Document:

rvb_8k0303ex101.htm

Exhibit 10.1

 

 

 

Branch Purchase and Assumption Agreement

 

 

by and among

 

 

River Valley Financial Bank

 

 

and

 

 

The New Washington State Bank

 

 

 

 

 

 

March 3, 2010

 

 

 

 

  

  

  

Table of Contents

 

	
ARTICLE I DEFINITIONS
	
1

	  	
Section 1.01 Definitions.
	
1

	  	  	  
	
ARTICLE II TERMS OF PURCHASE
	
4

	  	
Section 2.01 Assets.
	
4

	  	
Section 2.02 Liabilities.
	
4

	  	
Section 2.03 Pro-Rated Adjustment of Income and Expenses.
	
5

	  	
Section 2.04 Adjustments.
	
5

	  	  	  
	
ARTICLE III TRANSFER OF ASSETS
	
5

	  	
Section 3.01 Real Estate.
	
5

	  	
Section 3.02 Fixed Assets.
	
6

	  	
Section 3.03 Cash on Hand.
	
6

	  	
Section 3.04 Records and Telephone Numbers.
	
6

	  	
Section 3.05 Contracts.
	
6

	  	
Section 3.06 Prepaid Expenses.
	
6

	  	
Section 3.07 Retirement Accounts.
	
6

	  	
Section 3.08 Allocation.
	
7

	  	
Section 3.09 Transfer Taxes.
	
7

	  	
Section 3.10 Destruction of Property.
	
7

	  	  	  
	
ARTICLE IV CLOSING
	
7

	  	
Section 4.01 Closing Date.
	
7

	  	
Section 4.02 Closing Payment.
	
8

	  	
Section 4.03 Deliveries by Seller.
	
8

	  	
Section 4.04 Deliveries by Buyer.
	
8

	  	  	  
	
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER
	
8

	  	
Section 5.01 Organization and Authority.
	
8

	  	
Section 5.02 Conflicts; Consents; Defaults.
	
8

	  	
Section 5.03 Title to Real Estate.
	
9

	  	
Section 5.04 Title to Assets Other Than Real Estate.
	
9

	  	
Section 5.05 Deposits.
	
9

	  	
Section 5.06 Contracts.
	
10

	  	
Section 5.07 Tax Matters.
	
10

	  	
Section 5.08 Employee Matters.
	
10

	  	
Section 5.09 Environmental Matters.
	
11

	  	
Section 5.10 Litigation.
	
11

	  	
Section 5.11 Performance of Obligations.
	
11

	  	
Section 5.12 Compliance with Law.
	
11

	  	
Section 5.13 Brokerage.
	
12

	  	
Section 5.14 Records.
	
12

	  	
Section 5.15 Insurance.
	
12

	  	
Section 5.16 Regulatory Enforcement Matters.
	
12

  

i

  

	  	
Section 5.17 Community Reinvestment Act.
	
12

	  	
Section 5.18 Regulatory Approvals.
	
12

	  	
Section 5.19 Disclosure.
	
12

	  	  	  
	
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER
	
13

	  	
Section 6.01 Organization and Authority.
	
13

	  	
Section 6.02 Conflicts; Defaults.
	
13

	  	
Section 6.03 Litigation.
	
13

	  	
Section 6.04 Regulatory Approvals.
	
13

	  	
Section 6.05 Community Reinvestment Act.
	
13

	  	
Section 6.06 Brokerage.
	
14

	  	
Section 6.07 Antitrust.
	
14

	  	
Section 6.08 Pro Forma Capital Requirements.
	
14

	  	
Section 6.09 Disclosure.
	
14

	  	  	  
	
ARTICLE VII COVENANTS
	
14

	  	
Section 7.01 Reasonable Best Efforts.
	
14

	  	
Section 7.02 Press Releases.
	
14

	  	
Section 7.03 Access to Records and Information; Personnel; Customers.
	
15

	  	
Section 7.04 Operation in Ordinary Course.
	
15

	  	
Section 7.05 Regulatory Applications and Third Party Consents.
	
16

	  	
Section 7.06 Title Insurance and Surveys.
	
17

	  	
Section 7.07 Environmental Reports.
	
18

	  	
Section 7.08 Further Assurances.
	
19

	  	
Section 7.09 Payment of Checks.
	
20

	  	
Section 7.10 Close of Business on Closing Date.
	
20

	  	
Section 7.11 Confidentiality of Records.
	
20

	  	
Section 7.12 Solicitation of Customers.
	
20

	  	
Section 7.13 Installation/Conversion of Signage/Equipment.
	
21

	  	
Section 7.14 Seller Activities After Closing.
	
21

	  	
Section 7.15 Maintenance of Records by Buyer.
	
21

	  	  	  
	
ARTICLE VIII EMPLOYEES
	
21

	  	
Section 8.01 Employees.
	
21

	  	
Section 8.02 Employment Contracts and Employee Benefit Plans.
	
23

	  	
Section 8.03 Employee Documents.
	
23

	  	  	  
	
ARTICLE IX CONDITIONS TO CLOSING
	
23

	  	
Section 9.01 Conditions to the Obligations of Seller
	
23

	  	
Section 9.02 Conditions to the Obligations of Buyer.
	
24

	  	
Section 9.03 Condition to the Obligations of Seller and Buyer.
	
26

	 	 	 
	ARTICLE X INDEMNIFICATION	 26
	 	Section 10.01 Indemnification by Seller.	 26
	 	Section 10.02 Indemnification by Buyer.	 27
	 	Section 10.03 Limitation on Losses; Deductible.	27

  

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ARTICLE XI TERMINATION
	
28

	  	
Section 11.01 Termination.
	
28

	  	
Section 11.02 Effect of Termination and Abandonment.
	
29

	  	  	  
	
ARTICLE XII OTHER AGREEMENTS
	
29

	  	
Section 12.01 Holds and Stop Payment Orders.
	
29

	  	
Section 12.02 ACH Items and Recurring Debits.
	
29

	  	
Section 12.03 Withholding.
	
29

	  	
Section 12.04 Retirement Accounts.
	
30

	  	
Section 12.05 Interest Reporting.
	
30

	  	
Section 12.06 Notices to Depositors.
	
30

	  	
Section 12.07 Card Processing and Overdraft Coverage.
	
31

	  	
Section 12.08 Taxpayer Information.
	
31

	  	  	  
	
ARTICLE XIII GENERAL PROVISIONS
	
31

	  	
Section 13.01 Attorneys’ Fees.
	
31

	  	
Section 13.02 No Third Party Beneficiaries.
	
31

	  	
Section 13.03 Notices.
	
31

	  	
Section 13.04 Assignment.
	
32

	  	
Section 13.05 Successors and Assigns.
	
32

	  	
Section 13.06 Governing Law.
	
32

	  	
Section 13.07 Entire Agreement.
	
32

	  	
Section 13.08 Headings.
	
32

	  	
Section 13.09 Severability.
	
33

	  	
Section 13.10 Waiver.
	
33

	  	
Section 13.11 Counterparts.
	
33

	  	
Section 13.12 Force Majeure.
	
33

	  	
Section 13.13 Schedules.
	
33

	  	
Section 13.14 Knowledge.
	
33

	  	
Section 13.15 Survival.
	
33

	  	
Section 13.16 Transfer Charges and Assessments.
	
33

	  	
Section 13.17 Breaches of Agreements with Third Parties.
	
33

	  	
Section 13.18 Specific Performance.
	
33

	
Exhibit A
	
Contracts

	
Exhibit A(1)
	
Excluded Deposits

	
Exhibit B
	
Fixed Assets

	
Exhibit C
	
Prepaid Expenses

	
Exhibit D
	
Real Estate

	
Exhibit 2.02(a)
	
Assignment and Assumption Agreement

	
Exhibit 3.01(a)
	
Form of Corporate Warranty Deed

	
Exhibit 3.01(b)
	
Form of Vendor’s Affidavit

	
Exhibit 3.02(a)
	
Bill of Sale and Assignment

	
Exhibit 3.07
	
Retirement Account Transfer Agreement

	
Exhibit 5.05(b)
	
Deposits

  

iii

  

Branch Purchase And Assumption Agreement

 

This Branch Purchase and Assumption Agreement (“Agreement”) is made and entered into as of this 3rd day of March, 2010, by and among The
New Washington State Bank (“Seller”), an Indiana commercial bank having its home office in New Washington, Indiana, and River Valley Financial Bank (“Buyer”), a federal savings bank having its home office in Madison, Indiana.

 

 

RECITALS

 

WHEREAS, the Seller owns and operates a banking office located at 2675 Charlestown Road, New Albany, Indiana (the “Branch Office”);

 

WHEREAS, Buyer desires to acquire certain assets and assume certain liabilities of Seller associated with the Branch Office, and Seller desires to transfer to Buyer such assets and liabilities, all as described in more detail below; and

 

WHEREAS, Buyer desires to operate the Branch Office of Seller as a branch of Buyer;

 

NOW THEREFORE, for and in consideration of the premises and the mutual agreements, representations, warranties and covenants herein contained, the parties, intending to be bound, hereby agree as follows:

 

 

ARTICLE I

DEFINITIONS

 

Section 1.01 Definitions.  In addition to the terms defined elsewhere in this Agreement, as used herein, the following terms have the definitions indicated:

 

“Accrued Interest” on Deposits means interest that is accrued but unposted through the close of business on the Closing Date.

 

“ACH Items” means automated clearing house debits and credits including social security payments, federal recurring payments, and other payments debited and/or credited to or from Deposit accounts pursuant to arrangements between the owner of the account and third party
initiating the credits or debits.

 

“Affiliate” of a party means any person, partnership, corporation, association or other legal entity directly or indirectly controlling, controlled by, or under common control with that party.

 

“APY” means Annual Percentage Yield as defined in Regulation DD, i.e., the total interest earned on a deposit, based on the interest rate and the frequency of compounding for a 365 day period, and expressed as a
percentage.

 

“APYE” means Annual Percentage Yield Earned as defined in Regulation DD.

 

  

  

  

“Assets” means the Real Estate, Fixed Assets, the Contracts, the Cash on Hand, the Records, the Safe Deposit Boxes, the Prepaid Expenses, and the Telephone Numbers.

 

“Branch Office” means the branch office of Seller located at 2675 Charlestown Road, New Albany, Indiana 47150.

 

“Business Day” shall mean any Monday, Tuesday, Wednesday, Thursday, or Friday that is not a federal or Indiana state holiday generally recognized by Indiana commercial banks.

 

“Cash on Hand” means all petty cash, vault cash, and teller cash located at the Branch Office.

 

“Closing” and “Closing Date” shall have the meanings assigned to them in Section 4.01 of the Agreement.

 

“Contracts” means the service and maintenance agreements and the other agreements, licenses and permits to which Seller is a party (including contracts relating to the Safe Deposit Boxes) listed on Exhibit A hereto.

 

“Deposit or Deposits” means a deposit or deposits as defined in Section 3(l)(1) of the Federal Deposit Insurance Act (“FDIA”) as amended, 12 U.S.C. Section 1813(l)(1), including without limitation the
aggregate balances of all savings accounts with positive balances domiciled at the Branch Office, including accounts accessible by negotiable orders of withdrawal (“NOW” accounts), other demand instruments, Retirement Accounts, and all other accounts and deposits, together with Accrued Interest thereon, if any; provided, however, that Deposit or Deposits shall not include the deposit accounts listed on Exhibit
A(1).

 

“DFI” means the Indiana Department of Financial Institutions.

 

“Encumbrances” means all mortgages, claims, charges, liens, encumbrances, easements, restrictions, options, pledges, calls, commitments, security interests, conditional sales agreements, title retention agreements, leases, and other restrictions of any kind whatsoever.

 

“Environmental Laws” are defined in Section 5.09(a).

 

“Excluded Assets” are defined in Section 2.01(b).

 

“Excluded Liabilities” are defined in Section 2.02(b).

 

“FDIC” means the Federal Deposit Insurance Corporation.

 

“Fed Funds Rate” means the rate for that day set forth opposite the caption “Federal Fund (Effective)” in the daily statistical release designated as “Composite 3:30 p.m. Quotations for U.S. Government Securities,” or any successor publication,
published by the Federal Reserve Bank of New York.

 

  

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“Fixed Assets” means all furniture, equipment, trade fixtures, ATMs, office supplies,  and all other tangible personal property owned or leased by Seller, located in or upon the Branch Office or used in the Seller’s Branch Office business, and described
on Exhibit B hereto, which includes the depreciated book value of those Fixed Assets as of December 31, 2009.

 

“GAAP” means generally accepted accounting principles consistently applied by Seller.

 

“Governmental Authority” means any court, administrative agency or commission or other federal, state or local governmental authority or instrumentality.

 

“IRA” means Individual Retirement Account.

 

“IRS” means Internal Revenue Service.

 

“Liabilities” means the liabilities defined in Section 2.02 hereof.

 

“Prepaid Expenses” means the prepaid expenses relating to the Branch Office, recorded or reflected on the books of Seller at the close of business on the Closing Date (including, without limitation, prepaid FDIC deposit premiums relating to the Deposits but excluding any
prepaid insurance and prepaid expenses related to obligations not be assumed by Buyer) listed or described on Exhibit C hereto.

 

“Purchase Price” is defined in Section 2.01(c) hereof.

 

“Real Estate” means the real estate, buildings and fixtures owned by the Seller as of the date hereof described in Exhibit D attached hereto, upon and at which is located the Branch Office.

 

“Records” means (i) all open records and original documents, located at the Branch Office or in centralized servicing areas pertaining to the Safe Deposit Boxes or the Deposits, all of which shall comply with all applicable laws, regulations, rules, and business practices
with respect to the Safe Deposit Boxes and the Deposits acquired from Seller pursuant to this Agreement; and (ii) an account history of all accounts related to Deposits, Cash on Hand, and Safe Deposit Boxes. Records includes but is not limited to signature cards, customer cards, customer statements, legal files, pending files, all open account agreements, Retirement Account agreements, Safe Deposit Box records, and computer records.

 

“Recurring Debit” means payments made directly from a Deposit account to a third party on a regularly scheduled basis pursuant to arrangements between the owner of the account and the third party receiving the payments directly.

 

“Retirement Accounts” means any Deposit account, generally known as IRAs, Keoghs or SEPs, maintained by a customer for the stated purpose of the accumulation of funds to be drawn upon at retirement.

 

  

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“Safe Deposit Boxes” means all right, title and interest of Seller in and to any safe deposit business conducted at the Branch Office as of the close of business on the Closing Date.

 

“Telephone Numbers” means the telephone and facsimile numbers associated with the Branch Office.

 

“TIN” means Taxpayer Identification Number.

 

“Transactions” means the purchase and transfer contemplated by Articles II and III.

 

 

ARTICLE II

TERMS OF PURCHASE

 

Section 2.01 Assets.

 

(a)           Purchase and Sale. At the Closing and subject to the terms and conditions set forth in this Agreement, Seller shall sell, convey, assign, and transfer to Buyer and Buyer shall purchase and acquire from
Seller all of Seller’s right, title, and interest in and to the Assets.

 

(b)           Excluded Assets.  All assets, properties and rights of Seller not expressly included in the Assets are excluded from the transactions contemplated by this Agreement (the "Excluded
Assets").

 

(c)           Purchase Price. In consideration for the Assets acquired by Buyer and the assumption of the Liabilities by Buyer under this Agreement, Seller shall pay in cash to Buyer (the “Purchase
Price”) at Closing an amount equal to the aggregate amount of the Deposits, plus Accrued Interest thereon, less the sum of (a) $575,000, (b) the amount of the accrued and unpaid real and personal property taxes relating to the Real Estate and the Assets, and (c) the face amount of the Cash on Hand.

 

Such payment formula shall be further adjusted in accordance with Section 2.03 hereof (the “Purchase Price Calculation”).

 

In the event that the preceding formula results in a positive number, the Seller will pay the positive amount to the Buyer in immediately available funds at Closing. In the event the preceding formula produces a negative number, the absolute value of such amount shall be paid by the Buyer to the Seller by wire transfer on the Closing
Date, and the Seller shall have no obligation to make any payment to the Buyer.

 

Section 2.02 Liabilities.  Subject to the terms and conditions of this Agreement, Buyer, on the Closing Date, shall assume and agree to pay, discharge and perform when lawfully due, the
following obligations debts and liabilities of Seller (the “Liabilities”):

 

(a)           Deposits and Contracts. Each liability for the payment and performance of Seller’s obligations on the Deposits and the Contracts in accordance with the terms of such Deposits and Contracts in effect
on the Closing Date, pursuant to the form of Assignment and Assumption Agreement attached to this Agreement as Exhibit 2.02(a).

 

  

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(b)           No Other Debt Obligations or Liabilities Assumed. It is understood and agreed that, except as expressly set forth in this Section 2.02, Buyer shall not assume or be liable for any of the debts, obligations,
or liabilities of Seller of any kind and nature whatsoever, fixed or contingent, with respect to any period prior to or after the Closing Date (the “Excluded Liabilities”).

 

Section 2.03 Pro-Rated Adjustment of Income and Expenses.  All utility payments, real and personal property lease payments, and similar expenses and charges relating to the Real
Estate and the Assets and all Federal Deposit Insurance Corporation (“FDIC”) premiums and assessments relating to the Deposits assumed, and any unearned income associated with the Safe Deposit Boxes shall be pro­rated between the parties as of the Closing Date on the basis of a 365-day year; provided, however, that all real and
personal property taxes relating to the Real Estate and the Assets shall not be prorated and shall be paid by Buyer in accordance with Section 2.01(c). To the extent any such item has been prepaid by the Seller for a period extending beyond the Closing Date, there shall be a proportionate monetary adjustment in favor of the Seller provided the Buyer is permitted to assume or purchase the same for no additional consideration. All security deposits made by the Seller with respect to the Branch Office shall be reimbursed
to Seller to the extent the Seller would have had a right thereto at the Closing Date. All expenses relating to the Branch Office which arise on and after the Closing Date, shall be paid by the Buyer.

 

Section 2.04 Adjustments.  It is understood that the books and records of the Seller may not be complete as of the Closing Date and that the exact amount or amounts comprising the
Purchase Price may not have been included therein as of the Closing Date because items were not posted on the Closing Date, or for other reasons complete information with respect to such items was not otherwise available. The Purchase Price to be paid at Closing will be calculated as accurately as possible at the Closing Date based on the information then available. Within 14 days after the Closing Date, the Seller and the Buyer shall prepare a final closing statement setting forth the payment required pursuant
to Section 2.01(c) of this Agreement based on the complete information which should be available and the final posting of items which shall have occurred by such date. Each party shall provide the other party full access to its books and records to enable the other party to verify the final calculation of the Purchase Price. Within 10 days after agreement by Buyer and Seller as to this final closing statement, the Buyer shall pay to the Seller or the Seller shall pay to the Buyer, as appropriate, the difference
between the amount paid on the Closing Date and the amount required to be paid pursuant to the final closing statement, with interest thereon from the Closing Date to the date of payment at the Fed Funds Rate.

 

 

ARTICLE III

TRANSFER OF ASSETS

 

Subject to the terms and conditions of this Agreement, on and as of the Closing Date, Seller shall assign, transfer, convey and deliver to Buyer the Assets as described in Section 3.01 through Section 3.07 of this Article III.

 

Section 3.01 Real Estate.  All of Seller’s right, title and interest on the Closing Date in and to the Real Estate, together with all of Seller’s rights in and to all
improvements thereon, and

 

  

5

  

all easements associated therewith. Seller shall cause a Corporate Warranty Deed and Vendor’s Affidavit in the form of Exhibits 3.01 (a) and (b) to
be delivered to Buyer on the Closing Date with respect to the Real Estate to effect such transfer. All Real Estate shall be delivered to Buyer free and clear of all Encumbrances (except taxes which are a lien but not yet payable and easements, rights-of-way, and other similar restrictions of record which do not have a material adverse effect on the value of the Real Estate).

 

Section 3.02  Fixed Assets.

 

(a)           All of Seller’s right, title, and interest in and to the Fixed Assets free and clear of all Encumbrances other than the rights of lessors under leases. Seller shall cause a Bill of Sale and Assignment of such property in the form of Exhibit
3.02(a) to be delivered to Buyer on the Closing Date to effect such transfer.

 

(b)           Exhibit B sets forth the Fixed Assets, including the tangible personal property situated at the Branch Office including furniture, fixtures, equipment, and ATMs, which schedule identifies each item of such
personal property with reasonable particularity, giving the net book value of such item on Seller’s books and describing any Encumbrances thereon. Seller hereby agrees that the personal property to be delivered on the Closing Date shall be substantially the same as the personal property set forth on Exhibit B, ordinary wear and tear excepted, provided, that in the event of material damage
to the Fixed Assets, Seller shall have the option to repair or replace such Fixed Assets at Seller’s sole cost and expense. Seller shall assign to Buyer any manufacturer or supplier warranty covering such Fixed Assets.

 

Section 3.03 Cash on Hand.  All Cash on Hand at the Branch Office as of the close of business on the Closing Date, pursuant to the Bill of Sale and Assignment attached hereto as Exhibit
3.02(a).

 

Section 3.04 Records and Telephone Numbers.  All Records related to the Assets transferred or Liabilities assumed by Buyer hereunder and the Telephone Numbers shall be delivered
and assigned to Buyer as of the close of business on the Closing Date pursuant to the Bill of Sale and Assignment attached hereto as Exhibit 3.02(a).

 

Section 3.05 Contracts.  All of Seller’s right, title and interest at the close of business on the Closing Date in and to the Contracts pursuant to the Assignment and Assumption
Agreement attached hereto as Exhibit 2.02(a).

 

Section 3.06 Prepaid Expenses.  All of Seller’s right, title and interest as of the close of business on the Closing Date in and to the Prepaid Expenses pursuant to the Bill
of Sale and Assignment attached hereto as Exhibit 3.02(a).

 

Section 3.07 Retirement Accounts.  With regard to each Retirement Account all of the Seller’s right, title and interest in and to the related plan or trustee arrangement, and
in and to all assets held by Seller pursuant thereto, pursuant to the Retirement Account Transfer Agreement attached hereto as Exhibit 3.07. Pursuant to the terms of such Retirement Account Transfer Agreement, Buyer agrees to assume all of the fiduciary relationships of Seller arising out of any Retirement Accounts assigned to Buyer pursuant to this Section 3.07, and with respect to such

 

  

6

  

accounts, Buyer shall assume all of the obligations and duties of Seller as fiduciary and succeed to all such fiduciary relationships of Seller as fully and to the same extent as if Buyer had originally acquired, incurred, or entered into such fiduciary relationships. Notwithstanding anything in this Agreement to the contrary, however,
Buyer will not assume or be responsible for any act or failure to act of Seller in connection with such Retirement Accounts on or prior to the Closing Date.

 

Section 3.08 Allocation.  The Buyer and Seller agree that the allocation of the Purchase Price will be made based on the relative fair market value of the assets and liabilities
acquired, as required by Section 1060 of the Internal Revenue Code of 1986, as amended, and agree to utilize such allocation for federal income tax purposes (the “Purchase Price Allocation”). Such Purchase Price Allocation shall be mutually agreed to by Buyer and Seller prior to the Closing Date and will be consistently reflected by each party on their federal income tax returns and similar documents, including, but not limited to, Internal Revenue
Service Form 8594. No party shall file any document or assert any position that conflicts or is inconsistent with such Purchase Price Allocation, and each party agrees to inform the other promptly upon receipt of any communication from (or forwarding any communication to) the Internal Revenue Service relating to Form 8594. Each party shall cooperate fully with the other in filing Form 8594.

 

Section 3.09 Transfer Taxes.  Buyer shall pay all transfer and conveyance taxes in connection with the transfer of the Assets to Buyer and Buyer shall pay all recording fees in connection
with the transfer of the Real Estate to Buyer.

