Exhibit 10.1

 

  [Material indicated with brackets has been omitted from this document pursuant
to Item 601(b)(10)(iv) of Regulation S-K because it is deemed not to be material
and would likely cause competitive harm to the registrant if publicly
disclosed.  [***] indicates that information has been redacted.]

 

 

 

PRE-PAID FORWARD GOLD PURCHASE AGREEMENT

 
dated

 
March 7, 2019

 
by

 
Desert Hawk Gold Corp.,

 

as Seller,

 

PDK Utah Holdings LP,

 

as Buyer

 

 

 

 

 

 

  

Section 1 Definitions 1 Section 2 Interpretation 17 Section 3 Conditions
Precedent 18 Section 4 Sale and Purchase 22 Section 5 Delivery 22 Section 6
Title and Risk 24 Section 7 Purchase Price, Use of Proceeds and Other Payments
24 Section 8 Payments 26 Section 9 Guarantee 27 Section 10 Subordination of
Claims and Postponement of Subordination 29 Section 11 Representations and
Warranties 30 Section 12 Covenants 37 Section 13 Events of Default 50 Section 14
Remedies 53 Section 15 Indemnities and Limitations of Liability 54 Section 16
Confidentiality 55 Section 17 Governing Law and Jurisdiction 56 Section 18
Notices 57 Section 19 Costs, Expenses and Indemnity 58 Section 20 Taxes and
Other Taxes 59 Section 21 Rights of Set-Off and Suspension of Delivery
Obligations 60 Section 22 Judgment Currency 61 Section 23 Contract Quantity
Exchange Option 62 Section 24 Miscellaneous 63

 

ii 

 

 

SCHEDULES

 

Schedule A — Sites

 

Schedule B — Initial Annual Production Forecast

 

Schedule C — Existing Seller Debt to Be Extinguished

 

Schedule D — Material Agreements

 

Schedule E — Required Terms of Mineral Sales Contract/Refining Agreement

 

Schedule F — Mining Concessions

 

Schedule G — Form of Capital Expenditure Report

 

Schedule H — Permits

 

Schedule I — Ownership Structure and Equity of the Obligors

 

Schedule J — Insurance Policies

 

Schedule K — Liens

 

Schedule L — Litigation and Administrative Proceedings

 

Schedule M — Security Documents

 

Schedule N — Initial Expense Budget

 

Schedule O — Delivery Schedule

 

EXHIBITS

 

Exhibit A — Form of Guarantor Joinder Agreement

 

Exhibit B — Form of Compliance Certificate

 

iii 

 

 

PRE-PAID FORWARD GOLD PURCHASE AGREEMENT

 

This PRE-PAID FORWARD GOLD PURCHASE AGREEMENT (this “Agreement”) dated March 7,
2019 is made among Desert Hawk Gold Corp. (the “Seller”), a Nevada corporation,
and each Person that may from time to time become a guarantor (collectively, the
“Guarantors,” and each, a “Guarantor,” and the Guarantors, together with the
Seller, the “Obligors” of the Obligations (as defined below)), and PDK Utah
Holdings LP (the “Buyer”), a limited partnership organized under the laws of the
province of Ontario. Each of the Buyer, the Seller and the Guarantors shall be
considered a “Party,” and together, the “Parties.”

 

RECITALS

 

WHEREAS the Seller owns and/or has rights to, without encumbrance other than
Permitted Liens (as defined below), and operates, the Sites (as defined below)
and expects to produce gold, among other Minerals (as defined below), from the
Mine (as defined below) throughout the term of this Agreement;

 

AND WHEREAS the Seller, directly and/or through an Affiliate, wishes to sell to
the Buyer, and the Buyer, directly and/or through an Affiliate, wishes to
purchase from the Seller, the Contract Quantity (as defined below) of Gold (as
defined below). In consideration for such sale of Gold, the Buyer wishes to make
a prepayment in installments on each Effective Date (as defined below), with the
remainder of the consideration for such sale of Gold, if any, to be payable
following Delivery (as defined below), all on and subject to the terms and
conditions specified herein;

 

AND WHEREAS, by virtue of the foregoing, each Guarantor considers that it is
receiving at least fair consideration and reasonably equivalent value from the
Buyer for the obligations herein;

 

NOW THEREFORE in consideration of the premises, mutual covenants,
representations and warranties made herein, and of the mutual benefits to be
derived hereby, and for other good, fair and valuable consideration and
reasonably equivalent value, the receipt and sufficiency of which are hereby
acknowledged by each Obligor, the Obligors hereby agree with the Buyer as
follows:

 

Section 1 Definitions

 

As used in this Agreement, the following terms have the following meanings:

 

“Actual Monthly Quantity” means, with respect to each Monthly Delivery Date, the
amount of Gold in Ounces actually Delivered by or on behalf of the Seller to the
Buyer on such Monthly Delivery Date.

 

“Additional Gold Payment Amount” has the meaning given to it in Section 7(2)(a).

 

“Additional Gold Payment Date” means, in respect of each Monthly Delivery Date,
the date that falls two (2) Business Days after such Monthly Delivery Pricing
Date.

 

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

 

“Agreement” has the meaning specified in the Preamble.

 

“Annual Business Plan” means the Seller’s most recent financial plan in effect
from time to time that has been delivered by or on behalf of the Seller to the
Buyer.

 

1

 

 

“Annual Production Forecast” means an annually updated forecast of production of
each Covered Metal from the Mine for a period commencing on the date of such
update and ending on the ten (10)-year anniversary of the Initial Effective
Date, which includes (a) forecasted production for the next 12 months of
operation on a monthly basis and (b) forecasted production thereafter on an
annual basis, and is in the form attached as Schedule B.

 

“Applicable Laws” means all laws, statutes, regulations, Environmental Laws,
Applicable Securities Laws, ordinances, codes of practice, circulars, guidance,
common law, civil law, rules, by-laws, policies, guidelines, treaties and
regulations, and all directives, orders, judgments, decisions, injunctions,
awards and decrees of any Authority, and interpretations of any applicable laws
by any Authority, in each case whether or not having the force of law.

 

“Applicable Securities Laws” means all applicable securities laws of United
States, as applicable, 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
in the United States and such other jurisdictions as may be mutually acceptable
to the Seller and the Buyer.

 

“Authority” means any national, regional, state, municipal or local government
or governmental, administrative, fiscal, judicial, arbitral or government-owned
body, department. commission, authority, tribunal, agency or entity, or central
bank (or any Person, whether or not government-owned and howsoever constituted
or called, that exercises the functions of a central bank), including, but not
limited to, any Canadian Authority or US Authority.

 

“Bankruptcy Law” means all 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 Canada, the United States or any other applicable jurisdictions as
in effect from time to time.

 

[***]

 

“Business Day” means any day other than a Saturday or Sunday on which commercial
banks London, England, New York, New York, and Toronto, Ontario are open for
general business and on which the Gold Price is published on the Reference Price
Source.

 

“Buyer” has the meaning specified in the Preamble.

 

“Buyer Event of Default” means an Event of Default with respect to the Buyer.

 

“Buyer Royalty” has the meaning specified in Section 3(2)(e)(xv).

 

“Buyer’s Unallocated Gold Account” means the unallocated gold account of the
Buyer to be designated by the Buyer in accordance with this Agreement on or
prior to the Initial Effective Date.

 

“Calculation Agent” means the Buyer.

 

“Canadian Authority” the government of Canada, or any political subdivision
thereof, whether federal, provincial, regional, territorial, municipal or local,
and any public department, agency, authority, instrumentality, board, bureau, or
arbitral, judicial or administrative, regulatory body, self-regulatory authority
or body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government (including any supra-national body exercising such
powers or functions), including, but not limited, to any securities commission,
a Minister of the Crown, the Superintendent of Financial Institutions, or any
other comparable authority or agency, and any subdivision of any of the
foregoing.

 

2

 

 

“Capital Expenditure Report” means a report substantially in the form set out in
Schedule G (it being understood that such report may be modified from time to
time to the extent necessary in the opinion of the Buyer, acting reasonably, to
calculate any funding surplus or deficit or otherwise in connection with this
Agreement).

 

“Change of Control” means the occurrence of any of the following events: (a) any
Person is or becomes the owner, directly or indirectly, beneficially or of
record, of shares representing more than 50% (calculated on a fully diluted
basis) of the aggregate ordinary voting power represented by the outstanding
share capital of any Obligor; (b) the possession, directly or indirectly, by a
Person of the power to direct or cause the direction of the management or
policies of any Obligor, whether through the ability to exercise voting power,
by contract or otherwise; (c) the approval by any Obligor’s shareholders or
board of directors of any plan or proposal for the liquidation or dissolution of
such Obligor; or (d) a change of any Obligor’s board of directors in
contravention of the then-effective board of director agreement.

 

“Clifton” means Clifton Mining Company, a Utah corporation.

 

“Collateral” means any and all real and personal property, assets, rights,
titles and interests in respect of which the Buyer 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. The Collateral shall consist,
without limitation, of all real and personal assets of the Obligors subject to
the terms and conditions of this Agreement.

 

“Collection Account” means the account to be opened in the name of the Seller
for the purpose of receiving all cash proceeds of Mineral sales from the Kiewit
Project.

 

“Collection Account Instruction” means an irrevocable instruction from the
Seller to an Offtaker, in form and substance satisfactory to the Buyer in its
sole discretion, to pay all cash proceeds of Mineral sales into the applicable
Collection Account.

 

“Compliance Certificate” means a certificate substantially in the form of
Exhibit B hereto.

 

“Consents” means any consent, authorization, license, registration, exemption,
filing, agreement, permit or approval from, by, or with, an Authority or any
other Person required in order for the Buyer and the Obligors to enter into and
perform their respective obligations under this Agreement and the other
Transaction Documents.

 

“Contract Quantity” means a total of 73,910 Ounces of Gold, to be Delivered as
follows:

 

(a)(i) 0 Ounces of Gold for each of the 20 calendar months following the
calendar month in which the Gold Prepayment Amount is paid on the Initial
Effective Date, (ii) 655 Ounces of Gold for each of the 4 calendar months
thereafter, (iii) 670 Ounces of Gold for each of the 12 calendar months
thereafter, and (iv) 1,155 Ounces of Gold for each of the 24 calendar months
thereafter; plus

 

(b)(i) 0 Ounces of Gold for each of the 14 calendar months following the
calendar month in which the Gold Prepayment Amount is paid on the Tranche 2
Effective Date, (ii) 50 Ounces of Gold for each of the 4 calendar months
thereafter, (iii) 220 Ounces of Gold for each of the 12 calendar months
thereafter, (iv) 370 Ounces of Gold for each of the 24 calendar months
thereafter, and (v) 600 Ounces of Gold for each of the 6 calendar months
thereafter; plus

 

3

 

 

(c)(i) 0 Ounces of Gold for each of the 14 calendar months following the
calendar month in which the Gold Prepayment Amount is paid on the Tranche 3
Effective Date, (ii) 90 Ounces of Gold for each of the 12 calendar months
thereafter, (iii) 270 Ounces of Gold for each of the 24 calendar months
thereafter, (iv) 1,025 Ounces of Gold for each of the 6 calendar months
thereafter, and (v) 1,625 Ounces of Gold for each of the 4 calendar months
thereafter; plus

 

(d)any Ounces of Gold to be delivered pursuant to Section 7(3) under this
Agreement.

 

For the avoidance of doubt, the Ounces of Gold listed in each of subclauses (a)
through (d) hereof shall be in addition to the Ounces of Gold listed in each
other subclause hereof, as applicable.

 

“Contract Quantity Exchange Option” has the meaning specified in Section 23(1).

 

“Control” of any Person means the power (whether by way of ownership of shares,
proxy, contract, agency or otherwise) to, directly or indirectly, (a) 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; (b) appoint or remove all, or the
majority, of the directors or other equivalent officers of such Person; or (c)
otherwise direct or cause the direction of the management of such Person.

 

“Covered Metals” means gold and silver.

 

“Debt” of any Person means (a) all indebtedness of such Person for borrowed
money or on account of borrowings of commodities, bankers’ acceptances, letters
of credit or letters of guarantee, (b) all indebtedness of such Person for the
deferred purchase price of property or services represented by a note, bond,
debenture or other evidence of Debt, (c) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
vendor under such agreement in the event of default are limited to repossession
or sale of such property), (d) all current liabilities of such Person
represented by a note, bond, debenture or other evidence of Debt, (e) all
obligations under leases that have been or should be, in accordance with GAAP or
IFRS, as applicable, recorded as capital leases in respect of which such Person
is liable as lessee, (f) all obligations of such Person in respect of a prepaid
purchase or forward purchase transaction and all obligations that would in
accordance with GAAP or IFRS, as applicable, be accounted for as deferred
revenue, (g) any royalty obligations and (h) any guarantee, indemnification or
other similar obligation in respect of an obligation of any other Person of the
type referred to in (a) to (h), above. For the avoidance of doubt, any trade
accounts payable incurred in the ordinary course of business and not past due
for more than 91 days after the date on which each such trade payable or account
payable was created are excluded from the definition hereof.

 

“Default” means, in relation to any Party, an event which, with the giving of
notice or passage of time, or both, would constitute an Event of Default in
relation to such Party.

 

“Default Interest Rate” means, as of any date of calculation, a rate equal to
LIBOR for such date plus 2% per annum.

 

“Defaulting Party” has the meaning specified in Section 14(1).

 

4

 

 

“Delivery” means the delivery of Gold by the Seller to the Buyer by means of
credit to the Buyer’s Unallocated Gold Account and “Deliver” and “Delivered”
shall have corresponding meanings. For the avoidance of doubt, Delivery shall be
deemed to have occurred at the time and in the amount that Gold is credited to
the Buyers’ Unallocated Gold Account.

 

“Depositors” means the Seller and Covered Metal-producing Subsidiaries of the
Seller (if any), collectively.

 

“Disclosing Party” has the meaning specified in Section 16(1)(a).

 

“Distribution” means:

 

(a)any dividend or other distribution on issued shares of a Person or any of its
Subsidiaries; or

 

(b)the purchase, redemption or retirement amount of any issued shares, warrants
or any other options or rights to acquire shares of a Person or any of its
Subsidiaries redeemed or purchased by such Person or any its Subsidiaries.

 

“DNI” means, DNI Metals Inc., a Quebec corporation.

 

“DNI Royalty” has the meaning specified in Section 3(2)(e)(xx).

 

“Early Termination Amount” has the meaning specified in Section 5(8).

 

“Early Termination Date” has the meaning specified in Section 14(1).

 

“Effective Date” means the Initial Effective Date, the Tranche 2 Effective Date,
or the Tranche 3 Effective Date, as applicable.

 

“Environment” means all components of the earth, including: air (including air
within any building or other natural or man-made structure), water, land, flora,
fauna, ecosystems and man, and any sewer system.

 

“Environmental Laws” means any and all Applicable Laws concerning pollution or
the protection of the Environment, human health or welfare, the conditions of
the workplace or the generation, transportation, storage, treatment or disposal
of any Hazardous Substance, including civil or common law responsibility for
acts of omission with respect to the Environment, and all Permits issued
pursuant to such laws.

 

“Environmental Liabilities” means any cost, damage, expense, liability,
obligation or other responsibility arising from or under Environmental Laws and
consisting of or relating to: (a) any environmental conditions (including
on-site or off-site contamination, and regulation of Hazardous Substances); (b)
fines, penalties, judgments, awards, settlements, legal or administrative
proceedings, damages, losses, claims, demands and responses, investigative,
remedial, monitoring or inspection costs and expenses arising under
Environmental Laws; (c) cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, monitoring or other remediation or
response actions required by Environmental Laws (whether or not such has been
required or requested by any Authority or any other Person) and for any natural
resource damages; or (d) any other compliance, corrective, investigative, notice
or remedial measures required under Environmental Laws; provided, however, that
Environmental Liabilities shall not include any reclamation obligations of any
Obligors or any of their respective Affiliates or the foregoing arising in the
ordinary course of business under the Permits, the Mining Concessions or
Applicable Laws which reclamation obligations relate to the exploration,
start-up, development, expansion of production or operation of the Sites.

 

5

 

 

“Event of Default” has the meaning specified in Section 13(1) in relation to the
Seller and Section 13(2) in relation to the Buyer.

 

“Exchange Deadline” has the meaning specified in Section 23(1).

 

“Exchange Notice” has the meaning specified in Section 23(1).

 

“Financial Quarter” means each three-month period ending on March 31, June 30,
September 30 and December 31 of each calendar year.

 

“Financial Year” means each calendar year commencing on January 1 and ending on
December 31.

 

“FINTRAC” means the Financial Transactions and Reports Analysis Centre of
Canada.

 

“First A&R Clifton Lease” means the Amended and Restated Lease and Sublease
Agreement, dated as of July 24, 2009, by and between Clifton, Woodman, and the
Seller.

 

“GAAP” means, in relation to any Person at any time, accounting principles
generally accepted in the United States of America, applied on a basis
consistent with the most recent audited financial statements of such Person
(except for changes approved by the auditors of such Person).

 

“Gold” means the gold bars or unallocated gold, derived from all the Produced
Gold, complying with the rules of the LBMA from time to time in effect relating
to good delivery and fineness.

 

“Gold Prepayment Amount” has the meaning given to it in Section 7(1)(a).

 

“Gold Price” means the LBMA Gold Price PM.

 

“Gold Price Discount” means [***].

 

“Gold Shortfall” means, for any Monthly Delivery Date, the amount in Ounces
(if any) by which A exceeds B, where:

 

A is equal to the Scheduled Monthly Quantity for such Monthly Delivery Date; and

 

B is equal to the Actual Monthly Quantity Delivered with respect to such Monthly
Delivery Date, excluding any Gold Shortfall Delivered in respect of a prior
Scheduled Delivery Month.

 

“Gold Shortfall Replacement Cost” means, for any Monthly Delivery Date, an
amount in US Dollars equal to the product of the Gold Shortfall and the Gold
Price on such Monthly Delivery Date.

 

“Guarantee” has the meaning specified in Section 9(1)(a).

 

“Guarantors” has the meaning specified in the Preamble.

 

“Guarantor Joinder Agreement” means a guarantor joinder agreement substantially
in the form of Exhibit A hereto.

 

6

 

 

“Hazardous Substance” means any substance, product, liquid, waste, pollutant,
chemical, contaminant, insecticide, pesticide, gaseous or solid matter, organic
or inorganic matter, fuel, micro-organism, ray, odor radiation, energy, vector,
plasma, constituent or material that: (a) is or becomes listed, regulated or
addressed under any Environmental Law; or (b) is, or is deemed to be alone or in
any combination, hazardous, hazardous waste, toxic, a pollutant, a deleterious
substance, a contaminant or a source of pollution or contamination under any
Environmental Law, including, asbestos, petroleum and polychlorinated byphenyls,
including petroleum or petroleum distillates, asbestos or asbestos-containing
materials, polychlorinated byphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.

 

“H&H” means H&H Metals Corp., a New York corporation.

 

“H&H Agency Agreement” means the Agency Agreement, dated as of March 29, 2018,
by and between the Seller and H&H.

 

“IFRS” means, in relation to any Person at any time, the International Financial
Reporting Standards, applied on a basis consistent with the most recent audited
financial statements of such Person (except for changes approved by the auditors
of such Person).

 

“Indemnified Person” has the meaning given to it in Section 15(2).

 

“Initial Annual Production Forecast” means the Annual Production Forecast of
each Covered Metal for a period commencing on the Initial Effective Date and
ending on the date that is 120 months thereafter, in the form attached as
Schedule B hereto.

 

“Initial Effective Date” means the date on which (a) the conditions precedent
set forth in Sections 3(1) and 3(2) have been satisfied in accordance with the
terms thereof and (b) the Buyer makes an installment payment of the Gold
Prepayment Amount to the Seller in an amount equal to US$11,200,000.

 

“Initial Expense Budget” means the monthly budget set forth in Schedule N.

 

“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.

 

“IMM” means International Minerals and Metals, Inc., an Ohio corporation.

 

“IMM Royalty” has the meaning specified in Section 3(2)(e)(xix).

 

“ITA” means “An Act respecting income taxes” which may be cited as the Income
Tax Act (R.S.C., 1985, c. 1 (5th Supp.), as amended).

 

“Judgment Currency” has the meaning specified in Section 22(2).

 

“Kiewit Project” means the gold mining project of the Seller located within the
Site named as Kiewit Mine on Schedule A, to which the Mining Concessions relate,
and all properties, assets, facilities, equipment, rights, titles, interests,
contracts, Consents and Permits associated directly or indirectly in any manner
whatsoever therewith (including, without, limitation, the Mining Concessions).

 

7

 

 

“Knowledge” means, when referring to the “knowledge” of any Person, or any
similar phrase or qualification based on knowledge, the actual knowledge of such
Person (and, in the case of a Person that is not an individual, the actual
knowledge of senior management of such Person), and the knowledge that such
Person (or senior management of such Person) would have obtained after making
due and appropriate inquiry with respect to the particular matter in question.

 

“LBMA” means the London Bullion Market Association or its successor.

 

“LBMA Gold Price PM” means, with respect to any pricing date, the afternoon
London gold price per troy ounce of gold for delivery in London through a member
of the LBMA authorized to effect such delivery, stated in U.S. Dollars, as
calculated and administered by independent service provider(s), pursuant to an
agreement with the LBMA. In the event that such reference price ceases to exist,
the LBMA Gold Price PM will be based on a comparable, publicly available and
widely recognized source or mechanism as determined in the sole and absolute
discretion of the Buyer.

