EXHIBIT 10.1
 
UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE SECURITIES MUST
NOT TRADE THE SECURITIES BEFORE JULY 15, 2014.
 
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”)
OR ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.  THESE
SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO
THE COMPANY, (B) IF THE SECURITIES HAVE BEEN REGISTERED IN COMPLIANCE WITH THE
REGISTRATION REQUIREMENTS UNDER THE U.S. SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS, OR (C) IN A TRANSACTION THAT DOES NOT REQUIRE
REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE LAWS AND
REGULATIONS GOVERNING THE OFFER AND SALE OF SECURITIES, AND THE HOLDER HAS,
PRIOR TO SUCH SALE, FURNISHED TO THE COMPANY AN OPINION OF COUNSEL OF RECOGNIZED
STANDING, OR OTHER EVIDENCE OF EXEMPTION, REASONABLY SATISFACTORY TO THE
COMPANY.
 
TIMBERLINE RESOURCES CORPORATION
 
LONG FORM PROMISSORY NOTE
 
US$1,000,000
Dated as of March 14, 2014

 
FOR VALUE RECEIVED, TIMBERLINE RESOURCES CORPORATION (“Borrower”), having an
office at 101 E. Lakeside, Coeur d’Alene, ID 83814 USA, PROMISES TO PAY to the
order of WOLFPACK GOLD CORP. (“Lender”) of Suite 5, 5450 Riggins Court, Reno,
Nevada 89502, at the principal place of business of Lender or at such other
place as may be designated from time to time in writing by Lender, the principal
sum of One Million United States Dollars (US$1,000,000.00) or, if less, the
unpaid principal amount of the advances made hereunder, in lawful money of the
United States of America, together with interest thereon from the date of this
Promissory Note (the “Note”) to and including the date this Note is paid in full
calculated in the manner hereinafter set forth.
 
This Note is made pursuant to the letter agreement dated March 11, 2014 between
the Borrower and the Lender (the “Agreement”). If there is a conflict or
inconsistency between this Note and the Agreement, the Agreement will prevail to
the extent of that conflict or inconsistency.

1.           Definitions
 
The following terms as used in this Note shall have the following meanings:
 
 
(a)
“Applicable Rate” means, from the date hereof until September 14, 2014 an annual
rate equal to five percent (5.0%) and thereafter an annual rate equal to ten
percent (10%).

 
 
(b)
“Business Day” means any day except (i) Saturday, (ii) Sunday, and (iii) any
other day which is a legal holiday under the laws of the State of Idaho, State
of Nevada or the Province of British Columbia.

 
 
(c)
“Change of Control” means the occurrence after the date hereof of any of the
following events, excepting the events contemplated by the Proposed Transaction:
(i) the acquisition by any person or company or combination of persons or
companies, acting jointly or in concert, of effective control (whether through
legal or beneficial ownership of equity securities of the Borrower, by contract
or otherwise) of in excess of 20% of the voting securities of the Borrower; (ii)
the completion by the Borrower of any transaction pursuant to which the Borrower
disposes of all or substantially all of its assets; (iii) the Borrower merges
into, amalgamates or consolidates with any other person, or any person merges
into, amalgamates or consolidates with the Borrower and, after giving effect to
such transaction, the holders of voting securities of the Borrower immediately
prior to

 
 

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such transaction own less than 20% of the aggregate voting power of the Borrower
or the successor entity of such transaction; or (iv) the execution by the
Borrower of an agreement to which the Borrower is a party, or by which it is
bound, providing for any of the events set forth in clauses (i) through (iii)
above.

 
(d)
“Closing” means the completion of the Proposed Transaction.

 
 
(e)
“Common Shares” has the meaning set forth in Section 5(a).

 
 
(f)
“Common Share FMV” has the meaning set forth in Section 5(b).

 
 
(g)
“Common Share Payment Date” has the meaning set forth in Section 5(a).

 
 
(h)
“Common Share Payment Right” has the meaning set forth in Section 5(a).