 

Section 3.10 Destruction of Property.  Seller will give Buyer prompt written notice of (a) any material fire or casualty on any of the Assets, and (b) any actual or threatened condemnation
of all or any part of any of the Real Estate. Upon receipt of such notice, Buyer may, in its sole and exclusive discretion, within 14 days of receipt of such notice, elect either to: (x) close the Transactions, excluding the personal property or real property in question and deducting from the Purchase Price an amount equal to Seller’s financial reporting book value thereof; or (y) elect to close the Transactions, including the personal property or real property in question, in which event Seller shall
(i) assign, transfer and set over unto Buyer all right, title and interest Seller has in and to any condemnation award, casualty award, insurance policy, insurance payment, or any manner of payment whatever in any way related to the condemnation or casualty, and (ii) in the event of a casualty, extend Buyer a credit against the Purchase Price in the amount of any deductible carried under any policy of insurance; provided, however,
that in the event of a material fire or casualty affecting the Branch Office, Buyer may in its sole discretion, within 14 days of receipt of such notice, elect to terminate this Agreement, in which event neither party shall have any further liability or obligation to the other. For purposes hereof a “material fire or casualty” is one whose cost of repair is reasonably estimated by Buyer to be more than $25,000.

 

 

ARTICLE IV

CLOSING

 

Section 4.01 Closing Date.  The closing (“Closing”) under this Agreement shall be held at such time and place
as shall be mutually agreeable to the parties, as promptly as practicable and no later than 15 days after the fulfillment or waiver of all the terms and conditions contained in Article IX of this Agreement.

 

  

7

  

The date on which the Closing is to be held is herein called the “Closing Date.” The Closing shall be deemed to occur at 11:59 p.m. Central Standard Time on the Closing Date, and the Branch Office will close for business at 3:00 p.m. Central Standard Time on the Closing
Date.

 

Section 4.02 Closing Payment.  The cash amount owed to Seller by Buyer or by Buyer to Seller pursuant to Section 2.01(c) will be paid by Buyer or Seller, as applicable, by wire transfer
in immediately available funds on the Closing Date.

 

Section 4.03 Deliveries by Seller.  At or prior to the Closing, Seller shall deliver to Buyer the documents set forth in Section 9.02(c) of this Agreement, and on the Closing Date,
Seller shall deliver possession of the Assets to Buyer.

 

Section 4.04 Deliveries by Buyer.  At or prior to the Closing, Buyer shall deliver to Seller the documents set forth in Section 9.01(c) of this Agreement.

 

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF SELLER

 

On or prior to the date hereof, Seller has delivered to Buyer a schedule (“Disclosure Schedule”) setting forth, among other things, items the disclosure of which is necessary or appropriate either (i) in response to an express disclosure requirement contained in a provision
hereof or (ii) as an exception to one or more representations or warranties contained in this Article V or to one or more of Seller’s covenants contained in Article VII.

 

Seller represents and warrants to Buyer, as follows:

 

Section 5.01 Organization and Authority.  Seller is a commercial bank organized, validly existing, and in good standing (to the extent applicable) under the laws of the State of
Indiana with full power and authority to carry on its business as now being conducted and to own and operate the properties which it owns and/or operates, including the Branch Office. The execution, delivery, and performance by Seller of this Agreement are within its corporate power and have been duly authorized by all necessary corporate action on its part. This Agreement has been duly executed and delivered by Seller and constitutes its valid and legally binding obligation, enforceable against it in accordance
with its terms, subject to bankruptcy, receivership, insolvency, reorganization, moratorium or similar laws affecting or relating to creditors’ rights generally and subject to general principles of equity.

 

Section 5.02 Conflicts; Consents; Defaults.  Except as may be set forth in the Disclosure Schedule, neither the execution and delivery of this Agreement by Seller nor the consummation
of the Transactions will (i) conflict with, result in the breach of, constitute a default under or accelerate the performance required by, any order, law, regulation, contract, instrument or commitment to which Seller is a party or by which it is bound, (ii) violate the articles of incorporation or bylaws of Seller, (iii) require any consent, approval, authorization or filing under any law, regulation, judgment, order, writ, decree, permit, license or agreement to which Seller is a party other than any required
regulatory approvals of the OTS or any other Governmental Authority.

 

  

8

  

Section 5.03 Title to Real Estate.  Except as may be disclosed in the Disclosure Schedule, (i) Seller has good, marketable and insurable title to the Real Estate, free and clear of all Encumbrances
(except taxes which are a lien but not yet payable and easements and rights-of-way; (ii) the Real Estate complies in all material respects with all applicable private agreements, zoning requirements and, to Seller's knowledge, other governmental laws and regulations relating thereto; and (iii) there are no condemnation proceedings pending or, to Seller's knowledge, threatened with respect to the Real Estate.

 

Section 5.04 Title to Assets Other Than Real Estate.  Seller is the lawful owner of and has good and marketable title to Cash on Hand, Prepaid Expenses, the Fixed Assets owned by
it, and all Records, free and clear of all Encumbrances. Each item of tangible personal property included in the Seller Assets is in good repair and good operating condition, ordinary wear and tear excepted, is suitable for immediate use in the ordinary course of Seller’s banking business and, subject to the foregoing representation, will be received by Buyer in "AS IS, WHERE IS" condition, with no warranties or guarantees by Seller as to future performance, fitness for particular purpose, merchantability
or otherwise, except those related to title.

 

Section 5.05 Deposits.

 

(a)           Seller has delivered to Buyer a true and complete copy of the account forms for all Deposits offered by Seller. Except as listed in the Disclosure Schedule, all the accounts related to the Deposits are in material compliance with all applicable laws, orders and regulations
and were originated in material compliance with all applicable laws, orders and regulations.

 

(b)           Exhibit 5.05(b) is a true and correct schedule of the Deposits prepared as of the date indicated thereon (which shall be updated through the Closing Date), listing by category and the amount of such deposits,
together with the amount of Accrued Interest thereon. All Deposits are insured to the fullest extent permissible by the FDIC. Subject to the receipt of all requisite regulatory approvals, Seller has and will have at the Closing Date all rights and full authority to transfer and assign the Deposits without restriction. As of the date hereof, with respect to the Deposits:

 

(1)           Subject to items returned without payment in full (“Return Items”) and immaterial bookkeeping errors, all interest accrued or accruing on the Deposits has been properly credited thereto, and properly
reflected on Seller’s books of account, and Seller is not in default in the payment of any thereof;

 

(2)           Subject to Return Items and immaterial bookkeeping errors, Seller has timely paid and performed all of its obligations and liabilities relating to the Deposits as and when the same have become due and payable;

 

(3)           Subject to immaterial bookkeeping errors, Seller has administered all of the Deposits in accordance with applicable fiduciary duties and good and sound financial practices and procedures, and has properly made all appropriate credits and debits thereto; and

 

  

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(4)           None of the Deposits are subject to any Encumbrances or any legal restraint or other legal process, other than loans secured by the Deposits, customary court orders, levies, and garnishments affecting the depositors, all of which Encumbrances are described on Exhibit
5.05(b).

 

Section 5.06 Contracts.  The Disclosure Schedule lists or describes the following:

 

(a)           Each lease or license with respect to the Real Estate or the Fixed Assets to which Seller is a party whether as lessee or lessor or licensee or licensor;

 

(b)           The name, annual salary and primary department assignment as of December 31, 2009, of each employee of Seller at the Branch Office and any employment or consulting agreement or arrangement with respect to each such person; and

 

(c)           Final and complete copies of each document, plan or contract listed and described in the Disclosure Schedule pursuant to this Section 5.06 have been provided to Buyer.

 

Section 5.07 Tax Matters.  Except as set forth in the Disclosure Schedule, Seller has filed with the appropriate governmental agencies all federal, state and local income, franchise,
excise, sales, use, real and personal property and other tax returns and reports required to be filed by it with respect to the Assets or the Branch Office. Seller is not (a) delinquent in the payment of any such taxes shown on such returns or reports or on any assessments received by it for such taxes; (b) aware of any pending or threatened examination for income taxes for any year by the IRS or any state tax agency; (c) subject to any agreement extending the period for assessment or collection of any federal
or state tax; or (d) a party to any action or proceeding with, nor has any claim been asserted against it by, any Governmental Authority for assessment or collection of taxes. To Seller's knowledge, Seller is not the subject of any threatened action or proceeding by any Governmental Authority for assessment or collection of taxes relating to the Branch Office.

 

Section 5.08 Employee Matters.

 

(a)           Except as may be disclosed in the Disclosure Schedule, Seller has not entered into any collective bargaining agreement with any labor organization with respect to any group of employees of the Seller working at the Branch Office, and to the knowledge of the Seller, there
is no present effort nor existing proposal to attempt to unionize any group of such employees of the Seller.

 

(b)           Except as may be disclosed in the Disclosure Schedule with respect to employees working at the Branch Office, (i) to Seller's knowledge, Seller is and has been in material compliance with all applicable laws respecting employment and employment practices, terms and conditions
of employment and wages and hours, including, without limitation, any such laws respecting employment discrimination and occupational safety and health requirements, and the Seller is not engaged in any unfair labor practice; (ii) there is no unfair labor practice complaint against Seller pending or, to the knowledge of Seller, threatened before the National Labor Relations Board; (iii) there is no labor dispute, strike, slowdown or stoppage actually pending or, to the knowledge of Seller,

 

  

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threatened against or directly affecting Seller; and (iv) Seller has not experienced any work stoppage or other such labor difficulty during the past 5 years.

 

Section 5.09 Environmental Matters.

 

(a)           As used in this Agreement, “Environmental Laws” means all local, state and federal environmental, health and safety laws and regulations in all jurisdictions in which Seller has done business or owned,
leased or operated property, including, without limitation, the Federal Resource Conservation and Recovery Act, the Federal Comprehensive Environmental Response, Compensation and Liability Act, the Federal Clean Water Act, the Federal Clean Air Act, and the Federal Occupational Safety and Health Act.

 

(b)           Except as may be disclosed in the Disclosure Schedule, to Seller's knowledge, no activity or condition exists at or upon the Real Estate that violates any Environmental Law, and no condition has existed or event has occurred with respect to the Real Estate that, with
notice or the passage of time, or both, would constitute a violation of any Environmental Law or obligate (or potentially obligate) Seller to remedy, stabilize, neutralize or otherwise alter the environmental condition of the Real Estate where the aggregate cost of such actions would be material to Seller. Except as may be disclosed in the Disclosure Schedule, to Seller's knowledge, Seller has not received any notice from any person or entity that the operation or condition of any of the Real Estate is or was
in violation of any Environmental Law or that Seller is responsible (or potentially responsible) for the cleanup or other remediation of any pollutants, contaminants, or hazardous or toxic wastes, substances or materials at, on or beneath any such property.

 

Section 5.10 Litigation.  Except as set forth in the Disclosure Schedule, there is no action, suit, proceeding or investigation pending against Seller or to the best knowledge of
Seller threatened against or affecting Seller, before any court or arbitrator or any governmental body, agency, or official involving a monetary claim for $25,000 or more or equitable relief (i.e., specific performance or injunctive relief) relating to the Branch Office, operations at the Branch Office, or employees working at the Branch Office. Seller is not aware of any facts that would reasonably afford a basis for any such action, suit, proceeding or
investigation.

 

Section 5.11 Performance of Obligations.  Seller has performed in all material respects all obligations required to be performed by it to date under the Contracts and the Deposits,
and Seller is not in material default under, and no event has occurred which, with the lapse of time or action by a third party, could result in a material default under, any such agreements or arrangements.

 

Section 5.12 Compliance with Law.  Seller has all licenses, franchises, permits and other governmental authorizations that are legally required to enable it to conduct its business
in all material respects at the Branch Office and has conducted its business at the Branch Office in compliance in all material respects with all applicable federal, state and local statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable thereto or to the

 

  

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employees conducting such business. To Seller's knowledge, the Branch Office complies with all applicable requirements of the Americans with Disabilities Act.

 

Section 5.13 Brokerage.  There are no existing claims or agreements for brokerage commissions, finders’ fees, or similar compensation in connection with the Transactions contemplated
by this Agreement payable by Seller.

 

Section 5.14 Records.  The Records to be delivered to Buyer under Section 2.01(a) of this Agreement are and shall be sufficient to enable Buyer to conduct a banking business with
respect thereto under the same standards as Seller has heretofore conducted such business.

 

Section 5.15 Insurance.  The Real Estate and the Fixtures are adequately insured by financially sound and reputable insurers in such amounts and against fire and other risks insured
against by extended coverage and public liability insurance, as is customary with banks of similar size. The Disclosure Schedule sets forth, for each material policy of insurance maintained by Seller with respect to the Branch Office the amount and type of insurance, the name of the insurer and the amount of the annual premium. All amounts due and payable under such insurance policies are fully paid, and all such insurance policies are in full force and effect.

 

Section 5.16 Regulatory Enforcement Matters.  Except as may be disclosed in the Disclosure Schedule, the Seller is not subject to, and has received no notice or advice that it may
become subject to, any order, agreement or memorandum of understanding with any federal or state agency charged with the supervision or regulation of banks or bank holding companies or engaged in the insurance of financial institution deposits or any other governmental agency having supervisory or regulatory authority with respect to Seller.

 

Section 5.17 Community Reinvestment Act.  Seller received a rating of “Satisfactory” in its most recent examination or interim review with respect to the Community Reinvestment
Act. Seller has not been advised of any supervisory concerns regarding its compliance with the Community Reinvestment Act.

 

Section 5.18 Regulatory Approvals.  The information furnished or to be furnished by Seller for the purpose of enabling Seller or Buyer to complete and file all requisite regulatory
applications is or will be true and complete as of the date so furnished. There are no facts known to the Seller which Seller has not disclosed to the Buyer in writing, which, insofar as Seller can now reasonably foresee, may have a material adverse effect on the ability of the Buyer or Seller to obtain all requisite regulatory approvals or to perform its obligations pursuant to this Agreement.

 

Section 5.19 Disclosure.  No representation or warranty contained in this Article V and no statement or information
relating to Seller or any Assets or Liabilities contained in (i) this Agreement (including the Schedules and Exhibits hereto), or (ii) in any certificate or document furnished or to be furnished by or on behalf of Seller to Buyer pursuant to this Agreement, contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements made herein or therein, in light of the circumstances in which they were made, not misleading.

 

  

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ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer represents and warrants to Seller as follows:

 

Section 6.01 Organization and Authority.  Buyer is a federal savings bank duly organized and validly existing under the laws of the United States of America with full power and authority
to carry on its business as now being conducted and to own and operate the properties which it now owns and/or operates. The execution, delivery, and performance by Buyer of this Agreement are within Buyer’s corporate power, have been duly authorized by all necessary corporate action. This Agreement has been duly executed and delivered by Buyer and constitutes the valid and legally binding obligation of Buyer, enforceable against it in accordance with its terms, subject to bankruptcy, receivership, insolvency,
reorganization, moratorium or similar laws affecting or relating to creditors’ rights generally and subject to general principles of equity.

 

Section 6.02 Conflicts; Defaults.  Neither the execution and delivery of this Agreement by Buyer nor the consummation of the Transactions will (i) conflict with, result in the breach
of, constitute a default under, or accelerate the performance required by, the terms of any order, law, regulation, contract, instrument or commitment to which Buyer is a party or by which Buyer is bound, (ii) violate the charter or bylaws of Buyer, (iii) require any consent, approval, authorization or filing under any law, regulation, judgment, order, writ, decree, permit or license to which Buyer is a party or by which Buyer is bound, other than any required regulatory approvals of the OTS. Buyer is not subject
to any agreement or understanding with any regulatory authority which would prevent or adversely affect the consummation by Buyer of the transactions contemplated by this Agreement.

 

Section 6.03 Litigation.  There is no action, suit, proceeding or investigation pending against Buyer, or to the knowledge of Buyer, threatened against or affecting Buyer, before
any court or arbitrator or any governmental body, agency or official which alone or in the aggregate would, if adversely determined, adversely affect the ability of Buyer to perform its obligations under this Agreement or which in any manner questions the validity of this Agreement. Buyer is not aware of any facts that would reasonably afford a basis for any such action, suit, proceeding or investigation.

 

Section 6.04 Regulatory Approvals.  The information furnished or to be furnished by Buyer for the purpose of enabling Seller or Buyer to complete and file all requisite regulatory
applications is or will be true and complete as of the date so furnished. Except as set forth in the Disclosure Schedule, there are no facts known to the Buyer which, insofar as Buyer can now reasonably foresee, may have a material adverse effect on the ability of the Buyer or Seller to obtain all requisite regulatory approvals or to perform its obligations pursuant to this Agreement.

 

Section 6.05 Community Reinvestment Act.  Buyer received a rating of “Satisfactory” in its most recent examination or interim review with respect to the Community Reinvestment
Act. Except as set forth in the Disclosure Schedule, Buyer has not been advised of any supervisory concerns regarding its compliance with the Community Reinvestment Act.

 

  

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Section 6.06 Brokerage. There are no existing claims or agreements for brokerage commissions, finders’ fees, or similar compensation in connection with the Transactions contemplated
by this Agreement payable by Buyer.

 

Section 6.07 Antitrust. Buyer has no knowledge that it will be required to divest deposit liabilities, branches, loans or any business or line of business as a condition to the receipt
of any requisite regulatory approval in connection with the Transactions contemplated by this Agreement.

 

Section 6.08 Pro Forma Capital Requirements. Buyer is and, on a pro forma basis giving effect to the transactions, will be (a) at least "adequately capitalized", as defined for purposes
of the Federal Deposit Insurance Act and the rules and regulations promulgated thereunder, and (b) in compliance with all capital requirements, standards and ratios required by each state or federal regulator with jurisdiction over Buyer, and, to Buyer’s knowledge, no such regulator is likely to, or has indicated that it will, condition any regulatory approval required in connection with the Transactions contemplated by this Agreement upon an increase in Buyer's capital or compliance with any capital requirement,
standard or ratio.

 

Section 6.09 Disclosure.  No representation or warranty contained in this Article VI and no statement or information relating
to Buyer contained in (i) this Agreement (including the Schedules and Exhibits hereto), or (ii) in any certificate or document furnished or to be furnished by or on behalf of Buyer to Seller pursuant to this Agreement, contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements made herein or therein, in light of the circumstances in which they were made, not misleading.

 

 

ARTICLE VII

COVENANTS

 

Section 7.01 Reasonable Best Efforts.  Subject to the terms and conditions of this Agreement, each of Seller and Buyer agrees to use its reasonable best efforts in good faith to
take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or desirable, or advisable under applicable laws, so as to permit consummation of the Transactions as promptly as practicable and shall cooperate fully with the other party hereto to that end.

 

Section 7.02 Press Releases.  Each of Buyer and Seller agree that it will not, without the prior approval of the other party, issue any press release or written statement for general
circulation relating to the transactions contemplated hereby (except for any release or statement that, in the opinion of outside counsel to such party, is required by law or regulation and as to which such party has used its best efforts to discuss with the other party in advance, provided that such release or statement has not been caused by, or is not the result of, a previous disclosure by or at the direction of such party or any of its representatives that was not permitted by this Agreement).

 

  

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Section 7.03 Access to Records and Information; Personnel; Customers.

 

(a)           Upon reasonable advance notice, Seller shall afford to the officers and authorized representatives of Buyer reasonable access during regular business hours to the offices, properties, books, contracts, commitments and records of Seller in order that Buyer, at Buyer's
sole expense, may have full opportunity to make a reasonable review and investigation of the Deposits, Assets, Liabilities and the operations of the Branch Office. The officers of Seller shall furnish Buyer with such additional financial and operating data and other information relating to the assets, properties and business of Seller as Buyer shall from time to time reasonably request.  Nothing in this Section 7.03 shall be deemed to require Seller to disclose information it cannot lawfully disclose
or to breach any obligation of confidentiality or to reveal any proprietary information, trade secrets or marketing, business or strategic plans not related to the transactions contemplated by this Agreement.

 

(b)           Following the execution of this Agreement, Buyer may, at its own expense, be entitled to meet and communicate with, and deliver information, brochures, bulletins, press releases, and other communications to Branch Office customers of Seller concerning the Transactions
and concerning the business and operations of Buyer; provided, however, that (i) Seller shall be entitled to attend any such meetings and must approve any such written communications before they are sent, which approval shall not be unreasonably withheld, and (ii) no such meetings shall occur, nor such written communications sent, until Buyer has obtained all regulatory approvals from each Governmental
Authority required to approve the Transactions contemplated by this Agreement.

 

Section 7.04 Operation in Ordinary Course.  From the date hereof to the Closing Date, Seller shall: (a) not engage in any transaction affecting the Branch Office, the Deposits, the
Liabilities, or the Assets except in the ordinary course of business, and shall operate and manage its business in the ordinary course consistent with past practices; (b) use reasonable best efforts to maintain the Branch Office in a condition substantially the same as on the date of this Agreement, reasonable wear and use excepted; and (c) use reasonable best efforts to duly maintain compliance with all laws, regulatory requirements and agreements to which it is subject or by which it is bound. Without limiting
the generality of the foregoing, prior to the Closing Date, Seller shall not, without the prior written consent of Buyer, which consent shall not be unreasonably withheld:

 

(a)           fail to maintain the Fixed Assets and Real Estate in their present state of repair, order and condition, reasonable wear and tear and casualty excepted;

 

(b)           fail to comply, in all material respects, with all applicable laws and regulations relating to its operations;

 

(c)           authorize or enter into any contract or amend, modify or supplement any contract relating to or affecting its Branch Office operations or involving any of the Assets or Liabilities;

 

  

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(d)           do any act which, or omit to do any act the omission of which, could cause a breach of any Contract;

 

(e)           undertake any actions which are inconsistent with a program to use all reasonable efforts to maintain good relations with its Branch Office employees or customers;

 

(f)           transfer, assign, encumber, or otherwise dispose of, or enter into any contract, agreement, or understanding to transfer, assign, encumber, or otherwise dispose of, any of the Assets except in the ordinary course of business;

 

(g)           invest in any Fixed Assets or improvements except for commitments previously disclosed to Buyer in writing, made on or before the date of this Agreement for replacements of furniture, furnishings and equipment, for normal maintenance and refurbishing, purchased or made
in the ordinary course of business and for emergency and casualty repairs and replacements;

 

(h)           increase or agree to increase the salary, remuneration, or compensation of its employees or pay or agree to pay any uncommitted bonus to any Branch Office employee, except for normal merit raises consistent with past practice;

 

(i)           pay incentive compensation to Branch Office employees for purposes of retaining their services or maintaining Deposit levels through the Closing Date;

 

(j)           enter into or renew any employment agreements with Branch Office employees of Seller;

 

(k)           amend or modify any of its promotional, deposit account or account loan practices of the Branch Office other than amendments or modifications in the ordinary course of business or otherwise consistent with the provisions of this Agreement;

 

(l)           fail to maintain deposit rates substantially in accord with past standards and practices; or

 

(m)           change or amend its schedules or policies relating to service charges or service fees.

 

Section 7.05 Regulatory Applications and Third Party Consents.  As promptly as practicable after the date of this Agreement, Buyer shall file all applications, filings, notices,
consents, permits, requests, or registrations required to obtain authorizations of any Governmental Authority and Buyer and Seller shall use their best efforts to obtain all consents of third parties necessary to consummate the Transactions. Each party agrees to use its reasonable best efforts to cooperate in connection with obtaining such authorizations and consents. Each party will keep the other party apprised of the status of material matters relating to completion of the Transactions. Copies of applications
and correspondence with such Governmental Authorities shall be promptly provided to the other party. Each of Buyer and Seller agree, upon request, to furnish the other party with all information concerning itself and its respective directors, officers and shareholders and such other matters as may be reasonably necessary or

 

  

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advisable in connection with any filing, notice or application made by or on behalf of Buyer or Seller to any third party or Governmental Authority.

 

Section 7.06 Title Insurance and Surveys.

