Exhibit 10.46

 

SECURITY AGREEMENT

 

This SECURITY AGREEMENT (as amended, modified or otherwise supplemented from
time to time, this “Agreement”), dated and effective as of August 7, 2017 made
by Desert Hawk Gold Corp., a Nevada corporation (“Debtor”), in favor of
Ibearhouse, LLC and West C Street, LLC (the “Secured Parties”).

 

RECITALS

 

A. The Secured Parties have agreed to make available to Debtor a loan in the
aggregate principal amount of up to Five Hundred Thousand Dollars ($500,000)
(the “Loan”) pursuant to the terms and conditions of that certain Note Purchase
Agreement, of even date herewith, by and between the Secured Parties and Debtor
(the “Purchase Agreement”), as evidenced by that certain Senior Secured
Convertible Promissory Note, of even date herewith, in the aggregate principal
amount of the Loan (the “Note”), issued as a part of a series of Secured
Convertible Promissory Notes by Debtor in favor of Secured Parties (collectively
the “Notes” and, together with the Purchase Agreement and this Agreement,
collectively, the “Loan Documents”).

 

B. As a condition to making the Loan to Debtor, the Secured Parties requires
that it be granted, and Debtor has agreed to grant to Secured Parties, on a pari
passu basis based on the outstanding amount of the Obligation, a senior security
interest in the property described in Exhibit A (of which property the Secured
Parties already have a secured interest) attached hereto of the Debtor, whether
now existing or hereafter from time to time acquired (collectively, the
“Collateral”), which senior security interest is senior to certain Senior
Security Interests (as defined below).

 

NOW, THEREFORE, in order to induce the Secured Parties to make the Loan to
Debtor, and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, Debtor hereby represents, warrants, covenants,
grants and agrees as follows:

 

AGREEMENT

 

1. Incorporation of Recitals; Capitalized Terms. The recitals set forth
hereinabove are incorporated herein by this reference. All capitalized terms not
otherwise defined herein have the meanings ascribed to them in the Purchase
Agreement. Unless otherwise defined herein, all terms defined in the Uniform
Commercial Code (the “UCC”) have the respective meanings given to those terms in
the UCC.

 

2. Definitions.

 

(a) “Collateral” has the meaning given to that term in the Recital B hereof.

 

(b) “Lien” means any mortgage, deed of trust, lien, pledge, and security
interest or other charge or encumbrance, of any kind whatsoever, including but
not limited to the interest of the lessor or titleholder under any capitalized
lease, title retention contract or similar agreement.

 

(c) “Obligation” means the outstanding amount of the Loan plus all accrued
unpaid interest thereon. “Obligation” also includes amounts owing under the
Amended and Restated 15% Convertible Promissory Note dated July 14, 2010, as
amended, issued by the Debtor to each of the Secured Parties and the 10% Secured
Convertible Promissory Note dated October 14, 2016 issued by the Debtor to each
of the Secured Parties. Finally, “Obligation” includes any amounts owing
pursuant to shares purchased by each of the Secured Parties which are redeemable
with gold proceeds.

 

 

 

 

(d) “UCC” means the Uniform Commercial Code as in effect in the State of Nevada
from time to time.

 

(e) “Senior Security Interests” means the existing senior secured debt of the
Debtor as of the date hereof, which includes any amounts of indebtedness by
Debtor to Platinum Partners Credit Opportunities Master Fund, LP, a Delaware
limited partnership (“PPCO”) outstanding as of the date hereof or that may
accrue hereafter.

 

3. Security Interest.

 

(a) Debtor hereby grants to the Secured Parties, on a pari passu basis based on
the Obligation, a senior security interest (subject to subordination of the
Senior Security Interests): (a) in all of the Collateral, whether now owned or
hereafter acquired, wherever located, whether or not such Collateral is or has
been purchased, financed or otherwise acquired by the use of the Loan proceeds,
whether such Collateral is related to the business conducted by Debtor under any
fictitious business name referred to herein or under any other name, and whether
or not the creation of a security interest therein is subject to the UCC or the
Uniform Commercial Code as in effect in any other jurisdiction; and (b) in all
proceeds and products thereof.

 

(b) Debtor hereby authorizes the Secured Parties to file appropriate UCC or
other financing statements, all continuation, amendments and modification
filings related thereto and any other filings or recordings the Secured Parties
deem necessary or appropriate with respect to the Collateral and the Secured
Parties’ interest therein. The Secured Parties may, in their discretion,
describe the Collateral as “all assets” or “all personal property.”

