufficient, legally-enforceable rights of access, entry and egress to and from
the Mining Properties, including rights sufficient to develop and operate the
Mining Properties, as currently contemplated.

 
 
(mm)
Disclosure.  All forecasts, projections and other written information supplied
to the Lender were prepared in good faith and adequately disclosed all relevant
assumptions, are true and accurate in all respects, and were based on fair
assumptions.  There is no fact known to any Credit Party which could have a
Material Adverse Effect and which has not been fully disclosed to the
Lender.  None of the representations or warranties made by the Credit Parties in
the Credit Documents as of the date such representations and warranties are made
or deemed made, and none of the statements contained in each written exhibit,
report, statement or certificate furnished by or on behalf of the Credit Parties
in connection with the Credit Documents, contains to the knowledge of the
Borrower, acting reasonably and diligently, any untrue statement of a material
fact or omits any material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they
are made, not misleading as of the time when made or delivered which would
reasonably be expected to have a Material Adverse Effect.

 
Section 7.2                      Survival of Representations and Warranties.
 
The representations and warranties in this Agreement and in any certificates or
documents delivered to the Lender in connection therewith shall not merge in or
be prejudiced by and shall survive any Advance and shall continue in full force
and effect so long as any amounts are owing by the Borrower to the Lender under
this Agreement.
 

 
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Article 8
COVENANTS OF THE BORROWER
 
Section 8.1                      Affirmative Covenants
 
Until the full and final payment and performance of the Obligations and the
termination of this Agreement, each of the Credit Parties shall perform all
covenants in this Section 8.1:
 
 
(a)
Financial Statements, Reports and Other Information.  The Borrower shall
deliver, or arrange for the delivery, to the Lender:

 
 
(i)
as soon as practicable and in any event within 45 days after the end of each
quarter of each year, (A) the Borrower’s unaudited quarterly financial
statements for the Financial Year to such quarter end, prepared in accordance
with GAAP and (B) together with each such delivery of financial statements
pursuant to this paragraph, a duly completed and executed Compliance Certificate
relating thereto;

 
 
(ii)
as soon as practicable and in any event within 90 days after the end of each
Financial Year, (A) the annual consolidated financial statements of the Borrower
prepared in accordance with GAAP, and (B) together with each such delivery of
financial statements pursuant to this paragraph, a duly completed and executed
Compliance Certificate relating thereto;

 
 
(iii)
as soon as practicable, such other information in the possession of the Credit
Parties with respect to their financial condition, business and/or operations
including copies of all financial statements, proxy statements, material reports
and other material disclosure information which the Credit Parties shall send or
make available to any of its shareholders or which it is required or elects to
file with any Governmental Entity;

 
 
(iv)
as soon as practicable but no later than ten (10) days after the end of each
calendar month, the Credit Parties shall submit to the Lender a written report
concerning the business and activities of the Borrower, the status of the Santa
Rosa Project, the Borrower’s other Mining Properties and all activities and
occurrences with respect thereto during the preceding calendar month, to include
a summary description of actions taken with respect to the Credit Parties, the
Santa Rosa Project, and the Borrower’s other Mining Properties, a description of
actual expenditures (as compared to the mine plan) and such other data and
information reasonably requested by the Lender, with such monthly report to be
delivered in form and substance reasonably acceptable to the Lender;

 
 
(v)
promptly after receiving a request from the Lender, such other certificates,
reports, status updates, data and information respecting the condition or
operations, financial or otherwise, of any Credit Party, the Santa Rosa Project
and any other Project as the Lender may from time to time request, with the same
to be delivered in form and substance reasonably acceptable to the Lender; and

 
 
(vi)
all reports, certificates, status updates and other information delivered to the
Lender shall be true, accurate and complete in all material respects and shall
not contain any material misstatement of fact or omit to state a material fact,
and all projections contained in any such reports, certificates, status updates
and otherwise shall be based on information which, when delivered, was true,
correct and complete in all material respects and shall fairly present such
Credit Party’s then-current estimate of its future business, operations and
affairs;  the Credit Parties shall provide the foregoing certification in
writing upon delivery of any report, certificate, status update or other
information and shall be deemed to have done so to the extent that any Credit
Party fails to provide written certification thereof.

 

 
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(b)
Notice of Litigation.  Give notice to the Lender as soon as it becomes aware of
the commencement of any action, litigation, proceeding, arbitration,
investigation, grievance or dispute affecting any Credit Party, any Mining
Property, any Material Contract or any Affairs of a Credit Party, together with
copies of the court filings or other documents associated therewith.

 
 
(c)
Notice of Default.  Give notice to the Lender as soon as it becomes aware of any
Default or Event of Default or any event or circumstance which could have a
Material Adverse Effect.

 
 
(d)
Notice of Environmental Matters.  Promptly after the filing or receipt thereof,
copies of (i) all new Project Permits, together with a description thereof and
(ii) all notices with or from any Governmental Entity alleging noncompliance
with or violation of any Environmental Law or Project Permit and any
correspondence in response thereto.

 
 
(e)
Corporate Existence.  Preserve and maintain, and cause each of the Credit
Parties to preserve and maintain its corporate existence.

 
 
(f)
Compliance with Laws, etc.  The Credit Parties shall comply, and shall cause
each of their Subsidiaries, agents and third party contractors to comply with,
all Applicable Laws.

 
 
(g)
Comply with Environmental Laws.  Each Credit Party shall own, operate and manage
its business and the Mining Properties in compliance with all Applicable Laws,
including Environmental Laws, and each Credit Party shall, and shall cause its
agents and third party contractors to, (i) manage and operate the Mining
Properties and the Business in compliance with all Environmental Laws, (ii)
maintain all Authorizations and make all registrations required under all
Environmental Laws in relation to the Mining Properties and the Business and
remain in compliance therewith, (iii) store, treat, transport, generate,
otherwise handle and dispose of all Hazardous Materials and Waste owned, managed
or controlled by any of the Credit Parties in compliance with all Environmental
Laws, and (iv) comply with all recommendations contained in any environmental
impact assessment.

 
 
(h)
Conduct of Operations and Maintenance of Properties.  The Credit Parties shall
engage solely, and will cause each Credit Party to engage solely, in the
business of developing and operating the Mining Properties, and other
prospective mining projects, and in activities incident thereto, in accordance
with Prudent Mining Industry Practices.  The Credit Parties shall use
commercially reasonable efforts to explore, investigate, develop, mine, operate
and use each Mining Property in accordance with Prudent Mining Industry
Practices.  The Credit Parties shall diligently and continuously work to develop
and operate the Mining Properties.  The Credit Parties shall from time to time,
make and cause to be made, all repairs, renewals, replacements, additions and
improvements to the Mining Properties and their properties and assets, such that
the Borrower and the other Credit Parties may properly and advantageously
conduct their business at all times in accordance with Prudent Mining Industry
Practices.

 

 
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(i)
Payment of Taxes and Claims.  Pay, or cause to be paid and cause each of the
Credit Parties to pay or cause to be paid, when due, (i) all taxes, assessments
and governmental charges or levies imposed upon it or upon its income, sales,
capital or profit or any other property belonging to any of the Credit Parties,
and (ii) all claims which, if unpaid, might by Applicable Law become a Lien upon
any of the Credit Parties’ property or assets, except any such tax, assessment,
charge, levy or claim which is being contested in good faith and by proper
proceedings and in respect of which the Borrower or any of the Credit Parties
have established adequate reserves, satisfactory to the Lender, in accordance
with GAAP or which are Permitted Liens and which could not, individually or
collectively, in the Lender’s opinion, have a Material Adverse Effect.