 

“LBMA Silver Price” means, with respect to any pricing date, that day’s London
silver price per troy ounce of silver for delivery in London through a member of
the LBMA authorized to effect such delivery, stated in U.S. Dollars, as
calculated on behalf of the LBMA by the CME Group and Thomson Reuters. In the
event that such reference price ceases to exist, the LBMA Silver Price PM will
be based on a comparable, publicly available and widely recognized source or
mechanism as determined in the sole and absolute discretion of the Buyer, acting
reasonably.

 

“LIBOR” means: (a) for any calculation date that is a Business Day, an interest
rate per annum equal to the average of the rates which leading banks in the
London interbank markets shall quote and offer to the Buyer for placing
overnight deposits on such day with the Buyer in US Dollars at approximately
10:00 a.m. (London time) two Business Days prior to such date; and (b) for any
calculation date that is not a Business Day, such average at approximately 10:00
a.m. (London Time) on the Business Day prior to such date; provided that if such
average shall be less than 0%, LIBOR shall be deemed to be 0% for purposes of
this Agreement. In the event that such rate is not available for any reason,
then “LIBOR” for such calculation date shall be (i) for any calculation date
that is a Business Day, the average of the rates which leading banks in the
London interbank markets shall quote and offer to the Buyer U.S. Dollar deposits
of $5,000,000 and for a three-month maturity in immediately available funds in
the London interbank market at approximately at approximately 10:00 a.m. (London
time) two Business Days prior to such date; and (ii) for any calculation date
that is not a Business Day, such average at approximately 10:00 a.m. (London
Time) on the Business Day prior to such date, provided that, if any case, such
rate is less than 0%, LIBOR shall be deemed to be 0% for purposes of this
Agreement.

 

“Lien” means any mortgage, charge (whether fixed, floating or otherwise),
pledge, hypothecation, security interest, assignment, trust encumbrance (whether
transferred in trust, security trust or otherwise), lien (statutory or
otherwise), title retention agreement or arrangement, restrictive covenant or
other encumbrance of any nature or any other arrangement or condition that in
substance secures payment or performance of an obligation.

 

“Material Adverse Effect” means, with respect to any Obligor, the Mine, the
Sites or the Collateral, as applicable, a material and adverse effect on (a) its
financial condition, business, properties, assets or prospects, (b) the
operation of any Site, (c) its ability to perform its obligations under this
Agreement or any of the Transaction Documents, (d) the validity or
enforceability against it of this Agreement or any of the Transaction Documents
or (e) the validity, enforceability or priority of the security interest
provided for in the Transaction Documents.

 

8

 

 

“Material Agreements” means this Agreement, the Security Documents, the Mineral
Sales Contract/Refining Agreement, and all other contracts, indentures, purchase
agreements, credit agreements, agreements, leases, Instruments and other binding
commitments and undertakings of each Obligor, the performance or breach of which
would reasonably be expected to have a Material Adverse Effect, including
without limitation, all contracts, indentures, purchase agreements, credit
agreements, agreements, leases, Instruments and other binding commitments and
undertakings which relate in any manner to the access to or the development,
construction, operation and maintenance of the Mine and/or the Mining
Concessions, including the conduct of mining activities thereon.

 

“Mine” means the Kiewit Project.

 

“Mineral Sales Contract/Refining Agreement” means an agreement to be executed by
the Seller, as depositor; the Buyer; and an Offtaker, to purchase or refine all
gold-containing concentrate or doré produced by the Seller.

 

“Mineral Processing Facility” means any mill or other processing facility owned
by any Obligor or any third-party mill or other processing facility that may
process ore and/or mineralized rock from the Mine under the Mineral Sales
Contract/Refining Agreement.

 

“Minerals” means any and all marketable minerals or materials (including each
Covered Metal) in whatever form or state that is mined, extracted, removed,
produced or otherwise recovered from the Mining Concessions, including any such
material derived from any processing or reprocessing of any tailings, waste rock
or other waste products originally derived from the Mining Concessions, and
including ore and/or mineralized rock or other products resulting from the
further milling, processing or other beneficiation of Minerals, including
concentrates or doré bars.

 

[***]

 

[***]

 

“Mining Concessions” means those certain mining concession rights granted by any
Authority to any Obligor or to third parties, as listed in Schedule F, as
amended, supplemented, or replaced from time to time, including, but not limited
to, those rights and interests transferred and assigned to any Obligor,
including all “step-in” rights, interests, privileges and mining rights under
Applicable Laws, and any amendment, supplement, or replacement to of any the
aforesaid concession or any future extraction concession relating to any area
within the such concessions, including any rights, privileges and interests that
any Obligor may acquire in the surface, mineral and subsurface lands and other
property rights within the area of said concessions.

 

“Monthly Delivery Date” means the fourth Business Day prior to the last calendar
day of the Scheduled Delivery Month.

 

“Monthly Delivery Pricing Date” means the last Business Day of each Scheduled
Delivery Month.

 

“Monthly Payable Production” means the quantity of each Covered Metal produced
from the Mine by or on behalf of the Obligors and paid for each calendar month,
determined in accordance with the relevant Mineral Sales Contract/Refining
Agreement.

 

9

 

 

“Monthly Report” means a written report satisfactory to the Buyer to be
delivered by the Seller to the Buyer, in relation to any calendar month,
including the following detail as applicable:

 

(a)all ore and/or mineralized rock tonnages and head grades of Minerals
contained in the ore and/or mineralized rock mined from the Mining Concessions
and waste movement and/or operational development during such month;

 

(b)with respect to any Mineral Processing Facility, the quantity of ore and/or
mineralized rock tonnages processed and head grades of the ore and/or
mineralized rock processed from the Mining Concessions during such month;

 

(c)with respect to any Mineral Processing Facility, the quantity of each Covered
Metal produced during such month and the resulting recoveries for each Covered
Metal;

 

(d)the quantity of each Covered Metal contained in each delivery of Minerals to
an Offtaker during such calendar month for which the Obligors were paid
(provisional or final);

 

(e)the amount of Gold Delivered to the Buyer for that calendar month;

 

(f)a reconciliation between items (d) and (e);

 

(g)a copy of any statement received from an Offtaker during such calendar month;

 

(h)with respect to the total quantity of gold in each delivery of Minerals to an
Offtaker during such calendar month for which the Obligors were paid
(provisional or final), the average sales price for each Covered Metal sold
during such calendar month;

 

(i)the cash cost per Ounce of gold produced and sold and a breakdown of all
costs incurred by any Obligor including, but not limited to, with respect to the
Mine and the Site related to the Mine, details on costs charged by the Offtaker,
total capital expenditures, any salaries for direct employees or administrative
personnel and any other general Mine camp costs for such reporting period;

 

(j)with respect to the Site related to the Mine, for both production headings
and for the plant: costs by process (drilling, blasting, hauling, support,
administrative, crushing, grinding, flotation, etc.) and cost by element (labor,
energy, supplies, other);

 

(k)costs for development at the Mine and a calculation of all-in sustaining
costs per Ounce of gold produced and sold;

 

(l)during the construction and development phase of the Mine a detailing of the
project progress with respect to the Mine, including, but not limited to, the
progress with respect to the Mine, processing facility, capital expenditures,
update of the schedule and the estimated construction completion timing, and any
construction issues, including a comparison of such costs to the Initial Expense
Budget;

 

(m)during the construction and development phase of the Mine, a detailing of all
capital expenditures (including initial estimate) to date related to the
development of the Mine and an update of the total current estimated capital
expenditures for the completion of the Mine in the form set forth as Schedule G
hereto, including a comparison of such costs to the Initial Expense Budget;

 

(n)during the construction and development phase of the Mine, progress and
results of all exploration and definition drilling activities;

 

10

 

 

(o)safety performance information including rate of incidents and descriptions
of serious incidents;

 

(p)any pertinent administrative topics, such as human resources issues,
accounting topics, hiring success, permitting, union issues, issues with
regulators or government, security issues and operational readiness topics; and

 

(q)any additional information that the Buyer may reasonably request from the
Seller from time to time.

 

“Non-Defaulting Party” has the meaning specified in Section 14(1).

 

“Obligations” has the meaning specified in Section 9(1)(a).

 

“Obligors” has the meaning specified in the Preamble.

 

“Offtaker” means any Person other than the Obligors that purchases Minerals from
the Obligors or that takes delivery of Minerals for the purpose of smelting,
refining or other beneficiation of such Minerals for the benefit of any Obligor.

 

“Original Currency” has the meaning specified in Section 22(2).

 

“Other Taxes” means any present or future stamp or documentary taxes or any
other exercise or property taxes, charges, financial institutions duties, debits
taxes or similar levies, together with any interest and any penalties, additions
to tax or additional amounts with respect thereto.

 

“Ounce” means a fine troy ounce.

 

“Party” has the meaning specified in the Preamble.

 

“Patented Claims” means a mining claim for which the US federal government has
passed its title to the claimant thereof, giving the claimant exclusive title to
locatable minerals therein and, in most cases, to the surface and all resources
thereof.

 

“Paying Party” has the meaning specified in Section 22(3).

 

“Payoff Date” has the meaning specified in Section 9(6).

 

“Permits” means any permit, license, certificate, consent, approval,
registration, waiver or other authorization issued or required to be issued, by
any Authority, including any such Permit required under Environmental Law and
any and all Permits that are necessary and required to be obtained at any
particular time to undertake and conduct the business of the Obligors,
including: (i) the start-up, development, expansion of development or operation
of Sites or the Mining Concessions; and (ii) the financial condition of the
Obligors; in each case, as set out in Schedule H.

 

“Permitted Debt” means (a) the obligations to the Buyer under this Agreement;
(b) Debt arising in connection with purchases or leases of equipment or property
required by any Obligor for the operation of its business in the normal course;
(c) surety and similar bonds and other obligations of like nature to secure
bids, contracts, leases, statutory obligations and similar obligations arising
in the ordinary course of business, including closure plan and reclamation
obligations and related guarantees; (d) Debt arising from the honoring by a bank
or other financial institution of a check, draft or similar instrument
inadvertently drawn against insufficient funds; (e) Debt arising from netting
services, overdraft protection, cash management obligations and otherwise in
connection with deposit and securities accounts in the ordinary course of
business; (f) the Buyer Royalty; (g) obligations in connection with a full
prepayment by the Seller of its obligations under this Agreement as contemplated
in Section 5(8); or (h) until the applicable date specified for its
extinguishment on Schedule C, Debt listed on such schedule.

 

11

 

 

“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 that are not
delinquent or the validity of which is being contested at the time by the Person
in good faith by proper legal proceedings if, either: (i) adequate provision has
been made for their payment, or (ii) the Liens are not in the aggregate
materially prejudicial to the security constituted by the Security Documents;

 

(b)easements, rights-of-way, servitudes, zoning restrictions, survey exceptions,
encroachments, licenses and similar rights or defects in or to real property
comprised in the assets of the Person or interests therein granted or reserved
to other Persons; provided that such rights or defects: (i) do not reduce the
value of the assets of the Person in any material respect, (ii) do not
materially interfere with the use of such assets in the operation of the
business of the Person, or (iii) are not materially prejudicial to the security
constituted by the Security Documents;

 

(c)Liens given to a public utility or any municipality or governmental or other
public authority when legally required by such utility or other authority in
connection with the operation of the business or the ownership of the assets of
the Person; provided that such Liens, in the Buyer’s opinion: (i) do not reduce
the value of the assets of the Person in an amount in excess of US$50,000, (ii)
do not materially interfere with the use of such assets in the operation of the
business of the Person, or (iii) are not materially prejudicial to the security
constituted by the Security Documents;

 

(d)Liens resulting from the deposit or pledge of cash or securities in
connection with contracts, tenders, bids, leases, government contracts, supply
agreement utilities or expropriation proceedings;

 

(e)Liens in favor of the Buyer created by the Security Documents;

 

(f)Purchase Money Liens;

 

(g)until the applicable date specified for Debt listed on Schedule C to be
extinguished, Liens securing such Debt;

 

(h)Liens described on Schedule K; and

 

(i)such other Liens as may be approved in writing by the Buyer from time to
time.

 

“Person” means a natural person, partnership, corporation, joint stock company,
trust, unincorporated association, joint venture or Authority, and pronouns have
a similarly extended meaning.

 

“Priority Accounts Payable” means, at any time, the amount past due and owed by
the Obligors, or which they have an obligation to remit to an Authority pursuant
to any Applicable Laws in respect of pension fund obligations, unemployment
insurance, goods and services taxes, sales taxes and other taxes payable or to
be remitted or withheld, workers’ compensation and other like charges and
demands, in each case, in respect of which any Authority may claim a security
interest or other claim ranking or capable of ranking in priority at law to the
security interests created by the Security Documents.

 

12

 

 

“Produced Gold” means any and all gold in whatever form or state that is mined,
produced, extracted or otherwise recovered from the Mining Concessions and the
Mine, including any gold derived from any processing or reprocessing of any
tailings, waste rock or other waste products originally derived from the Mining
Concessions, and including gold contained in any ore and/or mineralized rock or
other products resulting from the further milling, processing or other
beneficiation of Minerals, including concentrates and doré bars.

 

“Project Technical Characteristics” means mineral resources, mineral reserves,
mine plans, and project economics, including operating and capital costs,
utilized to determine the technical and economic feasibility of the start of the
sustainable commercial operation of the Sites, each as disclosed to the Buyer.

 

“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 Sites.

 

“Purchase Money Lien” means a Lien created or incurred by a Person securing
indebtedness incurred to finance the acquisition of assets or property
(including the costs of installation thereof); provided that: (a) such Lien is
created substantially simultaneously with the acquisition of such assets or
property; (b) such Lien does not at any time encumber any property other than
the assets or property financed by such indebtedness; (c) the amount of
indebtedness secured thereby is not increased subsequent to such acquisition;
and (d) the principal amount of indebtedness secured by such Lien at no time
exceeds 100% of the original purchase price of such assets or property
(including the costs of installation thereof in the aggregate not in excess of
US$200,000).

 

“Purchase Offer Termination Date” has the meaning specified in Section 3(5).

 

[***]

 

“Quarterly Report” means a written report, in relation to any Financial Quarter,
including the following financial information:

 

(a)a forecast (by quarter) of the expected Actual Monthly Quantity for the
balance of the Financial Year; and

 

(b)a calculation of cost per Ounce of gold produced from the Mining Concessions
for such Financial Quarter.

 

“Reasonable and Prudent Operator” means a Person seeking in good faith to
perform its contractual obligations and in so doing, and in the general conduct
of its undertaking, exercising that degree of skill, diligence, prudence and
foresight that would reasonably and ordinarily be expected from a skilled and
experienced operator complying in all material respects with all Applicable Laws
engaged in the same type of undertaking, under the same or similar circumstances
and conditions and in the same general location. A Reasonable and Prudent
Operator is not necessarily defined as a Person performing the optimal standard
practice method or act to the exclusion of others, but rather refers to a range
of action that is both reasonable and prudent under the circumstances.

 

13

 

 

“Receiving Party” has the meaning specified in Section 22(3).

 

“Recipient” has the meaning specified in Section 16(1)(a).

 

“Reference Price Source” mean, with respect to any Covered Metal, Bloomberg, any
other comparable index or any comparable, publicly available and widely
recognized source or mechanism, each as determined in the sole and absolute
discretion of the Buyer.

 

“Related Party” means in respect of any Obligor or any Affiliates thereof: (a) 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 any Obligor or any Affiliates thereof; (b) a Person in respect of which a
Person referred to in clause (a) alone or in combination with others holds a
sufficient number of securities or has contractual rights sufficient to affect
materially its control; (c) a Person in respect of which any Obligor or any
Affiliates thereof alone or in combination with others holds a sufficient number
of securities or has contractual rights sufficient to affect materially its
control; (d) a Person who beneficially owns, directly or indirectly, voting
securities of any Obligor or any Affiliates thereof or who exercises control or
direction over voting securities of any Obligor or any Affiliates thereof or a
combination of both carrying more than 10% of the voting rights attached to all
voting securities of any Obligor or any Affiliate thereof for the time being
outstanding; (e) a director or senior officer of any Obligor or Affiliates
thereof, or related party of any Obligor or any Affiliate thereof; or (f) an
Affiliate of any of the foregoing.

 

“Restricted Party” means a Person that is: (a) listed on, or fifty percent or
more owned or controlled by a person or entity listed on, any Sanctions List;
(b) located in, organized under the laws of, or resident in a country or
territory that is a subject of country-wide or territory-wide Sanctions; or (c)
otherwise a target of Sanctions (namely a person with whom a U.S. person or
other relevant national would be prohibited or restricted by law from engaging
in trade, business or other activities).

 

“Sanction(s)” means any sanction administered or enforced by the Canadian
government (including, without limitation, FINTRAC), the United States
government, the United Nations Security Council, the European Union, Her
Majesty’s Treasury or other relevant sanctions authority.

 

“Sanctions List” means (a) the Specially Designated Nationals and Blocked
Persons List maintained by the U.S. Treasury Department’s Office of Foreign
Assets Control; (b) the Consolidated List of Financial Sanctions Targets
maintained by the UK Treasury; (c) any sanction list created or maintained by
FINTRAC; or (d) any similar list maintained by any other relevant sanctions
authority.

 

“Scheduled Delivery Month” means each of the calendar months following the month
in which the Initial Effective Date occurs, through the month that is 60
calendar months following the month in which the Tranche 3 Effective Date
occurs, in accordance with this Agreement and including any months pursuant to
Section 7(3) under this Agreement.

 

“Scheduled Monthly Quantity” means:

 

(a)(i) 0 Ounces of Gold for each of the 20 calendar months following the
calendar month in which the Gold Prepayment Amount is paid on the Initial
Effective Date, (ii) 655 Ounces of Gold for each of the 4 calendar months
thereafter, (iii) 670 Ounces of Gold for each of the 12 calendar months
thereafter, and (iv) 1,155 Ounces of Gold for each of the 24 calendar months
thereafter; plus

 

14

 

 

(b)(i) 0 Ounces of Gold for each of the 14 calendar months following the
calendar month in which the Gold Prepayment Amount is paid on the Tranche 2
Effective Date, (ii) 50 Ounces of Gold for each of the 4 calendar months
thereafter, (iii) 220 Ounces of Gold for each of the 12 calendar months
thereafter, (iv) 370 Ounces of Gold for each of the 24 calendar months
thereafter, and (v) 600 Ounces of Gold for each of the 6 calendar months
thereafter; plus

 

(c)(i) 0 Ounces of Gold for each of the 14 calendar months following the
calendar month in which the Gold Prepayment Amount is paid on the Tranche 3
Effective Date, (ii) 90 Ounces of Gold for each of the 12 calendar months
thereafter, (iii) 270 Ounces of Gold for each of the 24 calendar months
thereafter, (iv) 1,025 Ounces of Gold for each of the 6 calendar months
thereafter, and (v) 1,625 Ounces of Gold for each of the 4 calendar months
thereafter; plus

 

(d)any Ounces of Gold to be delivered pursuant to Section 7(3) under this
Agreement.

 

For the avoidance of doubt, the Ounces of Gold listed in each of subclauses (a)
through (d) hereof shall be in addition to the Ounces of Gold listed in each
other subclause hereof, as applicable.

 

“SEC” means the U.S. Securities and Exchange Commission.

 

“Second A&R Clifton Lease” means the Second Amended and Restated Lease
Agreement, dated on or prior to the Initial Effective Date, by and between
Clifton, Woodman, and the Seller, amending and restating the First A&R Clifton
Lease.

 

“Security Documents” means the guarantees and security documents, including, but
not limited to, those agreements set out in Schedule M hereto, and each other
guarantee and security from time to time delivered by or on behalf of any
Obligor as security for its obligations under this Agreement and the other
Transaction Documents.

 

“Seller” has the meaning specified in the Preamble.

 

“Seller Default” and “Seller Default or Event of Default” means, as applicable,
a Default or Event of Default with respect to the Seller.

 

“Settlement Price” means:

 

(c)with respect to gold, the LBMA Gold Price PM; and

 

(d)with respect to silver, the LBMA Silver Price for silver.

 

“Sites” means all assets needed to conduct mining activities by any Obligor
on the Mining Concessions, including, but not limited to the Mining Concessions,
real property, lands, rights to use or possess real property or lands, mills,
equipment, tools, spare parts, infrastructure, roads, permits, etc., identified
as belonging to any Obligor, as set out in Schedule A.

 

“Sovereign Immunities Act” means The Foreign Sovereign Immunities Act of 1976,
as amended from time to time.

 

15

 

 

[***]

 

“Subsidiary” means, with respect to any Person at any time, any other Person the
accounts of which would be consolidated with those of such Person in such
Person’s consolidated financial statements if such financial statements were
prepared in accordance with GAAP as well as any other Person (a) of which
securities or other ownership interests representing more than 50% of the equity
or more than 50% of the ordinary voting power or, in the case of a partnership,
more than 50% of the general partnership interests are, as of such date, owned,
controlled or held, by such Person or (b) that is, as of such date, otherwise
Controlled by such Person.

 

“Suspension Month” has the meaning specified in Section 21(2).

 

“Tax” or “Taxes” means all national, federal, state, regional, provincial,
municipal local, foreign and other net income, gross income (“income tax”),
gross receipts, sales (“VAT or IVA”), use, ad valorem, transfer, franchise,
profits, license, lease, service, goods and services, harmonized sales, value
added, withholding, payroll, employment, excise, severance, stamp (“timbre”),
occupation premium, property, windfall profits, fuel, gas import, customs,
duties or other taxes, fees, assessments or charges of any kind whatsoever
imposed by any Authority, whether in effect at the time of this Agreement or
thereafter imposed, together with any interest and any penalties, additions to
tax or additional amounts with respect thereto.