 

(c) The security interest granted to the Secured Parties hereunder shall secure
the Obligation.

 

4. Debtor’s Representations, Warranties, Covenants and Agreements. Debtor hereby
represent and warrants to the Secured Parties, and covenants and agrees, that:

 

(a) Debtor is the owner of (or, in the case of after-acquired Collateral, at the
time Debtor acquires rights in the Collateral, will be the owner thereof) and
that no other Person has (or, in the case of after-acquired Collateral, at the
time Debtor acquires rights therein, will have) any right, title, claim or
interest (by way of Lien or otherwise) in, against or to the Collateral that is
senior to the interest granted to the Secured Parties.

 

(b) Upon the filing of UCC-l financing statements in the appropriate filing
offices, the Secured Parties have (or in the case of after-acquired Collateral,
at the time Debtor acquires rights therein, will have), on a pari passu basis
based on the Obligation, a perfected security interest in the Collateral to the
extent that a security interest in the Collateral can be perfected by such
filing.

 

(c) This Agreement (i) has been duly authorized by all necessary corporate
action of Debtor, (ii) has been duly executed by Debtor, and (iii) constitutes
the legal, valid and binding obligation of Debtor, enforceable against Debtor in
accordance with its terms.

 

(d) Debtor’s place of business is located at 1290 Holcomb Ave, Reno, NV 89502.
Debtor’s true legal name is as set forth in the preamble to this Agreement.
Debtor does not do business under any trade name or fictitious business name and
have never used any other trade name or fictitious business name. Debtor will
notify the Secured Parties, in writing, at least thirty (30) days prior to any
change in its place of business or jurisdiction of formation or the adoption or
change of its legal name, any trade name or fictitious business name, and will
upon request of the Secured Parties, execute or authenticate any additional
financing statements or other certificates or records necessary to reflect any
change in its place of business or jurisdiction of formation or the adoption or
change in its legal name, trade names or fictitious business name.

 

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5. Protection of Collateral by Debtor.

 

(a) Debtor will not, without the prior written consent of the Secured Parties,
sell, transfer or dispose of any Collateral except for in the ordinary course of
Debtor’s business. Debtor shall keep the Collateral free from any and all liens,
except by PPCO (whose interest shall be subordinated). Debtor shall, at its own
expense, appear in and defend any and all actions and proceedings which purport
to affect title to the Collateral, or any part thereof, or which purport to
affect the security interest of the Secured Parties therein under this
Agreement.

 

(b) Debtor will keep the Collateral current, collected and/or in good condition
and repair, and will not misuse, abuse, allow to deteriorate, waste or destroy
the Collateral or any part thereof, except for ordinary wear and tear resulting
from its normal and expected use in Debtor’s business and will not use or permit
any Collateral to be used in violation in any material respect of any applicable
law, rule or regulation, or in violation of any policy of insurance covering the
Collateral. The Secured Parties may examine and inspect the Collateral at any
reasonable time, wherever located. Debtor shall perform, observe, and comply in
all material respects with all of the material terms and provisions to be
performed, observed or complied with by it under each contract, agreement or
obligation relating to the Collateral.

 

(c) Debtor, in a timely manner, will execute or otherwise authenticate, or
obtain, any document or other record, give any notices, do all other acts, and
pay all costs associated with the foregoing, that the Secured Parties determine
is reasonably necessary to protect the Collateral against rights, claims or
interests of third parties, or otherwise to preserve the Collateral as security
hereunder.

 

(d) Debtor shall immediately notify the Secured Parties of any claim against the
Collateral adverse to the interest of Secured Parties therein.

 

(e) Debtor shall, at its own expense, maintain insurance with respect to the
Collateral in such amounts, against such risks, in such form and with such
insurers, as is commonly maintained by prudent persons engaged in businesses
similar to the business engaged in by Debtor. Each policy of liability insurance
shall provide for all losses to be paid on behalf of the Secured Parties, Debtor
as its respective interests may appear; and each policy of property damage
insurance shall provide for all losses to be paid directly to the Secured
Parties. Each such policy shall name the Secured Parties as an insured party
thereunder (without any representation or warranty by or obligation upon the
Secured Parties) as its interest may appear.

 

(f) Debtor shall promptly pay when due all taxes and other governmental charges,
all Liens and all other charges now or hereafter imposed upon or affecting any
Collateral.