 
 
(j)
Keeping of Books.  Keep, and cause each of the other Credit Parties to keep,
proper books of record and account, in which full and correct entries shall be
made in respect of its business and shall promptly notify the Lender of any
material change in accounting practices or procedures implemented by a Credit
Party relative to such practices and procedures as of the execution of this
Agreement.

 
 
(k)
Updated Banking Information. The Borrower shall promptly notify the Lender of
any change in bank location or accounts, and shall at all times, following a
request by the Lender for the establishment of a Borrower Control Agreement,
ensure that all its bank accounts remain subject to the Borrower Control
Agreement.

 
 
(l)
Rights of Inspection.  At any time and from time to time upon reasonable
request, permit any employee, officer, agent or other representative of the
Lender, at the expense of the Borrower (for up to one examination per quarter
per year during the term of this Agreement, unless there has been an Event of
Default, in which case, all examinations during such period shall be at the
expense of the Borrower), to examine the Mining Properties and make copies of
any abstracts from the records and books of account of any Credit Party and to
discuss any of its Affairs with any of its directors, officers, employees,
agents, representatives or auditors.  At any time and from time to time, upon
request of the Lender, permit an independent technical engineer selected by the
Lender and any officer, agent or other representative of the Lender, at the
expense of the Borrower (for up to one inspection per quarter per year during
the term of this Agreement, unless there has been an Event of Default, in which
case, all inspections during such period shall be at the expense of the
Borrower), to inspect the Mining Properties and the Business and discuss any of
the Affairs of any Credit Party with any of its personnel and third party
contractors.

 
 
(m)
Maintenance of Insurance.  Each Credit Party shall maintain with financially
sound and reputable insurance companies (i) insurance on all its property and
assets insuring against at least such risks as are usually insured against in
the same or a similar business and as required by Applicable Laws and
(ii) liability insurance covering at least such risks as are usually insured
against in the same or a similar business and as required by Applicable Laws;
and furnish to the Lender, upon request, full information as to the insurance
carried.  The present insurance coverage of the Credit Parties as of the Closing
Date is outlined as to carrier, policy number, expiration date, type and amount
on Schedule 8.1(m).   Upon the request of the Lender from time to time, each
Credit Party shall deliver to the Lender evidence of the insurance then in
effect, including a detailed list of such insurance containing the information
set forth on Schedule 8.1(m).  The insurance policies with respect to the Mining
Properties shall name the Lender as loss payee or additional insured, as
appropriate, and shall contain an endorsement providing that such insurance
cannot be terminated or amended without at least thirty (30) days prior notice
to the Lender.

 

 
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(n)
Authorizations.  Obtain and maintain in full force all Authorizations necessary
for the exploration and development of the Mining Properties and the performance
of the Credit Parties’ obligations and perform and observe all covenants,
conditions and restrictions contained in, or imposed on it by, any Authorization
and/or Material Contract.

 
 
(o)
Material Adverse Effect.  Immediately notify the Lender of any event or
circumstance or any potential event or circumstance that could have a Material
Adverse Effect.

 
 
(p)
Deliver Additional Material Contracts.  Notify the Lender within five Business
Days upon the entering into of any new Material Contract and deliver (i) a
certified copy of each such Material Contract to the Lender within five Business
Days of the execution and delivery by the parties of such Material Contract, and
(ii) upon the request of the Lender, a Direct Agreement in respect of such
Material Contract within ten days of the Lender’s request.

 
 
(q)
Borrower’s Account.  Forthwith upon receipt, pay all cash receipts from the
Mining Properties or the Business (including all proceeds of insurance and
reinsurance) into the Borrower’s Account.  Direct all parties to the Material
Contracts, insurers and all other Persons from whom any Credit Party may become
entitled to receive payments (including proceeds arising from sale of
production, business interruption insurance, liquidated damages under any
Material Contract, any performance bond, letter of credit or guarantee, any
warranty claim, the sale of, or grant of any interest in any part of the Mining
Properties, any expropriation or property insurance) to pay all such amounts
directly to the Borrower’s Account.  No withdrawals or transfers will be
permitted from the Borrower’s Account except for payment of the following
amounts in the following order of priority and otherwise as agreed to by the
Lender:

 
 
(i)
first, interest, fees, principal and any other amounts then due and payable to
the Lender under the Credit Documents; and

 
 
(ii)
second, for payments of all other amounts permitted to be paid pursuant to this
Agreement.

 
 
(r)
Perfection and Protection of Security.  Perform, execute and deliver all acts,
agreements and other documents as may be requested by the Lender at any time to
register, file, signify, publish, perfect, maintain, protect, and enforce the
Security or grant a security interest thereon including, without limitation, (i)
executing, notarizing, recording and filing of the Security Documents and
financing or continuation statements in connection therewith, in form and
substance satisfactory to the Lender, (ii) delivering to the Lender the
originals of all instruments, documents and chattel paper and all other
Collateral of which the Lender determines it should have physical possession in
order to perfect and protect the Security, duly endorsed or assigned to the
Lender, (iii) delivering to the Lender warehouse receipts covering any portion
of the Collateral located in warehouses and for which warehouse receipts are
listed, (iv) placing notations on its books of account to disclose the Security,
(v) delivering to the Lender all letters of credit on which the Credit Party is
named beneficiary, and (vi) taking such other steps as are deemed reasonably
necessary by the Lender to maintain the Security.

 

 
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(s)
Additional Security.  Promptly upon the request of the Lender, the Borrower
shall, and shall ensure that each other Credit Party shall, execute, deliver,
create and perfect any and all Security which the Lender may require in relation
to any assets of any Credit Party, the Lender may designate together with all
related documents, Instruments, registrations and other evidence the Lender may
require to ensure that such Security creates a legal, valid and first priority
perfected security interest in relation to such assets, enforceable against
third parties and any trustee in bankruptcy.

 
 
(t)
Further Assurances.  Upon request of the Lender, execute and deliver, or cause
to be executed and delivered, to the Lender such further Instruments and do and
cause to be done such further acts as may be necessary or proper in the opinion
of the Lender, acting reasonably, to carry out more effectively the provisions
and purposes of the Credit Documents.

 
 
(u)
Purpose of Credit Facility.  Ensure each Advance of a Loan shall be used solely
for the purposes set out in Section 2.5 and otherwise as set forth in the
applicable Borrowing Notice.

 
 
(v)
Common Shares.

 
 
(i)
The Borrower shall comply with all Applicable Securities Legislation.

 
 
(ii)
The Borrower shall maintain the listing of its Common Shares on the Exchange.

 
 
(w)
Additional Guarantors.  The Borrower shall ensure that on or prior to any Person
becoming a Subsidiary:

 
 
(i)
such Person shall execute and deliver in favour of the Lender a guarantee of all
the obligations of the Credit Parties under this Agreement and all the other
Credit Documents;

 
 
(ii)
such Person shall grant any and all Security as the Lender may require;

 
 
(iii)
all shares in the capital of such Person are pledged to the Lender (and all
original share certificates are delivered to the Lender, duly endorsed in blank
or accompanied by a duly executed stock power transfer form) and all directors
of such Person have delivered to the Lender resignations duly executed but
undated;

 
 
(iv)
the Lender has received evidence of registration or other perfection of
such Security and/or pledge in such jurisdictions as the Lender may require to
ensure that such Security and/or pledge creates legal, valid, binding,
enforceable and first-priority security interests in the assets or shares to
which such Security or pledge relates, enforceable against third parties,
trustees in bankruptcy and similar officials;

 
 
(v)
the Lender has received all discharges, subordination agreements, waivers and
confirmations as the Lender may require to ensure that all obligations under the
Credit Documents are secured by first priority Liens on the property and assets
of such Person; and

 

 
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(vi)
the Lender has received such other evidence, certificates and documentation as
the Lender may request;

 
in each case, in form and substance satisfactory to the Lender.
 