 

“Term of this Agreement” means the period commencing on the Initial Effective
Date and ending on the final Monthly Delivery Date.

 

“Title Policy” has the meaning specified in Section 3(2)(d)(i)(B).

 

“Tranche 2 Effective Date” means the date on which (a) the conditions precedent
set forth in Sections 3(1) and 3(3) have been satisfied in accordance with the
terms thereof and (b) the Buyer makes an installment payment of the Gold
Prepayment Amount to the Seller in an amount equal to US$4,500,000.

 

“Tranche 3 Effective Date” means the date on which (a) the conditions precedent
set forth in Sections 3(1) and 3(4) have been satisfied in accordance with the
terms thereof and (b) the Buyer makes an installment payment of the Gold
Prepayment Amount to the Seller in an amount equal to US$5,500,000.

 

“Transaction Documents” means this Agreement, the Security Documents, and each
other document entered into by any Obligor with the Buyer with respect to the
transactions contemplated hereby.

 

“United States,” “US” and “U.S.” mean the United States of America.

 

“US Authority” the government of the United States, or any political subdivision
thereof, whether federal, state, regional, territorial, municipal or local, and
any public department, agency, authority, instrumentality, board, bureau, or
arbitral, judicial or administrative, regulatory body, self-regulatory authority
or body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government (including any supra-national body exercising such
powers or functions), including, but not limited, to any securities commission
or any other comparable authority or agency, and any subdivision of any of the
foregoing.

 

“Unpatented Claims” means any mining claim which is not a Patented Claim.

 

[***]

 

“US Dollar,” “U.S. Dollar,” “US$,” and “$” mean the lawful currency of the
United States.

 

16

 

 

“Woodman” means The Woodman Mining Company, a Utah corporation.

 

“1% Clifton Royalty” has the meaning specified in Section 3(2)(e)(xvi).

 

“6% Clifton Royalty” means the 6% net smelter return royalty initially granted
to Clifton pursuant to Section 4.6 of the First A&R Clifton Lease.

 

Section 2 Interpretation

 

(1)In this Agreement, unless the contrary intention appears, a reference:

 

(a)to a document (including this Agreement or any other Transaction Document)
is to that document as varied, amended, novated or replaced from time to time,
otherwise than in breach of this Agreement or of that document;

 

(b)to the singular includes the plural and vice versa, and to a gender includes
all genders;

 

(c)to any rules, statute or to any treaty or statutory provision includes any
modification or re-enactment of it or any treaty or provision substituted for
it, and all protocols, rules, guidelines, procedures, ordinances, by-laws,
regulations, rules and statutory instruments (however described) issued under
it;

 

(d)to a date or time is to that date or time in New York unless otherwise
specified; and

 

(e)to the words “including” and “include” shall mean “including without
limitation” and “include without limitation,” respectively.

 

(2)The headings do not affect the interpretation of this Agreement and the
Exhibits and Schedules form part of this Agreement.

 

(3)For purposes of this Agreement, weights in Ounces and prices per Ounce shall
be rounded to two decimal places (in each case with 0.005 being rounded upward).

 

(4)In this Agreement the words “Exhibit,” “Exhibits,” “Section,” “Sections,”
“Schedule,” or “Schedules” refer to Exhibits to, Sections of, and Schedules to
this Agreement.

 

(5)Accounting Terms and Determinations; GAAP.  Except as otherwise expressly
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided
that, if the Seller notifies the Buyer that the Seller requests an amendment to
any provision hereof to eliminate the effect of any change occurring after the
date hereof in GAAP or in the application thereof on the operation of such
provision (or if the Buyer notifies the Seller that the Buyer requests an
amendment to any provision hereof for such purpose), regardless of whether any
such notice is given before or after such change in GAAP or in the application
thereof, then such provision shall be interpreted on the basis of GAAP as in
effect and applied immediately before such change shall have become effective
until such notice shall have been withdrawn or such provision amended in
accordance herewith. Notwithstanding any other provision contained herein, all
terms of an accounting or financial nature used herein shall be construed, and
all computations of amounts and ratios referred to herein shall be made (i)
without giving effect to any election under Accounting Standards Codification
825-10-25 (previously referred to as Statement of Financial Accounting Standards
159) (or any other Accounting Standards Codification or Financial Accounting
Standard having a similar result or effect), to value any Debt or other
liabilities of the Seller or any Subsidiary at “fair value,” as defined therein,
(ii) without giving effect to any treatment of Debt in respect of convertible
debt instruments under Accounting Standards Codification 470-20, to value any
such Debt in a reduced or bifurcated manner as described therein, and such Debt
shall at all times be valued at the full stated principal amount thereof and
(iii) without giving effect to any change to lease accounting rules from those
in effect on the date hereof pursuant to Accounting Standards Codification 840
and other lease accounting guidance as in effect on the date hereof.

 

17

 

 

(6)Time of Day.  Unless otherwise specified, all references herein to time of
day shall be references to Eastern time (daylight or standard, as applicable).

 

(7)Currency Equivalents.  For purposes of determining aggregate amounts and
percentages across amounts in different currencies, all such amounts in all
currencies shall be expressed in their respective U.S. Dollar equivalents, which
equivalents shall be determined by the Buyer in good faith using currency
exchange rates in effect on the date of such determination.

 

Section 3 Conditions Precedent

 

The obligation of the Buyer to purchase Gold and to pay the purchase price
therefor pursuant to this Agreement, including the obligation of the Buyer to
pay each of the installments comprising the Gold Prepayment Amount, shall not
become effective until the respective date on which the following conditions
precedent have been satisfied to the satisfaction of the Buyer or specifically
waived in writing by the Buyer (for the avoidance of doubt, the waiver of one
condition shall in no way constitute a waiver of any other condition not
specifically waived in writing by the Buyer, in each case in its sole and
absolute discretion).

 

(1)The following conditions precedent shall apply to each Effective Date:

 

(a)All representations and warranties of the Obligors set out in this Agreement
are true and correct on and as of the Effective Date and after giving effect to
the transactions to be effected on the Effective Date.

 

(b)All covenants of the Seller set out in this Agreement required to be complied
with prior to the Effective Date shall have been complied with (other than those
which by their nature are required to be complied with and will be complied with
as of the Effective Date).

 

(c)No Seller Default or Seller Event of Default shall have occurred and be
continuing on or as of the Effective Date or after giving effect to the
transactions to be effected on the Effective Date.

 

(2)The following conditions precedent shall apply to the obligation of the Buyer
to pay the first installment of the Gold Prepayment Amount to be made on the
Initial Effective Date:

 

(a)Each of the Transaction Documents (i) shall have been duly executed,
notarized, and/or filed, as applicable, and as may be required from time to time
under Applicable Laws, and delivered by the parties thereto in accordance with
its terms and Applicable Laws, and shall be in full force and effect in
accordance with its terms, and (ii) each of the Transaction Documents shall have
been duly registered, as applicable.

 

(b)(i) All required Consents shall have been obtained by the Seller and
delivered to the Buyer, including, without limitation, the Consent of Clifton
and Woodman relating to the assignment of the lease of the real property where
the Mine is located, and (ii) the Buyer shall be satisfied in its sole
discretion with the resolution of each of the matters described in Schedules H
and L and each other aspect of its due diligence relating to this Agreement.

 

18

 

 

(c)(i) Each Obligor, as applicable, shall have filed for registration with the
applicable Authority each of the Security Documents as set forth therein, and
(ii) the Liens under the Security Documents listed in Schedule M shall have been
duly created, and, where applicable, registered as valid and enforceable first
priority Liens (subject only to Permitted Liens) or other interests or rights of
the kind the relevant Security Documents purport to create over all of the
Collateral, subject only to Permitted Liens.

 

(d)Real Property.

 

(i)The Buyer shall be satisfied that (x) the Liens granted in the Collateral
pursuant to the Security Documents each constitute a first-priority perfected
security interest, except for Permitted Liens that, pursuant to Applicable Law,
are entitled to a higher priority than the Liens granted by the Security
Documents; (y) each document required by the Security Documents or under law to
be filed, registered or recorded in order to create and maintain in favor of the
Buyer a perfected Lien on the Collateral described therein shall have been
filed, registered or recorded or shall have been delivered to the Buyer in
proper form for filing, registration or recordation; and (z) no Lien exists on
any of the Collateral other than Permitted Liens. To that end:

 

(A)Buyer shall have received an opinion of counsel for the Seller as to, among
other things, the enforceability of the Security Documents, the proper place of
filing and recording for such documents, and the perfection of the Lien intended
to be created by such documents.

 

(B)Relative to the those claims constituting a part of the Kiewit Project that
are Patented Claims, listed in Part I.A of Schedule P, have delivered to the
Buyer an ALTA lender’s policy of title insurance (the “Title Policy”) disclosing
title to the patented claims to be vested in the Seller, insuring the interest
of the Buyer as a “lender”, subject to no Liens except Permitted Liens, in such
amount of coverage and containing such endorsements thereto as the Buyer shall
reasonably require. The Title Policy shall otherwise be in form and substance
satisfactory to the Buyer. The Buyer shall have received evidence that all
premiums in respect of such Title Policy, all recording tax charges associated
with the Security Documents, and related expenses shall have been paid.

 

(C)Relative to those claims constituting a part of the Kiewit Project that are
Unpatented Claims, listed in Part I.B of Schedule P, the Buyer shall have
received evidence, in the form of a title report and a title opinion, reasonably
satisfactory to the Buyer that the Seller has good and marketable title to, or a
leasehold interest in, such claims, subject to no Liens except Permitted Liens.

 

(D)Relative to any matter of record proposed to be a Permitted Lien, the Buyer
shall have received a copy of all recorded documents referred to, or listed as
exceptions to title in, the title reports, a copy of all other material
documents affecting the Kiewit Project owned, operated, leased or licensed by
the Seller for the Kiewit Project of which the Seller has any Knowledge.

 

19

 

 

(ii)The Buyer shall have received such reports as to the physical, engineering,
and environmental conditions affecting the Kiewit Project as Buyer shall
reasonably require. If such report is an existing report, Buyer shall have
received a reliance letter with respect thereto from the author of the report.

 

(e)The Seller shall have delivered to the Buyer, in form and substance
reasonably satisfactory to the Buyer:

 

(i)certified copies of (A) the charter documents of each Obligor, (B) all
resolutions of the board of directors or shareholders, as appropriate, of each
Obligor, related to the execution, delivery and performance of the Transaction
Documents; (C) a list of the officers and directors of each Obligor, as
appropriate, authorized to sign the Transaction Documents, together with their
specimen signatures; and (D) all Consents, Material Agreements and Permits;

 

(ii)a good standing certificate or certification of status and compliance with
respect to each Obligor, issued by the appropriate Authority in each party’s
jurisdiction of incorporation not more than 30 days prior to the Initial
Effective Date and evidence of the qualification of such party in each
jurisdiction where it carries on business or owns material assets;

 

(iii)evidence of all registrations, Consents, waivers, estoppels, discharges and
subordinations as may be necessary to ensure that the Security Documents
constitute first priority Liens over the Collateral subject only to Permitted
Liens, including, without limitation, discharges or discharge documents in form
acceptable to the Buyer in its sole and absolute discretion to be registered on
the Initial Effective Date;

 

(iv)with respect to such Liens and other claims as the Buyer may require, a
payoff letter or other acknowledgement of the amount owed and an agreement to
deliver a release or discharge, in form acceptable to the Buyer, upon receipt of
the amount specified, executed by each relevant claimant;

 

(v)a certificate, dated the Initial Effective Date, that to the best of the
Obligors’ Knowledge, there are no facts or circumstances that would reasonably
be expected to give rise to material Environmental Liability;

 

(vi)a Compliance Certificate from the Seller and each Guarantor;

 

(vii)a solvency certificate from the chief financial officer of each Obligor;

 

(viii)an Initial Expense Budget;

 

(ix)all such other documents, deliveries, schedules, information, opinions and
instruments as the Buyer may reasonably request;

 

(x)an agreement terminating the H&H Agency Agreement, duly executed by the
Seller and H&H;

 

20

 

 

(xi)a certificate of insurance coverage, dated not more than 10 days prior to
the Initial Effective Date, evidencing that the Obligors carry the insurance
required by Section 12(1)(m) and that the Buyer has been added as an additional
insured and loss payee on those policies and all other policies of the Obligors
and as additional insured under the liability coverage and subject to a
non-vitiation clause and in form and substance satisfactory to the Buyer, all
insurance policies duly endorsed in favor of the Buyer designating it as
preferential beneficiary or co-insured, as applicable;

 

(xii)evidence that the Seller has opened the Collection Account;

 

(xiii)evidence that the Seller has delivered a Collection Account Instruction to
each Offtaker;

 

(xiv)the Second A&R Clifton Lease, pursuant to which:

 

(A)any remaining interest (other than the DNI Royalty and the IMM Royalty) in
the 6% Clifton Royalty is extinguished; and

 

(B)the Seller is provided with sufficient surface rights as to construct a
90-acre heap leach pad;

 

duly executed by Clifton, Woodman, and the Seller;

 

(xv)a royalty conveyance by which the Buyer shall purchase from the Seller for
$2,200,000, on the Initial Effective Date, a four (4) percentage point net
smelter return royalty (the “Buyer Royalty”), duly executed by the Buyer and the
Seller;

 

(xvi)an agreement to extinguish, on or prior to the Initial Effective Date, the
remaining interest held by Clifton in the 6% Clifton Royalty consisting of a one
(1) percentage point net smelter return royalty (the “1% Clifton Royalty”), duly
executed by the Seller and Clifton;

 

(xvii)evidence that a notice of agreement in respect of the Second A&R Clifton
Lease has been filed and recorded in the Tooele County, Utah Recorder /
Surveyor’s office;

 

(xviii)an undertaking by the Seller to indemnify the Buyer for Environmental
Liabilities and claims resulting from Hazardous Substances, duly executed by the
Seller and the Buyer;

 

(xix)an agreement by which the Seller shall have extinguished the interest held
by IMM in the 6% Clifton Royalty, and consisting of a one half (0.5) of a
percentage point net smelter return royalty (the “IMM Royalty”), duly executed
by the Seller and IMM; and

 

(xx)an agreement by which the Seller shall have extinguished the interest held
by DNI in the 6% Clifton Royalty pursuant to the Royalty Deed, dated as of July
15, 2009, by and among DNI and Clifton, and consisting of a one half (0.5) of a
percentage point net smelter return royalty (the “DNI Royalty”), duly executed
by the Seller and DNI.

 

21

 

 

(3)The following conditions precedent shall apply to the obligation of the Buyer
to pay the second installment of the Gold Prepayment Amount to be made on the
Tranche 2 Effective Date:

 

(a)All of the conditions precedent to the Initial Effective Date shall have been
satisfied; and

 

(b)At least [***]months shall have passed since the Initial Effective Date.

 

(4)The following conditions precedent shall apply to the obligation of the Buyer
to pay the third installment of the Gold Prepayment Amount to be made on the
Tranche 3 Effective Date:

 

(a)All of the conditions precedent to the Initial Effective Date and the Tranche
2 Effective Date shall have been satisfied; and

 

(b)At least [***]months shall have passed since the Initial Effective Date.

 

(5)All of the obligations of the Buyer hereunder shall terminate, and the Buyer
shall be under no obligation of any nature hereunder or under any of the
Transaction Documents or under any other agreement with respect to the subject
matter hereof, if the conditions precedent to the Initial Effective Date are not
(i) satisfied by the Seller, or (ii) specifically waived by the Buyer in
writing, subject to an extension of time for satisfaction by Buyer, prior to
12:00 noon (New York time) on [***] (such date, the “Purchase Offer Termination
Date”). In the event Buyer grants an extension of time to the Seller to satisfy
any condition precedent, the Initial Effective Date shall not become effective
until the conditions precedent to the Initial Effective Date have been satisfied
by the Seller and accepted by Buyer.

 

Section 4 Sale and Purchase

 

(1)Subject to the terms and conditions of this Agreement, the Seller shall sell
to the Buyer and the Buyer shall buy from the Seller the Contract Quantity of
Gold free and clear of all Liens.

 

(2)The Contract Quantity of Gold shall be Delivered during the Term of this
Agreement on each Monthly Delivery Date by Delivery of the Scheduled Monthly
Quantity in accordance with the provisions of this Agreement.

 

(3)The purchase price shall be paid during the Term of this Agreement in
accordance with Section 7.

 

Section 5 Delivery

 

(1)On each Monthly Delivery Date, the Seller shall Deliver or shall cause to be
Delivered to the Buyer the Scheduled Monthly Quantity of Gold for such Monthly
Delivery Date. All Gold required to be Delivered pursuant to this Agreement
shall be “Gold” as defined herein and shall be Delivered to Buyer free and clear
of any Liens and any adverse claims of any description.

 

(2)The Seller shall have the right, but not the obligation, to Deliver or cause
to be Delivered to the Buyer, at any time prior to the end of the then-current
calendar month, the Scheduled Monthly Quantity of Gold for the immediately
succeeding Monthly Delivery Date to fulfill its obligation to Deliver Gold with
respect to such Monthly Delivery Date. In connection with such Delivery, the
Seller shall be deemed to have satisfied its obligation to Deliver Gold with
respect to such immediately succeeding Monthly Delivery Date and have the right
to receive all proceeds from the Offtaker during the month to which such Monthly
Delivery Date relates with respect to any gold produced by any Obligor. In
connection with such Delivery, the date of Delivery shall be specified by the
Seller and pricing date for such Delivery shall be the next Business Day
following Delivery. The settlement date for such Delivery shall be two (2)
Business Days following the pricing date.

 

22

 

 

(3)The Seller agrees to convey and properly transfer all legal and beneficial
right, interest and title in the Actual Monthly Quantity upon each Delivery.

 

(4)All costs, charges or expenses pertaining to the deposit of the Gold to the
Buyer’s Unallocated Gold Account and the credit of such Gold to such account,
including, but not limited to, those associated with the production, transport,
warehousing (including insurance), customs, taxes, royalties and fees payable to
any Authority, refining and Delivery of any Gold shall be borne by the Seller
and will not affect in any manner the Contract Quantity of Gold to be credited
to the Buyer’s Unallocated Gold Account.

 

(5)Subject to subsections (6) and (7) of this Section 5, any obligation to
Deliver Gold on a Monthly Delivery Date that is not performed in full on such
Monthly Delivery Date shall be converted into, to the extent of the Gold
Shortfall, an obligation of the Seller to pay to the Buyer in US Dollars an
amount equal to the product of the Gold Shortfall and the Gold Price Discount on
such Monthly Delivery Date. Such obligation shall bear interest at the Default
Interest Rate and shall be payable on demand.

 

(6)If the Seller notifies the Buyer at least two Business Days prior to any
Monthly Delivery Date that the Seller will not be able to Deliver all or any
portion of the Scheduled Monthly Quantity of Gold on such Monthly Delivery Date
but that the Seller reasonably expects to be able to deliver the Gold Shortfall,
as adjusted in accordance with this Section 5(6), within thirty (30) days of
such Monthly Delivery Date, then the Seller shall Deliver a quantity of Gold
within thirty (30) days of such Monthly Delivery Date with a value (based on the
Gold Price and the Gold Price Discount on the date of actual delivery) equal to
the sum of (i) the product of the Gold Shortfall and the Gold Price Discount on
the Monthly Delivery Date; and (ii) the interest on an amount equal to the
product of the Gold Shortfall and the Gold Price Discount from the Monthly
Delivery Date to the date of actual delivery, calculated based on the Default
Interest Rate. The Seller may exercise the rights set forth in this Section 5(6)
no more frequently than twice in total during the Term of this Agreement and no
more frequently than once during any twelve (12) month period. If the Seller
fail to perform in accordance with this Section 5(6), then the Seller shall be
obligated to make the payment provided for in Section 5(5) within thirty (30)
days following such failure (with the Seller’s obligation under Section 5(5)
bearing interest at the Default Interest Rate from the Monthly Delivery Date),
all as if this Section 5(6) had never applied.

 

(7)If the Seller notifies the Buyer at least thirty (30) days prior to any
Monthly Delivery Date that the Seller will not be able to Deliver all or any
portion of the Scheduled Monthly Quantity of Gold on such Monthly Delivery Date,
but that the Seller reasonably expects to be able to deliver the Gold Shortfall
within thirty (30) days of such Monthly Delivery Date, then the Seller shall
deliver such quantity of Gold within thirty (30) days of such Monthly Delivery
Date with a value (based on the Gold Price and the Gold Price Discount on the
date of actual delivery) equal to the sum of (i) the product of the Gold
Shortfall and the Gold Price Discount on the Monthly Delivery Date; and (ii) the
interest on an amount equal to the product of the Gold Shortfall and the Gold
Price Discount from the Monthly Delivery Date to the date of actual delivery,
calculated based on the Default Interest Rate. The Seller may exercise the
rights set forth in this Section 5(7) no more frequently than twice in total
during the Term of this Agreement and no more frequently than once during any
six (6) month period. The Seller’s rights set forth in this Section 5(7) may not
be combined with any other curative provision, including the curative provisions
in Section 5(6). If the Seller fails to perform in accordance with this Section
5(7), then the Seller shall be obligated to make the payment provided for in
Section 5(5) within ten (10) days following such failure (with the Seller’s
obligation under Section 5(5) bearing interest at the Default Interest Rate from
the Monthly Delivery Date), all as if this Section 5(7) had never applied.