 
 
(i)
“Event of Default” means:

 
 
(i)
the occurrence of a Material Adverse Change with failure to cure to the
satisfaction of the Lender within 10 Business Days;

 
 
(ii)
the failure of Borrower to pay all or any portion of the Indebtedness in
accordance with the terms of this Note;

 
 
(iii)
Borrower becomes insolvent or makes a general assignment for the benefit of its
creditors, or if any order is made or an effective resolution is passed for the
winding-up, merger or amalgamation of Borrower (except for a merger or
amalgamation in connection with the Proposed Transaction) or if Borrower is
declared bankrupt or if a custodian or receiver be appointed for Borrower under
the applicable bankruptcy or insolvency legislation, or if a compromise or
arrangement is proposed by Borrower to its respective creditors or any class of
its creditors, or if a receiver or other officer with like powers is appointed
for Borrower;

 
 
(iv)
Borrower’s violation or breach of any representation, warranty, covenant or
agreement set forth in this Note or any Security Document that is not otherwise
listed in this definition, where such violation or breach is not cured within 15
days following Borrower’s receipt of notice thereof from Lender;

 
 
(v)
Borrower fails to maintain its existence under the laws of the State of
Delaware, provided that the merger of Borrower into another entity pursuant to a
transaction agreed to in writing by the Lender shall not constitute an “Event of
Default”;

 
 
(vi)
Borrow abandons the Project; and

 
 
(vii)
if any of the Security Documents shall cease to be a valid other than by reason
solely of the acts or omissions of the Lender or if any material provision of
this Note or a Security Document ceases to be in full force and effect or is
declared null and void or invalid.

 
(j)
“Indebtedness” means the Principal Balance, from time to time, together with all
accrued and unpaid interest (calculated in the manner set forth herein), and all
other sums due under this Note.

 

 
 

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(k)
“Initial Drawdown” has the meaning set forth in Section 2.

 
 
(l)
“Interest Payment Date” means (i) any day on which Borrower repays all or any
portion of the Principal Balance under Section 3(b); and (ii) the Maturity Date.

 
 
(m)
“Lien” means, (i) with respect to any asset, any mortgage, deed of trust, lien
(statutory or otherwise), deemed trust, pledge, hypothec, hypothecation,
encumbrance, charge, security interest, royalty interest, adverse claim, defect
of title or right of set off in, on or of such asset, (ii) the interest of a
vendor or a lessor under any conditional sale agreement, capital lease, title
retention agreement or consignment agreement (or any financing lease having
substantially the same economic effect as any of the foregoing) relating to any
asset, (iii) any purchase option, call or similar right of a third party with
respect to such assets, (iv) any netting arrangement, defeasance arrangement or
reciprocal fee arrangement, and (v) any other arrangement having the effect of
providing security.

 
 
(n)
“Material Adverse Change” means any change, effect, development, event or
occurrence that, individually or in the aggregate, is or is reasonably likely to
have a Material Adverse Effect.

 
 
(o)
“Material Adverse Effect” means an effect, a fact, a state, a liability, a loss
or a condition that is material and adverse to the business, properties, assets,
operations, condition, affairs, liabilities (contingent or otherwise), prospects
or obligations (whether absolute, conditional or otherwise) of the Borrower,
other than an effect, a fact, a state, a liability, a loss or a condition:

 
 
(i)
relating to the announcement of the execution of this Agreement or the Loan or
other transactions contemplated by this Agreement;

 
 
(ii)
relating to a decrease in the market price of the Common Shares on any stock
exchange;

 
 
(iii)
relating to the Canadian, United States or international economy or securities
markets in general;

 
 
(iv)
affecting the worldwide mining industry in general;

 
 
(v)
relating to any effect resulting from an act of terrorism or any outbreak of
hostilities or war (or any escalation or worsening thereof);

 
 
(vi)
relating to any natural disaster;

 
 
(vii)
relating to any generally applicable change in applicable laws; or

 
 
(viii)
relating to any action taken by the Borrower or the Lender that is required or
contemplated by this Note or the Agreement;

provided, however, that the effect referred to in clauses (iii), (iv), (v), (vi)
or (vii) above does not primarily relate to (or have the effect of primarily
relating to) the Borrower or disproportionately adversely affect the Borrower or
its properties, assets or operations, taken as a whole, compared with other
companies of a similar size operating in the industry and jurisdiction in which
the Borrower operates.

 
 

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(p)
“Maturity Date” means the date that is the earlier of (i) five (5) Business Days
after the Closing; and (ii) the Outside Date.

 
 
(q)
“Outside Date” means one year and one day following the date on which the
Initial Drawdown is advanced.

