EXHIBIT 10.5
 
Execution Version

GUARANTEE
 
This GUARANTEE (as amended, modified, supplemented, extended or restated, the
“Guarantee”), dated as of March 20, 2012, is made by Borealis Mining Company, a
company organized and existing under the laws of Nevada  (the “Guarantor”) in
favor and for the benefit of WATERTON GLOBAL VALUE, L.P. (the “Beneficiary”).
 
Recitals
 
A. Pursuant to that certain Bridge Loan Agreement of even date herewith (as
amended, modified, supplemented, extended or restated from time to time, the
“Agreement”), by and among Gryphon Gold Corporation, a Nevada corporation (the
“Borrower”), the Guarantor, those other Guarantors from time to time party
thereto and the Beneficiary, the Beneficiary has agreed to make a loan to the
Borrower (the “Loan”) to be used by the Borrower to repay existing debt and
further develop its Borealis Property (the “Project”).  Unless otherwise defined
herein, capitalized terms used in this Guarantee have the meanings assigned to
such terms in the Agreement.
 
B. The Borrower, the Guarantor and the Beneficiary have entered into a Gold and
Silver Supply Agreement  of even date herewith (the “Gold and Silver Supply
Agreement”), whereby the Sellers (as defined in the Gold and Silver Supply
Agreement) have agreed to sell gold and silver to the Beneficiary at the price,
and subject to the terms and conditions, stated therein.  The obligation of the
Sellers to sell gold and silver to Beneficiary pursuant to the Gold and Silver
Supply Agreement is independent of the Agreement, and shall remain in effect for
the term set forth in such Gold and Silver Supply Agreement.
 
C. It is a condition precedent to the Beneficiary’s obligation to enter into and
maintain the Loan under the Agreement that the Guarantor shall have executed and
delivered this Guarantee and that this Guarantee shall be in full force and
effect.
 
D. This Guarantee is given by the Guarantor to and in favor of the Beneficiary
to guarantee the due and punctual payment and performance of all the obligations
of the Borrower to the Beneficiary arising under the Agreement, the Loan
Documents and the Gold and Silver Supply Agreement.
 
E. The Guarantor is a wholly-owned subsidiary of the Borrower, and the Guarantor
will derive substantial direct and indirect benefit from the amounts made
available under the Agreement and from such financial and other support as the
Borrower may in the future provide to the Guarantor.  The Borrower and the
Guarantor are engaged in related businesses and integrated to such an extent
that the financial strength and flexibility of the Borrower has a direct,
tangible and immediate impact on the success of the Guarantor, and the Guarantor
will derive other significant benefit from the Agreement and the Loan made to
the Borrower thereunder.
 
F. In order to induce the Beneficiary to enter into the Gold and Silver Supply
Agreement, the Agreement and to make and maintain the Loan with the Borrower,
and as a condition thereto, the Guarantor is willing and has agreed to enter
into this Guarantee.
 
 
 
 

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Agreement
 
NOW, THEREFORE, in consideration of the foregoing premises and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Guarantor hereby agrees as follows:
 
1.  Guarantee.
 
(a) The Guarantor hereby:
 
(i) guarantees, absolutely, unconditionally and irrevocably, the full prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration, on demand or otherwise) and at all times thereafter of all present
and future obligations, conditions, covenants, liabilities and indebtedness of
all kinds of the Borrower under or related to the Gold and Silver Supply
Agreement, the Agreement or any other Loan Document, whether present or future,
absolute or contingent, liquidated or unliquidated, as principal or as surety,
alone or with others, of whatsoever nature or kind, whether for the payment of
money or the performance of obligations, in any currency, arising out of, under,
in respect of or in connection with the Agreement and each other Loan Document
and howsoever and whensoever otherwise created or characterized (extending to
all principal amounts, interest, fees, costs, late charges, prepayment fees,
early termination fees, sums and amounts as well as all costs and expenses of
collection), whether or not now contemplated, as the Gold and Silver Supply
Agreement, the Agreement or any other Loan Document may be amended, modified,
supplemented, restated or extended in accordance with their respective terms
(collectively, the “Obligations”), and
 
(ii) agrees to pay any and all expenses (including reasonable attorneys’ fees
and disbursements) which may be paid or incurred by the Beneficiary in enforcing
any rights with respect to, or collecting, any or all of the Obligations of the
Borrower and/or enforcing any rights with respect to, or collecting against the
Guarantor under this Guarantee (collectively, the Obligations described in
Section 1(a)(i) and in this Section 1(a)(ii) are referred to herein as the
“Guaranteed Obligations”).
 