 
(x)
Defense of Title and Rights.  Each Credit Party shall preserve and defend its
ownership of and all right, title and interest in its assets, properties and
rights, including each Mining Property, as such title is represented and
warranted in Section 7.1(j).  Each Credit Party shall defend, and will cause the
other Credit Parties to defend, the Liens in favor of the Lender under the
Security Documents, and the Credit Parties shall maintain and preserve such
Liens as perfected Liens with their Agreed Priority.  Each Credit Party shall
ensure that the Security Documents shall at all times cover and extend to all
assets, properties, rights and interests of each Credit Party or Subsidiary.

 
 
(y)
Post Effective Date Collateral and Document Deliveries.

 
 
(i)
The Borrower shall cause its Subsidiary Ra Resources Ltd. to execute and deliver
to the Lender a Guarantee, a Security Agreement and such other Credit Documents
as are required by the Lender by no later than forty-five (45) days following
the Effective Date.

 
 
(ii)
The Borrower shall deliver to the Lender all certificates or other evidence of
its ownership of the Santa Rosa Subsidiary as the Borrower earns an irrevocable
interest in and to the Santa Rosa Subsidiary, and the Borrower shall otherwise
take all actions and deliver all Instruments necessary or appropriate to
evidence and perfect its pledge of its ownership of the Santa Rosa Subsidiary.

 
 
(iii)
The Borrower shall deliver to the Lender a Gold Supply Agreement, substantially
in the form of Exhibit C hereto, executed by the Borrower and the Santa Rosa
Subsidiary, by no later than the date that is twelve (12) months following the
Effective Date.

 
Section 8.2                      Negative Covenants.
 
Except with the written consent of the Lender (acting in its sole discretion),
until the full and final payment and performance of the Obligations and the
termination of this Agreement, each of the Credit Parties shall not, and shall
ensure that no other Credit Party shall:
 
 
(a)
Debt.  Create, incur, assume or suffer to exist any Debt, other than Permitted
Debt, or as otherwise previously approved in writing by the Lender.

 
 
(b)
Liens.  Create, incur, assume or suffer to exist, any Lien on any of their
respective properties or assets, now owned or hereafter acquired, or assign or
otherwise convey any right to receive the production, proceeds or income
therefrom, other than Permitted Liens.  Notwithstanding the foregoing, if a
Credit Party shall grant a Lien on any of its properties or assets in violation
of this Section 8.2(b), then it shall be deemed to have simultaneously granted
an equal and ratable Lien on any such properties or assets to and in favour of
the Lender, to the extent that such a Lien has not already been granted to the
Lender.

 

 
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(c)
Mergers, Etc.  Except with the prior written consent of the Lender, enter into
any reorganization, consolidation, amalgamation, arrangement, winding-up, merger
or other similar transaction or convey, lease or Dispose of all or substantially
all of its assets or convey, lease or Dispose of all or any material portion of
any Mining Property.

 
 
(d)
Disposal of Assets Generally.  Dispose of any property or asset (including,
without limitation, any securities other than securities issued directly from
such Credit Party’s treasury) other than (i) bona fide sales of inventory in the
ordinary course of business for the purpose of carrying on the Business and at
fair market value, (ii) the sale of any asset (other than securities) which has
no material economic value in the Business and is obsolete provided the fair
market value of such asset does not exceed, when aggregated with the fair market
value of all other assets sold in reliance on this Section 8.2(d)(ii), the
aggregate sum of $100,000, and (iii) any Disposal to the extent the related
Disposal Proceeds are applied in prepayment of the Advances as contemplated
under Article 4.

 
 
(e)
Transactions with Related Parties.  Directly or indirectly enter into any
agreement with, make any financial accommodation for, or otherwise enter into
any transaction with, a Related Party other than a Permitted Affiliate
Transaction.

 
 
(f)
Change in Business.  Make any change in the nature of the Business or permit any
of the other Credit Parties to make any change in the nature of its business.

 
 
(g)
Distributions.  Declare, make or pay any Distribution.  For purposes of this
Section 8.2(g), “Distribution” includes with respect to any Person (i) any
dividend or other distribution on issued shares of the Person or any of its
subsidiaries, (ii) any purchase, redemption or retirement amount of any issued
share, warrant or any other option or right to acquire any share of the Person
or any of its subsidiaries redeemed or purchased by the Person or any its
subsidiaries, or (iii) any payment whether as consulting fees, management fees
or otherwise to any Related Party of the Person or any of its subsidiaries.

 
 
(h)
Financial Assistance.  Provide any Financial Assistance to any Person, except
for Financial Assistance provided to other Credit Parties in an aggregate amount
not exceeding $50,000 in any fiscal period.  For the purposes of this Section
8.2(h), “Financial Assistance” includes any advances, loans or other extensions
of credit, guarantees, indemnities or other contingent liabilities in the nature
of a guarantee or indemnity or capital contributions.

 
 
(i)
Acquisitions.  Purchase any shares, stocks, bonds, notes, debentures or other
securities of any Person or acquire the undertaking of, or all or substantially
all the assets of, any other Person, provided that the Borrower shall be
permitted to acquire additional Mining Properties and make other acquisitions,
in each case via option, asset or stock purchase, so long as such acquisitions
do not (in the reasonable opinion of the Lender) impair the Lender’s then
existing Security, no Default or Event of Default has occurred and is
continuing, the aggregate consideration for such acquisition and all other
acquisitions shall not exceed $100,000 in any year, and the acquired property
and assets are added to and covered by the Security.

 

 
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(j)
Hedging.  Enter into any Hedging Agreement on a margined or collateralized basis
or of a speculative nature.

 
 
(k)
Subsidiaries.  Carry on the Business otherwise than through the Borrower or
any  Credit Party.

 
 
(l)
Charter Documents.  Amend or modify its articles of incorporation or bylaws (or
equivalent charter documents) without the prior written consent of the Lender.

 
 
(m)
Change to Material Contracts.  Terminate, waive or make any amendment to, or
assign any interest, in any Material Contract, except with the prior written
consent of the Lender.

 
 
(n)
Burdens on Production.  No Credit Party shall grant, sell, transfer, assign or
convey, directly or indirectly, to any Person any royalty (of any kind or nature
whatsoever, howsoever designated), production payment or other non-cost bearing
interest in any Mineral Property, other than any granted to the Lender or as
required by Applicable Law in favour of a Governmental Entity.

 
 
(o)
Prepayment of Indebtedness.  The Borrower shall, not, directly or indirectly,
voluntarily purchase, redeem, defease or prepay any principal or interest of any
Debt, provided that, the Borrower may prepay the Debt described in paragraph (c)
of the definition of Permitted Debt if it simultaneously executes, delivers,
creates and perfects any and all Security which the Lender may require, with all
related documents, instruments, registrations and other evidence the Lender may
require to ensure that such Security creates legal, valid, binding, enforceable
and first priority perfected security interests over the property charged
thereunder, enforceable against third parties and any trustee in bankruptcy.

 
ARTICLE 9
EVENTS OF DEFAULT
 
Section 9.1                      Events of Default.
 