 
 
(r)
“Permitted Liens” means: (i) liens for taxes not yet due and payable or are
being contested in good faith; (ii) survey exceptions, easements, rights of way
and restrictions, zoning ordinances and other similar encumbrances affecting the
Project and which do not unreasonably restrict the use thereof; (iii) all
conditions, terms, exceptions, restrictions, obligations, easements, charges,
rights-of-way and encumbrances which are set forth in any lease or contract
listed on Schedule B, including any and all rights of lessors in any leased
claims; (iv) rights reserved to or vested in any governmental entity to control
or regulate any interest in the Property as imposed by applicable law and (v)
any other lien or encumbrance that does not materially impair the current use
and enjoyment of the Project and does not have a material adverse effect on the
business and operations of such Project.

 
(s)
“Person” means any individual, corporation, limited liability company, general
partnership, limited partnership, proprietorship, other business organization,
trust, union, association, governmental or regulatory authority, or other
entity.

 
 
(t)
“Principal Balance” means the outstanding principal balance of this Note from
time to time, prima facie evidence of which shall be reflected on Schedule A.

 
(u)
“Project” has the meaning ascribed to such term in the Agreement.

 
 
(v)
“Proposed Transaction” has the meaning ascribed to such term in the Agreement.

 
 
(w)
“Security Document(s)” means the financing statement and Deed of Trust, Security
Agreement, Assignment of Leases and Rents and Fixture Filings to Secure
Promissory Note dated the date hereof and executed by the Borrower in favor of
the Lender, and any and all other security agreements, pledges, guarantees or
other credit support from time to time provided by Borrower or by another Person
for the benefit of Borrower in connection with the advances under this Note.

 
2.           Credit Line
 
 
(a)
The Lender will make available to the Borrower up to One Million United States
Dollars (US$1,000,000.00), on a non-revolving basis, to be advanced as follows:
(a) US$500,000 on execution and delivery of this Note (the “Initial Drawdown”);
and (b) thereafter in tranches of US$250,000 based on a schedule of proposed
expenditures reasonably itemizing the working capital needs of the Borrower. The
amount of the Indebtedness evidenced hereby will be shown on Schedule A. Amounts
borrowed and re-paid under this Note may not be re-borrowed.

 
(b)
The Borrower will use the proceeds of the Initial Drawdown to maintain
compliance with the NYSE MKT, LLC and meet its immediate working capital
requirements, including accounts payable and payroll.

 
 

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3.           Payment of Indebtedness
 
 
(a)
Except as is otherwise provided herein, the entire Indebtedness shall be due and
payable on the Maturity Date.

 
(b)
Borrower may repay the outstanding Principal Balance of this Note, in whole or
in part, without penalty or premium, at any time and from time to time prior to
the Maturity Date, together with accrued interest to the date of such prepayment
on the amount prepaid.

4.           Interest
 
Interest shall be payable in arrears on each Interest Payment Date.  Payments
due on an Interest Payment Date that is not a Business Day shall be payable on
the next succeeding Business Day after such Interest Payment Date. Interest
shall accrue daily on the Principal Balance from the date hereof through the
Maturity Date at the Applicable Rate.  Interest shall be calculated daily on the
basis of a three hundred sixty five (365) day year.
 
5.           Conversion of Loan

 
(a)
In the event the Proposed Transaction for any reason does not complete prior to
the Outside Date and any portion of Indebtedness is not otherwise pre-paid by
the Borrower pursuant to Section 3(b) hereof prior to the Maturity Date, and
subject to the receipt of any required regulatory approvals, the availability of
requisite prospectus exemptions under applicable securities legislation, and the
other provisions of this Note, the Lender may, at its option, in exchange for or
in lieu of receiving the portion of the Indebtedness due on the Maturity Date
solely in money, elect to receive on the date of payment (the “Common Share
Payment Date”) that number of fully paid shares of common stock in the capital
of the Borrower (“Common Shares”) obtained by dividing such portion of the
Indebtedness that the Lender elects to receive in Common Shares by the Common
Share FMV (the “Common Share Payment Right”).

 
(b)
For the purposes of the foregoing, the “Common Share FMV” shall be: (a) with
respect to any payment of the Principal Balance, $0.14; and (b) with respect to
any payment of Interest, the Market Price (as such term is defined in the rules
of the TSX Venture Exchange) of the Common Shares on the NYSE MKT as at Common
Share Payment Date.

