Exhibit 10.1


 


EXECUTION VERSION


 


PURCHASE AND SALE AGREEMENT


 


BY AND AMONG


 


TERRANE METALS CORP.,


 


RGL ROYALTY AG,


 


solely in respect of
Article 10 and Sections  11.4 and 17.15 hereof,


 


ROYAL GOLD, INC.


 


and, solely in respect of
Article 10 and Sections 3.5, 11.2 and 17.14 hereof,


 


THOMPSON CREEK METALS
COMPANY INC.


 


DATED: as of
October 20, 2010


 


 

















 


TABLE OF CONTENTS


 


	
  Article 1
  INTERPRETATION

  	
  2

  
	
  1.1

  	
  Definitions

  	
  2

  
	
  1.2

  	
  Certain Rules of
  Interpretation

  	
  13

  
	
   

  	
   

  	
   

  
	
  Article 2
  PURCHASE AND SALE

  	
  14

  
	
  2.1

  	
  Purchase and Sale of Refined
  Gold

  	
  14

  
	
  2.2

  	
  Delivery Obligations

  	
  14

  
	
  2.3

  	
  Statements

  	
  16

  
	
  2.4

  	
  Gold Purchase Price

  	
  16

  
	
  2.5

  	
  Payment

  	
  17

  
	
  2.6

  	
  Sales Tax

  	
  17

  
	
   

  	
   

  	
   

  
	
  Article 3
  DEPOSIT

  	
  17

  
	
  3.1

  	
  Payment Deposit

  	
  17

  
	
  3.2

  	
  Initial Deposit

  	
  17

  
	
  3.3

  	
  Scheduled Deposits

  	
  17

  
	
  3.4

  	
  No Interest

  	
  17

  
	
  3.5

  	
  Use of Payment Deposit

  	
  17

  
	
  3.6

  	
  Deposit Record

  	
  18

  
	
  3.7

  	
  Deposit at Expiry of Initial
  Term

  	
  18

  
	
   

  	
   

  	
   

  
	
  Article 4
  DELIVERIES

  	
  18

  
	
  4.1

  	
  Deliveries of Vendor

  	
  18

  
	
  4.2

  	
  Deliveries of Purchaser

  	
  19

  
	
   

  	
   

  	
   

  
	
  Article 5
  PAYMENT OF SCHEDULED DEPOSITS

  	
  20

  
	
  5.1

  	
  Achievement of Deposit
  Events

  	
  20

  
	
  5.2

  	
  Payment of Scheduled
  Deposits

  	
  20

  
	
  5.3

  	
  Closing Conditions for
  Payment of Scheduled Deposits

  	
  20

  
	
   

  	
   

  	
   

  
	
  Article 6
  TERM

  	
  22

  
	
  6.1

  	
  Term

  	
  22

  
	
   

  	
   

  	
   

  
	
  Article 7
  REPORTING; BOOKS AND RECORDS; INSPECTIONS

  	
  22

  
	
  7.1

  	
  Monthly Reporting

  	
  22

  
	
  7.2

  	
  Annual Reporting

  	
  22

  
	
  7.3

  	
  Additional Reporting
  Requirements

  	
  22

  
	
  7.4

  	
  Books and Records

  	
  23

  
	
  7.5

  	
  Inspections

  	
  23

  
	
   

  	
   

  	
   

  
	
  Article 8
  COVENANTS

  	
  24

  
	
  8.1

  	
  Conduct of Operations

  	
  24

  
	
  8.2

  	
  Preservation of Corporate
  Existence

  	
  25

  
	
  8.3

  	
  Processing/Commingling

  	
  25

  
	
  8.4

  	
  Mineral Offtake Agreements

  	
  25

  
	
  8.5

  	
  Insurance

  	
  26

  
	
  8.6

  	
  Permitted Financings and
  Permitted Encumbrances

  	
  26

  
	
  8.7

  	
  Confidentiality

  	
  30

  
	
  8.8

  	
  Compliance with Law

  	
  32

  



 

















 


	
  8.9

  	
  Unprocessed Ore

  	
  32

  
	
   

  	
   

  	
   

  
	
  Article 9
  RIGHT OF FIRST OFFER

  	
  32

  
	
  9.1

  	
  Right of First Offer on Gold
  Interest

  	
  32

  
	
   

  	
   

  	
   

  
	
  Article 10
  TRANSFERS AND ASSIGNMENTS

  	
  34

  
	
  10.1

  	
  General

  	
  34

  
	
  10.2

  	
  Transfers to Affiliates

  	
  34

  
	
  10.3

  	
  Transfers of the Milligan
  Project

  	
  34

  
	
  10.4

  	
  Exceptions Based on
  Intercreditor Agreements

  	
  35

  
	
  10.5

  	
  Assignment by Purchaser
  Group

  	
  36

  
	
  10.6

  	
  Assignment by Vendor Group

  	
  36

  
	
   

  	
   

  	
   

  
	
  Article 11
  REPRESENTATIONS AND WARRANTIES

  	
  36

  
	
  11.1

  	
  Representations and
  Warranties of Vendor

  	
  36

  
	
  11.2

  	
  Representations and
  Warranties of Thompson Creek

  	
  36

  
	
  11.3

  	
  Representations and
  Warranties of the Purchaser

  	
  36

  
	
  11.4

  	
  Representations and
  Warranties of Royal Gold

  	
  36

  
	
  11.5

  	
  Survival of Representations
  and Warranties

  	
  37

  
	
  11.6

  	
  Knowledge

  	
  37

  
	
   

  	
   

  	
   

  
	
  Article 12
  VENDOR EVENTS OF DEFAULT

  	
  37

  
	
  12.1

  	
  Vendor Events of Default

  	
  37

  
	
  12.2

  	
  Remedies

  	
  37

  
	
   

  	
   

  	
   

  
	
  Article 13
  PURCHASER EVENTS OF DEFAULT

  	
  38

  
	
  13.1

  	
  Purchaser Events of Default

  	
  38

  
	
  13.2

  	
  Remedies

  	
  38

  
	
   

  	
   

  	
   

  
	
  Article 14
  INDEMNITIES

  	
  39

  
	
  14.1

  	
  Indemnity of Purchaser

  	
  39

  
	
  14.2

  	
  Indemnity of Vendor

  	
  39

  
	
  14.3

  	
  Limited Indemnity for Losses
  Related to Incidental Connection to Property

  	
  39

  
	
  14.4

  	
  Limitations on
  Indemnification

  	
  40

  
	
   

  	
   

  	
   

  
	
  Article 15
  INDEPENDENT ENGINEER; ADDITIONAL PAYMENT TERMS; DISPUTES

  	
  40

  
	
  15.1

  	
  Independent Engineer

  	
  40

  
	
  15.2

  	
  Payments

  	
  41

  
	
  15.3

  	
  Overdue Payments and Set-Off

  	
  41

  
	
  15.4

  	
  Statement Disputes

  	
  41

  
	
  15.5

  	
  Disputes and Arbitration

  	
  43

  
	
   

  	
   

  	
   

  
	
  Article 16
  TAXES

  	
  43

  
	
  16.1

  	
  Taxes

  	
  43

  
	
   

  	
   

  	
   

  
	
  Article 17
  GENERAL

  	
  44

  
	
  17.1

  	
  Further Assurances

  	
  44

  
	
  17.2

  	
  Survival

  	
  44

  
	
  17.3

  	
  No Joint Venture

  	
  44

  
	
  17.4

  	
  Governing Law

  	
  44

  
	
  17.5

  	
  Notices

  	
  44

  



 


ii

















 


	
  17.6

  	
  [Reserved]

  	
  46

  
	
  17.7

  	
  Amendments

  	
  46

  
	
  17.8

  	
  Beneficiaries; Successors
  and Assigns

  	
  46

  
	
  17.9

  	
  Contests

  	
  46

  
	
  17.10

  	
  Entire Agreement

  	
  46

  
	
  17.11

  	
  Waivers

  	
  47

  
	
  17.12

  	
  Severability

  	
  47

  
	
  17.13

  	
  Counterparts

  	
  47

  
	
  17.14

  	
  Thompson Creek Guarantee

  	
  47

  
	
  17.15

  	
  Royal Gold Guarantee

  	
  47

  



 


iii

















 


THIS PURCHASE AND SALE AGREEMENT dated as of October 20, 2010.


 


BY AND AMONG:


 


RGL ROYALTY AG, a Swiss Corporation


 


(the “Purchaser”),


 


- and-


 


TERRANE METALS CORP., a corporation amalgamated under the laws of British
Columbia by amalgamation of 0888046 B.C. Ltd. and Terrane Metals Corp.


 


(the “Vendor”)


 


-and, solely in respect of Article 10 and
Sections 11.4 and 17.15 hereof


 


ROYAL GOLD, INC., a corporation incorporated under the laws of the
State of Delaware


 


(“Royal Gold”)


 


- and, solely in respect of Article 10 and
Sections 3.5, 11.2 and 17.14 hereof


 


THOMPSON CREEK METALS
COMPANY INC., a corporation
incorporated under the laws of British Columbia


 


(“Thompson Creek”)


 


WITNESSES THAT:


 


WHEREAS Vendor has agreed to sell to the Purchaser and the Purchaser has agreed
to purchase from Vendor, an amount of Refined Gold equal to the Designated
Percentage of Produced Gold, subject to and in accordance with the terms and
conditions of this Agreement;


 


AND WHEREAS Vendor is the owner of a 100% interest in and to the Milligan Property;


 


AND WHEREAS capitalized terms when used in these recitals shall have the respective
meanings set forth in Section 1.1.


 


NOW THEREFORE in consideration of the mutual covenants and agreements herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Parties hereto, the Parties
mutually agree as follows:


 

















 


Article 1

INTERPRETATION


 


1.1                               Definitions


 


In this Agreement, including in the recitals
and schedules hereto:


 


“Acquisition”
means the acquisition of all of the outstanding securities of Terrane Metals
Corporation and its interest in the Milligan Project by Thompson Creek pursuant
to the terms of an Arrangement Agreement dated July 15, 2010.


 


“Additional Term”
has the meaning set out in Section 6.1(a).


 


“Affiliate”
means, in relation to any person or entity, any other person or entity
controlling, controlled by or under common control with such first mentioned
person or entity.


 


“Agreement”
means this purchase and sale agreement and all attached schedules, in each case
as the same may be supplemented, amended, restated, modified or superseded from
time to time in accordance with the terms hereof.


 


“Applicable Laws”
means any international, federal, state, provincial, or municipal law,
regulation, ordinance, code, order or other requirement or rule of law or
the rules, policies, orders or regulations of any Governmental Authority or
stock exchange, including any judicial or administrative interpretation
thereof, applicable to a person or any of its properties, assets, business or
operations.


 


“Approvals”
means all authorizations,
clearances, consents, orders and other approvals required to be obtained from
any person, including any Governmental Authority or stock exchange, in connection
with the completion of the transactions contemplated by this Agreement.


 


“Arbitration Rules”
means the rules established pursuant to the International
Commercial Arbitration Act (British
Columbia).


 


“Assignee” has
the meaning set forth in Section 10.1(a).


 


“Assignment” has
the meaning set forth in Section 10.1.


 


“Assignor” has
the meaning set forth in Section 10.1.


 


“Auditor” means
a national Canadian accounting firm, as supported in the discretion of such
accounting firm by a nationally recognized minerals engineering firm, that is
independent of the Parties and their respective Affiliates, and that has
experience and expertise in determining the quantity of gold mined, produced,
extracted or otherwise recovered from mining projects.


 


“Auditor’s Report”
has the meaning set out in Section 15.4(a)(ii).


 


2

















 


“Business Day”
means any day other than a Saturday or Sunday or a day that (i) is a
statutory holiday under the laws of the Province of British Columbia, or
(ii) national banking institutions in New York and Colorado are closed to
the public for conducting business.


 


“Collateral” means
the interest in property created by one or more of the Security Agreements.


 


“Commingling Plan”
has the meaning set out in Section 8.3.


 


“Confidential Information”
has the meaning set out in Section 8.7(a).


 


“Confidentiality Agreement”
means the Mutual Non-Disclosure Agreement between Thompson Creek and Purchaser
effective as of June 1, 2010.


 


“control” means
the right, directly or indirectly, to direct or cause the direction of the
management of the business or affairs of a person, whether by ownership of
securities, by contract or otherwise; and “controls”, “controlling”,
“controlled by” and “under common control with” have corresponding meanings.


 


“CSA” has the
meaning set out in Section 8.7(a)(ii).


 


“Date of Delivery”
has the meaning set out in Section 2.2(c).


 


“Default Deposit Reduction
Date” means the date on which the outstanding balance of the Payment
Deposit, as set forth in the Deposit Record, would have been reduced to nil
assuming for all purposes that no Purchaser Event of Default set forth in
Section 13.1(a) or 13.1(b) occurred or continued.


 


“Definitive Agreement”
has the meaning set out in Section 9.1(b).


 


“Delivery” or “Deliver” means, in respect of a delivery of Refined Gold,
either the crediting of units of gold into a metal account or, if the Vendor
elects to deliver physical gold pursuant to Section 2.2(e), the physical
delivery of Refined Gold to a metal account and “Delivered”
means that such Refined Gold has been so credited or physically delivered.


 


“Deposit Event”
has the meaning set out in Section 5.1.


 


“Deposit Record”
has the meaning set out in Section 3.6.


 


“Deposit Record Report”
has the meaning set out in Section 7.3(d).


 


“Deposit Reduction Time”
means the time at which the outstanding balance of the Payment Deposit, as set
forth in the Deposit Record, is reduced to nil.


 


“Deposit Suspension Event”
means an event that is reasonably beyond the control of the Vendor and its
Affiliates that prevents the Vendor and its Affiliates from continuing to
advance the Development Program, including (i) acts of God, earthquake,
cyclone, fire, 


 


3

















 


explosion, flood, landslide, lightening storm,
tempest, drought or meteor, (ii) war (declared or undeclared), invasion,
act of foreign enemy, hostilities between nations, civil insurrection or
military usurper power, (iii) revolution or act of public enemy, sabotage,
malicious damage, terrorism, insurrection or civil unrest,
(iv) confiscation, nationalisation, requisition, expropriation, embargo,
restraint or damage to property by or under the order of any Governmental
Authority, (v) shortages or inability to obtain fuel, water, electric
power, raw materials, supplies or equipment (vi) transportation
difficulties or handling or loading difficulties at any port or storage
facility, (vii) epidemic or quarantine restrictions, or (viii) an
event having the effect of damaging any part of the Milligan Project,
(ix) strikes, blockades, lock out or other labor dispute, or
(vii) blockades by First Nations groups that substantially prevent or
inhibit ingress or egress to the Milligan Project.


 


“Designated Percentage of
Produced Gold” means, without duplication (i) 25% *[Redacted]*  times the number of ounces of
Produced Gold in the form of concentrate in respect of which the Vendor or any
of its Affiliates receives a Gold Payment, (ii) 25% *[Redacted]*
times the number of ounces of Produced Gold in the form of doré in
respect of which the Vendor or any of its Affiliates receives a Gold Payment,
or (iii) 25% times any Gold Payment received by Vendor or any of
its Affiliates, in respect of Produced Gold that is not in the form of concentrate
or doré.


 


“Development”  means all activities,
operations and work performed for the purpose of or in connection with
construction of the Milligan Facilities through to the point of mechanical
completion of relevant processing facilities as determined in accordance with
the principle Engineering Procurement Construction Management contract (or
equivalent contract) governing the construction of the Milligan Facilities, and
including (i) acquisitions of mineral rights, Surface Rights, water rights,
Permits and other interests necessary for the conduct of construction and
operation of the Milligan Project, (ii) pre-production stripping and
development for the commencement of open pit mining operations, and
(iii) activities undertaken to comply with any legal requirements arising
out of or related to any of the foregoing, all in material accordance with the
Milligan Report as it may be amended from time to time.


 


“Development Program”  means the detailed monthly budget and schedule outlining the Development
in accordance with the mine plan set forth in the Milligan Report and otherwise
prepared in accordance with Schedule D, including an estimate of Project Costs
and showing, without limitation, the material construction, mine development,
equipment acquisitions and Permits to bring the Milligan Project or any part
thereof into commercial production, as amended from time to time.


 


“DIP Financing”
has the meaning set out in Section 8.6(a)(iv).


 


“Dispute Notice”
has the meaning set out in Section 15.4(a)(i).


 






*[Redacted]*
indicates confidential
information that has been omitted in reliance on Rule 24b-2 of the
Securities Exchange Act of 1934.  The
confidential information has been submitted separately to the U.S. Securities
and Exchange Commission.


 


4

















 


“Dispute Period”
has the meaning set out in Section 15.4(a)(i).


 


“Effective Date”
means the date of this Agreement.


 


“Encumbrances”
means any and all mortgages, charges, assignments, hypothecs, pledges, security
interests, liens and other encumbrances and adverse claims of every nature and
kind securing any obligation of any person, whether registered or unregistered.


 


“Environmental
Laws” mean Applicable Laws relating to pollution or protection of
the environment, including, without limitation, Applicable Laws relating to
emissions, discharges, releases of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes into the environment
(including, without limitation, ambient air, surface water, ground water,
aquifers, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes which are applicable to the Milligan
Project, the other assets owned, controlled or managed by the Vendor which are
used on or in connection with the or the Milligan Project or to the activities
of the Vendor on or in connection with the Milligan Project.


 


“Event of
Force Majeure” means an event that is reasonably beyond the control
of a Party and its Affiliates, including (i) acts of God, earthquake,
cyclone, fire, explosion, flood, landslide, lightening storm, tempest, drought
or meteor, (ii) war (declared or undeclared), invasion, act of foreign
enemy, hostilities between nations, civil insurrection or military usurper
power, (iii) revolution or act of public enemy, sabotage, malicious
damage, terrorism, insurrection or civil unrest, (iv) confiscation,
nationalisation, requisition, expropriation, embargo, restraint or damage to
property by or under the order of any Governmental Authority, (v) epidemic
or quarantine restrictions, or (vi) strikes, blockades, lock out or other
labor dispute, or (vii) blockades by First Nations groups that
substantially prevent or inhibit ingress or egress to the Milligan Project.


 


“Financing”
means any of (i) one or more secured corporate credit facility(ies)
provided to the Vendor or any of its Affiliates from time to time that is
secured partially or wholly by the Milligan Project and to which proceeds
thereof may or may not be used for the purpose of financing the Milligan
Project but does not include any unsecured financing or secured financing of
the Vendor or any of its Affiliates that is not secured by the Milligan
Project; and (ii) one or more credit facility(ies) available to the Vendor
or any of its Affiliates from time to time for the purpose of financing the
Milligan Project.


 


“Fixed Price”
means (i) with respect to the first 550,000 aggregate ounces of Refined
Gold sold by the Vendor to the Purchaser hereunder, US$400 per ounce, and
(ii) with respect to each ounce of Refined Gold sold by the Vendor to the
Purchaser hereunder in excess of 550,000 aggregate ounces, US$450 per ounce.


 


“Gold Payment”  means (i) with
respect to Minerals purchased by an Offtaker from the Vendor or any of its
Affiliates, the receipt by the Vendor or any of its Affiliates of payment,
whether provisional or final, or other consideration from the Offtaker in
respect of any Produced Gold, including amounts received in respect of
warehouse holding 


 


5

















 


certificates, and (ii) with respect to
Minerals refined, smelted or otherwise beneficiated by an Offtaker on behalf of
the Vendor or any of its Affiliates, the receipt by the Vendor or any of its
Affiliates of Refined Gold, whether provisional or final settlement, in
accordance with the applicable Mineral Offtake Agreement.


 


“Gold Purchase Price”
has the meaning set out in Section 2.4.


 


“Gold Security Interest”
has the meaning set out in Section 8.6(a)(i).


 


“Governmental Authority”
means any federal, provincial or local government, agency, department,
ministry, authority, tribunal, commission, official, court or securities
commission.  For the avoidance of doubt,
Governmental Authority shall not be deemed to include First Nations.


 


“Haslinger Royalty”
means the net smelter returns payable by Vendor to Richard Haslinger pursuant
to the Agreement between Richard Haslinger and Lincoln Resources Ltd. dated the
16th day of July, 1986, amended by the Amendment to
Agreement between Lincoln Resources Inc. and Richard Haslinger initially
hand-written and dated July 18, 1988 and subsequently typed and executed
but not dated, to which agreement the Vendor is now a party as successor in
title to Lincoln Resources Ltd. and Lincoln Resources Inc.


 


“Independent Engineer”
has the meaning set out in Section 15.1.


 


“Initial Term”  has the meaning set
out in Section 6.1(a).


 


“Insolvency Event”
means the making of an assignment for the benefit of creditors by a Party or a
Party becoming the voluntary or involuntary subject of any proceedings under
any bankruptcy or insolvency law, which proceedings remain undischarged for a
period of 30 days, or if a receiver or receiver/manager is appointed for all or
any substantial part of the property and business of a Party and such receiver
or receiver/manager remains undischarged for a period of 30 days, or if the
corporate existence of a Party is terminated by voluntary or involuntary
dissolution or winding-up (other than by way of amalgamation or
reorganization).


 


“Intermediate Intercreditor
Agreement” has the meaning set out in Section 8.6(b).


 


“Lenders” means
the lenders and their agents and trustees under any Financing.


 


“Lender Security”  means Encumbrances (including Permitted Encumbrances) in
favour of any Lenders (or agent or trustee on their behalf) as security for the
payment and performance, when due, of the obligations of Vendor or any of its
Affiliates under any Financing.


 


“LIBO Rate”
means for any calendar month the British Bankers’ Association Interest
Settlement Rate for US Dollars for an interest period of three months displayed
and identified on the Reuters Screen LIBOR 01 Page at approximately 10:00
am (Toronto time) on the first Business Day of that month, provided however, if
such rate does not appear on the Reuters Screen LIBOR 01 Page at that
time, then the “LIBO Rate” for that 


 


6
















 


calendar month shall be the six month LIBO Rate
(determined as at 10:00 am (Toronto time) on such Business Day) as quoted to
the Purchaser by a major UK bank.


 


“Losses” has the
meaning set out in Section 14.1.


 


“Lot” means the
applicable quantity of Minerals delivered to and accepted by an Offtaker, that
is separately sampled and assayed so that Vendor and the applicable Offtaker
can agree upon the content of some or all of the relevant Minerals therein, all
as set forth in the applicable Mineral Offtake Agreement.


 


“Lot Provisional Percentage”
means for Lots in which a provisional payment pursuant to
Section 2.2(a)(ii) is applicable, *[Redacted]*.


 


“Material Adverse Effect”
means any event, occurrence, change or effect that, when taken individually or
together with all other events, occurrences, changes or effects, is or could
reasonably be expected to:


 


(a)                                  materially
limit, restrict or impair the ability of Vendor to perform its obligations
under this Agreement;


 


(b)                                 limit,
restrict or impair the ability of Vendor to operate the Milligan Project
substantially in accordance with the mine plan for the Milligan Project in
effect at the time of the occurrence of the Material Adverse Effect; or


 


(c)                                  cause
any significant decrease to expected gold production from the Milligan Project
based on the mine plan for the Milligan Project in effect at the time of the
occurrence of the Material Adverse Effect.


 


“Milligan Facilities”
means the mining, processing, production, maintenance, administration,
infrastructure and related ancillary infrastructure constructed or operated by
the Vendor and its Affiliates to extract and beneficiate Minerals on the
Milligan Property.


 


“Milligan Gold Right”
has the meaning set forth in Section 9.1(a).


 


“Milligan Project”
means collectively, the Milligan Property and the Milligan Facilities.


 


“Milligan Property”
means the Mineral Claims and the Mining Lease listed in Schedule B
attached hereto, and includes any extension, renewal, replacement, conversion
or substitution of any such Mineral Claims into a Mining Lease, Surface Rights
or other right or concession or after acquired or resulting Mining Lease,
Mineral Claims, Surface Rights and other rights or concessions, including any
re-acquired after abandonment or other disposition, but in every case without
extending the area covered 


 






*[Redacted]* indicates confidential information that has been omitted in reliance on
Rule 24b-2 of the Securities Exchange Act of 1934.  The confidential information has been
submitted separately to the U.S. Securities and Exchange Commission.


 


7

















 


by the Milligan Property past the area covered
by the Mineral Claims and the Mining Lease listed in Schedule B.


 


“Milligan Report”
means the Technical Report pursuant to National Instrument 43-101 of the CSA of
Terrane Metals Corp. dated October 13, 2009, entitled “Technical Report —
Feasibility Update Mt. Milligan Property — Northern BC” or such other technical
report under National Instrument 43-101 as Thompson Creek may prepare from time
to time regarding the Milligan Project that establishes a mine plan for initial
commercial production of Minerals from the Milligan Property, provided that
such mine plan does not establish production at a materially lower volume or
materially extend the Development schedule compared to that contemplated in the
Milligan Report on the Effective Date.


 


“Mineral Claim”
means a mineral claim issued under the Mineral Tenure Act
(British Columbia) or any successor statute thereto or by any Governmental
Authority.


 


“Mineral Offtake Agreement”
means any agreement entered into by Vendor or any of its Affiliates with an
Offtaker (i) for the sale of Minerals to such Offtaker, or (ii) for
the smelting, refining or other beneficiation of Minerals by such Offtaker for
the benefit of the Vendor or any of its Affiliates, and all amendments or
addendums thereto.


 


“Minerals” means
any and all marketable metal bearing material (including Produced Gold) in
whatever form or state that is mined, produced, extracted or otherwise
recovered from the Milligan Property, including any such material derived from
any processing or reprocessing of any tailings, waste rock or other waste
products originally derived from the Milligan Property, and including ore and any
other products requiring further milling, processing, smelting, refining or
other beneficiation, including concentrates or doré bars.


 


“Mining Lease”
means a mining lease issued under the Mineral Tenure Act
(British Columbia) or any successor statute thereto or by any Governmental
Authority.


 


“Monthly Construction Report”  means a written report in relation to a calendar month with respect to
the Milligan Project prepared by the engineering, procurement and construction
management contractor and any other internally-prepared monthly report covering
aspects of the Development Program but not included in the engineering,
procurement and construction management report, together with such other
materials and information as the Purchaser reasonably may request, which may
include a summary of any (A) material health and safety violations,
(B) material violations of Applicable Law (including Environmental Laws),
(C) blockades or other disputes or disturbances with First Nations groups,
and (D) a summary of the status of Permits and Permit applications, to be
prepared by or on behalf of the Vendor for each month while the Milligan
Project is under Development.


 


“Monthly Report”  means a written
report in relation to a calendar month prepared by the Vendor or its Affiliates
with respect to the Milligan Project, together with such other materials and
information as the Purchaser reasonably may request, which may include:


 


(i)                                     a summary of the types,
tonnes or tons and gold grade of ore mined;


 


8

















 


(ii)                                  types, tonnes or tons and gold grade of any
ore stockpiled;


 


(iii)                               with respect to any processing plant of the
Milligan Facilities, the types, tonnes or tons and gold grade of processed ore;
recoveries for gold; dry concentrate tonnage or tonage and gold grades; and
doré weight and gold grade;


 


(iv)                              the number of ounces of gold contained in ore
processed during such month, but not delivered to an Offtaker by the end of
such month; and


 


(v)                                 such other matters as the Purchaser may reasonable request, which may
include a summary of any (A) exploration programs, (B) operational
issues, (C) material health and safety violations, (D) material
violations of Applicable Law (including Environmental Laws), (E) blockades
or other disputes or disturbances with First Nations groups, and (F) a
summary of the status of Permits and Permit applications.


 


“Nak’azdli Litigation” means the Supreme Court of British Columbia (S-094721) and
Federal Court of Canada (T-23-10) actions initiated by the Nak’azdli First
Nation.


 


“Negotiation Period”
has the meaning set out in Section 9.1(b).


 


“Offtaker” means
any person other than the Vendor or any of its Affiliates that is a
counterparty to a Mineral Offtake Agreement or an Affiliate of the Vendor who
contracts with the Vendor on arm’s length commercial terms in respect of the
applicable Mineral Offtake Agreement.


 


“Offtaker Documents”
means the provisional documents and final settlement sheets delivered to or in
the possession of the Vendor that are necessary for the Purchaser to determine
the amount of Refined Gold sold by the Vendor to the Purchaser pursuant to
Section 2.1(a) and such other related documents delivered to or in
the possession of the Vendor as the Purchaser may reasonably request, which may
include all invoices, credit notes, bills of lading, and any and all
certificates and other documentation prepared or produced by the Offtaker,
including without limitation, certificates in respect of provisional and final
shipped moisture content, all provisional and final analyses and assays
evidencing the amount of Minerals, including Produced Gold, delivered to an
Offtaker in each Lot and evidencing the amount of Refined Gold projected or
resulting from the refining, smelting or other beneficiation of a particular
Lot.


 


“Other Minerals”
means any and all marketable metal bearing material in whatever form or state
(including ore) that is mined, extracted or otherwise recovered from any
location that is not within the Milligan Property.


 


“Parties” means
the parties to this Agreement.


 


“Payment Deposit” has
the meaning set forth in Section 3.1.


 


“Permits” means
all material licenses, permits, Approvals (including environmental Approvals)
rights (including surface and access rights), privileges, concessions or 


 


9

















 


franchises necessary for the construction,
development, operation and reclamation of the Milligan Project.


 


“Permitted Encumbrances”
means at any time from time to time: (i) the Lender Security,
(ii) undetermined or inchoate Encumbrances incidental to construction,
maintenance or operations which have not at the time been filed pursuant to
law, (iii) the Encumbrance of taxes and assessments for the then current
year, the Encumbrance for taxes and assessments not at the time overdue and
Encumbrances securing worker’s compensation assessments which are not overdue,
(iv) cash or governmental obligations deposited in the ordinary course of
business in connection with contracts, bids, tenders or to secure worker’s
compensation, unemployment insurance, surety or appeal bonds, costs of
litigation, when required by law, public and statutory obligations,
Encumbrances or claims incidental to current construction, mechanics’,
warehousemen’s, carriers’ and other similar Encumbrances, (v) security
given in the ordinary course of business to a public utility or any
Governmental Authority when required by such utility or Governmental Authority
in connection with the operations of the Vendor in the ordinary course of
business, (vi) easements, rights of way and servitudes in existence at the
date hereof and future easements, rights of way and servitudes, (vii) all
rights reserved to or vested in any Governmental Authority by the terms of any
lease, licence, franchise, grant or permit held by the Vendor or by any
statutory provision to terminate any such lease, licence, franchise grant or
permit or to require annual or periodic payments as a condition of the
continuance thereof or to distrain against or to obtain an Encumbrance on any
property or assets of the Vendor in the event of failure to make such annual or
other periodic payments, (viii) such other Encumbrances as may from time
to time be consented to in writing by the Purchaser, and (ix) Encumbrances
noted on Schedule E.


 


“person”
includes an individual, corporation, body corporate, limited or general
partnership, joint stock company, limited liability corporation, joint venture,
association, company, trust, bank, trust company, Governmental Authority or any
other type of organization, whether or not a legal entity.


 


“Produced Gold” means any and all gold in whatever form or
state that is derived from any material mined, produced, extracted or otherwise
recovered from the Milligan Property during the Term.  For greater certainty, “Produced
Gold” shall include any gold derived from ores, concentrates, doré, tailings, waste rock or other waste products, or other products
originating from the Milligan Property.


 


“Project Costs”  means the estimated
total costs for the Development, including capital costs, operating costs,
working capital costs, interest costs, and financing costs.


 


“Project Studies”
has the meaning set out in Section 7.3(c).


 


“Proposed Intercreditor
Agreement” has the meaning set out in Section 8.6(b).


 


“Purchaser” has
the meaning set out in the recitals to this Agreement.


 


“Purchaser Event of Default”
has the meaning set out in Section 13.1.


 


10

















 


“Purchaser Gold Delivery”
means the Delivery of Refined Gold to the Purchaser as set out in
Section 2.2(a).


 


“Purchaser’s Pro Rata Share
of Funding” means the figure
obtained by dividing the remaining Scheduled Deposits by the Project Costs
necessary to complete Development.


 


“Receiving Party”
has the meaning set out in Section 8.7(a).


 


“Reference Price”
means the market price used to determine the price for Refined Gold in
connection with a sale of Minerals under a Mineral Offtake Agreement.  For greater certainty, “Reference Price” does
not include Refining Adjustments.


 


“Refining Adjustments”
means any refining charges, treatment charges, penalties, insurance charges,
transportation charges, settlement charges, financing charges or price
participation charges, or other similar charges or deductions, regardless of
whether such charges or deductions are expressed as a specific metal deduction,
separate and apart from the recovery rate pursuant to the terms of the
applicable Mineral Offtake Agreement.


 


“Refined Gold”
means marketable metal bearing material in the form of gold bars or coins that
is refined to a minimum 995 parts per 1,000 fine gold.


 


“Restricted Person”
means any person or entity that:


 


(a)                                  is
named, identified, described on or included on any of:


 


(i)                                     the lists maintained by the
Office of the Superintendent of Financial Institutions Canada with respect to
terrorism financing;


 


(ii)                                  the Denied Persons List, the
Entity List or the Unverified List, compiled by the Bureau of Industry and
Security, U.S. Department of Commerce;


 


(iii)                               the List of Statutorily
Debarred Parties compiled by the U.S. Department of State;


 


(iv)                              the Specially Designated
Nationals Blocked Persons List compiled by the U.S. Office of Foreign Assets
Control; or


 


(v)                                 the annex to, or is
otherwise subject to the provisions of, U.S. Executive Order No. 13324,


 


(b)                                 is
subject to trade restrictions under United States law, including, but not
limited to:


 


(i)                                     the International Emergency Economic Powers Act, 50 U.S.C.; or


 


(ii)                                  the Trading with the Enemy
Act, 50 U.S.C. App. 1 et seq.; or any other enabling legislation or executive
order relating thereto, including the Uniting and Strengthening America by
Providing Appropriate Tools 


 


11

















 


Required to Intercept and Obstruct Terrorism Act of
2001, Title III of Pub. L. 107-56; or


 


(c)                                  is
a person or entity who is an Affiliate of a person or entity listed above.


 


“Sales Tax”
has the meaning set out in Section 2.6.


 


“SEC”
has the meaning set out in Section 8.7(a)(ii).


 


“Security Agreements”
has the meaning set out in Section 4.1(b).


 


“Stipulation and Proposal”
has the meaning set out in Section 8.6(b).


 


“Surface Rights”
means all rights to use, enter and occupy the surface of a Mineral Claim or
Mining Lease for the exploration and development or production of Minerals or
placer minerals, including the treatment of ore and concentrates, and all
operations related to the exploration and development or production of Minerals
or placer minerals and the business of mining, and all leases, licenses,
contracts, agreements, Permits or other documents relating to such rights,
including without limitation, any and all surface rights related to
infrastructure such as electric power lines and roads, surface tenures issued
by a Governmental Authority such as investigative permits and temporary
permits, and any lease to the surface of the Milligan Property or license of
occupation or other occupation right and includes any fee simple rights over
any part of the Milligan Property.


 


“Technical Reports” means the: (i) Technical Report on the Mount Milligan
Project Omenica Mining District British Columbia NTS 94N/1, 93O/4 Latitude 55o
07’ N, Longitude 124o 01’ W prepared by Gary Lustig, MSc, P. Geo, Darin
Labrenz, BSc, MAusIMM and Darren O’Brien BSc, P. Geo in June 2007; (ii) Technical
Report Mt. Milligan Property — Northern BC prepared by Karla Mills, P. Eng,
Gilles Arseneau, Ph.D., P. Geo. and Peter Wells, A.Sc.T., B.Comm. on
October 29, 2007; (iii) Technical Report — Feasibility Mt. Milligan
Property — Northern prepared by Karla Mills, P. Eng, Gilles Arseneau, Ph.D., P.
Geo. and Peter Wells, A.Sc.T., B.Comm. April 11, 2008; (iv) Technical
Report Mt. Milligan Project Resource Report Omenica Mining District British
Columbia NTS 94N/1, 93O/4 Latitude 55o 07’ N, Longitude 124o 01’ prepared by
WJianhui Huang, Ph. D, P. Eng, on October 2, 2007; (v) Technical
Report — Feasibility Update Mt. Milligan Property — Northern BC prepared by:
Karla Mills, P. Eng. John Huang, P. Eng., Grant Bosworth, P. Eng., Scott Cowie,
MAusIMM, Bruno Borntraeger, P. Eng., Herb Welhener, MMSA-QPM, Jay Collins, P.
Eng., Tim Bekhuys, R.P.Bio., and Darin Labrenz, P. Geo. on October 13,
2009; and (vi) Technical Report on the Mount Milligan Project Omenica
Mining District British Columbia prepared by Gary Lustig, MSc, P. Geo G. N., in
June 2006.


 


“Term” has the
meaning set out in Section 6.1(a).


 


“Thompson Creek”
has the meaning set out in the recitals to this Agreement.


 


“Time of Delivery”
has the meaning set out in Section 2.2(c).


 


12

















 


“Transfer” has
the meaning set forth in Section 10.3.


 


“Vendor” has the
meaning set out in the recitals to this Agreement.


 


“Vendor Event of Default”
has the meaning set out in Section 12.1.


 


“Vendor Offer”
has the meaning set out in Section 9.1(a).


 


1.2                               Certain
Rules of Interpretation


 


Except as may be otherwise specifically
provided in this Agreement and unless the context otherwise requires:


 


(a)                                  the
terms “Agreement”, “this Agreement”, “the Agreement”, “hereto”, “hereof”,
“herein”, “hereby”, “hereunder” and similar expressions refer to this Agreement
in its entirety and not to any particular provision hereof;


 


(b)                                 references
to an “Article”, “Section” or “Schedule” followed by a number or letter refer
to the specified Article or Section of or Schedule to this Agreement;


 


(c)                                  headings
of Articles and Sections are inserted for convenience of reference only and
shall not affect the construction or interpretation of this Agreement;


 


(d)                                 where
the word “including” or “includes” is used in this Agreement, it means
“including without limitation” or “includes without limitation”;


 


(e)                                  the
language used in this Agreement is the language chosen by the Parties to
express their mutual intent, and no rule of strict construction shall be
applied against any Party;


 


(f)                                    unless
the context otherwise requires, words importing the singular include the plural
and vice versa and words importing gender include all genders;


 


(g)                                 a
reference to a statute includes all regulations made pursuant to such statute
and, unless otherwise specified, any reference to a statute or regulation
includes the provisions of any statute or regulation which amends, supplements
or supersedes any such statute or any such regulation;


 


(h)                                 in
this Agreement a period of days shall be deemed to begin on the first day after
the event which began the period and to end at 5:00 p.m. (Mountain time)
on the last day of the period. If, however, the last day of the period does not
fall on a Business Day, the period shall terminate at 5:00 p.m. (Mountain
time) on the next Business Day;


 


(i)                                     unless
specified otherwise in this Agreement, all statements or references to dollar
amounts in this Agreement are to United States of America dollars; and


 


(j)                                     the
following schedules are attached to and form part of this Agreement:


 


	
  Schedule A1

  	
  -

  	
  Vendor Representations and Warranties

  



 


13

















 


	
  Schedule A2

  	
  -

  	
  Thompson Creek Representations and Warranties

  
	
  Schedule A3

  	
  -

  	
  Purchaser Representations and Warranties

  
	
  Schedule A4

  	
  -

  	
  Royal Gold Representations and Warranties

  
	
  Schedule B

  	
  -

  	
  Description of Milligan Property (with Maps)

  
	
  Schedule C1

  	
  -

  	
  Form of Security Agreement for Milligan
  Property

  
	
  Schedule C2

  	
  -

  	
  Form of Security Agreement for Personal
  Property

  
	
  Schedule C3

  	
  -

  	
  Form of Security Agreement - Floating
  Charge

  
	
  Schedule D

  	
  -

  	
  Development Program and Scheduled Deposits

  
	
  Schedule E

  	
  -

  	
  Permitted Encumbrances

  
	
  Schedule F

  	
  -

  	
  Provisional Payment Illustration

  



 


Article 2

PURCHASE AND SALE


 


2.1                               Purchase and Sale of Refined
Gold


 


(a)                                  Subject
to and in accordance with the terms of this Agreement, the Vendor hereby agrees
to sell to the Purchaser, and the Purchaser hereby agrees to purchase from the
Vendor, an amount of Refined Gold equal to the Designated Percentage of
Produced Gold, free and clear of all Encumbrances.


 


(b)                                 For
each sale of Refined Gold pursuant to Section 2.1(a), the amount of
Produced Gold used as the basis for calculating the Designated Percentage of
Produced Gold shall be determined by the amount of contained gold in the Minerals
received at the Offtaker as determined by the Offtaker Documents.  Produced Gold shall not be reduced for, and
the Purchaser shall not be responsible for, any Refining Adjustments.


 


2.2                               Delivery Obligations


 


(a)                                  The
Vendor will sell and Deliver to Purchaser the Refined Gold as contemplated in
Section 2.1(a) within two Business Days following the date of the
relevant Gold Payment.  In the event a
Gold Payment consists of a provisional payment, then:


 


(i)                                     if such Gold Payment
represents a provisional payment in respect of a Lot under a Mineral Offtake
Agreement that is made in the form of Refined Gold, the Vendor shall sell and
Deliver to the Purchaser Refined Gold equal to the Designated Percentage of
Produced Gold for such Lot multiplied by the applicable provisional payment
percentage specified in such Mineral Offtake Agreement;


 


(ii)                                  if such Gold Payment
represents a provisional payment in cash in respect of a Lot under a Mineral
Offtake Agreement, the Vendor shall sell and Deliver to the Purchaser Refined
Gold equal to the Designated Percentage of Produced Gold (based on the Produced
Gold identified on the provisional settlement sheet provided by the Offtaker
for such Lot) multiplied by the applicable Lot Provisional Percentage;


 


14

















 


(iii)                               *[Redacted]*;


 


(iv)                              in respect of a Gold Payment
that represents the final settlement payment under a Mineral Offtake Agreement
for any Lot for which the Vendor previously Delivered Refined Gold to the
Purchaser in connection with a provisional Gold Payment pursuant to
Section 2.2(a)(i), 2.2(a)(ii) or 2.2(a)(iii) above, the Vendor
shall sell and Deliver to the Purchaser Refined Gold in an amount equal to the
amount by which the Designated Percentage of Produced Gold determined pursuant
to the final settlement with respect to such Lot exceeds the Refined Gold
previously Delivered to the Purchaser in respect of such Gold Payment pursuant
to Sections 2.2(a)(i), 2.2(a)(ii) or 2.2(a)(iii) above, as supported
by the documentation provided pursuant to Section 2.3, provided, that, if
such difference is negative, then the Vendor shall only be entitled to set off
and deduct such excess amount of Refined Gold from the next required Deliveries
by the Vendor under this Agreement until it has been fully offset against
Deliveries to the Purchaser of Refined Gold pursuant to Sections 2.2(a)(i),
2.2(a)(ii) and 2.2(a)(iii); and


 


(v)                                 Schedule F sets forth an
illustration of the determination of Refined Gold to be Delivered to the
Purchaser in the case of a provisional Gold Payment described in Sections
2.2(a)(ii) and 2.2(a)(iii) above and the Gold Payment representing a
final settlement payment in respect of the same Lot.


 


For the avoidance of doubt, in the event that the Vendor does not Deliver
Refined Gold to the Purchaser in connection with a provisional Gold Payment
with respect to any Lot, the Vendor will effect the sale to the Purchaser of
Refined Gold with respect to such Lot as contemplated in
Section 2.1(a) within two Business Days following the date of the
Gold Payment in the form of a final settlement for such Lot.