The occurrence of any of the following events that is continuing shall
constitute an “Event of Default” under this Agreement:
 
 
(a)
Non-Payment.  A Credit Party fails to make payment of any Obligation (whether
for principal, interest, costs, fees, expenses or any other amount due hereunder
or under any other Credit Document) when due and payable pursuant to the terms
of a Credit Document (whether on a payment date, by prepayment, on demand or
otherwise);

 
 
(b)
Misrepresentation.  Any representation or warranty or certification made or
deemed to be made by a Credit Party or any of its respective directors or
officers in any Credit Document shall prove to have been incorrect, incomplete
or misleading in any respect when made or deemed to be made (in the case of any
representation or warranty containing any materiality qualifier) or proves to
have been incorrect, incomplete or misleading in any material respect (in the
case of any representation or warranty without any materiality qualifier);

 
 
(c)
Breach of Covenants.  A Credit Party fails to perform, observe or comply with:

 

 
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(i)
any of the covenants or any other provision or obligation contained in Section
8.2, Section 8.1(u), Section 8.1(w), Section 8.1(x) or Section 8.1(y); or

 
 
(ii)
any other covenant or any other provision or obligation contained in any Credit
Document to which it is a party and such failure is not capable of being
remedied or, if capable of being remedied, continues for a period of five
Business Days, provided in such case the Credit Party is proceeding diligently
to remedy such failure and the Lender is not prejudiced thereby;

 
 
(d)
Cross-Default.  A Credit Party fails to pay the principal of, or premium or
interest on or any other amount relating to, any of its Debt exceeding $100,000
(or the equivalent amount in any other currency) when such amount becomes due
and payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise); or any other event occurs or condition exists if its
effect is to accelerate, or permit the acceleration of such Debt; or any such
Debt shall be declared to be due and payable prior to its stated maturity;

 
 
(e)
Material Contracts.  A Credit Party fails to perform or observe any term,
covenant or agreement contained in any Material Contract on its part to be
performed or observed where such failure could, have a Material Adverse Effect
and such failure remains outstanding for a period of ten (10) Business Days; or
any Material Contract is amended, where such amendment could have a Material
Adverse Effect; or any Material Contract is terminated or revoked or permitted
to lapse (other than in accordance with its terms and not as a result of
default); or any party to any Material Contract delivers a notice of termination
or revocation in respect of such Material Contract and such Material Contract is
subsequently terminated or revoked;

 
 
(f)
Judgments.  Any judgment or order for the payment of money in excess of
$100,000.00 (or the equivalent amount in any other currency) is rendered against
a Credit Party and either (i) enforcement proceedings have been commenced by a
creditor upon the judgment or order, or (ii) there is any period of ten (10)
consecutive days during which a stay of enforcement of the judgment or order, by
reason of a pending appeal or otherwise, is not in effect;

 
 
(g)
Bankruptcy; Insolvency.  (i) Any Credit Party shall initiate or commence any
case, proceeding or other action (A) under any existing or future Bankruptcy
Law, or otherwise seeking to have it judged bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B) seeking
appointment of a receiver, trustee, custodian, administrator, conservator or
other similar official for it or for all or any substantial part of its assets,
or any Credit Party shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against any Credit Party any case,
proceeding or other action of a nature referred to in clause (i) above which
(A) results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a period of
thirty (30) days; or (iii) there shall be commenced against any Credit Party any
case, proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial part of
their assets which results in the entry of an order for any such relief which
shall not have been vacated, discharged, or stayed or bonded pending appeal
within thirty (30) days from the entry thereof; or (iv) any Credit Party shall
take any action in furtherance of, or indicating its consent to, approval of,
authorization of, or acquiescence in, any of the acts set forth in clause (i),
(ii), or (iii) above; or (v) any Credit Party generally shall not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as they
become due.

 

 
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(h)
Dissolution.  Any application is made for, or order, judgment or decree is
entered against any Credit Party decreeing, the winding-up, dissolution or
similar process of such Credit Party and, in the case of an application, such
application remains undischarged or unstayed for a period in excess of ten days
provided the Lender is not materially prejudiced thereby;

 
 
(i)
Security Imperilled.  Any Credit Document is declared by a court or tribunal of
competent jurisdiction to be void, invalid, illegal or unenforceable or the
validity, legality or enforceability thereof is contested by any Credit Party or
any other Person party thereto (other than the Lender), or any Credit Party or
any other Person party thereto denies that it has any or further obligations
thereunder;

 
 
(j)
Change of Control.  A Change of Control occurs;

 
 
(k)
Material Adverse Effect.  Any event, circumstance or condition which could
reasonably be expected to have a Material Adverse Effect has occurred;

 
(l)           Expropriation/Condemnation.  An Expropriation Event shall have
occurred;
 
 
(m)
Regulatory Action.  Any Governmental Entity shall take or attempt to take any
action with respect to a Credit Party, or with respect to any Mining Property or
any Collateral subject to the Security Documents, which has had or could
reasonably be expected to have a Material Adverse Effect on a Credit Party or
the ability of the Borrower to repay the Loan or to meet its other Obligations
in a timely manner unless such action is set aside, dismissed or withdrawn
within twenty (20) days of its institution or such action is being contested in
good faith, its effect is stayed during such contest, the Credit Parties are
allowed to continue development of each Mining Property during such period, and
the same would not be expected to have a Material Adverse Effect;

 
 
(n)
Cessation of Project Operations.  Without the prior written consent of the
Lender, the Santa Rosa Project, the Mineral Ridge Project or any other Mining
Property, or any material portion thereof, shall be abandoned or terminated, or
exploration, development or operation of the Santa Rosa Project, the Mineral
Ridge Project or any other Mining Property shall be terminated or reduced
materially, or the Santa Rosa Acquisition Agreement shall be terminated prior to
the Borrower earning its full right and interest in the Santa Rosa Project; or

 
 
(o)
Financial Statements.  The audited consolidated financial statements of the
Borrower are qualified in any respect (other than with respect to a going
concern note) by the Borrower’s independent auditors.

 
Section 9.2                      Acceleration.
 
Upon the occurrence of an Event of Default specified in Section 9.1(g), all
obligations of the Lender hereunder shall automatically terminate, but such
termination shall not limit or affect any rights or remedies
hereunder.  Immediately and automatically upon the occurrence of an Event of
Default specified in Section 9.1(g), without delivery of any notice by the
Lender, the Loan, together with all interest thereon, the Obligations and all
other amounts owed by any Credit Party hereunder or under any other Credit
Document shall be automatically accelerated and immediately due and payable to
the Lender.  Upon the occurrence of any other Event of Default which is
continuing, the Lender may by notice to the Borrower, (A) declare its commitment
to Advance any part of the Loan to be terminated, whereupon the same shall
forthwith terminate, and (B) the Lender, in its sole discretion, may accelerate
the Loan.  Upon acceleration of the Loan, whether automatically or by notice,
the Borrower shall (i) immediately repay all Obligations, and (ii) the Borrower
shall pay to the Lender an amount in cash equal to the aggregate of the
following payments:
 

 
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(i)
an amount equal to [***]; plus

 
 
(ii)
the Profit Participation Amount relating to such payment;

 
together with all accrued interest (as applicable) and all other fees, charges,
costs and other amounts payable hereunder and under any other Credit Document.
 
Section 9.3                      Remedies.
 
(1)
Upon the occurrence of an Event of Default, the Lender may commence such legal
action or proceedings and exercise all its rights and remedies available to it
under the Credit Documents and/or Applicable Law, which in its sole discretion
it deems appropriate or expedient, including, the commencement of foreclosure
and enforcement proceedings under the Credit Documents, all without any
additional notice, presentation, demand, protest, notice of dishonour, entering
into of possession of any property or assets, or any other action or notice, all
of which are expressly waived by each Credit Party, whereupon all obligations of
the Lender to make any further Advances shall forthwith be suspended or
terminated.  Upon the occurrence of an Event of Default, the Lender shall have,
and may exercise, all of its rights and remedies under this Agreement and the
other Credit Documents as well as all other rights and remedies available at law
or in equity.

 
(2)
The rights and remedies of the Lender under the Credit Documents are cumulative
and are in addition to, and not in substitution for, any other rights or
remedies, and no right or remedy contained herein or in any other Credit
Document, or otherwise at law or in equity, is intended to be
exclusive.  Nothing contained in the Credit Documents with respect to the
liability of the Credit Parties to the Lender, nor any act or omission of the
Lender with respect to the Credit Documents or its rights or remedies, shall in
any way prejudice, impair, limit or otherwise affect the rights, remedies and
powers of the Lender under the Credit Documents or otherwise.