 

(8)[***]

 

23

 

 

Section 6 Title and Risk

 

(1)Upon each Delivery of the Gold pursuant to this Agreement, all legal and
beneficial title to such Gold will pass irrevocably from the Seller to the Buyer
free and clear of any Liens and third-party claims.

 

(2)Until Delivery has occurred, all costs of transport, warehousing, (including
insurance), customs and Taxes and risk of loss and any other related costs and
expenses shall be borne by the Seller.

 

Section 7 Purchase Price, Use of Proceeds and Other Payments

 

(1)On and subject to the terms and conditions set forth in this Agreement:

 

(a)Gold Prepayment Amount. The Buyer shall pay to the Seller, as set forth
herein, subject to the prior satisfaction or waiver (in Buyer’s sole and
absolute discretion) of each of the applicable conditions precedent set forth in
Section 3, an amount equal to:

 

(i)US$11,200,000 on the date referred to in subclause (a) of the definition of
“Initial Effective Date,” less the amount set forth in Section 7(1)(b) below;

 

(ii)US$4,500,000 on the date referred to in subclause (a) of the definition of
“Tranche 2 Effective Date”; and

 

(iii)US$5,500,000 on the date referred to in subclause (a) of the definition of
“Tranche 3 Effective Date”;

 

(such payments, collectively, the “Gold Prepayment Amount”). The proceeds of the
Gold Prepayment Amount shall be used in accordance with Section 12(1)(e).

 

(b)Upfront Fee.

 

The Seller shall pay to the Buyer a non-refundable upfront fee of US$600,000,
which amount shall either (x) if the Initial Effective Date occurs, be netted
from the Gold Prepayment Amount and credited to the Buyer on such date, or (y)
if the Purchase Offer Termination Date occurs, be payable by the Seller to the
Buyer in cash within two (2) Business Days of such date. This fee includes the
following expenses:

 

(i)the negotiation, preparation, printing, execution and delivery, both prior
and subsequent to the Initial Effective Date, of this Agreement and any other
Transaction Document;

 

(ii)the fees and expenses of engineering, environmental, insurance consulting
and other expert or professional services retained by the Buyer and any on-site
inspections by the Buyer or its representatives;

 

24

 

 

(iii)advice of counsel with respect to this Agreement, any other Transaction
Document or any transaction contemplated thereunder; and

 

(c)the maintenance of the registration and filing of the Security Documents and
the perfection of the Liens created thereunder.

 

(2) (a) On each Additional Gold Payment Date, the Buyer shall pay to the Seller
an amount (an “Additional Gold Payment Amount”) equal to the greater of:

 

(i)zero; and

 

(ii)the product of:

 

(A)the Actual Monthly Quantity of Gold Delivered on the Monthly Delivery Date,
and

 

(B)an amount equal to:

 

(I)the Gold Price on the Monthly Delivery Pricing Date for the relevant
Scheduled Delivery Month,

 

minus

 

(II)the Gold Price Discount.

 

(b)If, however, on an Additional Gold Payment Date, the Actual Monthly Quantity
is less than the Scheduled Monthly Quantity such that a Gold Shortfall arises,
then the Additional Gold Payment Amount shall be reduced by an amount equal to
the Gold Shortfall Replacement Cost.

 

(c)If the Gold Price on the Monthly Delivery Pricing Date for the relevant
Scheduled Delivery Month is less than the Gold Price Discount, the Seller shall
deliver on the Monthly Delivery Pricing Date additional Gold at no additional
cost to Buyer in such quantity such that the aggregate amount of Gold Delivered
to Buyer with respect to such Scheduled Delivery Month shall have a total value
based on the Gold Price on the Monthly Delivery Pricing Date equal to the
product of the Scheduled Monthly Quantity and the Gold Price Discount.

 

(d)Without limitation of its other rights and remedies hereunder and whether or
not a Seller Default or Seller Event of Default shall have occurred or be
continuing, the Buyer shall have the right to set off and to apply, to the
fullest extent permitted by Applicable Law, any obligation of the Seller under
this Agreement or any other Transaction Document against the obligations of the
Buyer hereunder, including, without limitation, the obligations of the Buyer in
respect of the Gold Prepayment Amount and the Additional Gold Payment Amount,
irrespective of whether or not the Buyer has made demand under this Agreement or
any other Transaction Document and although such obligations may be unmatured or
contingent.

 

(e)The settlement date for the Additional Gold Payment Amount shall be two (2)
Business Days following the Monthly Delivery Pricing Date.

 

(3)[***]

 

(4)[***]

 

25

 

 

Section 8 Payments

 

(1)Each Party shall make all cash payments in US Dollars by wire transfer in
immediately available funds.

 

(2)If any payment shall be due on a day that is not a Business Day, then the
date for payment shall be the next succeeding Business Day and, in the case of
any payment accruing interest on the basis of the Default Interest Rate,
interest shall be payable for the period of such extension.

 

(3)Any cash amount that is not paid to the Buyer or the Seller when due shall
bear interest at a rate equal to the Default Interest Rate payable on demand.

 

(4)All interest payable on the basis of the Default Interest Rate shall accrue
daily and shall be calculated on the basis of a year of three hundred sixty
(360) days.

 

(5)If any provision of this Agreement or of any of the other Transaction
Documents would obligate any Party to make any payment of interest or other
amount payable to the Buyer in an amount or calculated at a rate that would be
prohibited by Applicable Laws or would result in a receipt by the Buyer of
interest at a criminal rate, then, notwithstanding such provision, such amount
or rate shall be deemed to have been adjusted with retroactive effect to the
maximum amount or rate of interest as the case may be, as would not be so
prohibited by Applicable Laws or so result in a receipt by the Buyer of interest
at a criminal rate, such adjustment to be effected, to the extent necessary, as
follows:

 

(i)firstly, by reducing the amount or rate of interest required to be paid to
the Buyer under the applicable Transaction Documents, and

 

(ii)thereafter, by reducing any fee payments, commissions, costs, expenses,
premiums and other amounts required to be paid to the Buyer that would
constitute interest for purposes of Applicable Laws.

 

(6)All payments shall be made in accordance with the following instructions (or
as otherwise agreed in writing between the Parties):

 

(a)Payments to the Seller:

 

  Beneficiary Bank: [***]         Bank Address: [***]         ABA/Routing
Number: [***]         Beneficiary Name: Desert Hawk Gold Corp.        
Beneficiary Address: 1290 Holcomb Ave, Reno, NV 89502         Beneficiary
Account No.: [***]

 

26

 

 

(b)Payments to the Buyer:

 

  Bank Name: [***]         Bank Address: [***]         ABA/Routing Number: [***]
        SWIFT Code: [***]         Account No.: [***]         Account Name: PDK
UTAH HOLDINGS LP         Currency: U.S. Dollars (US$)

 

(7)Subject to the provisions of Section 5(2) herein, all Gold Delivered to the
Buyer that is not otherwise required to be applied in a specific manner
hereinafter shall be applied to the Scheduled Monthly Quantities in reverse
order of maturity.

 

(8)All amounts received by the Buyer from the Offtaker on behalf of the Seller
or from the Seller or received in respect of any Lien or the exercise of any
other remedy and not otherwise required to be applied in a specific manner
pursuant to this Agreement shall be applied by the Buyer as follows: (i) first,
in reduction of the Seller’s obligation to pay any unpaid interest and fees
which are due and owing, (ii) second, in reduction of the Seller’s obligation to
pay any amounts referred to in this Section 8 and (iii) third, in reduction of
the Seller’s obligation to pay any other amounts that are due and owing under
this Agreement or any other Transaction Documents.

 

Section 9 Guarantee

 

(1)Guarantee. Each Guarantor that from time to time becomes a party hereto
(pursuant to Section 12(1)(bb) of this Agreement or otherwise) hereby:

 

(a)absolutely and unconditionally, jointly and severally guarantees, as primary
obligor and as a guaranty of payment and performance and not merely as a
guaranty of collection, prompt payment when due, whether at stated maturity, by
required prepayment, upon acceleration, demand or otherwise, and at all times
thereafter, of any and all obligations (the “Obligations”) of the Seller or any
other Guarantor to the Buyer hereunder (the “Guarantee”);

 

(b)agrees that this Guarantee shall remain in full force and effect without
regard to, and shall not be affected or impaired by, any invalidity,
irregularity or unenforceability in whole or in part of this Agreement or any of
the Transaction Documents or the guaranteed Obligations;

 

(c)agrees that no failure or delay on the part of the Buyer in exercising any
right, power or privilege hereunder or with respect to any Collateral and no
single or partial exercise of any right, power or privilege hereunder or with
respect to any Collateral, shall preclude any other or further exercise thereof
or the exercise of any other right, power or privilege hereunder; and

 

(d)agrees that this Guarantee shall be discharged only by complete performance
of the Obligations contained herein and that it shall not have the right to
withhold or set-off against payment due hereunder for any reason;

 

27

 

 

provided that the liability of each Guarantor individually with respect to this
Guarantee shall be limited to an aggregate amount equal to the largest amount
that would not render its obligations hereunder subject to avoidance under
Section 548 of the Bankruptcy Code of the United States or any comparable
provisions of any applicable state law or other Applicable Laws. This Guarantee
shall not be affected by the genuineness, validity, regularity or enforceability
of the Obligations or any instrument or agreement evidencing any Obligations, or
by the existence, validity, enforceability, perfection, non-perfection or extent
of any collateral therefor, or by any fact or circumstance relating to the
Obligations (except for the payment in part or full of the Obligations, to the
extent of such payment) that might otherwise constitute a defense to the
obligations of the Guarantors, or any of them, under this Guarantee, and each
Guarantor hereby irrevocably waives any defenses it may now have or hereafter
acquire in any way relating to any or all of the foregoing.

 

(2)Rights of the Buyer. Each Guarantor consents and agrees that the Buyer may,
at any time and from time to time, without notice or demand, and without
affecting the enforceability or continuing effectiveness hereof: (a) amend,
extend, renew, compromise, discharge, accelerate or otherwise change the time
for payment or the terms of the Obligations or any part thereof; (b) take, hold,
exchange, enforce, waive, release, fail to perfect, sell or otherwise dispose of
any security for the payment of this Guarantee or any Obligations; (c) apply
such security and direct the order or manner of sale thereof as the Buyer in its
sole and absolute discretion may determine; and (d) release or substitute one or
more of any endorsers or other guarantors of any of the Obligations. Without
limiting the generality of the foregoing, each Guarantor consents to the taking
of, or failure to take, any action that might in any manner or to any extent
vary the risks of any Guarantor under this Guarantee or that, but for this
provision, might operate as a discharge of such Guarantor.

 

(3)Certain Waivers. Each Guarantor waives (a) any defense arising by reason of
any disability or other defense of the Seller or any other Guarantor (except for
the payment in part or in full of the Obligations, to the extent of such
payment), or the cessation from any cause whatsoever (including any act or
omission of the Buyer) of the liability of the Seller or any Guarantor; (b) any
defense based on any claim that any Guarantor’s obligations exceed or are more
burdensome than those of the Seller or any other Guarantor; (c) the benefit of
any statute of limitations affecting any Guarantor’s liability hereunder; (d)
any right to proceed against the Seller or any other Guarantor, proceed against
or exhaust any security for the Obligations, or pursue any other remedy in the
power of the Buyer whatsoever; (e) any benefit of and any right to participate
in any security now or hereafter held by the Buyer; and (f) to the fullest
extent permitted by law, any and all other defenses or benefits that may be
derived from or afforded by Applicable Laws limiting the liability of or
exonerating guarantors or sureties. Each Guarantor expressly waives all setoffs
and counterclaims and all presentments, demands for payment or performance,
notices of nonpayment or nonperformance, protests, notices of protest, notices
of dishonor and all other notices or demands of any kind or nature whatsoever
with respect to the Obligations, and all notices of acceptance of this Guarantee
or of the existence, creation or incurrence of new or additional Obligations,
including the benefits of order, excussion and division.

 

(4)Obligations Independent. The obligations of each Guarantor hereunder are
those of primary obligor, and not merely as surety, and are independent of the
Obligations and the obligations of any other Guarantor, and a separate action
may be brought against each Guarantor to enforce this Guarantee whether or not
the Seller or any other person or entity is joined as a party.

 

28

 

 

(5)Subrogation. No Guarantor shall exercise any right of subrogation,
contribution, indemnity, reimbursement or similar rights with respect to any
payments it makes under this Guarantee until all of the Obligations and any
amounts payable under this Guarantee have been indefeasibly paid and performed
in full and the commitments are terminated. If any amounts are paid to a
Guarantor in violation of the foregoing limitation, then such amounts shall be
held in trust for the benefit of the Buyer and shall forthwith be paid to the
Buyer to reduce the amount of the Obligations, whether matured or unmatured.

 

(6)Termination; Reinstatement. This Guarantee is a continuing and irrevocable
Guarantee of all Obligations now or hereafter existing and shall remain in full
force and effect until the indefeasible repayment or otherwise satisfaction in
full of the Obligations (such date, the “Payoff Date”). Notwithstanding the
foregoing, this Guarantee shall continue in full force and effect or be revived,
as the case may be, if any payment by or on behalf of an Obligor is made, or the
Buyer exercises its right of setoff, in respect of the Obligations and such
payment or the proceeds of such setoff or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, receiver or any other party, in connection with any
proceeding under any Applicable Laws or otherwise, all as if such payment had
not been made or such setoff had not occurred and whether or not the Buyer is in
possession of or has released this Guarantee and regardless of any prior
revocation, rescission, termination or reduction. The obligations of each
Guarantor under this paragraph shall survive termination of this Guarantee.

 

(7)Stay of Acceleration. If acceleration of the time for payment of any of the
Obligations is stayed, in connection with any case commenced by or against an
Obligor under any Applicable Laws, or otherwise, all such amounts shall
nonetheless be payable by the Guarantors, jointly and severally, immediately
upon demand by the Buyer.

 

(8)Condition of Seller. Each Guarantor acknowledges and agrees that it has the
sole responsibility for, and has adequate means of, obtaining from the Seller
and any other Guarantor such information concerning the financial condition,
business and operations of the Seller and any such other Guarantor as any
Guarantor requires, and that the Buyer has no duty, and no Guarantor may rely on
the Buyer at any time, to disclose to it any information relating to the
business, operations or financial condition of any Obligor.

 

Section 10 Subordination of Claims and Postponement of Subordination

 

(1)Each Guarantor hereby subordinates all its claims, whether present or future,
against the Seller to the Obligations guaranteed pursuant to the Guarantee so as
to enable the Buyer, in all circumstances, to be fully paid such guaranteed
Obligations in priority over such claims of each Guarantor.

 

(2)Each Guarantor hereby absolutely, unconditionally and irrevocably agrees to
refrain, until the Obligations guaranteed pursuant to the Guarantee shall have
been fully and indefeasibly paid in cash and performed and until the Buyer shall
have received the entire amount of their claims in connection with such
guaranteed Obligations, from exercising any right that it may now or hereafter
acquire against the Seller that arises from the existence, payment, performance
or enforcement of such Guarantor’s obligations under the Guarantee and this
Agreement or any other Transaction Document, including, without limitation, any
right of subrogation, reimbursement, exoneration, indemnification, and any right
to participate in any claim or remedy of the Buyer against the Seller, whether
or not such claim, remedy or right arises in equity, or under contract, statute
or common law, including, without limitation, the right to take or receive from
the Seller, directly or indirectly, in cash or other property or by set-off or
compensation or in any other manner, payment or Lien on account of such claim or
other rights.

 

29

 

 

(3)If any amount shall be paid to any Guarantor in violation of any of the
preceding subparagraphs of this Section 10 and the Obligations guaranteed
pursuant to the Guarantee shall not have been fully and indefeasibly paid and
performed, such amount shall be deemed to have been paid to such Guarantor for
the benefit of, and shall be held in trust for the benefit of, the Buyer, and
shall forthwith be paid to the Buyer, to be credited and applied upon such
guaranteed Obligations, whether matured or unmatured, in accordance with the
terms of this Agreement.

 

(4)Each Guarantor acknowledges that it will receive direct and indirect benefits
from the financing arrangements contemplated by this Agreement and that the
subordination and postponement set forth in this Section 10 are knowingly made
in contemplation of such benefits.

 

Section 11 Representations and Warranties

 

In addition to, and without limiting, any representations and warranties
contained in the Security Documents, each Obligor represents and warrants to the
Buyer with respect to itself and, where applicable, each of their respective
Affiliates, as of the date hereof and as of each applicable Effective Date:

 

(a)Qualification and Organization. It has all requisite corporate power and
authority to enter into this Agreement and the other Transaction Documents to
which it is a party and to carry out the transactions contemplated herein and
therein, and it is otherwise duly qualified to do business in each jurisdiction
where the nature of its business or properties requires such qualification. It
is a corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation or formation.

 

(b)Subsidiaries. No Obligor has any direct or indirect Subsidiaries.

 

(c)Authorization; No Conflict. The execution, delivery and performance by it of
this Agreement and the other Transaction Documents to which it is a party have
been duly authorized by all necessary shareholder and corporate action on the
part of such Obligor and do not and will not (i) contravene such Obligor’s
articles of incorporation, charter or by-laws, or similar constituent documents;
(ii) violate any provision of any Applicable Laws, order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to such Obligor; (iii) result in a breach of or constitute a
default under or require the Consent of any Person (other than Consents that
have been obtained) pursuant to any indenture, purchase agreement, credit
agreement or any other agreement, lease or instrument to which any Obligor is a
party or by which it or any such Obligor’s properties may be bound or affected;
or (iv) result in, or require, the creation or imposition of any Lien (other
than Permitted Liens) upon or with respect to any of the Collateral, and no
Obligor is in default in any respect under any such Applicable Laws, writ,
judgment, injunction, decree, determination or award or any such indenture,
agreement, lease or instrument that has or would reasonably be expected to have
a Material Adverse Effect.

 

(d)Required Consents. All Consents required to be obtained by the Obligors in
connection with the execution and delivery by them of this Agreement and each
other Transaction Document, and the performance by it of its obligations
hereunder and thereunder, have been obtained and are in full force and effect.

 

30

 

 

(e)Government Authorization. Other than Consents that have been obtained and are
in full force and effect, no authorization or approval or other action by or
consent of, and no notice to or filing or registration with, any Authority is
required (i) for the due execution and delivery of, and the due performance of,
the financial obligations of the Obligors under this Agreement or any other
Transaction Document, or (ii) for the due performance of all other Obligations
of the Obligors under this Agreement or any other Transaction Document (other
than registrations or filings of the Liens created by the Transaction
Documents).

 

(f)Binding Obligations. This Agreement and each of the other Transaction
Documents constitute legal, valid and binding obligations of each Obligor that
is party thereto, enforceable against such Obligor in accordance with its
respective terms (except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws or equitable principles affecting
enforcement of creditors’ rights generally at the time in effect).

 

(g)Litigation. There is no claim, action, lawsuit, proceeding, arbitration or
investigation pending or threatened in writing against or involving any Obligor
or any Collateral (or any part thereof), which: (i) alleges the violation of any
Applicable Laws; (ii) questions the validity of this Agreement or any other
Transaction Document or any action taken or to be taken pursuant to this
Agreement or any other Transaction Document; (iii) involves any Material
Agreement; or (iv) would otherwise reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.

 

(h)Financial Information; No Material Adverse Change. The financial information
provided to the Buyer truly and fairly presents the correct and complete
financial condition of the Obligors as at the date it was provided. No Obligor
has any contingent liability or liability for Taxes, Debt, long-term leases or
unusual forward or long-term commitments that are not reflected in such
financial information. Since October 15, 2018, neither the business, operations
or prospects of each of the Obligors, nor any of their properties or assets, has
been affected by any occurrence or development (whether or not insured against)
that has had or would reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect.

 

(i)Information Accurate. None of the information prepared by or on behalf of any
Obligor and delivered to the Buyer by any Obligor in connection with this
Agreement or the transactions contemplated hereby contains any material
misstatement of fact or omits to state a material fact. With respect to any
financial projections and forecasts that have been furnished to the Buyer, such
financial projections and forecasts were prepared in good faith on the basis of
assumptions that were, in the opinion of the management of such Obligor,
reasonable at the time made; and at the time of delivery, the management of such
Obligor believed, and as of the date hereof continues to believe, in good faith,
that the assumptions used in preparation of the financial projections and
forecasts were and remain reasonable.

 

(j)Title; Liens.

 

(i)Schedule A accurately and completely sets forth and describes each Site;

 

(ii)the Obligors (A) have good legal and marketable title to, or a leasehold
interest in, and are in exclusive possession of, the Sites and the Mining
Concessions and (B) have the right to use, and have all rights necessary and
desirable under any Applicable Laws in relation to, the Sites and the Mining
Concessions and any other assets (including intellectual rights) necessary or
customary to operate the Sites, perform their obligations and enter and complete
the transactions contemplated in this Agreement, free and clear of all Liens,
claims, encumbrances or other burdens on production, except for Permitted Liens;

 

31

 

 

(iii)the Obligors will be the legal and beneficial owners of their owned real
property and will have valid and effective rights to their leased property, free
and clear of Liens, except for Permitted Liens;

 

(iv)all taxes, charges, rates, levies and assessments that, if unpaid, would
create a Lien (other than a Permitted Lien) or charge on any Collateral or any
portion thereof, have been paid in full;

 

(v)all contractors, subcontractors, agents and other Persons engaged by the
Obligors providing services, materials or labor on or for the benefit of any
Collateral have been paid in a timely manner for all work performed or services,
goods or labor provided, on or with respect thereto;

 

(vi)there is no pending labor issue deriving from the activities performed in
the Mining Concessions and/or the Sites that has had or would reasonably be
expected to have a Material Adverse Effect, and except for Permitted Liens all
accounts for work and services performed and materials placed or furnished upon
or in respect of the Mining Concessions and/or the Sites have been fully paid
and satisfied and no person is entitled to claim a Lien under any Applicable
Laws against the Mining Concessions or any part thereof (other than Permitted
Liens); and

 

(vii)the Transaction Documents create, or upon their execution and delivery,
will create, valid and effective Liens in and on the Collateral purported to be
covered thereby, with the priority in accordance with the terms of such
Transaction Documents;

 

(k)Validity of Interests. With respect to all Sites: (i) all claims, permits and
leases forming part of the Sites were located, staked, filed and recorded in
compliance with all Applicable Laws and regulations; and (ii) there are no
actions or administrative or other proceedings pending or to each Obligor’s best
Knowledge threatened against or affecting any of the Sites.

