Document:

Exhibit

Exhibit 10.17
 
EXECUTION VERSION

AMERICAN REALTY CAPITAL HOSPITALITY PORTFOLIO SMT, LLC
c/o American Realty Hospitality Trust, Inc. 
405 Park Avenue
New York, NY 10022

October 20, 2015

Summit Hotel OP, LP
Each of the Sellers listed on Schedule 1 attached hereto
c/o Summit Hotel Properties, Inc.
12600 Hill Country Boulevard, Suite R-100 
Austin, TX 78738 
Attention: Chris Eng, Senior Vice President, General Counsel & Chief Risk Officer

Reference is made to that certain Real Estate Purchase and Sale Agreement, dated June 2, 2015 (the “Agreement”), by and among the sellers listed on Schedule 1 thereto, Summit Hotel OP, LP and American Realty Capital Hospitality Portfolio SMT, LLC.  Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Agreement. 

Sellers and Purchaser desire to include certain additional terms, as well as modify certain provisions, within the Agreement, and have agreed to amend the Agreement to reflect such additions and modifications on the terms and conditions set forth in this Amendment. Specifically, Sellers and Purchaser intend to extend the time period during which Purchaser shall have the option to extend the Closing Date.

Accordingly, we hereby agree with you as follows and the Agreement shall be deemed amended in accordance with Section 14.4 thereof: 

		
	1.
	Amendment to Section 4.1.  The final sentence of Section 4.1 of the Agreement is hereby amended to read as follows:  “Notwithstanding anything to the contrary set forth herein, Purchaser shall have the right, in its sole and absolute discretion (and without prejudice to any of its rights under this Agreement), to extend the Closing Date for a period of up to 60 days upon 5 days’ prior written notice to Sellers.”

		
	2.
	Counterpart Originals.  This letter agreement may be executed in several counterparts, each of which shall be deemed an original, and such counterparts shall together constitute one and the same agreement. 

Please confirm your agreement with the foregoing by signing and returning the enclosed execution counterpart of this letter. 

Very truly yours, 

AMERICAN REALTY CAPITAL HOSPITALITY PORTFOLIO SMT, LLC

By: /s/ Paul C. Hughes
 Name: Paul C. Hughes
 Title:   Authorized Signatory

AGREED AND ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN: 

SUMMIT HOTEL OP, LP 
(Individually and in accordance with Section 14.20 of the Agreement on behalf of each Seller)

By: SUMMIT HOTEL GP, LLC, its general partner

By: SUMMIT HOTEL PROPERTIES, INC., its sole member

By:  /s/ Christopher Eng      
   Name:  Christopher Eng      Title:    Secretary 

Schedule 1
Sellers/Hotels
	
			
	OWNER
	State of Formation
	LOCATION

	Summit Hotel OP, LP
	Delaware
	Residence Inn - Jackson, MS

	Summit Hotel OP, LP
	Delaware
	Holiday Inn Express - Vernon Hills, IL

	Summit Hospitality I, LLC
	Delaware
	Courtyard - Germantown, TN

	Summit Hotel OP, LP
	Delaware
	Courtyard - Jackson, MS

	Summit Hospitality I, LLC
	Delaware
	Fairfield Inn & Suites - Germantown, TN

	Summit Hospitality I, LLC
	Delaware
	Residence Inn - Germantown, TN

	Summit Hospitality 079, LLC
	Delaware
	Aloft - Jacksonville, FL

	Summit Hotel OP, LP
	Delaware
	Staybridge Suites - Ridgeland, MS

	Summit Hospitality 093, LLC
	Delaware
	Homewood Suites - Ridgeland, MS

	Summit Hospitality I, LLC
	Delaware
	Courtyard - El Paso, TXExhibit

 

Exhibit 10.18

FIRST AMENDMENT TO
ADVISORY AGREEMENT 

This FIRST AMENDMENT TO ADVISORY AGREEMENT is entered into as of November 11, 2015, among American Realty Capital Hospitality Trust, Inc., American Realty Capital Hospitality Operating Partnership, L.P. (the “Operating Partnership”) and American Realty Capital Hospitality Advisors, LLC (the “Advisor”).

RECITALS

WHEREAS, the Company, the Operating Partnership and the Advisor entered into that certain Advisory Agreement, dated as of January 7, 2014 (as amended, the “Advisory Agreement”); and

WHEREAS, the Company, the Operating Partnership and the Advisor desire to make certain amendments to the Advisory Agreement.