 
ARTICLE 10
MISCELLANEOUS
 
Section 10.1                      Amendments, etc.
 
No amendment or waiver of any provision of any of the Credit Documents, nor
consent to any departure by any Credit Party or any other Person from such
provisions, is effective unless in writing and approved by the Lender.  Any
amendment, waiver or consent is effective only in the specific instance and for
the specific purpose for which it was given.
 

 
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Section 10.2                      Waiver.
 
(1)
No failure on the part of the Lender to exercise, and no delay in exercising,
any right under any of the Credit Documents shall operate as a waiver of such
right; nor shall any single or partial exercise of any right under any of the
Credit Documents preclude any other or further exercise of such right or the
exercise of any other right.

 
(2)
Except as otherwise expressly provided in this Agreement, the covenants,
representations and warranties shall not merge on and shall survive each Advance
and, notwithstanding any such Advance or any investigation made by or on behalf
of any party, shall continue in full force and effect.

 
Section 10.3                      Evidence of Debt and Borrowing Notices.
 
The indebtedness of the Borrower resulting from the Advances shall be evidenced
by the Borrowing Notices and the records of the Lender, which shall constitute
prima facie evidence of such indebtedness.
 
Section 10.4                      Notices, etc.
 
Any notice, direction or other communication to be given under this Agreement
shall, except as otherwise permitted, be in writing and given by delivering it
or sending it by facsimile or other similar form of recorded communication
addressed:
 
 
(a)
to any Credit Party at:

 
Golden Phoenix Minerals, Inc.
1675 E. Prater Way, Suite 102
Sparks, Nevada 89434
Attention:       Tom Klein

Telephone:
Facsimile:        1-775-853-5010
Email:
 
 
(b)
to the Lender at:

 
Waterton Global Value, L.P.
Folio House, P.O. Box 800
Road Town, Tortola, VG1110
British Virgin Islands

Attention:       Peter Poole
Facsimile:        (284) 494-8356/7422

Any such communication shall be deemed to have been validly and effectively
given if (i) personally delivered, on the date of such delivery if such date is
a Business Day and such delivery was made prior to 4:00 p.m. (Toronto time),
otherwise on the next Business Day, (ii) transmitted by facsimile, electronic
mail or similar means of recorded communication on the Business Day following
the date of transmission.  Any party may change its address for service from
time to time by notice given in accordance with the foregoing and any subsequent
notice shall be sent to the party at its changed address.
 

 
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Section 10.5                      Costs, Expenses, General Indemnity and
Environmental Indemnity.
 
(1)
The Borrower and the other Credit Parties agree to pay on demand all reasonable
costs and expenses of the Lender in connection with the negotiation,
preparation, execution, and delivery of this Agreement, the other Credit
Documents and the other documents and Instruments to be delivered hereunder,
including the reasonable fees and expenses of all legal counsel and independent
consultants to the Lender and all other out-of-pocket expenses of the Lender,
and including the costs and expenses associated with undertaking due diligence
with respect to the Santa Rosa Project and in connection with the negotiation,
preparation, execution, and delivery of all Security Documents and other Credit
Documents by the Santa Rosa Subsidiary and otherwise with respect to the Santa
Rosa Project.  In addition, the Borrower and the other Credit Parties agree to
pay on demand all reasonable costs and expenses of the Lender in connection with
the administration of this Agreement and the other Credit Documents,  including
the reasonable costs and expenses incurred by the Lender in connection with site
visits by the Lender to the Mining Properties, and all costs and expenses, if
any, in connection with the protection of the Lender’s rights with respect to
and the enforcement of this Agreement, the other Credit Documents and the other
documents to be delivered hereunder (whether incurred before, during or after
commencement of any bankruptcy, reorganization or insolvency actions pertaining
to the Borrower or any other Credit Party).  All such expenses will be itemized
in reasonable detail.  In addition, the Borrower and the other Credit Parties
agree to pay any and all stamp, mortgage recording and other Taxes, filing fees,
duties or charges payable or determined to be payable in connection with the
execution and delivery of this Agreement, the other Credit Documents and the
other documents to be delivered hereunder, and the Borrower and the other Credit
Parties agree to indemnify and save the Lender harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or
omission to pay such Taxes, filing fees or charges.  The Borrower and the other
Credit Parties acknowledge that they shall pay all aforementioned costs,
expenses and taxes regardless of whether a Loan is advanced.

 
(2)
The Borrower and each other Credit Party agree, whether or not the transactions
contemplated in this Agreement are completed, to indemnify and to defend and
hold the Lender, the Lender’s Affiliates and their respective directors,
partners, managers, members, owners, principals, shareholders, officers,
employees, agents, consultants and representatives (each an “Indemnified
Person”) harmless from, and shall pay to such Indemnified Person promptly (and
in any event within five Business Days of demand) any amounts required to
compensate the Indemnified Person for, any cost, expense, liability, obligation,
loss, damage, penalty, action, judgment, fine, suit, charge, claim, taxes,
payments or disbursements of any kind or nature whatsoever, including attorneys
fees and expenses imposed on, incurred by, suffered by or asserted against, the
Indemnified Person as a result of, connected with or arising out of (i) the
preparation, execution and delivery of, preservation of rights under,
enforcement of, or refinancing, renegotiation or restructuring of, the Credit
Documents and any related amendment, waiver or consent, as well as the
consummation of the transactions contemplated thereby (ii) any advice of counsel
as to the rights and duties of the Lender with respect to the administration of
the Credit Documents or any transaction contemplated under the Credit Documents,
(iii) a default (whether or not constituting a Default or an Event of Default)
by a Credit Party, (iv) any proceedings brought by or against the Indemnified
Person, or in which the Indemnified Person otherwise participates, due to its
entering into or being a party to any of the Credit Documents, or by reason of
its exercising or performing, or causing the exercise or performance of, any
right, power or obligation under any of the Credit Documents or otherwise in
connection with its interest in any Security, whether or not such proceedings
are directly related to the enforcement of any Credit Document, and (v) the
ownership, management, administration or operation of any Mining Property,
except in each case to the extent caused by the gross negligence or wilful
misconduct of the Indemnified Person.

 

 
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(3)
Without limiting the generality of the foregoing provisions, the Borrower and
each other Credit Party hereby indemnifies and holds harmless and agrees to
defend the Indemnified Persons against any cost, expense, liability, obligation,
loss, damage, penalty, action, judgment, fine, suit, charge, claim, taxes,
payments or disbursements of any kind or nature whatsoever (including strict
liability and including costs and expenses of investigation, abatement and
remediation and monitoring of spills or Releases or threatened Releases of
Hazardous Materials or other Contaminants, and including liabilities of the
Indemnified Persons to third parties (including Governmental Entities) in
respect of bodily injuries, property damage, damage to or impairment of the
environment or any other injury or damage and including liabilities of the
Indemnified Persons to third parties for the third parties' foreseeable and
unforeseeable consequential damages) incurred as a result of or in connection
with the administration or enforcement of this Agreement or any other Credit
Document, including the exercise by the Lender of any rights hereunder or under
any of the other Credit Documents, which result from or relate, directly or
indirectly, to:

 
 
(a)
the presence, Release or threatened Release of any Hazardous Material or other
Contaminants, by any means or for any reason, whether or not such presence,
Release or threatened Release of Hazardous Materials or other Contaminants was
under the control, care or management of a Credit Party or of a previous owner,
operator, tenant or other Person;

 
 
(b)
any Release, presence, use, creation, transportation, storage or disposal of any
Hazardous Material or Contaminant on or with respect to the Subject Property or
the business, operations or activities of any Credit Party;

 
 
(c)
any claim or order for any clean-up, restoration, detoxification, reclamation,
repair or other securing or remedial action which relates to any Subject
Property or the business, operations or activities of any Credit Party;

 
 
(d)
any Environmental Claim with respect to any Subject Property or any Credit
Party; or

 
 
(e)
the breach or violation or alleged breach or violation of any Environmental Laws
by a Credit Party.