 

(a)           The Seller and the Buyer shall use their reasonable best efforts to order within 5 business days of the date hereof, with respect to the Real Estate:

 

(1)           a commitment for an ALTA 2006 owner’s title insurance policy for the Real Estate (each, a “Title Commitment”) issued on a date subsequent to the date hereof by a title company agreed to by the
Buyer and the Seller (the “Title Insurer”), insuring the fee simple title of the Buyer in the Real Estate, including any easements appurtenant thereto, in an amount equal to Buyer’s reasonable estimated value of the Real Estate, which shall include: (i) an extended coverage endorsement guaranteeing the deletion of all general or standard exceptions customarily contained in an ALTA 2006 owners title insurance policy, (ii) an ALTA Endorsement
3.1 (Zoning Complete Structure) as amended to include parking, (iii) a tax parcel endorsement, (iv) a subdivision endorsement, and (v) such other endorsements as Buyer deems necessary and appropriate;

 

(2)           legible copies of all documents cited, raised as exceptions or noted in the Title Commitment or the Survey (as defined below) with respect to the Real Estate to the extent reasonably available (“Title Documents”);
and

 

(3)           a survey for the Real Estate prepared in accordance with current ALTA/ACSM land survey standards by a registered land surveyor agreed to by the Buyer and the Seller and licensed in Indiana (the “Surveyor”),
which references the 2005 requirements adopted by ALTA/ACSM and NSPS, certified as of a date subsequent to the date hereof and showing with respect to such Real Estate:  (A) the legal description; (B) Table A, Items 1 (monuments placed and set), 2 (vicinity map), 3 (flood zone designation), 4 (gross land area), 6 (setback, height and area restrictions per zoning and/or building code), 7a (exterior dimensions of all buildings at ground level), 7b (square footage of exterior footprint and gross floor
area), 7c (measured height of buildings), 8 (visible improvements), 9 (parking, including the number of spaces on the subject property), 10 (indication of access), 11b (evidence of utilities per observation and plans), 13 (names of adjoining owners of platted land), 14 (distance to nearest intersecting streets), 16 (evidence of earth moving), 17 (changes to right of way) and 18 (evidence of dump site) and show them thereon (each, a “Survey”).
ALTA Minimum Standard Detail Certificate certified to Buyer, the title company and Buyer’s designees. In the ALTA Certification, please ask the surveyor to make reference to Table A and specifically Items 1 (monuments placed and set), 2 (vicinity map), 3 (flood zone designation), 4 (gross land area), 6 (setback, height and area restrictions per zoning and/or building code), 7a (exterior dimensions of all bldgs. at ground level), 7b (square footage of exterior footprint and gross floor area), 7c (measured
height of bldg.), 8 (visible improvements), 9 (parking), 10 (indication of access), 11b (evidence of utilities per observation and plans), 13

 

  

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(names of adjoining owners of platted land), 14 (distance to nearest intersecting streets), 16 (evidence of earth moving), 17 (changes to right of way) and 18 (evidence of dump site) and show them thereon.

 

(b)           With respect to the Real Estate, the Buyer shall a have a period of 20 business days from its receipt of the later of the Title Commitment, Survey and Title Documents in which to review such Title Commitment, Survey and Title Documents and to deliver to the Seller, at
the Buyer’s election, notice of any objections thereto with respect to matters that would materially and adversely affect the Buyer’s use, ownership of, marketability, or the market value of the Real Estate (each a “Buyer’s Objection Notice”). The Seller shall use its reasonable best efforts to promptly, but in no event later than the twentieth (20th)
day after Seller’s receipt of Buyer’s Objection Notice, cure all objections relating to all Buyer’s Objection Notices and take all commercially reasonable steps required by the Title Insurer to eliminate each objection as an exception to the applicable Title Commitment. Any objection that the Title Insurer is willing to insure over on terms reasonably acceptable to Buyer is herein referred to as an “Insured Exception.”  If
the objections are not cured or are not covered by an Insured Exception, the Buyer shall have the right to (A) terminate this Agreement or (B) in a writing to the Seller waive any remaining objection.

 

(c)           It shall be a condition to the Buyer’s obligation to close the Transactions that the Title Insurer be irrevocably committed to issue to the Buyer (1) an ALTA 2006 owner’s title insurance policy, based on each Title Commitment and including all unwaived objections,
dated as of the Closing Date, with respect to each parcel of Real Estate in the amount not less than the same amount as the Title Commitment therefor, subject only to (A) taxes which are a lien but not yet payable, (B) liens, charges, encumbrances, easements, rights-of-way or other restrictions that do not adversely affect the Buyer’s use and ownership of or the marketability of the Real Estate, (C) such other matters that were disclosed in the Title Commitment and that were not objected to by Buyer,
or if objected to, cured by Seller, and other matters approved in writing by the Buyer subsequent to the date of this Agreement, and (D) matters over which the Title Insurer has committed in writing to insure on terms reasonably acceptable to Buyer (each a “Title Policy”).

 

(d)           Buyer shall pay the costs and expenses associated with the Title Commitments, Title Documents, Title Policies, and the Surveys.

 

Section 7.07 Environmental Reports.  Seller shall provide Buyer copies of any environmental reports it has obtained or received with respect to the Real Estate within 5 Business
Days after the date hereof. Buyer, in its discretion, within 20 days after the date hereof, shall order a phase one and/or phase two environmental report with respect to the Real Estate of Seller. Buyer shall have 15 Business Days from the receipt of any such environmental reports to notify Seller of any dissatisfaction with the contents of such reports. Should the cost of taking all remedial or other corrective actions and measures with respect to the Real Estate in the aggregate (i) required by applicable law,
or (ii) recommended or suggested by such report or reports or prudent in light of serious life, health or safety concerns, in the aggregate, exceed the sum of $50,000 as reasonably estimated by an environmental expert retained for such purpose by Buyer

 

  

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and reasonably acceptable to Seller, or if the cost of such actions and measures cannot be so reasonably estimated by such expert to be such amount or less with any reasonable degree of certainty such circumstances shall be deemed an “Environmental Problem.” Upon the occurrence
of an Environmental Problem, Buyer, by giving written notice to Seller within thirty (30) days from Buyer’s discovery of the Environmental Problem, shall have the right to (A) terminate this Agreement without penalty or (B) to elect to proceed with the Transactions.  All costs of any phase one investigation and any phase two investigation or environmental report requested pursuant to this Section which does not recommend or suggest the taking of any remedial or corrective actions shall be at Buyer’s
sole cost and expense. Seller agrees to pay the costs of any phase two investigation prepared or conducted at Buyer’s request pursuant to this Section which recommends or suggests the taking of remedial or corrective action. Buyer does hereby agree to restore at its cost any property for which it has undertaken an environmental investigation to the condition existing immediately prior to such investigation if the investigation does not recommend or suggest the taking of remedial or corrective action.

 

Section 7.08 Further Assurances.

 

(a)           On and after the Closing Date, Seller shall (i) give such further assistance to Buyer and shall execute, acknowledge, and deliver all such instruments and take such further action as may be necessary and appropriate effectively to vest in Buyer full, legal, and equitable
title to the Assets, and (ii) use their reasonable best efforts to assist Buyer in the orderly transfer of the Assets and Deposits being acquired by Buyer.

 

(b)           Buyer and Seller agree to ensure an orderly transfer of all data tapes and processing information and to facilitate an electronic and systematic conversion of all applicable data regarding the Deposits effective as of the Closing Date. Seller agrees to provide:

 

(i)           within 15 Business Days after the date of this Agreement, (1) all information necessary to complete such conversion processing, and (2) the initial data processing pre-conversion file layout in an electronic form;

 

(ii)           within 15 Business Days of date of this Agreement, all data necessary to enable Buyer to calculate APY and APYE for the Deposits and otherwise to comply with Regulation DD, including rate history, back items, no books and interest calculation;

 

(iii)           no later than 30 days prior to the Closing Date, provide the final data processing pre-conversion file packages;

 

(iv)           on a day-to-day basis subsequent to the preparation of the final pre-conversion tapes, provide information on any data processing system changes or additions;

 

(v)           as part of the data processing conversion, pay off all accrued interest on checking and money market accounts (but not CD’s or

 

  

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passbooks), send statements on all accounts as required by Regulation DD, and book all savings account no-book items; and

 

(vi)           by 10:00 a.m. on the first business day after the Closing Date, provide two sets of final data processing conversion file packages.

 

Except with respect to item (v) above, Buyer agrees to reimburse Seller all out of pocket expenses incurred by Seller in connection with Seller's performance of its obligations pursuant to this Section 7.08(b).

(c)           The parties agree to send promptly to the other parties hereto, at the receiving party’s expense, any payments, documents or instruments a party receives after the Closing which belongs to another party.

 

Section 7.09 Payment of Checks.  From and after the Closing Date, Buyer agrees to pay, to the extent of sufficient available funds on deposit, all properly drawn checks, drafts,
and negotiable orders of withdrawal timely presented to it by mail, over its counters, or through clearings if such items are drawn by depositors whose Deposits or accounts on which such items are drawn are Deposits, whether drawn on the check or draft forms provided by Seller, for at least 120 days after the Closing Date, or on those provided by Buyer. In addition, Buyer shall, in all other respects, discharge the duties, liabilities and obligations with respect to the Deposits to the extent such duties, liabilities
or obligations occur following the Closing.

 

Section 7.10 Close of Business on Closing Date.  On the Closing Date, Seller shall close the Branch Office for business not later than 3:00 p.m., whereupon representatives of Buyer
shall have access to the Branch Office, under the supervision of representatives of Seller, to verify Seller’s provision to Buyer of the documents, files and records relating to the Branch Office, including the Records.

 

Section 7.11 Confidentiality of Records.  Buyer and its authorized agents and representatives shall receive and treat all Records, documents and information obtained pursuant to
any provision of this Agreement as confidential, until the transactions contemplated by this Agreement have been consummated, and if not consummated, shall thereafter continue to maintain such confidentiality and not use such information for any purpose whatsoever, and shall, upon the request of Seller, return to Seller all originals and copies of such documents or other materials containing such information or Records. Until the Closing Date, Buyer shall use all such information only for purposes of effectuating
the Transactions.

 

Section 7.12 Solicitation of Customers.  For one year following the Closing Date, Seller will not, directly or indirectly, and will not permit any of its officers, directors or affiliates
on behalf of Seller to, solicit customers whose Deposits are assumed pursuant to this Agreement for any banking business, including, without limitation, deposit taking activities; provided, however, that Seller shall not be restricted or prohibited from engaging in or using general mass mailings, telemarketing programs, newspaper, radio, television or print advertisements that are directed to the
general public, the internet, the Seller's website, electronic advertisements or communications that are directed to the general public or to persons who remain customers of Seller following the Closing.

 

  

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Section 7.13 Installation/Conversion of Signage/Equipment.  Prior to Closing, at times mutually agreeable to Buyer and Seller, Buyer may, at Buyer’s sole expense, install teller
equipment, platform equipment, security equipment, computers, and signage at the Branch Office, and Seller shall cooperate with Buyer in connection with such installation; provided, however, that (i) such installation shall not interfere with the normal business activities and operation of the Branch Office; (ii) no such signage shall be installed at the Branch Office more than 5 Business Days before
the Closing Date; and (iii) Buyer’s name as appearing on any such signage shall be covered by an opaque covering material until after the close of business on the Closing Date.  Within 24 hours after the close of business on the Closing Date, Buyer, at its expense, shall substitute its name and logo for the name and logo of Seller on all signs at the Branch Office.  Seller agrees, at its expense, to remove from the Branch Office within 5 days after the Closing Date any such signs which
carry the name or logo of Seller or any of its affiliates.  Buyer agrees to replace promptly all written, printed and electronic materials bearing Seller's or any of its affiliate's name and/or logo used at the Branch Office with written, printed or electronic materials bearing Buyer's name and/or logo, including, without limitation, Deposit account forms, stationery, marketing, advertising and other materials or brochures.  All such materials so replaced shall be removed by Seller, at its
expense, from the Branch Office as promptly as practicable after the Closing Date.

 

Section 7.14 Seller Activities After Closing.  Seller shall pay when due all of their respective obligations with respect to the Excluded Liabilities.

 

Section 7.15 Maintenance of Records by Buyer.  The Buyer agrees that it shall maintain, preserve and safely keep, for a period of six years, all of the Records for the benefit of itself
and the Seller, and that it shall permit the Seller or its representatives, at any reasonable time and at the expense of the Seller, to inspect, make extracts from or copies of any such Records as such parties shall deem reasonably necessary.

 

 

ARTICLE VIII

EMPLOYEES

 

Section 8.01 Employees.

 

(a)           Buyer shall offer substantially similar salaries, duties and benefits as are available to similarly situated employees of Buyer, to those employees of Seller who Buyer elects to hire and who satisfy Buyer’s customary employment requirements, including pre-employment
interviews, investigations and employment conditions, uniformly applied by Buyer and Buyer’s employment needs. Buyer and Seller will establish a mutually acceptable process for the orderly interviewing of employees for employment by Buyer; Seller will give Buyer a reasonable opportunity to interview the employees.

 

(b)           Seller shall give notices to Seller's employees as are required for it to comply with the Consolidated Omnibus Reconciliation Act of 1985 ("COBRA") or any applicable state law with respect to continuation of healthcare
coverage. To the extent that Seller maintains a group health plan after Closing which allows it to provide health continuation coverage and taking all other actions required of it by COBRA, with respect

 

  

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to all individuals who are, immediately before the Closing Date, or who become, upon or after the Closing Date, qualified beneficiaries because of their status as current or former employees of Seller or their relationship to current or former employees of Seller (collectively, the “COBRA
Employees”); then Seller shall be responsible for providing health continuation coverage and performing any related responsibilities to the COBRA Employees. Further Seller shall provide such other continuation and/or conversion notices to the employees as are required under federal or state law relative to the benefits which they enjoyed prior to the Closing Date.

 

(c)           Before Closing, with Seller’s prior consent (which consent shall not be unreasonably withheld), Buyer may conduct such training and other programs as it may, in its reasonable discretion and at its sole expense, elect to provide for those employees who accept an
offer of employment from Buyer; provided, however, that such training and other programs shall not materially interfere with or prevent the performance of the normal business operations of Seller.

 

(d)           This Section 8.01 shall not confer any rights or benefits on any person other than Buyer and Seller, or their respective successors and assigns, either as a third party beneficiary or otherwise.

 

(e)           Buyer agrees that those employees of Seller who become employees of Buyer on the Closing Date (“Former Seller Employees”), while they remain employees of Buyer after the Closing Date will be provided
with benefits under employee benefit plans during their period of employment which are no less favorable in the aggregate than those provided by Buyer to similarly situated employees of Buyer except as otherwise provided herein. Unused vacation pay which has been accrued as of the Closing Date by any Former Seller Employees shall be paid to such employees by Seller on or before the Closing Date if required by Seller’s policies or applicable law. Except as hereinafter provided, at the Closing Date, Buyer
will amend or cause to be amended each employee benefit and welfare plan of Buyer in which Former Seller Employees are eligible to participate, to the extent necessary and allowable under applicable law, so that as of the Closing Date:

 

(i)           such plans take into account for purposes of eligibility, participation, vesting, and benefit accrual (except that there shall not be any benefit accrual for past service under any qualified defined benefit pension plan), the service of such employees with Seller as
if such service were with Buyer;

 

(ii)           Former Seller Employees are not subject to any waiting periods or pre-existing condition limitations under the medical, dental and health plans of Buyer in which they are eligible to participate and may commence participation in such plans on the Closing Date;

 

  

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(iii)           for purposes of determining the entitlement of Former Seller Employees to sick leave and vacation pay following the Closing Date, the service of such employees with Seller shall be treated as if such service were with Buyer; and

 

(iv)           Former Seller Employees are first eligible to participate and will commence participation in the River Valley Financial Bank 401(k) Savings Plan, the River Valley Bancorp Employee Stock Ownership Plan, and River Valley Financial Bank’s Pentegra Group defined
benefit pension plan on the first entry date coinciding with or following the Closing Date.

 

Section 8.02 Employment Contracts and Employee Benefit Plans.  Buyer is not assuming, nor shall it have responsibility for the continuation of, any liabilities under or in connection
with:

 

(a)           any employment or consulting contract, collective bargaining agreement, supplemental employee retirement plan, plan or arrangement providing for insurance coverage or for deferred compensation, bonuses, stock options, or other forms of incentive compensation or post-retirement
compensation or benefits, written or implied, which is entered into or maintained, as the case may be, by Seller; or

 

(b)           any employee benefit plan as maintained, administered, or contributed to by Seller or any of its Affiliates and covering any employees.

 

Section 8.03 Employee Documents.  Within 15 Business Days of the date of this Agreement, Seller shall provide Buyer with access to employees at the Branch Office and Buyer will be
delivered copies of such employee’s personnel files including, but not limited to, copies of each written employment agreement and a written description of the terms of oral employment agreements for such employee, if any, but excluding any medical or health related information not disclosable without the consent of such employees.

 

 

ARTICLE IX

CONDITIONS TO CLOSING

 

Section 9.01 Conditions to the Obligations of Seller  Unless waived in writing by Seller, the obligations of Seller to consummate the Transactions contemplated by this Agreement
are subject to the satisfaction at or prior to the Closing Date of the following conditions:

 

(a)           Performance. Each of the acts and undertakings and covenants of Buyer to be performed at or before the Closing pursuant to this Agreement shall have been duly performed in all material respects.

 

(b)           Representations and Warranties. The representations and warranties of Buyer contained in Article VI of this Agreement shall be true, correct and complete, in all material respects, on and as of the Closing
Date with the same effect as though made on and as of the Closing Date.

 

  

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(c)           Documents. Seller shall have received the following documents from Buyer:

 

(1)           An executed copy of the Assignment and Assumption Agreement substantially in the form of Exhibit 2.02(a) hereto.

 

(2)           Resolutions of Buyer’s Board of Directors, certified by its Secretary or Assistant Secretary, authorizing the execution and delivery of this Agreement and the consummation of the Transactions.

 

(3)           A certificate of the Secretary or Assistant Secretary of Buyer as to the incumbency and signatures of officers.

 

(4)           A certificate signed by a duly authorized officer of Buyer stating that the conditions set forth in Section 9.01(a) and Section 9.01(b) of this Agreement have been fulfilled.

 

(5)           An executed copy of the Retirement Account Transfer Agreement attached hereto as Exhibit 3.07.

 

(6)           Such other instruments and documents as counsel for Seller may reasonably require as necessary or desirable for transferring to Buyer the obligation to pay the Deposit liabilities and otherwise perform Seller’s obligations that are being transferred to Buyer pursuant
to this Agreement, all in form and substance reasonably satisfactory to counsel for Seller.

 

(d)           Purchase Price. Seller shall have received the Purchase Price in immediately available funds, if Seller is entitled to a cash payment at the Closing.

 

Section 9.02 Conditions to the Obligations of Buyer.  Unless waived in writing by Buyer, the obligations of Buyer to consummate the Transactions contemplated by this Agreement are
subject to the satisfaction at or prior to the Closing of the following conditions:

 

(a)           Performance. Each of the acts and undertakings and covenants of Seller to be performed at or before the Closing pursuant to this Agreement shall have been duly performed in all material respects.

 

(b)           Representations and Warranties. The representations and warranties of Seller contained in Article V of this Agreement shall be true, correct and complete in all material respects on and as of the Closing
Date (unless they speak to an earlier date) with the same effect as though made on and as of the Closing Date, except to the extent that inaccuracies in those representations and warranties do not relate to the Assets or the Liabilities (other than the Deposits).

 

(c)           Documents. Buyer shall have received the following documents from Seller:

 

  

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(1)           A duly executed recordable Corporate Warranty Deed conveying title to the Real Estate and a Vendor’s Affidavit to be transferred hereunder in the form of Exhibits 3.01(a) and (b) hereto, and an updated
title report with respect to the Real Estate.

 

(2)           An executed Assignment and Assumption Agreement in the form of Exhibit 2.02(a) hereto.

 

(3)           An executed Bill of Sale and Assignment in the form of Exhibit 3.02(a) hereto.

 

(4)           Resolutions of Seller’s Board of Directors, certified by its Secretary or Assistant Secretary, authorizing the execution and delivery of this Agreement and the consummation of the Transactions.

 

(5)           A certificate from the Secretary or Assistant Secretary of Seller as to the incumbency and signatures of officers.

 

(6)           A certificate signed by a duly authorized officer of Seller stating that the conditions set forth in Section 9.02(a) and Section 9.02(b) of this Agreement have been satisfied.

 

(7)           A final customer list as set forth in Section 12.06(a) of this Agreement.

 

(8)           An affidavit of non-foreign status as required by Section 1445 of the Internal Revenue Code of 1986, as amended.

 

(9)           The holds and stop payment information described in Section 12.01 of this Agreement.

 

(10)          An executed copy of the Retirement Account Transfer Agreement attached hereto as Exhibit 3.07.

 

(11)          All third party consents required for the Seller to consummate the Transactions.

 

(12)          The Records.

 

(13)          Such other documents or instruments as counsel for Buyer may reasonably require as necessary or desirable for transferring, assigning and conveying to Buyer the Contracts and the Deposits and good, marketable, and (with respect to the Real Estate) insurable title to the Assets
to be transferred to Buyer pursuant to this Agreement, all in form and substance reasonably satisfactory to counsel for Buyer.

 

(d)           Physical Delivery. Seller shall also deliver to Buyer the Assets purchased hereunder which are capable of physical delivery.

 

  

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(e)           Purchase Price. Buyer shall have received any cash payment to which it is entitled at the Closing under Section 2.01(c) of this Agreement.

 

(f)           Conversion. Buyer and Seller shall have completed all steps required to permit the conversion of Seller’s Deposits to Buyer’s data processing system.

 

Section 9.03 Condition to the Obligations of Seller and Buyer.

 

(a)           Regulatory Approvals. All required licenses, approvals, and consents of any relevant federal, state, or other regulatory agency shall have been obtained without any non-standard conditions or other non-standard
requirements reasonably deemed unduly burdensome by either Seller or Buyer.

 

(b)           Absence of Proceedings and Litigation. No order shall have been entered and remain in force at the Closing Date restraining or prohibiting any of the Transactions in any legal, administrative or other proceeding,
no action or proceeding shall have been instituted or threatened on or before the Closing Date seeking to restrain or prohibit the Transactions contemplated by this Agreement.

 

 

ARTICLE X

INDEMNIFICATION

 

Section 10.01 Indemnification by Seller.

 

(a)           From and after the Closing Date, Seller shall indemnify, hold harmless, and (at the option of Buyer) defend Buyer from and against any and all actual liabilities, claims, losses, penalties, fines, forfeitures, legal fees and related costs and judgments (“Losses”),
arising out of (1) any failure of Seller to observe or perform any of its covenants or obligations under this Agreement, (2) the inaccuracy of any representation or warranty set forth in Article V hereof (subject to Section 13.15 hereof as to the survival of such representations and warranties), or (3) any claim by a third party that Buyer is responsible for any Excluded Liabilities.

 

(b)           The obligations of Seller under Section 10.01(a) shall be contingent upon Buyer giving Seller written notice (i) of receipt by Buyer of any process and/or pleading in or relating to any actions, suits, or proceedings of the kinds described in Section 10.01(a), including
copies thereof, and (ii) of the assertion of any claim or demand of the kind described in Section 10.01(a), including, to the extent known to Buyer, the identity of the person(s) or entity(ies) asserting such claim or making such demand and the nature thereof, and including copies of any correspondence or other writings relating thereto. The failure to give such notice within a reasonable time shall not void Buyer’s right to indemnification from Seller unless the delay shall have materially prejudiced Seller's
right to defend. Seller shall have the right, at its expense, to take over Buyer’s defense in such actions, suits, or proceedings through counsel selected by Seller, to compromise and/or settle the same (on a basis acceptable to Buyer) and to prosecute any available appeals or reviews of any adverse judgment or ruling that may be entered therein, and Buyer agrees to cooperate with Seller in the defense and/or prosecution of claims regarding these matters. If Seller shall fail or refuse to assume the defense
of any such

 

  

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matter, Buyer shall be entitled to defend, compromise and/or settle the same (in its sole discretion), and Seller shall be obligated to indemnify Buyer for all Losses incurred in connection therewith.

 

Section 10.02 Indemnification by Buyer.

 

(a)           From and after the Closing Date, Buyer shall indemnify, hold harmless, and defend Seller from and against all Losses arising out of (1) any failure of Buyer to observe or perform any of its covenants or obligations under this Agreement, (2) the inaccuracy of any representation
or warranty set forth in Article VI hereof (subject to Section 13.15 hereof as to the survival of such representations and warranties) or (2) any claims by a third party that Seller is responsible for any of the Liabilities.