 
(c)
Any amount payable by the Borrower to the Lender pursuant to the terms of this
Note that is paid in Common Shares in accordance with the Lender’s Common Share
Payment Right will be deemed to be paid and satisfied in full as of the Common
Share Payment Date.  The Lender shall be treated as the shareholder of record of
the Common Shares issued on due exercise by the Lender of its Common Share
Payment Right effective immediately after the close of business on the Common
Share Payment Date, and shall be entitled to all substitutions therefor, all
income earned thereon or accretions thereto and all dividends or distributions
(including distributions and dividends in kind) thereon and arising
thereafter.  As soon as practicable following the Common Share Payment Date, the
Borrower, at its expense, will cause to be issued in the name of and delivered
to the Lender, a certificate or certificates for the number of Common Shares to
which the Lender shall be entitled pursuant to this Section 5. The Lender
acknowledges and agrees that this Note and any securities acquired upon
conversion pursuant to this Section 5 will be subject to such trade restrictions
as may be imposed by operation of applicable

 
 

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- 6 -

 
 
 
securities rules and that the Borrower will be required to legend the
certificates representing such securities with those restrictions.

 
 
(d)
The Borrower shall not be required to issue fractional Common Shares upon the
payment of any portion of this Note in Common Shares pursuant to Section 5.  If
any fractional interest in Common Shares would, except for the provisions of
this Section 6, be issuable upon the payment of any amount of this Note, the
number of Common Shares issued upon such payment shall be rounded down to the
next whole number of Common Shares and the Borrower shall not be required to
make any payment in lieu of delivering any certificates of such fractional
interest.

6.           Adjustment and Anti-dilution Rights

 
(a)
If, prior to repayment of this Note, the Borrower undertakes any
reclassification of, or other change in (including a change resulting from
consolidation or subdivision) the outstanding Common Shares; or in case of any
issue of Common Shares (or securities convertible into Common Shares) to all or
substantially all of the holders of its outstanding Common Shares by way of a
stock dividend or other distribution of assets or securities; the number of
Common Shares to be issued under Section 5 shall, after such reclassification,
change, issue, distribution or dividend, be equal to the number of shares or
other securities or property of the Borrower, to which the Lender would have
been entitled to upon such reclassification, change, distribution or
dividend.  The Common Share FMV in effect on the Common Share Payment Date of
any such subdivision, redivision or on the record date for such issuance of the
Common Shares by way of a stock dividend or other distribution of assets or
securities, as the case may be, shall be decreased in the proportion which the
number of Common Shares outstanding before such transaction bears to the number
of Common Shares outstanding after such transaction.  The Common Share FMV in
effect on the Common Share Payment Date of any such reduction, combination or
consolidation of the Common Shares, shall be increased in the proportion which
the number of Common Shares outstanding before such transaction bears to the
number of Common Shares outstanding after such transaction.

 
(b)
The Borrower covenants with the Lender that so long as this Note remains
outstanding, it will give notice to the Lender of its intention to fix a record
date for any event referred to in this Section 6 which may give rise to an
adjustment in the number of Common Shares issuable under Section 5 herein and
such notice must specify the particulars of such event and the record date and
the effective date for such event.  The Borrower shall give such notice to the
Lender not less than ten business days in each case prior to such applicable
record date.

7.           Acceleration

At the option of Lender, the entire Indebtedness shall at once become due and
payable and may be collected forthwith without further notice or demand upon the
occurrence at any time of any of the following: (a) the Project is sold in whole
or in part; (b) there is a Change of Control in the Borrower; or (c) there is an
Event of Default.