 

(l)Material Contracts; Absence of Default. All the Obligors’ Material Agreements
are identified in Schedule D, and such Obligor has provided the Buyer with a
true, correct, and complete copy of each Material Agreement. No Obligor is in
default in any material respect under any of the Material Agreements, has
received any notice of an asserted default thereunder from any other Person, or
has Knowledge of a breach by any counterparty thereto or the inability of any
counterparty thereto to perform its obligations thereunder.

 

(m)Taxes and Other Payments. Each Obligor has filed all Tax returns and reports
required by Applicable Laws to have been filed by it on a timely basis and has
paid all Taxes, assessments, reassessments and governmental charges thereby
owing or shown to be owing, except (i) where the failure to do so would not
reasonably be expected to have a Material Adverse Effect; or (ii) in respect of
Taxes that are being diligently contested in good faith by proper proceedings
and in respect of which adequate reserves in accordance with GAAP have been set
aside on the books of such Obligor. Each Obligor has remitted on a timely basis
all amounts required to have been withheld and remitted, including withholding
from employee wages and salaries, goods and services tax and all other amounts
which, if not paid when due, could result in the creation of a Lien on the
property of the Obligor.

 

32

 

 

(n)Environmental Laws.

 

(i)The Sites have been owned, developed, operated, leased, reclaimed and
utilized in compliance in all material respects 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 orders,
decrees, judgments or other administrative or judicial requirements outstanding
under any Environmental Laws with respect to any Sites;

 

(iii)no Obligor has received any written or actual notice of any material
violation, alleged violation, non-compliance, investigation, liability or
potential liability, or request for information, with respect to Environmental
Laws, Hazardous Substances or other environmental matters with regard to any
Sites that remains unresolved, nor does any Obligor have Knowledge that any such
notice will be received or is being threatened;

 

(iv)with respect to the Sites, there are no pending or, to the Knowledge of each
Obligor, threatened, lawsuits, claims, complaints, injunctions or any other
governmental or judicial actions or proceedings with respect to any alleged
violation of any Applicable Laws, including Environmental Laws, or any release
or alleged release of any Hazardous Substance; and

 

(v)the Mining Concessions do not lie within any reservation, environmental or
historic protected area, area of special management concern for species or
habitat as designated by any Authority having jurisdiction and that would
materially and adversely impair the ability to conduct exploration for Minerals
or the development of a mining project on the Mining Concessions.

 

(o)Indebtedness. No Obligor has any Debt other than Permitted Debt.

 

(p)Compliance with Laws, Etc. Each Obligor has at all times been and is now in
compliance in all material respects with all Applicable Laws applicable to it or
applicable to any Site.

 

(q)Operation of Mine. The Obligors have heretofore made available to the Buyer
all studies with respect to the Mine supported by relevant geological, reserve,
resource, metallurgical, engineering and financial data and evaluations of the
Mine prepared by or for the benefit of any Obligor or otherwise in the
possession of or available to any Obligor. To the Obligors’ best Knowledge,
there is no material inaccuracy or omission in such information. Such
information has been prepared in accordance with Prudent Mining Industry
Practices, and the method of estimating the Project Technical Characteristics
has been verified by the Obligors to be Prudent Mining Industry Practices and
the information upon which the estimates of Project Technical Characteristics
were based, was, at the time of delivery thereof, complete and accurate in all
respects and there have been no material changes to such information since the
date of delivery or preparation thereof.

 

33

 

 

(r)Permits. All Permits are identified in Schedule H. The Obligors have obtained
all Permits necessary to conduct mining operations at the Sites, and all such
Permits are in full force and effect in accordance with their terms, free of
defaults, and no written notice alleging a breach or default under any of the
Permits or challenging or questioning the validity of any such Permit has been
delivered, except as noted on Schedule H under the heading “Permits to Be
Obtained.”

 

(s)Mining Concessions.

 

(i)The Obligors have acquired or leased all property and assets including the
Mining Concessions and have obtained such other surface and other rights as are
necessary for access rights, water rights, plant sites, tailings disposal, waste
dumps, ore and/or mineralized rock dumps, abandoned heaps or ancillary
facilities that are required in order to operate the Mine in accordance with the
Initial Expense Budget and the Initial Annual Production Forecast. All property
and assets including the Mining Concessions are sufficient in scope and
substance for the development and operation of the Mine as contemplated by the
Initial Expense Budget and the Initial Annual Production Forecast.

 

(ii)The Mining Concessions and the Sites are in good standing before the
relevant Authority with respect to (i) the Obligors’ obligations in respect of
the Mining Concessions as required under applicable legislation, (ii) the
obligation to pay mining duties and mining taxes as set forth in the Applicable
Laws as from the date of issuance of each Mining Concession and (iii) any other
obligation to maintain the legal effect of the Mining Concessions under the
Applicable Laws.

 

(iii)No Obligor has received any communication or order from any Authority
requesting payment or compliance with any outstanding obligation under this
paragraph. No Obligor has received any notice or other written communication
that any Mining Concessions or Permits may be subject to termination,
modification, suspension or revocation, and, except as noted on Schedule H under
the heading “Permits to Be Obtained,” no further Permits are required in
connection with the development or operation of the Sites, or the exercise of
its rights under the Mining Concessions, in the manner necessary to enable any
Obligor to meet its obligations hereunder except such as would reasonably be
expected to be obtained in the ordinary course of business and without the
expenditure of any unbudgeted amounts.

 

(iv)Except for the Permitted Liens, the Mining Concessions are duly issued and
not in conflict with any other mining concession, and are free from (A) any
Liens or limitations, (B) any option, exploration, exploitation or other
agreement with any third parties or any third-party right to any royalty or
other payment as rent or royalty over minerals, concentrates, precipitates
and/or products produced under the Mining Concessions, (C) any pending, or to
the Obligors’ best Knowledge, threatened, claim, action, lawsuit or controversy
against any Person or Authority and any circumstance that could prevent or
obstruct the free exercise of the rights arising under the Mining Concessions,
or any basis for any such claim or action, except as set out in Schedule L, and
(D) any possibility of breach, termination, abandonment, forfeiture,
relinquishment or other premature termination resulting from any act or omission
of any Obligor.

 

34

 

 

(t)Compliance with Securities Legislation. Except for Seller’s failure to file
its most recent reports with the SEC, each Obligor has complied, and will
comply, in all material respects with all Applicable Securities Laws in the
course of its affairs, including:

 

(i)The Seller is a reporting issuer under Section 15(d) of the U.S. Securities
Exchange Act of 1934, as amended;

 

(ii)The Seller is not in default in any material respect of any Applicable
Securities Laws or any rules or policies of any stock exchange on which it may
be listed from time to time, as applicable, nor is it included in a list of
defaulting reporting issuers maintained by any securities commissions where the
Seller is a reporting issuer or other securities regulatory authorities in
Canada, the United States, or any political subdivision of Canada or the United
States; and

 

(iii)No order ceasing, halting or suspending trading or prohibiting the sale of
common shares or any other securities of the Seller has been issued to and is
outstanding against any Obligor or its directors, officers or promoters and, to
the best of the Obligors’ Knowledge, no investigation or proceedings for such
purposes are pending or threatened.

 

(u)Counter-Terrorism Regulations and Anti-Money Laundering. Each Obligor is and,
with respect to the transactions contemplated by this Agreement, shall remain in
compliance with all applicable Sanctions 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, the Criminal
Code, the United Nations Act, 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), as amended,
and other Applicable Laws relating to “know your customer” and anti-money
laundering rules and regulation that apply to it. No part of the proceeds from
this Agreement 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 Laws.

 

(v)Margin Stock; Financial Assistance. No part of the proceeds of this Agreement
will be used, whether directly or indirectly, for any purpose that entails a
violation of any of the Regulations of the Board of Governors of the Federal
Reserve System of the United States of America, including Regulations T, U and
X, and/or any similar or comparable Applicable Laws in Canada.

 

(w)Ownership Structure and Equity Interests. As of the date hereof, the
ownership structure and equity holdings of each Obligor are as set out in
Schedule I. Other than as set out in Schedule I, the Obligors do not own any
equity interest.

 

(x)Hazardous Materials. The production from the Sites does not contain any
Hazardous Substance that (i) does not conform to the Applicable Laws, (ii) would
render any Covered Metal or intermediate products produced from the Sites
unacceptable for smelting and/or refining processes, as applicable, or (iii)
would otherwise render any Covered Metal or intermediate products produced from
the Sites unsaleable.

 

35

 

 

(y)Sanctions. No Obligor, nor any director, officer, employee, agent, affiliate
or representative thereof, is or is owned or controlled by any individual or
entity that is a Restricted Party.

 

(z)Quality. The Contract Quantity to be credited to Buyer’s Unallocated Gold
Account is and will be in accordance with the relevant quality standards and
specifications, free and clear from any Liens and third-party claims and any
defects in design, materials and workmanship.

 

(aa)Archeology. The Mining Concessions and the Sites: (i) are not located within
any area protected from mining activity under Applicable Laws, and there have
been no archeological or historical findings in the Mining Concessions; and (ii)
have all necessary Permits and licenses issued by public authorities, with the
corresponding approval with respect to archeological or historical findings
under the Applicable Laws.

 

(bb)Fairness. The consideration given or provided, or to be given or provided,
by the Buyer in connection with this Agreement is adequate and satisfactory in
all respects, and represents reasonably equivalent value, to support this
Agreement and the Obligors’ obligations hereunder.

 

(cc)Solvency. Immediately following the payment by the Buyer of the first
installment of the Gold Prepayment Amount on the Initial Effective Date: (i) the
fair value of the assets of each Obligor will exceed its respective debts and
liabilities, subordinated, contingent or otherwise; (ii) the present fair
saleable value of the property of each Obligor will be greater than the amount
that will be required to pay the probable liability of its respective debts and
other liabilities, subordinated, contingent or otherwise, as such debts and
other liabilities become absolute and matured; (iii) each Obligor will be able
to pay its debts and liabilities, subordinated, contingent or otherwise, as such
debts and liabilities become absolute and matured; and (iv) no Obligor has
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be conducted after
the date hereof.

 

(dd)Collateral. The Obligors have good legal and marketable title to, or a
leasehold interest in, all Collateral, free and clear of any Liens, encumbrances
and claims other than Permitted Liens.

 

(ee)Adverse Change. As at the date of hereof, there has been no material adverse
change in the financial condition, business, affairs, prospects, assets or
properties of any Obligor, or operations at the Sites, since October 15, 2018.

 

(ff)Breach. To the best Knowledge of the Obligors, there is no allegation that
any Obligor, Site or Mining Concession is in breach of any Consent, Permit,
Applicable Laws or any other obligation.

 

(gg)Immunity. No Obligor is entitled to claim immunity from suit, execution,
attachment or other legal process in any proceedings in relation to this
Agreement or any other Transaction Document.

 

36

 

 

(hh)Compliance and Absence of Certain Practices. On and after the Initial
Effective Date, each Obligor shall have adequate and valid compliance systems in
strict accordance with the Applicable Laws and regulations, and best governance
and internal control practices, with regards to anti-bribery and anti-public
corruption and each Obligor has adequate internal control and auditing systems
in order to prevent, control, monitor and detect the perpetration of crimes
and/or misconduct and/or any questionable payments or any risks associated with
anti-bribery and anti-public corruption. Neither the Obligors nor any of its
officers, managers, employees, agents, representatives of, shareholders and/or
former shareholders have, directly or indirectly, offered, paid or promised to
pay, or authorized the payment of any money or other thing of value to any
person who is an official, officer, agent, employee or representative of any
government or instrumentality thereof or of any existing or prospective
customer, or to any political party or official thereof, to any candidate for
political or political party office, or to any public or private individual or
entity involved in corruption and/or money laundering investigations in Canada
or the US, or to any other public or private individual or entity while knowing
or having reason to believe that all or any portion of such money or thing of
value would be offered, given, or promised, directly or indirectly, to any such
official, officer, agent, employee, representative, political party, political
party official, or candidate, (i) to obtain favorable treatment in securing
business, (ii) to pay for favorable treatment for business secured, (iii) to
obtain special concessions or for special concessions already obtained, for or
on behalf of or for the benefit of any of the Obligors, any affiliate or
relatives, or (iv) in violation of any Applicable Law regarding anti-bribery and
anti-public corruption, including, but not limited to, the United States Foreign
Corrupt Practices Act of 1977 and the United Kingdom Bribery Act 2010, including
their further modifications, and, where applicable, the principles described in
the ‘Convention on Combating Bribery of Foreign Public Officials in
International Business Transactions.

 

(ii)Defined Benefit Plan. No Obligor has established or acquired a “registered
pension plan” that contains a “defined benefit provision” as such terms are
defined in the ITA.

 

Section 12 Covenants

 

(1)Affirmative Covenants. So long as any Gold remains to be Delivered or any
amounts remain to be paid by the Seller under this Agreement, the Seller shall
in addition to and without limiting the covenants contained in the Security
Documents:

 

(a)Annual Business Plans, Annual Production Forecast, Financial Reporting and
Other Reporting. Deliver to the Buyer: (i) within 60 days prior to the
commencement of each Financial Year, an Annual Business Plan for the Financial
Year, together with a detailed budget for the Financial Year providing
supplementary detailed schedules and information supplementary to and consistent
with the Annual Business Plan; (ii) within 60 days prior to the commencement of
each Financial Year, an annual and updated mine plan for the Sites providing
detailed estimates of capital expenditures, production, revenues and expenses;
(iii) within sixty (60) days prior to the commencement of each Financial Year,
the Annual Production Forecast; (iv) as soon as practicable and in any event
within sixty (60) days after the end of each of the first three (3) Financial
Quarters in each Financial Year (A) a consolidated balance sheet of the Seller
as of the end of the Financial Quarter and (B) the related consolidated
statements of earnings and changes in financial position for the Financial
Quarter and for the period commencing at the end of the previous Financial Year
and ending with the end of the Financial Quarter (in each case (except for the
statement of changes in financial position) setting forth in comparative form
the figures for the corresponding Financial Quarter and corresponding portion of
the previous Financial Year); (v) as soon as practicable and in any event within
one hundred twenty (120) days after the end of each Financial Year, a copy of
the financial statements of the Seller for the Financial Year prepared on a
consolidated basis reported on by the Seller’s independent auditors; (vi) as
soon as practicable and in any event within thirty (30) days after the end of
each month, a management report for that month (to include cumulative management
accounts for the Financial Year to date); (vii) together with each delivery of
financial statements, a Compliance Certificate, and a statement of Priority
Accounts Payable, detailing all additions and subtractions therefrom, all
certified by an officer of the Seller; (viii) on a monthly basis, within five
(5) Business Days after the end of each month, a Capital Expenditure Report as
set forth on Schedule G with respect to the Mine; (ix) as soon as practicable
and in any event within five (5) Business Days after the end of each month, a
Monthly Report for that month; (x) as soon as possible and in any event within
ten (10) Business Days prior to the commencement of each Financial Quarter, a
Quarterly Report; and (xi) on a weekly basis, current balance statements
relating to the Collection Account.

 

37

 

 

(b)Environmental Reporting. Promptly, and in any event within ten (10) days of
becoming aware of the relevant circumstances, deliver to the Buyer a detailed
statement describing any of the following occurrences: (i) any order or
judgment, decision, notice or requirement of any Authority requiring any Obligor
to incur Environmental Liabilities (i) in excess of US$50,000 in any one
instance or, together with all other expenditures incurred in respect of
Environmental Liabilities in any Financial Year, in excess of US$100,000 in the
aggregate for the Seller and all the Guarantors taken together; and (ii) any
state of affairs in respect of the Sites that could result in the incurrence of
Environmental Liabilities in excess of US$50,000 in any one instance or,
together with all other expenditures incurred in respect of Environmental
Liabilities in any Financial Year, in excess of US$100,000 in the aggregate.
Each statement delivered to Buyer hereunder shall include a description of all
actions taken or proposed to be taken in connection with such occurrences.

 

(c)Additional Reporting. Deliver to the Buyer (i) as soon as practicable, and in
any event at least five (5) days prior to any Monthly Delivery Date, notice of
any anticipated failure to Deliver as required on such Monthly Delivery Date;
(ii) as soon as practicable, and in any event within one (1) day of receipt by
the Seller, notice of any default or other breach under the Second A&R Clifton
Lease; (iii) as soon as practicable, and in any event within five (5) days after
the occurrence of any Seller Default or Event of Default, a statement of the
chief financial officer of the Seller or any other officer acceptable to the
Buyer setting forth the details of the Seller Default or Event of Default and
the action that the Seller proposes to take or has taken (provided that the
foregoing shall not be deemed to extend the period of time that the Seller may
cure any such Default that is otherwise provided for herein); (iv) from time to
time upon request of the Buyer, evidence of the maintenance of all insurance
required to be maintained pursuant to this Agreement, including originals or
copies as the Buyer may request of policies, certificates of insurance, riders,
endorsements and proof of premium payments; (v) promptly upon their issuance,
copies of all notices, reports, press releases, circulars, offering documents
and other documents filed with or on the public record, or delivered to, any
stock exchange or securities commission or a similar Authority in any other
jurisdiction; and (vi) such other information respecting the condition or
operations, financial or otherwise, of the Sites, any Obligors or any of their
respective Affiliates as the Buyer may from time to time reasonably request.

 

(d)Corporate Existence. Preserve and maintain, and cause each Guarantor to
preserve and maintain, its and their corporate existence, except with the prior
written consent of the Buyer.

 

38

 

 

(e)Use of Proceeds. Use of the proceeds of the Gold Prepayment Amount shall be
allocated as follows: (i) an amount equal to US$[***] to be applied, on the
applicable date specified in Schedule C, to fully extinguish the Debt listed in
such schedule, (ii) an amount up to US$[***] to be immediately applied to the
extinguishing of the 1% Clifton Royalty, (iii) an amount up to US$[***] to be
immediately applied to the extinguishing of the IMM Royalty, (iv) an amount up
to US$[***] to be immediately applied to the extinguishing of the DNI Royalty,
and (v) the remainder to be applied toward general working capital expenditures
of the Seller, in each case, in accordance with the Initial Expense Budget and
subject to the terms and conditions of this Agreement, including the negative
covenants set forth in Section 12(2).

 

(f)Compliance with Laws. Comply and cause each Guarantor to comply in all
material respects with the requirements of all Applicable Laws (including,
without limitation, the requirement to post any performance bonds in order to
comply with Environmental Laws), Consents, Permits, Material Agreements and
judgments, orders, decisions and awards, except any non-compliance that does not
cause any Obligor to breach, disrupt, delay, alter or compromise the performance
of its obligations under this Agreement or the other Transaction Documents or
create, or become subject to, a superseding intervening Lien (other than a
Permitted Lien) to any of the security interests evidenced by the Security
Documents.

 

(g)Environmental Investigations. Promptly, if any Obligor or the Buyer has a
good faith concern that a discharge of a Hazardous Substance or violation of
Environmental Laws has occurred or is imminent, or a condition exists at the
Sites that has had or would reasonably be expected to have a Material Adverse
Effect, cause to be conducted such environmental investigations (including
without limitation, environmental compliance reviews) as are reasonably required
by the Buyer by an environmental consultant approved by the Buyer, and promptly
remedy any condition or non-compliance revealed by any such investigation in
accordance with Environmental Laws.

 

(h)Construction, Operation and Maintenance of Properties. Shall operate, and
shall cause each Guarantor to operate, the Sites as a Reasonable and Prudent
Operator and make all mining operations and activities pertaining or in respect
of the Sites in a commercially prudent manner and in accordance with all
Applicable Laws, Permits and good mining processing, engineering and
environmental practices prevailing in the mining industry in all material
respects, and cause each Guarantor to make all repairs, renewals, replacements,
additions and improvements to the Sites so that the business and activities
carried on at the Sites may be properly and advantageously conducted at all
times in accordance with good mining practice and in accordance with Applicable
Laws and Permits in all material respects; except any non-compliance that does
not cause any Obligor to breach, disrupt, delay, alter or compromise the
performance of its obligations under this Agreement or the other Transaction
Documents or create, or become subject to, a superseding intervening Lien (other
than a Permitted Lien) to any of the security interests evidenced by the
Security Documents.

 

(i)Auditors. On or prior to the Initial Effective Date, appoint as its auditors
DeCoria, Maichel & Teague, P.S., or a firm of international standing acceptable
to Buyer in its sole discretion.