 
For purposes of this Section, “liability” shall include (a) liability of an
Indemnified Person for costs and expenses of abatement and remediation of spills
and releases of Contaminants where such abatement and remediation is prudent for
the continued operation of the Business or required by Environmental Laws and to
the extent required to maintain the value and use of the Collateral, (b)
liability of an Indemnified Person to a third party to reimburse the third party
for bodily injuries, property damages and other injuries or damages which the
third party suffers, including (to the extent, if any, that the Indemnified
Person is liable therefor) foreseeable and unforeseeable consequential damages
suffered by the third party, (c) liability of the Indemnified Person for damage
suffered by the third party, (d) liability of an Indemnified Person for damage
to or impairment of the environment and (e) liability of an Indemnified Person
for court costs, expenses of alternative dispute resolution proceedings, and
fees and disbursements of expert consultants and legal counsel on a solicitor
and own client basis.
 
(4)
If, with respect to the Lender, (i) any change in any law, rule, regulation,
judgment or order or any change in the interpretation, application or
administration of such law, rule, regulation, judgment or order, occurring or
becoming effective after this date, or (ii) compliance by the Lender with any
direction, request or requirement (whether or not having the force of law) of
any Governmental Entity made or becoming effective after the date hereof, has
the effect of causing any loss to the Lender or reducing the Lender’s rate of
return by (w) increasing the cost to the Lender of performing its obligations
under any of the Credit Documents (including the costs of maintaining any
capital, reserve or special deposit requirements), (x) requiring the Lender to
maintain or allocate any capital or additional capital or affecting its
allocation of capital in respect of its obligations under any of the Credit
Documents, (y) reducing any amount payable to the Lender under any of the Credit
Documents, (z) causing the Lender to make any payment or to forego any return
on, or calculated by reference to, any amount received or receivable by the
Lender under the Credit Documents, then the Lender may give notice to the
Borrower specifying the nature of the event giving rise to the loss and the
Borrower shall, on demand, pay such amounts as the Lender specifies are
necessary to compensate it for any such loss.  A certificate as to the amount of
any such loss submitted in good faith by the Lender to the Borrower shall be
conclusive and binding for all purposes, absent manifest error.

 

 
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(5)
The Borrower shall pay to the Lender on demand any amounts required to
compensate the Lender for any loss suffered or incurred by it as a result of (i)
any payment being made in respect of an Advance, (ii) the failure of the
Borrower to give any notice in the manner and at the times required by this
Agreement, (iii) the failure of the Borrower to effect an Advance in the manner
and at the time specified in any Borrowing Notice, or (iv) the failure of the
Borrower to make a payment or a mandatory repayment in the manner and at the
time specified in this Agreement.  A certificate as to the amount of any loss
submitted in good faith by the Lender to the Borrower shall be conclusive and
binding for all purposes, absent manifest error.

 
(6)
The provisions of this Section 10.5 shall survive the termination of this
Agreement and the repayment of all Obligations.  The Borrower acknowledges that
neither its obligation to indemnify nor any actual indemnification by it of the
Lender or any other Indemnified Person in respect of such Person’s losses for
the legal fees and expenses shall in any way affect the confidentiality or
privilege relating to any information communicated by such Person to its
counsel.

 
Section 10.6                      Release.
 
Upon irrevocable and indefeasible repayment and performance in full of the
Obligations, including all indebtedness, obligations and liabilities (direct or
indirect, absolute or contingent, matured or not, solely or jointly) by the each
of the Credit Parties incurred under or in connection with this Agreement and/or
any other Security Documents and payment to the Lender of all costs, charges,
expenses and legal fees and disbursements (on a solicitor and his own client
basis) incurred by the Lender in connection with the Security, each of the
Credit Parties shall be entitled to a release and discharge of the Security
constituted by the Security Documents, other than obligations and/or liabilities
that have accrued prior to the date of such release or any other obligation
which is expressly stated to survive the termination of the Security Documents,
provided that the Lender no longer has any obligations (contingent or otherwise)
under or in connection with this Agreement or any other Credit Document.
 
Section 10.7                      Taxes and Other Taxes.
 
(1)
All payments to the Lender by the Borrower under any of the Credit Documents
shall be made free and clear of and without deduction or withholding for any and
all taxes, levies, imposts, deductions, charges or withholdings and all related
liabilities (all such taxes, levies, imposts, deductions, charges, withholdings
and liabilities being referred to as “Taxes”) imposed by Canada or any other
relevant jurisdiction (or any political subdivision or taxing authority of it),
unless such Taxes are required by Applicable Law to be deducted or withheld.  If
a Credit Party shall be required by Applicable Law to deduct or withhold any
such Taxes from or in respect of any amount payable under any of the Credit
Documents (i) the amount payable shall be increased as may be necessary so that
after making all required deductions or withholdings (including deductions or
withholdings applicable to any additional amounts paid under this Section
10.7(1)), the Lender receives an amount equal to the amount it would have
received if no such deduction or withholding had been made, (ii) the Borrower
shall make such deductions or withholdings, and (iii) the Borrower shall
immediately pay the full amount deducted or withheld to the relevant
Governmental Entity in accordance with Applicable Law.

 

 
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(2)
The Borrower shall immediately pay any present or future stamp or documentary
taxes or any other excise or property taxes, charges, financial institutions
duties, debits taxes or similar levies (all such taxes, charges, duties and
levies being referred to as “Other Taxes”) which arise from any payment made by
the Borrower under any of the Credit Documents or from the execution, delivery
or registration of, or otherwise with respect to, any of the Credit Documents.

 
(3)
The Borrower shall indemnify the Lender for the full amount of Taxes or Other
Taxes (including, without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable by the Borrower under this Section 10.7) arising
from the Credit Documents and paid by the Lender and any liability (including
penalties, interest and expenses) arising from or with respect to such Taxes or
Other Taxes, whether or not they were correctly or legally asserted.  The
Borrower shall (within three Business Days of demand by the Lender ) pay the
Borrower an amount equal to the loss, liability or cost which the Lender is
required to pay to any Governmental Entity as a result of any actions or
payments taken or made by the Borrower pursuant to Section 10.7(1).

 
(4)
Payment under this indemnification shall be made within 10 days from the date
the Lender makes written demand for it.  A certificate as to the amount of such
Taxes or Other Taxes submitted to the Borrower by the Lender shall be conclusive
evidence, absent manifest error, of the amount due from the Borrower to the
Lender.

 
(5)
The Borrower shall furnish to the Lender the original or a certified copy of a
receipt evidencing payment of Taxes or Other Taxes made by the Borrower within
10 days after the date of any payment of Taxes or Other Taxes.

 
(6)
Nothing contained in this Section 10.7 shall interfere with the right of the
Lender to arrange its tax affairs in whatever manner it deems fit (in its sole
and absolute discretion) and in particular, the Lender shall not be under any
obligation to claim relief from its corporate profits or similar tax liability
in respect of any deduction or withholding in priority to any other relief,
claims, credits or deductions available to it and the Lender shall not be
obligated to disclose to the Borrower any information regarding its tax affairs,
tax computations or otherwise.

 
(7)
The provisions of this Section 10.7 shall survive the termination of the
Agreement and the repayment of all Obligations.

 
Section 10.8                      Successors and Assigns.
 