 


(b)                                 Vendor
shall sell and Deliver to the Purchaser all Refined Gold to be sold and
Delivered under this Agreement by way of Delivery to the metal account or
accounts designated by the Purchaser from time to time in North America, the
United Kingdom or Switzerland or such other location as is mutually agreed by
the Parties (the “Purchaser Gold Delivery”).


 


(c)                                  Delivery
of Refined Gold to the Purchaser shall be deemed to have been made at the time
on the date of Delivery of Refined Gold in the designated metal account of the
Purchaser pursuant to paragraph (b) (the “Time of Delivery” on the “Date
of Delivery”). Title to, and risk of loss of, Refined Gold shall
pass from Vendor to the Purchaser at the Time of Delivery. All costs and
expenses pertaining to 


 






*[Redacted]* indicates confidential information that has been omitted in reliance on
Rule 24b-2 of the Securities Exchange Act of 1934.  The confidential information has been
submitted separately to the U.S. Securities and Exchange Commission.


 


15

















 


each Delivery of Refined
Gold by Vendor to the Purchaser shall be borne by Vendor.


 


(d)                                 Vendor
hereby represents and warrants to the Purchaser that, notwithstanding the
Vendor’s prior sale to Offtaker of Minerals from which the relevant Refined
Gold is derived, at each Time of Delivery (i) Vendor will be the legal and
beneficial owner of the Refined Gold that is Delivered to a metal account of
the Purchaser, (ii) Vendor will have good, valid and marketable title to
such Refined Gold, and (iii) such Refined Gold will be free and clear of
all Encumbrances.


 


(e)                                  The
Parties acknowledge that Vendor shall be entitled but shall not be obliged to
sell or Deliver to the Purchaser the Refined Gold physically resulting from
gold mined, produced, extracted or otherwise recovered from the Milligan
Property, and for greater certainty, shall be entitled to sell and Deliver
Refined Gold that is otherwise obtained by the Vendor for the purpose of making
such sale and Delivery to the Purchaser.


 


2.3                               Statements


 


Vendor shall notify the Purchaser in writing of
a Purchaser Gold Delivery, no later than the Time of Delivery, by delivery of a
statement to the Purchaser that includes:


 


(a)                                  the
calculation of the number of ounces of Refined Gold credited or physically
Delivered;


 


(b)                                 the
Offtaker Documents on which the calculation is based;


 


(c)                                  the
Date of Delivery and estimated Time of Delivery;


 


(d)                                 the
Gold Purchase Price for such Refined Gold; and


 


(e)                                  the
Mineral Offtake Agreement under which such delivery was made.


 


2.4                               Gold Purchase Price


 


The Purchaser shall pay to the Vendor a
purchase price for each ounce of Refined Gold sold and Delivered by the Vendor
to the Purchaser under this Agreement (the “Gold Purchase Price”)  equal to:


 


(a)                                  prior
to the Deposit Reduction Time, the Reference Price, payable by wire transfer up
to the amount of the Fixed Price; and, if such Reference Price is greater than
the Fixed Price, payable by applying an amount equal to the difference between
such Reference Price and the Fixed Price against the Payment Deposit in order
to reduce the outstanding balance of the Payment Deposit, as set forth in the
Deposit Record, until the outstanding balance of the Payment Deposit has been
reduced to nil; and


 


(b)                                 from
and after the Deposit Reduction Time, the lesser of the Fixed Price and the
Reference Price, payable by wire transfer.


 


16
















 


2.5                               Payment


 


Payment by the Purchaser for each Delivery of
Refined Gold shall be made no later than two Business Days after the applicable
Purchaser Gold Delivery by wire transfer to a bank account of the Vendor
designated in accordance with Section 15.2.


 


2.6                               Sales Tax


 


All federal, provincial, state and foreign
sales and transfer taxes, sales and use taxes, goods and services taxes,
value-added taxes, duties, fees, registration charges or other like charges (“Sales Taxes”) which are properly payable in
connection with the purchase and sale of the Refined Gold contemplated by this
Agreement shall be borne by the Party responsible for such Sales Taxes under
the Applicable Law.  Each party shall cause to be filed as required by it
under Applicable Law all tax returns and other documentation, at its own
expense, with respect to such Sales Taxes.


 


Article 3

DEPOSIT


 


3.1                               Payment Deposit


 


The Purchaser hereby agrees to pay a cash
deposit of US$311,500,000 to be applied against the Gold Purchase Price, on and
subject to the terms of this Agreement (the “Payment
Deposit”).  The Purchaser
shall only have the right to demand refund or repayment of all or any
outstanding balance of the Payment Deposit as provided in Section 3.7 or
as otherwise specifically provided in this Agreement.


 


3.2                               Initial Deposit


 


The Purchaser hereby agrees to pay
US$226,500,000 of the Payment Deposit by wire transfer to the Vendor on the
Effective Date (this portion of the Payment Deposit being the “Initial Deposit”).


 


3.3                               Scheduled Deposits


 


The Purchaser hereby agrees to pay
US$85,000,000 of the Payment Deposit (this portion of the Payment Deposit being
the “Scheduled Deposits”, and each partial
payment thereof a “Scheduled Deposit”)
to the Vendor by way of cash deposits in accordance with Article 5.  Once a Scheduled Deposit has been paid, such
Scheduled Deposit shall be referred to herein as a “Paid
Scheduled Deposit.”


 


3.4                               No Interest


 


No interest shall be payable on the Payment
Deposit.


 


3.5                               Use of Payment Deposit


 


It is agreed and acknowledged that Thompson
Creek and the Vendor shall only use the Payment Deposit as follows:


 


17

















 


(a)                                 the
Initial Deposit will be used as a portion of the consideration payable to
shareholders of Vendor by Thompson Creek in connection with the Acquisition;
and


 


(b)                                 the
Scheduled Deposits will be used for Vendor’s funding requirements with respect
to the Development pursuant to the Development Program.


 


3.6                               Deposit Record


 


The Vendor shall, at all times, maintain a
record of the Payment Deposit under this Agreement (the “Deposit
Record”), which shall be stated in US$ and the balance thereof shall
be equal to:


 


(Initial Deposit) + (all Paid Scheduled
Deposits) – (all reductions of the Payment Deposit in accordance with
Section 2.4, 3.7 or otherwise)


 


3.7                               Deposit at Expiry of Initial
Term


 


Vendor shall pay any outstanding balance of the
Payment Deposit, as evidenced by the Deposit Record, by wire transfer to the
Purchaser within 45 days after the expiry of the Initial Term, and shall
provide a detailed calculation of the Deposit Record on the expiry of the
Initial Term (other than the expiry of the Term due to termination of this
Agreement under Section 12.2 or Section 13.2) unless the Vendor has
sold and Delivered to the Purchaser an amount of Refined Gold sufficient to
reduce the balance of the Payment Deposit, as set forth in the Deposit Record,
to nil as calculated in accordance with Section 3.6.


 


Article 4

DELIVERIES


 


4.1                               Deliveries of Vendor


 


The Vendor hereby agrees to deliver to the
Purchaser the following concurrent with execution and delivery of this
Agreement:


 


(a)                                 an
executed certificate of a senior officer of Vendor in form and substance
satisfactory to the Purchaser, acting reasonably, dated as of the Effective
Date, as to: (i) resolutions of the board of directors or other comparable
authority of Vendor authorizing the execution, delivery and performance of this
Agreement, and the Security Agreements and the transactions contemplated
hereby, (ii) the names, positions and true signatures of the persons
authorized to sign this Agreement and the Security Agreements on behalf of
Vendor, and (iii) such other matters pertaining to the transactions
contemplated hereby as the Purchaser may reasonably require;


 


(b)                                 as
security for the performance of its obligations to the Purchaser under this
Agreement, the executed Security Agreements in substantially the form attached
as Schedules C1, C2 and C3 (the “Security
Agreements”), which Security Agreements shall have been registered,
filed or recorded in all offices, and all actions shall have been taken, that
may be prudent or necessary to preserve, protect or perfect the security
interest of the Purchaser under the Security 


 


18

















 


Agreements.  Without limiting the foregoing, the Security
Agreements on the Milligan Property shall also be registered in:
(i) British Columbia’s Mineral Titles Online Registry against each of the
Mineral Claims and Mineral Leases that are part of the Milligan Property,
(ii) British Columbia’s Personal Property Registry against all personal
property of Vendor, and (iii) in the Land Title Office with respect to any
Surface Rights that are registered in the Land Title Office from time to time,
in which case the Vendor will grant to the Purchaser a mortgage over its
interest in such Surface Rights as security for the performance of its
obligations to the Purchaser under this Agreement in a form acceptable to the
Parties, acting reasonably;


 


(c)                                  a
favourable legal opinion, in form and substance satisfactory to the Purchaser,
acting reasonably, dated as of the Effective Date, from legal counsel to Vendor
as to (i) the legal status of Vendor, (ii) the corporate power and
authority of Vendor to execute, deliver and perform this Agreement and the
Security Agreements, (iii) the execution and delivery of this Agreement
and the enforceability of this Agreement against the Vendor, (iv) such
legal opinions relating to the security granted in favour of the Purchaser as
Purchaser may reasonably request, and (v) such other legal opinions that
the Purchaser may reasonably request; and


 


(d)                                 evidence
of arrangements, satisfactory to the Purchaser, for the satisfaction and
discharge of the following charges in favour of the Bank of Montreal and
related obligations of the Vendor:


 


(i)                                     Base Registration
No. 478928E in the British Columbia Personal Property Registry;


 


(ii)                                  Registration No. 123380
in the Nunavut Personal Property Registry;


 


(iii)                               Registration
No. 2008/07039 14865 in the Yukon Personal Property Registry; and


 


(iv)                              Registration No. 625251
in the Northwest Territories Personal Property Registry.


 


4.2                               Deliveries of Purchaser


 


Purchaser hereby agrees to deliver to Vendor
the following concurrent with execution and delivery of this Agreement:


 


(a)                                 wire
transfer of funds to or to the direction of Vendor equal to the Initial
Deposit;


 


(b)                                 a
certificate of a senior officer of the Purchaser, in form and substance
satisfactory to Vendor, acting reasonably, as to: (i) the resolutions of
the board of directors of the Purchaser, authorizing the execution, delivery
and performance of this Agreement and the transactions contemplated hereby,
(ii) the names, positions and true signatures of the persons authorized to
sign this Agreement on behalf of the Purchaser, and (iii) such other
matters pertaining to the transactions contemplated hereby as Vendor may
reasonably require; and


 


19

















 


(c)                                  a
favourable legal opinion, in form and substance satisfactory to Vendor, acting
reasonably, from external legal counsel to the Purchaser as to (i) the
legal status of the Purchaser, (ii) the corporate power and authority of
the Purchaser to execute, deliver and perform this Agreement, (iii) the
execution and delivery of this Agreement and the enforceability of this
Agreement against the Purchaser, and (iv) such other legal opinions as the
Vendor may reasonably request.


 


Article 5

PAYMENT OF SCHEDULED DEPOSITS


 


5.1                               Achievement of Deposit
Events


 


Vendor may, from time to time, demand payment
by Purchaser to Vendor of a Scheduled Deposit in accordance with the
requirements set forth in Schedule D (a “Deposit Event”)
by providing to the Purchaser and the Independent Engineer a statement
containing the following at least 10 calendar days prior to the relevant
Deposit Event:


 


(a)                                 the
date of the Deposit Event;


 


(b)                                 an
accounting of the amount of Project Costs to date contributed by each of
Purchaser, Vendor, and any third party funding the Development;


 


(c)                                  an
estimate of the amount of Project Costs necessary to complete the Development
in accordance with the Development Program and any modifications thereto;


 


(d)                                 a
current calculation of the Purchaser’s Pro Rata Share of Funding;


 


(e)                                  Vendor’s forecast of the total Project Costs to be
incurred during the period of time encompassing the corresponding Scheduled
Deposit;


 


(f)                                   the
amount of United States dollars requested for the corresponding Scheduled
Deposit;


 


(g)                                  the
anticipated uses for the corresponding Scheduled Deposit; and


 


(h)                                 the
expected date of the next ensuing Deposit Event.


 


5.2                               Payment of Scheduled
Deposits


 


Subject to Section 5.3, Purchaser shall
pay the Vendor the Scheduled Deposit under a Deposit Event by wire transfer no
later than one Business Day following the date upon which the corresponding
Deposit Event occurs to a bank account of Vendor designated in accordance with
Section 15.2.


 


5.3                               Closing Conditions for
Payment of Scheduled Deposits


 


The obligation of the Purchaser to make a
Scheduled Deposit payment in accordance with a Deposit Event is subject to the
satisfaction of the following conditions:


 


20

















 


(a)                                 the
Vendor shall have delivered to Purchaser the relevant statement described in
Section 5.1;


 


(b)                                 the
Vendor shall have delivered to the Purchaser an executed certificate of a
senior officer of the Vendor certifying (and evidencing in the case of
(iv) and (v) below) that, as of the Deposit Event:


 


(i)                                     the representations and
warranties made by the Vendor and Thompson Creek set forth in Schedule A1 and
Schedule A2 and in the Security Agreements, remain true and correct in all
material respects on and as of such date;


 


(ii)                                  no Vendor Event of Default
(or an event which with notice or lapse of time or both would become a Vendor
Event of Default) has occurred and is continuing;


 


(iii)                               except as otherwise
previously communicated to the Purchaser and the Independent Engineer, no
changes to the Development Program have occurred, the Development is in accordance
with the Development Program and the Vendor has not abandoned the Milligan
Project;


 


(iv)                              the Vendor has obtained or
has access to sufficient financing to complete the Development (including
pursuant to any modifications to the Development Program);


 


(v)                                 all material Permits have
been obtained and are in good standing for the conduct of the activities
conducted in the Development Program to date and for the use of funds
contemplated by the Deposit Event, and no material Permit has been revoked or rescinded
that is necessary for the commencement of commercial production of Minerals
from the Milligan Project;


 


(vi)                              no written notice of any
Encumbrance other than a Permitted Encumbrance against the Milligan Property
has been received by Vendor; and


 


(vii)                           no Deposit Suspension Event
has occurred and is continuing.


 


(c)                                  the
Purchaser has not received from the Independent Engineer, prior to the date of
the Deposit Event, notification that (i) the Development is not in
accordance with the Development Program, (ii) the Vendor does not have
sufficient Permits to complete the proposed work program represented by the
funds under the Deposit Event or that one or more material Permits has been
revoked, rescinded or is not in good standing, or (iii) the Purchaser’s
Pro Rata Share of Funding set forth in the statement described in
Section 5.1 is not correct.


 


21

















 


Article 6

TERM


 


6.1                               Term


 


(a)                                 The
term of this Agreement shall commence on the date of this Agreement and, subject
to Sections 12.2, 13.2 and 6.1(b), shall continue until the date that is 50
years after the date of this Agreement (the “Initial
Term”)  and thereafter
shall automatically be extended for successive 10 year periods (each an “Additional Term”  and, together with the Initial Term, the “Term”).


 


(b)                                 This
Agreement may be terminated by the Parties on mutual written consent, or as
otherwise provided in this Agreement.


 


Article 7

REPORTING; BOOKS AND RECORDS; INSPECTIONS


 


7.1                               Monthly Reporting


 


During the full period in which Development
expenditures are being made, the Vendor shall deliver to the Purchaser a
Monthly Construction Report on or before the 30th calendar day
after the end of each calendar month. 
Commencing with the month in which Minerals are first shipped to an
Offtaker, the Vendor shall deliver to the Purchaser a Monthly Report on or
before the 30th calendar day after the end of each calendar
month.


 


7.2                               Annual Reporting


 


Within 60 calendar days after the end of each
calendar year, Vendor will deliver to the Purchaser an annual report that
addresses the following for the Milligan Project:


 


(a)                                 a
statement setting out the most recent estimated gold reserves and resources for
the Milligan Property for such calendar year and the assumptions used, including
cut-off grade, metal prices and metal recoveries;


 


(b)                                 a
budget, mine operating plan and production forecast of the number of ounces of
Produced Gold expected to be produced over the next calendar year, including:


 


(i)                                     tonnes or tons, types and gold
grade of ore to be mined;


 


(ii)                                  types, tonnes or tons and
gold grade of ore to be stockpiled; and


 


(iii)                               a forecast as to the amount
of Minerals expected to be produced over the next year.


 


7.3                               Additional Reporting
Requirements


 


(a)                                 The Vendor shall provide to Purchaser a copy of any life of mine plan
or similar comprehensive operating plan produced by or on behalf of Vendor
detailing the production and development plan for the Milligan Property reserves and resource, 


 


22

















 


including
all supportive narrative, assumptions and strategies, and any update thereto,
within 15 days after any life of mine plan or update is prepared.


 


(b)                                 The
Vendor or its Affiliates shall provide the Purchaser with copies of reserve and
resource reports on the Milligan Property from time to time as they become
available.


 


(c)                                  To
the extent not otherwise required to be delivered herein, the Vendor shall
promptly provide the Purchaser with all feasibility studies and all geological,
reserve, engineering and metallurgical and related data and evaluations of the
Milligan Project prepared by or for the benefit of the Vendor or otherwise in
the possession and control of Vendor which would reasonably be expected to be
material to the Purchaser’s interest in the Milligan Project (the “Project Studies”).


 


(d)                                 The
Vendor shall provide to the Purchaser a statement setting out the Deposit
Record, including the outstanding balance of the Payment Deposit, as at
June 30 and as at December 31 of each calendar year, in each case
within 30 days following such date (a “Deposit
Record Report”).


 


7.4                               Books and Records


 


(a)                                 Vendor
and its Affiliates shall, in all material respects, keep true, complete and
accurate books and records of all of its operations and activities with respect
to the Milligan Project, including the mining and production of Minerals and
the treatment, processing, milling, concentrating, transportation and sale of
Minerals. Vendor and its Affiliates shall permit the Purchaser and its authorized
representatives and agents to perform audits no more than once each year and
additional limited reviews and examinations of its books and records and other
information relevant to the production, Delivery and determination of Produced
Gold and Refined Gold from time to time at reasonable times, all at the
Purchaser’s sole risk and expense and upon reasonable notice to confirm
compliance with the terms of this Agreement. The Purchaser shall diligently
complete any audit or other reviews and examination permitted hereunder.


 


(b)                                 Vendor
shall use reasonable commercial efforts to provide in the terms of relevant
Mineral Offtake Agreements a right of Purchaser to have access to and review
relevant testing, documents and data of Offtakers and otherwise derived
pursuant to relevant Mineral Offtake Agreements in respect of smelting,
refining and beneficiation of Minerals.


 


7.5                               Inspections


 


Subject at all times to the workplace
rules and supervision of Vendor, and provided any rights of access do not
interfere with any exploration, development, mining or processing work
conducted on the Milligan Property, Vendor shall grant to the Purchaser and its
representatives and agents, including, without limitation, the Independent
Engineer, at reasonable times and upon reasonable notice and at the Purchaser’s
sole risk and, subject to Section 15.1, expense, the right to access and
inspect the Milligan Property and to monitor Vendor’s mining and processing
operations on 


 


23

















 


the Milligan Project.  The Vendor shall not be responsible for
injuries to or damages suffered by the Purchaser and its representatives and
agents, including, without limitation, the Independent Engineer, while visiting
the Milligan Property unless such injuries or damages are caused or contributed
to by the gross negligence or wilful misconduct of the Vendor or its
representatives. The Purchaser may avail itself of such right of access a
maximum of twice per calendar year, other than as required by the Independent
Engineer.  To the extent permitted under
Mineral Offtake Agreements, Purchaser and its representatives and agents,
including without limitation, the Independent Engineer, shall also have the
right to be present or to be represented at any smelter, refinery or other
processing facility at which the weighing, sampling and assaying of metals and
the calculation of the Refined Gold will be determined (i) at any time
that the Vendor or any Affiliate, its representatives or agents is present, provided,
that the Vendor or any such Affiliate shall give the Purchaser reasonable
advanced notice of any such visit, and (ii) at such other time as the
Purchaser may request, provided, that the Purchaser shall give the Vendor
reasonable advanced notice of the date on which Purchaser intends to conduct
such visit.  Vendor shall grant to the
Independent Engineer such access to the Milligan Project and its site,
facilities and employees, and to construction and other contractors at such
times and on such notice as the Independent Engineer considers reasonable for
the performance of the Independent Engineer’s duties with respect to this
Agreement.


 


Article 8

COVENANTS


 


8.1                               Conduct of Operations


 


(a)                                 All
decisions regarding the Milligan Project, including all decisions concerning
the methods, extent, times, procedures and techniques of any
(i) exploration, development and mining related to the Milligan Project,
including spending on capital expenditures, (ii) leaching, milling,
processing or extraction, (iii) materials to be introduced on or to the
Milligan Project, and (iv) except as provided herein, the sales of
Minerals and terms thereof shall be made by Vendor, in its sole discretion.
Without limiting the generality of the foregoing, Vendor shall be permitted to
amend the mine plan, process design and/or plant and equipment for the Milligan
Project at any time and from time to time in its sole discretion, provided that
it is acting in a commercially reasonable manner and not inconsistent with
accepted Canadian mining practice.


 


(b)                                 Notwithstanding
Section 8.1(a), Vendor agrees that it shall carry out and perform all
mining operations and activities pertaining to or in respect of the Milligan
Project in a commercially reasonable manner and in accordance with Applicable Laws,
all applicable licences, Permits and other authorizations and accepted mining,
processing, engineering and environmental practices prevailing in the Canadian
mining industry.


 


(c)                                  Notwithstanding
Section 8.1(a), Vendor and its Affiliates shall operate the Milligan
Project as though the Vendor had a full economic interest in all the gold
produced from the Milligan Property and shall not consider the economic impact
of the Agreement in its reserves and resources calculations or mine planning
provided, that the Vendor may seek the Purchaser’s written consent (which 


 


24

















 


consent may be withheld
in the Purchaser’s sole discretion) to consider the economic impact of this
Agreement with respect to a material expansion of the Milligan Project or the
reprocessing of tailings, waste
rock or other waste products.


 


(d)                                 Vendor
shall at all times during the Term do all things necessary to maintain the
Milligan Property and, subject to Sections 9.1(a)(ii) and 9.1(d)(ii) and
10.3(b), maintain the related Mineral Claims and Mining Leases in good
standing, including paying all taxes owing in respect thereof.


 


(e)                                  Notwithstanding
anything else contained in this Section 8.1, nothing in this Agreement
shall require Vendor or any of its Affiliates to construct, operate or continue
the Milligan Project or to explore or develop the Milligan Project.


 


8.2                               Preservation of Corporate
Existence


 


Vendor shall at all times during the term of
this Agreement do and cause to be done all things necessary or advisable to
maintain its corporate existence.


 


8.3                               Processing/Commingling


 


The Vendor may, and may cause each of its
Affiliates to, process Other Minerals through the Milligan Facilities in
priority to, or commingle Other Minerals with, Minerals mined, produced,
extracted or otherwise recovered from the Milligan Property, provided:
(i) Vendor (or such Affiliate) has adopted and employs best industry
practices and procedures for weighing, determining moisture content, sampling
and assaying and determining recovery factors (a “Commingling
Plan”), (ii) the Purchaser has approved the Commingling Plan,
such approval not to be unreasonably withheld, and (iii) Vendor or such
Affiliate keeps records required by the Commingling Plan.


 


8.4                               Mineral Offtake Agreements


 


(a)                                 During
the Term, the Vendor shall deliver, and (subject to Section 2.1(a)) Vendor
shall sell, all Minerals that contain Produced Gold to an Offtaker pursuant to
a Mineral Offtake Agreement, in such quantity, description and amounts and at
such times and places as required under and in accordance with a Mineral
Offtake Agreement.


 


(b)                                 Vendor
shall take commercially reasonable steps to ensure that it has sufficient
Mineral Offtake Agreements to efficiently recover gold as and when Minerals are
produced from the Milligan Project. 
Vendor shall use commercially reasonable efforts to cause the market
price for determination of any and all Refined Gold (including under
provisional payments) sold by Vendor under each Mineral Offtake Agreement to be
based on an average set by the London Bullion Market Association (or any
successor thereto) or such other benchmark on such gold market as the Parties
may mutually agree.  Vendor shall provide
the Purchaser with a final signed copy of any Mineral Offtake Agreement within
ten Business Days after the execution thereof.


 


25

















 


(c)                                  Vendor
shall take commercially reasonable steps to enforce its rights and remedies
under each Mineral Offtake Agreement with respect to any breaches of the terms
thereof relating to the timing and amount of payments for gold to be made
thereunder. Vendor shall notify the Purchaser in writing when any dispute
arising out of or in connection with any such Mineral Offtake Agreement is commenced
in respect of Minerals and shall provide the Purchaser with timely updates of
the status of any such dispute and the final decision and award of the court or
arbitration panel with respect to such dispute, as the case may be.  Vendor shall notify the Purchaser in writing
upon the occurrence of any force majeure or similar provision under any Mineral
Offtake Agreement and shall provide the Purchaser with timely updates of the
status thereof.


 


(d)                                 The
Vendor shall use its commercially reasonable efforts to cause each Mineral
Offtake Agreement to provide for provisional Gold Payments in the form of
Refined Gold, which for purposes of this Section 8.4(d) does not
include paying to an Offtaker greater consideration for its services than would
be payable for a provisional payment that was in the form of cash.


 


8.5                               Insurance


 


(a)                                 Vendor
shall maintain with reputable insurance companies insurance with respect to the
Milligan Project and for the construction, development and operations on and in
respect of the Milligan Project against such casualties and contingencies and
of such types and in such amounts as is customary in the Canadian mining
industry for similar operations.


 


(b)                                 Vendor
shall ensure that each shipment of Produced Gold is adequately insured, in such
amounts and with such coverage as is customary in the Canadian mining industry,
until the time that risk of loss and damage for such Produced Gold is
transferred to the Offtaker pursuant to a Mineral Offtake Agreement.


 


(c)                                  Where
the Vendor or its Affiliate receives payment under any insurance policy in
respect of a shipment of Produced Gold that is lost or damaged after leaving
the Milligan Project and before the risk of loss or damage is transferred to
the Offtaker, the Vendor shall sell and Deliver to the Purchaser (without
duplication to the extent previously sold and Delivered to the Purchaser by the
Vendor) pursuant to Sections 2.1 and 2.4, an amount of Refined Gold having a
value equal to 25% of the amount of the insurance payment received by the
Vendor and its Affiliates in respect of Produced Gold in such shipment.


 


8.6                               Permitted Financings and
Permitted Encumbrances


 


(a)                                 With
respect to any one or more secured Financings that either the Vendor or its
Affiliates arranges for the Milligan Project from time to time, or that are
secured against or by the assets of the Milligan Project, the Vendor agrees
that any such Financing shall provide that the Lenders (or any agent or trustee
that holds the Lender Security) will agree to enter into an intercreditor
agreement with the Purchaser that will be acknowledged by the Vendor, and such
intercreditor 


 


26
















 


agreement will be on terms reasonable in the syndicated secured lending market
prevailing at the time such intercreditor agreement is negotiated taking into
account the purpose and comparative size of the Financing and that such
intercreditor agreement shall contain the following terms:


 


(i)                                     an acknowledgment that the
Purchaser will hold a first-perfected security interest in the Designated
Percentage of Produced Gold and all proceeds thereof registered pursuant to the
Personal Property Security Act (British
Columbia) (the “Gold Security Interest”),


 


(ii)                                  provisions reflecting the
subordination of the Purchaser’s security interest in the assets of the Vendor
(other than the Gold Security Interest) to the Lender Security and limiting the
enforcement of the Purchaser’s security interest by inclusion of a standstill
provision whereby the Purchaser agrees not to exercise or continue to exercise,
as applicable, remedies against the Vendor and its Affiliates or the assets of
the Vendor or its Affiliates for a defined period of time, which period shall
be not less than 120 days from the date on which the Lenders are notified of
the event of default under this Agreement or any document, instrument or
agreement delivered pursuant hereto, and that such standstill period shall
continue for so long as the Lenders are then acting diligently and in good
faith with respect to all or any material portion of the Lender Security or
attempting diligently and in good faith to vacate any stay or prohibition
against such exercise, in each case at the expiration of such period; provided
however, that such standstill shall not in any way affect the Purchaser’s
rights with respect to the Gold Security Interest or prevent the Purchaser from
filing (A) a proof of claim in any bankruptcy or other insolvency
proceedings or (B) responsive pleadings to any objections to Purchaser’s
claim in connection with such bankruptcy or other insolvency proceeding,


 


(iii)                               the amount of the Financing
having priority over the Purchaser’s security interest in the assets of the
Vendor (other than the Gold Security Interest) pursuant to such intercreditor
agreement shall not be limited in any respect,


 


(iv)                              an agreement by the
Purchaser that, in the event of a bankruptcy or other insolvency proceeding of
the Vendor or its subsidiaries, whether voluntary or involuntary, (A) if
Lenders were to desire to consent to the use of their cash collateral or to
consent to the Vendor or any other subsidiary obtaining debtor in possession
financing (a “DIP Financing”),
then Purchaser would agree to not raise any objection to such use of such cash
collateral or to such DIP Financing and would subordinate its liens on the
Collateral (other than the Gold Security Interest) to any such DIP Financing on
the same terms (but on a basis junior to the liens of Lenders that are
participating as lenders in such DIP Financing) as the prepetition liens of the
Lenders are subordinated thereto; provided, that, if the Lenders were to be
granted adequate protection in the form of replacement liens on any of the
assets constituting Collateral, then the Purchaser may seek 


 


27

















 


adequate protection in the form of a replacement
lien on the same assets but subordinated to the liens securing the Financing
and the DIP Financing, and (B) the Purchaser would not raise any objection
or opposition to any sale of assets consented to by the Lenders or made in
connection with the enforcement of rights by the Lenders in the Collateral
(other than the Gold Security Interest); provided, that the proceeds of all
such sales shall become subject to the liens securing the obligations owed to
Purchaser to the same extent as any assets so disposed,


 


(v)                                 additional reasonable terms
and provisions which, in the event of a bankruptcy or other insolvency
proceeding by or against the Vendor or any of its subsidiaries, (A) limit
the Purchaser’s rights to seek adequate protection of its security interest in
the Collateral (other than the Gold Security Interest); provided, that, if the
Lenders were to be granted adequate protection in the form of replacement liens
on any of the assets constituting Collateral, then the Purchaser may seek
adequate protection in the form of a replacement lien on the same assets but
subordinated to the liens securing the Financing and the DIP Financing and
(B) prohibit the Purchaser from seeking relief from any stay granted as a
result of the filing of a bankruptcy or other insolvency proceeding,


 


(vi)                              an agreement by the Lenders
not to contest the validity of the Gold Security Interest, and an agreement by
each of the Lenders and the Purchaser not to contest the validity of the other
party’s security interest in any of the assets of the Vendor or its affiliates,


 


(vii)                           an agreement by each of the
Purchaser and the Lenders to promptly notify the other party in writing of any
material breach under this Agreement or any event of default as defined in any
document, instrument or agreement delivered in connection with this Agreement
or any event of default as defined in any document, instrument or agreement
delivered in connection with the Financing, as applicable, and


 


(viii)                        an agreement by the Lenders
that, in any realization upon the Lender Security during the continuance of an
event of default with respect to the Financing, they will not convey or approve
a transfer of any mineral tenures necessary or desirable for the extraction of
gold at the Milligan Property without requiring such transferee to agree in
writing that its interests in such mineral tenures are subject to the
obligations of the Vendor under this Agreement.


 


The parties agree that in considering the
reasonableness of any intercreditor agreement which the Vendor proposes to the
Purchaser in connection with any Financing, each of the foregoing shall be
considered valid and material considerations.


 


(b)                                 As
and when the Vendor considers any Financing, where an intercreditor agreement
is or may be required, the Vendor will notify the Purchaser and, as soon as
practicable following the Vendor’s receipt of the initial draft of the 


 


28

















 


intercreditor agreement,
provide such initial draft to the Purchaser accompanied by all material details
of the Financing and the proposed Lender Security that are reasonably necessary
for the Purchaser to consider the reasonableness of the proposed intercreditor
agreement (a “Proposed Intercreditor
Agreement”).  The Purchaser
shall have five Business Days following its receipt of any Proposed
Intercreditor Agreement to notify the Vendor that it accepts or rejects the
Proposed Intercreditor Agreement.  If the
Purchaser rejects the Proposed Intercreditor Agreement or any aspect thereof,
the Purchaser, acting in good faith, shall participate in negotiations with the
proposed Lenders in a bona fide effort to finalize such intercreditor
agreement.  For purposes of this Section 8.6,
the revised version of the intercreditor agreement that the proposed Lenders
and the Vendor would be prepared to enter into in accommodation of the
Purchaser pursuant to the immediately preceding sentence shall be referred to
hereafter as the “Intermediate Intercreditor
Agreement”.  If, within ten
Business Days following the date on which the Purchaser shall have notified the
Vendor that it has rejected the Proposed Intercreditor Agreement, the Purchaser
and the proposed Lenders have not finalized the terms of an intercreditor
agreement, Vendor shall provide to Purchaser the Intermediate Intercreditor
Agreement on such tenth Business Day, and on the Business Day following the
Purchaser’s receipt of the Intermediate Intercreditor Agreement, the Purchaser
shall (i) notify the Vendor of the provisions or aspects of the
Intermediate Intercreditor Agreement which it considers unreasonable, and
(ii) provide Vendor with a modified version of the Intermediate
Intercreditor Agreement that it would be prepared to execute (the “Stipulation and Proposal”).  A failure of the Purchaser to notify the
Vendor by the end of the fifth Business Day following the Purchaser’s receipt
of the Proposed Intercreditor Agreement that it rejects the Proposed
Intercreditor Agreement or any aspect thereof shall be construed as an
acceptance of the Proposed Intercreditor Agreement, and a failure of the
Purchaser to provide the Stipulation and Proposal on the Business Day following
the Purchaser’s receipt of the Intermediate Intercreditor Agreement shall be
construed as an acceptance of the Intermediate Intercreditor Agreement; and, in
either instance, the Purchaser shall thereafter be bound to execute and deliver
the applicable intercreditor agreement in furtherance of the Financing.


 


(c)                                  In
any case where the Purchaser and the proposed Lenders have been unable to
finalize an intercreditor agreement as set forth above, the Vendor may submit
the matter to the expedited arbitration process set forth in Annex 2 for a
determination of whether the Purchaser has established by a preponderance of
the evidence that the Intermediate Intercreditor Agreement was unreasonable,
measured by the terms set forth in Section 8.6(a) and any other
criteria which the arbitrator considers relevant or material.


 


(d)                                 In
the event that the arbitrator determines that the Intermediate Intercreditor
Agreement was not unreasonable, the Purchaser shall, upon the Vendor’s request,
execute and deliver the Intermediate Intercreditor Agreement.


 


(e)                                  Notwithstanding
any of the foregoing:  (i) any
Financing that the Vendor arranges for assets (including without limitation,
mobile mining equipment, motor vehicles 


 


29

















 


and office equipment)
subject to operating leases or purchase money financing or other similar
financing arrangements shall also be entitled to priority over the Purchaser’s
security interest with respect to such assets under the Security Agreements
(other than the Gold Security Interest) and there shall be no requirement for
any such lessor or lender to enter into an intercreditor agreement with the
Purchaser; and (ii) the Purchaser’s security interest in any asset of the
Vendor under any of the Security Agreements and any existing intercreditor
agreements related thereto (other than the Gold Security Interest and any
provision of any intercreditor agreement related thereto) shall terminate upon
the Deposit Reduction Time, at which time, except for intercreditor agreements
relating to the Gold Security Interest which shall be no less favourable to the
Lenders than the intercreditor agreements previously entered into hereunder,
there will be no further requirement under this Section 8.6 for the
Lenders to enter into intercreditor agreements.


 


(f)                                    The
security interests referred to in this Section 8.6 which are registered in
the (i) Personal Property Security Registry; (ii) British Columbia’s
Mineral Titles Online Registry, and (iii) Land Title Office with respect
to any Surface Rights that are registered in the Land Title Office from time to
time shall be deemed to be Permitted Encumbrances.


 


8.7                               Confidentiality


 


(a)                                  Each
Party (a “Receiving Party”) agrees
that it shall maintain as confidential and shall not disclose, and shall cause
its Affiliates, employees, officers, directors, advisors, agents and
representatives to maintain as confidential and not to disclose, the terms
contained in this Agreement and all information (whether written, oral or in
electronic format) received or reviewed by it as a result of or in connection
with this Agreement, including any draft or final technical reports provided
under Section 7.3, any Mineral Offtake Agreement provided under Section 8.4(a) and
the information received by it pursuant to the Confidentiality Agreement (“Confidential Information”), provided that a
Receiving Party may disclose Confidential Information in the following
circumstances:


 


(i)                                     to its auditor, legal
counsel, lenders, brokers, underwriters and investment bankers and to persons
with which it is considering or intends to enter into a transaction for which
such Confidential Information would be relevant, provided that such persons are
advised of the confidential nature of the confidential information, undertake
to maintain the confidentiality of it and are strictly limited in their use of
the confidential information to those purposes necessary for such persons to
perform the services for which they were, or are proposed to be, retained by
the Receiving Party or to consider or effect the applicable transaction, as
applicable;


 


(ii)                                  subject to Section 8.7(c),
where that disclosure is necessary to comply, in a Party’s reasonable judgment,
with Applicable Laws, including rules and regulations promulgated by the
U.S. Securities and Exchange Commission (the “SEC”),
the Canadian Securities Administrators (the “CSA”),
a 


 


30

















 


provincial securities commission, court order or the
policies of any relevant stock exchange, provided that such disclosure is
limited to only that Confidential Information so required to be disclosed and
that the Receiving Party will have evaluated the availability of any laws,
rules, regulations or contractual rights as to disclosure on a confidential
basis to which it may be entitled and sought such treatment for portions of
such documents it reasonably believes are eligible for such treatment;


 


(iii)                               for the purposes of the
preparation of an Auditor’s Report under Section 15.4 or any arbitration
proceeding commenced under Section 15.5;


 


(iv)                              where such information is
already widely known by the public other than by a breach of the
confidentiality terms of this Agreement or is known by the Receiving Party
prior to the entry into of this Agreement and the Confidentiality Agreement or
obtained independently of this Agreement and the disclosure of such information
would not breach any other confidentiality obligations;


 


(v)                                 with the consent of the
disclosing Party; and


 


(vi)                              to those of its and its
Affiliates’ directors, officers, employees, representatives and agents who need
to have knowledge of the Confidential Information;


 


(b)                                 Each
Party shall ensure that its and its Affiliates’ employees, directors, officers,
representatives and agents and those persons listed in Section 8.7(a)(i) are
made aware of this Section 8.7 and the Confidentiality Agreement and
comply with the provisions hereof and thereof. Each Party shall be liable to
the other Party for any improper use or disclosure of such terms or information
by such persons.


 


(c)                                  The
Vendor hereby acknowledges that the Purchaser will be required to file this
Agreement on EDGAR and SEDAR in order to comply with Applicable Laws, including
the rules and regulations of the SEC and the CSA.  Purchaser hereby agrees that, prior to such
filing, it shall consult in good faith with the Vendor regarding redactions, if
any, that are permitted to be made to this Agreement as filed on EDGAR pursuant
to Applicable Law, including the rules and regulations of the SEC;
provided, however, that the final determination of such redactions, if any,
shall be made in the Purchaser’s sole discretion.  If in order to comply with Applicable Laws,
including rules or regulations promulgated by the CSA, the Vendor is
required to file this Agreement on SEDAR, the Vendor shall notify the Purchaser
of such requirement at least two Business Days prior to the last date to file
on SEDAR, and the Parties shall consult in good faith with the Vendor regarding
redactions, if any, that are permitted to be made to this Agreement as filed on
SEDAR pursuant to Applicable Law, including the rules and regulations of
the CSA; provided, however, that the final determination of such redactions, if
any, shall be made in the Vendor’s sole discretion.


 


31

















 


(d)                                 Vendor
and the Purchaser will consult with each other before issuing any press release
concerning the execution of this Agreement or otherwise making any public
disclosure concerning the execution of this Agreement and shall not issue any
such press release or make any such public disclosure before receiving the
consent of the other party.  Nothing in
this Section 8.6(d) prohibits any party from making a press release
or other disclosure that is, in a Party’s reasonable judgement, required by
Applicable Laws or by the policies of any stock exchange if the party making
the disclosure has first used its commercially reasonable efforts to consult
the other party with respect to the timing and content thereof.


 


8.8                               Compliance with Law


 


(a)                                  The
Vendor shall materially comply with all Applicable Laws relating to the
Vendor’s operations on or with respect to the Milligan Property, including but
not limited to Environmental Laws; provided, however, the Vendor shall have the
right to contest enforcement actions and any allegations of infringement of the
same in its discretion.  The Vendor shall
timely and fully perform in all material respects all environmental protection and
reclamation activities required pursuant to Applicable Laws, including but not
limited to Environmental Laws, on or with respect to the Milligan Property


 


(b)                                 Each
of the Parties agrees that it will comply with the Corruption of Foreign Public Officials Act (Canada) in
connection with its dealings relating to this Agreement and the Milligan
Project.


 


8.9                               Unprocessed Ore


 


The Vendor hereby agrees that it shall not (i) sell
unprocessed ore from the Milligan Property, or (ii) enter into any
agreement to toll process ores at facilities owned by third parties (other than
Affiliates of the Vendor), in each case without the prior written consent of
the Purchaser, which consent may not be unreasonably withheld.


 


Article 9

RIGHT OF FIRST OFFER


 


9.1                               Right of First Offer on Gold
Interest


 


(a)                                  Subject
to Section 10.4, if


 


(i)                                     at any time and from time to
time, Vendor or any of its Affiliates wishes to offer for sale to any third
party or, following an offer by a third party to purchase (A) a gold
royalty on production from the Milligan Property, (B) an amount of gold
based on production from any portion of the Milligan Property, or (C) any
participating interest in gold based on production from the Milligan Property,
or


 


(ii)                                  the Vendor wishes to
terminate or not renew a Mineral Claim or Mining Lease from any portion of the
Milligan Property,


 


32

















 


((i) and (ii) collectively, a “Milligan Gold Right”)


 


then the Vendor shall, by notice in writing to the Purchaser, first offer
to sell such Milligan Gold Right to the Purchaser at the price and upon
substantially the terms that the Vendor proposes to offer or accept from a
third party (which offer the Vendor shall promptly provide to the Purchaser)
(the “Vendor Offer”). Notwithstanding
anything to the contrary herein, if the Milligan Gold Right represents less
than 25% of the fair market value of the assets the Vendor wishes to offer for
sale to a third party, then this Section 9.1(a) shall not apply to
such offer to sell to a third party.


 


(b)                                 Upon
receipt of a Vendor Offer, the Vendor and the Purchaser shall negotiate in good
faith for a period of up to 45 days commencing on the date of delivery by the
Vendor to the Purchaser of the Vendor Offer (the “Negotiation Period”) the definitive terms of an agreement for
the Milligan Gold Right which is the subject of the Vendor Offer (the “Definitive Agreement”).


 


(c)                                  If,
during the Negotiation Period, the Vendor and the Purchaser agree on the terms
of the Definitive Agreement, then the Vendor and the Purchaser shall enter into
the Definitive Agreement and proceed to close the transaction as soon as
commercially reasonable thereafter pursuant to the terms of such Definitive
Agreement.