 

39

 

 

(j)Payment of Taxes and Claims. Pay, cause to be paid, or cause each Obligor to
pay, 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 it, any other Obligor, as applicable; and (ii) all claims
that if unpaid might by Applicable Law become a Lien upon the assets or
properties of such Obligor, in each case except to the extent that such tax,
assessment, charge, levy or claim (x) is being diligently contested in good
faith by proper proceedings and in respect of which the Seller has set aside
adequate reserves in accordance with GAAP, or (y) constitutes a Permitted Lien.

 

(k)Keeping of Books. Keep, and cause each other Obligor, as applicable, to keep,
proper books of record and account, including in respect of all operations and
activities with respect to the Sites, including the mining and production
therefrom and account, in which full and correct entries shall be made in
respect of their respective businesses and offices, as the case may be.

 

(l)Visitation and Inspection. At any reasonable time or times, permit the Buyer
and any agents of the Buyer to visit the properties, including the Sites and
make best efforts to arrange for the Buyer and any agents of the Buyer to visit
any other facility where Minerals are milled or processed of any Obligor, and to
discuss their mine development, operations, affairs, finances and accounts with
the president, chief executive officer, chief financial officer, chief operating
officer, and other key personnel as determined by the Buyer. The Sellers shall
cooperate with the Buyer in the conduct of monitoring the construction and
development of the Mine.

 

(m)Maintenance of Insurance. As of the date indicated in Schedule J, obtain and
maintain thereafter in force with an insurer rated [***], in form and substance
satisfactory to the Buyer, in respect of itself, and the Guarantors, the
insurance described in Schedule J, with all such policies showing the Buyer as
an additional insured and a loss payee under a mortgage clause in a form
approved by the applicable governing body.

 

(n)Notice of Expropriation or Condemnation, Litigation and Default. Shall
promptly notify the Buyer in writing of:

 

(i)the commencement or the written threat of any expropriation or condemnation
of any material assets, property or undertaking of any Obligor or of the
institution of any proceedings related thereto;

 

(ii)any actions, suits, inquiries, disputes, claims or proceedings commenced or
threatened in writing against or affecting any Obligor before any Authority
that, individually or in the aggregate, have or would reasonably be expected to
have a Material Adverse Effect; and

 

(iii)upon the occurrence of an Event of Default of which the Seller is aware,
the nature and date of occurrence of such Default, such Seller’s assessment of
the duration and effect thereof and the action that such Seller proposes to take
with respect thereto.

 

40

 

 

(o)Mining Concessions Maintained in Good Order.

 

(i)Maintain the Mining Concessions in good standing in material compliance with
all Applicable Laws, except any non-compliance that does not cause any Obligor
to breach, disrupt, delay, alter or compromise the performance of its
obligations under this Agreement or the other Transaction Documents or create,
or become subject to, a superseding intervening Lien, other than a Permitted
Lien, to any of the security interests evidenced by the Security Documents,
including payment of mining duties corresponding to the Mining Concessions,
which the Seller will pay in full thirty (30) days prior to any deadlines
required under the Applicable Laws; and filing the work assessment reports
corresponding to the activities performed in the Mining Concessions thirty (30)
days prior to any deadlines required under the Applicable Laws. The Seller shall
notify the Buyer promptly upon making any payments corresponding to the mining
duties or filings of the work assessment reports mentioned in this paragraph,
and provide to the Buyer with a copy of the payments made and the reports filed.

 

(ii)Keep in good order the data related to the Mining Concessions. Such data
shall include, but not be limited to, surveys, maps, plans, specifications,
drill core samples, assays, books, records, studies, assessments, models,
interpretations and copies of drill logs, reports or other information of any
kind and in any format (including in electronic format) relating to the Mining
Concessions and operation of the Sites either owned by and/or in the possession
and control of the Seller.

 

(iii)The Obligors and their respective agents and contractors shall conduct
their operations in the Mining Concessions, in a good and workmanlike manner in
accordance with generally accepted mining industry practice and in material
compliance with all Applicable Laws and Environmental Laws and in accordance
with the contracts, Permits, licenses and other agreements related to the Mining
Concessions in all material respects; except any non-compliance that does not
cause any Obligor to breach, disrupt, delay, alter or compromise the performance
of its obligations under this Agreement or the other Transaction Documents or
create, or become subject to, a superseding intervening Lien, other than a
Permitted Lien, to any of the security interests evidenced by the Security
Documents. Each Seller shall conduct its operations with the care and skill
normally expected of someone conducting and managing exploration, development
and mining activities.

 

(iv)Pay or cause to be paid all agents of the Obligors, including workers or
wage earners employed by any Obligor or its contractors on the Mining
Concessions and for all material purchased by any Obligor or its contractors in
connection with all work that might give rise to a Lien or privilege on the
Mining Concessions. Should any such Lien or privilege be recorded against the
Mining Concessions in consequence of any work done on the Mining Concessions by
or for any Obligor, the Seller shall forthwith take all such actions, including
initiating legal proceedings, as may be necessary to have such Lien or privilege
removed or discharged from the Mining Concessions (or bonded over in accordance
with Applicable Laws) and shall have the same removed, discharged or bonded over
with all reasonable dispatch; provided, however, that upon such removal,
discharge or bond of such Lien or privilege, the Seller may proceed to contest
any such claim of Lien or privilege in good faith and diligently.

 

(v)File the corresponding applications in accordance with Applicable Laws in
order to obtain the extension of the term of the Mining Concessions,
if required.

 

(p)Permits. Duly obtain all Permits, in each case, in accordance with the timing
specified on Schedule H hereto, and, once obtained, maintain in full force and
effect all Permits and comply in all material respects with the terms thereof,
except any non-compliance that does not cause any Obligor to breach, disrupt,
delay, alter or compromise the performance of its obligations under this
Agreement or the other Transaction Documents or create, or become subject to, a
superseding intervening Lien, other than a Permitted Lien, to any of the
security interests evidenced by the Security Documents.

 

41

 

 

(q)Licenses. Duly maintain in full force and effect all licenses currently held
and comply in all material respects with the terms thereof, except any
non-compliance that does not cause any Obligor to breach, disrupt, delay, alter
or compromise the performance of its obligations under this Agreement or other
Transaction Documents or create, or become subject to, a superseding intervening
Lien, other than a Permitted Lien, to any of the security interests evidenced by
the Security Documents, without relinquishing any license except with the prior
written consent of the Buyer.

 

(r)[***]

 

(s)Consents. To and to cause each Guarantor to, each at its own cost and
expense, take any action, satisfy any condition or do anything (including
obtaining or effecting any necessary Consent) at any time required in accordance
with Applicable Laws, to be taken, fulfilled or done to:

 

(i)obtain and maintain in full force and effect all Consents that are required
in connection with the execution and delivery and performance of this Agreement
and the other Transaction Documents;

 

(ii)enable each Obligor to lawfully enter into, exercise its rights and perform
and comply with its obligations under each Transaction Document to which it is a
party;

 

(iii)ensure that each Obligor’s obligations under each Transaction Document to
which it is a party are legally binding and enforceable; and

 

(iv)take any and all action necessary to preserve the enforceability of, and
maintain the Buyer’s rights under, each Transaction Document, including
refraining from taking any action that would reasonably be expected to have a
Material Adverse Effect.

 

(t)Minerals. To cause all gold produced by the Obligors to be produced, handled,
transported and delivered in accordance with all Applicable Laws in all material
respects, except any non-compliance that does not cause any Obligor to breach,
disrupt, delay, alter, or compromise the performance of its obligations under
this Agreement or the other Transaction Documents or create, or become subject
to, a superseding intervening Lien, other than a Permitted Lien, to any of the
security interests evidenced by the Security Documents.

 

(u)Filings and Registrations.

 

(i)Forthwith after the entering into of this Agreement, file and cause the
registry, as applicable, of such documents as may be required under Applicable
Laws relating to the Transaction Documents (including the Security Documents)
and the transactions contemplated thereunder together with any required fees and
timely file all documents that must be publicly filed or sent to shareholders
pursuant to Applicable Securities Laws within the time prescribed by such
Applicable Securities Laws and make such documents available within such
prescribed time period; and

 

(ii)comply in all material respects with all the requirements of National
Instrument 43-101 - Standards of Disclosure for Mineral Projects, including,
without limitation, with respect to the preparation and filing of any technical
reports.

 

42

 

 

(v)Maintenance of Liens.

 

(i)The Seller shall (and shall cause each of its Affiliates to) take all action
reasonably required to maintain and preserve the Liens created by the Security
Documents to which it is a party and the priority of such Liens, subject to
Permitted Liens. The Seller shall (and shall cause each of its Affiliates to),
from time to time, execute or cause to be executed any and all further
instruments requested by the Buyer for such purposes. The Seller shall (and
shall cause each of its Affiliates to) promptly discharge at its own cost and
expense, any Lien (other than a Permitted Lien) on the Collateral.

 

(ii)If, after the date hereof, the Seller and/or any of its Affiliates acquires
any property or rights, which upon such acquisition, is not subject to the Liens
created pursuant to the then existing Security Documents, then, unless otherwise
specifically provided in an existing Security Document, the Seller shall advise
the Buyer as soon as reasonably practicable of such acquisition and shall within
fifteen (15) Business Days after the date of such acquisition execute and
deliver such additional security document(s) creating Liens on the newly
acquired property as the Buyer may reasonably require (together with any
necessary or desirable registration documents and an opinion of the Seller’s
counsel relating to such security document(s) and the Liens created thereby, all
in form and substance satisfactory to the Buyer, acting reasonably).

 

(w)Material Agreements. Perform and cause all other Obligors to perform, all of
its and their obligations under the Material Agreements in all material
respects, except any non-compliance that does not cause any Obligor to breach,
disrupt, delay, alter, or compromise the performance of its obligations under
this Agreement or the other Transaction Documents or create, or become subject
to, a superseding intervening Lien, other than a Permitted Lien, to any of the
security interests evidenced by the Security Documents, and take reasonable
actions to enforce all of its and their material obligations thereunder.

 

(x)Gold Quality. Cause the Contract Quantity credited to Buyer’s Unallocated
Gold Account to be in accordance with the relevant quality standards and
specifications, free and clear from any Liens and third-party claims.

 

(y)Further Assurances. At its cost and expense, upon request of the Buyer,
execute and deliver or cause to be executed and delivered to the Buyer such
further instruments and do and cause to be done such further acts as may be
necessary or proper in the reasonable opinion of the Buyer to carry out more
effectually the provisions and purposes of the Transaction Documents.

 

(z)[***]

 

43

 

 

(aa)Funding Deficit. If any funding deficit is identified in the Capital
Expenditure Report, cure such funding deficit within ninety (90) days after its
occurrence.

 

(bb)Joinder of Guarantors. Promptly upon the incorporation or acquisition of any
Subsidiary of the Seller (and in any event, within thirty (30) days of such
incorporation or acquisition), cause such Subsidiary to execute a Guarantor
Joinder Agreement.

 

(cc)Collection Account. Following the Initial Effective Date:

 

(i)maintain the Collection Account in the name of the Seller; and

 

(ii)deliver to the Buyer, within 15 days after the last day of each Scheduled
Delivery Month, the current balance statements relating to the Collection
Account; and

 

(iii)cause each Offtaker to pay all cash proceeds of Mineral sales into the
Collection Account.

 

(dd)Compliance with Anti-bribery and Anti-public corruption Laws.

 

(i)Comply with any and all Applicable Laws regarding anti-bribery and
anti-public corruption, including, but not limited to, the United States Foreign
Corrupt Practices Act of 1977 and the United Kingdom Bribery Act 2010, including
their further modifications, and, where applicable, the principles described in
the ‘Convention on Combating Bribery of Foreign Public Officials in
International Business Transactions’;

 

(ii)Maintain adequate and valid compliance systems in strict accordance with
Applicable Laws and regulations, and best governance and internal control
practices, with regards to anti-bribery and anti-public corruption; and

 

(iii)Maintain adequate internal control and auditing systems in order to
prevent, control, monitor and detect the perpetration of crimes and/or
misconduct and/or any questionable payments or any risks associated with
anti-bribery and anti-public corruption.

 

(ee)Permits. Obtain, and thereafter, maintain, each Permit, in each case, in
accordance with the timing specified on Schedule H hereto.

 

(ff)[***]

 

(gg)[***]

 

(hh)[***]

 

(ii)[***]

 

(jj)[***]

 

(kk)[***]

 

44

 

 

(ll)Title Comfort.

 

(i)Within one (1) month following the Initial Effective Date:

 

(A)relative to the those claims constituting a part of the Kiewit Project that
are Patented Claims, listed in Part II.A of Schedule P, have delivered to the
Buyer an updated Title Policy disclosing title to the patented claims to be
vested in the Seller, insuring the interest of the Buyer as a “lender”, subject
to no Liens except Permitted Liens, in such amount of coverage and containing
such endorsements thereto as the Buyer shall reasonably require. The Title
Policy shall otherwise be in form and substance satisfactory to the Buyer. The
Buyer shall have received evidence that all premiums in respect of such Title
Policy, all recording tax charges associated with the Security Documents, and
related expenses shall have been paid; and

 

(B)relative to the those claims constituting a part of the Kiewit Project that
are Unpatented Claims, listed in Part II.B of Schedule P, have delivered to the
Buyer evidence, in the form of a title opinion, reasonably satisfactory to the
Buyer that the Seller has good and marketable title to, or a leasehold interest
in, such claims, subject to no Liens except Permitted Liens.

 

(ii)Within forty-five (45) days following the Initial Effective Date, have
delivered to the Buyer a subordination, non-disturbance and attornment agreement
with each fee mortgagee of the real property leased by the Seller pursuant to
the Second A&R Clifton Lease, in each case, in form and substance reasonably
satisfactory to the Buyer and duly executed by the Seller, the Buyer, and each
such fee mortgagee.

 

(mm)Cactus Mill. On the Closing Date (as such term is defined in the Second A&R
Clifton Lease), complete the transfer of the Cactus Mill (as such term is
defined in the Second A&R Clifton Lease) to Clifton.

 

(nn)BLM Maintenance Fees. On or prior to January 31 of every year during the
Term of this Agreement, pay to the United States Bureau of Land Management the
amounts constituting the BLM Maintenance Fees (as such term is defined in the
Second A&R Clifton Lease) which shall become due and payable during the
following seven (7)-year period and which have not already been paid, and
provide the Buyer with written documentation evidencing the payment thereof.

 

(oo)Information Verification. In the event that the Seller fails to provide any
of the information or reports required pursuant to paragraphs (a), (b) or (c) of
this Section 12(1), or any other information which the Buyer has reasonably
requested of the Seller in connection with this Agreement, in each case, to the
sole and absolute satisfaction of the Buyer, then the Buyer (or any agent
appointed by the Buyer) shall have the right to review, independently verify or
produce any such information or report, and the Seller shall permit the Buyer or
its agent to visit the Sites and to access any information the Buyer or its
agent deems relevant to such review, verification or production of such
information or report.

 

(pp)Legal Opinions. Within five (5) Business Days following the Initial
Effective Date, the Seller shall have delivered opinions of counsel to the
Obligors, as to such matters for transactions of this nature as the Buyer may
reasonably require, in form and substance reasonably acceptable to the Buyer.

 

45

 

 

(2)Negative Covenants. So long as any Gold remains to be Delivered or any
amounts remain to be paid by the Seller under this Agreement, the Seller shall
not:

 

(a)Debt. Create, incur, assume or suffer to exist, or permit any Guarantor to
create, incur, assume or suffer to exist, any Debt other than the Permitted
Debt.

 

(b)Liens. Create, incur, assume or suffer to exist, or permit any Guarantor to
create, incur, assume or suffer to exist, any Lien on any of their respective
properties or assets other than (i) Permitted Liens; (ii) Liens created,
incurred, assumed or existing in connection with leases of equipment or property
required by any Obligor for the operation of its business in the normal course
up to a maximum of US$200,000 in the aggregate (which Liens, for greater
certainty, shall be in addition to Purchase Money Liens); or (iii) in connection
with a full prepayment by the Seller of its obligations under this Agreement as
contemplated in Section 5(8) on terms and conditions satisfactory to the Buyer
in its commercially reasonable discretion.

 

(c)Forward Commitments. Create, incur or permit to remain outstanding or permit
any Guarantor to create, incur, assume or permit to remain outstanding any
forward commitments to deliver gold or any other product of the Sites to any
Person other than the Buyer for a fixed price or containing an embedded hedge;

 

(d)Offtake Arrangements. Sell, assign, dispose, gift or otherwise transfer (or
permit any Guarantor to sell, assign, dispose, gift or otherwise transfer) any
gold amounts to any Person, including any Affiliate, in any Scheduled Delivery
Month until the Scheduled Monthly Quantity is credited to the Buyer’s
Unallocated Gold Account and until all amounts outstanding to the Buyer due to a
Gold Shortfall have been paid. For the avoidance of doubt, the Obligor shall be
entitled to sell the remaining gold amounts, over and above each Scheduled
Monthly Quantity, if any; provided that, so long as any amounts outstanding
remain unpaid due to a Gold Shortfall, no Obligor shall be permitted to sell any
such amounts of gold until such amounts have been paid in full to Buyer.

 

(e)Preferential Arrangements. Sell or dispose of, or permit any Guarantor to
sell or dispose of, any of its or their receivables on recourse terms or enter
into any arrangement under which money or the benefit of any bank or other
account may be applied or set off or made subject to a combination of accounts
or enter into any other preferential agreement having a similar effect to any of
the foregoing, other than in connection with a full prepayment by the Seller of
its obligations under this Agreement as contemplated in Section 5(8) on terms
and conditions satisfactory to the Buyer in its commercially reasonable
discretion.

 

(f)Mergers. Permit any of the Guarantors to enter into any reorganization,
consolidation, amalgamation, arrangement, winding-up, merger or other similar
transaction.

 

(g)Disposal of Assets. Other than the Delivery of the Contract Quantity pursuant
to this Agreement, generally sell, exchange, lease, release or abandon or
otherwise dispose of, or permit any Guarantor to sell, exchange, lease, release
or abandon or otherwise dispose of, any assets or properties to any Person,
other than bona fide sales, exchanges, leases, abandonments or other
dispositions of assets or properties made in the ordinary course of business for
the purpose of carrying on its business, and at fair market value, up to a
maximum of US$100,000 in the aggregate for the Obligors taken together during
any Financial Year.

 

46

 

 

(h)Transactions with Related Parties. Enter into, or allow any Guarantor to
enter into, any agreement with, make any financial accommodation for, or
otherwise enter into any transaction with, a Related Party, other than (i)
intercompany subscriptions, purchases, redemptions, advances, book entries,
other transactions by which the Seller provides working capital to the
Guarantors to be used for operations in the normal course of business and not
for redistribution by such Guarantor to third parties and (ii) any dividends or
other distributions comprised solely of capital stock.

 

(i)Change in Business. Make any change in the nature of its business or permit
any Guarantor carrying on business relating to the Sites to make any change in
the nature of their respective businesses.

 

(j)Issuance of Equity. Permit any of the Guarantors to issue shares, or any
options, warrants or securities convertible into shares, unless such securities
are held by another Obligor.

 

(k)Acquisition of Assets or Property. Permit any Obligor to acquire or own,
directly or indirectly, any assets or property, or make or own any investments
in shares, assets or other ownership interests, except in accordance with the
Initial Expense Budget (as such Initial Expense Budget may be updated from time
to time and approved by the Buyer), other than (i) any ownership interest held
as of the Initial Effective Date, (ii) in an amount less than US$100,000 in
aggregate for the Obligors taken together for the Term of this Agreement, or
(iii) with the prior written consent of the Buyer.

 

(l)Distributions. Declare, make or pay, or permit any Guarantor to declare, make
or pay, any Distributions.

 

(m)Financial Assistance. Give or permit any Guarantor to give any financial
assistance to any Person, other than inter-corporate subscriptions, purchases,
redemptions, advances, book entries or other transactions by which the Seller
provides working capital to any Guarantors.

 

(n)Lease-Backs. Enter into, or permit any Guarantors to enter into, any
arrangements, directly or indirectly, with any Person other than an Obligor,
whereby such Seller or such Guarantor, as the case may be, shall sell or
transfer any property, whether now owned or hereafter acquired, used or useful
in the carrying on of business relating to the Sites, in connection with the
rental or lease of the property so sold or transferred or of other property for
substantially the same purpose or purposes as the property so sold or
transferred.

 

(o)Hedging. Except for agreements entered into with the Buyer, enter into or
allow any Guarantors to enter into: (i) any prepaid forward arrangements in
respect of Minerals or any fixed price forward arrangements in respect of
Minerals or any embedded hedge forward arrangements in respect of Minerals; (ii)
any hedge arrangements; or (iii) any foreign exchange contracts or swap
contracts.

 

(p)Affiliates. Incorporate, acquire or have any subsidiaries other than the
Guarantors, or enter into or be part of any joint venture.

 

(q)Expenditures. Make or commit to make, or permit any Guarantors to make or
commit to make expenditures without the Buyer’s consent, other than those in
accordance with the Initial Expense Budget (as such Initial Expense Budget may
be updated from time to time and approved by the Buyer).

 

47

 

 

(r)Financial Year. Change its Financial Year other than a change to calendar
year end, provided that: (i) the Seller shall have provided ninety (90) days’
prior written notice to the Buyer; and (ii) the Seller would otherwise be able
to make the affirmations and deliver the deliverables required pursuant to this
Agreement on the dates provided herein as if such change of Financial Year had
not occurred.