(1)
The Borrower shall not have the right to assign or transfer any of its rights or
obligations under this Agreement or any interest in this Agreement without the
prior written consent of the Lender, which consent may be unreasonably withheld.

 
(2)
The Lender may not assign or transfer any of its rights, interests or
obligations (in whole or in part) under this Agreement except (i) to an
Affiliate of the Lender, (ii) with the prior written consent of the Borrower
(which consent may not be unreasonably withheld or delayed) or (iii) after the
occurrence of any Default which is continuing, to any Person without notice to
or the consent of the Borrower.  In the case of an assignment or transfer
authorized under this Section 10.8, the assignee or transferee (as the case may
be) shall have, to the extent of such assignment or transfer, the same rights,
benefits and obligations as it would if it were the Lender hereunder and the
Lender shall be relieved of its obligations hereunder with respect to the
commitments assigned or transferred; provided that an assignee or transferee (as
the case may be) shall not be entitled to receive any greater payment under any
provision of any Credit Document than the Lender would have been entitled to
receive.  The Borrower hereby acknowledges and agrees that any assignment or
transfer will give rise to a direct obligation of the Borrower to such assignee
or transferee (as the case may be) and that such assignee or transferee (as the
case may be) shall be considered to be the “Lender” hereunder.  The Lender may
furnish any information concerning the Borrower in its possession from time to
time to assignees and transferees provided that any such assignee or transferee
agrees to maintain the confidentiality of such information.

 

 
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(3)
The Borrower shall provide such certificates, acknowledgments and further
assurances in respect of this Agreement and the Credit Documents as the Lender
may reasonably require in connection with any assignment pursuant to this
Section 10.8.

 
(4)
Any assignment pursuant to this Section 10.8 will not constitute a repayment by
the Borrower to the Lender of any Advance, nor a new Advance to the Borrower by
the Lender or by the assignee, as the case may be, and the parties acknowledge
that the Borrower’s obligations with respect to any such Advances will continue
and will not constitute new obligations.

 
Section 10.9                      Right of Set-off.
 
Upon the occurrence and during the continuance of any Event of Default, the
Lender is authorized at any time and from time to time, to the fullest extent
permitted by law (including general principles of common-law), to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by it to or for
the credit or the account of any Credit Party against any and all of the
obligations of any Credit Party under any of the Credit Documents, irrespective
of whether or not the Lender has made demand under any of the Credit Documents
and although such obligations may be unmatured or contingent.  If an obligation
is unascertained, the Lender may, in good faith, estimate the obligation and
exercise its right of set-off in respect of the estimate, subject to providing
the applicable Credit Party with an accounting when the obligation is finally
determined.  The Lender shall promptly notify the applicable Credit Party after
any set off and application is made by it, provided that the failure to give
notice shall not affect the validity of the set off and application.  The rights
of the Lender under this Section 10.9 are in addition to any other rights and
remedies (including all other rights of set-off) which the Lender may have.
 
Section 10.10                    Judgment Currency.
 
(1)
If, for the purposes of obtaining judgment in any court, it is necessary to
convert a sum due to the Lender in any currency (the “Original Currency”) into
another currency (the “Other Currency”), the parties agree, to the fullest
extent that they may effectively do so, that the rate of exchange used shall be
that at which, in accordance with normal banking procedures, the Lender could
purchase the Original Currency with the Other Currency on the Business Day
preceding the day on which final judgment is given or, if permitted by
Applicable Law, on the day on which the judgment is paid or satisfied.

 

 
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(2)
The obligations of the Borrower in respect of any sum due in the Original
Currency from it to the Lender under any of the Credit Documents shall,
notwithstanding any judgment in any Other Currency, be discharged only to the
extent that on the Business Day following receipt by the Lender of any sum
adjudged to be so due in the Other Currency, the Lender may, in accordance with
normal banking procedures, purchase the Original Currency with such Other
Currency.  If the amount of the Original Currency so purchased is less than the
sum originally due to the Lender in the Original Currency, the Borrower agrees,
as a separate obligation and notwithstanding the judgment, to indemnify the
Lender, against any loss, and, if the amount of the Original Currency so
purchased exceeds the sum originally due to the Lender in the Original Currency,
the Lender shall remit such excess to the Borrower.

 
Section 10.11                     Interest on Amounts.
 
Except as may be expressly provided otherwise in this Agreement, all amounts
owed by the Borrower to the Lender, which are not paid when due (whether at
stated maturity, on demand, by acceleration or otherwise) shall bear interest
(both before and after default and judgment), from the date on which such amount
is due until such amount is paid in full, payable on demand, at a rate per annum
equal at all times to 10%.
 
Section 10.12                     Governing Law and Waiver of Jury Trial.
 
(1)
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEVADA.

 
(2)
The Borrower irrevocably attorns and submits to the non-exclusive jurisdiction
of any court of competent jurisdiction of the State of Nevada in any action or
proceeding arising out of or relating to this Agreement and the other Credit
Documents to which it is a party.  The Borrower irrevocably waives objection to
the venue of any action or proceeding in such court or that such court provides
an inconvenient forum.  Nothing in this Section 10.12 limits the right of the
Lender to bring proceedings against the Borrower in the courts of any other
jurisdiction.

 
(3)
The Borrower hereby irrevocably consents to the service of any and all process
in any such action or proceeding by the delivery of copies of such process to
the Borrower at its address set out in Section 10.4(a)  Nothing in this Section
10.12 affects the right of the Lender to serve process in any manner permitted
by Applicable Law.

 
(4)
Each of the parties to this Agreement hereby irrevocably waives all right to a
trial by jury in any action, proceeding or counterclaim arising out of or
relating to this Agreement, the other Credit Documents or the transactions
contemplated hereby or thereby.  The scope of this waiver is intended to be
all-encompassing with respect to any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
contract claims, tort claims, breach of duty claims and all other common law and
statutory claims.  Each of the parties hereto (a) acknowledges that this waiver
is a material inducement for the parties to the Credit Documents to enter into a
business relationship, that the parties to the Credit Documents have already
relied on this waiver in entering into same and the transactions that are the
subject thereof, and that they will continue to rely on this waiver in their
related future dealings, and (b) further warrants and represents that each has
reviewed this waiver with its legal counsel and that each knowingly and
voluntarily waives its jury trial rights following consultation with legal
counsel.  This waiver is irrevocable, meaning that it may not be modified either
orally or in writing, and this waiver shall apply to any subsequent amendments,
modifications, supplements, extensions, renewals and/or replacements of this
Agreement.  In the event of litigation, this Agreement may be filed as a written
consent to a trial by the court.

 

 
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Section 10.13                     Counterparts.
 
This Agreement and any amendments, waivers, consents, or supplements may be
executed in any number of counterparts in separate counterparts, each of which
when so executed and delivered shall be deemed an original, but all of which
counterparts together shall constitute one and the same instrument.  This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties.  This Agreement may be validly executed and delivered by
facsimile, portable document format (.pdf) or other electronic transmission, and
delivery of an executed counterpart of a signature page to this Agreement, any
amendment, waiver, consent or supplement, or to any other Credit Document, by
facsimile, portable document format (.pdf) or other electronic delivery
(including e-mail) shall be as effective and binding as delivery of a manually
executed counterpart thereof.
 
Section 10.14                     Severability.
 
If any provision hereof is determined to be ineffective or unenforceable for any
reason, the remaining provisions hereof shall remain in effect, binding on the
parties and enforceable at the election of the Lender in its sole discretion.
 
Section 10.15                     Governing Language.
 
For all purposes, this English language version of this Agreement shall be the
original, governing instrument and understanding of the parties.  In the event
of any conflict between this English language version of the Agreement and any
subsequent translation into any other language, this English language version
shall govern and control.
 
Section 10.16                     Survival of Representations and Warranties.
 
All representations and warranties made hereunder and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of any
Loan.
 
