PROMISSORY NOTE

 

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THIS PROMISSORY NOTE(“Note”) is entered into as of July 19, 2012(the “Effective Date”) by and between Elkhorn Goldfields, Inc.,(“Payor”), and Black Diamond Financial Group, LLC (the “Lender”). The Payor and Lender are hereafter sometimesreferred to individually as “Party” or collectively as “Parties”.

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**AGREEMENT**

 

FOR VALUE RECEIVED,Payor hereby promises to pay to the order of Lender the total dollar amount of up to SEVENTY FIVE ThousandTWO HUNDRED and NO/100 ($75,200) (the “Principal Amount”), together with interest on the outstanding Principal Amountcalculated from the date hereof in accordance with the provisions of this Note.

 

1.            Useof Proceeds. Payor will use the Principal Amount for working capital.

 

2.            Interest.

 

(a)            Intereston this note shall accrue from July 19, 2012, on the unpaid principal (drawn down by the Payor) at the rate of 0.5% per month(“Interest”). Upon an Event of Default the interest rate on this Note shall be the sum of the then current rate plussix percent (6%).

 

(b)           consisting of twelve 30-day months.

 

3.           ScheduledPayments. The principal amount and all accrued interest shall be payable on or before October 31, 2012.

 

4.           Prepaymentsof Note. Payor may at any time prepay, without premium or penalty, all or any portion of Payor’s obligations under theNote. All prepayments shall be applied in the manner set forth below in Section 6, hereof.

 

5.           Applicationof Payments. Unless otherwise expressly provided in this Note, all payments made on this Note shall be applied, (i) firstto the payment of the Interest and other charges then accrued and due on the unpaid Principal Amount of this Note, then (ii) theremainder of all such payments shall be applied to the reduction of the unpaid Principal Amount. Upon written request of Lender,Payor agrees to make all payments by electronic transfer of funds or other form of currently available funds acceptable to Lender.

 

 

6.            Eventsof Default.

 

(a)          Definition.For the purpose of this Note, an Event of Default will be deemed to have occurred if:

 

(i)          Payorfails to pay within five (5) days after written notice from Lender any Principal Amount then due and payable on this Note, or withinfifteen (15) days after written notice from Lender any interest or other amount then due and payable on this Note;

 

(ii)         Payorfails in any respect to perform or observe any other material provision contained in this Note and such failure continues for aperiod of fifteen (15) days after notice by the Lender of such failure;

 

(iii)        Payormakes an assignment for the benefit of creditors or admits in writing Payor’s inability to pay Payor’s debts generallyas they become due; or an order, judgment or decree is entered adjudicating Payor bankrupt or insolvent; or any order for reliefwith respect to Payor is entered under the Bankruptcy Code of 1978, as amended; or Payor petitions or applies to any tribunal forthe appointment of a custodian, trustee, receiver or liquidator, or commences any proceeding relating to Payor under any bankruptcy,reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction; or any suchpetition or application is filed, or any such proceeding is commenced, against Payor and either (A) Payor by any act indicatesPayor’s approval thereof, consents thereto or acquiesces therein or (B) such petition, application or proceeding is not dismissedwithin sixty (60) days.

 

(b)          Consequencesof Events of Default.

 

(i)          Ifan Event of Default (other than the type described in Section 7(a)(iv) hereof) occurs, the Lender may declare, by notice of defaultgiven to Payor, the entire outstanding Principal Amount of this Note, together with all accrued, unpaid interest thereon and anyother amounts due hereunder, immediately due and payable, and Lender may otherwise exercise any and all rights as set forth inthis Note.

 

(ii)         Ifan Event of Default of the type described in Section 7(a)(iv) hereof occurs, then all of the outstanding Principal Amount of thisNote, together with all accrued, unpaid interest thereon and any other amounts due hereunder, shall automatically be immediatelydue and payable without any further action on the part of the Lender, and Lender otherwise may exercise any and all rights as setforth in this Note.

 

7.           Amendmentand Waiver. Except as otherwise expressly provided herein, the provisions of this Note may be amended and Payor may take anyaction herein prohibited or omit to perform any act herein required to be performed by Payor, only if Payor has obtained the writtenconsent of the Lender.

 

8.            Cancellation.After all obligations for the payment of money arising under this Note have been paid in full, this Note will be surrendered toPayor for cancellation.