 

(s)Waivers, Releases, Assignments or Abandonments. Waive, release, grant,
transfer, exercise, modify, abandon, terminate or amend, (i) any Material
Agreement (except with the prior written consent of the Buyer) or any other
existing contractual rights with respect to the Mining Concessions, (ii) any
authorization, lease, concession, contract or other document in respect of the
Material Agreements or the Mining Concessions, or (iii) any other material legal
rights or claims in respect of the Material Agreements and Mining Concessions,
except any such waiver, release, assignment or abandonment that does not cause
any Obligors to breach, disrupt, delay, alter, or compromise the performance of
their obligations under this Agreement or the other Transaction Documents or
create, or become subject to, a superseding intervening Lien, other than a
Permitted Lien, to any of the security interests evidenced by the Security
Documents.

 

(t)Organizational Documents. Change (or permit any Guarantor to change) its
organizational or constitutive documents, unless, after such change, each
Obligor continues to be bound by this Agreement.

 

(u)Mining Concessions.

 

(i)Engage in (or permit any Guarantor to engage in) any act or sign any document
that could cause, without the prior approval of the Buyer: (i) a reduction of
the surface area comprised by the Mining Concessions; or (ii) the abandonment of
the Mining Concessions.

 

(ii)Encumber, assign or promise to assign (or permit any Guarantor to encumber,
assign or promise to assign) the rights derived from the Mining Concessions,
except for Permitted Liens.

 

(iii)Enter into (or permit any Guarantor to enter into) any exploration,
exploitation, option, royalty, promise to execute an agreement, joint venture,
association, joint investment, partnership, co-ownership or other agreement
affecting in any manner the ownership, use, operation or transferability of the
Mining Concessions.

 

(iv)Grant (or permit any Guarantor to grant) any third party, other than any
contractors or third-party service providers engaged by any Obligor to enhance
or accomplish the provisions of this Agreement or any Authority, existing or
prospective investors, joint venture parties or lenders or as may otherwise be
required by law, any right of access or entry on the Mining Concessions without
the prior written consent of the Buyer, such consent not to be unreasonably
withheld or delayed.

 

(v)Fuel Surcharge. Enter into, maintain, or cause or permit any Guarantor to
enter into or maintain any contract that requires any Obligor to pay for any
additions of fuel surcharges without the prior, written consent of the Buyer not
to be unreasonably withheld.

 

48

 

 

(w)Agreements with Offtakers. Execute or enter into (or permit any Guarantor to
execute or enter into) any agreement entered into by any Obligor with an
Offtaker (other than the Mineral Sales Contract/Refining Agreement) that
includes (i) the sale of any gold-containing concentrate produced by the
Depositors to an Offtaker or (ii) the smelting, refining, or other beneficiation
of Produced Gold by an Offtaker, without the Buyer’s prior written consent.

 

(3)Security Covenants.

 

(a)So long as any Gold remains to be Delivered or amounts remain to be paid by
the Seller pursuant to this Agreement, the Seller shall:

 

(i)(A) maintain books and records pertaining to the Collateral in such detail,
form and scope as the Buyer reasonably requires; (B) immediately notify the
Buyer if any account in excess of US$100,000 arises out of contracts with any
Authority, and execute any instruments and take any steps required by the Buyer
in order that all moneys due or to become due under any such contract are
assigned to the Buyer and notice of such assignment be given to the Authority;
(C) report immediately to the Buyer any matters materially adversely affecting
the value, enforceability or collectability of the Collateral, taken as a whole;
(D) if any amount payable to any Obligor under or in connection with any account
in excess of US$100,000 is evidenced by a promissory note or other instrument,
immediately pledge, endorse, assign and deliver to the Buyer the promissory note
or instrument, as additional Collateral; and (E) notify the Buyer in writing of
any agreement under which any terms of sale or service (written or oral) that
are materially different from normal operating procedures may have been or will
be granted;

 

(ii)at least thirty (30) days prior to any of the following changes becoming
effective, notify the Buyer in writing of (A) any proposed change in the
location of (w) any place of business of any Obligor, (x) the chief executive
office or head office of any Obligor, (y) any account debtors of any Obligor,
and (z) any place where any tangible property of any Obligor is stored; and (B)
any proposed change in the name of any Obligor; and

 

(iii)perform, execute and deliver and cause any Guarantors to perform, execute
and deliver all acts, agreements and other documents as may be requested by the
Buyer at any time to register, file, signify, publish, perfect, maintain,
protect, and enforce the security interests created by the Security Documents
including, without limitation, (A) executing, recording and filing of the
Security Documents and financing or continuation statements in connection
therewith, in form and substance satisfactory to the Buyer; (B) causing any
Obligors to file and record a security interest and register such instrument
with the appropriate Authorities in favor of, and to the benefit of Buyer,
promptly after the such Obligors have executed a valid and binding extraction
concession contract, contract-law, or similar administrative concession with the
applicable Authority with regard to any future extraction rights to any mineral
exploration and/or mining rights concession granted to any Obligors, including
any further and future rights, privileges, obligations and interests that any
Obligors may acquire in the surface, mineral, and subsurface lands and other
property rights of any mineral exploration and/or mining rights concession; (C)
delivering to the Buyer the originals of all instruments, documents and chattel
property and all other Collateral of which the Buyer determines it should have
physical possession in order to perfect and protect the security interests
created by the Security Documents, duly endorsed or assigned to the Buyer;
(D) delivering to the Buyer warehouse receipts covering any portion of the
Collateral located in warehouses and for which warehouse receipts are listed;
(E) placing notations on its books of account to disclose the security interests
created by the Security Documents; (F) delivering to the Buyer all letters of
credit on which any Obligor is named as beneficiary; and (G) taking such other
steps as are deemed necessary by the Buyer to maintain the security interests
created by the Security Documents.

 

49

 

 

Section 13 Events of Default

 

(1)Events of Default in Relation to the Seller. Each of the following events
shall constitute an “Event of Default” in relation to the Seller for purposes of
this Agreement:

 

(a)Any Seller fails to Deliver or cause to be Delivered any amount of Gold as
and when required by this Agreement or any other Transaction Document and such
failure is not remedied within fifteen (15) Business Days following notification
of such failure, provided that notwithstanding the foregoing such Seller shall
have the right (i) to convert the Delivery obligation into a payment obligation
under Section 5(5), and (ii) to delay Delivery under Sections 5(6) and 5(7), in
which event the failure to Deliver shall not constitute an Event of Default
provided that such Seller complies with the provisions of Section 5;

 

(b)Any Obligor fails to pay any amount as and when due under this Agreement or
any other Transaction Document and such failure is not remedied on or before
fifteen (15) Business Days following notification of such failure;

 

(c)Subject to Section 12(2)(s), the expropriation, condemnation, annulment,
cancellation or abandonment of any Mining Concession or any Site or any part
thereof or any restriction or limitation imposed by any Authority on the
Seller’s legal right to use the Mining Concessions owned by it or any Sites for
mining and exploration activities if such imposition resulting in such
restriction or limitation has not been discharged, vacated or stayed within
thirty (30) days;

 

(d)Any representation or warranty or certification made or deemed to be made by
any Obligors or any of their respective directors or officers in any other
Transaction Document shall prove to have been incorrect when made or deemed to
be made and such breach could, in the opinion of the Calculation Agent (in its
sole discretion, acting reasonably), have an adverse effect on the ability of
the Seller to perform its obligations hereunder;

 

(e)Any one or more of the Transaction Documents is determined by a court of
competent jurisdiction not to be a legal, valid and binding obligation of any
Obligor that is a party thereto, enforceable by the Buyer against Obligor and
such Transaction Document has not been replaced by a legal, valid, binding and
enforceable document that is equivalent in effect to such Transaction Document,
assuming such Transaction Document had originally been legal, valid, binding and
enforceable, in form and substance acceptable to the Buyer, within thirty (30)
days of such determination; provided, however, that such grace period shall only
be provided if such Obligor actively cooperates with the Buyer;

 

(f)Any Obligor fails to perform, observe or comply with any term, covenant or
agreement contained in this Agreement or any other Transaction Document to which
it is a party and such failure remains unremedied for fifteen (15) Business
Days;

 

50

 

 

(g)(i) Any Obligor fails to pay the principal of, or premium or interest on any
of its Debt (excluding Debt under this Agreement) that is outstanding in an
aggregate principal amount exceeding US$100,000 (or the equivalent amount in any
other currency) when such amount becomes due and payable or capable of being due
and payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise) and such failure continues after the applicable grace
period, if any, specified in the agreement or instrument relating to the Debt;
(ii) any other event occurs or condition exists and continues after the
applicable grace period, if any, specified in any agreement or instrument
relating to any such Debt if its effect is to accelerate, or permit the
acceleration of the Debt; or (iii) any such Debt shall be declared to be due and
payable prior to its stated maturity;

 

(h)(i) Any Obligor fails to perform or observe any term, covenant or agreement
contained in any Material Agreement or Permit on its part to be performed or
observed; (ii) any Material Agreement is terminated or revoked or permitted to
lapse (other than in accordance with its terms and not as a result of default);
(iii) any party to any Material Agreement delivers a notice of termination or
revocation (other than in accordance with its terms and not as a result of
default) in respect of the Material Agreement; (iv) any Permit is terminated or
revoked or permitted to lapse; or (v) any Authority gives notice of revocation
or termination of any Permit, except any noncompliance that does not cause any
Obligors to breach, disrupt, delay, alter, or compromise the performance of
their obligations under this Agreement or the other Transaction Documents or
create, or become subject to, a superseding intervening Lien, other than a
Permitted Lien, to any of the security interests evidenced by the Security
Documents;

 

(i)Any judgment or order for the payment of money in excess of US$100,000
(or the equivalent amount in any other currency) is rendered against any Obligor
and either (i) enforcement proceedings have been commenced by a creditor upon
the judgment or order; or (ii) there is any period of fifteen (15) 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;

 

(j)A writ, execution, garnishment, attachment or similar process is issued or
levied against all or any portion of the Collateral in connection with any
judgment against any Obligor in excess of US$100,000 and such writ, execution,
garnishment, attachment or similar process is not released, bonded, satisfied,
discharged, vacated or stayed within thirty (30) days after its entry,
commencement or levy;

 

(k)Any Obligor incurs or becomes subject to any Environmental Liabilities (i)
for any one occurrence in excess of US$50,000 after application of insurance
proceeds; or (ii) aggregating in any Financial Year on a consolidated basis,
US$100,000 after application of insurance proceeds;

 

(l)The occurrence of any event prior to the Payoff Date that results in Richard
Havenstrite, as president, chief executive officer and director of the Seller,
no longer serving in his corporate officer position, except as a result of a
merger or acquisition of the Seller, his death or incapacity, his willful
misconduct, negligence, fraud, or malfeasance, or in relation to his
performance, provided that such event shall not constitute an Event of Default
if that officer position is promptly filled by the appointment of one or more
individuals who meet the requirements of the Seller’s governing corporate
legislation and all applicable stock exchange requirements and, in the good
faith determination of the board of directors of the Seller, possess appropriate
qualifications and experience;

 

51

 

 

(m)Any Obligor (i) becomes insolvent or generally not able to pay its debts as
they become due; (ii) admits in writing its inability to pay its debts generally
or makes a general assignment for the benefit of creditors; (iii) institutes or
has instituted against it any proceeding seeking (x) to adjudicate it a bankrupt
or insolvent, (y) liquidation, winding-up, reorganization, arrangement,
adjustment protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief of debtors
including any plan of compromise or arrangement or other corporate proceeding
involving or affecting its creditors, or (z) the entry of an order for relief or
the appointment of a receiver, receiver and manager, trustee, monitor, custodian
or other similar official for it or for any substantial part of its properties
and assets, and in the case of any such proceeding instituted against it (but
not instituted by it), either the proceeding remains undismissed or unstayed for
a period of thirty (30) days, or any of the actions sought in such proceeding
(including the entry of an order for relief against it or the appointment of a
receiver, interim receiver, receiver and manager, trustee, monitor, custodian or
other similar official for it or for any substantial part of its properties and
assets) occurs; or (iv) takes any corporate action to authorize any of the above
actions;

 

(n)There has occurred, in the opinion of the Buyer, an event or development that
would reasonably be expected to have a Material Adverse Effect;

 

(o)The audited consolidated (if applicable) financial statements of the Seller
are qualified in any material respect by the Seller’s independent auditors;

 

(p)The Buyer ceases to have enforceable first priority Liens on all Collateral,
subject to Permitted Liens, as provided in the Transaction Documents;

 

(q)There is a Change of Control in relation to any Obligor;

 

(r)(i) Any Material Agreement shall at any time for any reason cease to be
enforceable or cease to be valid and binding or in full force and effect or
shall be impaired (in each case, except in connection with its expiration in
accordance with its terms in the ordinary course (and not related to any default
thereunder)) and (ii) any such Material Agreement has not been replaced by a
legal, valid, binding and enforceable document that is equivalent in effect to
such Material Agreement assuming such Material Agreement had originally been
legal, valid, binding and enforceable, in form and substance acceptable to the
Buyer, within fifteen (15) Business Days of such cessation, provided, however,
that such grace period shall only be provided if the Seller actively cooperates
with the Buyer to so replace such Material Agreement;

 

(s)There is (i) a deviation from the Initial Expense Budget (as such Initial
Expense Budget may be updated from time to time and approved by the Buyer), or
(ii) a change between the Initial Annual Production Forecast and any updated
Annual Production Forecast, where such deviation or change has had or would be
expected to have a Material Adverse Effect, each determined in the sole and
absolute discretion of the Buyer; or

 

(t)A default or breach by the Seller of the terms of the Second A&R Clifton
Lease exists and is continuing.

 

52

 

 

(2)Events of Default in relation to the Buyer. The following shall be Events of
Default in relation to the Buyer for purposes of this Agreement:

 

(a)The Buyer fails to make, when due, any payment under this Agreement if such
failure is not remedied on or before fifteen (15) Business Days following
notification of such failure by the Seller;

 

(b)Any representation or warranty or certification in this Agreement, made or
deemed to be made by the Buyer, shall prove to have been incorrect when made or
deemed to be made, and such breach would, in the opinion of the Calculation
Agent (in its sole and absolute discretion, acting reasonably), have a Material
Adverse Effect on the ability of the Buyer to perform its obligations hereunder;
or

 

(c)The Buyer (i) becomes insolvent or generally not able to pay its debts as
they become due; (ii) admits in writing its inability to pay its debts generally
or makes a general assignment for the benefit of creditors; (iii) institutes or
has instituted against it by a regulator, supervisor or any similar official
with primary insolvency, rehabilitative or regulatory jurisdiction over it in
the jurisdiction of incorporation or organization or the jurisdiction of its
head or home office, any proceeding seeking (x) to adjudicate it a bankrupt or
insolvent, (y) liquidation, winding-up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors including any plan
of compromise or arrangement or other corporate proceeding involving or
affecting its creditors, or (z) the entry of an order for relief or the
appointment of a receiver, receiver and manager, trustee, monitor, custodian or
other similar official for it or for any substantial part of its properties and
assets, and in the case of any such proceeding instituted against it (but not
instituted by it), either the proceeding remains undismissed or unstayed for a
period of thirty (30) days, or any of the actions sought in such proceeding
(including the entry of an order for relief against it or the appointment of a
receiver, receiver and manager, trustee, monitor, custodian or other similar
official for it or for any substantial part of its properties and assets)
occurs; or (iv) takes any corporate action to authorize any of the above
actions.

 

Section 14 Remedies

 

(1)Following the occurrence of an Event of Default described in Section 13 of
this Agreement: the other party (the “Non-Defaulting Party”) may, by giving
written notice to the defaulting party (the “Defaulting Party”), terminate this
Agreement with immediate effect (“Early Termination Date”); provided that if
such Event of Default is the result of force majeure or an act of state, and the
Defaulting Party is unable to make any absolute or contingent payment or
Delivery under this Agreement, the Defaulting Party and the Non-Defaulting Party
shall first use their good faith efforts to reschedule the Delivery obligations
for a period of up to sixty (60) calendar days, after which time the
Non-Defaulting Party may trigger an Early Termination Date by giving written
notice to the Defaulting Party.

 

(2)If notice designating an Early Termination Date is given under Section 14(1),
the Early Termination Date will occur on the date so designated, whether or not
the relevant Event of Default is then continuing.

 

(3)Upon the designation of an Early Termination Date, no further payments or
Deliveries under Section 5(1) or Section 7 will be required to be made, but
without prejudice to the other provisions of this Agreement.

 

53

 

 

(4)If the Defaulting Party is any Obligor, (i) the Buyer may demand payment of
the Early Termination Amount in accordance with Section 5(8), (ii) the Buyer may
enforce against the Collateral, in whole or in part, (iii) the Buyer shall have
the right to fully or partially enforce the Security Documents, and (iv) any and
all enforcement actions thereof shall be made in accordance with the terms of
Applicable Laws.

 

(5)Interest on all amounts due and unpaid hereunder shall accrue, from the date
due, at the Default Interest Rate.

 

(6)Upon the occurrence of a Seller Default or Seller Event of Default, all
rights of the Seller to exercise, or refrain from exercising, voting and
economic rights and powers over the pledged shares of the Guarantors shall cease
and all such rights shall thereupon become vested in the Buyer, which shall have
the sole and exclusive right and authority to exercise such voting and economic
rights and powers, solely as such action directly impacts the obligations and
performance herein. For the avoidance of doubt, the Buyer agrees not to sell or
liquidate the assets of the Seller by use of such voting power.

 

Section 15 Indemnities and Limitations of Liability

 

(1)The Buyer shall have no responsibility or liability whatsoever in relation to
the operation or management of the Sites or the production or refining of gold
therefrom.

 

(2)The Obligors (jointly and severally) shall indemnify the Buyer and each of
its Affiliates, and each officer, director, employee or agent of any of them
(each such Person being called an “Indemnified Person”) against, and hold each
Indemnified Person harmless from any and all losses, claims, damages,
liabilities and related expenses, including the fees, charges and disbursements
of any counsel for any Indemnified Person, incurred by any Indemnified Person or
asserted against any Indemnified Person by any Person (other than the Seller)
arising out of, in connection with, or as a result of:

 

(a)the execution or delivery of this Agreement, any other Transaction Document
or any agreement or instrument contemplated hereby or thereby, the performance
or nonperformance by the Obligors hereto of their respective obligations
hereunder or thereunder or the consummation or non-consummation of the
transactions contemplated hereby or thereby;

 

(b)the use or the proposed use of the proceeds therefrom by the Seller
hereunder;

 

(c)the operation or management of the Sites or the production or refining of
gold or gold bearing ores therefrom;

 

(d)any Environmental Laws, Environmental Liabilities, Permits or any actual or
alleged presence or release of Hazardous Substances on, at, in, under or from
any property owned, occupied, managed or operated by any Obligors, any of their
respective Affiliates or any Related Parties, including the property described
in the Security Documents, or any liability under Environmental Laws related in
any way to any Obligors, any of their respective Affiliates or any Related
Party; or

 

(e)any actual or prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract, tort or any other
theory, whether brought by a third party or by any Obligors, any of their
respective Affiliates or any Related Party and regardless of whether any
Indemnified Person is a party thereto, provided that such indemnity shall not,
as to any Indemnified Person, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a court of
competent jurisdiction by final and non-appealable judgment to have resulted
from the gross negligence or willful misconduct of such Indemnified Person.

 

54

 

 

(3)The obligations of the Obligors under this Section 15 shall survive: (a) the
payment and performance of the Seller’s obligations hereunder and under the
other Transaction Documents and (b) the termination this Agreement for a period
of two (2) years from and after the termination of this Agreement.

 

Section 16 Confidentiality

 

(1)The Parties undertake that during the operation of, and after the expiration,
termination or cancellation of, this Agreement for any reason, they will keep
confidential:

 

(a)Any information that a Party (“Disclosing Party”) communicates to the other
Party (“Recipient”) and which is stated to be, or by its nature is, or is
intended to be, confidential; and

 

(b)All other information of the same confidential nature concerning the business
of a Disclosing Party that comes to the knowledge of the Recipient while it is
engaged in negotiating the terms of this Agreement or after its conclusion,
including:

 

(i)details of the Disclosing Party’s financial structures and operating results;
and

 

(ii)details of the Disclosing Party’s strategic objectives and planning.

 

(2)Each Party undertakes, subject to Section 16(3) through Section 16(6),
inclusive, not to (a) disclose any information that is to be kept confidential
in accordance with the terms of this Section 16, or (b) use such information for
its own or anyone else’s benefit, except in connection with this Agreement and
the other Transaction Documents.

 

(3)A Recipient shall be entitled to disclose any information to be kept
confidential if and to the extent only that the disclosure is:

 

(a)bona fide and necessary for the purposes of carrying out its duties under
this Agreement;

 

(b)required by any Applicable Law or Applicable Securities Laws;

 

(c)required by the rules of any competent authority or securities exchange on
which securities of the Recipient are listed; or

 

(d)required by any court of competent jurisdiction or any competent judicial,
governmental, supervisory or regulatory body.

 

(4)The obligation of confidentiality placed on the Parties in terms of this
Section 16 shall cease to apply to a Recipient in respect of any information
which:

 

(a)is or becomes generally available to the public other than by the negligence
or default of the Recipient or by the breach of this Agreement by the Recipient;

 

55

 

 

(b)the Disclosing Party confirms in writing is disclosed on a non-confidential
basis;

 

(c)has lawfully become known by, or come into the possession of, the Recipient
on a non-confidential basis from a source other than the Disclosing Party, and
to the Recipient’s knowledge, not in violation of any duty of confidentiality;
or

 

(d)is disclosed pursuant to a requirement or request by operation of law,
regulation or court order, to the extent of compliance with such requirement or
request only and not for any other purpose.