 

(b)           The obligations of Buyer under Section 10.02(a) shall be contingent upon Seller giving Buyer written notice (i) of receipt by Seller of any process and/or pleading in or relating to any actions, suits, or proceedings of the kinds described in Section 10.02(a), including
copies thereof, and (ii) of the assertion of any claim or demand of the kind described in Section 10.02(a), including to the extent known to Seller the identity of the person(s) or entity(ies) asserting such claim or making such demand and the nature thereof, and including copies of any correspondence or other writings relating thereto. The failure to give such notice within a reasonable time shall not void Seller's right to indemnification from Buyer unless the delay shall have materially prejudiced Buyer’s
right to defend. Buyer shall have the right, at its expense, to take over Seller's defense in such actions, suits, or proceedings through counsel selected by Buyer, to compromise and/or settle the same (on a basis reasonably acceptable to Seller) and to prosecute any available appeals or reviews of any adverse judgment or ruling that may be entered therein, and Seller agrees to cooperate with Buyer in the defense and/or prosecution of claims regarding these matters. If Buyer shall fail or refuse to assume the
defense of any such matter, Seller shall be entitled to defend, compromise and/or settle the same (in its sole discretion), and Buyer shall be obligated to indemnify Seller for all Losses incurred in connection therewith.

 

Section 10.03 Limitation on Losses; Deductible.  Notwithstanding any other provisions of this Agreement, except in the case of actual fraud by Buyer or Seller:

 

(a)           any claim for indemnification hereunder, other than a claim arising out of a breach of a covenant to be performed after the Closing, must be asserted, if at all, during the period commencing on the Closing Date and ending eighteen (18) months following the Closing Date
(except that this limitation on the claims period shall not apply to the representations and warranties set forth in Section 5.09);

 

(b)           no party shall make any claim for indemnification of Losses that are less than $10,000 (the “Threshold Amount”); provided, that if the aggregate
of all claims for Losses by a party equals or exceeds the Threshold Amount, then such party shall be entitled to recover for Losses only to the extent such Losses exceed the Threshold Amount; and

 

  

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(c)           the aggregate maximum amount of all Losses that may be claimed for indemnification by a party with respect to the failure of the other party’s representations or warranties contained in this Agreement to be true and correct, or the failure of the other party’s
covenants or obligations required to be observed or performed under this Agreement, shall not exceed $2,000,000 (except that this limitation on damages shall not apply to the representations or warranties set forth in Section 5.01, Section 5.02(ii), the first sentence of Section 5.04, Section 5.07, or Section 5.09);

 

provided, however, that the foregoing limitations shall not apply to Buyer’s obligations with respect to the Liabilities or to Seller’s obligations with respect to the Excluded Liabilities.

 

 

ARTICLE XI

TERMINATION

 

Section 11.01 Termination.  This Agreement shall terminate and be of no further force or effect as between the parties, except as to liability for breach of any duty or obligation
arising prior to the date of termination, upon the occurrence of any of the following conditions:

 

(a)           The expiration of 10 Business Days after any Governmental Authority shall have denied or refused to grant the approvals or consents required to be obtained pursuant to this Agreement, unless within said 10 Business Day period Buyer and Seller agree to submit or resubmit
an application to, or appeal the decision of, the regulatory authority which denied or refused to grant approval thereof;

 

(b)           The expiration of 20 Business Days from the date that either party has given notice to the other party of such other party’s material breach or misrepresentation of any obligation, warranty, representation, or covenant in this Agreement; provided, however,
that no such termination shall take effect if within said 20 Business Day period the party so notified shall have fully and completely corrected the grounds for termination as specified in such notice; provided further, however, that no such termination shall take effect if within 30 Business Days of the failure by the notified party to make such correction within said 30 day period, the notifying party delivers to the notified party a written election not to terminate this Agreement notwithstanding such breach
or misrepresentation, and any such election to proceed shall not waive such party’s right to seek damages or other equitable relief;

 

(c)           The failure to consummate the transactions provided for in this Agreement by December 31, 2010, unless the date is extended by the mutual written agreement of the parties;

 

(d)           The mutual written consent of the parties to terminate;

 

(e)           By Seller, if any of the conditions set forth in Section 9.01 or Section 9.03 hereof have not been satisfied by December 31, 2010 (or such earlier time as it becomes apparent that such condition will not be met), unless the relevant condition shall have failed to occur
as a result of any material act or omission by Seller;

 

  

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(f)           By Buyer, if any of the conditions set forth in Section 9.02 or Section 9.03 hereof have not been satisfied by December 31, 2010 (or such earlier time as it becomes apparent that such condition will not be met), unless the relevant condition shall have failed to occur
as a result of any material act or omission by Buyer;

 

Section 11.02 Effect of Termination and Abandonment.  In the event of termination of this Agreement and the abandonment of the transactions contemplated by this Agreement pursuant
to this Article XI, no party to this Agreement shall have any liability or further obligation to any other party hereunder except (a) as set forth in Section 7.11, and (b) that termination will not relieve a breaching party from liability for any willful breach of this Agreement giving rise to such termination.

 

 

ARTICLE XII

OTHER AGREEMENTS

 

Section 12.01 Holds and Stop Payment Orders.  Holds and stop payment orders that have been placed by Seller on particular
accounts or on individual checks, drafts or other instruments before the Closing Date will be continued by Buyer under the same terms after the Closing Date. Seller will deliver to Buyer at the Closing a complete schedule of such holds and stop payment orders and documentation relating to the placing thereof

 

Section 12.02 ACH Items and Recurring Debits.  Seller will transfer all ACH arrangements to Buyer as soon as possible after the Closing Date. At least 15 Business Days prior to the
Closing Date, Seller will deliver to Buyer (i) a listing of account numbers for all accounts being assumed by Buyer subject to ACH Items and Recurring Debit arrangements, and (ii) all other records and information necessary for Buyer to administer such arrangements. Buyer shall continue such ACH arrangements and such Recurring Debit arrangements as are originated and administered by third parties and for which Buyer need act only as processor; Buyer shall also continue Recurring Debit arrangements that were originated
or administered by Seller.

 

Section 12.03  Withholding.  Seller shall deliver to Buyer (i) within 3 Business Days after the Closing Date a list of all “B” (TINs do not match) and “C”
(under reporting/IRS imposed withholding) notices from the IRS imposing withholding restrictions, and (ii) for a period of 120 days after the Closing Date, all notices received by Seller from the IRS releasing withholding restrictions on Deposit accounts transferred to Buyer pursuant to this Agreement. Any amounts required by any governmental agency to be withheld from any of the Deposits (the “Withholding Obligations”) will be handled in the
following manner:

 

(a)           Any Withholding Obligations required to be remitted to the appropriate governmental agency prior to the Closing Date will be withheld and remitted by Seller, and any other sums withheld by Seller pursuant to Withholding Obligations prior to the Closing Date shall also
be remitted by Seller to the appropriate governmental agency on or prior to the time they are due.

 

(b)           Any Withholding Obligations required to be remitted to the appropriate governmental agency on or after the Closing Date with respect to Withholding

 

  

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Obligations after the Closing Date and not withheld by Seller as set forth in Section 12.03(a) above will be remitted by Buyer.

 

(c)           Any penalties described on “B” notices from the IRS or any similar penalties that relate to Deposit accounts opened by Seller prior to the Closing Date will be paid by Seller promptly upon receipt of the notice providing such penalty assessment resulted from
Seller’s acts, policies or omissions.

 

Section 12.04 Retirement Accounts.  Seller will provide Buyer with the proper trust documents and all related information for any Retirement Accounts assumed by Buyer under Section
2.02 of this Agreement. Buyer shall be responsible for all federal and state income tax reporting of Retirement Accounts for 2010. Seller agrees to cooperate with Buyer to permit Buyer to retain Seller’s current reporting service provider (and assume any such contract) (if Buyer elects to do so) and to assist Buyer in the preparation of any such reports or background materials needed for the preparation of any such reports.

 

Section 12.05 Interest Reporting.  Buyer shall report for 2010 all interest credited to, interest withheld from, and early withdrawal penalties charged to the Deposits which are
assumed by Buyer under this Agreement. Seller agrees to cooperate with Buyer to permit Buyer to retain Seller’s current reporting service provider (and assume any such contract) (if Buyer elects to do so) and to assist Buyer in the preparation of any such reports or background materials needed for the preparation of any such reports. Said reports shall be made to the holders of these accounts and to the applicable federal and state regulatory agencies.

 

Section 12.06 Notices to Depositors. Seller shall provide Buyer an intermediate customer list of the Deposit accounts to be assumed by Buyer pursuant to this Agreement, together with
a tape thereof, as of month-end prior to the scheduled Seller mailing referred to in Section 12.06(a) below. Seller shall provide Buyer a final customer list of the Deposits transferred as of the Closing Date pursuant to this Agreement with the data processing tapes.

 

(a)           After receipt of all regulatory approvals and, with the concurrence of the DFI and the OTS, at least five Business Days before the Closing Date but only after the waiver or satisfaction of all conditions to Closing (other than deliveries), Seller shall mail notification
to the holders of the Deposits to be assumed that, subject to closing requirements, Buyer will be assuming the liability for the Deposits; provided however, such notice shall be given to the holders of IRAs at least 30 days prior to the Closing Date. The notification(s) will be based on the list referred to in the first paragraph of Section 12.06 above and a listing maintained at the Branch Office of the new accounts opened since the date of said list.
Seller shall provide Buyer with the documentation of said listing up to the date of Seller’s mailing. Buyer shall send notification(s) to the same holders either together with Seller’s mailing, (in which case Buyer and Seller shall equally share the costs of such mailing and Buyer shall not delay the timing of such mailing), or within 3 days after Seller’s notification setting out the details of its administration of the assumed accounts. Each party shall obtain the approval of the other on
its notification letter(s). Except as otherwise provided herein, each party will be responsible for the cost of its own mailing.

 

  

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(b)           At least 5 Business Days before the Closing Date, Seller will prominently and continuously display a sign in the Branch Office stating that they will be closed at 3:00 p.m. on the Closing Date.

 

Section 12.07 Card Processing and Overdraft Coverage.

 

(a)           Seller will provide Buyer with a list of ATM card holders and a magnetic tape no later than 30 days prior to the Closing Date; provided, however, Buyer shall
not use such list to contact the card holders prior to 5 Business Days before the Closing Date.

 

(b)           All customers at the Branch Office with overdraft coverage shall be provided similar overdraft coverage, if available, by Buyer after the Closing.

 

Section 12.08 Taxpayer Information.  Seller shall deliver to Buyer within 3 Business Days after the Closing Date: (i) TINs (or record of appropriate exemption) for all holders of
Deposit accounts acquired by Buyer pursuant to this Agreement; and (ii) all other information in Seller’s possession or reasonably available to Seller required by applicable law to be provided to the IRS with respect to the Assets and Deposit accounts transferred pursuant to this Agreement and the holders thereof, except for such information which Seller will report on pursuant to Section 12.03 and Section 12.05 of this Agreement (collectively, the “Taxpayer
Information”). Seller hereby certifies that such information, when delivered, shall accurately reflect the information provided by Seller’s customers.

 

 

ARTICLE XIII

GENERAL PROVISIONS

 

Section 13.01 Attorneys’ Fees.  Except as provided below, each party shall bear the cost of its own attorneys’ fees incurred in connection with the preparation of this
Agreement and consummation of the Transactions. Notwithstanding the foregoing, in any action between the parties seeking enforcement of any of the terms and provisions of this Agreement or in connection with any of the property described herein, the prevailing party in such action shall be awarded, in addition to damages, injunctive or other relief, its reasonable costs and expenses, not limited to taxable costs, and reasonable attorneys’ fees and expenses as determined by the court.

 

Section 13.02 No Third Party Beneficiaries.  This Agreement is not intended nor should it be construed to create any express or implied rights in any third parties.

 

Section 13.03 Notices.  All notices, requests, demands, and other communication given or required to be given under this Agreement shall be in writing, duly addressed to the parties
as follows or at such other address, telephone or facsimile number as either party may later specify by such written notice:

 

	
To Seller:
	
The New Washington State Bank

	  	
402 E. Main Street

	  	
New Washington, IN  47162

	  	
Telephone:  (812) 256-7100

	  	
Facsimile:  (812) 256-7114

  

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With a copy to:
	
R. James Straus

	  	
Frost Brown Todd LLC

	  	
400 West Market Street, 32nd Floor

	  	
Louisville, KY 40202

	  	
Telephone: (502) 589-5400

	  	
Facsimile: (502) 581-1087

	  	  
	
To Buyer:
	
River Valley Financial Bank

	  	
430 Clifty Drive

	  	
Madison, IN  47250

	  	
Telephone:  (812) 273-4949

	  	
Facsimile:  (812) 273-2883

	  	  
	
With copy to:
	
Claudia V. Swhier, Esq.

	  	
Barnes & Thornburg LLP

	  	
11 South Meridian Street

	  	
Indianapolis, IN  46204-3535

	  	
Telephone:  (317) 231-7231

	  	
Facsimile:  (317) 231-7433

Any such notice sent by registered or certified mail, return receipt requested, shall be deemed to have been duly given and received 48 hours after the same is so addressed and mailed with postage prepaid. Notice sent by any other manner shall be effective only upon actual receipt thereof.

 

Section 13.04 Assignment.  This Agreement may not be assigned by either party without the prior written consent of the other party, and any attempted assignment in violation of this
section is void.

 

Section 13.05 Successors and Assigns.  This Agreement shall be binding upon the parties hereto and their respective heirs, successors or representatives.

 

Section 13.06 Governing Law.  This Agreement shall be governed by and construed in accordance with the internal laws of the State of Indiana.

 

Section 13.07 Entire Agreement.  This Agreement, together with the Schedules and Exhibits hereto, contains all of the agreements of the parties to it with respect to the matters
contained herein and no prior or contemporaneous agreement or understanding, oral or written, pertaining to any such matters shall be effective for any purpose. No provision of this Agreement may be amended or added to except by an agreement in writing signed by the parties hereto or their respective successors in interest and expressly stating that it is an amendment of this Agreement.

 

Section 13.08 Headings.  The headings of this Agreement are for purposes of reference only and shall not limit or define the meaning of the provisions of this Agreement.

 

  

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Section 13.09 Severability.  If any paragraph, section, sentence, clause, or phrase contained in this Agreement shall become illegal, null or void, or against public policy, for any reason, or shall
be held by any court of competent jurisdiction to be illegal, null or void, or against public policy, the remaining paragraphs, sections, sentences, clauses, or phrases contained in this Agreement shall not be affected thereby.

 

Section 13.10 Waiver.  The waiver of any breach of any provision under this Agreement by any party hereto shall not be deemed to be a waiver of any preceding or subsequent breach
under this Agreement.

 

Section 13.11 Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which shall constitute one and the same instrument.

 

Section 13.12 Force Majeure.  No party shall be deemed to have breached this Agreement solely by reason of delay or failure in performance resulting from a natural disaster or other
act of God. The parties agree to cooperate in an attempt to overcome such a natural disaster or other act of God and consummate the transactions contemplated by this Agreement, but if either party reasonably believes that its interests would be materially and adversely affected by proceeding, such party shall be excused from any further performance of its obligations and undertakings under this Agreement.

 

Section 13.13 Schedules.  All information set forth in the Exhibits and Schedules hereto shall be deemed a representation and warranty of Seller as to the accuracy and completeness
of such information in all material respects.

 

Section 13.14 Knowledge.  Whenever any statement in this Agreement or in any list, certificate or other document delivered to any party pursuant to this Agreement is made “to
the knowledge” or “to the best knowledge” of any party, such knowledge shall mean facts and other information that an officer of such party knows or reasonably should know.

 

Section 13.15 Survival.  All of the representations and warranties and the covenants and obligations of the parties set forth herein that are to be performed after the Closing Date
(including the indemnification provisions of Article X), shall survive the Closing Date subject to the limitations set forth in Section 10.03(a) hereof.

 

Section 13.16 Transfer Charges and Assessments.  All transfer, assignment, sales, conveyancing and recording charges, assessments and taxes applicable to the sale and transfer of
the Assets shall be paid and borne by the Buyer.

 

Section 13.17 Breaches of Agreements with Third Parties.  If the assignment of any material claim, contract, license, lease, or commitment (or any material claim or right or any
benefit arising thereunder) without the consent of a third party would constitute a breach thereof or materially affect the rights of Buyer or Seller thereunder, then such assignment is hereby made subject to such consent or approval being obtained.

 

Section 13.18 Specific Performance.  The parties hereto agree that irreparable damage would occur in the event any covenants in this Agreement were not performed in accordance

 

  

33

  

with their specific terms or otherwise were materially breached. It is accordingly agreed that, without the necessity of proving actual damages or posting bond or other security, the parties shall be entitled to temporary and/or permanent injunction or injunctions to prevent breaches of such performance and to specific enforcement of the
terms and provisions in addition to any other remedy to which they may be entitled, at law or in equity.

 

The parties hereto have duly authorized and executed this Agreement as of the date first above written.

 

 

	  	
The New Washington State Bank

	  	  	  
	  	  	  
	  	
By:
	/s/ Patrick J. Glotzbach
	  	
Name:
	
Patrick J. Glotzbach

	  	
Title:
	
President and Chief Executive Officer

	  	  	  
	  	  	  
	  	  	  
	  	
River Valley Financial Bank

	  	  	  
	  	  	  
	  	
By:
	/s/ Matthew P. Forrester
	  	
Name:
	
Matthew P. Forrester

	  	
Title:
	
President and Chief Executive Officer

 

 

 

 

34EXHIBIT 10.1

         

        

        

        
            

            Execution Copy

             

            

        

        OPTION AGREEMENT

        made between:

         

        SAGE GOLD INC.

        and

        GRYPHON GOLD CORPORATION

        and

        BOREALIS MINING COMPANY

         

        Dated as at March 5, 2010

         

        
            

        

        
            

            - 2 -

             

            

        

        TABLE OF CONTENTS

        
            	
                        1. DEFINITIONS

                    	
                        2

                    

        

        
            	
                         

                    	
                        1.1    Defined Terms

                    	
                        2

                    

        

        
            	
                         

                    	
                        1.2    General

                    	
                        10

                    

        

        
            	
                         

                    	
                        1.3    Headings, etc.

                    	
                        10

                    

        

        
            	
                         

                    	
                        1.4    Currency

                    	
                        10

                    

        

        
            	
                         

                    	
                        1.5.   Severability

                    	
                        10

                    

        

        
            	
                         

                    	
                        1.6    Knowledge

                    	
                        10

                    

        

        
            	
                         

                    	
                        1.7    Schedules

                    	
                        10

                    

        

        
            	
                        2. GRANT AND EXERCISE OF OPTION

                    	
                        11

                    

        

        
            	
                         

                    	
                        2.1    Grant and Exercise of Option

                    	
                        11

                    

        

        
            	
                         

                    	
                        2.2    Obligations of BMC and Gryphon Regarding Properties

                    	
                        13

                    

        

        
            	
                         

                    	
                        2.3    Obligations of BMC During Option Period

                    	
                        13

                    

        

        
            	
                         

                    	
                        2.4    Obligations of Sage During Option Period

                    	
                        14

                    

        

        
            	
                         

                    	
                        2.5    Termination of the Option

                    	
                        15

                    

        

        
            	
                         

                    	
                        2.6    Reimbursement of Expenditures

                    	
                        16

                    

        

        
            	
                         

                    	
                        2.7    Right to Drop Claims

                    	
                        16

                    

        

        
            	
                         

                    	
                        2.8    Right to Audit

                    	
                        16

                    

        

        
            	
                         

                    	
                        2.9    Establishment of Joint Venture

                    	
                        17

                    

        

        
            	
                         

                    	
                        2.10  Royalty Buy Down

                    	
                        17

                    

        

        
            	
                         

                    	
                        2.11  Several Rights and Obligations

                    	
                        18

                    

        

        
            	
                         

                    	
                        2.12  No Partnership and Other Business Opportunities

                    	
                        18

                    

        

        
            	
                         

                    	
                        2.13  Accounting Procedures

                    	
                        18

                    

        

        
            	
                        3. REPRESENTATIONS AND WARRANTIES

                    	
                        18

                    

        

        
            

            
                	
                             

                        	
                            3.1    Representations and Warranties of Sage, BMC, and Gryphon

                        	
                            18

                        

            

            
                	
                             

                        	
                            3.2    Representations and Warranties of BMC and Gryphon

                        	
                            19

                        

            

            
                	
                            4. INTERESTS

                        	
                            21

                        

            

            
                	
                             

                        	
                            4.1    Contribution and Respective Interests

                        	
                            21

                        

            

            
                	
                            5. PROJECT TEAM

                        	
                            21

                        

            

            
                	
                             

                        	
                            5.1    Establishment of Project Team

                        	
                            21

                        

            

            
                	
                             

                        	
                            5.2    Representation on Project Team

                        	
                            22

                        

            

            
                	
                             

                        	
                            5.3    Meetings of Project Team

                        	
                            22

                        

            

            
                	
                             

                        	
                            5.4    Notice of Meetings

                        	
                            22

                        

            

            
                	
                             

                        	
                            5.5    Conduct of Project Team Meetings

                        	
                            23

                        

            

            
                	
                             

                        	
                            5.6    Decisions of the Project Team

                        	
                            23

                        

            

            
                	
                             

                        	
                            5.7    Unanimous Consent of the Project Team

                        	
                            23

                        

            

            
                	
                             

                        	
                            5.8    Chairman and Secretary

                        	
                            24

                        

            

            
                	
                             

                        	
                            5.9    Consent Resolutions

                        	
                            24

                        

            

            
                	
                             

                        	
                            5.10  Expenses

                        	
                            24

                        

            

            
                	
                             

                        	
                            5.11  Decisions Binding on Participants

                        	
                            24

                        

            

            
                	
                             

                        	
                            5.12  Power to Establish Other Rules

                        	
                            24

                        

            

            
                	
                             

                        	
                            5.13  Deadlock Resolution

                        	
                            24

                        

            

        

         

        
            

        

        
            

            - 3 -

             

        

        
            	
                        6. OPERATOR

                    	
                        25

                    

        

        
            	
                         

                    	
                        6.1    Operator

                    	
                        25

                    

        

        
            	
                        7. RIGHTS, DUTIES AND STATUS OF OPERATOR

                    	
                        25

                    

        

        
            	
                         

                    	
                        7.1    Rights and Powers of Operator

                    	
                        25

                    

        

        
            	
                         

                    	
                        7.2    Status of Operator

                    	
                        25

                    

        

        

        
            	
                         

                    	
                        7.3    Specific Duties and Obligations of Operator

                    	
                        25

                    

        

        
            	
                         

                    	
                        7.4    Maintenance of Accounts

                    	
                        26

                    

        

        
            	
                         

                    	
                        7.5    Restrictions

                    	
                        26

                    

        

        
            	
                         

                    	
                        7.6    Access Obligations

                    	
                        26

                    

        

        
            	
                         

                    	
                        7.7    Reporting Obligations

                    	
                        27

                    

        

        
            	
                         

                    	
                        7.8    Funding Budgets and Expenditure Obligations

                    	
                        27

                    

        

        
            	
                         

                    	
                        7.9    No Operators Fee

                    	
                        27

                    

        

        
            	
                        8. WORK PLANS AND EXPENDITURE BUDGET

                    	
                        28

                    

        

        
            	
                         

                    	
                        8.1    Work Plans and Expenditure Budget

                    	
                        28

                    

        

        
            	
                         

                    	
                        8.2    Approval of Work Plans and Expenditure Budget

                    	
                        28

                    

        

        
            	
                        9. PARTITION

                    	
                        28

                    

        

        
            	
                        10. FORCE MAJEURE

                    	
                        28

                    

        

        
            	
                         

                    	
                        10.1  Suspension of Timing of Obligation

                    	
                        28

                    

        

        
            	
                         

                    	
                        10.2  Notification of Force Majeure

                    	
                        29

                    

        

        
            	
                        11. RESTRICTIONS ON TRANSFERS

                    	
                        29

                    

        

        
            	
                        12. CHANGE OF CONTROL

                    	
                        29

                    

        

        
            	
                         

                    	
                        12.1  Termination for Change of Control

                    	
                        29

                    

        

        
            	
                         

                    	
                        12.2  Liquidated Damages Payable to Sage

                    	
                        30

                    

        

        
            	
                         

                    	
                        12.3  Liquidated Damages Payable to Gryphon

                    	
                        30

                    

        

        
            	
                        13. AMENDMENTS AND WAIVER

                    	
                        30

                    

        

        
            	
                         

                    	
                        13.1  Entire Agreement

                    	
                        30

                    

        

        
            	
                         

                    	
                        13.2  Amendments

                    	
                        30

                    

        

        
            	
                         

                    	
                        13.3  Waiver

                    	
                        30

                    

        

        
            	
                        14. DEADLOCKS AND DISPUTES

                    	
                        30

                    

            
                	
                             

                        	
                            14.1  Referral to Chief Executive Officers

                        	
                            30

                        

            

            
                	
                             

                        	
                            14.2  Resolution of Other Matters

                        	
                            31

                        

            

            
                	
                            15. ARBITRATION

                        	
                            31

                        

            

            
                	
                             

                        	
                            15.1  Arbitration of Disputes

                        	
                            31

                        

            

            
                	
                             

                        	
                            15.2  Notice to Arbitrate

                        	
                            31

                        

            

            
                	
                             

                        	
                            15.3  Arbitration

                        	
                            31

                        

            

            
                	
                             

                        	
                            15.4  Arbitration Award

                        	
                            31

                        

            

            
                	
                            16. ADDITIONAL COVENANTS

                        	
                            31

                        

            

            
                	
                             

                        	
                            16.1  Further Assurances

                        	
                            31

                        

            

        

         

        
            

        

        
            

            - 4 -

             

        

        
            	
                        17. GENERAL

                    	
                        32

                    

        

        
            	
                         

                    	
                        17.1  Notices

                    	
                        32

                    

        

        
            	
                         

                    	
                        17.2  Public Statements

                    	
                        32

                    

        

        
            	
                         

                    	
                        17.3  Confidentiality

                    	
                        33

                    

        

        
            	
                         

                    	
                        17.4  Expenses

                    	
                        33

                    

        

        
            	
                         

                    	
                        17.5  Time of Essence

                    	
                        34

                    

        

        
            	
                         

                    	
                        17.6  Successors and Assigns

                    	
                        34

                    

        

        
            	
                         

                    	
                        17.7  Governing Law

                    	
                        34

                    

        

        
            	
                         

                    	
                        17.8  Counterparts

                    	
                        35

                    

        

         

        Schedules:

        Schedule “A” - Properties

        Schedule “B” - Accounting Procedures

        Schedule “C” - Royalties

        Schedule “D” – Pre Feasibility Study

        Schedule “E” – Terms of Reimbursement of Expenditures

        Schedule “F” – Indicative Terms of the Joint Venture Agreement

        Schedule “G” – Underlying Agreements

         

        
            

        

        
            

            Execution Copy

             

            

        

        This Option Agreement entered into as of the 5th day of March, 2010.