8.           Representations and Warranties of the Borrower

The Borrower represents and warrants to the Lender that:

 
 

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       (a)           it (i) has been duly incorporated in and is validly
existing under the laws of its jurisdiction of incorporation and is up to date
in all regulatory filings; (ii) has all requisite corporate power and authority
to carry on its business as now conducted and to own, lease and operate its
properties and assets; and (iii) has all requisite corporate power and authority
to enter into this Note, to borrow the Loan, and to carry out the obligations
contemplated under this Note;

(b)           this Note and the Security Documents have been duly and validly
authorized, executed and delivered by the Borrower and are legal, valid and
binding obligations of the Borrower;

(c)           the Borrower is a reporting issuer in the United States and in the
Provinces of British Columbia and Alberta and is not subject to any cease trade
or other order of any applicable securities regulatory authority in any
jurisdiction and, to the knowledge of the Borrower, no investigation or other
proceedings involving the Borrower that may operate to prevent or restrict
trading of any securities of the Borrower is currently in progress or pending
before any applicable securities regulatory authority;

(d)           it is conducting its business in material compliance with all
applicable laws of each jurisdiction in which a material portion of its business
is carried on and is duly licensed, registered or qualified in all jurisdictions
in which it owns, leases or operates its property or carries on business to
enable its business to be carried on as now conducted and its property and
assets to be owned, leased and operated and all such licences, registrations and
qualifications are valid, subsisting and in good standing, except in respect of
matters which do not and will not have a Material Adverse Effect, and except for
the failure to be so qualified or the absence of any such license, registration
or qualification which does not and will not have a Material Adverse Effect;

(e)           it has not committed an act of bankruptcy, is not insolvent, has
not proposed an arrangement to its creditors generally, has not made a voluntary
assignment in bankruptcy, has not taken any proceedings with respect to an
arrangement, has not taken any proceedings to have itself declared bankrupt or
wound-up, and has not had any execution or distress become enforceable or become
levied upon any of its property;

(f)           it has filed all federal, state, county, municipal, and city
income, personal property and other tax returns required to have been filed by
it and has paid all taxes and related liabilities which have become due pursuant
to such returns or pursuant to any assessments received by it, and the Borrower
knows of no basis for any additional assessment in respect of any such taxes and
related liabilities for prior years;

(g)           since December 31, 2013 (which is the date of the most recent
financial statements of the Borrower available on EDGAR), or as otherwise
disclosed to the Lender in writing:

 
(i)
there has not been any change in its assets, liabilities or obligations
(absolute, accrued, contingent or otherwise) which could have a Material Adverse
Effect; and

 
(ii)
there has not been any change in its business, business prospects, condition
(financial or otherwise) or results of the operations which could have a
Material Adverse Effect;

(h)           since December 31, 2013 (which is the date of the most recent
financial statements of the Borrower available on EDGAR) or as otherwise
disclosed to the Lender in writing, it has carried on its business in the
ordinary course;

 
 

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        (i)           other than as disclosed to the Lender in writing, there is
no action, proceeding or investigation pending, or, to its knowledge, threatened
against or affecting the Borrower at law or in equity (whether in any court,
arbitration or similar tribunal) or before or by any governmental entity, which,
if determined adversely to the Borrower, could have a Material Adverse Effect;

(j)           none of the execution and delivery of, nor the performance and
compliance with the terms of this Agreement by the Borrower will result in any
breach of, or be in conflict with or constitute a default under, and no event
has occurred which, after notice or lapse of time, or both, would constitute a
default either directly or indirectly under:

 
(i)
any Law applicable to the Borrower or any of its properties or assets;

 
(ii)
resolutions of the directors, shareholders or committees of the Borrower which
are in effect at the date hereof;

 
(iii)
any mortgage, note, indenture, contract, agreement, instrument, lease or other
document to which the Borrower is a party or by which it is bound; or

 
(iv)
any judgment, decree or order binding the Borrower or its property or assets,

which breach, conflict or default, or the consequences thereof, would alone or
in the aggregate could have a Material Adverse Effect;

(k)           no Event of Default has occurred or is continuing;

(l)           since December 31, 2012: (i) the Borrower has filed all documents
and information required to be filed by the Borrower under applicable securities
laws and has made all such documents and information publicly available on the
SEDAR and EDGAR websites as required to be filed by it in accordance with
applicable securities laws, applicable securities regulatory authorities, the
TSX Venture Exchange and the NYSE-MKT (the “Borrower’s Disclosure Record”); and
(ii) all such documents and information comprising the Borrower’s Disclosure
Record, as of their respective dates (and the dates of any amendments thereto),
(1) are accurate and true, (2) did not contain any misrepresentation, and (3)
complied in all material respects with the requirements of applicable securities
laws.  The Borrower has not filed any confidential material change report,
confidential treatment request or other report or document with any securities
regulatory authority, the TSX Venture Exchange and/or the NYSE-MKT that at the
date of this Note remains confidential; and

(m)           Except (a) the security interest granted to Lender pursuant to
this Note and the Security Documents and (b) the Permitted Liens, the Borrower
owns the Project and Data free and clear of any and all encumbrances, claims,
liens or security interests of others.  No security agreement, financing
statement or other public notice with respect to all or any part of the Project
or Data that evidences an encumbrance, lien or security interest securing any
indebtedness of the Borrower is on file or of record in any public office,
except such as (i) have been or will be filed in favor of the Borrower pursuant
to this Note or (ii) are Permitted Liens.
 