(b) The Guarantor agrees that this Guarantee constitutes a guarantee of payment
and not of collection, and the Beneficiary shall not be obligated to initiate,
pursue or exhaust any form of remedy or recourse or to obtain any judgment
against any Borrower or others (including other guarantors) or to realize upon
or exhaust any collateral security held by or available to the Beneficiary
before being entitled to payment from the Guarantor.  The liability of the
Guarantor shall not be limited, diminished or affected by:
 
(i) any failure by the Beneficiary to file or enforce any claim against the
assets or estate (in administration, bankruptcy or otherwise) of the Borrower or
others,
 
(ii) the fact that recovery from the Borrower or any other person is barred by
any statute of limitations or for any other reason,
 
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(iii) any amendment, modification, supplement, increase, extension, restatement,
replacement or change of any kind or nature to the Gold and Silver Supply
Agreement, the Agreement or any other Loan Document, with or without notice
thereof to the Guarantor,
 
(iv) any adjustment, indulgence, forbearance or compromise granted by the
Beneficiary to the Borrower or any Guarantor, or
 
(v)   any other circumstance which might otherwise constitute a legal or
equitable discharge of a guarantor or surety.
 
The Guarantor hereby renounces all benefits of marshaling, discussion and
division and waives diligence, presentment, protest, notice of dishonor or
protest or default, demand for payment upon the Borrower, the Guarantor or any
other Person, notice of acceptance of this Guarantee, notice of any addition to
or increase or decrease in the Obligations and all other notices and demands
whatsoever.  The Guarantor waives all other acts or omissions to act or delay of
any kind by the Beneficiary or any other Person or any other circumstance
whatsoever that might, but for the provisions of this paragraph, constitute a
legal or equitable discharge of the obligations of a guarantor, and the
Guarantor waives all other defenses available to a guarantor or surety, whether
at law or in equity (including, without limitation, to the extent permitted
pursuant to section 40.495 of the Nevada Revised Statutes, the Guarantor waives
the provisions of section 40.430 of the Nevada Revised Statutes), in each case,
other than discharge by irrevocable payment in full of the Guaranteed
Obligations.  All amounts payable by the Guarantor shall be paid without set-off
or counterclaim and without deduction or withholding of any kind whatsoever.
 
(c) This Guarantee is a continuing guarantee, and it will not be discharged
until irrevocable payment in full of all of the Guaranteed Obligations and
cancellation of this Guarantee by the Beneficiary (“Termination”) and will
remain in full force and effect notwithstanding any interruption in the business
relations between the Borrower and the Beneficiary or any increase or decrease
from time to time in the amount of the Obligations.  No payment or payments made
by any other Person other than the Borrower or a Guarantor in payment of the
Guaranteed Obligations shall be deemed to modify, reduce, release or otherwise
affect the liability or obligations of the Guarantor hereunder until
Termination.
 
(d) Without limiting the generality of the foregoing, the Guarantor’s liability
shall extend to all amounts that constitute part of the Obligations and would be
owed by the Borrower or any other guarantor to the Beneficiary under or in
respect of the Loan Documents but for the fact that they are unenforceable or
not allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving the Borrower or any other guarantor.
 
2.  Limitation of Liability.
 
(a) Notwithstanding anything contained herein to the contrary, the Guaranteed
Obligations of the Guarantor hereunder at any time shall be limited to the
maximum amount as will result in the Guaranteed Obligations of the Guarantor
under this Guarantee not constituting a fraudulent transfer or conveyance for
purposes of any debtor relief law to the extent applicable to this Guarantee and
the Guaranteed Obligations of the Guarantor hereunder.
 
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(b) If any payment shall be required to be made to the Beneficiary under this
Guarantee, the Guarantor hereby unconditionally and irrevocably agrees it will
contribute, to the maximum extent permitted by law, such amounts to the Borrower
and any other guarantor so as to maximize the aggregate amount paid to the
Beneficiary under or in connection with the Loan Documents.
 