        BETWEEN:

        SAGE GOLD INC., a company existing under the laws of Ontario, having its head office at 365 Bay Street, Suite 500, Toronto, Ontario M5H 2V1 (“Sage”)

        OF THE FIRST PART

        BOREALIS MINING COMPANY, a company existing under the laws of Nevada, having its head office at 5490 Longley Lane, Reno, Nevada 89511 (“BMC”)

        AND:

        GRYPHON GOLD CORPORATION, a company existing under the laws of Nevada, having its head office at 5490 Longley Lane, Reno, Nevada 89511 (“Gryphon”)

        OF THE SECOND PART

        AND WITNESSES THAT WHEREAS:

        
            	
                        A.

                    	
                        BMC is the recorded owner of a 100% interest in and to the claims comprising the Properties (as defined below);

                    

        

        
            	
                        B.

                    	
                        Sage and Gryphon entered into a letter agreement dated February 23, 2010 (the “LOI”) pursuant to which Gryphon agreed to grant to Sage the option to enter into a joint venture agreement to earn a 50% joint venture interest either through (i) a 50% undivided interest in the Properties or (ii)
                        a 50% interest in BMC, all subject to certain terms and conditions; 

                    

        

        
            	
                        C.

                    	
                        As consideration for entering into the LOI, Sage paid Gryphon a non-refundable cash deposit of US$100,000; 

                    

        

        
            	
                        D.

                    	
                        Sage and Gryphon have entered into a Subscription Agreement under which Sage will invest US$400,000 in the Private Placement (as defined below); and

                    

        

        
            	
                        E.

                    	
                        This Option Agreement formalizes the terms of the LOI referred to above.

                    

        

        NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, the receipt and sufficiency of which is hereby acknowledged and upon and subject to the terms and conditions hereafter set out, the parties agree as follows:

         

        
            

        

        
            

            - 2 -

             

            

        

        
            	
                        1.

                    	
                        DEFINITIONS

                    

        

         

        
            	
                        1.1

                    	
                        Defined Terms

                    

        

        In this Agreement, the following words, phrases and expressions will have the following meanings:

        
            	
                         

                    	
                        (a)

                    	
                        “Accounting Procedure” means the procedure attached to this Agreement as Schedule “B”;

                    

        

        
            	
                         

                    	
                        (b)

                    	
                        “Additional Reserve Payments” will have the meaning attributed to that term in Section 2.1(a)(ii) of this Agreement;

                    

        

        
            	
                         

                    	
                        (c)

                    	
                        “Affiliate” has the meaning attributed to it in the Ontario Business Corporations Act;

                    

        

        
            	
                         

                    	
                        (d)

                    	
                        “Agreement” means this option agreement, together with the schedules attached hereto, as amended or supplemented from time to time;

                    

        

        
            	
                         

                    	
                        (e)

                    	
                        “Applicable Law” means any and all federal, state, territorial or municipal laws, statutes, regulations, by-laws, ordinances, rules, guidelines, policies, notices, orders and directions, or other requirements of any Government Authority having jurisdiction over the parties, the Participants, the Joint Venture or
                        any of the Properties;

                    

        

        
            	
                         

                    	
                        (f)

                    	
                        “Assets” mean all tangible and intangible goods, chattels, improvements or other items including, without limitation, land, buildings and equipment, acquired by or on behalf of a Party with respect to the Properties;

                    

        

        
            	
                         

                    	
                        (g)

                    	
                        “Borealis Pre-Feasibility Study” means the Pre-Feasibility Study of the Borealis Property dated September 17, 2009, as referred to in Schedule “D” to this Agreement;

                    

        

        
            	
                         

                    	
                        (h)

                    	
                        “Business Day” means a day, other than a Saturday or a Sunday, on which banks are generally open for business in the city of Toronto, Ontario and Vancouver, British Columbia;

                    

        

        
            	
                         

                    	
                        (i)

                    	
                        “Capital Contribution” will have the meaning attributed to that term in Subsection 2.1(a)(i) of this Agreement; 

                    

        

        
            	
                         

                    	
                        (j)

                    	
                        “Capital Contribution Condition” will have the meaning attributed to that term in Subsection 2.1(a)(i) of this Agreement; 

                    

        

        
            	
                         

                    	
                        (k)

                    	
                        “Change of Control” is defined as the occurrence of any one or more of the following events:

                    

        

        
            	
                         

                    	
                        (i)

                    	
                        a consolidation, merger, amalgamation, arrangement or other reorganization or acquisition involving either Party or any of its affiliates 

                    

        

         

        
            

        

        
            

            - 3 -

             

        

        
            	
                    	
                    	and another corporation or other entity, as a result of which the holders of common shares of either Party, prior to the completion of the transaction, hold less than 50% of the outstanding shares of the successor corporation after completion of the transaction, unless such transaction consists of the issue and sale of securities by either Party
                    for the purpose of raising capital considered by that Party to be required for funding amounts payable under this Agreement or otherwise in connection with the development of the Borealis Property, provided that no one person, entity or group of persons acting jointly or in concert hold more than 30% of the outstanding shares of the Party or successor cooperation after completion of the transaction;
	
                         

                    	
                        (ii)

                    	
                        any person, entity or group of persons or entities acting jointly or in concert (an “Acquiror”), other than an Acquiror acceptable (as confirmed in writing) to the Party who is not subject to a Change of Control, acquires or acquires control (including, without limitation, the
                        right to vote or direct the voting) of voting securities which, when added to the voting securities owned of record or beneficially by the Acquiror or which the Acquiror has the right to vote or in respect of which the Acquiror has the right to direct the voting, would entitle the Acquiror and/or associates and/or affiliates of the Acquiror to cast or to direct the casting of 30% or more of the votes attached to all of either Party’s outstanding voting securities
                        which may be cast to elect directors of either Party or the successor corporation (regardless of whether a meeting has been called to elect directors) and as a result of such acquisition of control, directors of either Party holding such office immediately prior to such acquisition of control shall not constitute a majority of the board of directors of either Party; 

                    

        

        
            	
                         

                    	
                        (iii)

                    	
                        as a result of or in connection with: (A) a contested election of directors, or; (B) a consolidation, merger, amalgamation, arrangement or other reorganization or acquisition involving either Party or any of its affiliates and another corporation or other entity, as a result of such acquisition of control, directors of either Party holding such office
                        immediately prior to such acquisition of control shall not constitute a majority of the board of directors of either Party; or 

                    

        

        
            	
                         

                    	
                        (iv)

                    	
                        the board of directors of either Party adopts a resolution to the effect that a change of control has occurred or is imminent;

                    

        

        
            	
                         

                    	
                        (l)

                    	
                        “Construction” means construction work or activity carried out or performed by the Operator under this Agreement;

                    

        

        
            	
                         

                    	
                        (m)

                    	
                        “Determination Event” will have the meaning attributed to that term in Section 14.1 of this Agreement;

                    

        

         

        
            

        

        
            

            - 4 -

             

            

        

        
            	
                         

                    	
                        (n)

                    	
                        “Due Diligence Out” means the option by either Gryphon or Sage to terminate this Option Agreement and Subscription Agreement during the Due Diligence Period due to the discovery of any condition that has a Material Adverse Effect on the other Party or, with respect to termination by Sage, on the Borealis Property
                        that has not otherwise been disclosed to the terminating Party prior to February 23, 2010;

                    

        

        
            	
                         

                    	
                        (o)

                    	
                        “Due Diligence Period” means the period commencing on February 23, 2010 and terminating on the earlier of (i) March 26, 2010 or (ii) the termination of this Option Agreement;

                    

        

        
            	
                         

                    	
                        (p)

                    	
                        “Effective Date” means March 5, 2010;

                    

        

        
            	
                         

                    	
                        (q)

                    	
                        “Environmental Laws” means all Applicable Laws currently in effect relating to pollution or protection of the environment, health, safety or natural resources, including, without limitation, the use, consumption, handling, transportation, storage or Release of Hazardous Substances;

                    

        

        
            	
                         

                    	
                        (r)

                    	
                        “Environmental Order” means any prosecution, order, decision, notice, direction, report, recommendation or request issued, rendered or made by any Governmental Authority in connection with Environmental Laws or environmental orders;

                    

        

        
            	
                         

                    	
                        (s)

                    	
                        “Exercise Date” means the date the Option is exercised by Sage under the terms of this Agreement;

                    

        

        
            	
                         

                    	
                        (t)

                    	
                        “Expenditures” means all costs and expenses whatsoever, direct or indirect, with respect to the Properties, in accordance with this Agreement. Without limitation, the following categories of Expenses will have the following meanings:

                    

        

        
            	
                         

                    	
                        (i)

                    	
                        “Expenses” means all costs incurred on the Properties, Operations and on exploration and development activities directed towards discovery and definition of an ore body on the Properties during the Option Period pursuant to Subsection 2.1(a) of this Agreement, including payments required to maintain the
                        Properties in good standing, monies expended in paying the fees, wages, salaries, traveling expenses and fringe benefits of all persons engaged in work with respect to or for the benefit of the Properties and which are attributable to such persons work on the Properties; and

                    

        

        
            	
                         

                    	
                        (ii)

                    	
                        “Royalty Buy Down Cash Payment” means any cash payments which Gryphon will be required to make under the terms of the Royalty Buy Down Option Agreement and, if applicable, the Royalty Holder Convertible Debenture, if Gryphon chooses to exercise its rights thereunder; provided that if Sage does not fund 50% of the
                        Royalty Buy Down Cash Payment, its interest in the Joint Venture shall not be adjusted, but rather the full amount of the Royalty Buy Down Cash Payment shall 

                    

        

         

        
            

        

        
            

            - 5 -

             

            

        

        
            	
                         

                    	
                         

                    	be reimbursed to Gryphon by the Joint Venture upon exercise of the Option by Sage in accordance with Section 2.1(d);

        

        
            	
                         

                    	
                        (u)

                    	
                        “Expenditure Budget” means the expenditure budget approved and authorized by the Project Team in accordance with Section 5.1(a) of this Agreement;

                    

        

        
            	
                         

                    	
                        (v)

                    	
                        “GAAP” means generally accepted accounting principles in the United States;

                    

        

        
            	
                         

                    	
                        (w)

                    	
                        “Governmental Authority” means any government or governmental, administrative, regulatory or judicial body, department, commission, authority, tribunal, agency or entity;

                    

        

        
            	
                         

                    	
                        (x)

                    	
                        “Hazardous Substance” means any substance, combination of substances or by-product of any substance which is or may become hazardous, toxic, injurious or dangerous to any person, property, air, land, water, flora, fauna or wildlife; and includes but is not limited to contaminants, pollutants, wastes and dangerous,
                        toxic, deleterious or designated substances as defined in or pursuant to any Environmental Laws or Environmental Orders;

                    

        

        
            	
                         

                    	
                        (y)

                    	
                        “Interest” means a beneficial interest in BMC or the Joint Venture Entity, as applicable;

                    

        

        
            	
                         

                    	
                        (z)

                    	
                        “Joint Venture” will have the meaning attributed to that term in Section 2.9 of this Agreement; 

                    

        

        
            	
                         

                    	
                        (aa)

                    	
                        “Joint Venture Agreement” means the Joint Venture Agreement to be negotiated by the Parties with terms and conditions contained in the indicative terms set forth on Schedule “G”;

                    

        

        
            	
                         

                    	
                        (bb)

                    	
                        “Joint Venture Entity” will have the meaning attributed to that term in Section 2.1(a)(i) of this Agreement; 

                    

        

        
            	
                         

                    	
                        (cc)

                    	
                        “JV Agreement Condition” will have the meaning attributed to that term in Section 2.1(b) of this Agreement; 

                    

        

        
            	
                         

                    	
                        (dd)

                    	
                        “JV Effective Date” will have the meaning attributed to that term in Section 2.9 of this Agreement;

                    

        

        
            	
                         

                    	
                        (ee)

                    	
                        “Licences” means any licences or permits (including, without limitation, water licences, surface leases, winter roads and rights of way) required in connection with the Properties;

                    

        

        
            	
                         

                    	
                        (ff)

                    	
                        “Losses” means actual losses, liabilities, damages, injuries, costs or expenses, including legal costs as expenses, suffered or incurred by the respective party;

                    

        

        
            	
                         

                    	
                        (gg)

                    	
                        “Project Team” means the committee established pursuant to Article 5 of this Agreement;

                    

        

         

        
            

        

        
            

            - 6 -

             

            

        

        
            	
                         

                    	
                        (hh)

                    	
                        “Material Adverse Effect” means any condition, event or change that would cause a material adverse effect on the value, economic viability, operations, property rights, property title, financial condition or prospects on a Party’s business or property or the ability to consummate the contemplated
                        transactions;

                    

        

        
            	
                         

                    	
                        (ii)

                    	
                        “Mine” means the workings established and Assets acquired, obtained or constructed in order to bring the Properties, or any portion thereof, into, and to maintain, commercial production, including, without limitation, mine development openings, plant and service facilities, concentrator and other metallurgical
                        installations, tailings impoundments, infrastructure, housing and other related facilities;

                    

        

        
            	
                         

                    	
                        (jj)

                    	
                        “Minerals” means any and all ores (and concentrates or metals derived therefrom) of precious, base or industrial minerals, in, on or under the Properties which may lawfully be explored for, mined and sold by the parties or Participants pursuant to the instruments of title under which the Properties are held;
                        

                    

        

        
            	
                         

                    	
                        (kk)

                    	
                        “Monthly Expenditure Report” will have the meaning attributed to that term in Section 7.8 of this Agreement;

                    

        

        
            	
                         

                    	
                        (ll)

                    	
                        “NI-43-101” means National Instrument 43-101 as adopted by the Canadian Securities Administrators;

                    

        

        
            	
                         

                    	
                        (mm)

                    	
                        “Notice of Exercise” will have the meaning attributed to that term in Section 2.9 of this Agreement;

                    

        

        
            	
                         

                    	
                        (nn)

                    	
                        “Operations” means every kind of work done, or activity performed, by the Operator on or in respect of the Properties to plan, arrange, carry out or complete work contemplated by a work programs, exploration programs and operating plans, or as otherwise directed by the Project Team, including, without limitation,
                        investigating, prospecting, exploring, and developing; property maintenance; reviewing technical information, preparing and completing reports, estimates and studies (including environmental studies); signing, equipping, improving and surveying, Construction; and, mining, milling. concentrating, rehabilitation, reclamation, and environmental protection; and further including the management and administration necessary to conduct and maintain records of the work or
                        activity aforesaid:

                    

        

        
            	
                         

                    	
                        (oo)

                    	
                        “Operator” means, at any time prior to the Exercise Date, BMC and, at any particular time on or after the Exercise Date, the Party or Parties acting as the Operator of the Joint Venture pursuant to the Joint Venture Agreement; 

                    

        

        
            	
                         

                    	
                        (pp)

                    	
                        “Option” will have the meaning attributed to that term in Subsection 2.1(a) of this Agreement; 

                    

        

        
            	
                         

                    	
                        (qq)

                    	
                        “Option Expiry Date” means December 31, 2010, unless extended by mutual agreement of the Parties for one or more additional option periods not to exceed six (6) months in the aggregate;

                    

        

         

        
            

        

        
            

            - 7 -

             

            

        

        
            	
                         

                    	
                        (rr)

                    	
                        “Option Period” means the period from the Effective Date to the earlier of (i) the exercise of the Option, (ii) the Option Expiry Date or (iii) the termination of the Option under the terms of this Agreement;

                    

        

        
            	
                         

                    	
                        (ss)

                    	
                        “Party” or “Parties” means, as the context may require, Sage, BMC and Gryphon and their respective successors and permitted assigns which become parties pursuant to the Agreement;

                    

        

        
            	
                         

                    	
                        (tt)

                    	
                        “Permitted Encumbrances” means, in respect of the Properties or the surface lands related thereto:

                    

        

        
            	
                         

                    	
                        (i)

                    	
                        inchoate or statutory liens for taxes not at the time overdue and inchoate or statutory liens for overdue taxes the validity of which BMC is contesting in good faith but only for so long as such contestation effectively postpones enforcement of any such liens or taxes;

                    

        

        
            	
                         

                    	
                        (ii)

                    	
                        statutory liens incurred in the ordinary course of the business of BMC in connection with workers’ compensation, unemployment insurance and similar legislation, but only to the extent that each such statutory lien relates to amounts not yet due;

                    

        

        
            	
                         

                    	
                        (iii)

                    	
                        liens and privileges arising out of any judgment with respect to which BMC intends to prosecute an appeal or proceedings for review but only for so long as there is a stay of execution pending the determination of such appeal or proceedings for review;

                    

        

        
            	
                         

                    	
                        (iv)

                    	
                        security given in respect of the Properties by BMC to a public utility or any Governmental Authority;

                    

        

        
            	
                         

                    	
                        (v)

                    	
                        royalties and other obligations in existence as of the Effective Date imposed under the terms of any mining, mineral, exploration or resource claim, concession, lease, contract or other right pursuant to which BMC holds its interest in the Properties;

                    

        

        
            	
                         

                    	
                        (vi)

                    	
                        any royalties, obligations, reservations or exceptions contained in the original grants from a Governmental Authority or arising under any Applicable Law in effect from time to time;

                    

        

        
            	
                         

                    	
                        (vii)

                    	
                        easements, including rights of way for, or reservations or rights of others relating to, sewers, water lines, gas lines, pipelines, electric lines, telegraph and telephone lines and other similar products or services and any registered restrictions or covenants that run with the land, provided that there has been compliance with the provisions
                        thereof;

                    

        

        
            	
                         

                    	
                        (viii)

                    	
                        zoning by-laws or ordinances as to the use of real property;

                    

        

         

        
            

        

        
            

            - 8 -

             

            

        

        
            	
                         

                    	
                        (ix)

                    	
                        other restrictions as to the use of real property and agreements with other persons registered against title to the Properties provided such restrictions and agreements existed as of the Effective Date; and

                    

        

        
            	
                         

                    	
                        (x)

                    	
                        the paramount title of the United States of America.

                    

        

        
            	
                         

                    	
                        (xi)

                    	
                        undetermined or inchoate construction or repair or storage liens arising in the ordinary course of the business of BMC, a claim for which has not been tiled or registered pursuant to law or of which notice in writing has not been given to BMC;

                    

        

        
            	
                         

                    	
                        (uu)

                    	
                        “Private Placement” means the subscription by Sage to purchase US$400,000 in units of Gryphon (the “Units”), effective on or before April 16, 2010, for cash on a private placement basis. Each unit consisting of one share of common stock and one-half of
                        one warrant (exercisable for a period of two years at a 50% premium to the Unit price, expressed in US$), at an issue price per Unit equal to the greater of (i) the maximum discounted price permitted under Part VI of the TSX Company Manual, and (ii) a 5% premium to the 30 day volume weighted closing price of the common stock of Gryphon ending on the day immediately prior to the closing date under the Subscription
                        Agreement, but not less than Cdn$0.18 per unit and not more than Cdn$0.25 per Unit, subject to TSX approval;

                    

        

        
            	
                         

                    	
                        (vv)

                    	
                        “Private Placement Condition” means the condition, for the benefit of Gryphon, related to the closing Private Placement on or before April 16, 2010;

                    

        

        
            	
                         

                    	
                        (ww)

                    	
                        “Project Financing Commitment” means such financing by one or more third parties as is required to bring a Mine into production; 

                    

        

        
            	
                         

                    	
                        (xx)

                    	
                        “Properties” means, subject to Section 2.7 of this Agreement, all mineral claims and permits comprising the Properties set forth in Schedule “A” attached hereto, the Minerals thereon, all information obtained from Operations and those rights and benefits appurtenant to the Properties, other
                        than royalties but including, without limitation, surface rights, land use permits, leases and water rights that become subject to this Agreement;

                    

        

        
            	
                         

                    	
                        (yy)

                    	
                        “Regulatory Approval” means the regulatory approval required for the Option, the transactions contemplated in this Agreement and, as applicable, the Joint Venture, including, but not limited to, TSX Venture Exchange approval for Sage and TSX approval for Gryphon;

                    

        

        
            	
                         

                    	
                        (zz)

                    	
                        “Release” includes abandon, add, deposit, discharge, disperse, dispose, dump, emit, empty, escape, leach, leak, migrate, pour, pump, release or spill; 

                    

        

        
            	
                         

                    	
                        (aaa)

                    	
                        “Representative” will have the meaning attributed to that term in Subsection 5.2 of this Agreement;

                    

        

        
            	
                         

                    	
                        (bbb)

                    	
                        “Royalties” will have the meaning attributed to that term in Schedule “C” to this Agreement; 

                    

        

         

        
            

        

        
            

            - 9 -

             

            

        

        
            	
                         

                    	
                        (ccc)

                    	
                        “Royalty Buy Down” means the option under the terms of the Royalty Buy Down Option Agreement, exercisable to buy down the Royalties for consideration equal to: (i) a cash payment of US$1,750,000, (ii) the issuance of the 7,726,250 shares of Gryphon common stock and (iii) the issuance of a convertible debenture in
                        the principal amount of US$1,909,500 to the holders of the Royalties, subject to adjustment in the case of amounts referred to in Sections 1.1(ccc)(ii) and (iii) in the event the Lessors (as referred to in the Royalty Buy Down Option Agreement) elect to adjust such amounts in accordance with Section 4(d) of the Royalty Buy Down Option Agreement, provided that principal amount of the convertible debenture will not exceed US$3,000,000; 

                    

        

        
            	
                         

                    	
                        (ddd)

                    	
                        “Royalty Buy Down Option Agreement” means the Option Agreement Amendment to Mining Lease, by and among Gryphon, BMC and each of Richard J. Cavell TTTEE F/T Richard J. Cavell Trust dated 02/23/1994, Hardrock Mining Company, a Nevada corporation, and John W. Whitney, as amended, including by the terms of Amendment
                        No. 2, effective as of February 12, 2010, and as may be amended from time-to-time; 

                    

        

        
            	
                         

                    	
                        (eee)

                    	
                        “Royalty Holder Convertible Debenture” means the convertible debenture in the principal amount of US$1,909,500 to the holders of the Royalties under the Royalty Buy Down Option Agreement;

                    

        

        
            	
                         

                    	
                        (fff)

                    	
                        “Simple Majority” means a decision made by the Project Team by a majority of the votes present at a meeting and entitled to be cast,

                    

        

        
            	
                         

                    	
                        (ggg)

                    	
                        “Special Expert” means an arm’s length third party expert designated by the Project Team to break any voting deadlock of the Project Team as contemplated in Section 5.13 of this Agreement or to settle any disputes related to the Additional Reserve Payments as contemplated in Section 2.1(a)(ii) of
                        this Agreement;

                    

        

        
            	
                         

                    	
                        (hhh)

                    	
                        “Subscription Agreement” means the subscription agreement between Sage and Gryphon executed in connection with the Private Placement;

                    

        

        
            	
                         

                    	
                        (iii)

                    	
                        “TSX” means the Toronto Stock Exchange;

                    

        

        
            	
                         

                    	
                        (jjj)

                    	
                        “TSX-V” means the TSX Venture Exchange;

                    

        

        
            	
                         

                    	
                        (kkk)

                    	
                        “Underlying Agreements” means, collectively, the agreements set forth on Schedule “G” attached to this Agreement; and 

                    

        

        
            	
                         

                    	
                        (lll)

                    	
                        “Work Plan” will have the meaning attributed to that term in Subsection 5.1(b) of this Agreement.