 


(d)                                 If,
during the Negotiation Period, the Vendor and the Purchaser are unable to agree
on the terms of, and enter into, the Definitive Agreement, then, on the earlier
of (i) the last day of the Negotiation Period, and (ii) the day on
which the Vendor and the Purchaser agree that negotiations have ended,


 


(i)                                     the Vendor may commence
negotiations with a third party for the sale of the Milligan Gold Right which
is the subject of the Vendor Offer, and, either directly or through an
Affiliate, sell the Milligan Gold Right that is the subject of the Vendor Offer
to a third party, provided that the terms of sale are no more favourable to
such third party than those offered to the Purchaser in the Vendor Offer, or


 


(ii)                                  in the case of the
termination or non-renewal of a Mineral Claim or Mining Lease, the Vendor may terminate
or choose not to renew such Mineral Claim or Mining Lease.


 


(e)                                  For
the avoidance of doubt, this Section 9.1 shall not apply to any (i) gold
spot sales, gold forward sales or options or other gold sales or gold loans to
a financial institution or bullion bank, (ii) internal transfers among
Vendor and its Affiliates, provided that any such transfer complies with
Section 8.4(a), (iii) a sale of all or substantially all of the
Milligan Property or of the Milligan Project or a sale of substantially all of
the assets of the Vendor, (iv) the sale of an equity interest in the
Vendor, or (v) any Mineral Offtake Agreement.


 


33

















 


Article 10

TRANSFERS AND ASSIGNMENTS


 


10.1                        General.


 


No Party may sell, transfer, assign, convey,
grant any right, title or interest in or to, or otherwise dispose of, this
Agreement, in whole or in part, or its rights under this Agreement, in whole or
in part (and Vendor may not effectuate such an assignment under the Security
Agreements), and Thompson Creek and Vendor may not effectuate a Transfer (any
such assignment or Transfer referred to herein as an “Assignment”)
except to the extent such Assignment complies with this Article 10,
including the conditions set forth in this Section 10.1.  Any Party making an Assignment hereunder
shall be referred to as an “Assignor”.


 


(a)                                  Any
assignee pursuant to an Assignment (an “Assignee”)
must execute an instrument in writing by which it expressly assumes any and all
of the obligations of the Assignor pursuant to the Assignment, and the failure
of any such Assignee to execute such a written instrument shall mean that the
Assignment is null and void.


 


(b)                                 Any
Assignor must provide all other Parties hereunder no less than twenty (20)
Business Days advance written notice of a proposed Assignment.


 


(c)                                  Upon
completion of an Assignment by an Assignor in compliance with this Article 10,
(i) if the Assignor is either the Vendor or Thompson Creek, then the
Purchaser and Royal Gold shall release such Assignor from its obligations under
this Agreement or the Security Agreements (in the case of an Assignment by the
Vendor under the Security Agreements), and (ii) if the Assignor is either
the Purchaser or Royal Gold, then the Vendor and Thompson Creek shall release
such Assignor from all further obligations under this Agreement, in each case
in a form reasonably acceptable to the Assignor.


 


(d)                                 No
Party hereunder may complete an Assignment while it is in breach or default of
any term, condition or obligation under this Agreement or the Security
Agreements.


 


(e)                                  No
Party hereunder may make an Assignment to a Restricted Person.


 


10.2                        Transfers to Affiliates.


 


Subject to Section 10.1 and
notwithstanding Sections 10.5 or 10.6, either Vendor or Purchaser may from time
to time complete an Assignment to an Affiliate.


 


10.3                        Transfers of the Milligan
Project


 


(a)                                  Subject
to Sections 10.1, 10.2 and 10.4(b), (i) the Vendor may sell, transfer,
assign, convey, grant any right, title or interest in or to, or otherwise
dispose of, all or any part of the Milligan Project, and (ii) Thompson
Creek or Vendor may sell, transfer, assign, grant any right, title or interest
in or to, or otherwise dispose of any equity interest in the Vendor (each of
clauses (i) and (ii), a “Transfer”),



 


34

















 


unless Purchaser
demonstrates to Vendor, acting reasonably, that at the time of the Transfer the
transferee does not have sufficient financial resources and operational expertise to continue developing and operating
the Milligan Project in a manner that provides reasonable assurance that the
Development will be completed in accordance with the Development Program and,
after Development, operate the Milligan Project in accordance with Section 8.1(b).


 


(b)                                 Subject
to Section 9.1, the Vendor may relinquish, surrender or terminate all or
any part of any Mineral Claims or Mining Leases constituting the Milligan
Project if Vendor reasonably determines that the cost of maintaining such
relinquished, surrendered or terminated Mineral Claims or Mining Leases is not
justified.  If Vendor acquires or
reacquires any Mineral Claims or Mining Leases that cover or relate to any
previously released portion of the Milligan Project, this Agreement shall apply
fully to such acquired or reacquired portion.


 


(c)                                  Notwithstanding
Section 10.3(a) above, the Vendor may enter into a joint venture with
another person or persons with respect to the Milligan Project provided that:


 


(i)                                     Vendor retains at least a
50% undivided interest in the Milligan Project; Vendor is at all times the
operator of the Milligan Project; and each joint venture participant agrees in
a document, or documents, acceptable to the Purchaser, acting reasonably, with
Vendor, the Purchaser and any other joint venture participant to assume on a
joint and several basis with the Vendor all of the obligations and duties under
this Agreement and to acknowledge and assume the obligations under the Security
Agreements; and


 


(ii)                                  all filings have been made
and all other actions have been taken that are required in order for the
Purchaser to continue at all times following such transfer to have the valid
and perfected security interest contemplated by Section 8.6 and the
Security Agreements.


 


10.4                        Exceptions Based on
Intercreditor Agreements


 


(a)                                  The
rights of the Purchaser pursuant to Section 9.1 shall be subject to the
provisions of any intercreditor agreement pursuant to Section 8.6 and
shall not terminate upon a realization by the Lenders, if applicable.


 


(b)                                 The
restrictions on Assignment under this Article 10 shall not apply to any
grant of an Encumbrance on all or any portion of the Milligan Project that is
permitted under Section 8.6.


 


(c)                                  The
restrictions on Assignment under this Article 10 shall apply to any sale,
transfer, assignment, conveyance, grant of any right, title or interest in or
to or other disposition of all or any portion of the Milligan Project in
connection with or resulting from a realization by the Lenders, if applicable,
which realization shall be subject to the provisions of any intercreditor
agreement made pursuant to Section 8.6.


 


35

















 


10.5                        Assignment by Purchaser
Group


 


Subject to Sections 10.1 and 10.2, until such
time as all of the Scheduled Deposits have been paid to Vendor, neither
Purchaser nor Royal Gold shall make an Assignment except with the prior written
consent of Vendor, such consent not to be unreasonably withheld.  Thereafter, Purchaser and Royal Gold may make
an Assignment without the consent of Vendor.


 


10.6                        Assignment by Vendor Group


 


Subject to Sections
10.1 and 10.2, neither the Vendor nor Thompson Creek shall make an
Assignment in respect of this Agreement or the Security Agreements (in the case
of the Vendor) except to the extent such Assignment is
concurrent with a Transfer or otherwise with the prior written consent of the
Purchaser, such consent not to be unreasonably withheld.


 


Article 11

REPRESENTATIONS AND WARRANTIES


 


11.1                        Representations and
Warranties of Vendor


 


Vendor, acknowledging that the Purchaser and
Royal Gold are entering into this Agreement in reliance thereon, hereby makes
the representations and warranties set forth in Schedule A1 to the Purchaser
and Royal Gold on and as of the date of this Agreement and on and as of any
other date required pursuant to this Agreement.


 


11.2                        Representations and
Warranties of Thompson Creek


 


Thompson Creek, acknowledging that the
Purchaser and Royal Gold are entering into this Agreement in reliance thereon,
hereby makes the representations and warranties set forth in Schedule A2 to the
Purchaser and Royal Gold on and as of the date of this Agreement and on and as
of any other date required pursuant to this Agreement.


 


11.3                        Representations and
Warranties of the Purchaser


 


The Purchaser, acknowledging that Vendor and
Thompson Creek are entering into this Agreement in reliance thereon, hereby
makes the representations and warranties set forth in Schedule A3 to Vendor and
Thompson Creek on and as of the date of this Agreement.


 


11.4                        Representations and
Warranties of Royal Gold


 


Royal Gold, acknowledging that Vendor and
Thompson Creek are entering into this Agreement in reliance thereon, hereby
makes the representations and warranties set forth in Schedule A4 to Vendor and
Thompson Creek on and as of the date of this Agreement.


 


36
















 


11.5                        Survival of Representations
and Warranties


 


The representations and warranties set forth in
Schedules A1, A2, A3 and A4 shall survive the execution and delivery of this
Agreement for a term of five years following the payment of the final Scheduled
Deposit.


 


11.6                        Knowledge


 


Where any representation or warranty contained
in this Agreement is expressly qualified by reference to the “knowledge” of
Vendor to refer to the actual knowledge of any of the Chief Executive, Chief
Financial and Chief Operating Officers of Thompson Creek.


 


Article 12

VENDOR EVENTS OF DEFAULT


 


12.1                        Vendor Events of Default


 


Each of the following events or circumstances
constitutes an event of default by Vendor (each, a “Vendor Event
of Default”):


 


(a)                                  Vendor
fails to sell and Deliver Refined Gold to the Purchaser on the terms and
conditions set forth in this Agreement within ten Business Days after receipt
of notice from the Purchaser notifying Vendor of such default;


 


(b)                                 other
than as provided in Section 12.1(a), Vendor is in breach or default of any
terms or conditions, or any of its covenants or obligations, set forth in this
Agreement or the Security Agreements in any material respect, which is
incapable of being cured, or, if any such term, condition, covenant or
obligation is capable of being cured, such breach or default is not remedied
within a period of 30 days following delivery by the Purchaser to Vendor of
written notice of such breach or default, or such longer period of time as the
Purchaser may determine in its sole discretion;


 


(c)                                  the
Vendor is in breach of Article 10;


 


(d)                                 if,
prior to the Deposit Reduction Time, Vendor or any of its Affiliates defaults
under any indebtedness and such default is not remedied within the cure period
permitted under such indebtedness and materially adversely affects the
financial condition of Vendor such that it impairs its ownership of the
Milligan Project or its ability to operate the Milligan Project in the ordinary
course; or


 


(e)                                  upon
the occurrence of an Insolvency Event affecting Vendor.


 


12.2                        Remedies


 


(a)                                  If
a Vendor Event of Default occurs and is continuing, the Purchaser shall have
the right, upon written notice to Vendor, at its option, and in addition to and
not in substitution for any other remedies available to it at law or in equity,
to terminate this Agreement and demand from Vendor on 90 days notice the
repayment of the outstanding balance of the Payment Deposit, as set forth in
the Deposit Record, without interest.


 


37

















 


(b)                                 For
greater certainty, if the Purchaser does not exercise its right under
Section 12.2(a), the obligation of Vendor or any successor on a
realization hereunder shall continue in full force and effect.


 


Article 13

PURCHASER EVENTS OF DEFAULT


 


13.1                        Purchaser Events of Default


 


Each of the following events or circumstances
constitutes an event of default by the Purchaser (each, a “Purchaser
Event of Default”):


 


(a)                                  the
Purchaser fails to pay for Refined Gold Delivered to the Purchaser in
accordance with Section 2.4 within 10 days of receipt of notice from
Vendor notifying the Purchaser of such default;


 


(b)                                 subject
to satisfaction of the conditions set forth in Section 5.3 and Schedule D,
the Purchaser fails to pay any portion of the Payment Deposit to Vendor, within
10 days of receipt of notice from Vendor notifying the Purchaser of such
default;


 


(c)                                  the
Purchaser is in breach of Article 10;


 


(d)                                 the
Purchaser is in breach or default of any of the terms or conditions, or any of
its covenants or obligations, set forth in this Agreement in any material
respect (other than a breach or default of the covenants or obligations
referenced in Sections 13.1(a) and 13.1(b) above), which is
incapable of being cured, or, if any such term, condition, covenant or obligation
is capable of being cured, such breach or default is not remedied within a
period of 30 days following delivery by the Vendor to Purchaser of written
notice of such breach or default, or such longer period of time as the Vendor
may determine in its sole discretion; or


 


(e)                                  upon
the occurrence of an Insolvency Event affecting Purchaser.


 


13.2                        Remedies


 


In addition to Vendor’s rights and remedies
available to it at law or in equity, if a Purchaser Event of Default described
in Sections 13.1(a), 13.1(b) or 13.1(c) occurs and is continuing,
Vendor shall have the right, upon written notice to the Purchaser, to suspend
its obligations under this Agreement; provided, however, that those obligations
that existed prior to the date of such written notice and such other provisions
of this Agreement as are required to give effect thereto, shall not be
suspended and provided that, if suspension is as a result of a Purchaser Event
of Default for a breach of Article 10, the provisions of Article 7
shall also be suspended and Vendor shall not be obligated to sell or Deliver
any Refined Gold to the Purchaser during such suspension.  If the Purchaser cures the Purchaser Event of
Default in full within 60 days, then Vendor’s obligations under this Agreement
shall recommence as of the date the Purchaser cures the Purchaser Event of
Default in full. If the Purchaser fails to cure the Purchaser Event of Default
described in Sections 13.1(a) or 13.1(b) in full within 60 days then
Vendor may elect at any time thereafter to suspend its obligations to Deliver
Refined Gold under this Agreement for the remainder of the Term of the
Agreement, and thereupon the Purchaser shall only have the 


 


38

















 


right or conversely, Vendor shall only have the
obligation, to refund the outstanding balance of the Payment Deposit, as set
forth in the Deposit Record, on the Default Deposit Reduction Date.  In addition, Purchaser shall indemnify
Vendor, and save it harmless, on an after-tax basis, from and against any tax
liability of Vendor to the extent that it arises (i) as a consequence of
Vendor electing to suspend its obligations to Deliver Refined Gold for the
reminder of the Term of the Agreement, and (ii) in the taxation year of
Vendor in which such suspension occurs. 
If a Purchaser Event of Default under Sections 13.1(d) and
13.1(e) has occurred and is continuing, then Vendor shall have no right to
terminate this Agreement, but it shall be entitled to all other remedies
available to it at law or in equity.


 


Article 14

INDEMNITIES


 


14.1                        Indemnity of Purchaser


 


Subject to Section 14.4, the Vendor agrees
to indemnify the Purchaser and Royal Gold from and against, and to hold the
Purchaser harmless from any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, claims, expenses or disbursements
of any kind whatsoever (collectively “Losses”) which
may at any time be imposed on, incurred by or asserted against the Purchaser in
any way to the extent relating to or arising out of (A) any breach by the
Vendor or Thompson Creek or any misrepresentation or inaccuracy of any
representation or warranty of the Vendor or Thompson Creek contained in this
Agreement, including without limitation the representations and warranties set
forth on Schedules A1 and A2 hereto, or in any document, instrument or
agreement delivered pursuant hereto; (B) any breach, including breach due
to non-performance, by the Vendor or Thompson Creek of any covenant or
agreement to be performed by the Vendor or Thompson Creek contained in this
Agreement or in any document, instrument or agreement delivered pursuant
hereto.


 


14.2                        Indemnity of Vendor


 


Subject to Section 14.4, the Purchaser
agrees to indemnify the Vendor and Thompson Creek from and against, and to hold
the Vendor harmless from, any and all Losses which may at any time be imposed
on, incurred by or asserted against the Vendor in any way to the extent
relating to or arising out of (A) any breach by the Purchaser or Royal
Gold or any misrepresentation or inaccuracy of any representation or warranty
of the Purchaser contained in this Agreement, including without limitation the
representations and warranties set forth on Schedules A3 and A4 hereto, or in
any document, instrument or agreement delivered pursuant hereto; and (B) any
breach, including breach due to non-performance, by the Purchaser or Royal Gold
of any covenant or agreement to be performed by the Purchaser or Royal Gold
contained in this Agreement or in any document, instrument or agreement
delivered pursuant hereto.


 


14.3                        Limited Indemnity for Losses
Related to Incidental Connection to Property


 


Subject to Section 14.4, the Vendor agrees
to indemnify the Purchaser and Royal Gold from and against, and to hold the
Purchaser and Royal Gold harmless from, any and all Losses which may at any
time be imposed on, incurred by or asserted against the Purchaser and Royal
Gold in any way to the extent relating to or arising out of (A) the
failure of the Vendor or Thompson Creek to comply with any Applicable Law,
including any Applicable Law relating to environmental 


 


39

















 


protection and reclamation obligations, with
respect to the Milligan Property; (B) the physical environmental condition
of the Milligan Project and matters of health or safety related to the Milligan
Project or any action or claim brought with respect thereto; and (C) any
actual or threatened withdrawal by any Governmental Authority of any material
Approval under Environmental Laws which is necessary for the construction or
operation of the Milligan Project, or any actual or threatened challenge by any
person to any material Approval under Environmental Laws which is necessary for
the construction or operation of the Milligan Project.  Vendor’s indemnification obligation pursuant
to this Section 14.3 shall arise to the extent such Losses are direct,
such as but not limited to Losses incurred from defending enforcement actions
or defending lawsuits joined against Purchaser or Royal Gold.  Vendor’s indemnification obligation pursuant
to this Section 14.3 shall not arise (i) where indemnification is
available to Purchaser pursuant to Section 14.1, and (ii) where
Losses are incidental or consequential to the occurrence of the matters listed
in this Section 14.3 (A), (B) and (C), such as but not limited to
lost profits from the resulting failure of Vendor to develop the Milligan
Project, to extract or process Minerals, or to deliver or sell Minerals to an
Offtaker.


 


14.4                        Limitations on Indemnification


 


Notwithstanding anything else to the contrary
in this Article 14, in no event will either Party be liable to the other
Party for:


 


(a)                                  any lost profits or incidental, indirect, speculative,
consequential, special, punitive, or exemplary damages of any kind (whether
based in contract, tort, including negligence, strict liability, fraud, or
otherwise, or statutes, regulations, or any other theory) arising out of or in
connection with this Agreement, even if advised of such potential damages; or


 


(b)                                 Losses directly arising from an Event of Force
Majeure.


 


Article 15

INDEPENDENT ENGINEER; ADDITIONAL PAYMENT TERMS; DISPUTES


 


15.1                        Independent Engineer


 


(a)                                  Following
the Effective Date, the Parties will select by mutual agreement an individual
to serve as an independent engineer under this Agreement (the “Independent Engineer”). To the extent he is
no longer available to perform the service or if agreed by the Purchaser and
Vendor, a replacement Independent Engineer will be selected by the mutual
agreement of the Purchaser and Vendor. If the Purchaser and Vendor cannot agree
upon an initial Independent Engineer within 45 days following the date of this
Agreement or a replacement Independent Engineer within 15 days after an
existing Independent Engineer ceases to perform such service, the Independent
Engineer shall be selected by the following procedure: the Purchaser will
nominate three Qualified Candidates, one of which Vendor will elect within 10
days after Vendor shall have received notice of the Purchaser’s nomination,
failing which the Purchaser shall appoint one of the nominees as the
Independent Engineer. For purposes hereof, a “Qualified
Candidate” shall mean an individual with not less than 15 years of
relevant 


 


40

















 


mineral engineering
expertise in the precious metals industry. The Qualified Candidate will not
have been a director, officer, employee of, or contractor or service provider
to, or director, officer, beneficial owner or close relative of a beneficial
owner of any contractor or service provider to the Purchaser or Vendor or any
Affiliate thereof for a period of five years preceding his or her nomination by
the Purchaser unless mutually agreed between the Purchaser and Vendor.


 


(b)                                 The
regular retainer of the Independent Engineer shall be paid by the Purchaser.
All incremental fees, costs and expenses of the Independent Engineer,
including, without limitation, the costs related to reviewing data resulting
from a proposed change to Project Costs or the Development Program, will be
borne by Vendor.


 


15.2                        Payments


 


All payments of funds due by one Party to
another under this Agreement shall be made in U.S. Dollars or such other
currency as the Parties may agree from time to time in writing and shall be
made by wire transfer in immediately available funds to the bank account or
accounts designated by the receiving Party in writing from time to time.


 


15.3                        Overdue Payments and Set-Off


 


(a)                                  Any
payment not made by a Party on or by any applicable payment date referred to in
this Agreement shall incur interest from the due date until such payment or
delivery is paid or made in full at a per annum rate equal to the LIBO Rate on
the due date plus four percent, calculated and compounded monthly in arrears.


 


(b)                                 Any
such overdue dollar amount owed to the Vendor under this Agreement may be set
off against future Refined Gold owed to Purchaser based on the London Bullion
Market Association afternoon price fix for gold on the date such dollar amount
became overdue.


 


(c)                                  The
value of any such overdue payment associated with Refined Gold owed to the
Purchaser under this Agreement shall be based on the London Bullion Market
Association afternoon fix for gold on the date such Refined Gold became
overdue, and the Purchaser may elect to receive such overdue payment in Refined
Gold or as a set off against future Gold Purchase Price payments owed to the
Vendor under Section 2.5.


 


15.4                        Statement Disputes


 


(a)                                  If
the Purchaser disputes any statement provided pursuant to Section 2.3, the
number of ounces of Refined Gold to be Delivered in any Delivery of Refined
Gold to the Purchaser hereunder, or the outstanding balance of the Payment
Deposit set forth in any Deposit Record Report:


 


(i)                                     the Purchaser may notify
Vendor in writing (the “Dispute Notice”)
of such dispute within one year from the date of delivery of the applicable
Deposit Record Report (in the case of a dispute regarding the calculation of
the outstanding balance of the Payment Deposit as set forth in the 


 


41

















 


Deposit Record) or the applicable statement under
Section 2.3 (in the case of a dispute regarding any statement or the
number of ounces of Refined Gold to be Delivered to the Purchaser hereunder),
as applicable (the “Dispute Period”);


 


(ii)                                  if the Purchaser and Vendor
have not resolved the dispute within a 60-day period, then the Purchaser shall
have the right during the ensuing 60 days to require Vendor to retain an
Auditor to prepare a written report on the subject matter of the dispute (the “Auditor’s Report”);


 


(iii)                               the Auditor shall have the
same inspection rights as the Purchaser under Section 7.4(a) in order
to prepare the Auditor’s Report and Vendor shall provide, or cause to be
provided, to the Auditor any information reasonably requested by the Auditor to
enable the auditor to prepare the Auditor’s Report;


 


(iv)                              promptly following
completion of the Auditor’s Report, Vendor will deliver a copy thereof to the
Purchaser;


 


(v)                                 the cost of obtaining the
Auditor’s Report shall be paid by the Purchaser unless the Auditor’s Report
concludes that (i) in the case of a dispute regarding the number of ounces
of Refined Gold to be Delivered in any Delivery of Refined Gold to the
Purchaser hereunder, the number of ounces that should have been Delivered by
Vendor (in aggregate for all Deliveries in dispute) was more than 5% greater
than the actual number of ounces so Delivered by Vendor, or (ii) in the
case of a dispute regarding the calculation of the outstanding balance of the
Payment Deposit in a Deposit Record Report, the correct outstanding balance of
the Payment Deposit is more than 5% different from the amount reported by
Vendor in the applicable Deposit Record Report, in each of which cases the cost
of obtaining the Auditor’s Report shall be paid by Vendor;


 


(vi)                              if either Vendor or the
Purchaser disputes the Auditor’s Report and such dispute is not resolved
between the Parties within 10 days after the date of delivery of the Auditor’s
Report, then such dispute may be resolved by arbitration in accordance with the
arbitration provisions set out in Section 15.5 of this Agreement provided
that such dispute must be referred to arbitration within 30 days after the end
of such 10-day period; and


 


(vii)                           if such dispute is not
referred to arbitration within such 30-day period, then the Auditor’s Report
will be deemed final and binding on the Parties;


 


(b)                                 If
the Purchaser does not deliver a Dispute Notice within the applicable Dispute
Period, then each statement provided pursuant to Section 2.3, the number
of ounces of Refined Gold to be Delivered in any Delivery of Refined Gold to
the Purchaser hereunder or the calculation of the outstanding balance of the
Payment 


 


42

















 


Deposit, as set forth in
any Deposit Record Report, as applicable, will be deemed final and binding on
the Parties after the expiry of the applicable Dispute Period.


 


(c)                                  Any
matter in respect of which a Dispute Notice is delivered shall be resolved only
pursuant to this Section 15.4 including, if applicable, an arbitration
commenced in accordance with Section 15.4(a)(vi).


 


15.5                        Disputes and Arbitration


 


Any dispute,
controversy or claim arising out of or relating to this Agreement or the
breach, termination or invalidity thereof which has not been resolved by the
Parties in accordance with the procedures set out herein, if any, and within
the time frames specified herein (or where no time frames are specified, within
15 days of the delivery of written notice by either Party of such dispute,
controversy or claim), including the determination of the scope or
applicability of this Agreement to arbitrate, shall be settled by binding
arbitration, and any party may so refer such dispute, controversy or claim to
binding arbitration. Such referral to binding arbitration shall be to a
qualified single arbitrator pursuant to the Arbitration Rules, as may be
amended from time to time, which rules shall govern such arbitration
proceeding except to the extent modified by the rules for arbitration set
out in Annex 1 and the discretion of the arbitrator thereunder.  The determination of such arbitrator shall be
final and binding upon the Parties and the costs of such arbitration shall be
as determined by the arbitrator. 
Judgment on the award may be entered in any court having jurisdiction.
This Section 15.5 shall not preclude the Parties from seeking provisional
remedies in aid of arbitration from a court of competent jurisdiction. The
Parties covenant and agree that they shall conduct all aspects of such
arbitration having regard at all times to expediting the final resolution of
such arbitration.


 


Article 16

TAXES


 


16.1                        Taxes


 


(a)                                  Except
as described in Section 16.1(c), all Deliveries of Refined Gold or
payments made by a Party shall be made without any deduction, withholding,
charge or levy for or on account of any tax, duty or other charges of whatever
nature imposed by any taxing or Governmental Authority, all of which shall be
for the account of the Party making the Delivery or payment.


 


(b)                                 The
Parties acknowledge and agree that this Agreement and the purchase and sale
transactions contemplated hereby are, and are intended to be, transactions for
the purchase and sale of gold and the Parties do not intend this Agreement and
the transactions contemplated hereby to constitute the purchase and sale of a
resource property for Canadian legal and tax purposes.


 


(c)                                  If
the Purchaser is an entity that is a non resident of Canada for the purposes of
the Income Tax Act (Canada), the
Purchaser shall indemnify the Vendor for any Canadian withholding on any amount
paid or credited to the Purchaser as, on account or in lieu of payment of, or
in satisfaction of a payment of Refined Gold or any other payment to be made to
the Purchaser under this Agreement.  If
the 


 


43

















 


Vendor does withhold any
amount, it shall provide written proof of any such withholding payment to the
Purchaser.


 


Article 17

GENERAL


 


17.1                        Further Assurances


 


Each Party shall execute all such further
instruments and documents and do all such further actions as may be necessary
to effectuate the documents and transactions contemplated in this Agreement, in
each case at the cost and expense of the Party requesting such further instrument,
document or action, unless expressly indicated otherwise.


 


17.2                        Survival


 


The following provisions shall survive
termination of this Agreement: 8.7, 12.2, 13.2, Article 14, 15.4, 15.5 and
Sections 4.10 and 4.17 of each of the Security Agreements and such other
provisions of this Agreement as are required to give effect thereto.


 


17.3                        No Joint Venture


 


Nothing herein shall be construed to create,
expressly or by implication, a joint venture, mining partnership, commercial
partnership, agency relationship or fiduciary relationship between the Parties
under Canadian law.


 


17.4                        Governing Law


 


This Agreement shall be governed by and
construed under the laws of the Province of British Columbia and the federal
laws of Canada applicable therein (without regard to its laws relating to any
conflicts of laws).  The United Nations
Vienna Convention on Contracts for the International Sale of Goods shall not
apply to this Agreement.


 


17.5                        Notices


 


(a)                                  Unless
otherwise specifically provided in this Agreement, any notice or other
correspondence required or permitted by this Agreement shall be deemed to have
been properly given or delivered when made in writing and hand-delivered to the
Party to whom directed, or when given by facsimile transmission, with all
necessary delivery charges fully prepaid (or in the case of a facsimile, upon
confirmation of receipt), and addressed to the Party to whom directed at the
following address:


 


(i)                                     if to Vendor to:


 


Terrane Metals Corp.


c/o Thompson Creek Metals Company Inc.


 


44

















 


26 W. Dry Creek Circle

Suite 810

Littleton, CO 80120   USA

Attention:  General Counsel

Facsimile:  (303) 761-7420


 


with a copy, which shall not constitute notice,
to:


 


Goodmans

Barristers and Solicitors

1900 – 355 Burrard Street

Vancouver, BC V6C 2G8


 


(ii)                                  if to Thompson Creek to:


 


26 W. Dry Creek Circle

Suite 810

Littleton, CO 80120   USA

Attention:  Wendy Cassity, General
Counsel

Facsimile:  (303) 761-7420


 


with a copy, which shall not constitute notice,
to:


 


Goodmans

Barristers and Solicitors

1900 – 355 Burrard Street

Vancouver, BC V6C 2G8


 


(iii)                               if to the Purchaser to:


 


RGL Royalty AG


c/o Royal Gold, Inc.


1660 Wynkoop Street, Suite 1000


Denver, CO 80202-1132 USA


Attention: Vice President and General Counsel


Facsimile: (303) 595-9385


 


with a copy, which shall not constitute notice,
to:


 


Hogan Lovells US LLP


One Tabor Center


1200 Seventeenth Street, Suite 1500


Denver, CO 80202   USA


Attention: 
Paul Hilton, Esq.


Facsimile: 
(303) 899-7333


 


(iv)                              if to Royal Gold, to:


 


Royal Gold, Inc.


1660 Wynkoop Street, Suite 1000


 


45

















 


Denver, CO 80202-1132 USA


Attention: Vice President and General Counsel


Facsimile: (303) 595-9385


 


with a copy, which shall not constitute notice,
to:


 


Hogan Lovells US LLP


One Tabor Center


1200 Seventeenth Street, Suite 1500


Denver, CO 80202   USA


Attention: 
Paul Hilton, Esq.


Facsimile: 
(303) 899-7333


 


(b)                                 Any
notice or other communication given in accordance with this section, if
delivered by hand as aforesaid shall be deemed to have been validly and
effectively given on the date of such delivery if such date is a Business Day
and such delivery is received before 4:00 pm at the place of delivery;
otherwise, it shall be deemed to be validly and effectively given on the
Business Day next following the date of delivery. Any notice of communication
which is transmitted by facsimile transmission as aforesaid shall be deemed to
have been validly and effectively given on the date of transmission if such
date is a Business Day and such transmission was received before 4:00 pm at the
place of receipt; otherwise it shall be deemed to have been validly and
effectively given on the Business Day next following such date of transmission.


 


17.6                        [Reserved]


 


17.7                        Amendments


 


This Agreement may not be changed, amended or
modified in any manner, except pursuant to an instrument in writing signed on
behalf of each of the Parties hereto.


 


17.8                        Beneficiaries; Successors
and Assigns


 


This Agreement is for the sole benefit of the Parties
and shall enure to the benefit of and be binding on their successors and
permitted assigns and, except as expressly contemplated herein, nothing herein
is intended to or shall confer upon any other person any legal or equitable
right, benefit or remedy of any nature or kind whatsoever under or by reason of
this Agreement.


 


17.9                        Contests


 


The Vendor hereby consents to the Purchaser’s
participation (at the Purchaser’s sole expense) to protect its interest and
investment in any proceeding relating to any act of eminent domain,
expropriation, confiscation, or nationalization of all or part of the Milligan
Property.


 


17.10                 Entire Agreement


 


This Agreement, the Security Agreements and the
Confidentiality Agreement together constitute the entire agreement between the
Parties with respect to the subject matter hereof and cancel and 


 


46
















 


supersede any prior understandings and
agreements between the Parties with respect thereto. There are no
representations, warranties, terms, conditions, opinions, advice, assertions of
fact, matters, undertakings or collateral agreements, express, implied or
statutory, by or between the Parties (or by any of their respective employees,
directors, officers, representatives or agents) other than as expressly set
forth in this Agreement, the Security Agreements or the Confidentiality
Agreement.


 


17.11                 Waivers


 


Any waiver of, or consent to depart from, the
requirements of any provision of this Agreement shall be effective only if it
is in writing and signed by the Party giving it, and only in the specific
instance and for the specific purpose for which it has been given. No failure
on the part of any Party to exercise, and no delay in exercising, any right
under this Agreement shall operate as a waiver of such right. No single or
partial exercise of any such right shall preclude any other or further exercise
of such right or the exercise of any other right.


 


17.12                 Severability


 


If any provision of this Agreement is
determined by a court of competent jurisdiction to be invalid, illegal or
unenforceable in any respect, all other provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any Party.


 


17.13                 Counterparts


 


This Agreement may be executed in one or more
counterparts, and by the Parties in separate counterparts, each of which when
executed shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Agreement by telecopy or
electronic scan shall be effective as delivery of a manually executed
counterpart of this Agreement.


 


17.14                 Thompson Creek Guarantee


 


Thompson Creek hereby absolutely,
unconditionally and irrevocably guarantees the prompt and complete performance
of all of the terms, covenants, conditions and provisions to be performed by
the Vendor pursuant to this Agreement, and shall perform such terms, covenants,
conditions and provisions upon the default or non-performance thereof by the
Vendor.


 


17.15                 Royal Gold Guarantee


 


Royal Gold hereby absolutely, unconditionally
and irrevocably guarantees the prompt and complete performance of all of the
terms, covenants, conditions and provisions to be performed by the Purchaser
pursuant to this Agreement, and shall perform such terms, covenants, conditions
and provisions upon the default or non-performance thereof by the Purchaser.


 


47

















 


IN WITNESS WHEREOF the Parties have executed this Agreement as of the day and year first
written above.


 


	
   

  	
  RGL ROYALTY AG

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Per:

  	
  /s/ Tony Jensen

  
	
   

  	
   

  	
  Name:  Tony
  Jensen

  
	
   

  	
   

  	
  Authorized Signatory: Chairman

  
	
   

  	
  Per:

  	
  /s/ Martin Weber

  
	
   

  	
   

  	
  Name:  Martin
  Weber

  
	
   

  	
   

  	
  Authorized Signatory: Board Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TERRANE METALS CORP.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Per:

  	
  /s/ Pamela Saxton

  
	
   

  	
   

  	
  Name:  Pamela
  Saxton

  
	
   

  	
   

  	
  Title: 
    Chief Financial Officer and
  Vice President, Finance

  
	
   

  	
   

  
	
   

  	
  Solely in respect of
  Article 10 and Sections 11.4 and 17.15 hereof

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ROYAL GOLD, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Per:

  	
  /s/ William H. Heissenbuttel

  
	
   

  	
   

  	
  Name:  William
  H. Heissenbuttel

  
	
   

  	
   

  	
  Title:   
  Vice President Corporate Development

  
	
   

  	
   

  
	
   

  	
  Solely in respect of
  Article 10 and Sections 3.5, 11.2 and 17.14 hereof

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THOMPSON CREEK METALS COMPANY
  INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Per:

  	
  /s/ Pamela Saxton

  
	
   

  	
   

  	
  Name:  Pamela
  Saxton

  
	
   

  	
   

  	
  Title:   
  Chief Financial Officer and Vice President, Finance

  



 


[SIGNATURE
PAGE — PURCHASE AND SALE AGREEMENT]


 

















 


ANNEX 1


 


RULES OF ARBITRATION


 


The following rules and procedures shall
apply with respect to any matter to be arbitrated by the Parties in accordance
with the Agreement, except for any matter to be arbitrated pursuant to Section 8.6,
in which case the rules and procedures of Annex 2 shall apply.


 


1.              Initiation of Arbitration
Proceedings


 


(a)                                 If
any Party to this Agreement wishes to have any matter under this Agreement
arbitrated in accordance with the provisions of this Agreement, it shall give
notice to the other Party hereto specifying particulars of the matter or
matters in dispute and proposing the name of the person it wishes to be the
single arbitrator. Within 20 days after receipt of such notice, the other Party
to this Agreement shall give notice to the first Party advising whether such
Party accepts the arbitrator proposed by the first Party. If such notice is not
given within such 20-day period, the other Party shall be deemed to have
accepted the arbitrator proposed by the first Party. If the Parties do not
agree upon a single arbitrator within such 20-day period such arbitrator shall
be chosen by British Columbia International Commercial Arbitration Centre,
Vancouver, British Columbia, at the written request of either Party.


 


(b)                                 The
individual selected as Arbitrator shall be qualified by education and
experience to decide the matter in dispute. The Arbitrator shall be at arm’s
length from both Parties and shall not be a member of the audit or legal firm
or firms who advise either Party or a person who is otherwise regularly
retained by either of the Parties.


 


2.              Submission of Written Statements


 


(a)                                 Within
20 days of the appointment of the Arbitrator, the Party initiating the
arbitration (the “Claimant”) shall
send the other Party (the “Respondent”)
a statement of claim setting out in sufficient detail the facts and any
contentions of law on which it relies, and the relief that it claims.


 


(c)                                  Within
15 days of the receipt of the statement of claim, the Respondent shall send the
Claimant a statement of defence stating in sufficient detail which of the facts
and contentions of law in the statement of claim it admits or denies, on what
grounds, and on what other facts and contentions of law the Respondent relies.


 


(d)                                 Within
ten days of receipt of the statement of defence, the Claimant may send the
Respondent a statement of reply.


 


(e)                                  All
statements of claim, defence and reply shall be accompanied by copies (or, if
they are especially voluminous, lists) of all essential documents on which the
Party concerned relies and which have not previously been submitted by any
Party, and (where practicable) by any relevant samples.


 

















 


(f)                                   After
submission of all the statements, the Arbitrator will give directions for the
further conduct of the arbitration.


 


3.              Meetings and Hearings


 


(a)                                 The
arbitration shall take place in Vancouver, British Columbia or in  such other place as the Claimant and the
Respondent shall agree upon in writing.


 


(b)                                 The
arbitration shall be conducted in English unless otherwise agreed by such
Parties and the Arbitrator.


 


(c)                                  All
meetings and hearings will be in private unless the Parties otherwise agree.


 


(d)                                 Any
Party may be represented at any meetings or hearings by legal counsel.


 


(e)                                  Each
Party may examine, cross-examine and re-examine all witnesses at the
arbitration.


 


4.              The Decision


 


(a)                                 The
Arbitrator will make a decision in writing and, unless the Parties otherwise
agree, will set out reasons for decision in the decision


 


(b)                                 The
Arbitrator will send the decision to the Parties as soon as practicable after
the conclusion of the final hearing, but in any event no later than 60 days
thereafter, unless that time period is extended for a fixed period by the
Arbitrator on written notice to each Party because of illness or other cause
beyond the Arbitrator’s control.


 


(c)                                  The
decision shall determine and award costs.


 


(d)                                 Any
Party may appeal the decision of the Arbitrator on a question of law. In the
event either Party initiates any court proceeding in respect of the decision of
the Arbitrator or the matter arbitrated, such Party, if unsuccessful in the
court proceeding, shall pay the other Party’s costs of such proceedings on a
substantial indemnity basis.


 


5.              Jurisdiction and Powers of the
Arbitrator


 


(a)                                 By
submitting to arbitration under the Arbitration Rules, the Parties shall be
taken to have conferred on the Arbitrator the following jurisdiction and powers,
to be exercised at the Arbitrator’s discretion subject only to the Arbitration
Rules and the relevant law with the object of ensuring the just,
expeditious, economical and final determination of the dispute referred to
arbitration.  Without limiting the
jurisdiction of the Arbitrator at law, the Parties agree that the Arbitrator
shall have jurisdiction to:


 


(i)                                     determine any question of
law or fact arising in the arbitration;


 

















 


(ii)                                  determine any question as to
the Arbitrator’s jurisdiction;


 


(iii)                               determine any question of
good faith, dishonesty or fraud arising in the dispute;


 


(iv)                              order any Party to furnish further details of that Party’s case,
in fact or in law;


 


(v)                                 proceed in the arbitration
notwithstanding the failure or refusal of any Party to comply with these Rules or
with the Arbitrator’s orders or directions, or to attend any meeting or
hearing, but only after giving that Party written notice that the Arbitrator
intends to do so;


 


(vi)                              receive and take into
account such written or oral evidence tendered by the Parties as the Arbitrator
determines is relevant, whether or not strictly admissible in law;


 


(vii)                           make one or more interim
awards;


 


(viii)                        hold meetings and hearings,
and make a decision (including a final decision) in Vancouver, British Columbia
or elsewhere with the concurrence of
the Parties thereto;


 


(ix)                              order the Parties to produce
to the Arbitrator, and to each other for inspection, and to supply copies of,
any documents or other evidence or classes of documents in their possession or
power which the Arbitrator determines
to be relevant;


 


(x)                                 award any remedy or relief
that a court could order or grant in accordance with the Agreement, including,
without limitation, specific performance of any obligation created under the
Agreement, the issuance of an interim, interlocutory or permanent injunction,
or the imposition of sanctions for abuse or frustration of the arbitration
process; and


 


(xi)                              make interim orders to
secure all or part of any amount in dispute in the arbitration.


 


6.              Confidentiality


 


(a)                                 The
arbitration, including any settlement discussions between the parties related
to the subject matter of the arbitration, shall be conducted on a private and
confidential basis and any and all information exchanged and disclosed during
the course of the arbitration shall be used only for the purposes of the
arbitration. Neither party shall communicate any information obtained or
disclosed during the course of the arbitration to any third party except to
those experts or consultants employed or retained by, or consulted about
retention on behalf of, such party in connection with the arbitration and
solely to the extent necessary for assisting in the arbitration, and only after
such persons have agreed to be bound by these confidentiality conditions. In
the event that disclosure of any information related 


 

















 


to the arbitration is
required to comply with Applicable Law or court order, the disclosing Party
shall promptly notify the other Party of such disclosure, shall limit such
disclosure limited to only that information so required to be disclosed and
shall have availed itself of the full benefits of any laws, rules, regulations
or contractual rights as to disclosure on a confidential basis to which it may
be entitled.


 


(b)                                 The
award of the Arbitrator and any reasons for the decision of the Arbitrator
shall also be kept confidential except (i) as may reasonably be necessary
to obtain enforcement thereof, (ii) for either Party to comply with its
disclosure obligations under Applicable Law, (iii) to permit the parties
to exercise properly their rights under the Arbitration Rules, and (iv) to
the extent that disclosure is required to allow the Parties to consult with
their professional advisors.


 

















 


ANNEX 2


 


RULES OF ARBITRATION -
SECTION 8.6


 


The following sets forth the expedited
procedures that must be followed in connection with any arbitration brought by
the Vendor pursuant to Section 8.6(c) of the Agreement.  Capitalized terms used herein but not
otherwise defined have the meanings assigned to them in the Agreement.


 


1.  The arbitration shall be conducted
pursuant to the Arbitration Rules (as that term is defined in
Section 1.1 of the Agreement) then prevailing, except as to those
Arbitration Rules that may be inconsistent with the provisions of Sections
8.6(c) and 8.6(d) of the Agreement, or the terms of this Annex, in
which case the terms of this Annex shall prevail over any inconsistent terms
thereof, and the terms of Sections 8.6(c) and 8.6(d) of the Agreement
shall prevail over any inconsistent terms otherwise contained in the
Arbitration Rules.