 

6. Further Acts of Debtor. Debtor shall, at the request of the Secured Parties,
execute or otherwise authenticate and deliver to the Secured Parties any
financing statements, financing statement changes and any and all additional
instruments, documents and other records, and Debtor shall perform all actions,
that from time to time the Secured Parties may reasonably deem necessary or
desirable to carry into effect the provisions of this Agreement or to establish
or maintain a perfected security interest in the Collateral having the priority
provided for herein or otherwise to protect the Secured Parties’ interest in the
Collateral.

 

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7. Effect of Additional Security. If the performance of all or any portion of
the Obligation shall at any time be secured by any other collateral, the
exercise by the Secured Parties, in the event of a default in the performance of
any such obligation, of any right or remedy under any agreement or other record
granting a lien on or security interest in such collateral shall not be
construed as or deemed to be a waiver of, or limitation upon, the right of the
Secured Parties to exercise, at any time and from time to time thereafter, any
right or remedy under this Agreement or under any other such agreement or
record.

 

8. Default. Upon the occurrence of a Default or Event of Default under any Loan
Document and the continuance thereof beyond any applicable cure periods under
the Loan Documents (a “Default”), the Secured Parties shall have all the rights
and remedies of a the Secured Parties on default under the UCC (whether or not
the UCC applies to the affected Collateral) or, to the extent required by
applicable law, the Uniform Commercial Code as in effect in the jurisdiction
where Secured Parties enforces such rights and remedies.

 

9. No Implied Waivers. No delay or omission on the part of the Secured Parties
in exercising any right or remedy created by, connected with or provided for in
this Agreement or arising from any default by Debtor, shall be construed as or
be deemed to be an acquiescence in or a waiver of such default or a waiver of or
limitation upon the right of the Secured Parties to exercise, at any time and
from time to time thereafter, any right or remedy under this Agreement. No
waiver of any breach of any of the covenants or conditions in this Agreement
shall be deemed to be a waiver of or acquiescence in or consent to any previous
or subsequent breach of the same or any other covenant or condition.

 

10. Entire Agreement. This Agreement, together with each of the Loan Documents,
contains the entire understanding and agreement of Debtor and the Secured
Parties with respect to the subject matter hereof and may not be altered or
amended in any way except by a written agreement signed by the parties. No
provision of this Agreement or right of Secured Parties hereunder can be waived,
nor shall Debtor be released from its obligations hereunder, except by a writing
duly executed by the Secured Parties.

 

11. Transfer of Indebtedness. Upon the transfer by the Secured Parties of all or
any portion of the indebtedness secured hereby, the Secured Parties may transfer
therewith all or any portion of the security interest created hereunder, but the
Secured Parties shall retain all of their rights hereunder with respect to any
part of such indebtedness and any part of its security interest hereunder not so
transferred.

 

12. Term; Binding Effect. This Agreement shall be and remain in full force and
effect until the Obligation has been fully performed and paid. Upon expiration
and payment or conversion in full of the Obligation, this Agreement shall
automatically terminate and Debtor shall be permitted to file or cause the
Secured Parties to file one (1) or more UCC termination statements with respect
to the Collateral. Each of the provisions hereof shall be binding upon Debtor
and its respective legal representatives, successors and assigns and shall inure
to the benefit of the Secured Parties and its legal representatives, successors
and assigns.

 

13. Rules of Construction. Terms used in the singular shall apply to the plural,
and vice versa, as the context requires; likewise masculine, feminine and neuter
genders shall be interchangeable as the context requires. The use of the
disjunctive term “or” does not imply an exclusion of the conjunctive, i.e., “or”
shall have the same meaning as the expression “and/or.” “Including” shall not be
limiting. Headings and section titles are for convenience of reference only and
are not substantive parts of this Agreement, and shall not be given effect in
construing the provisions of this Agreement. Each reference to a Loan Document
shall mean such Loan Document as from time to time extended, modified, renewed,
restated, reaffirmed, supplemented or amended.

 

14. Severability. If any provision of this Agreement, or the application thereof
to any person or circumstance, shall, to any extent, be invalid or
unenforceable, the remainder of this Agreement, or the application of such term
to persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby, and each term of this Agreement
shall be valid and enforceable to the fullest extent permitted by law.

 

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15. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute but one and the same instrument.

 

16. Governing Law and Jurisdiction. This Agreement shall be deemed to be
executed and delivered in the State of Nevada. The Debtor and the Secured
Parties: (i) agree that this Agreement shall be construed according to and
governed by the laws of the State of Nevada, without regard to principles of
conflicts of law (except to the extent governed by the UCC); (ii) consents to
personal jurisdiction in the State of Nevada in the state and United States
courts in Nevada; and (iii) consents to venue in the State of Nevada, for all
actions and proceedings with respect to this Agreement and the Loan Documents,
and waives any right it may have to assert the doctrine of forum non conveniens
or to object to venue to the extent any proceeding is brought in accordance with
this Section 16.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the undersigned has executed this Security Agreement as of
the day and year first hereinabove written.