                    

        

         

        
            

        

        
            

            - 10 -

             

            

        

        
            	
                        1.2

                    	
                        General

                    

        

        In this Agreement, words importing gender will include all genders, words importing the singular number only will include the plural and vice versa, and any reference to any statute will be deemed to extend to and include any amendment or re-enactment of such statute.

        

        
            	
                        1.3

                    	
                        Headings, etc.

                    

        

        The division of this Agreement into Sections, Subsections and other subdivisions and the insertion of headings are for convenience of reference only and will not affect or be utilised in the construction or interpretation of this Agreement.

        

        
            	
                        1.4

                    	
                        Currency

                    

        

        All references in this Agreement to dollars, unless otherwise specifically indicated, are expressed in United States dollars. Canadian dollars are designated “C$” or “Cdn$.”

        

        
            	
                        1.5

                    	
                        Severability

                    

        

        Any Section, Subsection or other subdivision of this Agreement and any other provision of this Agreement which is, or becomes, illegal, invalid or unenforceable will be severed from this Agreement and be ineffective to the extent of such illegality, invalidity or unenforceability and will not affect or impair the spirit or intent of the remaining provisions hereof.

        

        
            	
                        1.6

                    	
                        Knowledge

                    

        

        Where any representation, warranty or covenant contained in this Agreement is expressly qualified by reference to the “knowledge” or “awareness” of BMC or Gryphon, it shall be deemed to refer to the actual knowledge or awareness, without additional inquiry of John Key and Bill Wilson. Where any representation, warranty or covenant contained in this Agreement is expressly qualified
        by reference to the “knowledge” or “awareness” of Sage, it shall be deemed to refer to the actual knowledge or awareness, without additional inquiry of Chief Executive Officer (currently Nigel Lees) and the Vice-President, Business Development (currently William Love).

        

        
            	
                        1.7

                    	
                        Schedules

                    

        

        The following schedules and appendices are incorporated by reference into this Agreement:

        
            	
                         

                    	
                        Schedules:

                    	
                        Description:

                    
	
                         

                    	
                        A

                    	
                        The Properties

                    
	
                         

                    	
                        B

                    	
                        Accounting Procedures

                    
	
                         

                    	
                        C

                    	
                        Royalties

                    
	
                         

                    	
                        D

                    	
                        Pre-Feasibility Study

                    
	
                         

                    	
                        E

                    	
                        Terms of Reimbursement of Expenditures

                    
	
                         

                    	
                        F

                    	
                        Indicative Terms of the Joint Venture Agreement

                         

                    

        

         

         

        
            

        

        
            

            - 11 -

             

            

        

        
            	
                        2.

                    	
                        GRANT AND EXERCISE OF OPTION

                    

        

         

        
            	
                        2.1

                    	
                        Grant and Exercise of Option

                    

        

        
            	
                         

                    	
                        (a)

                    	
                        Sage shall have the right to enter into the Joint Venture Agreement (the “Option”) by satisfying the following conditions, each for the benefit of Gryphon and BMC (each, an “Option Exercise Condition”):

                    

        

        
            	
                         

                    	
                        (i)

                    	
                        Sage will make an equity capital contribution in the aggregate sum of US$9,000,000 (the “Capital Contribution”) in cash to BMC or, upon mutual agreement of Sage and Gryphon, a corporate entity formed for the purposes of the Joint Venture (a “Joint Venture
                        Entity”), in connection with the exercise of the Option; provided, however, that Sage will make the Capital Contribution on or before the earlier of (A) any time prior to the Option Expiry Date or, (B) within sixty (60) days after receipt by the Parties (or as soon thereafter as is practicable for Sage using its best efforts) of a binding commitment letter (a
                        “Project Financing Commitment”) for the remainder of the Project Financing on terms acceptable to the Parties, acting reasonably (the “Capital Contribution Condition”).

                    

        

        
            	
                         

                    	
                        (ii)

                    	
                        If the Payment Accrual Date (as defined below) has occurred prior to the exercise of the Option, Sage will to pay Gryphon cash payments (the “Additional Reserve Payments”) of US$1,000,000 for each 100,000 ounces of proven and probable reserves of gold (and gold equivalents) in the Borealis
                        Property (over and above that set forth in the Borealis Pre-Feasibility Study), based on an independent third party report acceptable to Sage, acting reasonably, which may include a NI 43-101 technical report or a bankable feasibility study. Sage shall have a period of 30 days to engage an independent third party to review data and confirm proven and probable reserves prior to paying the Additional Reserve Payments. The Additional Reserve Payments for ounces greater than
                        100,000 ounces will be made on a proportionate basis if less than 200,000 ounces in total are confirmed. The Additional Reserve Payments will be made based on proven and probable reserves up to a total of US$2,000,000 and be payable in cash by the date (the “Payment Accrual Date”) which is the later of (A) the JV Effective Date and (B) 30 days upon delivery of an independent third party
                        report. Any disputes of the proven and probable reserve determinations shall be settled by a Special Expert, who shall be an independent third party mining geologist. Sage’s obligations to make the Additional Reserve Payments will be reflected in the Joint Venture Agreement.

                    

        

        
            	
                         

                    	
                        (iii)

                    	
                        Sage will deliver to Gryphon common shares of Sage with a value equal to US$1,000,000, based on the 30 day volume weighted closing price of its common stock traded on the TSX-V immediately prior the issue date, provided that if approval of the TSX-V is not obtained for the Sage 

                    

        

         

        
            

        

        
            

            - 12 -

             

            

        

        Issuance, Sage will pay to Gryphon US$1,000,000 in cash (the “Sage Issuance Condition”).

        
            	
                         

                    	
                        (iv)

                    	
                        Sage has executed and delivered to Gryphon the Subscription Agreement pursuant to which Sage will invest US$400,000 in the Private Placement, and pay the purchase price for the Units to Gryphon in cash on or before April 16, 2010 (the “Private Placement Condition”). If Sage does not pay
                        purchase price for the Units to Gryphon on or before April 16, 2010 or if required regulatory approvals (including from the TSX and, if required by Sage, the TSX-V) for the Private Placement have not been obtained by April 16, 2010, the Option will terminate.

                    

        

        
            	
                         

                    	
                        (v)

                    	
                        Sage will have paid 50% of the Expenditures. If Sage fails to fund its portion of any Expenditure which has been approved in accordance with the terms of this Agreement, Gryphon shall have the right to terminate the Option Agreement upon ten (10) days written notice of default and Sage’s failure to pay its portion of the Expenditures in accordance
                        with Section 7.8 of this Agreement (the “Expenditure Funding Condition”); provided that Gryphon’s right to terminate the Option pursuant to this section 2(a)(v) shall not apply in the event Sage does not fund any portion of the Royalty Buy Down Cash Payment.

                    

        

        
            	
                         

                    	
                        (vi)

                    	
                        Sage will deliver to Gryphon:

                    

        

        
            	
                         

                    	
                        A.

                    	
                        evidence that Sage has obtained Regulatory Approval for the performance of the transactions and obligations under this Agreement and the terms of such Regulatory Approvals have been satisfied; and 

                    

        

        
            	
                         

                    	
                        B.

                    	
                        evidence of a Project Financing Commitment.

                    

        

        
            	
                         

                    	
                        (vii)

                    	
                        If applicable, the Joint Venture Entity will assume and fulfill all of the obligations of BMC under each of the Underlying Agreements.

                    

        

        
            	
                         

                    	
                        (b)

                    	
                        During the Option Period, the Parties will use best efforts to negotiate the terms and conditions of the Joint Venture Agreement in accordance with the Indicative Terms of the Joint Venture Agreement set out in Schedule F, and agree to the form thereof as soon as reasonably practicable, but in no event later than June 15, 2010, and either Party may
                        terminate this Agreement if the terms, conditions and form of the Joint Venture Agreement have not been agreed to by June 15, 2010 (the “JV Agreement Condition”).

                    

        

        
            	
                         

                    	
                        (c)

                    	
                        If the Royalty Buy Down Option is exercised, the Joint Venture will agree to assume the obligations of Gryphon under the Royalty Holder Convertible Debenture; provided that if the Royalty Holder Convertible Debenture is converted in accordance with its terms, the Joint Venture shall reimburse Gryphon in cash for the principal amount of the Royalty Holder
                        Convertible Debenture converted into shares of Gryphon.

                    

        

         

        
            

        

        
            

            - 13 -

             

            

        

        
            	
                         

                    	
                        (d)

                    	
                        If the Royalty Buy Down Option is exercised and Sage has not funded 50% of the Royalty Buy Down Cash Payment, the Joint Venture shall agree to reimburse Gryphon for the full US$1,750,000 amount of the Royalty Buy Down Cash Payment upon exercise of the Option by Sage.

                    

        

        
            	
                         

                    	
                        (e)

                    	
                        If applicable, each of Gryphon, BMC and Sage agree to use their best efforts to enter into an assignment and assumption of the Underlying Agreements, as soon as possible following Regulatory Approval, pursuant to which the Joint Venture Entity shall assume BMC’s obligations and take an assignment of BMC’s rights, under the Underlying
                        Agreements.

                    

        

         

        
            	
                        2.2

                    	
                        Obligations of BMC and Gryphon Regarding Properties

                    

        

        
            	
                         

                    	
                        (a)

                    	
                        During the Option Period, BMC and Gryphon covenant and agree that:

                    

        

        
            	
                         

                    	
                        (i)

                    	
                        BMC and Gryphon will allow Sage access to all reports, maps, sections, drill logs, assay results, studies, technical data and other information in its possession or control, whether in paper or electronic form, in respect of the Properties.

                    

        

        
            	
                         

                    	
                        (ii)

                    	
                        At all times BMC and Gryphon shall provide to Sage copies of all correspondence with or from the Bureau of Land Management. or from a Governmental Authority from Mineral County, Nevada pertaining to mineral tenure or assessment work in respect of the claims comprising the Properties.

                    

        

        
            	
                         

                    	
                        (iii)

                    	
                        Gryphon and BMC will seek all required consents to permit the exercise of the Option by Sage, including any approvals which may be required under the terms of the Leases. 

                    

        

        
            	
                         

                    	
                        (iv)

                    	
                        Gryphon and BMC will use best efforts to negotiate the terms and conditions of the Joint Venture Agreement and agree to the form thereof as soon as reasonably practicable, but in no event later than June 15, 2010.

                    

        

        
            	
                         

                    	
                        (v)

                    	
                        Gryphon and BMC will use best efforts to obtain Regulatory Approval and all other approvals, consents and waivers reasonable required for the execution, delivery and performance of the Joint Venture Agreement and performance of the transactions contemplated in this Agreement. 

                    

        

         

        
            	
                        2.3

                    	
                        Obligations of BMC During Option Period

                    

        

        
            	
                         

                    	
                        (a)

                    	
                        (a)          During the Option Period, BMC shall act in good faith and with reasonable care as follows:

                    

        

        
            	
                         

                    	
                        (i)

                    	
                        BMC shall do such acts, and shall pay as Expenses such taxes, fees and rents as may be required to keep the Properties in good standing.

                    

        

         

        
            

        

        
            

            - 14 -

             

            

        

        
            	
                         

                    	
                        (ii)

                    	
                        All work conducted, carried out or performed by BMC on the Properties during the Option Period shall be done in a sound and workmanlike manner in accordance with sound mining practice and in compliance with all Applicable Laws of all Governmental Authorities, including without limitation, all Environmental Laws. BMC shall not be considered to be in
                        default of this covenant if it is opposing in good faith any allegations of a breach of compliance with any Applicable Laws.

                    

        

        
            	
                         

                    	
                        (iii)

                    	
                        BMC shall complete the necessary filings to maintain the Properties in good standing.

                    

        

        
            	
                         

                    	
                        (iv)

                    	
                        Subject to receipt of Expenditures payments from Sage and Gryphon under Section 7.8 of this Agreement, BMC, as Operator, shall pay or cause to be paid all invoices for all materials and services purchased in connection with its work on the Properties that might give rise to a lien thereon. 

                    

        

        
            	
                         

                    	
                        (v)

                    	
                        BMC, as Operator, shall provide Gryphon and Sage with Monthly Expenditure Reports and such other reports as the Project Team may reasonably request.

                    

        

        
            	
                         

                    	
                        (vi)

                    	
                        BMC shall permit Sage and Gryphon and their respective agents and representatives at their own risk and expense, reasonable access to the Properties at all times and to review and make copies (paper or electronic) of all reports, maps, sections, drill logs, assay results, studies and all other technical, accounting and financial records or data (paper or
                        electronic) prepared by or on behalf of BMC in connection with any work done on or with respect to the Properties, to the extent the same are in BMC’s possession and the provision of such material does not create a hardship, within 20 days of any request thereof by Sage or Gryphon to BMC.

                    

        

         

        
            	
                        2.4

                    	
                        Obligations of Sage During Option Period

                    

        

        
            	
                         

                    	
                        (a)

                    	
                        During the Option Period, Sage covenants and agrees that:

                    

        

        
            	
                         

                    	
                        (i)

                    	
                        Sage will use its best efforts to obtain Regulatory Approval and all other approvals, consents and waivers reasonable required for the execution, delivery and performance of the Joint Venture Agreement and performance of the transactions contemplated in this Agreement.

                    

        

        
            	
                         

                    	
                        (ii)

                    	
                        Sage will use its best efforts to negotiate the terms and conditions of the Joint Venture Agreement and agree to the form thereof as soon as reasonably practicable, but in no event later than June 15, 2010.

                    

        

        
            	
                         

                    	
                        (iii)

                    	
                        Except as otherwise provided herein, Sage will pay 50% of the Expenditures. 

                    

        

         

        
            

        

        
            

            - 15 -

             

            

        

        
            	
                         

                    	
                        (iv)

                    	
                        Sage will use its best efforts to arrange for Project Financing and obtain a Project Financing Commitment that is customary and usual in the marketplace with respect to the Properties to complete the development of the Mine on commercially reasonable terms.

                    

        

         

        
            	
                        2.5

                    	
                        Termination of the Option

                    

        

        
            	
                         

                    	
                        (a)

                    	
                        Subject to Sage exercising the Option in accordance with Subsection 2.1(a) hereof, the Option Period shall end on the earlier of (i) the Option Expiry Date or (ii) termination of this Agreement in accordance with this Section 2.5.

                    

        

        
            	
                         

                    	
                        (b)

                    	
                        Subject to the obligations of the parties that expressly survive the termination of this Agreement, the Option and this Agreement shall automatically terminate on the earlier of:

                    

        

        
            	
                         

                    	
                        (i)

                    	
                        the mutual consent of the parties to terminate the Option and this Agreement;

                    

        

        
            	
                         

                    	
                        (ii)

                    	
                        the Option Expiry Date; or

                    

        

        
            	
                         

                    	
                        (iii)

                    	
                        the exercise of the Due Diligence Out by either Party.

                    

        

        
            	
                         

                    	
                        (c)

                    	
                        Subject to the obligations of the parties that expressly survive the termination of this Agreement, Gryphon and BMC shall have the right to terminate the Option and this Agreement under the following circumstances:

                    

        

        
            	
                         

                    	
                        (i)

                    	
                        the failure of the Capital Contribution Condition;

                    

        

        
            	
                         

                    	
                        (ii)

                    	
                        the failure of the Private Placement Condition;

                    

        

        
            	
                         

                    	
                        (iii)

                    	
                        the failure of the Expenditure Funding Condition;

                    

        

        
            	
                         

                    	
                        (iv)

                    	
                        the failure of the Sage Issuance Condition;

                    

        

        
            	
                         

                    	
                        (v)

                    	
                        in the event of a material breach by Sage of its covenants contained in this Agreement or the representations and warranties contained in Section 3.1 of this Agreement; provided that Sage has not cured such breach within 30 days following delivery of written notice of breach, or immediately if such default is not capable of being cured within 30
                        days; or

                    

        

        
            	
                         

                    	
                        (vi)

                    	
                        forthwith if Sage shall generally not pay its debts as such debts become due or Sage shall admit in writing its inability to pay its debts generally as such debts become due or if Sage shall make a general assignment for the benefit of creditors or if any proceedings shall be instituted by or against Sage under any bankruptcy, insolvency or similar
                        law.

                    

        

         

        
            

        

        
            

            - 16 -

             

            

        

        
            	
                         

                    	
                        (d)

                    	
                        Subject to the obligations of the parties that expressly survive the termination of this Agreement, any of Sage, Gryphon or BMC shall have the right to terminate the Option and this Agreement with written notice of:

                    

        

        
            	
                         

                    	
                        (i)

                    	
                        exercise of a Due Diligence Out; 

                    

        

        
            	
                         

                    	
                        (ii)

                    	
                        the failure of the JV Agreement Condition; 

                    

        

        
            	
                         

                    	
                        (iii)

                    	
                        the failure to obtain a Project Financing Commitment on or before the Option Expiry Date; or

                    

        

        
            	
                         

                    	
                        (iv)

                    	
                        a Determination Event. 

                    

        

        
            	
                         

                    	
                        (e)

                    	
                        Subject to the obligations of the parties that expressly survive the termination of this Agreement, either Sage or Gryphon shall have the right to terminate the Subscription Agreement with written notice of the exercise of its Due Diligence Out.

                    

        

        
            	
                         

                    	
                        (f)

                    	
                        As applicable, Sections 2.6, 2.12, 5.10, 9, 11.2 and 11.3 and Articles 14 and 17 of this Agreement shall survive termination of the Option and this Agreement.

                    

        

         

        
            	
                        2.6

                    	
                        Reimbursement of Expenditures

                    

        

        Except as otherwise provided in Section 11.3, termination of the Option and this Agreement under Section 2.5 of this Agreement shall entitle Sage to reimbursement of Expenditures that have been paid by Sage hereunder prior to the time of termination. In the event that Sage is entitled to reimbursement of Expenditures under this Subsection 2.6, Gryphon shall issue to Sage a promissory note
        in the principal amount of the reimbursed Expenditures on the terms set forth in Schedule “F” attached hereto.

        

        
            	
                        2.7

                    	
                        Right to Drop Claims

                    

        

        During the Option Period, BMC will have the right to drop any claims forming part of the Properties, subject to Project Team approval in accordance with Section 5.1(e):

        
            	
                         

                    	
                        (a)

                    	
                        BMC shall have no further responsibility to maintain in good standing such claims; and

                    

        

        
            	
                         

                    	
                        (b)

                    	
                        the claims so dropped will be excluded from the terms of the Option and for the purposes of this Agreement thereafter the term “Properties” will exclude such dropped land, except for the purposes of determining the aggregate Expenditures incurred on the Properties which throughout
                        will be based on the Expenditures on the retained and all dropped claims or land.

                    

        

         

        
            	
                        2.8

                    	
                        Right to Audit

                    

        

        During the Option Period, Sage may, with reasonable notice and at its own cost, undertake an audit of the accounting and financial records of BMC related to the Monthly Expenditure Report. 

         

        
            

        

        
            

            - 17 -

             

            

        

        All written exceptions to and claims upon BMC for discrepancies in the amount of Expenditures disclosed by such audit shall be made not more than ten (10) Business Days after receipt by Sage of the Monthly Expenditure Report. Failure to make any such exception or claim within the ten (10) Business Day period shall mean the Monthly Expenditure Report is accurate and correct and binding upon the
        Parties.

        

        
            	
                        2.9

                    	
                        Establishment of Joint Venture

                    

        

        Sage may exercise the Option and enter into the Joint Venture Agreement by delivering Gryphon and BMC written notice of exercise at least five (5) Business Days prior to the Option Expiry Date (the “Notice of Exercise”) and a fully executed Joint Venture Agreement with an effective date no later than ten (10) Business Days after delivery of
        the Notice of Exercise to Gryphon and BMC (the “JV Effective Date”), provided that the payment required to be made by Sage to Gryphon pursuant to Section 2.1(a)(ii) of this Agreement shall not be required to be made on the JV Effective Date unless the Payment Accrual Date preceded the JV Effective Date. The Notice of Exercise will include a certificate of a senior officer of Sage stating that each of the Option Exercise
        Conditions has been or will be satisfied on or before the JV Effective Date. Upon receipt of the Notice of Exercise and satisfaction or waiver of the Option Exercise Conditions, Gryphon and BMC shall execute and deliver the Joint Venture Agreement. On and after the exercise of the Option, Gryphon, BMC and Sage will participate in a joint venture (herein called the “Joint Venture”), under the terms of the Joint Venture
        Agreement, for the purpose of further exploring the Properties and, if deemed warranted, bringing all or a portion of the Properties into commercial production by establishing and operating a Mine or Mines thereon.

        

        
            	
                        2.10

                    	
                        Royalty Buy Down

                    

        

        
            	
                         

                    	
                        (a)

                    	
                        The Parties acknowledge that the Royalty Buy Down Option will expire on August 22, 2010, unless otherwise extended. The Parties further agree that if the Royalty Buy Down Option is exercised: 

                    

        

        
            	
                         

                    	
                        (i)

                    	
                        the Joint Venture shall agree to reimburse Gryphon for the full US$1,750,000 amount of the Royalty Buy Down Cash Payment upon exercise of the Option by Sage, if Sage has not funded 50% of the Royalty Buy Down Cash Payment; 

                    

        

        
            	
                         

                    	
                        (ii)

                    	
                        Gryphon shall be solely responsible for the issuance of the 7,726,250 shares of its common stock; and 

                    

        

        
            	
                         

                    	
                        (iii)

                    	
                        Gryphon will issue the Royalty Holder Convertible Debenture upon exercise of the Royalty Buy Down Option and that the Joint Venture will agree to assume the obligations of Gryphon under Royalty Holder Convertible Debenture; provided that if the Royalty Holder Convertible Debenture is converted in accordance
                        with its terms, the Joint Venture shall reimburse Gryphon in cash for the principal amount of the Royalty Holder Convertible Debenture converted into shares of Gryphon. 

                    

        

         

        
            

        

        
            

            - 18 -

             

            

        

        
            	
                         

                    	
                        (b)

                    	
                        Nothing contained in this Agreement shall restrict Gryphon or BMC’s ability to negotiate an extension to or otherwise amend the Royalty Buy Down Option Agreement or require the consent of the Project Team or Sage to do so.

                    

        

         

        
            	
                        2.11

                    	
                        Several Rights and Obligations

                    

        

        Unless otherwise specifically indicated herein, the rights and obligations of each Participant in connection with the Joint Venture will be in every case several and not joint or joint and several, the intent being that the Participants hold their respective Interests as tenants in common.