9.           Representations and Warranties of the Lender

The Lender represents and warrants to the Borrower that:

 
 

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- 9 -
 
       (a)           The Lender understands that the Note and the Common Shares
issuable upon conversion of the Notes (the “Securities”) have not been
registered under the U.S. Securities Act of 1933, as amended  (the “U.S.
Securities Act”) or any applicable securities laws of any state of the United
States and accordingly, the Securities may not be offered, sold, pledged,
assigned or otherwise transferred into the United States or to, or for the
account or benefit of, a U.S. Person or person in the United States unless
registered under the U.S. Securities Act and any applicable securities laws of
any state of the United States or pursuant to an exemption from such
registration requirements and the Lender has no intention to distribute either
directly or indirectly any of the Securities in the United States or to, or for
the account or benefit of a U.S. Person, except in compliance with the U.S.
Securities Act and any applicable state securities laws; the Common Shares
issuable upon exercise of the Notes will be “restricted securities” under Rule
144 under the U.S. Securities Act, subject to a hold-period under Rule 144 and
certificates representing such Common Shares will bear a legend restricting
their transfer under the U.S. Securities Act;

(b)           The Lender is able to bear the economic risk of the investment and
is able to afford a complete loss of its investment and by reason of its
business or financial experience could be reasonably assumed to have the
capacity to evaluate the merits and risks of this investment;

(c)           The Lender has not purchased the Note as a result of any form of
general solicitation or general advertising, including advertisements, articles,
notices or other communications published in any newspaper, magazine or similar
media or broadcast over radio, or television, or any seminar or meeting whose
attendees have been invited by general solicitation or general advertising;

(d)           The Lender is an “accredited investor” as defined in each of
National Instrument 45-106 of the Canadian Securities Administrators and Rule
501(a) of Regulation D under the U.S. Securities Act.

10.           Positive Covenants of the Borrower

In addition to the covenants elsewhere in this Agreement, the Borrower covenants
and agrees with the Lender that, at all times during the currency of this Note,
it will:

 
(a)
pay the principal sum, interest and all other monies required to be paid to the
Lender pursuant to this Note in the manner set forth herein;

 
(b)
duly observe and perform each and every of its covenants and agreements set
forth in this Note;

 
(c)
provide the Lender with immediate notice of any Event of Default;

 
(d)
do all things necessary to maintain its existence as a legally valid and
subsisting corporation and to carry out its business in a proper and efficient
manner in like manner as prudent operators of similar businesses;

 
(e)
comply in all material respects with all applicable laws and do all things
necessary to obtain, renew and maintain in good standing from time to time all
material permits and licenses required for the operation of its business,
including without limitation, all permits and licenses with respect to the
Project;

 
(f)
provide the Lender with prompt notice of any:

 
(i)
Event of Default, together with a detailed statement specifying the nature
thereof and the steps being taken to cure such Event of Default;

 
 

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- 10 -

 
 
(ii)
breach of any representation and/or warranty in this Note:

 
(iii)
action, suit, proceeding or investigation pending or to the best of its
knowledge threatened against it; and

 
(iv)
material breach or receipt of written allegation of a material breach by any
party under a material contract to which it is a party;

 
(g)
keep and maintain the Project and Data in good working order and condition;

 
(h)
from time to time forthwith upon request by the Lender, make, do, execute or
cause to be made, done or executed all such further and other lawful acts,
deeds, things, devices, documents, matters and assurances whatsoever for the
better or more perfect and absolute performance of the terms and conditions of
this Note;

 
(i)
carry on its respective business in the ordinary course;

 
(j)
furnish to the Lender any other information that the Lender may reasonably
require relating to the business, operations, personnel, property and financial
position of the Borrower;

 
(k)
upon request of the Lender, duly execute and deliver, or cause to be executed
and delivered to the Lender such further instruments and do and cause to be done
such further acts as the Lender may request to carry out more effectively the
provisions and purposes of this Note; and

 
(l)
at all times reserve and keep available out of its authorized shares, a
sufficient number of Common Shares to enable it to perform its obligations under
this Note.