 


2.  There shall be a single arbitrator,
who shall be impartial and independent of the Parties and the proposed Lenders.


 


3.  The arbitrator shall be selected
through a rank and strike method among a list of 15 arbitrators provided to
Vendor and Purchaser by the British Columbia International Commercial
Arbitration Centre, Vancouver, British Columbia (the “BCICAC”), which list shall
consist of transactional lawyers who have commercial lending expertise and who
have worked for at least ten years at a large commercial law firm in Vancouver,
British Columbia or Toronto, Ontario (the “List”).  Prior to the date on
which BCICAC provides the List, but no later than one Business Day after the BCICAC
is requested to provide the List, Vendor and Purchaser will provide BCICAC with
the name of any arbitrator who would otherwise be eligible to be included in
the List but who is a member of the audit or legal firm or firms who advise
such Party or the proposed Lenders or a person who is otherwise regularly
retained by such Party or the proposed Lenders, and BCICAC shall not include
any such arbitrators in the List.  Each
of Vendor and Purchaser (i) may strike no more than five names from the
List, (ii) shall rank the remaining names on the List, and (iii) shall
provide their confidential ranks and strikes to the BCICAC within one Business
Day of receiving the List.  If Vendor or
Purchaser fails to provide its ranks and strikes within the one Business Day
provided for, it shall be deemed to waive its right to object, and the other
Party’s first ranked arbitrator shall become the appointed arbitrator.  BCICAC shall notify the Vendor and Purchaser
of the arbitrator selected no later than one Business Day from the date it
circulated the List, and its decision shall be conclusive, final, and
non-appealable, subject to the requirements of Paragraph 2.


 


4.  The arbitrator selected shall have
one Business Day thereafter to confirm his willingness and availability to proceed
on the expedited basis provided in this Annex, and shall by that time also
confirm that he meets the criteria set forth in Paragraphs 2 and 3 and has no
legal conflicts.  If the arbitrator fails to make the required
confirmations within the required time frame, then the BCICAC shall, on the
following Business Day, select the next ranked arbitrator from the list and so
forth until an arbitrator is selected.


 

















 


5.  Once confirmed, the arbitrator shall
hold a telephone conference with the Parties by the next Business Day, and the
Parties shall make themselves available for such conference.  During the
conference, the arbitrator shall address logistics regarding the hearing and
pre-hearing submissions.  If one Party fails to participate without good
cause (as determined by the arbitrator), then the arbitrator shall proceed with
the conference without that Party and the Party shall be bound by the decisions
reached.


 


6.  Within five Business Days of that
initial telephone conference, each Party shall simultaneously submit to the
arbitrator and exchange with the other Party (by hand or email) its factual and
legal submission (the “Purchaser Submission” and the “Vendor Submission”,
respectively, and each, a “Submission”) addressing the issues set forth in Paragraph
9 below.  The Purchaser and Vendor
Submission shall consist of affidavits, exhibits, and all materials and any
other evidence that the Parties wish the arbitrator to consider in evaluating
their respective positions, and shall also include the Intermediate
Intercreditor Agreement that the Vendor provided to Purchaser pursuant to
Section 8.6(b) of the Agreement. 
Neither Party shall be allowed to supplement its respective Submission
except on good cause shown (as determined by the arbitrator), and the Purchaser
and Vendor Submissions shall substitute for direct testimony at the
hearing.  The Parties shall address in
their respective Submissions all matters, defenses, proofs, and arguments
(hereinafter, the “Matters”) that they reasonably anticipate the other Party
may raise in its respective Submission.


 


7.  Within five Business days of the
exchange of the Purchaser and Vendor Submissions, each Party shall
simultaneously submit to the arbitrator and exchange with the other Party (by
email or by hand) its rebuttal of the other Party’s Submission (the “Rebuttal
Submission”).  For the avoidance of
doubt, the Rebuttal Submission may include Matters not contained in the
Parties’ initial Submissions, but only to the extent such Matters could not
have been reasonably anticipated by the Parties in accordance with the terms of
Paragraph 6 hereof.  By motion of either
Party, made no later than two Business Days following the exchange of the
Rebuttal Submissions, either Party may seek to exclude any matters from the Rebuttal
Submission that should have been reasonably anticipated in the other Party’s
initial Submission.  The arbitrator shall
rule on any such motion within two Business Days thereafter.


 


8.  The hearing shall be held in
Vancouver no later than five Business Days following the date the Rebuttal
Submissions were due.  There shall be no
direct testimony at the hearing.  The
affidavits contained in the Parties’ Submissions and Rebuttal Submissions, to
the extent not excluded by the arbitrator pursuant to Paragraph 7 above, shall
constitute the direct testimony at the hearing. 
Each Party at the hearing shall be allotted equal time in which to
cross-examine the other Party and any witnesses for which the other Party put in
affidavits.  The hearing shall be concluded on the same day, and the
arbitrator shall render a short form decision within one Business Day
thereafter, which briefly explains his findings and the reasons therefor. 
The arbitrator’s decision shall be final and binding.


 


9.  The sole issues for resolution by
the arbitrator shall be whether the Purchaser has met its burden of proving, by
a preponderance of the evidence, that (i) the 


 

















 


Intermediate Intercreditor Agreement does not contain each of the terms
set forth in Section 8.6(a)(i) through 8.6(a)(viii) of the
Agreement (the “Required Terms”), unless such omission was not included in the
Stipulation and Proposal; (ii) the provisions of the Intermediate
Intercreditor Agreement containing the Required Terms are set forth in an
unreasonable manner, as measured by any criteria which the arbitrator deems to
be relevant or material (so long as any such criteria does not conflict with
the terms set forth in Section 8.6 of the Agreement); or (iii) the
Intermediate Intercreditor Agreement is unreasonable as a whole, as measured by
similar terms prevailing in the syndicated secured lending market.  If the arbitrator finds that the Purchaser
did not prove (i), (ii), or (iii) in the preceding sentence, then the
arbitrator shall immediately enter a final order and judgment requiring
Purchaser to fully execute the Intermediate Intercreditor Agreement in all
respects within one Business Day of receiving a written request from the Vendor
that the Purchaser execute the Intermediate Intercreditor Agreement (the “Arbitrator
Compel Order”).  Vendor and Purchaser
agree that the Arbitrator Compel Order will be specifically enforceable by any
court of competent jurisdiction.  Any appeal of the Arbitrator Compel
Order shall be made on an expedited basis.  It is agreed that no stay will
issue or be applied for pending any such appeal.


 


10.  If any Party fails to cooperate
with the arbitration as provided for herein without good cause (as determined
by the arbitrator), the arbitrator shall proceed without that Party’s participation,
and the resulting decision shall be fully enforceable and effective as if that
Party fully participated in all respects. 
It is understood that time is of the essence, and that Purchaser agreed
to the limited remedy reflected in Paragraph 9 hereof in consideration of and
in reliance on the expedited timetables reflected herein.  The arbitrator has no power to extend the
outside dates contemplated herein for the arbitration hearing and/or for its
decision thereafter.


 


11.  The costs and expenses of the
arbitration provided for herein, including reasonable attorneys’ and expert’s
fees, shall be borne by the losing party.  The losing party shall be the
Purchaser if the arbitrator issues the Arbitrator Compel Order in Paragraph 9,
and shall be Vendor, if the arbitrator does not issue the Arbitrator Compel
Order.  In furtherance of this paragraph,
within thirty days of issuing the order and judgment referenced in Paragraph 9,
the arbitrator shall issue a further order and judgment identifying the precise
amount that the losing party must pay pursuant to this Paragraph 11, and
ordering that the losing party pay that amount within five Business Days
thereof.  To the extent either party is
required to commence a court action to enforce the decision, award and/or
judgment of the arbitrator under this Annex, the other Party shall owe that
Party its reasonable attorneys’ fees, expert’s fees, and costs incurred in
connection therewith.  The arbitrator
hereunder will determine how much those fees and costs calculate to, and shall
order them to be paid within five Business Days therefrom.


 

















 


Schedule A1 — Vendor
Representations and Warranties


 


The Vendor hereby represents
and warrants to the Purchaser as follows:


 


(a)                                 it
is a company validly existing under the laws of its jurisdiction of
incorporation and is up to date in respect of all filings required by law to
maintain its existence;


 


(b)                                 all
requisite corporate acts and proceedings have been done and taken by it,
including obtaining all requisite board of directors’ approvals, with respect
to entering into this Agreement and the Security Agreements and performing its
obligations hereunder and thereunder;


 


(c)                                  it
has the requisite corporate power, capacity and authority to enter into this
Agreement and the Security Agreements and to perform its obligations hereunder
and thereunder;


 


(d)                                 this
Agreement and the Security Agreements and the exercise of its rights and
performance of its obligations hereunder and thereunder do not and will not,
(i) conflict with or result in a default under any agreement, mortgage,
bond or other instrument to which it is a party or which is binding on its
assets, (ii) conflict with its constating or constitutive documents, or
(iii) conflict with or violate any Applicable Laws, in each case except as
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect;


 


(e)                                  it
is not currently in breach or default under any agreement, mortgage, bond or
other instrument to which it is a party or which is binding on or affecting any
of its assets, and no event has occurred that with the passage of time would
constitute such a breach or default, except in each case where the breach or
default would not, or would not reasonably be expected to, have a Material Adverse
Effect, and it has no knowledge of a material breach or default by any
counterparty thereto or the inability of any counterparty to perform its
obligations thereunder;


 


(f)                                   no
Approvals are required to be obtained by it in connection with the execution
and delivery or the performance by it of this Agreement or any of the Security
Agreements or the transactions contemplated hereby and thereby;


 


(g)                                  each
of this Agreement and the Security Agreements has been duly and validly
executed and delivered by it and constitutes a legal, valid and binding
obligation of it, enforceable against it in accordance with its terms subject
to any qualification regarding enforceability in the legal opinions provided
pursuant to Section 4.1(c);


 


(h)                                 there
is no Insolvency Event in respect of it, and it is not now aware of any
circumstance which, with notice or the passage of time, or both, would give
rise to an Insolvency Event with respect to it;


 
















 


(i)                                     other
than the Haslinger Royalty, no person has any agreement, option, right of first
refusal or right, title or interest or right capable of becoming an agreement,
option, right of first refusal or right, title or interest, in or to all or any
part of the Milligan Project or the gold produced from the Milligan Project;


 


(j)                                     all
mining patents, fees and other amounts have been paid when due and payable and
all other actions have been taken and all other obligations as are required to
maintain the Milligan Project have been complied with, except where the failure
to make a payment when due or take an action or perform an obligation would not
be material to the Company;


 


(k)                                  it
has obtained or been issued all licences, permits, Approvals (including environmental
Approvals), authorizations, rights (including surface and access rights),
privileges, concessions or franchises necessary for the construction and
Development of the Milligan Project as contemplated by the Development Program,
other than those that are not necessary on the date this representation and
warranty is given and are expected to be obtained in the ordinary course of
business by the time they are necessary, and such licences, permits, approvals,
authorizations, rights, privileges, concessions or franchises the failure to
have or obtain which will not, or will not reasonably be expected to have,
individually or in the aggregate, Material Adverse Effect, and to the knowledge
its knowledge, other than the Nak’azdli Litigation, there are no facts or
circumstances that might reasonably be expected to adversely affect the
issuance of any such material licences, permits, Approvals (including
environmental Approvals), authorizations, rights (including surface and access
rights), privileges, concessions or franchises;


 


(l)                                     the
Mineral Claims and Mining Leases referred to in Schedule B (the “Milligan Tenures”) constitute all of the
rights that comprise its interest in the Mineral reserves and resources of the
Milligan Project as of the date of this Agreement and it is the legal and
beneficial owner of a 100% undivided interest in and to the Milligan Project,
free and clear of all Encumbrances, except Permitted Encumbrances or as would
not have, individually or in the aggregate, a Material Adverse Effect or
materially affect the security interest of the Purchaser under any Security
Agreement or other security document, and, within ten (10) Business Days
of the Effective Date, it will be the registered and recorded holder of the
Milligan Tenures in the registry (as defined in the Mineral Tenure Act (British Columbia));


 


(m)                               the
Milligan Tenures are in full force and effect and it has complied in all
respects with its obligations in respect thereof under Applicable Laws
(including without limitation Environmental Laws) and the terms thereof except
to the extent such non-compliance would not be reasonable 


 

















 


expected to result in a
Material Adverse Effect on the operation of the Milligan Project;


 


(n)                                 its
right, title and interest in and to the Milligan Project is not subject to any
Encumbrances, other than Permitted Encumbrances, except as would not reasonably
be expected to have a Material Adverse Effect or materially affect the security
interest of the Purchaser under any Security Agreement or other security
document;


 


(o)                                 the
maps attached hereto as Schedule B depict the location of the Milligan Project
in all material respects;


 


(p)                                 subject
only to the rights of any Governmental Authority, no person is entitled to or
has been granted any rent or royalty, or other payment in the nature of rent or
royalty on or in respect of any Produced Gold other than Haslinger Royalty;


 


(q)                                 it
has not received any notice of any expropriation proceeding or decision to
expropriate all or any part of the Milligan Project, and it does not have
knowledge of any expropriation proceeding pending or threatened against or
affecting all or any part of the Milligan Project or of any discussions or
negotiations which could lead to any such expropriation proceeding;


 


(r)                                    except
as would not, or would not reasonably be expected to, have individually or in
the aggregate, a Material Adverse Effect, conditions on and relating to the
Milligan Project and the surface area or mining lots covered by the Milligan
Project respecting all past and current operations conducted thereon by it are
in material compliance with Applicable Laws (including without limitation
Environmental Laws), and conditions on and relating to the Milligan Project and
the surface area or mining lots covered by the Milligan Project respecting all
past operations conducted thereon by persons other than the Vendor are, to its
knowledge, in compliance in all material respects with Applicable Laws
(including without limitation Environmental Laws);


 


(s)                                  other
than the Nak’azdli Litigation, it has not been notified that it is a party or
is subject to any action, suit, proceeding, investigation or claim affecting or
pertaining to the Milligan Project or any part thereof, except as would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect and, to its knowledge, no such action, suit, proceeding,
investigation or claim is threatened or outstanding;


 


(t)                                    neither
it nor the Milligan Project, nor any part thereof, is subject to any
outstanding judgment, order, writ, injunction or decree that has or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect;


 

















 


(u)                                 it
enters into and performs this Agreement on its own account and not as trustee
or a nominee of any other person;


 


(v)                                 except
for Permitted Encumbrances, the Vendor has not granted, nor agreed to grant, an
Encumbrance affecting or in the Minerals or the Milligan Project, or any part
thereof, to any person other than to the Purchaser;


 


(w)                               the
Technical Reports are accurate in all material respects and do not contain a
misrepresentation.  The Technical Reports
were prepared in accordance with Canadian industry standards set forth in NI
43-101 and the information contained in the Technical Reports was, at the time
of delivery thereof, complete and accurate in all material respects and there
has occurred no change to such information since the date of delivery thereof
other than any change that would not reasonably be expected to have a Material
Adverse Effect; and


 


(x)                                   since
December 31, 2009, neither the business, properties, assets, liabilities
(contingent or otherwise), condition (financial or otherwise), capitalization,
operation or results of operations of the Vendor, have been affected by any
change, effect, event or occurrence (whether or not insured against) which
could reasonably be expected to result, either individually or in the
aggregate, in a Material Adverse Effect.


 

















 


Schedule A2 — Thompson Creek
Representations and Warranties


 


Thompson Creek hereby represents and warrants to the Purchaser as
follows:


 


(a)                                  it
is a company validly existing under the laws of its jurisdiction of
incorporation and is up to date in respect of all filings required by law to
maintain its existence;


 


(b)                                 all
requisite corporate acts and proceedings have been done and taken by it,
including obtaining all requisite board of directors’ approvals, with respect
to entering into this Agreement and performing its obligations hereunder;


 


(c)                                  it
has the requisite corporate power, capacity and authority to enter into this
Agreement and to perform its obligations hereunder;


 


(d)                                 this
Agreement and the exercise of its rights and performance of its obligations
hereunder do not and will not, (i) conflict with or result in a default
under any agreement, mortgage, bond or other instrument to which it is a party
or which is binding on its assets, (ii) conflict with its constating or
constitutive documents, or (iii) conflict with or violate any Applicable
Laws, in each case except as would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on Thompson Creek
or the performance of its obligations under this Agreement;


 


(e)                                  it
is not currently in breach or default under any material agreement, mortgage,
bond or other instrument to which it is a party or which is binding on its
assets, and no event has occurred that with the passage of time would
constitute such a breach or default, and it has no knowledge of a material
breach or default by any counterparty thereto or the inability of any
counterparty to perform its obligations thereunder;


 


(f)                                    no
Approvals are required to be obtained by it in connection with the execution
and delivery or the performance by it of this Agreement or the transactions
contemplated hereby;


 


(g)                                 this
Agreement has been duly and validly executed and delivered by it and
constitutes a legal, valid and binding obligation of it, enforceable against it
in accordance with its terms subject to any qualification regarding enforceability
in the legal opinion provided pursuant to Section 4.1(c);


 


(h)                                 it
has not suffered an Insolvency Event and it is not now aware of any
circumstance which, with notice or the passage of time, or both, would give
rise to an Insolvency Event with respect to it; and


 


(i)                                     it
enters into and performs this Agreement on its own account and not as trustee
or a nominee of any other person.


 

















 


Schedule A3 — Purchaser
Representations and Warranties


 


Purchaser hereby represents and warrants to the Vendor and Thompson
Creek as follows:


 


(a)                                  it
is a company validly existing under the laws of its jurisdiction of
incorporation and is up to date in respect of all filings required by law to
maintain its existence;


 


(b)                                 all
requisite corporate acts and proceedings have been done and taken by it,
including obtaining all requisite board of directors’ approvals, with respect
to entering into this Agreement and performing its obligations hereunder;


 


(c)                                  it
has the requisite corporate power, capacity and authority to enter into this
Agreement and to perform its obligations hereunder;


 


(d)                                 this
Agreement and the exercise of its rights and performance of its obligations
hereunder do not and will not, (i) conflict with or result in a default
under any agreement, mortgage, bond or other instrument to which it is a party
or which is binding on its assets, (ii) conflict with its constating or
constitutive documents or (iii) conflict with or violate any Applicable
Laws, in each case except as would not reasonably be expected to have, individually
or in the aggregate, a material adverse effect on the Purchaser or the
performance of its obligations under this Agreement;


 


(e)                                  it
is not currently in breach or default under any material agreement, mortgage,
bond or other instrument to which it is a party or which is binding on its
assets, and no event has occurred that with the passage of time would
constitute such a breach or default, and it has no knowledge of a material
breach or default by any counterparty thereto or the inability of any
counterparty to perform its obligations thereunder;


 


(f)                                    no
Approvals are required to be obtained by it in connection with the execution
and delivery or the performance by it of this Agreement or the transactions
contemplated hereby;


 


(g)                                 this
Agreement has been duly and validly executed and delivered by it and
constitutes a legal, valid and binding obligation of it, enforceable against it
in accordance with its terms subject to any qualification regarding
enforceability in the legal opinion provided pursuant to Section 4.2(c);


 


(h)                                 it
has not suffered an Insolvency Event and it is not now aware of any
circumstance which, with notice or the passage of time, or both, would give
rise to an Insolvency Event with respect to it; and


 


(i)                                     it
enters into and performs this Agreement on its own account and not as trustee
or a nominee of any other person.


 

















 


Schedule A4 — Royal Gold
Representations and Warranties


 


Royal Gold hereby represents and warrants to the Vendor and Thompson
Creek as follows:


 


(a)                                  it
is a company validly existing and in good standing under the laws of State of
Delaware;


 


(b)                                 all
requisite corporate acts and proceedings have been done and taken by it,
including obtaining all requisite board of directors’ approvals, with respect
to entering into this Agreement and performing its obligations hereunder;


 


(c)                                  it
has the requisite corporate power, capacity and authority to enter into this
Agreement and to perform its obligations hereunder;


 


(d)                                 this
Agreement and the exercise of its rights and performance of its obligations
hereunder do not and will not, (i) conflict with or result in a default
under any agreement, mortgage, bond or other instrument to which it is a party
or which is binding on its assets, (ii) conflict with its charter or
bylaws, or (iii) conflict with or violate any Applicable Laws, in each
case except as would not reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the Purchaser or the performance of its
obligations under this Agreement;


 


(e)                                  it
is not currently in breach or default under any material agreement, mortgage,
bond or other instrument to which it is a party or which is binding on its
assets, and no event has occurred that with the passage of time would
constitute such a breach or default, and it has no knowledge of a material
breach or default by any counterparty thereto or the inability of any
counterparty to perform its obligations thereunder;


 


(f)                                    no
Approvals are required to be obtained by it in connection with the execution and
delivery or the performance by it of this Agreement or the transactions
contemplated hereby;


 


(g)                                 this
Agreement has been duly and validly executed and delivered by it and
constitutes a legal, valid and binding obligation of it, enforceable against it
in accordance with its terms subject to any qualification regarding
enforceability in the legal opinion provided pursuant to Section 4.2(c);


 


(h)                                 it
has not suffered an Insolvency Event and it is not now aware of any
circumstance which, with notice or the passage of time, or both, would give
rise to an Insolvency Event with respect to it; and


 


(i)                                     it
enters into and performs this Agreement on its own account and not as trustee
or a nominee of any other person.


 

















 


Schedule B — Description of
Milligan Property (with Maps)


 


Milligan Property mineral claims and lease are
identified in maps 093J, 093K, 093N, and 093O provided by the Mineral Titles
Office of British Columbia, Canada.


 


Mineral Lease Tenure Identification: 631503


 


Mineral Claims Tenure Identification: 100
claims listed in the table below


 


	
   

  	
  1.

  	
  512884

  	
  35.

  	
  521177

  	
  69.

  	
  521213

  
	
   

  	
  2.

  	
  512887

  	
  36.

  	
  521178

  	
  70.

  	
  579598

  
	
   

  	
  3.

  	
  512888

  	
  37.

  	
  521179

  	
  71.

  	
  579599

  
	
   

  	
  4.

  	
  512890

  	
  38.

  	
  521180

  	
  72.

  	
  579600

  
	
   

  	
  5.

  	
  512891

  	
  39.

  	
  521181

  	
  73.

  	
  579602

  
	
   

  	
  6.

  	
  512897

  	
  40.

  	
  521182

  	
  74.

  	
  580741

  
	
   

  	
  7.

  	
  512907

  	
  41.

  	
  521183

  	
  75.

  	
  580742

  
	
   

  	
  8.

  	
  512909

  	
  42.

  	
  521184

  	
  76.

  	
  580743

  
	
   

  	
  9.

  	
  512913

  	
  43.

  	
  521185

  	
  77.

  	
  580744

  
	
   

  	
  10.

  	
  512919

  	
  44.

  	
  521186

  	
  78.

  	
  580745

  
	
   

  	
  11.

  	
  512921

  	
  45.

  	
  521187

  	
  79.

  	
  580746

  
	
   

  	
  12.

  	
  512923

  	
  46.

  	
  521189

  	
  80.

  	
  580747

  
	
   

  	
  13.

  	
  512924

  	
  47.

  	
  521190

  	
  81.

  	
  580748

  
	
   

  	
  14.

  	
  512925

  	
  48.

  	
  521191

  	
  82.

  	
  580749

  
	
   

  	
  15.

  	
  512927

  	
  49.

  	
  521192

  	
  83.

  	
  580750

  
	
   

  	
  16.

  	
  512930

  	
  50.

  	
  521193

  	
  84.

  	
  595146

  
	
   

  	
  17.

  	
  512931

  	
  51.

  	
  521194

  	
  85.

  	
  595163

  
	
   

  	
  18.

  	
  512932

  	
  52.

  	
  521195

  	
  86.

  	
  677107

  
	
   

  	
  19.

  	
  512933

  	
  53.

  	
  521196

  	
  87.

  	
  677785

  
	
   

  	
  20.

  	
  512934

  	
  54.

  	
  521197

  	
  88.

  	
  678524

  
	
   

  	
  21.

  	
  512935

  	
  55.

  	
  521198

  	
  89.

  	
  678527

  
	
   

  	
  22.

  	
  512936

  	
  56.

  	
  521199

  	
  90.

  	
  678536

  
	
   

  	
  23.

  	
  512937

  	
  57.

  	
  521200

  	
  91.

  	
  678564

  
	
   

  	
  24.

  	
  512938

  	
  58.

  	
  521201

  	
  92.

  	
  678583

  
	
   

  	
  25.

  	
  512939

  	
  59.

  	
  521202

  	
  93.

  	
  678588

  
	
   

  	
  26.

  	
  512940

  	
  60.

  	
  521203

  	
  94.

  	
  678603

  
	
   

  	
  27.

  	
  512941

  	
  61.

  	
  521204

  	
  95.

  	
  679483

  
	
   

  	
  28.

  	
  512942

  	
  62.

  	
  521205

  	
  96.

  	
  679484

  
	
   

  	
  29.

  	
  512943

  	
  63.

  	
  521206

  	
  97.

  	
  679485

  
	
   

  	
  30.

  	
  512944

  	
  64.

  	
  521207

  	
  98.

  	
  679505

  
	
   

  	
  31.

  	
  512945

  	
  65.

  	
  521208

  	
  99.

  	
  679506

  
	
   

  	
  32.

  	
  512960

  	
  66.

  	
  521209

  	
  100.

  	
  679509

  
	
   

  	
  33.

  	
  521164

  	
  67.

  	
  521210

  	
   

  	
   

  
	
   

  	
  34.

  	
  521165

  	
  68.

  	
  521212

  	
   

  	
   

  



 

















 


Schedule C1


 


Form of Security Agreement
for Milligan Property


 

















 


SECURITY AGREEMENT MINING CLAIMS
AND LEASES


 


THIS AGREEMENT is made as of the 20 day of October, 2010 by TERRANE
METALS CORP. (herein called “Vendor”)
a company amalgamated under the laws of British Columbia by amalgamation of
0888046 B.C. Ltd. and Terrane Metals Corp., Suite 1500 - 999 West Hastings
Street, Vancouver, British Columbia, (Fax No. 604-630-2090) in favour of
RGL ROYALTY AG, (herein called the “Purchaser”)
a corporation incorporated under the laws of Switzerland, c/o SchelPart AG,
Baarerstrasse 53, P O Box 4559, CH - 6304 Zug, Switzerland (Fax No. +41 41
729 20 77).


 


BACKGROUND:


 


Pursuant to the gold purchase and sale
agreement dated October 20, 2010 (the “Purchase
Agreement”) by and among Vendor, the Purchaser, and, solely in
respect of certain sections thereof, Royal Gold, Inc., a corporation
organized under the laws of the State of Delaware, and Thompson Creek Metals
Company Inc., a company governed by the laws of British Columbia, it is a
condition of the Purchase Agreement that Vendor enter into this Security
Agreement.


 


FOR VALUABLE CONSIDERATION (the receipt and
sufficiency of which are hereby acknowledged), Vendor covenants, agrees,
grants, acknowledges, represents and warrants in favour of the Purchaser, as
follows:


 


Article 1

INTERPRETATION


 


1.1                               Definitions


 


Each word and phrase defined or given an
extended meaning in Schedule 1.1 is used in this Security Agreement with the
defined or extended meaning assigned to it in Schedule 1.1.


 


1.2                               Statutes


 


Each reference in this Security Agreement to any
code, statute, regulation, official interpretation, directive or other
legislative enactment of any Canadian or foreign jurisdiction (including any
political subdivision of any thereof) at any time shall be construed so as to
include such code, statute, regulation, official interpretation, directive or
enactment and each change thereto made at or before that time.


 


1.3                               Headings


 


The division of this Security Agreement into
Articles and Sections and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Security Agreement. The Article and Section headings in this Security
Agreement are included solely for convenience, are not intended to be full or
accurate descriptions and shall not be considered part of this Security
Agreement.


 

















 


1.4                               Number and
Gender


 


In this Security Agreement, words (including
defined terms) in the singular include the plural and vice-versa (the necessary changes being
made to fit the context) and words in one gender include all genders.


 


1.5                               Reference
to Agreements


 


Each reference in this Security Agreement to
any agreement (including this Security Agreement and any other term defined in
Schedule 1.1 that is an agreement), document or instrument shall be construed
so as to include such agreement (including any attached schedules, appendices
and exhibits), document or instrument and each amendment, supplement, other
modification, amendment and restatement, novation and replacement made to it at
or before the time in question.


 


Article 2

GRANT OF SECURITY


 


2.1                               Security


 


As general and continuing collateral security,
without impairment or novation, for the due payment and performance of the
Obligations, and subject to the exceptions in Section 2.5, Vendor charges,
mortgages, assigns and transfers and grants a security interest in the
following Collateral as and by way of a fixed and specific mortgage, charge and
security interest to and in favour of the Purchaser:


 


(a)                                  all of Vendor’s right, title
and interest in and to all presently owned or held Mining Leases (including its
interest in the Mining Leases listed in Schedule 2.1 hereto) and all Surface
Rights relating to or comprising the Milligan Property or any part thereof,
together with any renewals thereof, and all other rights related thereto;


 


(b)                                 all of Vendor’s right, title
and interest in and to all presently owned or held Mineral Claims (including
its interests in the Mineral Claims listed in Schedule 2.1 hereto) and all
Surface Rights relating to or comprising the Milligan Property or any part
thereof, together with any renewals thereof; and all other rights related
thereto; and


 


(c)                                  all Proceeds and
Replacements of or to Collateral referred to in clauses (a) and (b) above,
including all rights thereto.


 


The security given hereunder is given in
addition to and not in substitution for any other security granted pursuant to
the Purchase Agreement and any other documents and agreements related thereto.


 


2.2                               Attachment


 


Vendor acknowledges that value has been given,
that Vendor and the Purchaser have not agreed to postpone the time for
attachment of the Security and that the Security is intended to attach, as to
all of the Collateral in which Vendor now has rights, when Vendor executes this
Security 


 
















 


Agreement, and, as to all Collateral in which
Vendor only has rights after the execution of this Security Agreement, when
Vendor first has such rights. For certainty, Vendor confirms and agrees that
the Security is intended to attach to all present and future Collateral of
Vendor and each successor of Vendor.


 


2.3                               Permitted Dispositions


 


Vendor shall be permitted to sell, dispose of
or otherwise deal with any of the Collateral so long as such sale, disposition
or other dealing (both singly and in the aggregate):


 


a)              is not otherwise prohibited
under this Agreement or the Purchase Agreement;


 


b)             is consistent with prudent
business practices for a developer and operator of a mining property; and


 


c)              does not otherwise trigger a
Material Adverse Effect.


 


With respect to any Permitted Disposition, the
Purchaser shall promptly, upon the written request of the Vendor accompanied by
(A) confirmation of the disposition and (B) any detail concerning the
item or items of Collateral sold or disposed of by the Vendor (“Disposed Collateral”) reasonably required by the Purchaser:


 


(i)                                     execute and return to the
Vendor for filing a registrable discharge of its Security with respect to the
Disposed Collateral; or


 


(ii)                                  amend, or provide written
authorization to the Vendor to amend, any applicable registration or
registrations of the Purchaser’s Security so as to exclude the Disposed
Collateral; or


 


(iii)                               provide to the Vendor
written confirmation (and addressed to persons having acquired an interest in
the Disposed Collateral) confirming that the Purchaser no longer has nor will
assert any security interest in the Disposed Collateral depending on the
circumstances as determined by the Vendor acting reasonably.


 


This Section 2.3 shall not prohibit the
Vendor from selling, disposing of or otherwise dealing with any of the
Collateral in accordance with the prior written consent of the Purchaser (such
consent not to be unreasonably withheld, conditioned or delayed).


 


2.4                               Proceeds Held in Trust


 


After an Event of Default occurs, Vendor shall
receive and hold all Proceeds in trust, separate and apart from other monies,
instruments or property, and shall forthwith endorse as necessary and pay over
or deliver them to the Purchaser.


 

















 


2.5                               Surface Rights, Mineral
Claims and Mining Leases


 


(a)                                  The last day of the term of
any lease, oral or written, or any agreement therefor, now held or hereafter
acquired by Vendor shall be excepted from the Security and shall not form part
of the Collateral but Vendor shall stand possessed of such one day remaining
upon trust to assign and dispose of the same as the Purchaser directs. Subject
to Section 2.5(c), if any such lease or agreement therefor contains a
provision which provides in effect that such lease or agreement may not be
assigned, sub-leased, charged or made the subject of any Lien without the
consent of the lessor, the application of the Security to any such lease or
agreement shall be conditional upon such consent being obtained.


 


(b)                                 Upon any sale by the
Purchaser or any Receiver of any leasehold interest pursuant to this Security
Agreement, the Purchaser or any Receiver, for the purpose of vesting the one
day residue of the term or renewal thereof in any purchaser or purchasers,
shall be entitled by deed or writing to appoint such purchaser or purchasers or
any other Person or Persons a new trustee or trustees of the aforesaid reside
of any such term or renewal thereof in the place and stead of Vendor and to
vest the same accordingly in the new trustee or trustees so appointed free from
any obligation respecting the same.


 


(c)                                  Notwithstanding anything to
the contrary contained herein, if Vendor cannot lawfully grant the Security in
any Surface Right, Mineral Claim or Mining Lease comprised in the Collateral in
which it now or hereafter has rights because the Surface Right, Mineral Claim
or Mining Lease prohibits or restricts such Security, the Surface Right,
Mineral Claim or Mining Lease requires the consent of any Person which has not
been obtained or the grant of such Security in the Surface Right, Mineral Claim
or Mining Lease would contravene Applicable Law, that Surface Right, Mineral
Claim or Mining Lease shall not, to the extent it would be illegal or result in
a breach or default under that Surface Right, Mineral Claim or Mining Lease (each,
a “Prescribed Right”), be subject
to the Security (save to the extent provided below) unless and until such
agreements, consents, waivers and approvals as may be required to avoid such
illegality, breach or default have been obtained (“Required Approvals”). The Security shall nonetheless
immediately attach to any rights of Vendor arising under, by reason of, or
otherwise in respect of such Surface Right, Mineral Claim or Mining Lease such
as the right to receive payments thereunder and all Proceeds and Replacements
of the Surface Right, Mineral Claim or Mining Lease (“Related Rights”), if and to the extent and
as at the time such attachment to the Related Rights is not illegal or would
not result in a breach or default thereunder.


 


(d)                                 To the extent permitted by
Applicable Law and the Prescribed Rights, Vendor will hold in trust for the
Purchaser, and provide the Purchaser with the benefits of, each Prescribed
Rights and will enforce all Related Rights at the direction of the Purchaser or
at the direction of such other Person (including any purchaser of Collateral
from the Purchaser or any Receiver) as the Purchaser may designate.


 

















 


(e)                                  Vendor shall forthwith use
commercially reasonable best efforts to obtain, as soon as reasonably
practicable, all such Required Approvals and acknowledgements of the nature
referred to in Subsection 2.5(c).


 


Article 3

REPRESENTATIONS AND WARRANTIES


 


Vendor represents and warrants to and in favour
of the Purchaser, as follows:


 


3.1                               Incorporation


 


Vendor is validly incorporated and organized
and is a valid and subsisting corporation under the laws of the Province of
British Columbia.


 


3.2                               Corporate Power


 


Vendor has the power, capacity, and authority,
and has taken all necessary corporate action, to authorize, issue and perform
this Security Agreement and to grant the Security.


 


3.3                               Licences and Permits


 


Vendor has all necessary power, capacity, and
authority, and holds all Licenses and Permits which it requires, to own its
Business Assets (including the Collateral) and to carry on its current
undertakings at the Milligan Project except where failure to do so would not
reasonably be expected to have a Material Adverse Effect on the Vendor.


 


3.4                               No Conflict


 


Neither the issuance nor the performance of
this Security Agreement nor the granting of the Security requires the
Authorization of any Governmental Authority having jurisdiction over Vendor or
its Business Assets, nor is this Security Agreement in contravention or breach
of or in conflict with the constating documents, any unanimous shareholder
agreement, by-laws or resolutions of the directors or shareholders of Vendor or
of the provisions of any agreement or License or Permit to which Vendor is a
party as at the date hereof or by which it or any of its Business Assets may be
bound as at the date hereof (except, in relation to any agreement or License or
Permit, for any contravention, breach or conflict which does not, and could not
reasonably be expected to have a Material Adverse Effect on Vendor or any of
its Business Affairs) or of any Applicable Law to which Vendor or any of its
Business Assets may be subject. No such action will oblige Vendor to grant any
Lien to any Person other than the Purchaser.


 


3.5                               Title


 


Subject only to Permitted Encumbrances,
Applicable Law governing the Surface Rights, Mineral Claims or Mining Leases
and the terms of the Surface Rights, Mineral Claims or Mining Leases, Vendor
has and will have good and marketable title to the Collateral free and clear of
all Liens whatsoever.


 

















 


3.6                               Enforceability


 


This Security Agreement constitutes a valid and
legally binding obligation of Vendor enforceable against Vendor in accordance
with its terms, subject only to bankruptcy, insolvency or other statutes or
judicial decisions affecting the enforcement of creditors’ rights in general,
to general principles of equity under which specific performance and injunctive
relief may be refused by a court in its discretion and to any reasonable
qualifications expressed in the legal opinions delivered by counsel for Vendor
to the Purchaser pursuant to the Purchase Agreement.


 


3.7                               Mineral Tenures


 


Schedule 2.1 includes a complete list of all
Surface Rights (other than those provided under s.14(1) of the Mineral
Tenure Act (British Columbia)), Mineral Claims and Mining Leases owned, held or
used by Vendor as at the date hereof in carrying on Vendor’s business related
to the Milligan Property. Upon Vendor’s acquisition of rights in any additional
Surface Right (other than those provided under s.14(1) of the Mineral
Tenure Act (British Columbia)), Mineral Claim or Mining Lease related to the
Milligan Property, Vendor will promptly give written notice to the Purchaser of
full particulars of the same.


 


3.8                               Reliance and Survival


 


All representations and warranties of Vendor
made herein or in any certificate or other document delivered by or on behalf
of Vendor to the Purchaser are material, shall survive the issuance of this
Security Agreement and shall continue in full force and effect for a term of
five years following payment of the final Scheduled Deposit. The Purchaser
shall be deemed to have relied upon each such representation and warranty
notwithstanding any investigation made by or on behalf of the Purchaser at any
time.


 


Article 4

COVENANTS OF VENDOR


 


4.1                               Maintenance


 


Vendor shall diligently maintain and use the
Collateral and shall conduct its business in a proper and efficient manner so
as to preserve and protect the Collateral and the earnings, issues and profits
thereof.


 


4.2                               Access to Records


 


Vendor shall upon prior written request from
the Purchaser, permit the Purchaser or its Representatives at any commercially
reasonable time to have access to all premises occupied by Vendor or any place
where any Collateral may be found in order to inspect any Collateral and to examine
the books of account and other records and reports of Vendor including the
Records, and to have temporary custody of, make copies of and take extracts
from such records, reports and Records.


 


4.3                               Taxes


 


Vendor shall pay all Taxes when due except those
which are being contested in good faith by appropriate proceedings and with
respect to which adequate reserves under GAAP have been 


 

















 


established and either (a) no Lien
attaches to Collateral to secure the payment of such Taxes or (b) a Lien
attaches to Collateral to secure the payment of such Taxes but no risk of
enforcement exists and Vendor has paid to or deposited with the relevant
taxation authority such amounts as may be assessed or otherwise required to
cease all related penalties and interest from continuing to accrue. Vendor
shall provide the Purchaser with evidence of Tax payments upon written request.


 


4.4                               Liens


 


Vendor shall keep the Collateral free at all
times from Liens, except Permitted Encumbrances, and shall defend the title to
the Collateral against all Persons. Vendor shall not permit any Collateral to
become an accession to or commingled with any property other than other
Collateral or to become a fixture unless the Security ranks prior to the
interests of all Persons in the subject realty. Neither the foregoing nor
Section 3.5 shall in any way prevent the Purchaser from, at any time,
contesting the validity, enforceability or priority of any Lien. Subject to the
Purchase Agreement, no Lien shall be entitled to priority over the Security.
Nothing in this Security Agreement is intended to create any rights (including
subordination rights) in favour of any Person other than the Purchaser, any
Receiver and the other Indemnified Parties.


 


4.5                               Compliance with Governmental
Requirements


 


With respect to the Milligan Project, the
Vendor shall materially comply with all requirements of any Governmental
Authority applicable to any Collateral or its use and with all covenants, terms
or conditions upon which any Collateral is held or used; provided, however, the
Vendor shall have the right to contest enforcement actions and any allegations
of infringement of the same in its discretion.


 


4.6                               Further Assurances


 


Vendor shall at all times do, execute,
acknowledge and deliver or cause to be done, executed, acknowledged or
delivered all such further acts, deeds, transfers, mortgages and charges,
security agreements, assignments, agreements and assurances as the Purchaser
may reasonably require in order to give effect to the provisions of this
Security Agreement and for the better, confirming, registering, securing or
perfecting, or maintaining the perfection of, the Security and the priority
accorded to the Security intended under this Security Agreement. Upon the
request of the Purchaser, Vendor shall specifically mortgage, pledge, charge,
grant a security interest in, or assign in favour of the Purchaser any property
that forms part of the Collateral and shall execute all documents reasonably
required by the Purchaser in connection therewith. Vendor constitutes and
appoints the Purchaser acting by any officer for the time being of the
Purchaser located at its address for notices prescribed by Section 7.3 to
be its attorney with full power of substitution to do on Vendor’s behalf
anything that Vendor can lawfully do by an attorney, including to do, make and
execute all such agreements, deeds, acts, matters or things, with the right to
use the name of Vendor, whenever and wherever it deems necessary or expedient
and to carry out Vendor’s obligations under this Security Agreement. Such power
of attorney, being granted by way of security and coupled with an interest, is
irrevocable until Payment in Full of the Obligations. Such power of attorney
shall not be exercisable by the Purchaser (a) unless an Event of Default
has occurred and is continuing or (b) unless the Purchaser has requested
in writing 


 

















 


Vendor to take any action required pursuant to
this Section 4.6 and Vendor has failed to do so after 90 days of such
request.


 


4.7                               Notice of Change


 


Vendor shall notify the Purchaser in writing:


 


(a)                                  forthwith of any Litigation
which could materially adversely affect any Collateral or the Security therein;


 


(b)                                 forthwith after receipt by
Vendor of any notice from any Governmental Authority regarding, or the occurrence
of, any of the following events where any of such events could reasonably be
seen to have a Material Adverse Effect on any Collateral or Security:
non-compliance with Applicable Laws, order for suspension of mining activities,
cancellation or forfeiture of or the failure to renew or expiry of, a Mineral
Claim, Mining Lease or Surface Right; and


 


(c)                                  at least 3 Business Days
prior to (i) any change of name, or the adoption of a French form of name,
or the adoption of a combined English/French or French/English form of name, of
Vendor, (ii) any transfer of Vendor’s interest in any Collateral not
expressly permitted hereunder, or (iii) any change in the registered
office or chief executive office of Vendor.


 


4.8                               Costs


 


Vendor shall forthwith reimburse the Purchaser,
on demand and on a full indemnity basis, for all interest, commissions, costs
of realization and other reasonable, out-of-pocket and properly documented
costs and expenses (including reasonable out-of-pocket and properly documented
legal fees on a full indemnity basis) incurred by the Purchaser or any Receiver
in connection with the enforcement of this Security Agreement and the
enforcement of the Security, including those arising in connection with the
realization, disposition of, retention, protection or collection of any
Collateral and the protection or enforcement of the rights of the Purchaser or
any Receiver.


 


4.9                               Reimbursements as
Obligations


 


All amounts for which Vendor is required
hereunder to reimburse the Purchaser or any Receiver shall, from the date of
disbursement until the date the Purchaser or such Receiver receives
reimbursement, be deemed advanced to Vendor by the Purchaser or such Receiver,
as the case may be, on the faith and security of this Security Agreement, shall
be deemed to be Obligations secured by the Security and shall bear interest
from the date of disbursement, compounded and payable monthly, both before and
after demand, default and judgment, until payment of such amount is paid in
full at the Default Rate.