NOW, THEREFORE, in consideration of the premises made hereunder, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

		
	1.
	Amendment to Section 1.  The following definition is hereby added to Section 1 of the Agreement in the appropriate alphabetical order:

“ ‘Asset Management Fee’ means the fee payable to the Advisor of its assignees pursuant to Section 10(i) for any period commencing on or after October 1, 2015.”  
    
		
	2.
	Amendment to Section 10(f) of the Advisory Agreement.  Effective as of the date hereof, Section 10(f) of the Advisory Agreement is hereby replaced in its entirety with the following:

“(f)    Payment of Fees.  In connection with the Acquisition Fee, Real Estate Commission, Annual Subordinated Performance Fee, Asset Management Fee and Financing Coordination Fee, the Company shall pay such fees to the Advisor or its assignees in cash, in Shares, or a combination of both, the form of payment to be determined in the sole discretion of the Advisor.  For the purposes of the payment of any fees in Shares, (i) if at the applicable time an Offering is underway, (a) prior to the NAV Pricing Start Date, each Share shall be valued at the per-share offering price of the Shares in such Offering minus the maximum Selling Commissions and Dealer Manager Fee allowed in such Offering,  and (b) after the NAV Pricing Start Date, each Share shall be valued at the then-current NAV per Share; and (ii) at all other times, each Share shall be valued by the Board in good faith (A) at the estimated value thereof, calculated in accordance with the provisions of NASD Rule 2340(c)(1) (or any successor similar rule), or (B) if no such rule shall then exist, at the fair market value thereof; provided, however, that in the case of Asset Management Fees payable in grants of restricted Shares, each Share shall be valued in accordance with the provisions of the equity incentive plan of the Company pursuant to which such grants are to be made.”

		
	3.
	Amendment to Section 10(h) of the Advisory Agreement.  Effective as of the date hereof, Section 10(h) of the Advisory Agreement is hereby replaced in its entirety with the following:

         

 

“(h)    Subordinated Participation Interests.  The Company shall cause the Operating Partnership to periodically issue Subordinated Participation Interests in the Operating Partnership to the Advisor or its assignees, pursuant to the terms and conditions contained in the Operating Partnership Agreement, in connection with the Advisor’s (or its assignees’) management of the Operating Partnership’s assets for any period ending prior to or on September 30, 2015.”

		
	4.
	Addition of Section 10(i) of the Advisory Agreement.  Effective as of the date hereof, the Advisory Agreement is supplemented by the addition of the following new Section 10(i):

“(i)     Asset Management Fee. For any period commencing on or after October 1, 2015, the Company shall pay an Asset Management Fee to the Advisor or its assignees in accordance with this Section 10(i) as compensation for services rendered in connection with the management of the Company’s assets.  The Asset Management Fee is payable on the first business day of each month in the amount of 0.0625% multiplied by (i) during any period of time prior to the time the Company publishes an NAV, the Cost of Assets or (ii) during any period of time after the time the Company publishes an NAV, the lower of (A) the Cost of Assets and (B) the fair market value of the Company’s assets as reported in the applicable periodic or current report filed with the Securities and Exchange Commission disclosing the fair market value; provided, however, that until the Offering is completed, payment of the Asset Management Fee, if the form of payment determined by the Advisor is cash, will be deferred if the forecast of Modified Funds from Operations (“MFFO”) coverage (where the coverage is calculated as MFFO divided by the distribution payout) for the applicable period does not exceed 110%.  Forecasts of MFFO coverage will be calculated on a monthly basis through December 2015, and will be calculated quarterly thereafter.  Any deferred Asset Management Fee will accrue and become payable in full as soon as the MFFO coverage exceeds 110% in the current or any subsequent period.  For the avoidance of doubt, once the Offering is completed, payment of the Asset Management Fee will no longer be subject to any MFFO coverage threshold.”

[Signature page follows.]

         

 

IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, have duly executed this agreement as of the date first set forth above.

AMERICAN REALTY CAPITAL HOSPITALITY TRUST, INC.

By:    /s/ Jonathan P. Mehlman        
Name:    Jonathan P. Mehlman
Title:    CEO and President

AMERICAN REALTY CAPITAL HOSPITALITY OPERATING PARTNERSHIP, L.P.