11.           Negative Covenants of the Borrower

The Borrower covenants and agrees with the Lender that, at all times during the
term of this Note, unless it has received the prior written consent of the
Lender to do so, which consent will not be unreasonably withheld, it will not:

 
(a)
pay any dividend or other distribution to its shareholders, except such as may
occur in connection with the Proposed Transaction;

 
(b)
lend money, guarantee a loan or grant any other form of financial assistance or
benefit to any Person;

 
(c)
make any material payments to its shareholders, directors or officers other than
to the Lender and other than in the ordinary course of business, amounts paid to
settle loans advanced by such parties or amounts paid pursuant to employment or
consulting arrangements with such parties;

 
(d)
create, incur, assume or permit to exist any indebtedness, except the
Indebtedness created hereunder and except as during normal course of business;

 
 

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(e)
create, incur, assume or permit to exist any Lien on the Project or Data, except
for (a) the security interest granted to Lender pursuant to this Note and the
Security Documents, and (b) the Permitted Liens;

 
 
(f)
enter into any arrangement, directly or indirectly, with any Person for the sale
or transfer of any interest in the Project or Data, unless such arrangement
provides for the payment of all outstanding Indebtedness under this Note prior
to or concurrently with the closing of such arrangement;

 
(g)
amend its constating documents or by-laws, as applicable, except as done by
shareholders as a properly constituted meeting or such amendments by the board
of directors that do not or could not reasonably be expected to result in a
Material Adverse Effect or affect the Borrower’s obligations under this Note,
the Borrower’s ability to meet its obligations under this Note, the security
interest granted pursuant to the Security Documents or otherwise result in an
Event of Default;

 
(h)
merge, amalgamate or otherwise consolidate with any other Person; except as such
may occur in connection with the Proposed Transaction; and

 
(i)
enter into any agreement or arrangement with any Person or create, incur, assume
or permit to exist any royalty of any type on the Project.

12.           General

 
(a)
Except as expressly stated otherwise, all amounts set forth in this Note are in
United States Dollars, and all payments shall be made in United States
Dollars.  All payments hereunder shall be applied:  first, to the payment of
fees and other charges then due or payable under this Note; second, to accrued
and unpaid interest; and third, any balance shall be applied in reduction of the
Principal Balance.

 
(b)
All representations and warranties made herein will survive the execution and
delivery of this Note to the Lender and will be deemed to be repeated by the
Borrower as of each day up to and including the date the Indebtedness is paid to
the Lender in full.

 
(c)
Except as otherwise provided, Borrower hereby waives presentment of payment,
demand, protest, notice of non-payment or dishonor and of protest, and of any
and all other notices and demands whatsoever.  Borrower agrees to remain bound
hereby, and to perform and comply with each of the terms, covenants and
provisions contained herein, until the Indebtedness is paid in full,
notwithstanding any extensions of time for payment that may be granted, even
though the period of extension be indefinite and notwithstanding any inaction
by, or failure to assert any legal right available to, Lender.  No alteration,
amendment or waiver of any provision of this Note made by agreement between
Lender and any other Person shall release, discharge, modify or affect the
liability of Borrower under this Note or under any Security Document.

 
(d)
Borrower hereby waives the benefit of any law that now or hereafter might
authorize the stay of any execution issued on any judgment recovered on this
Note or the exemption of any property of Borrower from levy or sale
thereunder.  Borrower also waives and releases unto Lender all errors, defects,
and imperfections of proceedings relating thereto.

 
(e)
None of the rights and remedies of Lender herein or under any Security Document
shall be waived or affected by Lender’s failure or delay, if any, to exercise
them, nor shall any

 
 

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single or partial exercise of any right hereunder preclude any other or further
exercise thereof. All remedies conferred on Lender by law or by this Note, any
Security Document or by any other instrument or agreement shall be cumulative,
concurrently or consecutively at Lender’s option, and shall not be exclusive of
any remedies provided at law.