 


4.10                        General Indemnity


 


In addition to any indemnity contained in the
Purchase Agreement, Vendor will indemnify the Purchaser, any Receiver and their
respective Representatives, (each, an “Indemnified
Party”) in 


 

















 


respect of, and save each Indemnified Party fully
harmless from and against, all loss and expense which an Indemnified Party may
suffer or incur in connection with (a) the exercise by the Purchaser or
any Receiver of any of its rights hereunder, (b) any breach by Vendor of
the representations or warranties of Vendor contained herein, or (c) any
breach by Vendor of, or any failure by Vendor to observe or perform, any of the
Obligations, save that Vendor shall not be obliged to so indemnify any
Indemnified Party to the extent such losses and expenses are determined by a
final Award (from which no appeal may be made or the applicable appeal periods
have lapsed without any appeal therefrom having been perfected) to have
directly resulted from the willful misconduct or gross negligence of the
Indemnified Party. The Purchaser shall be constituted as the trustee of each
Indemnified Party, other than itself, and shall hold and enforce each such
other Indemnified Party’s rights under this Section 4.10 for their
respective benefits.  In no event will Vendor be liable
to Purchaser for any lost profits or incidental, indirect, speculative,
consequential, special, punitive, or exemplary damages of any kind (whether
based in contract, tort, including negligence, strict liability, fraud, or
otherwise, or statutes, regulations, or any other theory) arising out of or in
connection with this Security Agreement, even if advised of such potential
damages.


 


4.11                        Updated Lists


 


As soon as Vendor acquires any rights in any
Surface Right (other than those provided under s.14(1) of the Mineral Tenure Act (British Columbia)),
Mineral Claim or Mining Lease that forms part of or is used in connection with
the Milligan Property, a written description describing that Surface Right,
Mineral Claim or Mining Lease shall be deemed to have been incorporated into
Schedule 2.1 and Vendor shall promptly deliver to the Purchaser an updated
version of such Schedule 2.1, showing additions and deletions to the Collateral
since the prior version forming a part hereof, provided however that any such
addition shall not result in increasing the physical or subsurface area of the
Milligan Project outside of the Mineral Claims existing as of the date hereof.
Each such version approved of by the Purchaser shall be deemed to be part of
this Security Agreement as of its preparation date.


 


Article 5

DEFAULT


 


5.1                               Acceleration on Event of
Default


 


If the uncredited portion of the Payment
Deposit becomes due and payable to the Purchaser pursuant to either Section 12.2
(a) or Section 13.2 of the Purchase Agreement, upon expiry of the
time permitted for payment of same, the Obligations shall be immediately due
and payable and the Security shall become immediately enforceable without the
necessity for any further action or notice by the Purchaser.


 


5.2                               Waiver


 


The Purchaser may waive any Event of Default or
any breach by Vendor of any of the provisions of this Security Agreement. No
waiver, however, shall be deemed to extend to a subsequent breach or Event of
Default, whether or not the same as or similar to the breach or Event of
Default waived, and no act or omission by the Purchaser shall extend to, or be
taken in any 


 

















 


manner whatsoever to affect, any subsequent
breach or Event of Default or the rights of the Purchaser arising therefrom.
Any such waiver must be in writing and signed by the Purchaser to be effective.
No failure on the part of the Purchaser to exercise, and no delay by the
Purchaser in exercising, any right under this Security Agreement shall operate
as a waiver of such right. No single or partial exercise of any such right
shall preclude any other or further exercise of such right or the exercise of
any other right.


 


Article 6

REMEDIES ON DEFAULT


 


6.1                               Remedies of Purchaser


 


If the Security becomes enforceable in
accordance with Article 5, the Purchaser shall have the rights set out in
this Article 6.


 


6.2                               Right to Appoint a Receiver


 


The Purchaser may appoint by instrument in
writing one or more Receivers of any Collateral. Any such Receiver shall have
the rights set out in this Article 6. In exercising such rights, any
Receiver shall act as and for all purposes shall be deemed to be the agent of
Vendor and the Purchaser shall not be responsible for any act or default of any
Receiver. The Purchaser may remove any Receiver and appoint another from time
to time. An officer or employee of the Purchaser may be appointed as a
Receiver. No Receiver appointed by the Purchaser need be appointed by, nor need
its appointment be ratified by, or its actions in any way supervised by, a
court. If two or more Receivers are appointed to act concurrently, they shall,
unless otherwise expressly provided in the instrument appointing them, so act
severally and not jointly and severally. The appointment of any Receiver or
anything done by a Receiver or the removal or termination of any Receiver shall
not have the effect of constituting the Purchaser a mortgagee in possession in
respect of the Collateral.


 


6.3                               Rights of a Receiver


 


Any Receiver appointed by the Purchaser shall
have the following rights:


 


(a)                                  Power of
Entry.
Vendor shall forthwith upon demand deliver to a Receiver possession of any
Collateral at the place specified by the Receiver. Any Receiver may at any time
enter upon any premises owned, leased or otherwise occupied by Vendor or where
any Collateral is located to take possession of, disable or remove any
Collateral, and may use whatever means the Receiver considers advisable to do
so.


 


(b)                                 Power of
Sale.
Any Receiver may sell, lease, consign, license, assign or otherwise dispose of
any Collateral by public auction, private tender or private contract with or
without notice, advertising or any other formality, all of which are hereby
waived by Vendor to the extent permitted by Applicable Law. Any Receiver may,
at its discretion, establish the terms of such disposition, including terms and
conditions as to credit, upset, reserve bid or price. All payments made
pursuant to 


 

















 


such dispositions shall be credited against the
Obligations only as they are actually received. Any Receiver may buy in,
rescind or vary any contract for the disposition of any Collateral and may
dispose of any Collateral again without being answerable for any loss
occasioned thereby. Any such disposition may take place whether or not the
Receiver has taken possession of the Collateral. The exercise by the Receiver
of any power of sale does not preclude the Receiver from further exercise of
its power of sale in accordance with this clause.


 


(c)                                  Carrying
on Business. With respect to, and to the extent of, the Collateral and the Milligan
Property, any Receiver may carry on, or concur in the carrying on of, any of
the business or undertaking of Vendor and may, to the exclusion of all others,
including Vendor after five Business Days written notice, enter upon, occupy
and use any of the premises, buildings, plant and undertaking of, or occupied
or used by, Vendor and, for such time and such purposes as the Receiver sees
fit, may use any of the equipment and intangibles of Vendor that Vendor has not
removed from the Milligan Property within five Business Days after the
Purchaser or the Receiver has given Vendor written notice to do so. No Receiver
shall be liable to Vendor for any negligence in so doing or in respect of any
rent, charges, costs, depreciation or damages in connection with any such action.


 


(d)                                 Any Receiver may complete
any unfinished construction upon or in the Collateral including having the
power to:


 


(i)                                     appoint and engage
superintendents, architects, engineers, miners, geologists, consultants,
contractors, managers, advisors and such other personnel which, in the
discretion of the Receiver, may be required to construct, furnish or operate
the Collateral;


 


(ii)                                  enter into contracts for the
supply of materials and services which the Receiver deems necessary to complete
or operate the Collateral;


 


(iii)                               enter into and enforce and
take the benefit of Surface Rights, Mineral Claims, Mining Leases, agreements
and other arrangements in respect of the Collateral from municipal or other
Governmental Authorities or from any other source whatsoever which provide
loans, grants or Licenses;


 


(iv)                              enter into, enforce, use and
take the benefit of construction contracts, contracts for services or
materials, performance bonds, insurance contracts, development agreements,
plans, studies, reports, information or any other matter, material or
arrangement in respect of the Collateral; and


 


(v)                                 with the approval of a court
of competent jurisdiction, if required by Applicable Law, terminate any Surface
Rights, Mineral Claims, Mining Leases or other arrangements made by Vendor in
connection with the Collateral on such terms as the Receiver deems reasonable.


 

















 


(e)                                  Pay Liens. Any Receiver may pay any
liability secured by any actual or threatened Lien against any Collateral. A
Receiver may borrow money for the maintenance, preservation or protection of
any Collateral or for carrying on any of the business or undertaking of Vendor
with respect to, and to the extent of, the Collateral and the Milligan Property
and may grant Liens in any Collateral in priority to the Security as security
for the money so borrowed. Vendor will forthwith on demand reimburse the
Receiver for all such payments and borrowings.


 


(f)                                    Dealing
with Collateral. Any Receiver may seize, collect, realize, dispose
of, enforce, release to third parties or otherwise deal with any Collateral in
such manner, upon such terms and conditions and at such time as it deems
advisable without notice to Vendor (except as otherwise required by Applicable
Law), and may charge on its own behalf and pay to others its costs and expenses
(including legal, Receiver’s and accounting fees and expenses on a full
indemnity basis) incurred in connection with such actions. Vendor will
forthwith upon demand reimburse the Receiver for all such costs or expenses.


 


(g)                                 Powers re
Collateral. Any Receiver may have, enjoy and exercise all of the rights of and
enjoyed by Vendor with respect to the Collateral or incidental, ancillary,
attaching or deriving from the ownership by Vendor of the Collateral, the right
to commence or continue Litigation to preserve or protect Collateral and the
right to grant or agree to Liens and grant or reserve profits a prendre, easements, rights of
ways, rights in the nature of easements and licenses over or pertaining to the
whole or any part of the Collateral.


 


(h)                                 Retain
Services.
Any Receiver may retain the services of such real estate brokers and agents,
lawyers, accountants, appraisers and other consultants as the Receiver may deem
necessary or desirable in connection with anything done or to be done by the
Receiver or with any of the rights of the Receiver set out herein and pay their
commissions, fees and disbursements (which payment shall constitute part of the
Receiver’s disbursements reimbursable by Vendor hereunder). Vendor shall
forthwith on demand reimburse the Receiver for all such payments.


 


6.4                               Right to have Court Appoint
a Receiver


 


The Purchaser may, at any time, apply to a
court of competent jurisdiction for the appointment of a Receiver, or other
official, who may have powers the same as, greater or lesser than, or otherwise
different from, those capable of being granted to a Receiver appointed by the
Purchaser pursuant to this Security Agreement.


 


6.5                               Purchaser may exercise
rights of a Receiver


 


In lieu of, or in addition to, exercising its
rights under Sections 6.3 and 6.4, the Purchaser has, and may exercise, any of
the rights which are capable of being granted to a Receiver appointed by the
Purchaser pursuant to this Security Agreement.


 
















 


6.6          Retention of Collateral


 


The Purchaser may elect to retain any
Collateral in satisfaction of the Obligations. The Purchaser may designate any
part of the Obligations to be satisfied by the retention of particular
Collateral which the Purchaser considers to have a net realizable value
approximating the amount of the designated part of the Obligations, in which
case only the designated part of the Obligations shall be deemed to be
satisfied by the retention of the particular Collateral.


 


6.7          Limitation of Liability


 


Except for any loss or expense resulting from
any gross negligence, bad faith or willful misconduct of the Purchaser, any
Receiver or any of their respective Representatives, neither the Purchaser nor
any Receiver shall be liable or accountable for any failure of the Purchaser or
any Receiver to seize, collect, realize, dispose of, enforce or otherwise deal
with any Collateral nor shall any of them be bound to institute Litigation for
any such purposes or for the purpose of preserving any rights of the Purchaser,
Vendor or any other Person in respect of any Collateral. Neither the Purchaser
nor any Receiver shall be liable or responsible for any loss and expense
whatever which may accrue in consequence of any such failure resulting from any
negligence of the Purchaser, any Receiver or any of their respective
Representatives or otherwise. If any Receiver or the Purchaser takes possession
of any Collateral, neither the Purchaser nor any Receiver shall have any
liability as a mortgagee in possession or be accountable for anything except
actual receipts.


 


6.8          Extensions of Time


 


The Purchaser and any Receiver may grant
renewals, extensions of time and other indulgences, take and give up Liens,
accept compositions, grant releases and discharges, perfect or fail to perfect
any Liens, release any Collateral to third parties and otherwise deal or fail
to deal with Vendor, debtors of Vendor, guarantors, sureties and others and
with any Collateral and other Liens as the Purchaser may see fit, all without prejudice
to the liability of Vendor to the Purchaser or the rights of the Purchaser and
any Receiver under this Security Agreement.


 


6.9          Application of Payments against
Obligations


 


Any Recovery received by the Purchaser in
respect of the Obligations from time to time and any Recovery realized by the
Purchaser on any Collateral shall be appropriated and applied by the Purchaser
in accordance with Section 6.17.


 


6.10        Set-Off, Combination of Accounts
met and/or Crossclaims


 


The Obligations will be paid by Vendor without
regard to any equities between Vendor and the Purchaser or any right of set-off
or cross-claim. Any indebtedness owing by the Purchaser to Vendor, direct or
indirect, extended or renewed, actual or contingent, mutual or not, may be set
off or applied against, or combined with, the Obligations by the Purchaser at
any time either before or after maturity, without demand upon or notice to
anyone.


 

















 


6.11        Deficiency


 


If the proceeds of the realization of any
Collateral are insufficient to repay all liquidated Obligations, Vendor shall
forthwith pay or cause to be paid to the Purchaser such deficiency.


 


6.12        Validity of Sale


 


No Person dealing with the Purchaser or any
Receiver or with any Representative of the Purchaser or any Receiver shall be
concerned to inquire whether the Security has become enforceable, whether any
right of the Purchaser or any Receiver has become exercisable, whether any
Obligations remain outstanding or otherwise as to the propriety or regularity
of any dealing by the Purchaser or any Receiver with any Collateral or to see
to the application of any money paid to the Purchaser or any Receiver, and in
the absence of fraud on the part of such Person such dealings shall be deemed,
as regards such Person, to be within the rights hereby conferred and to be
valid and effective accordingly.


 


6.13        Purchaser or Receiver may Perform


 


If Vendor fails to perform any Obligations,
without limiting any other provision hereof, the Purchaser or any Receiver may
perform those Obligations as attorney for Vendor in accordance with Section 4.6.
Vendor shall remain liable under each agreement, Surface Right, Mineral Claim,
Mining Lease and License to which it is party or by which it or any of its
Business Assets is bound and shall perform all of its obligations thereunder,
and shall not be released from any of its obligations under any such agreement,
Surface Right, Mineral Claim or Mining Lease by the exercise of any rights by
the Purchaser or any Receiver. Neither the Purchaser nor any Receiver shall have
any obligation under any such agreement, Surface Right, Mineral Claim or Mining
Lease by reason of this Security Agreement, nor shall the Purchaser or any
Receiver be obliged to perform any of the obligations of Vendor thereunder or
to take any action to collect or enforce any claim made subject to the security
of this Security Agreement. The rights conferred on the Purchaser and any
Receiver under this Security Agreement are for the purpose of protecting the
Security in the Collateral and shall not impose any obligation upon the
Purchaser or any Receiver to exercise any such rights.


 


6.14        Effect of Appointment of Receiver


 


As soon as the Purchaser takes possession of
any Collateral or appoints a Receiver over any Collateral, all rights of each
of the Representatives of Vendor with respect to that Collateral shall cease,
unless specifically continued by the written consent of the Purchaser or the
Receiver.


 


6.15        Time for Payment


 


If any Obligations are due by maturity, demand
or acceleration, it shall be deemed reasonable for the Purchaser to exercise
its rights under this Security Agreement immediately if such payment is not
made, and any days of grace or any time for payment which might otherwise be
required to be afforded to Vendor by any agreement or Applicable Law is hereby
irrevocably waived to the extent permitted by law.


 

















 


6.16        Rights in Addition


 


The rights conferred by this Article 6 are
in addition to, and not in substitution for, any other rights the Purchaser may
have under this Security Agreement, at law, in equity or by or under Applicable
Law or the Purchase Agreement or any other security agreement. The Purchaser
may proceed by way of any action, suit or other proceeding at law or in equity
including (a) the right to take proceedings in any court of competent
jurisdiction for the sale or foreclosure of the Collateral and (b) filing
proofs of claim and other documentation to establish the claims of the
Purchaser in any Litigation relating to Vendor. No right of the Purchaser or
any Receiver shall be exclusive of or dependent on any other. Any such right
may be exercised separately or in combination, and at any time. The exercise by
the Purchaser or any Receiver of any right hereunder does not preclude the
Purchaser or any Receiver from further exercise of such right in accordance
with this Security Agreement.


 


6.17        Application of Proceeds


 


Each Recovery received by the Purchaser will be
held and dealt with by or applied and paid to the relevant parties or Persons
indicated below promptly following receipt by the Purchaser in the following
order:


 


(a)           first, to be applied to the
Payment in Full of the Obligations due and owing to the Purchaser under the
Purchase Agreement, including all reasonable fees of the Purchaser and all
reasonable out-of-pocket disbursements, fees, costs and expenses incurred by
the Purchaser in connection with the preservation of the Security or the
Collateral or any enforcement proceedings and all amounts for which the
Purchaser is entitled to payment or indemnity from Vendor pursuant to any other
provision of this Security Agreement;


 


(b)           second, after Payment in
Full of all Obligations in accordance with paragraph (a) above, the
surplus, if any, remaining from that Recovery will be paid to Vendor, unless
otherwise directed by any Order of any competent Governmental Authority, or as
required by Applicable Law.


 


The fact that
the Purchaser may make a payment pursuant to paragraph (b) above or may
determine that the Obligations have been paid in full, will not thereafter prevent
the Purchaser from applying any further Recovery in the order set out in this
Section 6.17.


 


Article 7

GENERAL


 


7.1          Security in Addition


 


The Security does not replace or otherwise
affect any existing or future Lien held by the Purchaser. Neither the taking of
any Litigation, judicial or extra-judicial, nor the refraining from so doing,
nor any dealing with any other security for any Obligations shall release or
affect the Security. Neither the taking of any Litigation, judicial or
extra-judicial, pursuant to this Security Agreement, nor the refraining from so
doing, nor any dealing with any Collateral shall release or affect any of the
other Liens held by the Purchaser for the payment or performance of the
Obligations.


 

















 


7.2          No Merger


 


This Security Agreement shall not operate by
way of a merger of the Obligations or of any agreement or other document by
which the Obligations now or at any time hereafter may be represented or
evidenced. Neither the taking of any judgment nor the exercise of any power of
seizure or disposition shall extinguish the liability of Vendor to pay and
perform the Obligations nor shall the acceptance of any payment or alternate
security constitute or create any novation. No covenant, representation or
warranty of Vendor herein shall merge in any judgment.


 


7.3          Notices


 


Any notice, demand, consent, approval or other
communication to be made or given under or in connection with this Security
Agreement shall be given in accordance with the Purchase Agreement.


 


7.4          Time of the Essence


 


Time is and shall remain of the essence of this
Security Agreement and each of its provisions.


 


7.5          Governing Law


 


This Security Agreement shall be governed by,
and interpreted in accordance with, the laws in force in the Province of
British Columbia, including the federal laws of Canada applicable therein
(excluding any conflict of laws rule or principle which might refer such
construction to the laws of another jurisdiction). Vendor irrevocably attorns
to and submits to the non-exclusive jurisdiction of the Courts of British
Columbia with respect to any matter arising hereunder or related hereto. Such
choice of law shall, however, be without prejudice to or limitation of any
other rights available to the Purchaser under the laws of any other jurisdiction
where Collateral may be located.


 


7.6          Doctrine of Consolidation


 


Pursuant to section 31(2) of the Property Law Act (British Columbia), the
doctrine of consolidation shall apply to this Security Agreement.


 


7.7          Security Effective Immediately


 


Neither the issuance nor registration of, or
any filings with respect to, this Security Agreement, nor any partial advance
of the Payment Deposit by the Purchaser, shall bind the Purchaser to advance
any amounts of the Payment Deposit to Vendor, but the Security shall take
effect forthwith upon the issuance of this Security Agreement by Vendor.


 


7.8          Entire Agreement


 


There are no representations, warranties,
covenants, agreements or acknowledgments whether direct or collateral, express
or implied, that form part of or affect this Security Agreement or any
Collateral, other than as expressed herein or in the Purchase Agreement or
other security agreements granted contemporaneously herewith by Vendor to the
Purchaser and other than as 


 

















 


may be expressed in any other written agreement
entered into between Vendor and the Purchaser contemporaneously herewith. The
execution of this Security Agreement has not been induced by, nor does Vendor
rely upon or regard as material, any representations, warranties, conditions,
other agreements or acknowledgments not expressly made in this Security
Agreement and the other written agreements and other documents to be delivered
pursuant hereto or contemporaneously herewith. 
In the event of any inconsistency between the terms of this Security
Agreement and the terms of the Purchase Agreement with respect to the subject
matter herein, the terms of the Purchase Agreement shall control.


 


7.9          Provisions Reasonable


 


Vendor acknowledges that the provisions of this
Security Agreement and, in particular, those respecting rights of the Purchaser
or any Receiver against Vendor and any Collateral upon an Event of Default, are
commercially reasonable and not manifestly unreasonable.


 


7.10        Invalidity


 


If any provision of this Security Agreement is
found to be invalid or unenforceable, by a court of competent jurisdiction from
which no further appeal right lies, that provision shall be deemed to be
severed herefrom and the remaining provisions of this Security Agreement shall
not be affected thereby but shall remain valid and enforceable.


 


7.11        Binding Effect


 


This Security Agreement shall enure to the
benefit of the Purchaser and any Receiver and their respective successors and
assigns permitted under the Purchase Agreement and shall be binding on Vendor,
its legal representatives (including receivers) and its successors and assigns
permitted under the Purchase Agreement. Each reference to Vendor in this
Security Agreement shall be construed so as to include the successors and such
permitted assigns of Vendor to the extent the context so admits.


 


7.12        Survival


 


The Obligations payable under Sections 4.10 and
6.17 (the “Indemnity Obligations”)
shall survive the Payment in Full of all other Obligations and shall continue
in full force and effect until Payment in Full has been irrevocably made of
such Indemnity Obligations.


 


7.13        Statutory Waivers


 


To the fullest extent permitted by Applicable
Law, Vendor waives all of the rights, benefits and protections given by the
provisions of any existing or future statute which imposes limitations upon the
rights of a secured party or upon the methods of realization of security,
including any seize or sue or anti-deficiency statute or any similar provisions
of any other statute.


 


7.14        Currency


 


All references in this Security Agreement to
monetary amounts, unless specifically provided, are to lawful currency of the
United States of America. All sums of money payable under this 


 

















 


Security Agreement shall be paid in the
currency in which such sums are incurred or expressed as due hereunder.


 


7.15        Currency Conversions


 


If the Purchaser receives or recovers any
amount payable under this Security Agreement in a currency (the “Recovered Amount”) which is different than
the currency of the United States of America (the “Contract Currency”), the Purchaser may convert the Recovered
Amount to the Contract Currency at the rate of exchange which the Purchaser is
able, acting in a reasonable manner and in good faith, to purchase the relevant
amount of the Contract Currency. The amount of the Contract Currency resulting
from any such conversion shall then be applied in accordance with the
provisions of Section 6.9.


 


7.16        Judgment Currency


 


If, for the purposes of obtaining or enforcing
judgment in any court in any jurisdiction, it becomes necessary to convert into
the currency of the country giving such judgment (the “Judgment
Currency”) an amount due hereunder in a different currency (the “Agreed Currency”), then the date on which
the rate of exchange for conversion is selected by the court is referred to
herein as the “Conversion Date”.
If there is a change in the rate of exchange between the Judgment Currency and
the Agreed Currency between the Conversion Date and the actual receipt by the
Purchaser or any Receiver of the amount due hereunder or under any such
judgment, Vendor will, notwithstanding any such judgment, pay all such
additional amounts as may be necessary to ensure that the amount received by
the Purchaser or Receiver in the Judgment Currency, when converted at the rate of
exchange prevailing on the date of receipt, will produce the amount due in the
Agreed Currency. Vendor’s liability hereunder constitutes a separate and
independent liability which shall not merge with any judgment or any partial
payment or enforcement of payment of sums due under this Security Agreement.


 


7.17        Amendment


 


Subject to Section 1.5, no agreement
purporting to change this Security Agreement shall be binding upon either
Vendor or the Purchaser unless that agreement is in writing and signed by Vendor
and the Purchaser.


 


7.18        Information


 


At any time the Purchaser may provide to any
Person that claims an interest in Collateral copies of this Security Agreement
or information about it or about the Collateral or the Obligations.


 


7.19        Discharge


 


Forthwith following the Deposit Reduction Time,
the Purchaser shall discharge all security interests in the Collateral.  Upon the discharge of the security interests
in the Collateral, the Purchaser shall discharge or authorize Vendor to
discharge, any applicable registrations in respect of the Collateral and shall
execute and deliver to Vendor such other documents or instruments as Vendor may
reasonably require to reflect such discharge.


 

















 


7.20        Date of Reference


 


For convenience of reference, this Security Agreement
may be referred to as being dated for reference October 20, 2010
irrespective of its actual date of execution.


 


7.21        Vendor Acknowledgment


 


The Vendor:


 


(a)           acknowledges receiving a copy of this Security
Agreement; and


 


(b)           waives all rights to receive from the Purchaser a copy
of any financing statement, financing change statement or verification
statement filed or issued, as the case may be, at any time in respect of this
Security Agreement or any amendments to it.


 


[SIGNATURE PAGE FOLLOWS]


 

















 


TO WITNESS THIS AGREEMENT, Vendor has caused this Security Agreement to be duly
executed.


 


	
  TERRANE METALS CORP.

  
	
   

  
	
  Per:

  
	
   

  
	
   

  
	
   

  	
   

  
	
   

  
	
  Authorized Signatory

  



 

















 


SCHEDULE 1.1


 


DEFINITIONS


 


1.             Unless the context otherwise requires, in
this Security Agreement the following terms are used with their corresponding
defined meanings:


 


“Applicable Law” means any international,
federal, state, provincial, or municipal law, regulation, ordinance, code,
order or other requirement or rule of law or the rules, policies, orders
or regulations of any Governmental Authority or stock exchange, including any
judicial or administrative interpretation thereof, applicable to a Person or
any of its properties, assets, business or operations.


 


“Authorizations” means any authorization, approval,
consent, exemption, license, permit, franchise or no-action letter from any
Governmental Authority having jurisdiction with respect to any specified
Person, property, transaction or event, or with respect to any of such Person’s
Business Affairs or from any Person in connection with any easements or
contractual rights.


 


“Award” means any judgment, decree,
injunction, rule, award or order of any Governmental Authority, arbitrator or
other decision-making authority of competent jurisdiction.


 


“Bankruptcy Proceeding” means, with respect
to any Person, any proceeding contemplated by any application, petition,
assignment, filing of notice or other means, whether voluntary or involuntary
and whether or not under the Bankruptcy and
Insolvency Act (Canada), the Companies’
Creditors Arrangement Act (Canada), the Winding-Up and Restructuring Act (Canada) or any other like,
equivalent or analogous legislation of any jurisdiction seeking any moratorium,
reorganization, adjustment, composition, proposal, compromise, arrangement or
other like or similar relief in respect of any or all of the obligations of
that Person, seeking the winding up, liquidation or dissolution of that Person
or all or any part of its Business Assets, seeking any Award declaring, finding
or adjudging that Person insolvent or bankrupt, seeking the appointment
(provisional, interim or permanent) of any receiver or resulting, by operation
of law, in the bankruptcy of that Person.


 


“Business Affairs” means the Business
Assets, liabilities, financial condition, and results of operations of Vendor.


 


“Business Assets” means the business,
operations, undertaking, property and assets of the Vendor in relation to the
Milligan Project.


 


“Business Day” means a day other than a
Saturday or a Sunday or a day (i) that is a statutory holiday under the
laws of the Province of British Columbia or (ii) on which national banking
institutions in New York and Colorado are closed to the public for conducting
business.


 
















 


“Collateral” means all of the property made
subject to the Liens created under Section 2.1, wherever located, now or
hereafter owned by Vendor or in or to which Vendor now or hereafter has rights,
including all such rights, and (as the context so admits) any item or part
thereof.


 


“Default Rate” means the interest rate per
annum payable by Vendor pursuant to Section 15.3(a) of the Purchase
Agreement.


 


“Deposit Reduction Time” has the meaning assigned to it in
the Purchase Agreement.


 


“Documents of Title” means all documents of
title, whether negotiable or non-negotiable, including all warehouse receipts
and bills of lading, in which Vendor now or hereafter has rights, and (as the
context so admits) any item or part thereof.


 


“Event of Default” means a Vendor Event of
Default as defined in the Purchase Agreement.


 


“Governmental Authority” means any federal,
provincial, or local government, agency, department, ministry, authority,
tribunal, commission, official, court or securities commission.  For the avoidance of doubt, “tribunal” shall
not be deemed to include First Nations.


 


“Income Taxes” means taxes based on or
measured by income or profit of any nature or kind, including Canadian federal
and provincial income taxes and similar such taxes imposed by any foreign
jurisdiction (including any union of nations).


 


“Indemnified Party” has the defined meaning
assigned to it in Section 4.10.


 


“License” means (i) any Authorization
from any Governmental Authority having jurisdiction with respect to Vendor’s
interest in the Milligan Property, and (ii) any Authorization from any
Person granting any easement or license with respect to any real or immovable
property in relation to the Milligan Project.


 


“Lien” means (i) any right of set-off
intended to secure the payment or performance of an obligation, (ii) any
interest in property created by way of mortgage, pledge, charge, lien,
assignment by way of security, hypothecation, security interest, hire purchase
agreement, conditional sale agreement, Sale/Lease Back Transaction, deposit
arrangement, title retention, capital lease or discount, factoring or
securitization arrangement on recourse terms, (iii) any statutory deemed
trust or lien, (iv) any preference, priority, adverse claim, levy,
execution, seizure, attachment, garnishment or other encumbrance which binds
property, and (v) any agreement to grant any of the rights or interests
described in clauses (i) to (iv) inclusive of this definition.


 


“Litigation” means any grievance,
investigation, litigation, legal action, lawsuit, mediation, alternative
dispute resolution proceeding or other proceeding (whether civil,
administrative, quasi-criminal or criminal) by or before any Governmental
Authority, arbitrator or other decision-making authority.


 

















 


“Material Adverse Effect” has the meaning assigned to it in
the Purchase Agreement.


 


“Milligan Project” has the meaning assigned
to it in the Purchase Agreement.


 


“Milligan Property” has the meaning assigned
to it in the Purchase Agreement.


 


“Minerals” has the meaning assigned to it in the Purchase
Agreement.


 


“Mineral Claim” means a mineral claim as
defined under the Mineral Tenure Act (British Columbia) or any successor
statute thereto or a Crown granted mineral claim.


 


“Mining Lease” means a mining lease issued
under the Mineral Tenure Act (British Columbia) or any successor statute
thereto or by any Governmental Authority.


 


“Obligations” means all advances of the
Payment Deposit and all obligations for the performance of covenants, tasks or
duties including, without limitation, for the delivery of Refined Gold, payment
of monetary amounts, debts and liabilities (whether or not such performance is
then required or contingent, or such amounts are liquidated or determinable),
including, for greater certainty, the return of the uncredited amount of the
Payment Deposit, if applicable, owing by Vendor to the Purchaser pursuant to
the Purchase Agreement, and all covenants, duties regarding such Refined Gold
or amounts, of any kind or nature, present or future, absolute or contingent, joint
or several or joint and several, direct or indirect, matured or not, extended
or renewed, whenever and however incurred, whether or not evidenced by any
note, agreement, letter of credit agreement or other instrument, arising under,
by reason of, pursuant to or otherwise in respect of the Purchase Agreement,
this Security Agreement or any other security agreement granted by Vendor to
the Purchaser, and (as the context so admits) each and every item or part of
any thereof. This term includes all principal, interest (including all interest
that accrues after the commencement of, or which would have accrued but for the
commencement of, any Bankruptcy Proceeding in accordance with and at the rate,
including the Default Rate to the extent lawful, specified herein or in the
Purchase Agreement, whether or not such interest is an allowable claim in such
Bankruptcy Proceeding), expenses, legal fees and any other sum chargeable to
Vendor under the Purchase Agreement, this Security Agreement or any other
security agreement granted by Vendor to the Purchaser, and (as the context so
admits) each and any item or part of any thereof.


 


“Order” means any order, directive,
direction or request of any Governmental Authority, arbitrator or other
decision-making authority of competent jurisdiction.


 


“Payment Deposit” has the meaning assigned
to it in the Purchase Agreement.


 


“Payment in Full” in relation to any
Obligations means permanent, indefeasible and irrevocable delivery of Refined
Gold or payment in cash (or other freely available funds transfer as may be
expressly provided for in the Purchase Agreement) to the Purchaser in full of
all Obligations (other than contingent indemnification obligations) in
accordance with the express provisions of the Purchase Agreement, without
regard to any compromise, reduction or disallowance of all or any item or part
thereof by virtue of the 


 

















 


application
of any bankruptcy, insolvency or other similar such laws, any law affecting
creditors’ rights generally or general principles of equity, and the
cancellation or expiry of all commitments by the Purchaser to advance any
portion of the Payment Deposit to or for the benefit or at the request of
Vendor, and “paid in full” shall (to the extent the context so admits) be
construed in like manner.


 


“Permits” has the meaning assigned to it in
the Purchase Agreement.


 


“Permitted Encumbrances” has (i) the
defined meaning assigned to it in the Purchase Agreement and (ii) means
any right of title retention or any purchase money security in connection with
the purchase price of assets in the ordinary course of business which the
purchase price is promptly paid when due.


 


“Person” means an individual, corporation,
company (limited, unlimited, unlimited liability or other), limited liability
corporation, other body corporate, estate, limited or general partnership,
business trust, trustee, joint venture, other legal entity, unincorporated
association or Governmental Authority.


 


“Prescribed Right” has the defined meaning
assigned to it in Section 2.5(c).


 


“Proceeds” means all proceeds and real or
personal property in any form derived directly or indirectly from any disposal
of or other dealing with any Collateral, or that indemnifies or compensates for
such Collateral stolen, lost, destroyed or damaged, and proceeds of Proceeds
whether or not of the same type, class or kind as the original Proceeds, and
(as the context so admits) any item or part thereof.


 


“Purchase Agreement” has the defined meaning
assigned to it in the Background to this Security Agreement.


 


“Purchaser” means RGL Royalty AG, and if
such Purchaser shall assign all or any portion of its rights, benefits or
obligations under the Purchase Agreement as permitted thereunder, such term
shall include any assignee of such Purchaser, whether immediate or derivative,
relative to such rights, benefits and obligations.


 


“Receiver” means any receiver for the
Collateral or any of the business, undertakings, property and assets of Vendor
appointed by the Purchaser pursuant to this Security Agreement or by a court on
application by the Purchaser.


 


“Records” means all books, accounts,
invoices, letters, papers, security certificates, documents and other records
in any form evidencing or relating in any way to any item or part of the
Collateral and all agreements, Licenses, Permits and other rights and benefits
in respect thereof, and (as the context so admits) any item or part thereof.


 


“Recovery” means any monies received or
recovered by the Purchaser pursuant to this Security Agreement on account of
the Obligations, whether pursuant to any enforcement of the Security, any
Litigation, any settlement thereof or otherwise.


 


“Refined Gold” has the defined meaning
assigned to it in the Purchase Agreement.


 

















 


“Replacements” means all increases,
additions and accessions to, and all substitutions for and replacements of, any
item or part of the Collateral, and any item or part thereof.


 


“Representative” of any Person means any
director, officer, employee, agent, legal counsel, accountant, financial
advisor, expert, manager, consultant or other representative appointed, engaged
or employed by such Person.


 


“Sale/Lease Back Transaction” means any
transaction, series of transactions (related or not) or arrangement pursuant to
which Business Assets of a Person are disposed of and are thereafter leased
back, or are otherwise made available for use, to that Person.


 


“Sales Taxes” means sales, transfer,
turnover or value added taxes of any nature or kind, including Canadian goods
and services taxes and federal, state and provincial sales and excise taxes, or
harmonized Canadian and provincial taxes.


 


“Scheduled Deposit” has the meaning assigned to it in the
Purchase Agreement.


 


“Security” means any and all Liens granted
by Vendor to the Purchaser in this Security Agreement.


 


“Security Agreement” means this security
agreement and all schedules attached hereto. All uses of the words “hereto”, “herein”,
“hereof”, “hereby” and “hereunder” and similar expressions refer to this Security
Agreement and not to any particular section or portion of it. References to an
“Article”, “Section”, “Subsection” or “Schedule”
refer to the applicable article, section, subsection or schedule of this
Security Agreement.


 


“Surface Rights” means all rights to use,
enter and occupy the surface of a Mineral Claim or Mining Lease for the
exploration and development or production of Minerals or placer minerals,
including the treatment of ore and concentrates, and all operations related to
the exploration and development or production of Minerals or placer minerals
and the business of mining, and all leases, licenses, contracts, agreements,
permits or other documents relating to such rights, including without
limitation, any and all surface rights related to infrastructure such as
electric power lines and roads, surface tenures issued by a Governmental
Authority such as investigative permits and temporary permits, and any lease to
the surface of the Milligan Property or license of occupation or other
occupation right and includes any fee simple rights over any part of the
Milligan Property.


 


“Taxes” means all taxes of any kind or
nature whatsoever including federal large corporation taxes, provincial capital
taxes, realty taxes (including utility charges which are collectible like
realty taxes), business taxes, property transfer taxes, Income Taxes,
Sales Taxes, custom duties, payroll taxes, levies, stamp taxes, royalties,
duties, and all fees, deductions, compulsory loans and withholdings imposed,
levied, collected, withheld or assessed as of the date hereof or at any time in
the future, by any Governmental Authority of or within Canada or any other
jurisdiction whatsoever having power to tax, together with penalties, fines,
additions to tax and interest thereon.


 

















 


2.             Extended Meanings


 


To the extent
the context so admits, any reference in this Security Agreement to:


 


“agreement” shall be construed as any
agreement, oral or written, any simple contract or specialty, and includes any
bond, bill of exchange, indenture, instrument or undertaking.


 


“arm’s length” shall be construed in the
same manner it is used in the Income Tax Act
(Canada).


 


“change” shall be construed as change,
modify, alter, amend, supplement, extend, renew, compromise, novate, replace,
terminate, release, discharge, cancel, suspend or waive or (where the context
so admits) the noun or participle form of any of the foregoing, and “changed” shall be construed in like manner.


 


“dispose” shall be construed as lease, sell,
transfer, license or otherwise dispose of any property, or the commercial benefits
of use or ownership of any property, including the right to profit or gain
therefrom, whether in a single transaction or in a series of related
transactions, and “disposed”, “disposition” and “disposal” shall be construed in like
manner.


 


“include”, “includes” and “including”
shall be construed to be followed by the statement “without limitation” and
none of such terms shall be construed to limit any word or statement which it
follows to the specific items or matters immediately following it or similar
terms or matters.


 


“losses and expenses” shall be construed as
losses, costs, expenses, damages, penalties, Awards, Orders, Litigation,
claims, claims over, demands and liabilities, including any applicable court
costs and legal fees and disbursements on a full indemnity basis, and “loss and expense” shall be construed in
like manner.


 


“rate of exchange” shall be construed so as
to include any premiums or costs payable in connection with any currency
conversion being effected.


 


a “receiver” means a privately appointed or
court appointed receiver or receiver and manager, interim receiver, liquidator,
trustee-in-bankruptcy, administrator, administrative receiver, monitor and any
other like or similar official.


 


“rights” shall be construed as rights,
titles, benefits, interests, powers, authorities, discretions, privileges,
immunities and remedies (actual or contingent, direct or indirect, matured or
unmatured, now existing or arising hereafter), whether arising by agreement or
statute, at law, in equity or otherwise, and “right”
shall be construed in like manner.


 


“set-off” means any right or obligation of
set-off, compensation, offset, combination of accounts, netting, retention,
withholding, reduction, deduction or any similar right or obligation, or (as
the context requires) any exercise of any such right or performance of such
obligation.


 


“successor” of a Person (the “relevant party”) shall be construed so as
to include (i) any amalgamated or other body corporate of which the
relevant party or any of its successors 


 

















 


is one of the
amalgamating or merging body corporates, (ii) any body corporate resulting
from any court approved arrangement of which the relevant party or any of its
successors is party, (iii) any Person to whom all or substantially all the
undertakings, property and assets of the relevant party is transferred, (iv) any
body corporate resulting from the continuance of the relevant party or any
successor of it under the laws of another jurisdiction of incorporation and (v) any
successor (determined as aforesaid or in any similar or comparable procedure
under the laws of any other jurisdiction) of any Person referred to in clause
(i), (ii), (iii) or (iv) of this definition. Each reference in this
Security Agreement to any party hereto or any other Person shall (where the
context so admits) include its successors.


 

















 


SCHEDULE 2.1


 


MINERAL CLAIMS


 


Milligan Property mineral claims and lease are
identified in maps 093J, 093K, 093N, and 093O provided by the Mineral Titles
Office of British Columbia, Canada.


 


Mineral Claims Tenure Identification: 100
claims listed in the table below


 


	
  1.

  	
   

  	
  512884

  	
   

  	
  35.

  	
   

  	
  521177

  	
   

  	
  69.

  	
   

  	
  521213

  
	
  2.

  	
   

  	
  512887

  	
   

  	
  36.

  	
   

  	
  521178

  	
   

  	
  70.

  	
   

  	
  579598

  
	
  3.

  	
   

  	
  512888

  	
   

  	
  37.

  	
   

  	
  521179

  	
   

  	
  71.

  	
   

  	
  579599

  
	
  4.

  	
   

  	
  512890

  	
   

  	
  38.

  	
   

  	
  521180

  	
   

  	
  72.

  	
   

  	
  579600

  
	
  5.

  	
   

  	
  512891

  	
   

  	
  39.

  	
   

  	
  521181

  	
   

  	
  73.

  	
   

  	
  579602

  
	
  6.

  	
   

  	
  512897

  	
   

  	
  40.

  	
   

  	
  521182

  	
   

  	
  74.

  	
   

  	
  580741

  
	
  7.

  	
   

  	
  512907

  	
   

  	
  41.

  	
   

  	
  521183

  	
   

  	
  75.

  	
   

  	
  580742

  
	
  8.

  	
   

  	
  512909

  	
   

  	
  42.

  	
   

  	
  521184

  	
   

  	
  76.

  	
   

  	
  580743

  
	
  9.

  	
   

  	
  512913

  	
   

  	
  43.

  	
   

  	
  521185

  	
   

  	
  77.

  	
   

  	
  580744

  
	
  10.

  	
   

  	
  512919

  	
   

  	
  44.

  	
   

  	
  521186

  	
   

  	
  78.

  	
   

  	
  580745

  
	
  11.

  	
   

  	
  512921

  	
   

  	
  45.

  	
   

  	
  521187

  	
   

  	
  79.

  	
   

  	
  580746

  
	
  12.

  	
   

  	
  512923

  	
   

  	
  46.

  	
   

  	
  521189

  	
   

  	
  80.

  	
   

  	
  580747

  
	
  13.

  	
   

  	
  512924

  	
   

  	
  47.

  	
   

  	
  521190

  	
   

  	
  81.

  	
   

  	
  580748

  
	
  14.

  	
   

  	
  512925

  	
   

  	
  48.

  	
   

  	
  521191

  	
   

  	
  82.

  	
   

  	
  580749

  
	
  15.

  	
   

  	
  512927

  	
   

  	
  49.

  	
   

  	
  521192

  	
   

  	
  83.

  	
   

  	
  580750

  
	
  16.

  	
   

  	
  512930

  	
   

  	
  50.

  	
   

  	
  521193

  	
   

  	
  84.