 

  DEBTOR:       DESERT HAWK GOLD CORP.,   a Nevada corporation       By: /s/
Richard Havenstrite     Richard Havenstrite, Chief Executive Officer      
Accepted and Agreed:       SECURED PARTIES:       WEST C STREET LLC       By:
/s/ Richard Meadows     Richard Meadows, Manager       IBEARHOUSE LLC       By:
/s/ Kelley Price     Kelley Price, Manager

 

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EXHIBIT A

 

COLLATERAL DESCRIPTION

 

All property of Debtor, whether now owned or hereafter acquired, wherever
located, including, without limitation, all right, title and interest of Debtor
in, to and under the following:

 

(a) All Accounts;

 

(b) All Chattel Paper;

 

(c) All Commercial Tort Claims and other claims or causes of action;

 

(d) All Deposit Accounts and cash;

 

(e) All Documents;

 

(f) All Equipment;

 

(g) All General Intangibles;

 

(h) All Goods;

 

(i) All Instruments;

 

(j) All Intellectual Property;

 

(k) All Inventory;

 

(l) All Investment Property;

 

(m) All Letter-of-Credit Rights;

 

(n) All contract rights;

 

(o) All financial assets;

 

(p) All payment intangibles;

 

To the extent not otherwise described above:

 

(i) All insurance policies, including the proceeds thereof, and water stock;

 

(ii) All architectural, structural, mechanical and engineering plans and
specifications prepared for construction of improvements or extraction of
minerals from any real property now or hereafter owned or leased by Debtor and
all studies, data and drawings related thereto; and also all contracts and
agreements of the Debtor relating to the foregoing plans and specifications or
to the foregoing studies, data and drawings or to the construction of
improvements on or extraction of minerals or gravel from any real property now
or hereafter owned or leased by Debtor;

 

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(iii) All refunds, rebates, reimbursements, reserves, deferred payments,
deposits, cost savings, governmental subsidy payments, governmentally registered
credits (such as, by way of example and not as limitation, emissions reduction
credits), other credits, waivers and payments, whether in cash or kind, due from
or payable by any governmental authority or any insurance or utility company
relating to any or all of the personal property or real property now or
hereafter owned or leased by Debtor or to any improvements thereon or any of the
other collateral described herein or arising out of the satisfaction of any
condition imposed upon or the obtaining of any approvals for the development of
the any real property now or hereafter owned by Debtor or the improvements
thereon;

 

(iv) All refunds, rebates, reimbursements, credits and payments of any kind due
from or payable by any governmental authority or other entity for any taxes,
special taxes, assessments, or similar governmental or quasi-governmental
charges or levies imposed upon Debtor with respect to any personal property or
real property now or hereafter owned or leased by Debtor and with respect to any
improvements thereon or to any of the other collateral described herein, or
arising out of the satisfaction of any condition imposed upon or the obtaining
of any approvals for the development of any real property now or hereafter owned
or leased by Debtor or the improvements thereon;

 

(v) All supporting obligations with respect to any other Collateral; and

 

(vi) All proceeds and products of any of the foregoing (and proceeds and
products of proceeds and products).

 

The term “Intellectual Property” means all intellectual and similar property of
every kind and nature now owned or hereafter acquired by Debtor, including
inventions, designs, patents (whether registered or unregistered), copyrights
(whether registered or unregistered), trademarks (whether registered or
unregistered), trade secrets, domain names, confidential or proprietary
technical and business information, know-how, methods, processes, drawings,
specifications or other data or information and all memoranda, notes and records
with respect to any research and development, software and databases and all
embodiments or fixations thereof whether in tangible or intangible form or
contained on magnetic media readable by machine together with all such magnetic
media and related documentation, registrations and franchises, and all
additions, improvements and accessions to, and books and records describing or
used in connection with, any of the foregoing.

 

All terms used herein which are defined in the UCC shall have the same meanings
when used herein, unless the context requires otherwise and except that (i) for
purposes of this Agreement, the meaning of such terms will not be limited by
reason of any limitation on the scope of the UCC, whether under Section 9-109 of
the UCC, by reason of federal preemption or otherwise, and (ii) to the extent
the definition of any category or type of Collateral is expanded by any
amendment, modification or revision to the UCC, such expanded definition will
apply automatically as of the date of such amendment, modification or revision.

 

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