Section 10.17                     Entire Agreement; Schedules and Exhibits.
 
The Schedules to this Agreement and the Exhibits to this Agreement form an
integral part of this Agreement and are incorporated herein by reference and
expressly made a part hereof.  This Agreement constitutes the entire agreement
among the Parties with respect to the subject matter hereof, superseding all
prior statements, representations, discussions, agreements and understandings,
oral or written, relating to such subject matter.
 
Section 10.18                     Credit Party Joint and Several Liability.
 
The Borrower and the other Credit Parties are engaged in related businesses and
are integrated to such an extent that the financial strength and flexibility of
each Credit Party has a direct, tangible and immediate impact on the success of
the other Credit Parties.  Each Guarantor will derive substantial direct and
indirect benefit from the extensions of the Loan to the Borrower
hereunder.  Each Guarantor waives any right to revoke, terminate or suspend its
Guarantee and acknowledges that it entered into such Guarantee in contemplation
of the benefits that it would receive by this Agreement.
 

 
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Section 10.19                     Further Assurances.
 
Each Credit Party shall execute, acknowledge and deliver to the Lender such
other and further documents and Instruments and do or cause to be done such
other acts as the Lender reasonably determines to be necessary or desirable to
effect the intent of the parties to this Agreement or otherwise to protect and
preserve the interests of the Lender hereunder, promptly upon request of the
Lender, including the execution and delivery of any and all documents and
Instruments which are necessary or advisable to create, protect or maintain in
favor of the Lender, Liens on all Collateral of the Credit Parties as may be
required by this Agreement or any Security Document that are duly perfected in
accordance with all Applicable Laws.
 
Section 10.20                     Acknowledgements.
 
Each of the parties hereto hereby acknowledges that:
 
 
(i)
it has been advised by its own legal counsel in the negotiation, preparation,
execution and delivery of this Agreement and each other Credit Document;

 
 
(ii)
this Agreement and the other Credit Documents shall not be construed  against
any party or more favourably in favor of any party based upon which party
drafted the same, it being agreed and acknowledged that all parties contributed
substantially to the negotiation and preparation of this Agreement and the other
Credit Documents;

 
 
(iii)
the Lender has no fiduciary relationship with or duty to the Borrower or any
other Credit Party arising out of or in connection with the Existing Agreement,
this Agreement, or any other agreement, arrangement or Instrument, and the
relationship between the Lender, on one hand, and the Borrower and the other
Credit Parties, on the other hand, in connection herewith is solely that of
creditor and debtor; and

 
 
(iv)
neither this Agreement nor any other Credit Document or other Instrument between
any Credit Party and the Lender creates a joint venture or partnership among the
parties hereto, and no joint venture or partnership exists, or shall be deemed
to exist, among the Lender and the Borrower or among the Lender and the other
Credit Parties.

 
Section 10.21                     Amendment and Restatement.
 
This Agreement amends, restates and continues the Existing Agreement, and this
Agreement and all other Instruments executed in connection herewith, constitute
an amendment, renewal, continuance and restatement of all Loans and Obligations
of the Borrower and the Guarantors.  The Existing Loan shall continue as part of
the Tranche One Loan under this Agreement.  Each Credit Document entered into in
connection with the Existing Agreement or the Existing Loan is hereby ratified
and confirmed and shall remain in full force and effect in accordance with its
terms, except to the extent expressly amended or modified in accordance with its
terms.  It is expressly understood and agreed by the parties hereto that this
Agreement is in no way intended to constitute, and does not constitute, a
release, repayment, satisfaction, discharge or novation of the Existing Loan or
the obligations and liabilities existing under the Existing Agreement, or a
release, termination, novation or impairment of any Credit Document or Lien
granted to the Lender.  All such Credit Documents and Liens created pursuant to
the Credit Documents in connection with the Existing Loan shall remain in full
force and effect and extend and apply to this Agreement, the Loan and the full
payment and performance of all Obligations, in each case for the benefit of the
Lender.  All such Liens created pursuant to the Security Documents entered into
in connection with the Existing Agreement are hereby expressly continued,
ratified and confirmed by the Borrower and the Guarantors.  The amendment and
restatement hereby of the Existing Agreement, and the concurrent amendment and
restatement of any other Credit Document, shall not constitute a waiver of any
conditions or requirements set forth herein or therein, whether or not
performed, fulfilled or required to be performed or fulfilled prior to the date
hereof, nor does it constitute consent to, or waiver of, any prior or existing
default, event of default or breach of any provision hereof or of any other
Credit Document.  All references to the Existing Agreement in any Credit
Document or any other Instrument shall be deemed to refer to this Agreement.  If
any inconsistency exists between this Agreement and the Existing Agreement, the
terms of this Agreement shall prevail.  Nothing contained in this Agreement or
any other Instrument executed contemporaneously herewith shall be deemed to
satisfy or discharge the Loans or Obligations arising under the Existing
Agreement or this Agreement (this being an amendment and restatement only).
 

 
57

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[Signatures on following page.]
 

 
58

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IN WITNESS WHEREOF the parties have executed this Senior Secured Gold Stream
Credit Agreement.
 

   
THE BORROWER:
 
GOLDEN PHOENIX MINERALS, INC.
 
 
By:          ______________________________ 
Name:
Title:
   
 
 
         
THE LENDER:
         
WATERTON GLOBAL VALUE, L.P., BY THE GENERAL PARTNER OF ITS GENERAL PARTNER,
CORTLEIGH LIMITED
 
 
 
   
By:           ______________________________
Authorized Signatory

 

 

[Signature Page to Senior Secured Gold Stream Credit Agreement]
 
 

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EXHIBIT A
 
Form of Borrowing Notice
 

 

 

 

 

Exhibit A – Page 1
 
 

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EXHIBIT B
 
Form of Compliance Certificate
 

 

 

 

 

 

Exhibit B – Page 1
 
 

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EXHIBIT C
 
Form of Gold Supply Agreement
 

 

 

 

Exhibit C – Page 1
 
 

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EXHIBIT D
 
Form of Omnibus Certificate
 

 

 

 

 

Exhibit D – Page 1
 
 

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EXHIBIT E
 
Form of Solvency Certificate
 

 

 

 

 

 

 

Exhibit E – Page 1
 
 

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Schedule 1.1(b)
 
Repayment Schedule
 
 

 
 Months After Initial Close
T1 Funded
T1/T2 Funded
T1/T2/T3 Funded
T1/T2/T3/T4 Funded
T1/T2/T3/T4/T5 Funded
Mar-12
7
$750,000
$750,000
$750,000
$750,000
$750,000
Apr-12
8
$750,000
$750,000
$750,000
$750,000
$750,000
May-12
9
$250,000
$750,000
$750,000
$750,000
$750,000
Jun-12
10
 
$750,000
$750,000
$750,000
$750,000
Jul-12
11
 
$750,000
$750,000
$750,000
$750,000
Aug-12
12
 
$750,000
$750,000
$750,000
$750,000
Sep-12
13
 
$750,000
$750,000
$750,000
$750,000
Oct-12
14
 
$750,000
$750,000
$750,000
$750,000
Nov-12
15
   
$750,000
$750,000
$950,000
Dec-12
16
   
$750,000
$750,000
$950,000
Jan-13
17
   
$750,000
$750,000
$950,000
Feb-13
18
   
$750,000
$750,000
$950,000
Mar-13
19
     
$750,000
$950,000
Apr-13
20
     
$750,000
$950,000
May-13
21
       
$950,000
Jun-13
22
       
$950,000
Jul-13
23
       
$950,000
Aug-13
24
       
$950,000
   
$1,750,000
$6,000,000
$9,000,000
$10,500,000
$15,500,000

 
 
 
 
Schedule 1.1(b)

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