        

        
            	
                        2.12

                    	
                        No Partnership and Other Business Opportunities

                    

        

        The Parties have not created a partnership and nothing contained in this Agreement will constitute any Party to be the partner, agent or legal representative of any other Party, or create any fiduciary relationship between them for any purpose whatsoever. No Party will have any authority to act for, or to assume any obligation or responsibility on behalf of, any other Party except as otherwise expressly
        provided herein.

        

        
            	
                        2.13

                    	
                        Accounting Procedures

                    

        

        The parties hereby agree that the Accounting Procedures will be used in connection with the accounting during the Option Period. Any reference to the term “Accounting Procedures” contained in this Agreement shall refer to the Accounting Procedures outlined in Schedule “B” attached hereto.

        
            	
                        3.

                    	
                        REPRESENTATIONS AND WARRANTIES

                    

        

         

        
            	
                        3.1

                    	
                        Representations and Warranties of Sage, BMC, and Gryphon

                    

        

        Each of Sage, BMC and Gryphon (and jointly and severally in the case of BMC and Gryphon) represent and warrant to the other as follows and acknowledge and confirm that the others are relying on such representations and warranties in entering into this Agreement:

        
            	
                         

                    	
                        (a)

                    	
                        it is a corporation duly incorporated, organized, validly existing and in good standing under the laws of its incorporating jurisdiction and is qualified to do business in those jurisdictions where necessary in order to carry out the purposes of this Agreement;

                    

        

        
            	
                         

                    	
                        (b)

                    	
                        it has full power, capacity and authority to enter into and perform its obligations under this Agreement and any agreement or instrument referred to or contemplated by this Agreement;

                    

        

        
            	
                         

                    	
                        (c)

                    	
                        the execution and delivery of this Agreement will not violate or result in the breach of any Applicable Law to which it is subject or the terms of its constating documents;

                    

        

         

        
            

        

        
            

            - 19 -

             

            

        

        
            	
                         

                    	
                        (d)

                    	
                        neither the execution and delivery of this Agreement, nor the performance of the transactions contemplated hereunder, conflict with, result in the breach of or accelerate the performance required by any agreement to which it is a party;

                    

        

        
            	
                         

                    	
                        (e)

                    	
                        BMC has obtained the principal operating permits in respect of the Properties set out in Section 1.21.1 of the Pre-Feasibility Study, and to the knowledge of BMC and Gryphon, such permits are in force on the date hereof;

                    

        

        
            	
                         

                    	
                        (f)

                    	
                        this Agreement and all other agreements or instruments to be executed and delivered by such party hereunder have been duly executed and delivered by such party and constitute, legal, valid and binding obligations of such party enforceable against such party in accordance with their respective terms;

                    

        

        
            	
                         

                    	
                        (g)

                    	
                        except as otherwise disclosed, no consent from a lender or any third party (other than the TSX-V in the case of Sage, the TSX in the case of Gryphon or such other consents as shall be referred to in the Joint Venture Agreement) is necessary to authorize such party to execute, deliver and perform its obligations under this Agreement;

                    

        

        
            	
                         

                    	
                        (h)

                    	
                        there is no judgment, decree, injunction, ruling or order of any court, governmental department, commission, agency, instrumentality or arbitrator and no claim, suit, action, litigation, arbitration or governmental proceeding in progress, pending or threatened, which prevents or which seeks to prevent such party from entering into this Agreement:
                        and

                    

        

        
            	
                         

                    	
                        (i)

                    	
                        it has not committed an act of bankruptcy, is not insolvent, has not proposed a compromise or arrangement to its creditors generally, has not had any petition for a receiving order in bankruptcy filed against it, has not made a voluntary assignment in bankruptcy, has not taken any proceedings with respect to a compromise or arrangement, has not taken any
                        proceeding to have itself declared bankrupt or wound-up, has not taken any proceeding to have a receiver appointed of any part of its assets, has not had any encumbrancer take possession of any of its property and has not had any execution or distress become enforceable or become levied upon any of its property.

                    

        

         

        
            	
                        3.2

                    	
                        Representations and Warranties of BMC and Gryphon

                    

        

        BMC and Gryphon (acting jointly and severally) represent and warrant as follows to Sage and acknowledge and confirm that Sage is relying on such representations and warranties in entering into this Agreement:

        
            	
                         

                    	
                        (a)

                    	
                        BMC is the registered and beneficial holder of a 100% legal and beneficial interest in the Properties, free and clear of any privilege, reservation, rights of others, lien, pledge, mortgage, lease, sublease, charge, encumbrance or other security interest therein other than Permitted Encumbrances;

                    

        

        
            	
                         

                    	
                        (b)

                    	
                        Schedule “A” sets forth a true, accurate and complete description of the Properties;

                    

        

         

        
            

        

        
            

            - 20 -

             

            

        

        
            	
                         

                    	
                        (c)

                    	
                        the exploration and mining rights attaching to the Properties (as described in Schedule “A”) have been properly staked or otherwise properly constituted, as applicable, are properly recorded, and are valid and in good standing to the date hereof, in accordance with Applicable Law and all taxes and fees due thereon or in respect thereof
                        to the date hereof have been paid in full;

                    

        

        
            	
                         

                    	
                        (d)

                    	
                        BMC has caused work of sufficient value to be performed upon the Properties or paid fees in lieu thereof through to December 31, 2009 and has recorded and filed proof thereof, all of which work, recordings and filings have been completed in accordance with applicable statutes pertaining to such work:

                    

        

        
            	
                         

                    	
                        (e)

                    	
                        to the best of BMC’s knowledge, it has not entered into any current material agreements other than the Underlying Agreements and has not made any material contractual commitments, in respect of the Properties, other than arising under the Underlying Agreements;

                    

        

        
            	
                         

                    	
                        (f)

                    	
                        to the best of BMC’s knowledge, each of the Underlying Agreements is a legal, valid and binding obligation of each of the parties thereto, is enforceable in accordance with its terms, and no party thereto is in default of any of its obligations thereunder;

                    

        

        
            	
                         

                    	
                        (g)

                    	
                        there is no judgment, decree, injunction, ruling or order of any court, Governmental Authority. instrumentality or arbitrator and no claim, suit, action, litigation, arbitration or governmental proceeding in progress, pending or threatened against or relating to, and affecting any of the Properties which prevents or which seeks to prevent BMC from
                        entering into and performing its obligations hereunder and the transaction contemplated hereby;

                    

        

        
            	
                         

                    	
                        (h)

                    	
                        the activities and operations that have been carried out on the Properties have been in compliance with all material respects with all Applicable Laws and directives of all Governmental Authorities and it has not received notice of non-compliance from any such Governmental Authorities;

                    

        

        
            	
                         

                    	
                        (i)

                    	
                        BMC has not entered into any labour contracts, collective bargaining agreements, or any other labour-related obligations and liabilities which may affect the Properties or any Operations conducted thereon:

                    

        

        
            	
                         

                    	
                        (j)

                    	
                        to the best of BMC’s knowledge and except as otherwise disclosed, all the lands covered by the Properties are free and clear of any Hazardous Substance and there is no judicial or administrative proceeding pending and no Environmental Order has been issued or, to the best of BMC’s knowledge and except as otherwise disclosed, threatened,
                        concerning the possible violation of any Environmental Laws or Environmental Orders in respect of the Properties;

                    

        

        
            	
                         

                    	
                        (k)

                    	
                        to the best of BMC’s knowledge except as otherwise disclosed, there are no material outstanding obligations or liabilities, contingent or otherwise, under any applicable environmental, mining or other law, including reclamation or 

                    

        

         

        
            

        

        
            

            - 21 -

             

            

        

        rehabilitation work, associated with the Properties or arising out of past exploration, development and/or mining activities carried out thereon; and

        
            	
                         

                    	
                        (l)

                    	
                        all environmental approvals required with respect to activities carried out by BMC on any part of the lands covered by the Properties, have been obtained, are valid and in full force and effect, have been complied with and there have been and are no proceedings commenced or threatened to revoke or amend any such environmental approvals.

                    

        

         

        
            	
                        4.

                    	
                        INTERESTS

                    

        

         

        
            	
                        4.1

                    	
                        Contribution and Respective Interests

                    

        

        Except as otherwise provided in this Agreement or the Joint Venture Agreement, after formation of the Joint Venture, the Joint Venture will bear all Expenses and all liabilities arising under this Agreement and will own the Properties, the Assets and any Mine.

        
            	
                        5.

                    	
                        PROJECT TEAM

                    

        

         

        
            	
                        5.1

                    	
                        Establishment of Project Team

                    

        

        A Project Team will be established with effect from the Effective Date. The Project Team will have the exclusive right and authority to:

        
            	
                         

                    	
                        (a)

                    	
                        develop the Expenditure Budget for each calendar quarter commencing on the Effective Date, which Expenditure Budget shall include (i) estimates for projected funding requirements during the Option Term and (ii) estimates of funding reasonably required to complete assessment work or make payments in lieu thereof and pay such rentals, maintenance fees,
                        taxes or other payments and do all such other things as may be necessary to maintain the Properties in good standing, including, without limitation, staking, restaking, and surveying mining claims, and applying for licences, leases, grants, concessions, permits, patents and other rights to and interests in the Minerals;

                    

        

        
            	
                         

                    	
                        (b)

                    	
                        consider and approve and, as applicable, develop all exploration programs, work programs, feasibility studies, mining plans and any amendments thereto (each, a “Work Plan”);

                    

        

        
            	
                         

                    	
                        (c)

                    	
                        review and approve the Monthly Expenditure Report;

                    

        

        
            	
                         

                    	
                        (d)

                    	
                        review and approve and, as applicable, participate in the preparation of all exploration, construction, operating and financial reports on the Operations;

                    

        

        
            	
                         

                    	
                        (e)

                    	
                        consider and approve abandonment or surrender of any grant, patent, lease, mineral or mining claim, mining lease, permit, licence to prospect, mineral disposition or other right to or interest in Minerals which is comprised in the Properties;

                    

        

         

        
            

        

        
            

            - 22 -

             

            

        

        
            	
                         

                    	
                        (f)

                    	
                        consider and approve any major change in the mining plan established for any Mine or any plan for the installation of additional milling, concentrating or refining capacity or of additional plant, facilities or infrastructure at any Mine;

                    

        

        
            	
                         

                    	
                        (g)

                    	
                        review and approve the annual ore reserve and resource estimates prepared by the Operator;

                    

        

        
            	
                         

                    	
                        (h)

                    	
                        review and approve all material agreements with respect to the Properties and Operations;

                    

        

        
            	
                         

                    	
                        (i)

                    	
                        review and approve all consultants and experts retained by or at the expense of the Operator with respect to the Properties and Operations;

                    

        

        
            	
                         

                    	
                        (j)

                    	
                        consider and approve changes in the Accounting Procedure;

                    

        

        
            	
                         

                    	
                        (k)

                    	
                        establish and modify its own rules of procedure in a manner not inconsistent with this Agreement;

                    

        

        
            	
                         

                    	
                        (l)

                    	
                        negotiate with third parties the terms and conditions of the Project Financing and proposals in respect thereto and undertake all reasonable actions required to procure a Project Financing Commitment; and

                    

        

        
            	
                         

                    	
                        (m)

                    	
                        retain such advisors and consultants as shall be approved by the Project Team.

                    

        

         

        
            	
                        5.2

                    	
                        Representation on Project Team

                    

        

        Each of Sage and Gryphon will have the right to appoint three (3) representatives to the Project Team (each, a “Representative”), and each of Sage and Gryphon may appoint one or more alternate Representatives to act in the absence of its Representatives and any alternate Representative so acting will be deemed to be that Party’s
        Representatives in respect of the matter upon which he acts. Each of Sage and Gryphon may change its Representatives and any alternate Representatives at any time. Notice of any appointment or change will be given to the other Party.

        
            	
                        5.3

                    	
                        Meetings of Project Team

                    

        

        Unless otherwise agreed in writing, a Project Team regular meeting will be held at least once every month on the third Tuesday of each month. A special meeting of the Project Team may be called with five (5) Business Days notice days by a Representative of either Sage or Gryphon. Unless otherwise agreed, all meetings of the Project Team will be held in Reno, Nevada and may be attended by means of
        telephonic, video or other electronic communications.

        

        
            	
                        5.4

                    	
                        Notice of Meetings

                    

        

        The Operator will give notice, specifying the time and place of, and the agenda for, each Project Team meeting to all Representatives at least three (3) Business Days before the time appointed for the meeting. Notice of a meeting may be waived if each Party is represented at the meeting 

         

        
            

        

        
            

            - 23 -

             

            

        

        by at least one of its Representatives and all the Representatives present at the meeting agree upon the waiver and upon the proposed agenda.

        

        
            	
                        5.5

                    	
                        Conduct of Project Team Meetings

                    

        

        A quorum for any Project Team meeting will be present if a majority of the Representatives and at least one Representative of each Party is present or participating by telephone. If a quorum is present at the meeting, then the Project Team will be competent to exercise all of the authorities, powers and discretions bestowed upon it under this Agreement. No business other than the election of a chairman,
        if any, and the adjournment or termination of the meeting will be transacted at any meeting unless a quorum is present. If within 30 minutes from the time appointed for a meeting, a quorum is not present, then the meeting will, at the election of those Representatives who are present:

        
            	
                         

                    	
                        (a)

                    	
                        be dissolved; or

                    

        

        
            	
                         

                    	
                        (b)

                    	
                        be adjourned to the same place but on a date and at a time, to be fixed by the chairman of the meeting before the adjournment, which will be not less than three (3) days following the date for which the meeting was called.

                    

        

        Notice of the adjourned meeting will be given to the Representatives of the Parties forthwith after the adjournment of the meeting. If at the adjourned meeting a quorum is not present within 30 minutes from the time appointed, then the Representative or Representatives present and entitled to attend and vote at the meeting, will constitute a quorum. No material item of business will be transacted at a
        Project Team meeting unless the item appears on the agenda or at least one Representative of each Participant is present and those Representatives unanimously agree to the item being added to the agenda.

        

        
            	
                        5.6

                    	
                        Decisions of the Project Team

                    

        

        Except as otherwise contemplated in Sections 5.7, 5.9, 5.12, 7.5 and 7.8, the Project Team will decide every question submitted to it by Simple Majority with the Representatives of each of Gryphon and Sage present at a meeting of the Project Team shall be entitled to cast one-half of the votes. If the matter requires Special Majority approval which is not obtained, the Party which proposed the defeated
        resolution may elect to have the matter determined in accordance with the deadlock resolution procedures under Article 14.

        

        
            	
                        5.7

                    	
                        Unanimous Consent of the Project Team

                    

        

        The following decisions shall require the unanimous approval of the Project Team:

        
            	
                         

                    	
                        (a)

                    	
                        the Expenditure Budget; and

                    

        

        
            	
                         

                    	
                        (b)

                    	
                        Expenditures that in the aggregate exceed the greater of (A) the amount which is $50,000 above the Expenditure Budget, and (B) the amount which is 10% above the Expenditure Budget.

                    

        

         

        
            

        

        
            

            - 24 -

             

            

        

        
            	
                        5.8

                    	
                        Chairman and Secretary

                    

        

        Meetings of the Project Team will be chaired by a member of the Project Team or other person appointed by the Project Team, and a member of the Project Team or other person appointed by the Project Team will serve as the secretary of Project Team meetings. The wording for any resolution to be passed by the Project Team at a meeting will be circulated to each Representative prior to such meeting and, if
        passed at the meeting, the wording will be agreed at the meeting and initialed by the Representatives in attendance at the meeting. The secretary for the meeting will take minutes of each meeting and will circulate draft copies of the minutes to each Representative within 15 days of the meeting. Representatives will discuss and, if appropriate, approve the draft minutes within 15 days of the next meeting, after which the secretary will circulate the approved minutes for execution (and
        return) by the chairman and secretary. Copies of the executed minutes will be distributed by the secretary to each Representative.

        

        
            	
                        5.9

                    	
                        Consent Resolutions

                    

        

        Any decision made by obtaining the unanimous consent in writing of the all Representatives on the Project Team and will be as valid as a decision made at a duly called and held meeting of the Project Team.

        

        
            	
                        5.10

                    	
                        Expenses

                    

        

        Each Party will bear the expenses incurred by its Representatives in attending meetings of the Project Team. 

        
            	
                        5.11

                    	
                        Decisions Binding on Participants

                    

        

        Project Team decisions made in accordance with this Agreement shall be binding upon all of the Parties.

        
            	
                        5.12

                    	
                        Power to Establish Other Rules

                    

        

        The Project Team may, by unanimous agreement of the Representatives of the Parties, establish such other rules of procedure, not inconsistent with this Agreement, as the Project Team deems fit. 

        
            	
                        5.13

                    	
                        Deadlock Resolution

                    

        

        Any deadlock or dispute that cannot be resolved by the Project Team will be referred initially by the Parties to their respective chief executive officers (or such other persons as may be designated by the chief executive officer) for settlement in good faith. The chief executive officers or designees will meet within seven (7) days of the date on which the deadlock or dispute is so referred. If the
        deadlock or dispute cannot be resolved, then the chief executive officers will, within seven (7) days of the initial meeting, meet again in the presence of a Special Expert (who will be mutually agreed by the Parties and whose expenses shall be paid by the Parties equally) to attempt to settle the deadlock or dispute. If the deadlock or dispute is not resolved within seven (7) days of the initial referral to the chief executive officers, the Special 

         

        
            

        

        
            

            - 25 -

             

            

        

        Expert will make a decision to resolve the dispute and such decision will be binding on the Parties, subject to Article 15 of this Agreement.

         

        
            	
                        6.

                    	
                        OPERATOR

                    

        

         

        
            	
                        6.1

                    	
                        Operator

                    

        

        BMC will serve as the initial Operator effective as and from the Effective Date.

        
            	
                        7.

                    	
                        RIGHTS, DUTIES AND STATUS OF OPERATOR

                    

        

         

        
            	
                        7.1

                    	
                        Rights and Powers of Operator

                    

        

        Subject to the decisions of the Project Team, the Operator will have full, complete and exclusive control, charge and supervision of the Properties and Assets and the sole and exclusive right and authority to supervise, manage and carry out all Operations and to incur the Expenses required for that purpose in accordance with Work Plans approved by the Project Team. The Operator will manage and carry out
        the Operations in accordance with the terms and conditions of Work Plans approved by the Project Team and in connection therewith will, in advance, if reasonably possible, notify the Project Team of any change in Operations which the Operator considers material. If it is not reasonably practicable to give notice in advance, then the Operator will notify the Project Team as soon thereafter as is reasonably practicable.

        

        
            	
                        7.2

                    	
                        Status of Operator

                    

        

        The Operator in the conduct of its activities under this Agreement will be deemed to have the status of an independent contractor. The Operator will not act or hold itself out as an agent for Sage nor make any commitments on behalf of any of either Gryphon or Sage unless permitted by this Agreement or directed in writing by Gryphon or Sage, as applicable.

        

        
            	
                        7.3

                    	
                        Specific Duties and Obligations of Operator

                    

        

        Unless the Operator obtains the approval of the Project Team to the contrary, the Operator will have the following specific duties and obligations:

        
            	
                         

                    	
                        (a)

                    	
                        to prepare and submit to the Project Team draft work programs, exploration programs and operating plans;

                    

        

        
            	
                         

                    	
                        (b)

                    	
                        subject to any specific provision of this Agreement (including Subsection 5.1(g)), to implement, using such contractors, if any, as the Operator deems appropriate, all work programs, exploration programs and operating plans approved by the Project Team;

                    

        

        
            	
                         

                    	
                        (c)

                    	
                        to pay all expenses properly incurred promptly as and when due in accordance with the Expenditure Budget;

                    

        

        
            	
                         

                    	
                        (d)

                    	
                        to comply with the provisions of all agreements or instruments of title under which the Properties or Assets are held;

                    

        

         

        
            

        

        
            

            - 26 -

             

            

        

        
            	
                         

                    	
                        (e)

                    	
                        to perform such assessment work or make payments in lieu thereof and pay such rentals, maintenance fees, taxes or other payments and do all such other things as may be necessary to maintain the Properties in good standing, including, without limitation, staking, restaking, and surveying mining claims, and applying for licences, leases, grants,
                        concessions, permits, patents and other rights to and interests in the Minerals;

                    

        

        
            	
                         

                    	
                        (f)

                    	
                        to perform its duties and obligations hereunder in a sound and workmanlike manner, in accordance with sound mining and engineering practices and in compliance with all Applicable Laws; and

                    

        

        
            	
                         

                    	
                        (g)

                    	
                        to prosecute claims or, where a defense is available, defend litigation arising out of the Operations.

                    

        

         

        
            	
                        7.4

                    	
                        Maintenance of Accounts

                    

        

        The Operator will maintain the accounts for the Expenditures in accordance with GAAP and the Accounting Procedure; provided, that the judgment of the Operator as to matters related to the accounting, for which provision is not made in the Accounting Procedure, will govern if the Operator’s accounting practices are not inconsistent with joint venture accounting practices generally accepted in the
        mining industry in the United States.

        

        
            	
                        7.5

                    	
                        Restrictions

                    

        

        The following decisions shall require the unanimous approval of the Project Team:

        
            	
                         

                    	
                        (a)

                    	
                        any decision to abandon, lease, sell or otherwise dispose of any Assets or series of related Assets having an aggregate value of greater than $25,000;

                    

        

        
            	
                         

                    	
                        (b)

                    	
                        any decision to settle any suit, claim or demand in an aggregate amount in excess of $50,000; 

                    

        

        
            	
                         

                    	
                        (c)

                    	
                        any decision to enter into any material agreement with respect to the Operations; and

                    

        

        
            	
                         

                    	
                        (d)

                    	
                        any agreements entered into with parties not acting at arm’s length with either Gryphon or Sage.

                    

        

         

        
            	
                        7.6

                    	
                        Access Obligations

                    

        

        At all reasonable times, the Operator will provide the Representatives of the Parties access to, and the right to inspect and copy all geological, geochemical, geophysical and engineering data, maps, available drill core, drill logs, surveys, assays, analyses, technical, accounting and financial records and other information acquired in Operations. In addition, the Operator will allow Representatives of
        the Parties, at their own sole risk and expense and subject to reasonable safety regulations, to inspect the Properties and Operations at all reasonable times so long as the inspecting Representatives do not unreasonably interfere with Operations.

         

        
            

        

        
            

            - 27 -

             

            

        

        
            	
                        7.7

                    	
                        Reporting Obligations

                    

        

        The Operator will, in respect of Programs it is conducting, prepare and submit to the Project Team:

        
            	
                         

                    	
                        (a)

                    	
                        Monthly Expenditure Reports;

                    

        

        
            	
                         

                    	
                        (b)

                    	
                        quarterly reports, with such reports to be delivered within 45 days following the end of each quarter;

                    

        

        
            	
                         

                    	
                        (c)

                    	
                        an annual financial report, with such report to be delivered within 75 days following the end of each calendar year; and

                    

        

        
            	
                         

                    	
                        (d)

                    	
                        an annual technical report, with such report to be delivered within 75 days following the completion of each Program, it being agreed that a Program will not be complete until after receipt of all data in respect of the Program.

                    

        

        The foregoing quarterly and annual reports will include all necessary data, analyses, projections, studies, evaluations and other reports sufficient to provide the Project Team with an accurate summary of all relevant Operations and the results of those Operations and will include a statement of Expenses and comparisons of such Expenses to approve Expenditure Budgets. The Operator will, on becoming aware
        of any material change in respect of the Properties, prepare and submit to the Parties a notice of the details of such change with the reports to be delivered within 24 hours of the occurrence of a material change.

        

        
            	
                        7.8

                    	
                        Funding Budgets and Expenditure Obligations

                    

        

        The Operator’s obligation to manage and carry out Operations approved by the Project Team or to perform any of its duties or obligations under this Agreement is subject to each of Sage and Gryphon paying its proportionate share of required funds in a timely way according to an approved schedule of advances or within the time limits contemplated in this Agreement for the payment of invoices for
        Expenses. The Operator will deliver to Sage and Gryphon Monthly Expenditure Reports no later than fifteen (15) calendar days following the completion of any calendar month. “Monthly Expenditure Report” means a monthly accounting report that will provide an itemized accounting of the Expenditures of the month and a projected funding amount due from each of Sage and Gryphon to satisfy its obligations to fund Expenditures for
        the next 60 day period. Each of Sage and Gryphon agree to fund its 50% share of the estimated Expenditures within ten (10) calendar days following delivery of each Monthly Expenditure Report. The Operator will immediately notify the Project Team of any material departure from an adopted Program and its related Expenditure Budget.