3.  Guarantee Absolute and Unconditional; No Waiver of Obligations.  The
Guarantor guarantees that the Guaranteed Obligations will be paid strictly in
accordance with the terms of the Loan Documents, regardless of any law,
regulation or order of any Governmental Authority now or hereafter in
effect.  The Guaranteed Obligations of the Guarantor hereunder are independent
of the Obligations of the Borrower or any other guarantor under any Loan
Document.  A separate action may be brought against the Guarantor to enforce
this Guarantee, whether or not any action is brought against the Borrower or any
other guarantor or whether or not the Borrower or any other guarantor is joined
in any such action. The liability of the Guarantor hereunder is irrevocable,
continuing, absolute and unconditional and the Guaranteed Obligations of the
Guarantor hereunder shall not be discharged or impaired or otherwise effected
by, and the Guarantor hereby irrevocably waives any defenses to enforcement it
may have (now or in the future) by reason of:
 
(a) any illegality or lack of validity or enforceability of any Guaranteed
Obligation or any Loan Document or any related agreement or instrument;
 
(b) any change in the time, place or manner of payment of, or in any other term
of, the Guaranteed Obligations or any other obligation of the Borrower or any
other guarantor under any Loan Document;
 
(c) any taking, exchange, substitution, release, impairment or non-perfection of
any collateral, or any taking, release, impairment, amendment, waiver or other
modification of any guaranty, for the Guaranteed Obligations;
 
(d) any manner of sale, disposition or application of proceeds of any collateral
or other assets to all or part of the Guaranteed Obligations;
 
(e) any default, failure or delay, willful or otherwise, in the performance of
the Guaranteed Obligations;
 
(f) any change, restructuring or termination of the corporate structure,
ownership or existence of any Credit Party or any of its Subsidiaries or any
insolvency, bankruptcy, reorganization or other similar proceeding affecting the
Borrower or its assets or any resulting release or discharge of any Obligation;
 
(g) the failure of the Beneficiary to assert any claim or demand or to exercise
or enforce any right or remedy under the provisions of any Loan Document or
otherwise;
 
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(h) any defense, set-off or counterclaim (other than a defense of payment or
performance) that may at any time be available to, or be asserted by, the
Borrower against the Beneficiary; or
 
(i) any other circumstance (including, without limitation, any statute of
limitations) or manner of administering the Loans or any existence of or
reliance on any representation by the Beneficiary that might vary the risk of
the Guarantor or otherwise operate as a defense available to, or a legal or
equitable discharge of, any Credit Party or any other guarantor or surety.
 
4.  Beneficiary’s Rights.  The Guarantor authorizes the Beneficiary, without
notice or demand and without affecting the Guarantor’s liability hereunder, to
take and hold security from any other Person for the payment of this Guarantee
and/or any of the Guaranteed Obligations, and exchange, enforce, waive and
release any such security; to apply such security and direct the order or manner
of sale thereof, as the Beneficiary, in its sole discretion, may determine; and
to obtain a guarantee of the Guaranteed Obligations from any one or more Persons
and at any time or times to enforce, waive, rearrange, modify, limit or release
any of such other Persons from their obligations under such guaranties.
 
5.  Effectiveness; Reinstatement.  This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Guaranteed Obligations is rescinded or must
otherwise be restored or returned by the Beneficiary upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Borrower, or upon
or as a result of the appointment of a receiver, intervenor or conservator of,
or trustee or similar officer for, the Borrower or any substantial part of its
property, or otherwise, all as though such payments had not been made.  The
Beneficiary and the Borrower may increase, modify, rearrange, extend for any
period and/or renew from time to time the Obligations without notice to the
Guarantor, and in such event the obligations of the Guarantor with respect to
the Obligations shall not be released, discharged or reduced and the Guarantor
will remain fully bound hereunder on such Obligations.  This Guarantee may be
enforced by the Beneficiary and any subsequent holder of the Guaranteed
Obligations, to the extent that any such subsequent holder obtained its interest
therein in accordance with the Agreement or the Gold and Silver Supply
Agreement, and shall not be discharged by the assignment or negotiation of all
or a part of the Guaranteed Obligations.
 
6.  Default.  If the Borrower has failed to pay or perform when due its
Obligations or if an Event of Default (however defined) under the Gold and
Silver Supply Agreement, the Agreement or any other Loan Document has occurred,
then all of the Guaranteed Obligations shall be immediately due and payable by
the Guarantor, regardless of whether the payment of the Guaranteed Obligations
has been accelerated or the Borrower is in default with respect to the
Guaranteed Obligations.
 
7.  Merger.  This Guarantee shall not be affected by any change in the name of
the Borrower or the Guarantor, or by the acquisition of the Borrower’s or
Guarantor’s business by any person, firm or corporation, or by any change
whatsoever in the objects, capital structure or constitution of the Borrower or
Guarantor, or by any merger, amalgamation or consolidation of the Borrower or
Guarantor with any corporation or other Person, or by any dissolution or
 
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liquidation of the Borrower or Guarantor, but shall, notwithstanding the
happening of any such event, continue to apply to all the Obligations whether
theretofore or thereafter incurred, and in this instrument the word “Borrower”
and the word “Guarantor” shall each include every such person, firm, partner and
corporation and all successors.  Nothing in this Section 5 shall be construed as
authorization or approval of any such transaction except as permitted by and in
accordance with the Agreement.  The Guarantor shall promptly notify the
Beneficiary of any change or event described in this Section 5.
 