 

9.            Costsof Enforcement. Subject to Section 12 below, Payor agrees to pay, and to indemnify and hold harmless the Lender from,against and for any and all liabilities, obligations, claims, damages, actions, penalties, causes of action, losses, judgments,suits, costs, expenses and disbursements, including without limitation, reasonable attorneys’ fees, incurred or arisingin connection with the enforcement by the Lender of its rights under this Note.

 

 

10.          Waiverof Presentment, Demand and Dishonor.

 

(a)           Payorhereby waives presentment for payment, protest, demand, notice of protest, notice of nonpayment and diligence with respect to thisNote.

 

(b)           Nofailure on the part of Lender to exercise any right or remedy hereunder with respect to Payor, whether before or after the happeningof an Event of Default, shall constitute waiver of any such Event of Default or of any other Event of Default by Lender. No failureto accelerate the debt of Payor evidenced hereby by reason of an Event of Default or indulgence granted from time to time shallbe construed to be a waiver of the right to insist upon prompt payment thereafter; or shall be deemed to be a novation of thisNote or a reinstatement of such debt evidenced hereby or a waiver of such right of acceleration or any other right, or be construedso as to preclude the exercise of any right Lender may have, whether by the laws of the state governing this Note, by agreementor otherwise; and Payor hereby expressly waives the benefit of any statute or rule of law or equity that would produce a resultcontrary to or in conflict with the foregoing.

 

(c)           Payordoes not waive or renounce any rights to the benefits of any statute of limitations or any moratorium, appraisement, exemption,or homestead now provided or that hereafter may be provided by any federal or applicable state statute, including but not limitedto exemptions provided by or allowed under the Bankruptcy Code of 1978, as amended, both as to Payor and as to all of Payor’sproperty, whether real or personal, against the enforcement and collection of the obligations evidenced by this Note and any andall extensions, renewals, and modifications hereof.

 

11.          Usury.Payor and Lender intend that the obligations evidenced by this Note conform strictly to the applicable usury laws from time totime in force. All agreements between Payor and Lender, whether now existing or hereafter arising and whether oral or written,hereby are expressly limited so that in no contingency or event whatsoever, whether by acceleration of maturity hereof or otherwise,shall the amount paid or agreed to be paid to Lender, or collected by Lender, by or on behalf of Payor for the use, forbearanceor detention of the money to be loaned to Payor hereunder or otherwise, or for the payment or performance of any covenant or obligationcontained herein of Payor to Lender, or in any other document evidencing, securing or pertaining to such indebtedness evidencedhereby, exceed the maximum amount permissible under applicable usury law. If under any circumstances whatsoever, fulfillment ofany provision thereof or any other document, at the time performance of such provisions shall be due, shall involve transcendingthe limit of validity prescribed by law, then *ipso facto*, the obligation to be fulfilled shall be reduced to the limit ofsuch validity and if under any circumstances Lender ever shall receive from or on behalf of Payor an amount deemed interest, byapplicable law, which would exceed the highest lawful rate such amount that would be excessive interest under applicable usurylaws shall be applied to the reduction of Payor’s principal amount owing hereunder and not to the payment of interest, orif such excessive interest exceeds the unpaid balance of principal and such other indebtedness, the excess shall be deemed to havebeen a payment made by mistake and shall be refunded to Payor or to any other person making such payment on Payor’s behalf.

 

 

12.          GoverningLaw. The validity, construction and interpretation of this Note will be governed by and construed in accordance with the internallaws of the State of Colorado.

 

13.          Conflictof Terms**.** If and to the extent that there are any discrepancies between the provisions of this Note and any other documentsecuring or pertaining to the indebtedness evidenced by this Note, the provisions of this Note shall control.

 

14.          Notice.For the purpose of this Note, notices and all other communications provided for in this Note shall be in writing and shall begiven to the respective addresses set forth in the preamble of this Note with a copy to Steven N. Levine, Esq., 1430 Wynkoop Street,Suite 300, Denver, Colorado 80202, or to such other address as either party may have furnished to the other in writing in accordanceherewith. Each such notice or other communication shall be effective (i) if given by prepaid overnight courier, upon receipt,or (ii) if given by United States mail, postage prepaid, return receipt requested, the later of actual receipt or three (3)business days after deposit with the United States postal service; provided that notice of change of address shall be effectiveonly upon actual receipt.

 

15.          Assignment.Absent the prior written consent of the other party hereto, this Note shall not be assignable by the Payor or Lender.

 

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IN WITNESS WHEREOF,Payor has executed and delivered this Promissory Note on the date first above written.