  	
   

  	
  595146

  
	
  17.

  	
   

  	
  512931

  	
   

  	
  51.

  	
   

  	
  521194

  	
   

  	
  85.

  	
   

  	
  595163

  
	
  18.

  	
   

  	
  512932

  	
   

  	
  52.

  	
   

  	
  521195

  	
   

  	
  86.

  	
   

  	
  677107

  
	
  19.

  	
   

  	
  512933

  	
   

  	
  53.

  	
   

  	
  521196

  	
   

  	
  87.

  	
   

  	
  677785

  
	
  20.

  	
   

  	
  512934

  	
   

  	
  54.

  	
   

  	
  521197

  	
   

  	
  88.

  	
   

  	
  678524

  
	
  21.

  	
   

  	
  512935

  	
   

  	
  55.

  	
   

  	
  521198

  	
   

  	
  89.

  	
   

  	
  678527

  



 

















 


	
  22.

  	
   

  	
  512936

  	
   

  	
  56.

  	
   

  	
  521199

  	
   

  	
  90.

  	
   

  	
  678536

  
	
  23.

  	
   

  	
  512937

  	
   

  	
  57.

  	
   

  	
  521200

  	
   

  	
  91.

  	
   

  	
  678564

  
	
  24.

  	
   

  	
  512938

  	
   

  	
  58.

  	
   

  	
  521201

  	
   

  	
  92.

  	
   

  	
  678583

  
	
  25.

  	
   

  	
  512939

  	
   

  	
  59.

  	
   

  	
  521202

  	
   

  	
  93.

  	
   

  	
  678588

  
	
  26.

  	
   

  	
  512940

  	
   

  	
  60.

  	
   

  	
  521203

  	
   

  	
  94.

  	
   

  	
  678603

  
	
  27.

  	
   

  	
  512941

  	
   

  	
  61.

  	
   

  	
  521204

  	
   

  	
  95.

  	
   

  	
  679483

  
	
  28.

  	
   

  	
  512942

  	
   

  	
  62.

  	
   

  	
  521205

  	
   

  	
  96.

  	
   

  	
  679484

  
	
  29.

  	
   

  	
  512943

  	
   

  	
  63.

  	
   

  	
  521206

  	
   

  	
  97.

  	
   

  	
  679485

  
	
  30.

  	
   

  	
  512944

  	
   

  	
  64.

  	
   

  	
  521207

  	
   

  	
  98.

  	
   

  	
  679505

  
	
  31.

  	
   

  	
  512945

  	
   

  	
  65.

  	
   

  	
  521208

  	
   

  	
  99.

  	
   

  	
  679506

  
	
  32.

  	
   

  	
  512960

  	
   

  	
  66.

  	
   

  	
  521209

  	
   

  	
  100.

  	
   

  	
  679509

  
	
  33.

  	
   

  	
  521164

  	
   

  	
  67.

  	
   

  	
  521210

  	
   

  	
   

  	
   

  	
   

  
	
  34.

  	
   

  	
  521165

  	
   

  	
  68.

  	
   

  	
  521212

  	
   

  	
   

  	
   

  	
   

  



 

















 


MINING LEASES


 


MINING LEASES
LEGALLY AND BENEFICIALLY OWNED AND HELD BY VENDOR:


 


Mineral Lease Tenure Identification: 631503.


 


SURFACE RIGHTS


 


SURFACE
RIGHTS LEGALLY AND BENEFICIALLY OWNED AND HELD BY VENDOR:


 


·      Realignment Rainbow Forest Service Road Permit #2009-01177


 


·      Provincial Permit No. 2009-05414 for Power Line Crossing


 


·      Provincial Licence of Occupation No. 705959


 


·      Forest and Range Practices Act permit for timber cutting and road
construction for Forest Service Roads 10663 and 10679


 


·      Road Use Permit OTH10006 authorizing use of Forest Service roads


 

















 


Schedule C2


 


Form of Security Agreement
for Personal Property


 

















 


SECURITY AGREEMENT COLLATERAL


 


THIS AGREEMENT is made as of the 20 day of October, 2010 by TERRANE
METALS CORP. (herein called “Vendor”)
a company amalgamated under the laws of British Columbia by the amalgamation of
0888046 B.C. Ltd. and Terrane Metals Corp., Suite 1500 - 999 West Hastings
Street, Vancouver, British Columbia, (Fax No. 604-630-2090) in favour of
RGL ROYALTY AG, (herein called the “Purchaser”)
a corporation incorporated under the laws of Switzerland, c/o SchelPart AG,
Baarerstrasse 53, P O Box 4559, CH - 6304 Zug, Switzerland (Fax No. +41 41
729 20 77).


 


BACKGROUND:


 


Pursuant to the gold purchase and sale
agreement dated October 20, 2010 (the “Purchase
Agreement”) by and among Vendor, the Purchaser, and, solely in
respect of certain sections thereof, Royal Gold, Inc., a corporation
organized under the laws of the State of Delaware, and Thompson Creek Metals
Company Inc., a company governed by the laws of British Columbia, it is a
condition of the Purchase Agreement that Vendor enter into this Security Agreement.


 


FOR VALUABLE CONSIDERATION (the receipt and sufficiency of which are hereby
acknowledged), Vendor covenants, agrees, grants, acknowledges, represents and
warrants in favour of the Purchaser, as follows:


 


Article 1

INTERPRETATION


 


1.1          Definitions


 


Each word and phrase defined or given an
extended meaning in Schedule 1.1 is used in this Security Agreement with the
defined or extended meaning assigned to it in Schedule 1.1. Words and phrases
defined in the PPSA and used without initial capitals in this Security
Agreement (including in Schedule 1.1) have the respective defined meanings
assigned to them in the PPSA, unless the context otherwise requires.


 


1.2          Statutes


 


Each reference in this Security Agreement to
any code, statute, regulation, official interpretation, directive or other
legislative enactment of any Canadian or foreign jurisdiction (including any
political subdivision of any thereof) at any time shall be construed so as to
include such code, statute, regulation, official interpretation, directive or
enactment and each change thereto made at or before that time.


 


1.3          Headings


 


The division of this Security Agreement into
Articles and Sections and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Security Agreement. The Article and Section headings in this Security
Agreement are included solely for convenience, are not intended to be full or
accurate descriptions and shall not be considered part of this Security
Agreement.


 
















 


1.4          Number and Gender


 


In this Security Agreement, words (including
defined terms) in the singular include the plural and vice-versa (the necessary changes being
made to fit the context) and words in one gender include all genders.


 


1.5          Reference to Agreements


 


Each reference in this Security Agreement to
any agreement (including this Security Agreement and any other term defined in
Schedule 1.1 that is an agreement), document or instrument shall be construed
so as to include such agreement (including any attached schedules, appendices
and exhibits), document or instrument and each amendment, supplement, other
modification, amendment and restatement, novation and replacement made to it at
or before the time in question.


 


Article 2

GRANT OF SECURITY


 


2.1          Security


 


As general and continuing collateral security,
without impairment or novation, for the due payment and performance of the
Obligations, and subject to the exceptions in Section 2.5, Vendor charges,
mortgages, assigns and transfers and grants a security interest to and in
favour of Purchaser in the following Collateral:


 


(a)           all of Vendor’s right, title
and interest in and to the Designated Percentage of Produced Gold (the “Produced Gold Collateral”);


 


(b)           all of Vendor’s right, title
and interest in and to all Licenses and Permits presently owned or held and
after acquired or held, together with any renewals and replacements thereof;


 


(c)           all Minerals (other than
Produced Gold Collateral) provided such charge shall in no way hinder or
prevent Vendor, subject to the Purchase Agreement or until the security hereof
shall have become enforceable, from selling, disposing of or otherwise dealing
with any and all of such Minerals in the ordinary course of Vendor’s business
and as required by the Purchase Agreement and for the purpose of carrying on
and extending the same;


 


(d)           all Accounts;


 


(e)           all Equipment;


 


(f)            all Inventory;


 


(g)           all chattel paper, Documents
of Title, instruments, money, investment property, and other goods relating to
or arising out of the Milligan Project that are not Produced Gold Collateral,
Accounts, Equipment or Inventory;


 

















 


(h)           all intangibles and
intangible property (except for Accounts) relating to or arising out of the Milligan Project
including, without limitation, all contractual rights, licenses, goodwill,
patents, trade-marks, tradenames, copyrights, other industrial designs and
other industrial or intellectual property and undertaking of Vendor and all
other choses in action of Vendor of every kind which now are, or which may at
any time hereafter be, due or owing to or owned by the Vendor and all other
intangible property of Vendor which is not Accounts, goods, chattel paper,
documents of title, instruments, money or investment property;


 


(i)            (the Collateral referred to
in clauses (b) through (h) above
is the “Balance of  Collateral”) and


 


(j)            all Proceeds and
Replacements of or to Collateral referred to in clauses (a) through (h) above,
including all rights thereto.


 


The security given hereunder is given in
addition to and not in substitution for any other security granted pursuant to
the Purchase Agreement and any other documents and agreements related thereto.


 


2.2          Attachment


 


Vendor acknowledges that value has been given,
that Vendor and the Purchaser have not agreed to postpone the time for
attachment of the Security and that the Security is intended to attach, as to
all of the Collateral in which Vendor now has rights, when Vendor executes this
Security Agreement, and, as to all Collateral in which Vendor only has rights after
the execution of this Security Agreement, when Vendor first has such rights.
For certainty, Vendor confirms and agrees that the Security is intended to
attach to all present and future Collateral of Vendor and each successor of
Vendor.


 


2.3          Permitted Dispositions


 


Vendor shall be permitted to sell, dispose of
or otherwise deal with any of the Collateral so long as such sale, disposition
or other dealing (both singly and in the aggregate):


 


(a)           is not otherwise prohibited
under this Agreement or the Purchase Agreement;


 


(b)           is consistent with prudent
business practices for a developer and operator of a mining property; and


 


(c)           does not otherwise trigger a
Material Adverse Effect.


 


With respect to any Permitted Disposition, the
Purchaser shall promptly, upon the written request of the Vendor accompanied by
(A) confirmation of the disposition and (B) any detail concerning the
item or items of Collateral sold or disposed of by the Vendor (“Disposed Collateral”) reasonably required by the Purchaser:


 


(i)            execute and return to the
Vendor for filing a registrable discharge of its Security with respect to the
Disposed Collateral; or


 

















 


(ii)           amend, or provide written
authorization to the Vendor to amend, any applicable registration or
registrations of the Purchaser’s Security so as to exclude the Disposed
Collateral; or


 


(iii)          provide to the Vendor
written confirmation (and addressed to persons having acquired an interest in
the Disposed Collateral) confirming that the Purchaser no longer has nor will
assert any security interest in the Disposed Collateral depending on the circumstances as determined
by the Vendor acting reasonably.


 


This Section 2.3 shall not prohibit the
Vendor from selling, disposing of or otherwise dealing with any of the
Collateral in accordance with the prior written consent of the Purchaser (such
consent not to be unreasonably withheld, conditioned or delayed).


 


2.4          Proceeds Held in Trust


 


After an Event of Default occurs, Vendor shall
receive and hold all Proceeds in trust, separate and apart from other monies,
instruments or property, and shall forthwith endorse as necessary and pay over
or deliver them to the Purchaser.


 


2.5          Agreements, Licenses and Permits


 


(a)           Vendor shall use
commercially reasonable efforts to obtain all Required Approvals and consents
required for the assignment by way of security of all agreements, Licenses and
Permits, including, without limitation, those listed in Schedule 2.1, those
obtained from the conversion of claims and those acquired after the date hereof
in connection with the Milligan Property.


 


(b)           Notwithstanding anything to
the contrary contained herein, if Vendor cannot lawfully grant the Security in
any agreement, License or Permit, comprised in the Collateral in which it now
or hereafter has rights because the agreement, License or Permit prohibits or
restricts such Security, the agreement, License or Permit requires the consent
of any Person which has not been obtained or the grant of such Security in the
agreement, License or Permit would contravene Applicable Law, that agreement,
License or Permit shall not, to the extent it would be illegal or result in a
breach of or default under that agreement, License or Permit (each, a “Prescribed Agreement”), be subject to the
Security (save to the extent provided below) unless and until such agreements,
consents, waivers and approvals as may be required to avoid such illegality,
breach or default have been obtained (“Required
Approvals”).
The Security shall nonetheless immediately attach to any rights of Vendor arising
under, by reason of, or otherwise in respect of such agreement, License or
Permit such as the right to receive payments thereunder and all Proceeds and
Replacements of the agreement, License or Permit (“Related Rights”), if and to the extent and
as at the time such attachment to the Related Rights is not illegal or would
not result in a breach or default thereunder.


 


(c)           To the extent permitted by
Applicable Law and the Prescribed Agreements, Vendor will hold in trust for the
Purchaser, and provide the Purchaser with the 


 

















 


benefits of, each Prescribed Agreement and will
enforce all Related Rights at the direction of the Purchaser or at the
direction of such other Person (including any purchaser of Collateral from the
Purchaser or any Receiver) as the Purchaser may designate.


 


(d)           The mortgages, charges and
security interests granted in this Security Agreement do not apply or extend
to:


 


(i)            the last day of any term
created by any lease or agreement therefor now held or hereafter acquired by
Vendor, but Vendor will stand possessed of the reversion thereby remaining in
Vendor of any leasehold premises upon trust for Purchaser to assign and dispose
thereof as Purchaser or any buyer of such leasehold premises directs; and


 


(ii)           any lease or other agreement
which contains a provision which provides in effect that such lease or
agreement may not be assigned, subleased, charged or encumbered without the
leave, licence, consent or approval of the lessor or other party until such
leave, licence, consent or approval is obtained, and the security interest
created hereby will attach and extend to such lease or agreement as soon as
such leave, licence, consent or approval is obtained.


 


Article 3

REPRESENTATIONS AND WARRANTIES


 


Vendor represents and warrants to and in favour
of the Purchaser, as follows:


 


3.1          Incorporation


 


Vendor is validly incorporated and organized
and is a valid and subsisting corporation under the laws of the Province of
British Columbia.


 


3.2          Corporate Power


 


Vendor has the power, capacity, and authority,
and has taken all necessary corporate action, to authorize, issue and perform
this Security Agreement and to grant the Security.


 


3.3          Licenses and Permits


 


Vendor has all necessary power, capacity, and
authority, and holds all Licenses and Permits which it requires, to own its
Business Assets (including the Collateral) and to carry on its current
undertakings at the Milligan Project except where failure to do so would not
reasonably be expected to have a Material Adverse Effect on the Vendor.


 


3.4          No Conflict


 


Neither the issuance nor the performance of
this Security Agreement nor the granting of the Security requires the
Authorization of any Governmental Authority having jurisdiction over 


 

















 


Vendor or its Business Assets, nor is this
Security Agreement in contravention or breach of or in conflict with the
constating documents, any unanimous shareholder agreement, by-laws or
resolutions of the directors or shareholders of Vendor or of the provisions of
any agreement or License or Permit to which Vendor is a party as at the date
hereof or by which it or any of its Business Assets may be bound as at the date
hereof (except, in relation to any agreement or License or Permit, for any
contravention, breach or conflict which does not, and could not reasonably be
expected to have a Material Adverse Effect on Vendor or any of its Business
Affairs) or of any Applicable Law to which Vendor or any of its Business Assets
may be subject. No such action will oblige Vendor to grant any Lien to any
Person other than the Purchaser.


 


3.5          Title


 


Subject only to Permitted Encumbrances,
Applicable Law governing the Licenses and Permits and the terms of the Licenses
and Permits, Vendor has and will have good and marketable title to the
Collateral free and clear of all Liens whatsoever.


 


3.6          Enforceability


 


This Security Agreement constitutes a valid and
legally binding obligation of Vendor enforceable against Vendor in accordance
with its terms, subject only to bankruptcy, insolvency or other statutes or
judicial decisions affecting the enforcement of creditors’ rights in general,
to general principles of equity under which specific performance and injunctive
relief may be refused by a court in its discretion and to any reasonable
qualifications expressed in the legal opinions delivered by counsel for Vendor
to the Purchaser pursuant to the Purchase Agreement.


 


3.7          Locations of Collateral


 


Vendor’s registered office, places of business,
chief executive office and the locations of the Collateral (except Collateral
which has been disposed of in accordance with the provisions of the Purchase
Agreement), including its Records relating thereto, are listed in Schedule 3.7.


 


3.8          List of Licenses and Permits


 


Schedule 2.1 includes a complete list of all
Licenses and Permits owned, held or used by Vendor as at the date hereof. Upon
Vendor’s acquisition of rights in any additional License or Permit, Vendor will
promptly give written notice to the Purchaser of full particulars of the same.


 


3.9          Reliance and Survival


 


All representations and warranties of Vendor
made herein or in any certificate or other document delivered by or on behalf
of Vendor to the Purchaser are material, shall survive the issuance of this
Security Agreement and shall continue in full force and effect for a term of
five years following payment of the final Scheduled Deposit. The Purchaser
shall be deemed to have relied upon each such representation and warranty
notwithstanding any investigation made by or on behalf of the Purchaser at any
time.


 

















 


Article 4

COVENANTS OF VENDOR


 


4.1          Maintenance


 


Vendor shall diligently maintain and use the
Collateral and shall conduct its business in a proper and efficient manner so
as to preserve and protect the Collateral and the earnings, issues and profits
thereof.


 


4.2          Access to Records


 


Vendor shall keep its Records at the locations
specified in Schedule 3.7 and, upon prior written request from the Purchaser,
permit the Purchaser or its Representatives at any commercially reasonable time
to have access to all premises occupied by Vendor or any place where any
Collateral may be found in order to inspect any Collateral and to examine the
books of account and other records and reports of Vendor including the Records,
and to have temporary custody of, make copies of and take extracts from such
records, reports and Records.


 


4.3          Taxes


 


Vendor shall pay all Taxes when due except
those which are being contested in good faith by appropriate proceedings and
with respect to which adequate reserves under GAAP have been established and
either (a) no Lien attaches to Collateral to secure the payment of such
Taxes or (b) a Lien attaches to Collateral to secure the payment of such
Taxes but no risk of enforcement exists and Vendor has paid to or deposited
with the relevant taxation authority such amounts as may be assessed or
otherwise required to cease all related penalties and interest from continuing
to accrue. Vendor shall provide the Purchaser with evidence of Tax payments
upon written request.


 


4.4          Liens


 


Vendor shall keep the Collateral free at all
times from Liens, except Permitted Encumbrances, and shall defend the title to
the Collateral against all Persons. Vendor shall not permit any Collateral to
become an accession to or commingled with any property other than other
Collateral or to become a fixture unless the Security ranks prior to the
interests of all Persons in the subject realty. Neither the foregoing nor
Section 3.5 shall in any way prevent the Purchaser from, at any time,
contesting the validity, enforceability or priority of any Lien. Subject to the
Purchase Agreement, no Lien shall be entitled to priority over the Security
except to the extent that it is a Permitted Encumbrance entitled to such
priority as a purchase-money security interest under the PPSA. Nothing in this
Security Agreement is intended to create any rights (including subordination
rights) in favour of any Person other than the Purchaser, any Receiver and the
other Indemnified Parties.


 


4.5          Compliance with Governmental
Requirements


 


With respect to the Milligan Project, the
Vendor shall materially comply with all requirements of any Governmental
Authority applicable to any Collateral or its use and with all covenants, terms
or conditions upon which any Collateral is held or used; provided, however, the
Vendor shall 


 

















 


have the right to contest enforcement actions
and any allegations of infringement of the same in its discretion.


 


4.6          Further Assurances


 


Vendor shall at all times do, execute,
acknowledge and deliver or cause to be done, executed, acknowledged or
delivered all such further acts, deeds, transfers, pledges and charges,
security agreements, assignments, agreements, debentures and assurances as the
Purchaser may reasonably require in order to give effect to the provisions of
this Security Agreement and for the better securing or perfecting, or
maintaining the perfection of, the Security and the priority accorded to the
Security intended under this Security Agreement. Upon the request of the
Purchaser, Vendor shall specifically mortgage, pledge, charge, grant a security
interest in, or assign in favour of the Purchaser any property that forms part
of the Collateral and shall execute all documents reasonably required by the
Purchaser in connection therewith. Vendor constitutes and appoints the
Purchaser acting by any officer for the time being of the Purchaser located at
its address for notices prescribed by Section 7.3 to be its attorney with
full power of substitution to do on Vendor’s behalf anything that Vendor can
lawfully do by an attorney, including to do, make and execute all such
agreements, deeds, acts, matters or things, with the right to use the name of
Vendor, whenever and wherever it deems necessary or expedient and to carry out
Vendor’s obligations under this Security Agreement. Such power of attorney,
being granted by way of security and coupled with an interest, is irrevocable
until Payment in Full of the Obligations. Such power of attorney shall not be
exercisable by the Purchaser (a) unless an Event of Default has occurred
and is continuing or (b) unless the Purchaser has requested in writing
Vendor to take any action required pursuant to this Section 4.6 and Vendor
has failed to do so after 90 days of such request.


 


4.7          Notice of Change


 


Vendor shall notify the Purchaser in writing:


 


(a)           forthwith of any Litigation
which could materially adversely affect any Collateral or the Security therein;


 


(b)           forthwith after receipt by
Vendor of any notice from any Governmental Authority regarding, or the
occurrence of, any of the following events where any of such events could
reasonably be seen to have a Material Adverse Effect on any Collateral or
Security: non-compliance with Applicable Laws, order for suspension of mining
activities, cancellation or forfeiture of, or the failure to renew or expiry of
a License or Permit; and


 


(c)           at least 3 Business Days
prior to (i) any change of name, or the adoption of a French form of name,
or the adoption of a combined English/French or French/English form of name, of
Vendor, (ii) any transfer of Vendor’s interest in any Collateral not
expressly permitted hereunder, (iii) any change in or addition to the
location of any Collateral from those locations referred to in Section 3.7,
or (iv) any change in the registered office or chief executive office of
Vendor.


 

















 


4.8          Costs


 


Vendor shall forthwith reimburse the Purchaser,
on demand and on a full indemnity basis, for all interest, commissions, costs
of realization and other reasonable, out-of-pocket and properly documented
costs and expenses (including reasonable out-of-pocket and properly documented
legal fees on a full indemnity basis) incurred by the Purchaser or any Receiver
in connection with the enforcement of this Security Agreement and the
enforcement of the Security, including those arising in connection with the
realization, disposition of, retention, protection or collection of any
Collateral and the protection or enforcement of the rights of the Purchaser or
any Receiver.


 


4.9          Reimbursements as Obligations


 


All amounts for which Vendor is required
hereunder to reimburse the Purchaser or any Receiver shall, from the date of
disbursement until the date the Purchaser or such Receiver receives
reimbursement, be deemed advanced to Vendor by the Purchaser or such Receiver,
as the case may be, on the faith and security of this Security Agreement, shall
be deemed to be Obligations secured by the Security and shall bear interest
from the date of disbursement, compounded and payable monthly, both before and
after demand, default and judgment, until payment of such amount is paid in
full at the Default Rate.


 


4.10        General Indemnity


 


In addition to any indemnity contained in the
Purchase Agreement, Vendor will indemnify the Purchaser, any Receiver and their
respective Representatives, (each, an “Indemnified
Party”) in respect of, and save each Indemnified Party fully
harmless from and against, all loss and expense which an Indemnified Party may
suffer or incur in connection with (a) the exercise by the Purchaser or
any Receiver of any of its rights hereunder, (b) any breach by Vendor of
the representations or warranties of Vendor contained herein, or (c) any
breach by Vendor of, or any failure by Vendor to observe or perform, any of the
Obligations, save that Vendor shall not be obliged to so indemnify any
Indemnified Party to the extent such losses and expenses are determined by a
final Award (from which no appeal may be made or the applicable appeal periods
have lapsed without any appeal therefrom having been perfected) to have
directly resulted from the willful misconduct or gross negligence of the
Indemnified Party. The Purchaser shall be constituted as the trustee of each
Indemnified Party, other than itself, and shall hold and enforce each such
other Indemnified Party’s rights under this Section 4.10 for their respective
benefits.  In
no event will Vendor be liable to Purchaser for any lost profits or incidental,
indirect, speculative, consequential, special, punitive, or exemplary damages
of any kind (whether based in contract, tort, including negligence, strict
liability, fraud, or otherwise, or statutes, regulations, or any other theory)
arising out of or in connection with this Security Agreement, even if advised
of such potential damages.


 


4.11        Updated Lists


 


As soon as Vendor acquires any rights in any
License or Permit, a written description describing that License or Permit
shall be deemed to have been incorporated into Schedule 2.1 and Vendor shall
promptly deliver to the Purchaser an updated version of such Schedule 2.1,
showing additions and deletions to the Collateral since the prior version
forming a part hereof, provided however that any such addition shall not result
in increasing the physical or subsurface area of 


 

















 


the Milligan Project outside of the area
existing as of the date hereof. Each such version approved of by the Purchaser
shall be deemed to be part of this Security Agreement as of its preparation
date.


 


Article 5

DEFAULT


 


5.1          Acceleration on Event of Default


 


If the uncredited portion of the Payment
Deposit becomes due and payable to the Purchaser pursuant to either Section 12.2
(a) or Section 13.2 of the Purchase Agreement, upon expiry of the
time permitted for payment of same, the Obligations shall be immediately due
and payable and the Security shall become immediately enforceable without the
necessity for any further action or notice by the Purchaser.


 


5.2          Waiver


 


The Purchaser may waive any Event of Default or
any breach by Vendor of any of the provisions of this Security Agreement. No
waiver, however, shall be deemed to extend to a subsequent breach or Event of
Default, whether or not the same as or similar to the breach or Event of
Default waived, and no act or omission by the Purchaser shall extend to, or be
taken in any manner whatsoever to affect, any subsequent breach or Event of Default
or the rights of the Purchaser arising therefrom. Any such waiver must be in
writing and signed by the Purchaser to be effective. No failure on the part of
the Purchaser to exercise, and no delay by the Purchaser in exercising, any
right under this Security Agreement shall operate as a waiver of such right. No
single or partial exercise of any such right shall preclude any other or
further exercise of such right or the exercise of any other right.


 


Article 6

REMEDIES ON DEFAULT


 


6.1          Remedies of Purchaser


 


If the Security becomes enforceable in
accordance with Article 5, the Purchaser shall have the rights set out in
this Article 6.


 


6.2          Right to Appoint a Receiver


 


The Purchaser may appoint by instrument in
writing one or more Receivers of any Collateral. Any such Receiver shall have
the rights set out in this Article 6. In exercising such rights, any
Receiver shall act as and for all purposes shall be deemed to be the agent of
Vendor and the Purchaser shall not be responsible for any act or default of any
Receiver. The Purchaser may remove any Receiver and appoint another from time
to time. An officer or employee of the Purchaser may be appointed as a
Receiver. No Receiver appointed by the Purchaser need be appointed by, nor need
its appointment be ratified by, or its actions in any way supervised by, a
court. If two or more Receivers are appointed to act concurrently, they shall,
unless otherwise expressly provided in the instrument appointing them, so act
severally and not jointly and severally. The appointment of any Receiver or
anything done by a Receiver or the removal or 


 

















 


termination of any Receiver shall not have the
effect of constituting the Purchaser a mortgagee in possession in respect of
the Collateral.


 


6.3          Rights of a Receiver


 


Any Receiver appointed by the Purchaser shall
have the following rights:


 


(b)           Power of
Entry.
Vendor shall forthwith upon demand deliver to a Receiver possession of any
Collateral at the place specified by the Receiver. Any Receiver may at any time
enter upon any premises owned, leased or otherwise occupied by Vendor or where
any Collateral is located to take possession of, disable or remove any
Collateral, and may use whatever means the Receiver considers advisable to do
so.


 


(c)           Power of
Sale.
Any Receiver may sell, lease, consign, license, assign or otherwise dispose of
any Collateral by public auction, private tender or private contract with or
without notice, advertising or any other formality, all of which are hereby
waived by Vendor to the extent permitted by Applicable Law. Any Receiver may,
at its discretion, establish the terms of such disposition, including terms and
conditions as to credit, upset, reserve bid or price. All payments made
pursuant to such dispositions shall be credited against the Obligations only as
they are actually received. Any Receiver may buy in, rescind or vary any
contract for the disposition of any Collateral and may dispose of any
Collateral again without being answerable for any loss occasioned thereby. Any
such disposition may take place whether or not the Receiver has taken
possession of the Collateral. The exercise by the Receiver of any power of sale
does not preclude the Receiver from further exercise of its power of sale in
accordance with this clause.


 


(d)           Carrying
on Business. With respect to, and to the extent of, the Collateral and the Milligan
Property, any Receiver may carry on, or concur in the carrying on of, any of
the business or undertaking of Vendor and may, to the exclusion of all others,
including Vendor after five Business Days written notice, enter upon, occupy
and use any of the premises, buildings, plant and undertaking of, or occupied
or used by, Vendor and, for such time and such purposes as the Receiver sees
fit, may use any of the equipment and intangibles of Vendor that Vendor has not
removed from the Milligan Property within five Business Days after the
Purchaser or the Receiver has given Vendor written notice to do so. No Receiver
shall be liable to Vendor for any negligence in so doing or in respect of any
rent, charges, costs, depreciation or damages in connection with any such
action.


 


(e)           Any Receiver may complete
any unfinished construction upon or in the Collateral including having the
power to:


 


(i)            appoint and engage
superintendents, architects, engineers, miners, geologists, consultants,
contractors, managers, advisors and such other personnel which, in the
discretion of the Receiver, may be required to construct, furnish or operate
the Collateral;


 
















 


(ii)           enter into contracts for the
supply of materials and services which the Receiver deems necessary to complete
or operate the Collateral;


 


(iii)          enter into and enforce and
take the benefit of Permits, Licenses, agreements and other arrangements in
respect of the Collateral from municipal or other Governmental Authorities or
from any other source whatsoever which provide loans, grants, Permits or
Licenses;


 


(iv)          enter into, enforce, use and
take the benefit of construction contracts, contracts for services or
materials, performance bonds, insurance contracts, development agreements,
plans, studies, reports, information or any other matter, material or
arrangement in respect of the Collateral; and


 


(v)           with the approval of a court
of competent jurisdiction, if required by Applicable Law, terminate any
Permits, Licenses, agreements or other arrangements made by Vendor in
connection with the Collateral on such terms as the Receiver deems reasonable.


 


(f)            Pay Liens. Any Receiver may pay any
liability secured by any actual or threatened Lien against any Collateral. A
Receiver may borrow money for the maintenance, preservation or protection of
any Collateral or for carrying on any of the business or undertaking of Vendor
with respect to, and to the extent of the Collateral and the Milligan Property
and may grant Liens in any Collateral in priority to the Security as security
for the money so borrowed. Vendor will forthwith on demand reimburse the
Receiver for all such payments and borrowings.


 


(g)           Dealing
with Collateral. Any Receiver may seize, collect, realize, dispose
of, enforce, release to third parties or otherwise deal with any Collateral in
such manner, upon such terms and conditions and at such time as it deems
advisable without notice to Vendor (except as otherwise required by Applicable
Law), and may charge on its own behalf and pay to others its costs and expenses
(including legal, Receiver’s and accounting fees and expenses on a full
indemnity basis) incurred in connection with such actions. Vendor will
forthwith upon demand reimburse the Receiver for all such costs or expenses.


 


(h)           Powers re
Collateral. Any Receiver may have, enjoy and exercise all of the rights of and
enjoyed by Vendor with respect to the Collateral or incidental, ancillary,
attaching or deriving from the ownership by Vendor of the Collateral, the right
to commence or continue Litigation to preserve or protect Collateral and the
right to grant or agree to Liens and grant or reserve profits a prendre,
easements, rights of ways, rights in the nature of easements and licenses over
or pertaining to the whole or any part of the Collateral.


 


(i)            Retain
Services.
Any Receiver may retain the services of such brokers and agents, lawyers,
accountants, appraisers and other consultants as the Receiver may deem
necessary or desirable in connection with anything done or to be done by the 


 

















 


Receiver or with any of the rights of the Receiver
set out herein and pay their commissions, fees and disbursements (which payment
shall constitute part of the Receiver’s disbursements reimbursable by Vendor
hereunder). Vendor shall forthwith on demand reimburse the Receiver for all
such payments.


 


6.4          Right to have Court Appoint a
Receiver


 


The Purchaser may, at any time, apply to a
court of competent jurisdiction for the appointment of a Receiver, or other
official, who may have powers the same as, greater or lesser than, or otherwise
different from, those capable of being granted to a Receiver appointed by the
Purchaser pursuant to this Security Agreement.


 


6.5          Purchaser may exercise rights of a
Receiver


 


In lieu of, or in addition to, exercising its
rights under Sections 6.3 and 6.4, the Purchaser has, and may exercise, any of
the rights which are capable of being granted to a Receiver appointed by the
Purchaser pursuant to this Security Agreement.


 


6.6          Retention of Collateral


 


The Purchaser may elect to retain any
Collateral in satisfaction of the Obligations. The Purchaser may designate any
part of the Obligations to be satisfied by the retention of particular Collateral
which the Purchaser considers to have a net realizable value approximating the
amount of the designated part of the Obligations, in which case only the
designated part of the Obligations shall be deemed to be satisfied by the
retention of the particular Collateral.


 


6.7          Limitation of Liability


 


Except for any loss or expense resulting from
any gross negligence, bad faith or willful misconduct of the Purchaser, any
Receiver or any of their respective Representatives, neither the Purchaser nor
any Receiver shall be liable or accountable for any failure of the Purchaser or
any Receiver to seize, collect, realize, dispose of, enforce or otherwise deal
with any Collateral nor shall any of them be bound to institute Litigation for
any such purposes or for the purpose of preserving any rights of the Purchaser,
Vendor or any other Person in respect of any Collateral. Neither the Purchaser
nor any Receiver shall be liable or responsible for any loss and expense
whatever which may accrue in consequence of any such failure resulting from any
negligence of the Purchaser, any Receiver or any of their respective
Representatives or otherwise. If any Receiver or the Purchaser takes possession
of any Collateral, neither the Purchaser nor any Receiver shall have any liability
as a mortgagee in possession or be accountable for anything except actual
receipts.


 


6.8          Extensions of Time


 


The Purchaser and any Receiver may grant
renewals, extensions of time and other indulgences, take and give up Liens,
accept compositions, grant releases and discharges, perfect or fail to perfect
any Liens, release any Collateral to third parties and otherwise deal or fail
to deal with Vendor, debtors of Vendor, guarantors, sureties and others and
with any Collateral and other 


 

















 


Liens as the Purchaser may see fit, all without
prejudice to the liability of Vendor to the Purchaser or the rights of the
Purchaser and any Receiver under this Security Agreement.


 


6.9          Application of Payments against
Obligations


 


Any Recovery received by the Purchaser in
respect of the Obligations from time to time and any Recovery realized by the
Purchaser on any Collateral shall be appropriated and applied by the Purchaser
in accordance with Section 6.17.


 


6.10        Set-Off, Combination of Accounts
met and/or Crossclaims


 


The Obligations will be paid by Vendor without
regard to any equities between Vendor and the Purchaser or any right of set-off
or cross-claim. Any indebtedness owing by the Purchaser to Vendor, direct or
indirect, extended or renewed, actual or contingent, mutual or not, may be set
off or applied against, or combined with, the Obligations by the Purchaser at
any time either before or after maturity, without demand upon or notice to
anyone.


 


6.11        Deficiency


 


If the proceeds of the realization of any Collateral
are insufficient to repay all liquidated Obligations, Vendor shall forthwith
pay or cause to be paid to the Purchaser such deficiency.


 


6.12        Validity of Sale


 


No Person dealing with the Purchaser or any
Receiver or with any Representative of the Purchaser or any Receiver shall be
concerned to inquire whether the Security has become enforceable, whether any
right of the Purchaser or any Receiver has become exercisable, whether any
Obligations remain outstanding or otherwise as to the propriety or regularity
of any dealing by the Purchaser or any Receiver with any Collateral or to see
to the application of any money paid to the Purchaser or any Receiver, and in
the absence of fraud on the part of such Person such dealings shall be deemed,
as regards such Person, to be within the rights hereby conferred and to be
valid and effective accordingly.


 


6.13        Purchaser or Receiver may Perform


 


If Vendor fails to perform any Obligations,
without limiting any other provision hereof, the Purchaser or any Receiver may
perform those Obligations as attorney for Vendor in accordance with Section 4.6.
Vendor shall remain liable under each agreement, Permit and License to which it
is party or by which it or any of its Business Assets is bound and shall
perform all of its obligations thereunder, and shall not be released from any
of its obligations under any such agreement, Permit or License by the exercise
of any rights by the Purchaser or any Receiver. Neither the Purchaser nor any
Receiver shall have any obligation under any such agreement, Permit or License,
by reason of this Security Agreement, nor shall the Purchaser or any Receiver
be obliged to perform any of the obligations of Vendor thereunder or to take
any action to collect or enforce any claim made subject to the security of this
Security Agreement. The rights conferred on the Purchaser and any Receiver
under this Security Agreement are for the purpose of protecting the Security in
the Collateral and shall not impose any obligation upon the Purchaser or any Receiver
to exercise any such rights.


 

















 


6.14        Effect of Appointment of Receiver


 


As soon as the Purchaser takes possession of
any Collateral or appoints a Receiver over any Collateral, all rights of each
of the Representatives of Vendor with respect to that Collateral shall cease,
unless specifically continued by the written consent of the Purchaser or the
Receiver.


 


6.15        Time for Payment


 


If any Obligations are due by maturity, demand
or acceleration, it shall be deemed reasonable for the Purchaser to exercise
its rights under this Security Agreement immediately if such payment is not
made, and any days of grace or any time for payment which might otherwise be
required to be afforded to Vendor by any agreement or Applicable Law is hereby
irrevocably waived to the extent permitted by law.


 


6.16        Rights in Addition


 


The rights conferred by this Article 6 are
in addition to, and not in substitution for, any other rights the Purchaser may
have under this Security Agreement, at law, in equity or by or under Applicable
Law or the Purchase Agreement or any other security agreement. The Purchaser
may proceed by way of any action, suit or other proceeding at law or in equity
including (a) the right to take proceedings in any court of competent
jurisdiction for the sale or foreclosure of the Collateral and (b) filing
proofs of claim and other documentation to establish the claims of the
Purchaser in any Litigation relating to Vendor. No right of the Purchaser or
any Receiver shall be exclusive of or dependent on any other. Any such right
may be exercised separately or in combination, and at any time. The exercise by
the Purchaser or any Receiver of any right hereunder does not preclude the
Purchaser or any Receiver from further exercise of such right in accordance
with this Security Agreement.


 


6.17        Application of Proceeds


 


Each Recovery received by the Purchaser will be
held and dealt with by or applied and paid to the relevant parties or Persons
indicated below promptly following receipt by the Purchaser in the following order:


 


(a)           first, to be applied to the
Payment in Full of the Obligations due and owing to the Purchaser under the
Purchase Agreement, including all reasonable fees of the Purchaser and all
reasonable out-of-pocket disbursements, fees, costs and expenses incurred by
the Purchaser in connection with the preservation of the Security or the
Collateral or any enforcement proceedings and all amounts for which the
Purchaser is entitled to payment or indemnity from Vendor pursuant to any other
provision of this Security Agreement;


 


(b)           second, after Payment in
Full of all Obligations in accordance with paragraph (a) above, the
surplus, if any, remaining from that Recovery will be paid to Vendor, unless
otherwise directed by any Order of any competent Governmental Authority, or as
required by Applicable Law.


 

















 


The fact that
the Purchaser may make a payment pursuant to paragraph (b) above or may
determine that the Obligations have been paid in full, will not thereafter
prevent the Purchaser from applying any further Recovery in the order set out
in this Section 6.17.


 


Article 7

GENERAL


 


7.1          Security in Addition


 


The Security does not replace or otherwise
affect any existing or future Lien held by the Purchaser. Neither the taking of
any Litigation, judicial or extra-judicial, nor the refraining from so doing,
nor any dealing with any other security for any Obligations shall release or
affect the Security. Neither the taking of any Litigation, judicial or
extra-judicial, pursuant to this Security Agreement, nor the refraining from so
doing, nor any dealing with any Collateral shall release or affect any of the
other Liens held by the Purchaser for the payment or performance of the
Obligations.


 


7.2          No Merger


 


This Security Agreement shall not operate by
way of a merger of the Obligations or of any agreement or other document by
which the Obligations now or at any time hereafter may be represented or
evidenced. Neither the taking of any judgment nor the exercise of any power of
seizure or disposition shall extinguish the liability of Vendor to pay and
perform the Obligations nor shall the acceptance of any payment or alternate
security constitute or create any novation. No covenant, representation or
warranty of Vendor herein shall merge in any judgment.


 


7.3          Notices


 


Any notice, demand, consent, approval or other
communication to be made or given under or in connection with this Security
Agreement shall be given in accordance with the Purchase Agreement.


 


7.4          Time of the Essence


 


Time is and shall remain of the essence of this
Security Agreement and each of its provisions.


 


7.5          Governing Law


 


This Security Agreement shall be governed by,
and interpreted in accordance with, the laws in force in the Province of
British Columbia, including the federal laws of Canada applicable therein
(excluding any conflict of laws rule or principle which might refer such
construction to the laws of another jurisdiction). Vendor irrevocably attorns
to and submits to the non-exclusive jurisdiction of the Courts of British
Columbia with respect to any matter arising hereunder or related hereto. Such
choice of law shall, however, be without prejudice to or limitation of any
other rights available to the Purchaser under the laws of any other
jurisdiction where Collateral may be located.


 

















 


7.6          Security Effective Immediately


 


Neither the issuance nor registration of, or
any filings with respect to, this Security Agreement, nor any partial advance
of the Payment Deposit by the Purchaser, shall bind the Purchaser to advance
any amounts of the Payment Deposit to Vendor, but the Security shall take
effect forthwith upon the issuance of this Security Agreement by Vendor.


 


7.7          Entire Agreement


 


There are no representations, warranties,
covenants, agreements or acknowledgments whether direct or collateral, express
or implied, that form part of or affect this Security Agreement or any
Collateral, other than as expressed herein or in the Purchase Agreement or
other security agreements granted contemporaneously herewith by Vendor to the
Purchaser and other than as may be expressed in any other written agreement
entered into between Vendor and the Purchaser contemporaneously herewith. The
execution of this Security Agreement has not been induced by, nor does Vendor
rely upon or regard as material, any representations, warranties, conditions,
other agreements or acknowledgments not expressly made in this Security
Agreement and the other written agreements and other documents to be delivered
pursuant hereto or contemporaneously herewith. 
In the event of any inconsistency between the terms of this Security
Agreement and the terms of the Purchase Agreement with respect to the subject
matter herein, the terms of the Purchase Agreement shall control.


 


7.8          Provisions Reasonable


 


Vendor acknowledges that the provisions of this
Security Agreement and, in particular, those respecting rights of the Purchaser
or any Receiver against Vendor and any Collateral upon an Event of Default, are
commercially reasonable and not manifestly unreasonable.


 


7.9          Invalidity


 


If any provision of this Security Agreement is
found to be invalid or unenforceable, by a court of competent jurisdiction from
which no further appeal right lies, that provision shall be deemed to be
severed herefrom and the remaining provisions of this Security Agreement shall
not be affected thereby but shall remain valid and enforceable.


 


7.10        Binding Effect


 


This Security Agreement shall enure to the
benefit of the Purchaser and any Receiver and their respective successors and
assigns permitted under the Purchase Agreement and shall be binding on Vendor,
its legal representatives (including receivers) and its successors and assigns
permitted under the Purchase Agreement. Each reference to Vendor in this
Security Agreement shall be construed so as to include the successors and such
permitted assigns of Vendor to the extent the context so admits.