8.  No Waiver by the Beneficiary.  The Beneficiary shall not be obligated to
exercise any right, power or privilege hereunder, and no failure to exercise and
no delay in exercising, on the part of the Beneficiary, any such right, power or
privilege shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.  No notice to or demand on the Guarantor
shall be deemed to be a waiver of the right of the Beneficiary to take further
action without notice or demand as provided herein.  No waiver shall be
applicable except in the specific instance and for the specific purpose for
which given, nor in any event shall any amendment, modification or waiver of any
provision of this Guarantee be effective unless in writing and signed on behalf
of the Beneficiary.
 
9.  Waiver of Subrogation.  The Guarantor hereby agrees to waive its rights to
be subrogated to any claims of the Beneficiary against the Borrower until the
Guaranteed Obligations have been indefeasibly and irrevocably paid in full.
 
10.  Representations and Warranties of Guarantor.  In addition to the
representations and warranties in the Gold and Silver Supply Agreement, the
Agreement and each of the Loan Documents, each of which is incorporated herein
by reference as fully as if set forth herein, the Guarantor represents and
warrants (which representations and warranties will survive the creation of the
Guaranteed Obligations and any extension of the term under the Agreement) that:
 
(a) Benefit to Guarantor.  The guarantee by the Guarantor pursuant to this
Guarantee reasonably may be expected to benefit, directly or indirectly, the
Guarantor;
 
(b) Familiarity and Reliance.  The Guarantor has independently reviewed the
books and records regarding the financial condition of the Borrower and is
familiar with the value of any and all collateral intended to be created as
security for the Guaranteed Obligations.  Notwithstanding the foregoing, the
Guarantor is not relying on such financial condition or the collateral as an
inducement to enter into this Guarantee;
 
(c) No Representation.  Neither the Beneficiary nor any other Person has made
any representation, warranty or statement to the Guarantor with regard to the
Borrower or the Borrower’s financial condition in order to induce the Guarantor
to execute this Guarantee; and
 
(d) Guarantor’s Financial Condition.  As of the date hereof and after giving
effect to this Guarantee and the contingent liability evidenced hereby, the
Guarantor is and will be solvent, and has assets which, fairly valued, exceed
its obligations, liabilities and debts.
 
(e) Recitals.  The Recitals set forth above are true and correct in all respects
 
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11.  Guarantor’s Covenants.  The Guarantor hereby confirms, and shall perform,
each of the covenants relating to the Guarantor set forth in the Agreement, the
Gold and Silver Supply Agreement and each Loan Document to which it is a party
or by which it is bound. The Guarantor may not assign this Guarantee without the
prior written consent of the Beneficiary, which may be withheld in the
Beneficiary’s sole discretion.
 
12.  Notices.  All notices, demands, and other communications to be given or
delivered under or by reason of the provisions of this Guarantee will be in
writing and will be deemed to have been given (i) when delivered if personally
delivered by hand (with written confirmation of receipt), (ii) when received if
sent by a nationally recognized overnight courier service (receipt requested),
(iii) five (5) Business Days after being mailed, if sent by first class mail,
return receipt requested, or (iv) when receipt is acknowledged by an affirmative
act of the Party receiving notice, if sent by facsimile, telecopy, electronic
mail or other electronic transmission device (provided that such an
acknowledgement does not include an acknowledgment generated automatically by a
facsimile or telecopy machine or other electronic transmission
device).  Notices, demands, and communications to the parties will, unless
another address is specified in writing, be sent to the address indicated below:
 
If to Guarantor:
 
Borealis Mining Company
611 N Nevada Street
Carson City, Nevada 89703
USA
Attn:  Lisanna Lewis
Facsimile:  (604) 608-3262
 
If to Beneficiary:
 
Waterton Global Value, L.P.
Folio House, Road Town, Tortola, VG1110
British Virgin Islands
Attn:  Peter Poole
Facsimile:  (284) 494-8356/7422

13.  Successors and Assigns.  This Guarantee shall extend to and inure to the
benefit of the Beneficiary and its successors and assigns, in accordance with
the terms of the Gold and Silver Supply Agreement and the Agreement, and every
reference herein to a Guarantor is a reference to, and shall be construed as
including, each Guarantor and the successors and assigns of such Guarantor, to
and upon all of whom this Guarantee and agreement shall extend and be binding.
 