        

        
            	
                        7.9

                    	
                        No Operators Fee

                    

        

        It is not intended that BMC acting as the Operator shall profit nor suffer any loss by virtue of it acting in its capacity as Operator. The Accounting Procedure provides for the manner in which the Operator will account for Expenses expended for operations contemplated in this Agreement, including reasonable ordinary course administrative services, overhead and expenses related to serving as
        Operator.

         

        
            

        

        
            

            - 28 -

             

            

        

        
            	
                        8.

                    	
                        WORK PLANS AND EXPENDITURE BUDGET

                    

        

         

        
            	
                        8.1

                    	
                        Work Plans and Expenditure Budget

                    

        

        Within thirty (30) days following the Effective Date, the Operator will prepare and submit an initial draft Work Plan and Expenditure Budget for the balance of that calendar year for consideration by the Project Team. On or before November 1 of each year, commencing with the year in which the Effective Date occurs, the Operator will prepare and submit a draft Work Plan for the following calendar year for
        consideration by the Project Team. The term of an Work Plan will not exceed 12 months unless the Project Team otherwise unanimously approves. Every draft Work Plan will contain a statement in reasonable detail of the proposed Operations and estimates of all Expenditures to be incurred. The Operator will be entitled to include in the Expenditure Budget for the Work Plan, including an allowance of up to 10% for contingencies.

        

        
            	
                        8.2

                    	
                        Approval of Work Plans and Expenditure Budget

                    

        

        The Project Team will review and consider the initial Work Plan and Expenditure Budget within fifteen (15) days and, if it deems fit, approve such Work Plan and Expenditure Budget with such modifications, if any, as the Project Team deems desirable. Prior to October 15 of each year, commencing with the year after the year in which the Effective Date occurs, the Project Team will review and consider
        all exploration programs and Work Plans and Expenditure Budget submitted and, if it deems fit, approve an Work Plan and Expenditure Budget with such modifications, if any, as the Project Team deems desirable.

        

        
            	
                        9.

                    	
                        PARTITION

                    

        

        Each of the Parties waives any right to partition of the Properties or the Assets or any part thereof and no Party will seek or be entitled to partition of the Properties or the Assets whether by way of physical partition, judicial sale or otherwise.

        
            	
                        10.

                    	
                        FORCE MAJEURE

                    

        

         

        
            	
                        10.1

                    	
                        Suspension of Timing of Obligation

                    

        

        Time shall be of the essence of this Agreement provided, however, that, notwithstanding anything to the contrary contained herein, if any Party should at any time or times during the currency of this Agreement be delayed in or prevented from complying with this Agreement, or BMC experiences delays in completing any Work Plan, by reason of wars, acts of God, strike, lockouts or other industrial disputes,
        inability to access its place of business, acts of the public enemy, riots, weather conditions, fire, storm, flood, explosion, government restriction, failure to obtain any approvals required from regulatory authorities including environmental protection agencies, unavailability of equipment or qualified personnel, delays of transportation, breakdown of machinery, interference of persons primarily concerned about environmental issues or native rights pressure groups or other causes
        whether of the kind enumerated above or otherwise which are not reasonably within the control of the applicable Party, excluding for greater certainty and without limitation, unavailability of funds, the period of all such delays resulting from such causes or any of them, shall be excluded in computing the time within which anything required 

         

        
            

        

        
            

            - 29 -

             

            

        

        or permitted by the applicable party to be done, is to be done hereunder, it being understood that the time within which anything is to be done hereunder shall be extended by the total period of all such delays. Nothing contained in this Article 10 shall require the applicable party to test the constitutionality of any enacted law.

        

        
            	
                        10.2

                    	
                        Notification of Force Majeure

                    

        

        In the event that a Party asserts that an event or events of force majeure has occurred, such Party shall give notice in writing to the other Party specifying the following:

        
            	
                         

                    	
                        (a)

                    	
                        the commencement date and the cause and nature of the alleged event of force majeure;

                    

        

        
            	
                         

                    	
                        (b)

                    	
                        a Summary of the action such Party or its representatives, agents, contractors or employees have taken to the date of such notice to correct the alleged event of force majeure;

                    

        

        
            	
                         

                    	
                        (c)

                    	
                        confirmation as to all acts, actions and things done by such Party or its representatives, agents, contractors or employees to terminate the event of force majeure; and

                    

        

        
            	
                         

                    	
                        (d)

                    	
                        the reasonably expected duration of the period of force majeure.

                    

        

        A Party claiming an event or events of force majeure shall provide ongoing monthly notice in writing to the other Party with respect to event or events of force majeure, including the matters set out above, within fifteen (15) calendar days of the end of each calendar month during the period of force majeure and shall provide prompt notice in writing to the other Party upon the termination of the event
        or events of force majeure. A force majeure shall not extend the Option Expiry Date, unless otherwise agreed by the Parties.

        

        
            	
                        11.

                    	
                        RESTRICTIONS ON TRANSFERS

                    

        

        Neither Gryphon nor Sage may transfer, assign or dispose of, in whole or in part, directly or indirectly, its interest in the Option without the consent of the other, which consent may be unreasonably withheld, and subject to the transferee agreeing to be bound by the terms of this Agreement.

        

        
            	
                        12.

                    	
                        CHANGE OF CONTROL

                    

        

         

        
            	
                        12.1

                    	
                        Termination for Change of Control

                    

        

        The Parties acknowledge that they are entering into this Agreement and, if applicable, the Joint Venture Agreement based on its existing relationship with current management and the board of directors of the other. Either Party may terminate the Option Agreement upon the occurrence of any or all of the following events (a “Determination
        Event”):

        
            	
                         

                    	
                        (a)

                    	
                        a Change in Control;

                    

        

         

        
            

        

        
            

            - 30 -

             

            

        

        
            	
                         

                    	
                        (b)

                    	
                        Either or both Parties shall be in material default of any obligation to creditors secured or otherwise, which would constitute a Material Adverse Effect.

                    

        

         

        
            	
                        12.2

                    	
                        Liquidated Damages Payable to Sage

                    

        

        In the event of a termination by Sage of this Agreement as a result of a Change in Control of Gryphon pursuant to Section 12.1(a), Gryphon agrees to pay to Sage, as liquidated damages and not as a penalty, an amount equal to US$1,000,000 plus Expenditures funded by Sage on the closing of such Change in Control transaction.

        

        
            	
                        12.3

                    	
                        Liquidated Damages Payable to Gryphon

                    

        

        In the event of a termination by Gryphon of this Agreement as a result of a Change in Control of Sage, Sage agrees to pay to Gryphon pursuant to Section 12.1(a), as liquidated damages and not as a penalty, an amount equal to US$1,000,000 less any Expenditures funded by Sage on the closing of such Change in Control transaction.

        
            	
                        13.

                    	
                        AMENDMENTS AND WAIVER

                    

        

         

        
            	
                        13.1

                    	
                        Entire Agreement

                    

        

        This Agreement constitutes the entire agreement between the parties hereto relating to the subject matter hereof and supersedes all prior discussions and agreements with respect thereto including, without limitation, the LOI dated February 23, 2010 referred to in the recitals hereto.

        
            	
                        13.2

                    	
                        Amendments

                    

        

        An amendment or variation of this Agreement will be binding upon a Party only if evidenced in writing executed by that Party.

        
            	
                        13.3

                    	
                        Waiver

                    

        

        The waiver by a Party of any breach of this Agreement will only be binding upon that Party if evidenced in writing and executed by that Party. Any waiver will extend only to the particular breach so waived and will not limit any rights of such Party with respect to any future breach.

        
            	
                        14.

                    	
                        DEADLOCKS AND DISPUTES

                    

        

         

        
            	
                        14.1

                    	
                        Referral to Chief Executive Officers

                    

        

        Any deadlock or dispute arising out of this Agreement will be referred initially by the Parties to their respective chief executive officers (or such other persons as may be designated by the chief executive officer) for settlement in good faith. The chief executive officers or designees will meet within seven (7) days of the date on which the deadlock or dispute is so referred. If the deadlock or
        dispute cannot be resolved, then the chief executive officers will, within 14 days of the initial meeting, meet again in the presence of a mediator (whose expenses shall be paid by the Parties equally) to attempt to settle the deadlock or dispute. If the deadlock or dispute is not 

         

        
            

        

        
            

            - 31 -

             

            

        

        resolved within 21 days of the initial referral to the chief executive officers, the remainder of this Article 14 will apply.

        

        
            	
                        14.2

                    	
                        Resolution of Other Matters

                    

        

        Subject to Section 14.1, any deadlock or dispute under any provision of this Agreement that is not resolved by or dealt with in this Article 14 (including a matter which requires Simple Majority approval) shall be determined by arbitration according to the procedures established under Article 15.

        

        
            	
                        15.

                    	
                        ARBITRATION

                    

        

         

        
            	
                        15.1

                    	
                        Arbitration of Disputes

                    

        

        Subject to Article 14, all disputes arising out of or in connection with this Agreement will be referred to and finally resolved by arbitration in accordance with the terms of the Arbitration Act (Ontario) by a sole arbitrator.

        

        
            	
                        15.2

                    	
                        Notice to Arbitrate

                    

        

        Any Party may refer any such matter to arbitration by written notice to the other Party and, within 30 days after receipt of such notice, the parties to such arbitration will endeavour to agree on the appointment of an arbitrator, who will be capable of commencing the arbitration within 21 days of his appointment. The arbitrator will be a person who by a combination of education and experience is
        competent to adjudicate the matter in dispute and who has indicated his willingness and ability to act as arbitrator in accordance with this Article 15. If the parties to such arbitration are unable to agree on an arbitrator, the parties will request that ADR Chambers, Toronto recommend three arbitrators and each of Gryphon and Sage shall eliminate one of the three recommended arbitrators, the remaining arbitrator will be appointed to act as arbitrator in accordance with this Article
        15.

        
            	
                        15.3

                    	
                        Arbitration

                    

        

        The place of arbitration will be Toronto, Ontario, Canada and the language of the arbitration will be English.

        

        
            	
                        15.4

                    	
                        Arbitration Award

                    

        

        The award of the arbitrator will be final and binding upon each of the parties to the arbitration and will not be subject to appeal or judicial review.

        
            	
                        16.

                    	
                        ADDITIONAL COVENANTS

                    

        

         

        
            	
                        16.1

                    	
                        Further Assurances

                    

        

        The parties hereto covenant and agree to do or cause to be done all acts or things necessary to implement and carry into effect the provisions and intent of this Agreement. Without limitation, each of the parties hereto will from time to time execute and deliver all such further documents 

         

        
            

        

        
            

            - 32 -

             

            

        

        and instruments and do all such further acts and things as another party may reasonably require effectively to carry out or better evidence or perfect the full intent and meaning of this Agreement.

        

        
            	
                        17.

                    	
                        GENERAL

                    

        

        
            	
                        17.1

                    	
                        Notices

                    

        

        Any notice, direction or other instrument required or permitted to be given hereunder will be in writing and given by personal delivery or by delivering or sending it by facsimile or other similar form of communication addressed:

        
            	
                         

                    	
                        (a)

                    	
                        To Sage at:

                    

        

        
            	
                         

                    	
                        Suite 500, 365 Bay Street

                    

        

        
            	
                         

                    	
                        Toronto, Ontario

                    

        

        
            	
                         

                    	
                        M5H 2V1

                    

        

        
            	
                         

                    	
                        Attention:

                    	
                        Nigel Lees, President & CEO

                    

        

         

        
            	
                         

                    	
                        Telephone:

                    	
                        416-204-3170 x 222

                    

        

        
            	
                         

                    	
                        Telefax:

                    	
                        416-260-2243

                    

        

         

        
            	
                         

                    	
                        (b)

                    	
                        To BMC or to Gryphon at:

                    

        

        
            	
                         

                    	
                        5490 Longley Lane

                    

        

        
            	
                         

                    	
                        Reno, Nevada

                    

        

        
            	
                         

                    	
                        89511

                    

        

        
            	
                         

                    	
                        Attention:

                    	
                        John Key, CEO

                    

        

         

        
            	
                         

                    	
                        Telephone:

                    	
                        775-853-8814

                    

        

        
            	
                         

                    	
                        Telefax:

                    	
                        775-552-8511

                    

        

        Any such notice, direction or other instrument given as aforesaid will be deemed to have been effectively given, if sent by facsimile or other similar form of telecommunication, on the next Business Day following such transmission or, if delivered, to have been received on the date of such delivery. Any party may change its address for service from time to time by notice given in accordance with the
        foregoing and any subsequent notice will be sent to such party at its changed address.

        

        
            	
                        17.2

                    	
                        Public Statements

                    

        

        The text of any voluntary public statements which a party or its Affiliates wish to make with respect to the Properties will be made available to the other parties by notice at least 24 hours prior to release and the other parties will have the right during such 24 hour period to make suggestions for changes therein. The text of any press release or other public statements which a 

         

        
            

        

        
            

            - 33 -

             

            

        

        party or its Affiliates consider they are required by law to make with respect to the Properties or which are contained in any prospectus, statement of material facts, registration statement, management information circular or other similar document will be provided to the other parties by notice at the time of or prior to publication or filing with the securities regulatory authorities or stock
        exchanges. No party will utilize the name of any other party in any press release or other public statement without the consent of that party unless required by law.

        

        
            	
                        17.3

                    	
                        Confidentiality

                    

        

        Except as otherwise provided hereunder, the parties and Participants agree to treat all information, data, reports and other records (including the terms and existence of this Agreement and the identity of the parties and Participants) (collectively, the “Information”) relating to the business of the Joint Venture as confidential and will not
        disclose such Information to any person other than their legal advisors, financial advisors or auditors without the prior written consent of the other Party, as the case may be, such consent not to be unreasonably withheld; provided, however, that no Party will be liable for any such disclosure if such Information:

        
            	
                         

                    	
                        (a)

                    	
                        becomes generally available to the public other than as a result of a disclosure by a Party or its representatives in violation of this Agreement;

                    

        

        
            	
                         

                    	
                        (b)

                    	
                        was available to a Party on a non-confidential basis without violation of this Agreement prior to its disclosure by any Party;

                    

        

        
            	
                         

                    	
                        (c)

                    	
                        becomes available to a Party on a non-confidential basis without violation of this Agreement from a source other than another Party or any representative of another Party provided that such source is not bound by a duty of confidentiality to the Joint Venture or any of the parties or Participants;

                    

        

        
            	
                         

                    	
                        (d)

                    	
                        is made to any contractor, consultant. surety or any entity which provides financing for a Participant, where any such person reasonably needs to know such Information in the course of providing services to or otherwise dealing with the Participant making such disclosure and has executed a confidentiality undertaking containing provisions at least as
                        onerous as in this Section 17.3; or

                    

        

        
            	
                         

                    	
                        (e)

                    	
                        is required to be disclosed by Applicable Laws, provided that a Party first notifies the other parties or Participants that it believes it is required to disclose such information and it allows a reasonable period of time for the disclosure of such Information to be contested.

                    

        

        The provisions of this Section 17.3 shall survive the termination of this Agreement for a period of one year.

        

        
            	
                        17.4

                    	
                        Expenses

                    

        

        Each party will pay its own legal and other costs and expenses incurred in connection with the drafting of this Agreement and agrees to save harmless each other party from and against any and all claims whatsoever for any commissions or other remuneration payable or alleged to be payable to anyone acting on its behalf.

         

        
            

        

        
            

            - 34 -

             

            

        

        
            	
                        17.5

                    	
                        Time of Essence

                    

        

        Subject only to Article 10, time is of the essence of this Agreement.

        
            	
                        17.6

                    	
                        Successors and Assigns

                    

        

        This Agreement will enure to the benefit of and be binding upon the parties and their respective successors and permitted assigns, subject to the terms of this Agreement.

        
            	
                        17.7

                    	
                        Governing Law

                    

        

        This Agreement will be governed by and interpreted in accordance with the laws of the Province of Ontario, and the federal laws of Canada applicable herein. Each of the parties agrees to submit and attorn to the non-exclusive jurisdiction of the Courts of the Province of Ontario on any actions commenced between the parties or any of them that are not subject to arbitration under Article 15.

        The remainder of this page has been deliberately left blank

         

        
            

        

        
            

            
                - 35 -

            

             

            

        

         

        
            	
                        17.8

                    	
                        Counterparts

                    

        

        This Agreement may be executed in any number of counterparts, each of which will be considered to be an original and together will constitute one and the same document.

        IN WITNESS WHEREOF the parties have duly executed this Agreement on date set forth on the first page of this Agreement.

        
            	
                        SAGE GOLD INC.

                    
	
                        By:

                    	
                         

                    
	
                         

                    	
                        Name:

                        Title:

                    
	
                         

                    	
                         

                    
	
                         

                    	
                         

                    
	
                        BOREALIS MINING COMPANY

                    
	
                        By:

                    	
                         

                    
	
                         

                    	
                        Name:

                        Title:

                    
	
                         

                    	
                         

                    
	
                         

                    	
                         

                    
	
                        GRYPHON GOLD CORPORATION

                    
	
                        By:

                    	
                         

                    
	
                         

                    	
                        Name:

                        Title:

                    

        

         

         

         

        
            

        

        
            

             

             

            

        

        This is Schedule “A” to the

        Option Agreement dated as of March 5, 2010 among Sage Gold Inc., Borealis Mining

        Company, and Gryphon Gold Corporation

        DESCRIPTION OF PROPERTIES

        The Properties consist of the mining claims owned by:

         

        
            	
                        (i)

                    	
                        Richard J. Cavell, Hardrock Mining Co. and John Whitney and leased to BMC as described in the Affidavit of Payment of Maintenance Fees and Intention to Hold Mining Claims dated August 7, 2009 and recorded in Mineral County, Nevada, as document #148668; 

                    

        

         

        
            	
                        (ii)

                    	
                        Borealis Mining Company as described in the Affidavit of Payment of Maintenance Fees and Intention to Hold Mining Claims dated August 7, 2009 as recorded in Mineral County, Nevada, as document #148666; and 

                    

        

         

        
            	
                        (iii) 

                    	
                        Borealis Mining Company as described in the Affidavit of Payment of Maintenance Fees and Intention to Hold Mining Claims dated August 7, 2009 as recorded in Mineral County, Nevada, as document #148667.

                    

        

         

         

        
            

        

        
            

             

             

            

        

        This is Schedule “B” to the

        Option Agreement dated as of March 5, 2010 among Sage Gold Inc., Borealis Mining

        Company, and Gryphon Gold Corporation

        ACCOUNTING PROCEDURES

        [attached]

         

         

        
            

        

        
            

             

             

            

        

        This is Schedule “C” to the

        Option Agreement dated as of March 5, 2010 among Sage Gold Inc., Borealis Mining

        Company, and Gryphon Gold Corporation

        ROYALTIES

        The Royalties are the production royalties payable in respect of certain of the claims forming part of the Properties as set out in Section 5 of the Mining Lease referred to in Schedule B, subject to amendment in accordance with the terms of the Option Agreement Amendment to Mining Lease and Amendment No. 1 and Amendment No. 2 thereto, also referred to in Schedule G.

         

        
            

        

        
            

             

             

            

        

        This is Schedule “D” to the

        Option Agreement dated as of March 5, 2010 among Sage Gold Inc., Borealis Mining

        Company, and Gryphon Gold Corporation

        PRE FEASIBILITY STUDY

        [Reference is made to the Pre-Feasibility Study filed on 

        sedar.com on September 22, 2009]

         

        
            

        

        
            

             

             

            

        

        This is Schedule “E” to the

        Option Agreement dated as of March 5, 2010 among Sage Gold Inc., Borealis Mining

        Company, and Gryphon Gold Corporation

        TERMS OF REIMBURSEMENT OF EXPENDITURES

         

        Amounts to be reimbursed in accordance with Section 2.6 of the Option Agreement shall be evidenced by a promissory note (the “Note”) of Gryphon Gold Corporation which shall be issued on the following terms:

        
            	
                        (1)

                    	
                        The principal amount of the Note shall be as determined in accordance with Section 2.6 of the Option Agreement;

                    

        

        
            	
                        (2)

                    	
                        The maturity date of the Note shall be 12 months from the date of issue;

                    

        

        
            	
                        (3)

                    	
                        The principal amount of the Note shall bear interest at the prime rate of interest (calculated annually) charged by Gryphon Gold Corporation's principal banker to its customers at the date of issue;

                    

        

        
            	
                        (4)

                    	
                        The interest shall be calculated and accrue annually;

                    

        

        
            	
                        (5)

                    	
                        The principal amount and accrued interest shall be payable on the maturity date;

                    

        

        
            	
                        (6)

                    	
                        Gryphon Gold Corporation shall covenant in the Note not to incur any new debt obligations for borrowed money which rank in priority to the promissory note. 

                    

        

         

        
            

        

        
            

             

             

            

        

        This is Schedule “F” to the

        Option Agreement dated as of March 5, 2010 among Sage Gold Inc., Borealis Mining

        Company, and Gryphon Gold Corporation

        INDICATIVE TERMS OF THE JOINT VENTURE AGREEMENT

        [attached]

         

        
            

        

         

         

        This is Schedule “G” to the

        Option Agreement dated as of March 5, 2010 among Sage Gold Inc., Borealis Mining

        Company, and Gryphon Gold Corporation

        UNDERLYING AGREEMENTS

        The following agreements, copies of which have been delivered by Gryphon to Sage concurrently with the execution and delivery of the Option Agreement, constitute the Underlying Agreements:

         

        
            	
                        1.

                    	
                        Mining Lease made effective as of the 24th day of January, 1997, by and between Richard J. Cavell TTTEE F/T Richard J. Cavell Trust dated 2/23/94, Hardrock Mining Company, a Nevada corporation, and John W. Whitney and J.D. Welsh & Associates, Inc., a Nevada Corporation.

                    

        

         

        
            	
                        2.

                    	
                        Amendment No. 1 to Mining Lease made and effective as of the 24th day of February 1997, by and between Richard J. Cavell TTTEE F/T Richard J. Cavell Trust dated 2/23/94, Hardrock Mining Company, a Nevada corporation, and John W. Whitney, and J.D. Welsh & Associates, Inc., a Nevada corporation, and Cambior Exploration USA, Inc., a Nevada
                        corporation.

                    

        

         

        
            	
                        3.

                    	
                        Assignment of Borealis Mining Lease dated January 24, 1997 made and entered into as of the 10th day of January, 2005, by and between Golden Phoenix Mineral Company, a Minnesota corporation, and Borealis Mining Company, a Nevada corporation.

                    

        

         

        
            	
                        4.

                    	
                        Option Agreement Amendment to Mining Lease entered into effective as of August 22, 2008 by and among Gryphon Gold Corporation, a Nevada corporation, Borealis Mining Company, a Nevada corporation, Richard J. Cavell TTTEE F/T Richard J. Cavell Trust dated 2/23/1994, Hardrock Mining Company, a Nevada corporation, and John W. Whitney, an
                        individual.

                    

        

         

        
            	
                        5.

                    	
                        Amendment No. 1 to the Option Agreement Amendment to Mining Lease is entered into effective as of August 7, 2009, by and among Gryphon Gold Corporation, a Nevada corporation, Borealis Mining Company, a Nevada corporation, Richard J. Cavell TTTEE F/T Richard J. Cavell Trust dated 2/23/1994, Hardrock Mining Company, a Nevada corporation, and John W.
                        Whitney, an individual.

                    

        

         

        
            	
                        6.

                    	
                        Amendment No. 2 to the Option Agreement Amendment to Mining Lease, as amended, is entered into effective as of February 12, 2010, by and among Gryphon Gold Corporation, a Nevada corporation, Borealis Mining Company, a Nevada corporation, Richard J. Cavell TTTEE F/T Richard J. Cavell Trust dated 2/23/1994, Hardrock Mining Company, a Nevada corporation,
                        and John W. Whitney, an individual.

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