 


7.11        Survival


 


The Obligations payable under Sections 4.10 and
6.17 (the “Indemnity Obligations”)
shall survive the Payment in Full of all other Obligations and shall continue
in full force and effect until Payment in Full has been irrevocably made of
such Indemnity Obligations.


 

















 


7.12        Statutory Waivers


 


To the fullest extent permitted by Applicable
Law, Vendor waives all of the rights, benefits and protections given by the
provisions of any existing or future statute which imposes limitations upon the
rights of a secured party or upon the methods of realization of security,
including any seize or sue or anti-deficiency statute or any similar provisions
of any other statute.


 


7.13        Currency


 


All references in this Security Agreement to
monetary amounts, unless specifically provided, are to lawful currency of the
United States of America. All sums of money payable under this Security
Agreement shall be paid in the currency in which such sums are incurred or
expressed as due hereunder.


 


7.14        Currency Conversions


 


If the Purchaser receives or recovers any
amount payable under this Security Agreement in a currency (the “Recovered Amount”) which is different than
the currency of the United States of America (the “Contract Currency”), the Purchaser may convert the Recovered
Amount to the Contract Currency at the rate of exchange which the Purchaser is
able, acting in a reasonable manner and in good faith, to purchase the relevant
amount of the Contract Currency. The amount of the Contract Currency resulting
from any such conversion shall then be applied in accordance with the
provisions of Section 6.9.


 


7.15        Judgment Currency


 


If, for the purposes of obtaining or enforcing
judgment in any court in any jurisdiction, it becomes necessary to convert into
the currency of the country giving such judgment (the “Judgment Currency”) an amount due hereunder
in a different currency (the “Agreed Currency”),
then the date on which the rate of exchange for conversion is selected by the
court is referred to herein as the “Conversion
Date”. If there is a change in the rate of exchange between the
Judgment Currency and the Agreed Currency between the Conversion Date and the
actual receipt by the Purchaser or any Receiver of the amount due hereunder or
under any such judgment, Vendor will, notwithstanding any such judgment, pay
all such additional amounts as may be necessary to ensure that the amount
received by the Purchaser or Receiver in the Judgment Currency, when converted
at the rate of exchange prevailing on the date of receipt, will produce the
amount due in the Agreed Currency. Vendor’s liability hereunder constitutes a
separate and independent liability which shall not merge with any judgment or
any partial payment or enforcement of payment of sums due under this Security
Agreement.


 


7.16        Amendment


 


Subject to Section 1.5, no agreement
purporting to change this Security Agreement shall be binding upon either
Vendor or the Purchaser unless that agreement is in writing and signed by
Vendor and the Purchaser.


 

















 


7.17        Receipt of Copy


 


Vendor acknowledges receipt of a copy of this
Security Agreement. To the extent permitted by Applicable Law, Vendor
irrevocably waives the right to receive a copy of each financing statement (or
any verification statement pertaining thereto) or financing change statement
(or any verification statement pertaining thereto) filed under the PPSA or
under the personal property security statutes of other provinces by the
Purchaser in respect of this Security Agreement or any other security
agreement, and releases any and all claims or causes of action it may have
against the Purchaser for failure to provide any such copy.


 


7.18        Information


 


At any time the Purchaser may provide to any
Person that claims an interest in Collateral copies of this Security Agreement
or information about it or about the Collateral or the Obligations.


 


7.19        Discharge


 


Forthwith following the Deposit Reduction Time,
the Purchaser shall discharge all security interests in the Balance of
Collateral.  Upon the discharge of the
security interests in the Balance of Collateral, the Purchaser shall discharge
or authorize Vendor to discharge, any applicable registrations in respect of
the Balance of Collateral and shall execute and deliver to Vendor such other
documents or instruments as Vendor may reasonably require to reflect such
discharge.  For greater certainty, the
security interests in the Produced Gold Collateral and all Proceeds thereof
will only be discharged upon full performance of all Obligations.


 


7.20        Date of Reference


 


For convenience of reference, this Security
Agreement may be referred to as being dated for reference October 20, 2010
irrespective of its actual date of execution.


 


[SIGNATURE PAGE FOLLOWS]


 

















 


TO WITNESS THIS AGREEMENT, Vendor has caused this Security Agreement to be duly
executed.


 


	
  TERRANE METALS CORP.

  
	
   

  
	
  Per:

  
	
   

  
	
   

  	
   

  
	
   

  
	
  Authorized Signatory

  



 

















 


SCHEDULE 1.1


 


DEFINITIONS


 


1.             Unless the context otherwise requires, in
this Security Agreement the following terms are used with their corresponding
defined meanings:


 


“Accounts” means
all debts, accounts, claims, monies and choses in action due or owing to or
owned by Vendor relating to or arising out of the Milligan Project, and all
books, records, documents, papers and electronically recorded data recording,
evidencing, securing or otherwise relating to such debts, accounts, claims,
monies and choses in action or any part or parts thereof.


 


“Applicable Law” means any international,
federal, state, provincial, or municipal law, regulation, ordinance, code,
order or other requirement or rule of law or the rules, policies, orders
or regulations of any Governmental Authority or stock exchange, including any
judicial or administrative interpretation thereof, applicable to a Person or
any of its properties, assets, business or operations.


 


“Authorizations” means any authorization,
approval, consent, exemption, license, permit, franchise or no-action letter
from any Governmental Authority having jurisdiction with respect to any
specified Person, property, transaction or event, or with respect to any of
such Person’s Business Affairs or from any Person in connection with any
easements or contractual rights.


 


“Award” means any judgment, decree,
injunction, rule, award or order of any Governmental Authority, arbitrator or
other decision-making authority of competent jurisdiction.


 


“Bankruptcy Proceeding” means, with respect
to any Person, any proceeding contemplated by any application, petition,
assignment, filing of notice or other means, whether voluntary or involuntary
and whether or not under the Bankruptcy and
Insolvency Act (Canada), the Companies’
Creditors Arrangement Act (Canada), the Winding-Up and Restructuring Act (Canada) or any other like,
equivalent or analogous legislation of any jurisdiction seeking any moratorium,
reorganization, adjustment, composition, proposal, compromise, arrangement or
other like or similar relief in respect of any or all of the obligations of
that Person, seeking the winding up, liquidation or dissolution of that Person
or all or any part of its Business Assets, seeking any Award declaring, finding
or adjudging that Person insolvent or bankrupt, seeking the appointment
(provisional, interim or permanent) of any receiver or resulting, by operation
of law, in the bankruptcy of that Person.


 


“Business Affairs” means the Business
Assets, liabilities, financial condition, and results of operations of Vendor.


 


“Business Assets” means the business,
operations, undertaking, property and assets of the Vendor in relation to the
Milligan Project.


 
















 


“Business Day” means a day other than a
Saturday or a Sunday or a day (i) that is a statutory holiday under the
laws of the Province of British Columbia or (ii) on which national banking
institutions in New York and Colorado are closed to the public for conducting
business.


 


“Collateral” means all of the property made
subject to the Liens created under Section 2.1, wherever located, now or
hereafter owned by Vendor or in or to which Vendor now or hereafter has rights,
including all such rights, and (as the context so admits) any item or part
thereof.


 


“Default Rate” means the interest rate per
annum payable by Vendor pursuant to Section 15.3(a) of the Purchase
Agreement.


 


“Deposit Reduction Time” has the meaning assigned to it in
the Purchase Agreement.


 


“Designated Percentage of Produced Gold” has the meaning
assigned to it in the Purchase Agreement.


 


Documents of Title” means all documents of title, whether negotiable or non-negotiable,
including all warehouse receipts and bills of lading, in which Vendor now or
hereafter has rights, and (as the context so admits) any item or part thereof.


 


“Equipment”
means goods and equipment, including all machinery, fixtures, plants, tools,
furniture, vehicles of any kind or description relating to or arising out of
the Milligan Project, all spare parts, accessions and accessories located at or
installed in or affixed or attached to any of the foregoing, and all drawings,
specifications, plans and manuals relating thereto and any other goods that are
not Inventory.


 


“Event of Default” means a Vendor Event of
Default as defined in the Purchase Agreement.


 


“Governmental Authority” means any federal,
provincial, or local government, agency, department, ministry, authority,
tribunal, commission, official, court or securities commission.  For the avoidance of doubt, “tribunal” shall
not be deemed to include First Nations.


 


“Income Taxes” means taxes based on or
measured by income or profit of any nature or kind, including Canadian federal
and provincial income taxes and similar such taxes imposed by any foreign
jurisdiction (including any union of nations).


 


“Indemnified Party” has the defined meaning
assigned to it in Section 4.10.


 


“Inventory” means inventory of
whatever kind relating to or arising out of the Milligan Project, including all
raw materials, materials used or consumed in the business or profession of
Vendor, goods, work in progress, finished goods, returned goods, repossessed
goods, goods used for packing, all packaging materials, supplies and
containers, materials used in the business of Vendor whether or not intended
for sale and 


 

















 


goods acquired or held for sale, lease or
resale or furnished or to be furnished under contracts of rental or service.


 


“License” means (i) any Authorization
from any Governmental Authority having jurisdiction with respect to Vendor’s
interest in the Milligan Property, and (ii) any Authorization from any
Person granting any easement or license with respect to any real or immovable
property in relation to the Milligan Project.


 


“Lien” means (i) any right of set-off
intended to secure the payment or performance of an obligation, (ii) any
interest in property created by way of mortgage, pledge, charge, lien,
assignment by way of security, hypothecation, security interest, hire purchase
agreement, conditional sale agreement, Sale/Lease Back Transaction, deposit
arrangement, title retention, capital lease or discount, factoring or
securitization arrangement on recourse terms, (iii) any statutory deemed
trust or lien, (iv) any preference, priority, adverse claim, levy,
execution, seizure, attachment, garnishment or other encumbrance which binds
property, and (v) any agreement to grant any of the rights or interests
described in clauses (i) to (iv) inclusive of this definition.


 


“Litigation” means any grievance,
investigation, litigation, legal action, lawsuit, mediation, alternative
dispute resolution proceeding or other proceeding (whether civil,
administrative, quasi-criminal or criminal) by or before any Governmental
Authority, arbitrator or other decision-making authority.


 


“Material Adverse Effect” has the meaning assigned to it in
the Purchase Agreement.


 


“Milligan Project” has the meaning assigned
to it in the Purchase Agreement.


 


“Milligan Property” has the meaning assigned
to it in the Purchase Agreement.


 


“Minerals” has the meaning assigned to it in the Purchase
Agreement.


 


“Obligations” means all advances of the
Payment Deposit and all obligations for the performance of covenants, tasks or
duties including, without limitation, for the delivery of Refined Gold, payment
of monetary amounts, debts and liabilities (whether or not such performance is
then required or contingent, or such amounts are liquidated or determinable),
including, for greater certainty, the return of the uncredited amount of the
Payment Deposit, if applicable, owing by Vendor to the Purchaser pursuant to
the Purchase Agreement, and all covenants, duties regarding such Refined Gold
or amounts, of any kind or nature, present or future, absolute or contingent,
joint or several or joint and several, direct or indirect, matured or not,
extended or renewed, whenever and however incurred, whether or not evidenced by
any note, agreement, letter of credit agreement or other instrument, arising
under, by reason of, pursuant to or otherwise in respect of the Purchase
Agreement, this Security Agreement or any other security agreement granted by
Vendor to the Purchaser, and (as the context so admits) each and every item or
part of any thereof. This term includes all principal, interest (including all
interest that accrues after the commencement of, or which would have accrued
but for the commencement of, any Bankruptcy Proceeding in accordance with and
at the rate, including the Default Rate to the extent lawful, specified herein
or in the Purchase 


 

















 


Agreement,
whether or not such interest is an allowable claim in such Bankruptcy
Proceeding), expenses, legal fees and any other sum chargeable to Vendor under
the Purchase Agreement, this Security Agreement or any other security agreement
granted by Vendor to the Purchaser, and (as the context so admits) each and any
item or part of any thereof.


 


“Order” means any order, directive,
direction or request of any Governmental Authority, arbitrator or other
decision-making authority of competent jurisdiction.


 


“Payment Deposit” has the meaning assigned
to it in the Purchase Agreement.


 


“Payment in Full” in relation to any
Obligations means permanent, indefeasible and irrevocable delivery of Refined
Gold or payment in cash (or other freely available funds transfer as may be
expressly provided for in the Purchase Agreement) to the Purchaser in full of
all Obligations (other than contingent indemnification obligations) in
accordance with the express provisions of the Purchase Agreement, without regard
to any compromise, reduction or disallowance of all or any item or part thereof
by virtue of the application of any bankruptcy, insolvency or other similar
such laws, any law affecting creditors’ rights generally or general principles
of equity, and the cancellation or expiry of all commitments by the Purchaser
to advance any portion of the Payment Deposit to or for the benefit or at the
request of Vendor, and “paid in full” shall (to the extent the context so
admits) be construed in like manner.


 


“Permits” has the meaning assigned to it in
the Purchase Agreement.


 


“Permitted Encumbrances” has (i) the
defined meaning assigned to it in the Purchase Agreement and (ii) means
any right of title retention or any purchase money security in connection with
the purchase price of assets in the ordinary course of business which the
purchase price is promptly paid when due.


 


“Person” means an individual, corporation,
company (limited, unlimited, unlimited liability or other), limited liability
corporation, other body corporate, estate, limited or general partnership,
business trust, trustee, joint venture, other legal entity, unincorporated
association or Governmental Authority.


 


“PPSA” means the Personal Property Security Act (British Columbia).


 


“Produced Gold” means any and all gold in
whatever form or state that is mined, produced, extracted or otherwise
recovered from the Milligan Property during the Term, including any gold
derived from any processing or reprocessing of any tailings, waste rock or
other waste products originally derived from the Milligan Property, and
including gold contained in any ore or other products requiring further
milling, processing, smelting, refining or other beneficiation of Minerals
mined, produced, extracted or otherwise recovered from the Milligan Property,
including concentrates and doré bars. 
The gold content of doré, concentrate or other product containing gold
shall be considered Produced Gold at the time it leaves the Milligan Project
mine site.


 


“Prescribed Agreement” has the defined
meaning assigned to it in Section 2.5(b).


 

















 


“Proceeds” means all goods, investment
property, instruments, Documents of Title, chattel paper, intangibles or money
in any form derived directly or indirectly from any disposal of or other
dealing with any Collateral, or that indemnifies or compensates for such
Collateral stolen, lost, destroyed or damaged, and proceeds of Proceeds whether
or not of the same type, class or kind as the original Proceeds, and (as the
context so admits) any item or part thereof.


 


“Purchase Agreement” has the defined meaning
assigned to it in the Background to this Security Agreement.


 


“Purchaser” means RGL Royalty AG, and if
such Purchaser shall assign all or any portion of its rights, benefits or
obligations under the Purchase Agreement as permitted thereunder, such term
shall include any assignee of such Purchaser, whether immediate or derivative,
relative to such rights, benefits and obligations.


 


“Receiver” means any receiver for the
Collateral or any of the business, undertakings, property and assets of Vendor
appointed by the Purchaser pursuant to this Security Agreement or by a court on
application by the Purchaser.


 


“Records” means all books, accounts,
invoices, letters, papers, security certificates, documents and other records
in any form evidencing or relating in any way to any item or part of the
Collateral and all agreements, Licenses, Permits and other rights and benefits
in respect thereof, and (as the context so admits) any item or part thereof.


 


“Recovery” means any monies received or
recovered by the Purchaser pursuant to this Security Agreement on account of
the Obligations, whether pursuant to any enforcement of the Security, any
Litigation, any settlement thereof or otherwise.


 


“Refined Gold” has the defined meaning
assigned to it in the Purchase Agreement


 


“Replacements” means all increases,
additions and accessions to, and all substitutions for and replacements of, any
item or part of the Collateral, and any item or part thereof.


 


“Representative” of any Person means any
director, officer, employee, agent, legal counsel, accountant, financial
advisor, expert, manager, consultant or other representative appointed, engaged
or employed by such Person.


 


“Sale/Lease Back Transaction” means any
transaction, series of transactions (related or not) or arrangement pursuant to
which Business Assets of a Person are disposed of and are thereafter leased
back, or are otherwise made available for use, to that Person.


 


“Sales Taxes” means sales, transfer,
turnover or value added taxes of any nature or kind, including Canadian goods
and services taxes and federal, state and provincial sales and excise taxes, or
harmonized Canadian and provincial taxes.


 


“Scheduled Deposit” has the meaning assigned to it in the
Purchase Agreement.


 

















 


“Security” means any and all Liens granted
by Vendor to the Purchaser in this Security Agreement.


 


“Security Agreement” means this security
agreement and all schedules attached hereto. All uses of the words “hereto”, “herein”,
“hereof”, “hereby” and “hereunder” and similar expressions refer to this Security
Agreement and not to any particular section or portion of it. References to an
“Article”, “Section”, “Subsection” or “Schedule”
refer to the applicable article, section, subsection or schedule of this
Security Agreement.


 


“Taxes” means all taxes of any kind or
nature whatsoever including federal large corporation taxes, provincial capital
taxes, realty taxes (including utility charges which are collectible like
realty taxes), business taxes, property transfer taxes, Income Taxes,
Sales Taxes, custom duties, payroll taxes, levies, stamp taxes, royalties,
duties, and all fees, deductions, compulsory loans and withholdings imposed,
levied, collected, withheld or assessed as of the date hereof or at any time in
the future, by any Governmental Authority of or within Canada or any other
jurisdiction whatsoever having power to tax, together with penalties, fines,
additions to tax and interest thereon.


 


“Term” has the meaning assigned to it in the Purchase
Agreement.


 


2.             Extended Meanings


 


To the extent
the context so admits, any reference in this Security Agreement to:


 


“agreement” shall be construed as any
agreement, oral or written, any simple contract or specialty, and includes any
bond, bill of exchange, indenture, instrument or undertaking.


 


“arm’s length” shall be construed in the
same manner it is used in the Income Tax Act
(Canada).


 


“change” shall be construed as change,
modify, alter, amend, supplement, extend, renew, compromise, novate, replace,
terminate, release, discharge, cancel, suspend or waive or (where the context
so admits) the noun or participle form of any of the foregoing, and “changed” shall be construed in like manner.


 


“dispose” shall be construed as lease, sell,
transfer, license or otherwise dispose of any property, or the commercial
benefits of use or ownership of any property, including the right to profit or
gain therefrom, whether in a single transaction or in a series of related
transactions, and “disposed”, “disposition” and “disposal” shall be construed in like
manner.


 


“include”, “includes” and “including”
shall be construed to be followed by the statement “without limitation” and
none of such terms shall be construed to limit any word or statement which it
follows to the specific items or matters immediately following it or similar
terms or matters.


 


“losses and expenses” shall be construed as
losses, costs, expenses, damages, penalties, Awards, Orders, Litigation,
claims, claims over, demands and liabilities, including any 


 

















 


applicable
court costs and legal fees and disbursements on a full indemnity basis, and “loss and expense” shall be construed in
like manner.


 


“rate of exchange” shall be construed so as
to include any premiums or costs payable in connection with any currency
conversion being effected.


 


a “receiver” means a privately appointed or
court appointed receiver or receiver and manager, interim receiver, liquidator,
trustee-in-bankruptcy, administrator, administrative receiver, monitor and any
other like or similar official.


 


“rights” shall be construed as rights,
titles, benefits, interests, powers, authorities, discretions, privileges,
immunities and remedies (actual or contingent, direct or indirect, matured or
unmatured, now existing or arising hereafter), whether arising by agreement or
statute, at law, in equity or otherwise, and “right”
shall be construed in like manner.


 


“set-off” means any right or obligation of
set-off, compensation, offset, combination of accounts, netting, retention,
withholding, reduction, deduction or any similar right or obligation, or (as
the context requires) any exercise of any such right or performance of such
obligation.


 


“successor” of a Person (the “relevant party”) shall be construed so as
to include (i) any amalgamated or other body corporate of which the
relevant party or any of its successors is one of the amalgamating or merging
body corporates, (ii) any body corporate resulting from any court approved
arrangement of which the relevant party or any of its successors is party,
(iii) any Person to whom all or substantially all the undertakings,
property and assets of the relevant party is transferred, (iv) any body
corporate resulting from the continuance of the relevant party or any successor
of it under the laws of another jurisdiction of incorporation and (v) any
successor (determined as aforesaid or in any similar or comparable procedure
under the laws of any other jurisdiction) of any Person referred to in clause
(i), (ii), (iii) or (iv) of this definition. Each reference in this
Security Agreement to any party hereto or any other Person shall (where the
context so admits) include its successors.


 

















 


SCHEDULE 2.1


 


PERMITS AND LICENSES


 


PERMITS AND
LICENSES LEGALLY AND BENEFICIALLY OWNED AND HELD BY VENDOR:


 


·      Provincial Environmental Assessment Certificate #M09-01


 


·      Realignment Rainbow Forest Service Road Permit #2009-01177


 


·      Provincial Mine Permit Approving Mine Plan and Reclamation Program
Permit #M-236


 


·      Proposed 230kV Aerial Electric Cable Crossing No. 09-041 Permit
from Spectra Energy Transmission


 


·      Provincial Permit No. 2009-05414 for Power Line Crossing


 


·      Provincial Licence of Occupation No. 705959


 


·      Federal Environmental Assessment Decision Statement dated December 1.
2009


 


·      Federal Decision from Fisheries and Oceans Canada and Natural Resources
Canada dated December 14, 2009


 


·      Provincial Occupant Licence to Cut and Remove Timber L48253


 


·      Navigable
Waters Protection Act
Permit for Aerial Cable located at Colbourne Creek


 


·      Navigable
Waters Protection Act
Permit for Aerial Cable located at Pack River


 


·      Navigable
Waters Protection Act
Permit for Aerial Cable located at Parsnip River


 


·      Provincial Forestry Licence to Cut Permit A86092


 


·      Occupant Licence to Cut L48226, including Provincial Forest Tenure
Administration — Exhibit A Clearance to Occupant Licence to Cut L48226


 


·      Notification to Commence Work under Mine Permit M-236 (pursuant to
section 6.2.1 of the Health, Safety and Reclamation Cod for Mines in British
Columbia)


 


·      Regulatory Impact Analysis Statement in Canada Gazette regarding
amendment to the Metal Mining Effluent Regulations


 


·      Forest and Range Practices Act permit for timber cutting and road
construction for Forest Service Roads 10663 and 10679


 


·      Permit No. PR104778 under Provincial Environmental
Management Act to discharge refuse


 

















 


·      Permit No. PA104779 under Provincial
Environmental Management Act to discharge air contaminants


 


·      Permit No. PE104777 under Provincial
Environmental Management Act to discharge liquid effluent


 


·      Mining Lease Tenure No. 631503


 


·      Road Use Permit OTH10006 authorizing use of Forest Service roads


 


·      Water
Act licences C125689 and
C125690 (issued September 10, 2010)


 

















 


SCHEDULE 3.7


 


LOCATIONS OF REGISTERED OFFICE,
PLACES OF BUSINESS,

CHIEF EXECUTIVE OFFICE, RECORDS AND

OTHER COLLATERAL


 


Registered Office


 


British
Columbia


 


Chief Executive Office


 


British
Columbia


 


Places of Business


 


British
Columbia


 


Locations of Records


 


British
Columbia


 


Locations of Collateral


 


British
Columbia


 

















 


Schedule C3


 


Form of Security Agreement —
Floating Charge


 
















 


SECURITY AGREEMENT FLOATING CHARGE


 


THIS AGREEMENT is made as of the 20 day of October, 2010 by TERRANE METALS CORP.
(herein called “Vendor”) a company
amalgamated under the laws of British Columbia by amalgamation of 0888046 B.C.
Ltd. and Terrane Metals Corp., Suite 1500 - 999 West Hastings Street,
Vancouver, British Columbia, (Fax No. 604-630-2090) in favour of RGL
ROYALTY AG, (herein called the “Purchaser”)
a corporation incorporated under the laws of Switzerland, c/o SchelPart AG,
Baarerstrasse 53, P O Box 4559, CH - 6304 Zug, Switzerland (Fax No. +41 41
729 20 77).


 


BACKGROUND:


 


Pursuant to
the gold purchase and sale agreement dated October 20, 2010 (the “Purchase Agreement”) by and among Vendor,
the Purchaser, and, solely in respect of certain sections thereof, Royal Gold, Inc.,
a corporation organized under the laws of the State of Delaware, and Thompson
Creek Metals Company Inc. a company governed by the laws of British Columbia,
it is a condition of the Purchase Agreement that Vendor enter into this
Security Agreement.


 


FOR VALUABLE CONSIDERATION (the receipt and sufficiency of which are hereby
acknowledged), Vendor covenants, agrees, grants, acknowledges, represents and
warrants in favour of the Purchaser, as follows:


 


Article 1

INTERPRETATION


 


1.1          Definitions


 


Each word and phrase
defined or given an extended meaning in Schedule 1.1 is used in this Security
Agreement with the defined or extended meaning assigned to it in Schedule 1.1.


 


1.2          Statutes


 


Each reference in
this Security Agreement to any code, statute, regulation, official
interpretation, directive or other legislative enactment of any Canadian or
foreign jurisdiction (including any political subdivision of any thereof) at
any time shall be construed so as to include such code, statute, regulation,
official interpretation, directive or enactment and each change thereto made at
or before that time.


 


1.3          Headings


 


The division of this
Security Agreement into Articles and Sections and the insertion of headings are
for convenience of reference only and shall not affect the construction or
interpretation of this Security Agreement. The Article and Section headings
in this Security Agreement are included solely for convenience, are not
intended to be full or accurate descriptions and shall not be considered part
of this Security Agreement.


 

















 


1.4          Number
and Gender


 


In this Security
Agreement, words (including defined terms) in the singular include the plural
and vice-versa (the necessary
changes being made to fit the context) and words in one gender include all
genders.


 


1.5          Reference
to Agreements


 


Each reference in
this Security Agreement to any agreement (including this Security Agreement and
any other term defined in Schedule 1.1 that is an agreement), document or
instrument shall be construed so as to include such agreement (including any
attached schedules, appendices and exhibits), document or instrument and each
amendment, supplement, other modification, amendment and restatement, novation
and replacement made to it at or before the time in question.


 


Article 2

GRANT OF SECURITY


 


2.1          Security


 


As general and
continuing collateral security, without impairment or novation, for the due
payment and performance of the Obligations, and subject to the exceptions in
Section 2.5 and 2.6, Vendor charges, mortgages, assigns and transfers and
grants a security interest in the following Collateral as and by way of a
floating charge to and in favour of Purchaser:


 


(a)           all of Vendor’s right,
title and interest in and to all presently owned or held and after acquired or
held real property, whether in fee or of a less estate, relating to or
comprising the Milligan Property or any part thereof, together with all
commons, ways, profits, easements, rights-of-way, privileges, benefits,
licenses, improvements, immunities and rights connected therewith or
appurtenant thereto and all structures, buildings, plant, fixed machinery,
fixtures, appurtenances and other assets belonging, affixed or appurtenant to
the said real property (the “Real Property
Rights”), provided such floating charge shall in no way hinder or
prevent Vendor, subject to the Purchase Agreement or until the security hereof
shall have become enforceable, from selling, disposing of or otherwise dealing
with any and all of such Real Property Rights in the ordinary course of
Vendor’s business and for the purpose of carrying on and extending the same,
provided, however, that such floating charge shall prevent Vendor, unless it
has the express written consent of the Purchaser, from granting, creating,
assuming, or permitting to exist any encumbrance, other than Permitted
Encumbrances, upon the whole or any part of the Real Property Rights; and


 


(b)           all Proceeds and
Replacements of or to Collateral referred to in clause (a) above,
including all rights thereto.


 


The security
given hereunder is given in addition to and not in substitution for any other
security granted pursuant to the Purchase Agreement and any other documents and
agreements related thereto.


 

















 


2.2          Attachment


 


Vendor acknowledges
that value has been given, that Vendor and the Purchaser have not agreed to
postpone the time for attachment of the Security and that the Security is
intended to attach, as to all of the Collateral in which Vendor now has rights,
when Vendor executes this Security Agreement, and, as to all Collateral in
which Vendor only has rights after the execution of this Security Agreement,
when Vendor first has such rights. For certainty, Vendor confirms and agrees
that the Security is intended to attach to all present and future Collateral of
Vendor and each successor of Vendor.


 


2.3          Permitted
Dispositions


 


Vendor shall be
permitted to sell, dispose of or otherwise deal with any of the Collateral so
long as such sale, disposition or other dealing (both singly and in the
aggregate):


 


(a)           is not otherwise
prohibited under this Agreement or the Purchase Agreement;


 


(b)           is consistent with
prudent business practices for a developer and operator of a mining property;
and


 


(c)           does not otherwise
trigger a Material Adverse Effect.


 


With respect to any
Permitted Disposition, the Purchaser shall promptly, upon the written request
of the Vendor accompanied by (A) confirmation of the disposition and (B) any
detail concerning the item or items of Collateral sold or disposed of by the
Vendor (“Disposed Collateral”) reasonably
required by the Purchaser:


 


(a)           execute and return to the
Vendor for filing a registrable discharge of its Security with respect to the
Disposed Collateral; or


 


(b)           amend, or provide written
authorization to the Vendor to amend, any applicable registration or
registrations of the Purchaser’s Security so as to exclude the Disposed
Collateral; or


 


(c)           provide to the Vendor
written confirmation (and addressed to persons having acquired an interest in
the Disposed Collateral) confirming that the Purchaser no longer has nor will
assert any security interest in the Disposed Collateral depending on the
circumstances as determined by the Vendor acting reasonably.


 


This Section 2.3
shall not prohibit the Vendor from selling, disposing of or otherwise dealing
with any of the Collateral in accordance with the prior written consent of the
Purchaser (such consent not to be unreasonably withheld, conditioned or
delayed).


 

















 


2.4          Proceeds Held in Trust


 


After an Event of
Default occurs, Vendor shall receive and hold all Proceeds in trust, separate
and apart from other monies, instruments or property, and shall forthwith
endorse as necessary and pay over or deliver them to the Purchaser.


 


2.5          Leases


 


(a)           The last day of the term
of any lease, oral or written, or any agreement therefor, now held or hereafter
acquired by Vendor shall be excepted from the Security and shall not form part
of the Collateral but Vendor shall stand possessed of such one day remaining
upon trust to assign and dispose of the same as the Purchaser directs. If any
such lease or agreement therefor contains a provision which provides in effect
that such lease or agreement may not be assigned, sub-leased, charged or made
the subject of any Lien without the consent of the lessor, the application of
the Security to any such lease or agreement shall be conditional upon such
consent being obtained. Vendor shall forthwith use commercially reasonable best
efforts to obtain, as soon as reasonably practicable, such consent.


 


(b)           Upon any sale by the
Purchaser or any Receiver of any leasehold interest pursuant to this Security
Agreement, the Purchaser or any Receiver, for the purpose of vesting the one
day residue of the term or renewal thereof in any purchaser or purchasers,
shall be entitled by deed or writing to appoint such purchaser or purchasers or
any other Person or Persons a new trustee or trustees of the aforesaid reside
of any such term or renewal thereof in the place and stead of Vendor and to
vest the same accordingly in the new trustee or trustees so appointed free from
any obligation respecting the same.


 


2.6          Agreements


 


(a)           Notwithstanding anything
to the contrary contained herein, if Vendor cannot lawfully grant the Security
in any agreement comprised in the Collateral in which it now or hereafter has
rights because the agreement prohibits or restricts such Security, the
agreement requires the consent of any Person which has not been obtained or the
grant of such Security in the agreement would contravene Applicable Law, that agreement
shall not, to the extent it would be illegal or result in a breach or default
under that agreement (each, a “Prescribed
Agreement”), be subject to the Security (save to the extent provided
below) unless and until such agreements, consents, waivers and approvals as may
be required to avoid such illegality, breach or default have been obtained (“Required Approvals”). The Security shall
nonetheless immediately attach to any rights of Vendor arising under, by reason
of, or otherwise in respect of such agreement such as the right to receive
payments thereunder and all Proceeds and Replacements of the agreement (“Related Rights”), if and to the extent and
as at the time such attachment to the Related Rights is not illegal or would
not result in a breach or default thereunder.


 

















 


(b)           To the extent permitted
by Applicable Law and each Prescribed Agreement, Vendor will hold in trust for
the Purchaser, and provide the Purchaser with the benefits of, each Prescribed
Agreement and will enforce all Related Rights at the direction of the Purchaser
or at the direction of such other Person (including any purchaser of Collateral
from the Purchaser or any Receiver) as the Purchaser may designate.


 


(c)           Vendor shall forthwith
use commercially reasonable best efforts to obtain, as soon as reasonably
practicable, all such Required Approvals and acknowledgements of the nature
referred to in Subsection 2.6(a).


 


Article 3

REPRESENTATIONS AND WARRANTIES


 


Vendor represents
and warrants to and in favour of the Purchaser, as follows:


 


3.1          Incorporation


 


Vendor is validly
incorporated and organized and is a valid and subsisting corporation under the
laws of the Province of British Columbia.


 


3.2          Corporate  Power


 


Vendor has the
power, capacity, and authority, and has taken all necessary corporate action,
to authorize, issue and perform this Security Agreement and to grant the
Security.


 


3.3          Licences and Permits


 


Vendor has all
necessary power, capacity, and authority, and holds all Licenses and Permits
which it requires, to own its Business Assets (including the Collateral) and to
carry on its current undertakings at the Milligan Project except where failure
to do so would not reasonably be expected to have a Material Adverse Effect on
the Vendor.


 


3.4          No Conflict


 


Neither the issuance
nor the performance of this Security Agreement nor the granting of the Security
requires the Authorization of any Governmental Authority having jurisdiction
over Vendor or its Business Assets, nor is this Security Agreement in
contravention or breach of or in conflict with the constating documents, any
unanimous shareholder agreement, by-laws or resolutions of the directors or
shareholders of Vendor or of the provisions of any agreement or License to
which Vendor is a party as at the date hereof or by which it or any of its
Business Assets may be bound as at the date hereof (except, in relation to any
agreement or License, for any contravention, breach or conflict which does not,
and could not reasonably be expected to have a Material Adverse Effect on Vendor
or any of its Business Affairs) or of any Applicable Law to which Vendor or any
of its Business Assets may be subject. No such action will oblige Vendor to
grant any Lien to any Person other than the Purchaser.


 

















 


3.5          Title


 


Subject only
to Permitted Encumbrances, Vendor has and will have good and marketable title
to the Collateral free and clear of all Liens whatsoever.


 


3.6          Enforceability


 


This Security
Agreement constitutes a valid and legally binding obligation of Vendor
enforceable against Vendor in accordance with its terms, subject only to
bankruptcy, insolvency or other statutes or judicial decisions affecting the
enforcement of creditors’ rights in general, to general principles of equity
under which specific performance and injunctive relief may be refused by a
court in its discretion and to any reasonable qualifications expressed in the
legal opinions delivered by counsel for Vendor to the Purchaser pursuant to the
Purchase Agreement.


 


3.7          Real Property
Rights


 


Schedule 2.1
includes a complete list of all Real Property Rights owned, held or used by
Vendor as at the date hereof in carrying on Vendor’s business related to the
Milligan Property that are registered at the applicable Land Title Office in
British Columbia. Upon Vendor’s acquisition of rights in any additional Real
Property Right registered at the applicable Land Title Office in British
Columbia, Vendor will promptly give written notice to the Purchaser of full
particulars of the same.


 


3.8          Reliance and
Survival


 


All representations
and warranties of Vendor made herein or in any certificate or other document
delivered by or on behalf of Vendor to the Purchaser are material, shall
survive the issuance of this Security Agreement and shall continue in full
force and effect for a term of five years following payment of the final
Scheduled Deposit. The Purchaser shall be deemed to have relied upon each such
representation and warranty notwithstanding any investigation made by or on
behalf of the Purchaser at any time.


 


Article 4

COVENANTS OF VENDOR


 


4.1          Maintenance


 


Vendor shall
diligently maintain and use the Collateral and shall conduct its business in a
proper and efficient manner so as to preserve and protect the Collateral and
the earnings, issues and profits thereof.


 


4.2          Access  to Records


 


Vendor shall upon
prior written request from the Purchaser, permit the Purchaser or its
Representatives at any commercially reasonable time to have access to all
premises occupied by Vendor or any place where any Collateral may be found in
order to inspect any Collateral and to examine the books of account and other
records and reports of Vendor including the Records, and to have temporary
custody of, make copies of and take extracts from such records, reports and
Records.


 

















 


4.3          Taxes


 


Vendor shall pay all
Taxes when due except those which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves under GAAP
have been established and either (a) no Lien attaches to Collateral to
secure the payment of such Taxes or (b) a Lien attaches to Collateral to
secure the payment of such Taxes but no risk of enforcement exists and Vendor
has paid to or deposited with the relevant taxation authority such amounts as
may be assessed or otherwise required to cease all related penalties and
interest from continuing to accrue. Vendor shall provide the Purchaser with
evidence of Tax payments upon written request.


 


4.4          Liens


 


Vendor shall keep
the Collateral free at all times from Liens, except Permitted Encumbrances, and
shall defend the title to the Collateral against all Persons. Vendor shall not
permit any Collateral to become an accession to or commingled with any property
other than other Collateral or to become a fixture unless the Security ranks
prior to the interests of all Persons in the subject realty. Neither the
foregoing nor Section 3.5 shall in any way prevent the Purchaser from, at
any time, contesting the validity, enforceability or priority of any Lien.
Subject to the Purchase Agreement, no Lien shall be entitled to priority over
the Security. Nothing in this Security Agreement is intended to create any
rights (including subordination rights) in favour of any Person other than the
Purchaser, any Receiver and the other Indemnified Parties.


 


4.5          Compliance with Governmental Requirements


 


With respect to the
Milligan Project, the Vendor shall materially comply with all requirements of
any Governmental Authority applicable to any Collateral or its use and with all
covenants, terms or conditions upon which any Collateral is held or used;
provided, however, the Vendor shall have the right to contest enforcement
actions and any allegations of infringement of the same in its discretion.


 


4.6          Further Assurances


 


Vendor shall at all
times do, execute, acknowledge and deliver or cause to be done, executed,
acknowledged or delivered all such further acts, deeds, transfers, mortgages
and charges, security agreements, assignments, agreements and assurances as the
Purchaser may reasonably require in order to give effect to the provisions of
this Security Agreement and for the better, confirming, registering, securing
or perfecting, or maintaining the perfection of, the Security and the priority
accorded to the Security intended under this Security Agreement. Upon the
request of the Purchaser, Vendor shall specifically mortgage, pledge, charge,
grant a security interest in, or assign in favour of the Purchaser any property
that forms part of the Collateral and shall execute all documents reasonably
required by the Purchaser in connection therewith. Vendor constitutes and
appoints the Purchaser acting by any officer for the time being of the
Purchaser located at its address for notices prescribed by Section 7.3 to
be its attorney with full power of substitution to do on Vendor’s behalf anything
that Vendor can lawfully do by an attorney, including to do, make and execute
all such agreements, deeds, acts, matters or things, with the right to use the
name of Vendor, whenever and wherever it deems necessary or expedient and to
carry out 


 

















 


Vendor’s obligations
under this Security Agreement. Such power of attorney, being granted by way of
security and coupled with an interest, is irrevocable until Payment in Full of
the Obligations. Such power of attorney shall not be exercisable by the Purchaser
(a) unless an Event of Default has occurred and is continuing or (b) unless
the Purchaser has requested in writing Vendor to take any action required
pursuant to this Section 4.6 and Vendor has failed to do so after 90 days
of such request.


 


4.7          Notice of Change


 


Vendor shall notify
the Purchaser in writing:


 


(a)           forthwith of any
Litigation which could materially adversely affect any Collateral or the
Security therein;


 


(b)           forthwith after receipt
by Vendor of any notice from any Governmental Authority regarding, or the
occurrence of, any of the following events where any of such events could
reasonably be seen to have a Material Adverse Effect on any Collateral or
Security: non-compliance with Applicable Laws, order for suspension of mining
activities, cancellation or forfeiture of, or the failure to renew or expiry
of, any Real Property Rights; and


 


(c)           at least 3 Business Days
prior to (i) any change of name, or the adoption of a French form of name,
or the adoption of a combined English/French or French/English form of name, of
Vendor, (ii) any transfer of Vendor’s interest in any Collateral not
expressly permitted hereunder, or (iii) any change in the registered
office or chief executive office of Vendor.


 


4.8          Costs


 


Vendor shall
forthwith reimburse the Purchaser, on demand and on a full indemnity basis, for
all interest, commissions, costs of realization and other reasonable,
out-of-pocket and properly documented costs and expenses (including reasonable
out-of-pocket and properly documented legal fees on a full indemnity basis)
incurred by the Purchaser or any Receiver in connection with the enforcement of
this Security Agreement and the enforcement of the Security, including those
arising in connection with the realization, disposition of, retention,
protection or collection of any Collateral and the protection or enforcement of
the rights of the Purchaser or any Receiver.


 


4.9          Reimbursements as Obligations


 


All amounts for
which Vendor is required hereunder to reimburse the Purchaser or any Receiver
shall, from the date of disbursement until the date the Purchaser or such
Receiver receives reimbursement, be deemed advanced to Vendor by the Purchaser
or such Receiver, as the case may be, on the faith and security of this
Security Agreement, shall be deemed to be Obligations secured by the Security
and shall bear interest from the date of disbursement, compounded and payable
monthly, both before and after demand, default and judgment, until payment of
such amount is paid in full at the Default Rate.


 

















 


4.10        General
Indemnity


 


In addition to any
indemnity contained in the Purchase Agreement, Vendor will indemnify the
Purchaser, any Receiver and their respective Representatives, (each, an “Indemnified Party”) in respect of, and save
each Indemnified Party fully harmless from and against, all loss and expense
which an Indemnified Party may suffer or incur in connection with (a) the
exercise by the Purchaser or any Receiver of any of its rights hereunder, (b) any
breach by Vendor of the representations or warranties of Vendor contained
herein, or (c) any breach by Vendor of, or any failure by Vendor to
observe or perform, any of the Obligations, save that Vendor shall not be
obliged to so indemnify any Indemnified Party to the extent such losses and
expenses are determined by a final Award (from which no appeal may be made or
the applicable appeal periods have lapsed without any appeal therefrom having
been perfected) to have directly resulted from the willful misconduct or gross
negligence of the Indemnified Party. The Purchaser shall be constituted as the
trustee of each Indemnified Party, other than itself, and shall hold and
enforce each such other Indemnified Party’s rights under this Section 4.10
for their respective benefits.  In no event will Vendor be liable
to Purchaser for any lost profits or incidental, indirect, speculative,
consequential, special, punitive, or exemplary damages of any kind (whether
based in contract, tort, including negligence, strict liability, fraud, or
otherwise, or statutes, regulations, or any other theory) arising out of or in
connection with this Security Agreement, even if advised of such potential
damages.


 


4.11        Updated
Lists


 


As soon as Vendor
acquires any rights in any Real Property Right registered at the applicable
Land Title Office in British Columbia, a written description describing that
Real Property Right shall be deemed to have been incorporated into Schedule 2.1
and Vendor shall promptly deliver to the Purchaser an updated version of such
Schedule 2.1, showing additions and deletions to the Collateral since the prior
version forming a part hereof, provided however that any such addition shall
not result in increasing the physical or subsurface area of the Milligan
Project outside of the area existing as of the date hereof. Each such version
approved of by the Purchaser shall be deemed to be part of this Security
Agreement as of its preparation date.