 
(f)
The unenforceability, invalidity or illegality of any provision of this Note
shall not affect the enforceability, validity or legality of any other provision
hereof.

 
(g)
This Note and the duties and obligations of Borrower hereunder may not be
assigned or delegated by either party without the written consent of the other
party.

 
(h)
Borrower shall further pay to Lender on demand all costs and expenses, if any
(including reasonable counsel fees and expenses), in connection with the
enforcement of this Note and any Security Document(s).

 
(i)
All agreements between Borrower and Lender, whether now existing or hereafter
arising and whether written or oral, are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of acceleration of the
maturity hereof or otherwise, shall the amount paid, or agreed to be paid to
Lender hereof for the use, forbearance, or detention of the money to be loaned
hereunder or otherwise or for the payment or the performance of any covenant or
obligation contained herein or in any other document that evidences secures or
pertains to the indebtedness evidenced hereby, exceed the maximum amount
permissible under applicable law.  If from any circumstances whatsoever
fulfillment of any provision hereof, at the time performance of such provision
shall be due, shall involve transcending the limit of validity prescribed by
law, then, ipso facto, the obligation to be fulfilled shall be reduced to the
limit of such validity, and if from any such circumstance Lender shall ever
receive as interest or otherwise an amount that would exceed the highest lawful
rate, such amount that would be excessive interest shall be applied to the
reduction of the Principal Balance, and not to the payment of interest, or if
such excessive interest exceeds the Principal Balance, such excess shall be
refunded to Borrower.

 
(j)
This Note will be governed by and construed in accordance with the laws of the
State of Delaware without giving effect to any conflicts or choice of laws
provisions thereunder.

 
(k)
TIME SHALL BE OF THE ESSENCE of this Note.

 
(l)
Any notices, demands, certifications, requests, communications or the like
required to be given hereunder shall be in writing and shall be deemed to have
been validly served, given or delivered upon delivery thereof by hand, by
messenger or courier service to the respective party at either such party’s
principal place of business.

 
(m)
[INTENTIONALLY OMITTED]

 
 

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(n)
This Note may not be changed, terminated or modified orally or in any manner
other than by an agreement in writing signed by the party or parties sought to
be charged therewith.

 
TIMBERLINE RESOURCES CORPORATION
 

 
By:  /s/ Paul E. Dircksen                    
                                                          
  Authorized Signatory
      Paul E. Dircksen

 
WOLFPACK GOLD CORP.
 

 
By:  /s/ William Sheriff                       
                                                            
  Authorized Signatory
      William Sheriff

 
 

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SCHEDULE A

Grid Promissory Note dated March 14, 2014
by Timberline Resources Corporation
in favour of Wolfpack Gold Corp.

Schedule of advances under the Loan Agreement

Date of Advance
Amount Advanced
 
Principal Paid
Amount of
Principal Balance
 
Entry Made By
March 17, 2014
$500,000
$0
$500,000
Paul Dircksen
                                       

 
Borrower hereby unconditionally and absolutely authorizes and directs Lender to
record all amounts advanced by Lender to Borrower from time to time hereunder on
this Schedule A, provided, however, that failure to make a notation or the
existence of an error in notation with respect to any advance set forth thereon
or the failure to give written confirmation shall not limit or otherwise affect
the obligations of Borrower under this Note.
 
Borrower acknowledges, confirms and agrees with Lender that the date and amount
of each advance recorded on this Schedule A shall be conclusive and binding on
Borrower in the absence of manifest error.

 
 

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SCHEDULE B
 

 
1.
The one percent (1%) net smelter returns royalty from the production of minerals
from the portion of the Project claims covered by Mining Lease (Long Form) dated
December 31, 1975 between Slash Inc. and John M. Robinson (the “Lease”) assigned
to Timberline by CIT Microprobe Holdings, LLC, a Nevada limited liability
company (“CIT”), and two percent (2%) net smelter returns royalty from
production of minerals from the Project claims previously owned by CIT and sold
to Timberline, in each case, pursuant to Section 2.2 of the “Purchase Agreement
– Seven Troughs Property” dated June 20, 2012 by and between CIT and Timberline.

 
 
2.
A one percent (1%) net smelter returns royalty from the production of minerals
from the portion of the Project claims covered by the Lease pursuant to the
terms of the Lease.

 
 

 
 

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