 

(5)In the event that the Recipient is required to disclose confidential
information of the Disclosing Party as contemplated by clause (3) above, the
Recipient will to the extent possible and legally permissible:

 

(a)advise the Disclosing Party thereof in writing prior to disclosure;

 

(b)take such steps to limit the disclosure to the minimum extent required to
satisfy such requirement;

 

(c)afford the Disclosing Party a reasonable opportunity to intervene in the
proceedings;

 

(d)comply with the Disclosing Party’s reasonable requests as to the manner and
terms of any such disclosure; and

 

(e)notify the Disclosing Party of the receipt of, and the form and extent of,
any such disclosure or announcement immediately after it is made.

 

(6)Notwithstanding any other provisions of this Section 16, the Buyer may
disclose any information about the Obligors, their respective Affiliates, the
Sites, this Agreement or any Transaction Document to any potential assignee,
participant hedging counterparty or insurer, subject to such Person agreeing to
adhere to the same confidentiality undertakings contained in this Section 16.

 

Section 17 Governing Law and Jurisdiction

 

(1)This Agreement is governed by the laws of the State of New York.

 

(2)Each Obligor irrevocably and unconditionally submits, for itself and its
property, to the non-exclusive jurisdiction of the Federal courts sitting in the
City of New York, in any action or proceeding arising out of or relating to this
Agreement or any other Transaction Document, or for recognition or enforcement
of any judgment and each of the Parties irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in such court. Each Party hereby irrevocably waives, to the fullest
extent it may effectively do so, the defense of inconvenient forum to the
maintenance of such action or proceeding. Each of the Parties agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement or in any other Transaction Document
shall affect any right that the Buyer may otherwise have to bring any action or
proceeding relating to this Agreement or any other Transaction Document against
the Obligors or their properties in the courts of Canada or any other
jurisdiction unless specifically permitted by the terms of such Transaction
Document. EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAWS, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.

 

56

 

 

Section 18 Notices

 

(1)Any notice or other communication (including, without limitation, any consent
or waiver by the Buyer hereunder or in connection herewith) to be given under
this Agreement or any other Transaction Document shall be in writing and shall
be sent to the below email addresses designated below, to the Party to be
served:

 

(a)the Seller:

 

Desert Hawk Gold Corp.

1290 Holcomb Ave.

Reno, NV 89502

  Attention: Rick Havenstrite, CEO   Email: rickh@odcnv.com

 

with a copy to the Seller’s legal counsel at:

 

Pearson Butler

1802 W South Jordan Parkway, Suite 200

South Jordan, UT 84095

  Attention: Ronald N. Vance, Esq.   Email: ron@pearsonbutler.com

 

(b)any Guarantor:

 

c/o Desert Hawk Gold Corp.

1290 Holcomb Ave.

Reno, NV 89502

  Attention: Rick Havenstrite, CEO   Email: rickh@odcnv.com

 

with a copy to the Seller’s legal counsel at:

 

Pearson Butler

1802 W South Jordan Parkway, Suite 200

South Jordan, UT 84095

  Attention: Ronald N. Vance, Esq.   Email: ron@pearsonbutler.com

 

57

 

 

(c)the Buyer:

 

PDK Utah Holdings LP
[***]
[***]

  Attention: [***]   Email: [***]

 

or at such other address of which such Party may have notified the other Party
in accordance with this Section 18.

 

(2)Any notice or other formal communication shall be deemed to have been given
and shall be effective:

 

(a)if sent by mail, at the time of delivery; or

 

(b)if sent by email, on the date of transmission, if transmitted before 3:00 pm
(New York time) on any Business Day, and in any other case on the Business Day
following the date of transmission.

 

(3)In proving service of a notice or other formal communication it shall be
sufficient to prove that delivery was made or that the envelope containing the
communication was properly addressed and posted either by prepaid first class
airmail (as the case may be) and that the email was properly addressed and
transmitted.

 

(4)This Section 18 shall not apply in relation to the service of any claim form,
notice, order, judgment or other document relating to or in connection with any
proceedings, suit or action arising out of or in connection with this Agreement.

 

Section 19 Costs, Expenses and Indemnity

 

(1)The Seller shall pay to the Buyer all reasonable costs and expenses
(including all reasonable legal fees and disbursements) incurred by the Buyer
for:

 

(a)the enforcement of this Agreement or any other Transaction Document or the
enforcement or preservation of rights thereunder or the bringing of any action,
suit or proceeding with respect to the enforcement of this Agreement or any
other Transaction Document or any such right or seeking any remedy that may be
available to the Buyer at law or in equity;

 

(b)any amendments, waivers or Consents requested by the Buyer pursuant to the
provisions hereof or any other Transaction Document; and

 

(c)costs and expenses incurred by the Buyer or its agents in connection with
Section 12(1)(oo).

 

58

 

 

(2)If, with respect to the Buyer: (i) any change in any law, rule, regulation,
judgment or order of general application, or any change in the interpretation or
application of such law, rule, regulation, judgment or order, occurring or
becoming effective after this date; or (ii) compliance by the Buyer with any
direction, request, or requirement (whether or not having the force of law) of
any Authority made or becoming effective after the date, has the effect of
causing any loss to the Buyer or reducing the Buyer’s rate of return by
(w) increasing the cost to the Buyer of performing its obligations under this
Agreement (including the costs of maintaining any capital, reserve or special
deposit requirements but other than a reduction resulting from a higher rate or
from a change in the calculation of income or capital tax relating to the
Buyer’s income or capital in general), (x) requiring the Buyer to maintain or
allocate any capital or additional capital or affecting its allocation of
capital in respect of its obligations under this Agreement, (y) reducing any
amount payable or required to be Delivered to the Buyer under this Agreement by
any material amount, (z) causing the Buyer to make any payment or to forego any
return on or calculated by reference to, any amount received or receivable by
the Buyer or required to be Delivered under this Agreement, then the Buyer may
give notice to the Seller specifying the nature of the event giving rise to the
loss and the Seller shall pay the amounts, on demand, as the Buyer specifies is
necessary to compensate it for any such loss. A certificate as to the amount of
any such loss submitted in good faith by the Buyer to the Seller shall be
conclusive and binding for all purposes, absent manifest error.

 

(3)The obligations of the Seller under this Section 19 shall survive the payment
and performance of the Seller’s obligations hereunder and under the other
Transaction Documents and the termination of this Agreement.

 

Section 20 Taxes and Other Taxes

 

(1)All payments and Deliveries by, or on account of any obligation of, the
Obligors under this Agreement or any other Transaction Document shall be made
free and clear of and without deduction or withholding for any and all Taxes,
unless such Taxes are required by Applicable Laws to be deducted or withheld.

 

If any Obligor shall be required by Applicable Laws to deduct or withhold any
such Taxes from or in respect of any amount payable or Delivered under this
Agreement or any other Transaction Document, (i) the amount payable or Delivered
shall be increased (and for the avoidance of doubt, in the case of interest, the
amount of interest 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 20(1)), the Buyer
receives an amount equal to the amount it would have received if no such
deduction or withholding had been made; (ii) the Obligors shall make such
deductions or withholdings; and (iii) the Obligors shall immediately pay the
full amount deducted or withheld to the relevant Authority in accordance with
Applicable Laws.

 

(2)Each Seller (or, where applicable, any Guarantor) agrees to immediately pay
when due any Other Taxes that arise from any payment or Delivery made by any
Obligor under this Agreement or any other Transaction Document or from the
execution, delivery or registration of, or otherwise with respect to this
Agreement or any other Transaction Document.

 

(3)The Obligors (jointly and severally) shall indemnify the Buyer 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 Obligors, or
any of their respective Affiliates, under this Section 20) paid by the Buyer 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, excluding Taxes imposed on the Buyer’s net income, capital
taxes or receipts and franchise taxes. Payment under this indemnification shall
be made within thirty (30) days from the date the Buyer makes written demand for
it. A certificate as to the amount of such Taxes or Other Taxes submitted in
good faith by the Buyer to the Seller shall be conclusive evidence, absent
manifest error, of the amount due from the Seller to Buyer.

 

59

 

 

(4)Each Seller (or, where applicable, any Guarantor) shall furnish to the Buyer
the original or a certified copy of a receipt evidencing payment of Taxes or
Other Taxes made by any Obligor within thirty (30) days after the date of any
payment of Taxes or Other Taxes.

 

(5)If the Buyer is, in its sole opinion, entitled to claim a refund or able to
apply for or otherwise take advantage of any tax credit, tax deduction or
similar benefit by reason of any withholding or deduction made by any Obligor in
respect of a payment made by it under this Agreement, which payment shall have
been increased pursuant to this Section 20, then the Buyer will use its
reasonable efforts to obtain the refund, credit, deduction or benefit and upon
credit or receipt of it will pay to any Obligor, the amount (if any) not
exceeding the increased amount paid by any Obligor, as equals the net after-tax
value to the Buyer of that part of the refund, credit, deduction or benefit as
it considers is allocable to such withholding or deduction having regard to all
of its dealings giving rise to similar credits, deductions or benefits in
relation to the same tax period and to the cost of obtaining the same. Nothing
contained in this Section 20 shall interfere with the right of the Buyer to
arrange its tax affairs in whatever manner it deems fit and, in particular, the
Buyer shall be under no 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 Buyer
shall not be obligated to disclose to any Obligor any information regarding its
tax affairs, tax computations or otherwise.

 

(6)The provisions of this Section 20 shall survive the termination of this
Agreement and the payment and performance of all outstanding obligations
hereunder and under any other Transaction Document.

 

Section 21 Rights of Set-Off and Suspension of Delivery Obligations

 

(1)Without limiting Buyer’s rights set forth in Section 7, upon the occurrence
and during the continuance of the Seller Event of Default, the Buyer 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 the Seller (including any amount owing from the Buyer to the
Seller pursuant to Section 7(3)), against any and all of the obligations of the
Seller under this Agreement or any other Transaction Document, irrespective of
whether or not the Buyer has made demand under this Agreement or any other
Transaction Document and although such obligations may be unmatured or
contingent. If an obligation is unascertained, the Buyer may, in good faith,
estimate the obligation and exercise its right of set-off in respect of the
estimate, subject to providing the Seller with an accounting when the obligation
is finally determined. The Buyer shall promptly notify the Seller 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
Buyer under this Section 21 are in addition to any other rights and remedies
(including all other rights of set-off) that the Buyer may have.

 

60

 

 

(2)Upon the occurrence and during the continuance of a Buyer Event of Default,
the Seller shall have the right, upon notice to the Buyer, at the Seller’s
option to suspend its obligations to Deliver Gold under this Agreement. However,
for each such month (a “Suspension Month”) of suspension:

 

(a)the Scheduled Monthly Quantity for that Suspension Month will be credited
against the Contract Quantity as if such Scheduled Monthly Quantity had been
Delivered; and

  

(b)the Seller shall deliver to Buyer two (2) Business Days following the Monthly
Delivery Pricing Date a cash payment equal to the greater of:

 

(i)Zero; and

 

(ii)The amount calculated as follows:

 

(A)the product of the Scheduled Monthly Quantity for that Suspension Month and
the Gold Price Discount;

 

minus

 

(B)the sum of (i) any unpaid amounts due and owing from the Buyer to the Seller
together with interest accrued thereon, (ii) [***].

 

(c)The Seller’s obligations to Deliver Gold under this Agreement shall
recommence as of the date the Buyer cures the Buyer’s Event of Default in full
or the Seller deliver a payment under Section 21(2)(b).

 

(d)Interest on any amounts owing from the Buyer to the Seller shall accrue and
be payable at the Default Interest Rate from the date of the Buyer Event of
Default.

 

(3)The payment obligation referred to in (b) above shall apply until the Seller
either recommence Delivery as set forth hereunder or designates an Early
Termination Date as provided in Section 14. The rights of the Seller under this
Section 21 are in addition to any other rights and remedies that the Seller may
have. Notwithstanding anything set out herein, the Seller shall be allowed to
sell the Scheduled Monthly Quantity for a Suspension Month with no restriction
whatsoever. Only during a Suspension Month the terms of Sections 1 through 7 of
Schedule E shall likewise be suspended until the Buyer cures any Event of
Default.

 

Section 22 Judgment Currency

 

(1)Payment of any judgment shall be effected in the lawful currency of the
United States.

 

(2)If, for the purposes of obtaining judgment in any court, it is necessary to
convert a sum due hereunder to any party in one currency (the “Original
Currency”) into another currency (the “Judgment 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
Buyer could purchase the Original Currency with the Judgment Currency on the
Business Day preceding that on which final judgment is paid or satisfied.

 

(3)The obligations of any party (the “Paying Party”) in respect of any sum due
by the Paying Party in the Original Currency to the other Party (the “Receiving
Party”) under any Transaction Document, shall, notwithstanding any judgment in
any Judgment Currency, be discharged only to the extent that, on the Business
Day following receipt by the Receiving Party of any sum adjudged to be so due in
such Judgment Currency, the Receiving Party may in accordance with normal
banking procedures purchase the Original Currency with the Judgment Currency.
If the amount of the Original Currency so purchased is less than the sum
originally due to the Receiving Party in the Original Currency, the Paying Party
shall agree, as a separate obligation and notwithstanding any such judgment, to
indemnify the Receiving Party against such loss and, if the amount of the
Original Currency so purchased exceeds the sum originally due to the Receiving
Party in the Original Currency, Receiving Party shall remit such excess to the
Receiving Party.

 

61

 

 

Section 23 Contract Quantity Exchange Option

 

(1)Subject to any prior consents required pursuant to Section 23(2), the Buyer
may, at its option exercisable by written notice (the “Exchange Notice”) to the
Seller, at any time prior to the final Monthly Delivery Date (the “Exchange
Deadline”), elect to reduce the Contract Quantity by up to 4,000 ounces on a pro
rata basis (elect to reduce the Contract Quantity by up to 4,000 ounces on a
monthly proportional basis) in minimum increments of 100 Ounces (valued at [***]
shares), in exchange for [***] common shares of the Seller (the “Contract
Quantity Exchange Option”).  (For greater certainty, the Contract Quantity
Exchange Option shall be exercisable, in whole or in part, and from time to time
prior to the Exchange Deadline, in increments of 100 Ounces and in exchange for
125,000 ordinary listed shares of the Seller.) Within ten (10) Business Days
after the date the Exchange Notice is given to the Seller, the Seller shall
issue the applicable common shares to the Buyer, which shares shall be duly
authorized, fully paid, non-assessable and free and clear of all liens and
encumbrances.

 

(2)[***]

 

(3)Prior to the date on which any shares are issued to the Buyer pursuant to
Section 23(1), the Buyer and the Seller shall enter into a registration rights
agreement in form and substance acceptable to the Buyer pursuant to which the
Seller shall agree, among other things:

 

(a)to file a registration statement under the Securities Act of 1933, as
amended, with the Securities and Exchange Commission registering for resale the
common shares issued to the Buyer;

 

(b)to cause such registration statement to become effective within 90 days after
the date that the common shares are initially issued to the Buyer;

 

(c)to keep such registration statement effective for a period of at least two
years, unless the Buyer could be deemed to be an affiliate of the Seller, in
which case, the registration statement shall remain effective until all common
shares have been sold by the Buyer pursuant thereto;

 

(d)to cooperate in connection with any underwritten offerings by the Buyer,
including cooperating with the underwriters and their counsel in their due
diligence efforts, making management available for diligence sessions and road
shows, entering into customary underwriting agreements, causing its independent
auditors to deliver customary comfort letters, and causing its counsel to
delivery customary opinions in connection with such offerings;

 

(e)to indemnify the Buyer, any underwriters, their respective affiliates and
each of their respective officers, directors, employees and control persons for
any losses, claims damages or liabilities arising from any untrue or alleged
untrue statement of material fact contained in any registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading; and

 

(f)to pay all fees and expenses related to such registration.

 

62

 

 

Section 24 Miscellaneous

 

(1)The Buyer may at any time or from time to time, assign or transfer (including
by way of novation, syndication or participation) any or all of its rights and
obligations under this Agreement (including in part).

 

(2)No Obligor may, without the prior written consent of the Buyer (which consent
may be withheld in the Buyer’s sole and absolute discretion), at any time assign
or transfer (including by way of novation) any of its rights or obligations
under this Agreement.

 

(3)Each of the provisions of this Agreement shall be enforceable independently
of each other provision and their validity shall not be affected if any of the
others are invalid. If any of those provisions is void but would be valid if
some part of the provision were deleted, the provision in question shall apply
with such modification as may be necessary to make it valid.

 

(4)This Agreement may be executed in any number of counterparts, all of which,
taken together, shall constitute one and the same agreement, and any Party
(including any duly authorized representative of a Party) may enter into this
Agreement by executing a counterpart. Facsimile signatures shall be valid and
binding to the same extent as the original signatures.

 

(5)This Agreement and the other Transaction Documents constitute the entire
agreement and understanding of the Parties with respect to their subject matter.

 

(6)Each of the Parties acknowledges that in entering into this Agreement it has
not relied on any oral or written representation, warranty or other assurance
(except as provided for or referred to in this Agreement) and waives all rights
and remedies that might otherwise be available to it in respect thereof, except
that nothing in this Agreement will limit or exclude any liability of a party
for fraud.

 

(7)The Calculation Agent shall have no responsibility for good faith errors or
omissions in respect of any calculations or determinations contemplated herein,
and its calculations and determinations shall, in the absence of manifest error,
be final, conclusive and binding on the Seller and the Buyer.

 

(8)Each Obligor acknowledges that the execution and performance of this
Agreement and each other Transaction Document is a commercial activity and to
the extent that the Obligor has or hereafter may acquire any immunity from any
legal action, suit or proceedings, from jurisdiction of any court or from set
off or any legal process (whether through service or notice, attachment prior to
judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise) with respect to itself or any of its property or assets, whether or
not held for its own account, each Obligor hereby irrevocably and
unconditionally waives and agrees not to plead or claim such immunity in respect
of the Obligations to the extent permitted by the Applicable Laws and, without
limiting the generality of the foregoing, the waivers set forth in this
paragraph shall have effect to the fullest extent permitted under the Sovereign
Immunities Act and are intended to be irrevocable for purposes of such Act.

 

(9)A waiver (whether express or implied) by any Party of any of the provisions
of this Agreement or of any other Transaction Document or of any breach of or
default by the other Party in performing any of those provisions shall not
constitute a continuing waiver and that waiver shall not prevent the waiving
Party from subsequently enforcing any of the provisions of this Agreement not
waived or from acting on any subsequent breach of or default by the other Party
under any of the provisions of this Agreement.

 

63

 

 

(10)Delay in exercising or non-exercise of any right of a Party under this
Agreement is not a waiver of that right.

 

(11)Nothing in this Agreement shall be deemed to constitute a partnership or
joint venture between the Parties nor constitute any Party to be the agent of
any other Party for any purpose.

 

(12)The Obligors, and each of their respective Affiliates, shall, upon request,
at their own expense, at all times from the date of this Agreement, do or
procure the doing of all things as may be required to give full effect to this
Agreement, including the execution of all deeds and documents.

 

(13)Any variation of this Agreement shall not be binding on the Parties unless
set out in writing and signed by authorized representatives of each of the
Parties.

 

(14)The Parties represent that each is a “forward contract merchant” and that
this Agreement is a “forward contract” as such terms are defined in the
Bankruptcy Law.

 

(15)The Buyer and the Seller shall jointly plan and coordinate any public
notices, press releases, and any other publicity concerning the transactions
contemplated by this Agreement or any Transaction Document and, subject to the
obligation of the Seller to comply with the policies of any stock exchange on
which the common shares of the Seller are then listed and Applicable Securities
Laws, no Party shall act in this regard without the prior approval of the other,
such approval not to be unreasonably withheld or delayed.

 

(16)For the purposes of the Interest Act (Canada) and disclosure thereunder,
whenever any interest or any payment to be paid hereunder or in connection
herewith by is to be calculated on the basis of a 360-day or 365-day year, the
yearly rate of interest to which the rate used in such calculation is equivalent
is the rate so used multiplied by the actual number of days in the calendar year
in which the same is to be ascertained and divided by 360 or 365, as applicable.
The rates of interest under this Agreement are nominal rates, and not effective
rates or yields. The principle of deemed reinvestment of interest does not apply
to any interest calculation under this Agreement.

 

[Signature pages follow]

 

64

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
written above.

 

  DESERT HAWK GOLD CORP.,       as the Seller         By:  /s/ Rick Havenstrite
    Name: Rick Havenstrite     Title: CEO

 

S-1

 

 

  PDK UTAH HOLDINGS LP,       as the Buyer         By: /s/ [***]     Name: [***]
    Title: Authorized Signatory

 

S-2

 

 

SCHEDULES

 

Schedule A — Sites

 

Schedule B — Initial Annual Production Forecast

 

Schedule C — Existing Seller Debt to be Extinguished

 

Schedule D — Material Agreements

 

Schedule E — Required Terms of Mineral Sales Contract/Refining Agreement

 

Schedule F — Mining Concessions

 

Schedule G — Form of Capital Expenditure Report

 

Schedule H — Permits

 

Schedule I — Ownership Structure and Equity of the Obligors

 

Schedule J — Insurance Policies

 

Schedule K — Liens

 

Schedule L — Litigation and Administrative Proceedings

 

Schedule M — Security Documents

 

Schedule N — Initial Expense Budget

 

Schedule O — Delivery Schedule

 

EXHIBITS

 

Exhibit A — Form of Guarantor Joinder Agreement

 

Exhibit B — Form of Compliance Certificate