14.  Further Assurances.  The Guarantor agrees to execute and deliver to the
Beneficiary all such certificates, documents and Instruments and to take all
such other action as may be reasonably requested by the Beneficiary to more
fully vest in and assure the Beneficiary of all of the rights, powers,
privileges and remedies herein intended to be granted to or conferred upon the
Beneficiary.
 
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15.  GOVERNING LAW.  THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA, NOT INCLUDING THE CONFLICTS OF
LAW AND CHOICE OF LAW PROVISIONS THEREOF.
 
16.  WAIVER OF JURY TRIAL.  THE GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
GUARANTEE, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF THE BENEFICIARY OR THE GUARANTOR.  THE
GUARANTOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN
DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PARTIES ENTERING INTO THE AGREEMENT AND EACH OTHER LOAN
DOCUMENT (AS DEFINED IN THE AGREEMENT).
 
17.  Benefit to the Guarantor.  The Borrower and the Guarantor are engaged in
related businesses and integrated to such an extent that the financial strength
and flexibility of the Borrower has a direct, tangible and immediate impact on
the success of the Guarantor.  The Guarantor will derive substantial direct and
indirect benefit from the extension of credit to the Borrower under the
Agreement.  The Guarantor hereby waives any right to revoke this Guarantee, and
acknowledges that this Guarantee is continuing in nature and applies to all
Guaranteed Obligations, whether existing now or in the future.  The Guarantor
knowingly waives certain rights and defenses as set forth in this Agreement in
contemplation of the benefits that it will receive.
 
18.  Indemnification.  The Guarantor agrees to pay, indemnify, save and hold
harmless, and defend, the Beneficiary, its successors and assigns, and each of
its respective directors, officers, partners, managers, members, shareholders,
owners, employees, affiliates, representatives and advisors from and against any
and all claims, damages, losses, penalties, liabilities, judgments, suits,
proceedings, taxes, costs and expenses (including, without limitation, fees and
disbursements of counsel) which may at any time (including, without limitation,
at any time following the payment of the Obligations or any Loan Document) be
imposed on, incurred by or asserted against any such indemnified person, in any
way relating to, in connection with or arising out of this Guarantee, the
Agreement, any other Loan Document and the transactions contemplated hereby and
thereby and any claim, investigation, subpoena, litigation, proceeding or
otherwise related to or arising out of this Guarantee or any other Loan Document
or any transaction contemplated hereby or thereby (but in any case excluding any
such claims, damages, losses, liabilities, costs or expenses incurred by reason
of the gross negligence or willful misconduct of any indemnitee).  The
indemnification obligations of the Guarantor under this paragraph shall survive
the payment in full of the Gold and Silver Supply Agreement, the Agreement and
the other Loan Documents and the termination and release of this Guarantee.
 
19.  Right of Set-off.  Upon the occurrence and during the continuance of any
Event of Default, the Beneficiary is hereby authorized at any time and from time
to time, without notice to
 
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the Guarantor, the Borrower, any Other Guarantor or any Additional Guarantor
(any such notice being expressly waived by the Guarantor and the other Credit
Parties), 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 the Beneficiary to or for the credit or the account of any Credit
Party against any and all of the Obligations of any Credit Party now or
hereafter existing, although such Obligations may be contingent and
unmatured.  The Beneficiary agrees promptly to notify the Guarantor and the
appropriate Credit Party after any such set-off and application, provided that
the failure to give such notice shall not affect the validity of such set-off
and application.  The rights of the Beneficiary under this Section 17 are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Beneficiary may have.
 
20.  Amendments.  Except as otherwise expressly provided in this Guarantee, no
amendment or waiver of any provision of this Guarantee, nor consent to any
departure by the Guarantor therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Beneficiary, and, in the case of any
amendment, by the Guarantor and the Beneficiary and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
 
21.  Entire Agreement.  This written Guarantee represents the final agreement by
the undersigned with respect to the matters set forth herein and may not be
contradicted by evidence of prior, contemporaneous or subsequent oral agreements
by the undersigned.  There are no unwritten oral agreements relating to this
Guarantee or the matters set forth herein.
 
22.  Facsimile and Electronic Signature.  This Guarantee may be validly executed
and delivered by facsimile, portable document format (.pdf) or other electronic
transmission, and a signature by facsimile, portable document format (.pdf) or
other electronic transmission shall be as effective and binding as an original
signature.
 

 
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IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be duly
executed and delivered by its duly authorized officer as of the date first above
written.
 
 

 
BOREALIS MINING COMPANY
      By:  ___________________________________       Name:       Title: 

 
 
 
 
 
 
 
 
 

[Signature Page to Guarantee]
 
 

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