 


Article 5

DEFAULT


 


5.1          Acceleration on Event of Default


 


If the uncredited
portion of the Payment Deposit becomes due and payable to the Purchaser
pursuant to either Section 12.2 (a) or Section 13.2 of the
Purchase Agreement, upon expiry of the time permitted for payment of same, the
Obligations shall be immediately due and payable and the Security shall become
immediately enforceable without the necessity for any further action or notice
by the Purchaser.


 


5.2          Waiver


 


The Purchaser may
waive any Event of Default or any breach by Vendor of any of the provisions of
this Security Agreement. No waiver, however, shall be deemed to extend to a
subsequent breach or Event of Default, whether or not the same as or similar to
the breach or Event of 


 

















 


Default waived, and
no act or omission by the Purchaser shall extend to, or be taken in any manner
whatsoever to affect, any subsequent breach or Event of Default or the rights
of the Purchaser arising therefrom. Any such waiver must be in writing and
signed by the Purchaser to be effective. No failure on the part of the
Purchaser to exercise, and no delay by the Purchaser in exercising, any right
under this Security Agreement shall operate as a waiver of such right. No
single or partial exercise of any such right shall preclude any other or
further exercise of such right or the exercise of any other right.


 


Article 6

REMEDIES ON DEFAULT


 


6.1          Remedies of Purchaser


 


If the Security
becomes enforceable in accordance with Article 5, the Purchaser shall have
the rights set out in this Article 6.


 


6.2          Right to Appoint a Receiver


 


The Purchaser may
appoint by instrument in writing one or more Receivers of any Collateral. Any
such Receiver shall have the rights set out in this Article 6. In
exercising such rights, any Receiver shall act as and for all purposes shall be
deemed to be the agent of Vendor and the Purchaser shall not be responsible for
any act or default of any Receiver. The Purchaser may remove any Receiver and
appoint another from time to time. An officer or employee of the Purchaser may
be appointed as a Receiver. No Receiver appointed by the Purchaser need be
appointed by, nor need its appointment be ratified by, or its actions in any
way supervised by, a court. If two or more Receivers are appointed to act
concurrently, they shall, unless otherwise expressly provided in the instrument
appointing them, so act severally and not jointly and severally. The
appointment of any Receiver or anything done by a Receiver or the removal or
termination of any Receiver shall not have the effect of constituting the
Purchaser a mortgagee in possession in respect of the Collateral.


 


6.3          Rights of a Receiver


 


Any Receiver
appointed by the Purchaser shall have the following rights:


 


(a)           Power
of Entry. Vendor shall forthwith upon demand deliver
to a Receiver possession of any Collateral at the place specified by the
Receiver. Any Receiver may at any time enter upon any premises owned, leased or
otherwise occupied by Vendor or where any Collateral is located to take
possession of, disable or remove any Collateral, and may use whatever means the
Receiver considers advisable to do so.


 


(b)           Power
of Sale. Any Receiver may sell, lease, consign, license, assign or otherwise
dispose of any Collateral by public auction, private tender or private contract
with or without notice, advertising or any other formality, all of which are
hereby waived by Vendor to the extent permitted by Applicable Law. Any Receiver
may, at its discretion, establish the terms of such disposition, including
terms and conditions as to credit, upset, reserve bid or price. All payments
made pursuant to 


 
















 


such dispositions shall be credited against
the Obligations only as they are actually received. Any Receiver may buy in,
rescind or vary any contract for the disposition of any Collateral and may
dispose of any Collateral again without being answerable for any loss
occasioned thereby. Any such disposition may take place whether or not the
Receiver has taken possession of the Collateral. The exercise by the Receiver
of any power of sale does not preclude the Receiver from further exercise of
its power of sale in accordance with this clause.


 


(c)           Carrying
on Business. With respect to, and to the extent of, the
Collateral and the Milligan Property, any Receiver may carry on, or concur in
the carrying on of, any of the business or undertaking of Vendor and may, to
the exclusion of all others, including Vendor after five Business Days’ written
notice, enter upon, occupy and use any of the premises, buildings, plant and
undertaking of, or occupied or used by, Vendor and, for such time and such
purposes as the Receiver sees fit, may use any of the equipment and intangibles
of Vendor that Vendor has not removed from the Milligan Property within five
Business Days after the Purchaser or the Receiver has given Vendor written
notice to do so. No Receiver shall be liable to Vendor for any negligence in so
doing or in respect of any rent, charges, costs, depreciation or damages in
connection with any such action.


 


(d)           Any Receiver may complete
any unfinished construction upon or in the Collateral including having the
power to:


 


(i)            appoint and engage
superintendents, architects, engineers, miners, geologists, consultants,
contractors, managers, advisors and such other personnel which, in the
discretion of the Receiver, may be required to construct, furnish or operate
the Collateral;


 


(ii)           enter into contracts for the supply of materials and services which the Receiver deems necessary to
complete or operate the Collateral;


 


(iii)          enter into and enforce
and take the benefit of Real Property Rights, agreements and other arrangements
in respect of the Collateral from municipal or other Governmental Authorities
or from any other source whatsoever which provide loans, grants or Licenses;


 


(iv)          enter into, enforce, use
and take the benefit of construction contracts, contracts for services or
materials, performance bonds, insurance contracts, development agreements,
plans, studies, reports, information or any other matter, material or
arrangement in respect of the Collateral; and


 


(v)           with the approval of a
court of competent jurisdiction, if required by Applicable Law, terminate any
Real Property Rights or other arrangements made by Vendor in connection with
the Collateral on such terms as the Receiver deems reasonable.


 


(e)           Pay
Liens. Any Receiver may pay any liability secured by any actual or threatened
Lien against any Collateral. A Receiver may borrow money for the 


 

















 


maintenance, preservation or protection of any Collateral or for carrying on any of the business or
undertaking of Vendor with respect to, and to the extent of, the Collateral and
the Milligan Property and may grant Liens in any Collateral in priority to the
Security as security for the money so borrowed. Vendor will forthwith on demand
reimburse the Receiver for all such payments and borrowings.


 


(f)            Dealing
with Collateral. Any Receiver may seize, collect, realize,
dispose of, enforce, release to third parties or otherwise deal with any
Collateral in such manner, upon such terms and conditions and at such time as
it deems advisable without notice to Vendor (except as otherwise required by
Applicable Law), and may charge on its own behalf and pay to others its costs
and expenses (including legal, Receiver’s and accounting fees and expenses on a
full indemnity basis) incurred in connection with such actions. Vendor will
forthwith upon demand reimburse the Receiver for all such costs or expenses.


 


(g)           Powers
re Collateral. Any Receiver may have, enjoy and exercise
all of the rights of and enjoyed by Vendor with respect to the Collateral or
incidental, ancillary, attaching or deriving from the ownership by Vendor of
the Collateral, the right to commence or continue Litigation to preserve or
protect Collateral and the right to grant or agree to Liens and grant or
reserve profits a prendre, easements, rights of ways, rights in the nature of
easements and licenses over or pertaining to the whole or any part of the
Collateral.


 


(h)           Retain
Services. Any Receiver may retain the services of such
real estate brokers and agents, lawyers, accountants, appraisers and other
consultants as the Receiver may deem necessary or desirable in connection with
anything done or to be done by the Receiver or with any of the rights of the
Receiver set out herein and pay their commissions, fees and disbursements
(which payment shall constitute part of the Receiver’s disbursements
reimbursable by Vendor hereunder). Vendor shall forthwith on demand reimburse
the Receiver for all such payments.


 


6.4          Right to have Court Appoint a Receiver


 


The Purchaser may,
at any time, apply to a court of competent jurisdiction for the appointment of
a Receiver, or other official, who may have powers the same as, greater or
lesser than, or otherwise different from, those capable of being granted to a
Receiver appointed by the Purchaser pursuant to this Security Agreement.


 


6.5          Purchaser may exercise rights of a Receiver


 


In lieu of or in
addition to, exercising its rights under Sections 6.3 and 6.4, the Purchaser
has, and may exercise, any of the rights which are capable of being granted to
a Receiver appointed by the Purchaser pursuant to this Security Agreement.


 

















 


6.6          Retention of Collateral


 


The Purchaser may
elect to retain any Collateral in satisfaction of the Obligations. The
Purchaser may designate any part of the Obligations to be satisfied by the
retention of particular Collateral which the Purchaser considers to have a net
realizable value approximating the amount of the designated part of the
Obligations, in which case only the designated part of the Obligations shall be
deemed to be satisfied by the retention of the particular Collateral.


 


6.7          Limitation of Liability


 


Except for any loss
or expense resulting from any gross negligence, bad faith or willful misconduct
of the Purchaser, any Receiver or any of their respective Representatives,
neither the Purchaser nor any Receiver shall be liable or accountable for any
failure of the Purchaser or any Receiver to seize, collect, realize, dispose
of, enforce or otherwise deal with any Collateral nor shall any of them be
bound to institute Litigation for any such purposes or for the purpose of
preserving any rights of the Purchaser, Vendor or any other Person in respect
of any Collateral. Neither the Purchaser nor any Receiver shall be liable or
responsible for any loss and expense whatever which may accrue in consequence
of any such failure resulting from any negligence of the Purchaser, any
Receiver or any of their respective Representatives or otherwise. If any
Receiver or the Purchaser takes possession of any Collateral, neither the
Purchaser nor any Receiver shall have any liability as a mortgagee in
possession or be accountable for anything except actual receipts.


 


6.8          Extensions of Time


 


The Purchaser and
any Receiver may grant renewals, extensions of time and other indulgences, take
and give up Liens, accept compositions, grant releases and discharges, perfect
or fail to perfect any Liens, release any Collateral to third parties and
otherwise deal or fail to deal with Vendor, debtors of Vendor, guarantors,
sureties and others and with any Collateral and other Liens as the Purchaser
may see fit, all without prejudice to the liability of Vendor to the Purchaser
or the rights of the Purchaser and any Receiver under this Security Agreement.


 


6.9          Application of Payments against Obligations


 


Any Recovery
received by the Purchaser in respect of the Obligations from time to time and
any Recovery realized by the Purchaser on any Collateral shall be appropriated
and applied by the Purchaser in accordance with Section 6.17.


 


6.10        Set-Off, Combination of Accounts met and/or Crossclaims


 


The Obligations will
be paid by Vendor without regard to any equities between Vendor and the
Purchaser or any right of set-off or cross-claim. Any indebtedness owing by the
Purchaser to Vendor, direct or indirect, extended or renewed, actual or contingent,
mutual or not, may be set off or applied against, or combined with, the
Obligations by the Purchaser at any time either before or after maturity,
without demand upon or notice to anyone.


 


6.11        Deficiency


 


If the proceeds of
the realization of any Collateral are insufficient to repay all liquidated Obligations, Vendor shall forthwith pay or cause to be paid to
the Purchaser such deficiency.


 

















 


6.12        Validity of Sale


 


No Person dealing
with the Purchaser or any Receiver or with any Representative of the Purchaser
or any Receiver shall be concerned to inquire whether the Security has become
enforceable, whether any right of the Purchaser or any Receiver has become
exercisable, whether any Obligations remain outstanding or otherwise as to the
propriety or regularity of any dealing by the Purchaser or any Receiver with
any Collateral or to see to the application of any money paid to the Purchaser
or any Receiver, and in the absence of fraud on the part of such Person such
dealings shall be deemed, as regards such Person, to be within the rights
hereby conferred and to be valid and effective accordingly.


 


6.13        Purchaser or Receiver may Perform


 


If Vendor fails to
perform any Obligations, without limiting any other provision hereof, the
Purchaser or any Receiver may perform those Obligations as attorney for Vendor
in accordance with Section 4.6. Vendor shall remain liable under each
agreement and Real Property Right to which it is party or by which it or any of
its Business Assets is bound and shall perform all of its obligations
thereunder, and shall not be released from any of its obligations under any
such agreement or Real Property Right by the exercise of any rights by the
Purchaser or any Receiver. Neither the Purchaser nor any Receiver shall have any
obligation under any such agreement or Real Property Right by reason of this
Security Agreement, nor shall the Purchaser or any Receiver be obliged to
perform any of the obligations of Vendor thereunder or to take any action to
collect or enforce any claim made subject to the security of this Security
Agreement. The rights conferred on the Purchaser and any Receiver under this
Security Agreement are for the purpose of protecting the Security in the
Collateral and shall not impose any obligation upon the Purchaser or any
Receiver to exercise any such rights.


 


6.14        Effect of Appointment of Receiver


 


As soon as the
Purchaser takes possession of any Collateral or appoints a Receiver over any
Collateral, all rights of each of the Representatives of Vendor with respect to
that Collateral shall cease, unless specifically continued by the written
consent of the Purchaser or the Receiver.


 


6.15        Time for Payment


 


If any
Obligations are due by maturity, demand or acceleration, it shall be deemed
reasonable for the Purchaser to exercise its rights under this Security
Agreement immediately if such payment is not made, and any days of grace or any
time for payment which might otherwise be required to be afforded to Vendor by
any agreement or Applicable Law is hereby irrevocably waived to the extent
permitted by law.


 


6.16        Rights in Addition


 


The rights conferred
by this Article 6 are in addition to, and not in substitution for, any
other rights the Purchaser may have under this Security Agreement, at law, in
equity or by or under Applicable Law or the Purchase Agreement or any other
security agreement. The Purchaser may proceed by way of any action, suit or
other proceeding at law or in equity including (a) the right to take
proceedings in any court of competent jurisdiction for the sale or foreclosure
of the 


 

















 


Collateral and (b) filing
proofs of claim and other documentation to establish the claims of the
Purchaser in any Litigation relating to Vendor. No right of the Purchaser or
any Receiver shall be exclusive of or dependent on any other. Any such right
may be exercised separately or in combination, and at any time. The exercise by
the Purchaser or any Receiver of any right hereunder does not preclude the
Purchaser or any Receiver from further exercise of such right in accordance
with this Security Agreement.


 


6.17        Application of Proceeds


 


Each Recovery
received by the Purchaser will be held and dealt with by or applied and paid to
the relevant parties or Persons indicated below promptly following receipt by
the Purchaser in the following order:


 


(a)           first, to be applied to
the Payment in Full of the Obligations due and owing to the Purchaser under the
Purchase Agreement, including all reasonable fees of the Purchaser and all
reasonable out-of-pocket disbursements, fees, costs and expenses incurred by
the Purchaser in connection with the preservation of the Security or the
Collateral or any enforcement proceedings and all amounts for which the
Purchaser is entitled to payment or indemnity from Vendor pursuant to any other
provision of this Security Agreement;


 


(b)           second, after Payment in
Full of all Obligations in accordance with paragraph (a) above, the
surplus, if any, remaining from that Recovery will be paid to Vendor, unless
otherwise directed by any Order of any competent Governmental Authority, or as
required by Applicable Law.


 


The fact that
the Purchaser may make a payment pursuant to paragraph (b) above or may
determine that the Obligations have been paid in full, will not thereafter
prevent the Purchaser from applying any further Recovery in the order set out
in this Section 6.17.


 


Article 7

GENERAL


 


7.1          Security in Addition


 


The Security does
not replace or otherwise affect any existing or future Lien held by the
Purchaser. Neither the taking of any Litigation, judicial or extra-judicial,
nor the refraining from so doing, nor any dealing with any other security for
any Obligations shall release or affect the Security. Neither the taking of any
Litigation, judicial or extra-judicial, pursuant to this Security Agreement,
nor the refraining from so doing, nor any dealing with any Collateral shall
release or affect any of the other Liens held by the Purchaser for the payment
or performance of the Obligations.


 


7.2          No Merger


 


This Security
Agreement shall not operate by way of a merger of the Obligations or of any
agreement or other document by which the Obligations now or at any time
hereafter may be represented or evidenced. Neither the taking of any judgment
nor the exercise of any power of 


 

















 


seizure or
disposition shall extinguish the liability of Vendor to pay and perform the
Obligations nor shall the acceptance of any payment or alternate security
constitute or create any novation. No covenant, representation or warranty of
Vendor herein shall merge in any judgment.


 


7.3          Notices


 


Any notice, demand,
consent, approval or other communication to be made or given under or in
connection with this Security Agreement shall be given in accordance with the
Purchase Agreement.


 


7.4          Time of the Essence


 


Time is and shall
remain of the essence of this Security Agreement and each of its provisions.


 


7.5          Governing Law


 


This Security
Agreement shall be governed by, and interpreted in accordance with, the laws in
force in the Province of British Columbia, including the federal laws of Canada
applicable therein (excluding any conflict of laws rule or principle which
might refer such construction to the laws of another jurisdiction). Vendor
irrevocably attorns to and submits to the non-exclusive jurisdiction of the
Courts of British Columbia with respect to any matter arising hereunder or
related hereto. Such choice of law shall, however, be without prejudice to or
limitation of any other rights available to the Purchaser under the laws of any
other jurisdiction where Collateral may be located.


 


7.6          Doctrine of Consolidation


 


Pursuant to section
31(2) of the Property Law Act
(British Columbia), the doctrine of consolidation shall apply to this Security
Agreement.


 


7.7          Security Effective Immediately


 


Neither the issuance
nor registration of, or any filings with respect to, this Security Agreement,
nor any partial advance of the Payment Deposit by the Purchaser, shall bind the
Purchaser to advance any amounts of the Payment Deposit to Vendor, but the
Security shall take effect forthwith upon the issuance of this Security
Agreement by Vendor.


 


7.8          Entire Agreement


 


There are no
representations, warranties, covenants, agreements or acknowledgments whether
direct or collateral, express or implied, that form part of or affect this
Security Agreement or any Collateral, other than as expressed herein or in the
Purchase Agreement or other security agreements granted contemporaneously
herewith by Vendor to the Purchaser and other than as may be expressed in any
other written agreement entered into between Vendor and the Purchaser
contemporaneously herewith. The execution of this Security Agreement has not
been induced by, nor does Vendor rely upon or regard as material, any
representations, warranties, conditions, other agreements or acknowledgments
not expressly made in this Security Agreement and the other written agreements
and other documents to be delivered pursuant hereto or 


 

















 


contemporaneously
herewith.  In the event of any
inconsistency between the terms of this Security Agreement and the terms of the
Purchase Agreement with respect to the subject matter herein, the terms of the
Purchase Agreement shall control


 


7.9          Provisions Reasonable


 


Vendor acknowledges
that the provisions of this Security Agreement and, in particular, those
respecting rights of the Purchaser or any Receiver against Vendor and any
Collateral upon an Event of Default, are commercially reasonable and not
manifestly unreasonable.


 


7.10        Invalidity


 


If any provision of
this Security Agreement is found to be invalid or unenforceable, by a court of
competent jurisdiction from which no further appeal right lies, that provision
shall be deemed to be severed herefrom and the remaining provisions of this
Security Agreement shall not be affected thereby but shall remain valid and enforceable.


 


7.11        Binding Effect


 


This Security
Agreement shall enure to the benefit of the Purchaser and any Receiver and
their respective successors and assigns permitted under the Purchase Agreement
and shall be binding on Vendor, its legal representatives (including receivers)
and its successors and assigns permitted under the Purchase Agreement. Each
reference to Vendor in this Security Agreement shall be construed so as to
include the successors and such permitted assigns of Vendor to the extent the context
so admits.


 


7.12        Survival


 


The Obligations
payable under Sections 4.10 and 6.17 (the “Indemnity
Obligations”) shall survive the Payment in Full of all other
Obligations and shall continue in full force and effect until Payment in Full
has been irrevocably made of such Indemnity Obligations.


 


7.13        Statutory Waivers


 


To the fullest
extent permitted by Applicable Law, Vendor waives all of the rights, benefits
and protections given by the provisions of any existing or future statute which
imposes limitations upon the rights of a secured party or upon the methods of
realization of security, including any seize or sue or anti-deficiency statute
or any similar provisions of any other statute.


 


7.14        Currency


 


All references in
this Security Agreement to monetary amounts, unless specifically provided, are
to lawful currency of the United States of America. All sums of money payable
under this Security Agreement shall be paid in the currency in which such sums
are incurred or expressed as due hereunder.


 

















 


7.15        Currency Conversions


 


If the Purchaser
receives or recovers any amount payable under this Security Agreement in a
currency (the “Recovered Amount”)
which is different than the currency of the United States of America (the “Contract Currency”), the Purchaser may
convert the Recovered Amount to the Contract Currency at the rate of exchange
which the Purchaser is able, acting in a reasonable manner and in good faith,
to purchase the relevant amount of the Contract Currency. The amount of the
Contract Currency resulting from any such conversion shall then be applied in
accordance with the provisions of Section 6.9.


 


7.16        Judgment Currency


 


If, for the purposes
of obtaining or enforcing judgment in any court in any jurisdiction, it becomes
necessary to convert into the currency of the country giving such judgment (the
“Judgment Currency”) an amount due
hereunder in a different currency (the “Agreed
Currency”), then the date on which the rate of exchange for
conversion is selected by the court is referred to herein as the “Conversion Date”. If there is a change in
the rate of exchange between the Judgment Currency and the Agreed Currency
between the Conversion Date and the actual receipt by the Purchaser or any
Receiver of the amount due hereunder or under any such judgment, Vendor will,
notwithstanding any such judgment, pay all such additional amounts as may be
necessary to ensure that the amount received by the Purchaser or Receiver in
the Judgment Currency, when converted at the rate of exchange prevailing on the
date of receipt, will produce the amount due in the Agreed Currency. Vendor’s
liability hereunder constitutes a separate and independent liability which
shall not merge with any judgment or any partial payment or enforcement of
payment of sums due under this Security Agreement.


 


7.17        Amendment


 


Subject to Section 1.5,
no agreement purporting to change this Security Agreement shall be binding upon
either Vendor or the Purchaser unless that agreement is in writing and signed
by Vendor and the Purchaser.


 


7.18        Information


 


At any time the
Purchaser may provide to any Person that claims an interest in Collateral
copies of this Security Agreement or information about it or about the
Collateral or the Obligations.


 


7.19        Discharge


 


Forthwith following
the Deposit Reduction Time, the Purchaser shall discharge all security
interests in the Collateral.  Upon the
discharge of the security interests in the Collateral, the Purchaser shall
discharge or authorize Vendor to discharge, any applicable registrations in
respect of the Collateral and shall execute and deliver to Vendor such other
documents or instruments as Vendor may reasonably require to reflect such
discharge.


 

















 


7.20        Date of Reference


 


For convenience of
reference, this Security Agreement may be referred to as being dated for
reference October 20, 2010 irrespective of its actual date of execution.


 


7.21        Vendor Acknowledgment


 


The Vendor:


 


(a)           acknowledges receiving a
copy of this Security Agreement; and


 


(b)           waives all rights to
receive from the Purchaser a copy of any financing statement, financing change statement
or verification statement filed or issued, as the case may be, at any time in
respect of this Security Agreement or any amendments to it.


 


[SIGNATURE PAGE FOLLOWS]


 

















 


TO WITNESS THIS AGREEMENT, Vendor has caused this Security Agreement to be
duly executed.


 


	
  TERRANE METALS CORP.

  
	
  Per:

  
	
   

  	
   

  
	
  Authorized
  Signatory

  



 
















 


SCHEDULE 1.1


 


DEFINITIONS


 


1.             Unless the context otherwise requires, in
this Security Agreement the following terms are used with their corresponding
defined meanings:


 


“Applicable Law” means any international,
federal, state, provincial, or municipal law, regulation, ordinance, code,
order or other requirement or rule of law or the rules, policies, orders
or regulations of any Governmental Authority or stock exchange, including any
judicial or administrative interpretation thereof, applicable to a Person or
any of its properties, assets, business or operations.


 


“Authorizations” means any authorization,
approval, consent, exemption, license, permit, franchise or no-action letter
from any Governmental Authority having jurisdiction with respect to any specified
Person, property, transaction or event, or with respect to any of such Person’s
Business Affairs or from any Person in connection with any easements or
contractual rights.


 


“Award” means any judgment, decree,
injunction, rule, award or order of any Governmental Authority, arbitrator or
other decision-making authority of competent jurisdiction.


 


“Bankruptcy Proceeding” means, with respect
to any Person, any proceeding contemplated by any application, petition,
assignment, filing of notice or other means, whether voluntary or involuntary
and whether or not under the Bankruptcy and
Insolvency Act (Canada), the Companies’
Creditors Arrangement Act (Canada), the Winding-Up and Restructuring Act (Canada) or any other like,
equivalent or analogous legislation of any jurisdiction seeking any moratorium,
reorganization, adjustment, composition, proposal, compromise, arrangement or
other like or similar relief in respect of any or all of the obligations of
that Person, seeking the winding up, liquidation or dissolution of that Person
or all or any part of its Business Assets, seeking any Award declaring, finding
or adjudging that Person insolvent or bankrupt, seeking the appointment
(provisional, interim or permanent) of any receiver or resulting, by operation
of law, in the bankruptcy of that Person.


 


“Business Affairs” means the Business
Assets, liabilities, financial condition, and results of operations of Vendor.


 


“Business Assets” means the business,
operations, undertaking, property and assets of the Vendor in relation to the
Milligan Project.


 


“Business Day” means a day other than a
Saturday or a Sunday or a day (i) that is a statutory holiday under the
laws of the Province of British Columbia or (ii) on which national banking
institutions in New York and Colorado are closed to the public for conducting
business.


 

















 


“Collateral” means all of the property made
subject to the Liens created under Section 2.1, wherever located, now or
hereafter owned by Vendor or in or to which Vendor now or hereafter has rights,
including all such rights, and (as the context so admits) any item or part
thereof.


 


“Default Rate” means the interest rate per
annum payable by Vendor pursuant to Section 15.3(a) of the Purchase
Agreement.


 


“Deposit Reduction Time” has the meaning assigned to it in
the Purchase Agreement.


 


“Documents of Title” means all documents of
title, whether negotiable or non-negotiable, including all warehouse receipts
and bills of lading, in which Vendor now or hereafter has rights, and (as the
context so admits) any item or part thereof.


 


“Event of Default” means a Vendor Event of
Default as defined in the Purchase Agreement.


 


“Governmental Authority” means any federal,
provincial, or local government, agency, department, ministry, authority,
tribunal, commission, official, court or securities commission.  For the avoidance of doubt, “tribunal” shall
not be deemed to include First Nations.


 


“Income Taxes” means taxes based on or
measured by income or profit of any nature or kind, including Canadian federal
and provincial income taxes and similar such taxes imposed by any foreign
jurisdiction (including any union of nations).


 


“Indemnified Party” has the defined meaning
assigned to it in Section 4.10.


 


“License” means (i) any Authorization
from any Governmental Authority having jurisdiction with respect to Vendor’
interest in the Milligan Property, and (ii) any Authorization from any
Person granting any easement or license with respect to any real or immovable
property in relation to the Milligan Project.


 


“Lien” means (i) any right of set-off
intended to secure the payment or performance of an obligation, (ii) any
interest in property created by way of mortgage, pledge, charge (fixed or
floating), lien, assignment by way of security, hypothecation, security interest,
hire purchase agreement, conditional sale agreement, Sale/Lease Back
Transaction, deposit arrangement, title retention, capital lease or discount,
factoring or securitization arrangement on recourse terms, (iii) any
statutory deemed trust or lien, (iv) any preference, priority, adverse
claim, levy, execution, seizure, attachment, garnishment or other encumbrance
which binds property, and (v) any agreement to grant any of the rights or
interests described in clauses (i) to (iv) inclusive of this
definition.


 


“Litigation” means any grievance,
investigation, litigation, legal action, lawsuit, mediation, alternative
dispute resolution proceeding or other proceeding (whether civil,
administrative, quasi-criminal or criminal) by or before any Governmental
Authority, arbitrator or other decision-making authority.


 

















 


“Material Adverse Effect” has the meaning assigned to it in
the Purchase Agreement.


 


“Milligan Project” has the meaning assigned
to it in the Purchase Agreement.


 


“Milligan Property” has the meaning assigned
to it in the Purchase Agreement.


 


“Minerals” has the meaning assigned to it in the Purchase
Agreement.


 


“Obligations” means all advances of the
Payment Deposit and all obligations for the performance of covenants, tasks or
duties including, without limitation, for the delivery of Refined Gold, payment
of monetary amounts, debts and liabilities (whether or not such performance is
then required or contingent, or such amounts are liquidated or determinable),
including, for greater certainty, the return of the uncredited amount of the
Payment Deposit, if applicable, owing by Vendor to the Purchaser pursuant to
the Purchase Agreement, and all covenants, duties regarding such Refined Gold
or amounts, of any kind or nature, present or future, absolute or contingent,
joint or several or joint and several, direct or indirect, matured or not,
extended or renewed, whenever and however incurred, whether or not evidenced by
any note, agreement, letter of credit agreement or other instrument, arising
under, by reason of, pursuant to or otherwise in respect of the Purchase
Agreement, this Security Agreement or any other security agreement granted by
Vendor to the Purchaser, and (as the context so admits) each and every item or
part of any thereof. This term includes all principal, interest (including all
interest that accrues after the commencement of, or which would have accrued
but for the commencement of, any Bankruptcy Proceeding in accordance with and
at the rate, including the Default Rate to the extent lawful, specified herein
or in the Purchase Agreement, whether or not such interest is an allowable
claim in such Bankruptcy Proceeding), expenses, legal fees and any other sum
chargeable to Vendor under the Purchase Agreement, this Security Agreement or
any other security agreement granted by Vendor to the Purchaser, and (as the
context so admits) each and any item or part of any thereof.


 


“Order” means any order, directive,
direction or request of any Governmental Authority, arbitrator or other
decision-making authority of competent jurisdiction.


 


“Payment Deposit” has the meaning assigned
to it in the Purchase Agreement.


 


“Payment in Full” in relation to any
Obligations means permanent, indefeasible and irrevocable delivery of Refined
Gold or payment in cash (or other freely available funds transfer as may be
expressly provided for in the Purchase Agreement) to the Purchaser in full of
all Obligations (other than contingent indemnification obligations) in
accordance with the express provisions of the Purchase Agreement, without
regard to any compromise, reduction or disallowance of all or any item or part
thereof by virtue of the application of any bankruptcy, insolvency or other
similar such laws, any law affecting creditors’ rights generally or general
principles of equity, and the cancellation or expiry of all commitments by the
Purchaser to advance any portion of the Payment Deposit to or for the benefit
or at the request of Vendor, and “paid in full” shall (to the extent the
context so admits) be construed in like manner.


 

















 


“Permits” has the meaning assigned to it in
the Purchase Agreement.


 


“Permitted Encumbrances” has (i) the
defined meaning assigned to it in the Purchase Agreement and (ii) means
any right of title retention or any purchase money security in connection with
the purchase price of assets in the ordinary course of business which the
purchase price is promptly paid when due.


 


“Person” means an individual, corporation,
company (limited, unlimited, unlimited liability or other), limited liability
corporation, other body corporate, estate, limited or general partnership,
business trust, trustee, joint venture, other legal entity, unincorporated
association or Governmental Authority.


 


“Prescribed Agreement” has the defined
meaning assigned to it in Section 2.6(a).


 


“Proceeds” means all proceeds and real or
personal property in any form derived directly or indirectly from any disposal
of or other dealing with any Collateral, or that indemnifies or compensates for
such Collateral stolen, lost, destroyed or damaged, and proceeds of Proceeds
whether or not of the same type, class or kind as the original Proceeds, and
(as the context so admits) any item or part thereof.


 


“Purchase Agreement” has the defined meaning
assigned to it in the Background to this Security Agreement.


 


“Purchaser” means RGL Royalty AG, and if
such Purchaser shall assign all or any portion of its rights, benefits or
obligations under the Purchase Agreement as permitted thereunder, such term
shall include any assignee of such Purchaser, whether immediate or derivative,
relative to such rights, benefits and obligations.


 


“Receiver” means any receiver for the
Collateral or any of the business, undertakings, property and assets of Vendor
appointed by the Purchaser pursuant to this Security Agreement or by a court on
application by the Purchaser.


 


“Records” means all books, accounts,
invoices, letters, papers, security certificates, documents and other records
in any form evidencing or relating in any way to any item or part of the
Collateral and all agreements, Licenses and other rights and benefits in
respect thereof, and (as the context so admits) any item or part thereof.


 


“Recovery” means any monies received or
recovered by the Purchaser pursuant to this Security Agreement on account of
the Obligations, whether pursuant to any enforcement of the Security, any
Litigation, any settlement thereof or otherwise.


 


“Refined Gold” has the defined meaning
assigned to it in the Purchase Agreement.


 


“Replacements” means all increases,
additions and accessions to, and all substitutions for and replacements of, any
item or part of the Collateral, and any item or part thereof.


 

















 


“Representative” of any Person means any
director, officer, employee, agent, legal counsel, accountant, financial
advisor, expert, manager, consultant or other representative appointed, engaged
or employed by such Person.


 


“Sale/Lease Back Transaction” means any
transaction, series of transactions (related or not) or arrangement pursuant to
which Business Assets of a Person are disposed of and are thereafter leased
back, or are otherwise made available for use, to that Person.


 


“Sales Taxes” means sales, transfer,
turnover or value added taxes of any nature or kind, including Canadian goods
and services taxes and federal, state and provincial sales and excise taxes, or
harmonized Canadian and provincial taxes.


 


“Scheduled Deposit” has the meaning assigned to it in the
Purchase Agreement.


 


“Security” means any and all Liens granted
by Vendor to the Purchaser in this Security Agreement.


 


“Security Agreement” means this security
agreement and all schedules attached hereto. All uses of the words “hereto”, “herein”,
“hereof”, “hereby” and “hereunder” and similar expressions refer to this Security
Agreement and not to any particular section or portion of it. References to an
“Article”, “Section”, “Subsection” or “Schedule”
refer to the applicable article, section, subsection or schedule of this
Security Agreement.


 


“Taxes” means all taxes of any kind or
nature whatsoever including federal large corporation taxes, provincial capital
taxes, realty taxes (including utility charges which are collectible like
realty taxes), business taxes, property transfer taxes, Income Taxes,
Sales Taxes, custom duties, payroll taxes, levies, stamp taxes, royalties,
duties, and all fees, deductions, compulsory loans and withholdings imposed,
levied, collected, withheld or assessed as of the date hereof or at any time in
the future, by any Governmental Authority of or within Canada or any other
jurisdiction whatsoever having power to tax, together with penalties, fines,
additions to tax and interest thereon.


 


2.             Extended Meanings


 


To the extent
the context so admits, any reference in this Security Agreement to:


 


“agreement” shall be construed as any
agreement, oral or written, any simple contract or specialty, and includes any
bond, bill of exchange, indenture, instrument or undertaking.


 


“arm’s length” shall be construed in the
same manner it is used in the Income Tax Act (Canada).


 


“change” shall be construed as change,
modify, alter, amend, supplement, extend, renew, compromise, novate, replace,
terminate, release, discharge, cancel, suspend or waive or (where the context
so admits) the noun or participle form of any of the foregoing, and “changed” shall be construed in like manner.


 

















 


“dispose” shall be construed as lease, sell,
transfer, license or otherwise dispose of any property, or the commercial
benefits of use or ownership of any property, including the right to profit or
gain therefrom, whether in a single transaction or in a series of related
transactions, and “disposed”, “disposition” and “disposal” shall be construed in like
manner.


 


“include”, “includes” and “including”
shall be construed to be followed by the statement “without limitation” and
none of such terms shall be construed to limit any word or statement which it
follows to the specific items or matters immediately following it or similar
terms or matters.


 


“losses and expenses” shall be construed as
losses, costs, expenses, damages, penalties, Awards, Orders, Litigation,
claims, claims over, demands and liabilities, including any applicable court
costs and legal fees and disbursements on a full indemnity basis, and “loss and expense” shall be construed in
like manner.


 


“rate of exchange” shall be construed so as
to include any premiums or costs payable in connection with any currency
conversion being effected.


 


a “receiver” means a privately appointed or
court appointed receiver or receiver and manager, interim receiver, liquidator,
trustee-in-bankruptcy, administrator, administrative receiver, monitor and any
other like or similar official.


 


“rights” shall be construed as rights,
titles, benefits, interests, powers, authorities, discretions, privileges,
immunities and remedies (actual or contingent, direct or indirect, matured or
unmatured, now existing or arising hereafter), whether arising by agreement or
statute, at law, in equity or otherwise, and “right”
shall be construed in like manner.


 


“set-off” means any right or obligation of
set-off, compensation, offset, combination of accounts, netting, retention,
withholding, reduction, deduction or any similar right or obligation, or (as
the context requires) any exercise of any such right or performance of such
obligation.


 


“successor” of a Person (the “relevant party”) shall be construed so as
to include (i) any amalgamated or other body corporate of which the
relevant party or any of its successors is one of the amalgamating or merging
body corporates, (ii) any body corporate resulting from any court approved
arrangement of which the relevant party or any of its successors is party,
(iii) any Person to whom all or substantially all the undertakings,
property and assets of the relevant party is transferred, (iv) any body
corporate resulting from the continuance of the relevant party or any successor
of it under the laws of another jurisdiction of incorporation and (v) any
successor (determined as aforesaid or in any similar or comparable procedure
under the laws of any other jurisdiction) of any Person referred to in clause
(i), (ii), (iii) or (iv) of this definition. Each reference in this
Security Agreement to any party hereto or any other Person shall (where the
context so admits) include its successors.


 

















 


SCHEDULE 2.1


 


REAL PROPERTY RIGHTS


 


NIL.


 

















 


Schedule D — Development
Program and Scheduled Deposits


 


1.             Development
Program: The Vendor shall deliver the Development Program to the Purchaser and
the Independent Engineer at least 30 days prior to the first Scheduled Deposit.


 


2.             Modifications
to the Development Program:  The Vendor
and Purchaser acknowledge that the Development Program may require
modifications throughout Development. 
Immediately when known, the Vendor shall provide the Independent
Engineer and Purchaser written notice of any material change to the Development
Program and reconcile the changes in a report. 
The Independent Engineer shall review and provide to the Purchaser an
opinion as to whether such changes are reasonable and shall keep a record of
the current and prior Development Program.


 


3.             Basis for
making Scheduled Deposits:


 


(a)           Promptly when
received, the Independent Engineer shall review the Development Program and
will establish a method for tracking the overall Project Costs in consultation
with the Vendor and the Purchaser;


 


(b)           The Independent
Engineer shall keep a record of all funding sources and the calculations of the
Independent Engineer shall represent the definitive record of the Purchaser’s
Pro Rata Share of Funding;


 


(c)           The Purchaser shall
contribute Scheduled Deposits no more frequently than every 30 days in an
amount consistent with the Purchaser’s Pro Rata Share of Funding after
accounting for the use of proceeds contemplated in the relevant Deposit Event
along with all proceeds concurrently being funded by Vendor and third parties
for the Development Program, payable in accordance with each Deposit Event;


 


(d)           Notwithstanding any
other provision of this Agreement, Purchaser’s obligation to make a Scheduled
Deposit shall be suspended if:


 


(i)            Vendor has not
delivered to Purchaser copies of executed Mineral Offtake Agreements
representing at least 75% of the Minerals projected to be produced during the
first five years of operation of the Milligan Project, and at such time as the
Development has surpassed the cumulative investment of 50% of Project Costs; or


 


(ii)           after March 31,
2011, the Vendor shall have failed to obtain and keep in good standing the
Fishery and Oceans Permits.


 


(e)           If Purchaser’s
obligation to make Scheduled Deposits are suspended in accordance with 3.d.i.
or 3.d.ii. above, Purchaser will make a Scheduled Deposit in the amount to
regain the Purchaser’s Pro Rata Share of Funding on the Deposit Event occurring
subsequent to the time that the Vendor satisfies the conditions set forth in
3.d.i. or 3.d.ii. above (a “Catch-Up Payment”).  Interest shall accrue on any Catch-Up Payment
from the date the Scheduled Deposits are suspended at an 


 

















 


interest rate equivalent to the average three month United States
Treasury bill yield, as quoted daily in the Wall Street Journal during such
suspension, compounded annually, and shall be paid with the Catch-Up
Payment.  The “Fishery and Oceans
Permits” means (i) an authorization pursuant to section 35(2) of the Fisheries Act for the harmful alteration,
disruption or destruction of fish habitat in respect of tailings impoundment
area for the Milligan Project as described in the Milligan Report, and
(ii) the addition of the area of the tailings impoundment area for the
Milligan Project as described in the Milligan Report to Schedule 2 to the Metal
Mining Effluent Regulations for the purposes of section 5(1) thereof, and
the approval pursuant to section 27.1(1) of the Metal Mining Effluent
Regulations of a habitat compensation plan for such tailings impoundment area
that complies with the requirements of section 27.1 of the Metal Mining
Effluent Regulations.


 


(f)            Notwithstanding
anything to the contrary, if Vendor completes the Development, Vendor will be
entitled to establish a Deposit Event for the outstanding balance of Scheduled
Deposits that have not been funded to date.


 

















 


Schedule E — Permitted
Encumbrances


 


	
  Personal Property Registry (BC)

  	
   

  	
  Base Registration No.: 262518D

  Registration Date: September 27, 2006

  Registration Length: Infinity

  Secured Party: International Royalty Corporation

  Debtor(s): Terrane Metals Corp.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Base Registration No.: 478928E

  Registration Date: July 15, 2008

  Registration Length: 5 years

  Secured Party: Bank of Montreal, as Administrative Agent

  Debtor(s): Terrane Metals Corp.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Base Registration No.: 605381F

  Registration Date: June 10, 2010

  Registration Length: 4 years

  Secured Party: Key Lease Canada Ltd.

  Debtor(s): Terrane Metals Corp.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Base Registration No.: 605397F

  Registration Date: June 10, 2010

  Registration Length: 4 years

  Secured Party: Key Lease Canada Ltd.

  Debtor(s): Terrane Metals Corp.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Base Registration No.: 764748F

  Registration Date: September 15, 2010

  Registration Length: 4 years

  Secured Party: Key Lease Canada Ltd.

  Debtor(s): Terrane Metals Corp.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Base Registration No.: 815225F

  Registration Date: October 15, 2010

  Registration Length: Infinity

  Secured Party: RGL Royalty AG

  Debtor(s): Terrane Metals Corp.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Base Registration
  No.: 815230F

  Registration Date: October 15, 2010

  Registration Length: 20 years

  Secured Party: RGL Royalty AG

  Debtor(s): Terrane Metals Corp.

  
	
   

  	
   

  	
   

  
	
  Personal Property Registry (Nunavut)

  	
   

  	
  Registration No.: 123380

  Registration Date: July 30, 2008

  Registration Length: 5 years

  Secured Parties: Bank of Montreal, as Administrative Agent, Bank of Montreal

  Debtor(s): Terrane Metals Corp.

  
	
   

  	
   

  	
   

  
	
  Personal Property Registry (Yukon)

  	
   

  	
  Registration No.: 2008/07/30 14865

  Registration Date: July 30, 2008

  



 

















 


	
   

  	
   

  	
  Registration Length: 5 years

  Secured Parties: Bank of Montreal, as Administrative Agent, Bank of Montreal

  Debtor(s): Terrane Metals Corp.

  
	
   

  	
   

  	
   

  
	
  Personal Property Registry (Northwest
  Territories)

  	
   

  	
  Registration No.: 625251

  Registration Date: July 30, 2008

  Registration Length: 5 years

  Secured Parties: Bank of Montreal, as Administrative Agent, Bank of Montreal
  Debtor(s): Terrane Metals Corp.

  



 

















 


Schedule F — Provisional
Payment Illustration


 


*[Redacted]*


 






*[Redacted]* indicates confidential information that has been omitted in reliance on
Rule 24b-2 of the Securities Exchange Act of 1934.  The confidential information has been
submitted separately to the U.S. Securities and Exchange Commission.