By:    American Realty Capital Hospitality Trust, 
Inc., its General Partner

By:    /s/ Jonathan P. Mehlman        
Name:    Jonathan P. Mehlman
Title:    CEO and President
    

AMERICAN REALTY CAPITAL HOSPITALITY ADVISORS, LLC

		
	By:
	American Realty Capital Hospitality Special Limited Partner, LLC, its Member

		
	By:
	American Realty Capital IX, LLC, 

its Sole Member

		
	By:
	AR Capital, LLC, its Sole Member

By:    /s/ William M. Kahane            
Name:    William M. Kahane    
Title:    MemberExhibit 10.1

 

Execution Version

 

 

 

LOAN AGREEMENT

 

Dated as of October 27, 2015

 

Between

 

 

GOLDEN MINERALS COMPANY

 

as Borrower

 

 

and

 

 

SENTIENT GLOBAL RESOURCES FUND IV, L.P.,

 

as Lender

 

 

 

 

	
Section 1. Definitions
    	
1
    
	
 
    	
 
    	
 
    
	
1.1
    	
Defined Terms
    	
1
    
	
 
    	
 
    	
 
    
	
1.2
    	
Accounting Terms
    	
9
    
	
 
    	
 
    	
 
    
	
1.3
    	
Other Interpretive   Provisions
    	
9
    
	
 
    	
 
    	
 
    
	
Section 2. Commitment
    	
10
    
	
 
    	
 
    	
 
    
	
Section 3. Loan
    	
10
    
	
 
    	
 
    	
 
    
	
3.1
    	
Loan Interest and   Payments
    	
10
    
	
 
    	
 
    	
 
    
	
3.2
    	
Prepayment Prohibited
    	
10
    
	
 
    	
 
    	
 
    
	
3.3
    	
Use of Proceeds
    	
10
    
	
 
    	
 
    	
 
    
	
3.4
    	
Payment Due Date
    	
10
    
	
 
    	
 
    	
 
    
	
3.5
    	
Payments without Offset
    	
11
    
	
 
    	
 
    	
 
    
	
3.6
    	
Conditions Precedent to   the Advance
    	
12
    
	
 
    	
 
    	
 
    
	
Section 4. Security for the Obligations
    	
14
    
	
 
    	
 
    	
 
    
	
4.1
    	
Security for   Obligations
    	
14
    
	
 
    	
 
    	
 
    
	
4.2
    	
Possession and Transfer   of Collateral
    	
15
    
	
 
    	
 
    	
 
    
	
4.3
    	
Preservation of the   Collateral
    	
15
    
	
 
    	
 
    	
 
    
	
4.4
    	
Other Actions as to any   and all Collateral
    	
15
    
	
 
    	
 
    	
 
    
	
4.5
    	
Financing Statements
    	
16
    
	
 
    	
 
    	
 
    
	
Section 5. Representations and Warranties
    	
16
    
	
 
    	
 
    	
 
    
	
5.1
    	
Organization and Name
    	
16
    
	
 
    	
 
    	
 
    
	
5.2
    	
Authorization
    	
17
    
	
 
    	
 
    	
 
    
	
5.3
    	
Validity and Binding   Nature
    	
17
    
	
 
    	
 
    	
 
    
	
5.4
    	
Consent; Absence of   Breach
    	
17
    
	
 
    	
 
    	
 
    
	
5.5
    	
Ownership of   Properties; Liens
    	
18
    
	
 
    	
 
    	
 
    
	
5.6
    	
Capital Structure
    	
18
    
	
 
    	
 
    	
 
    
	
5.7
    	
Intellectual Property
    	
18
    
	
 
    	
 
    	
 
    
	
5.8
    	
Financial Statements
    	
19
    
	
 
    	
 
    	
 
    
	
5.9
    	
Litigation and   Contingent Liabilities
    	
19
    
	
 
    	
 
    	
 
    
	
5.10
    	
Event of Default
    	
19
    
	
 
    	
 
    	
 
    
	
5.11
    	
Adverse Circumstances
    	
19
    
	
 
    	
 
    	
 
    
	
5.12
    	
Environmental Laws and   Hazardous Substances
    	
19
    
	
 
    	
 
    	
 
    
	
5.13
    	
Solvency, etc.
    	
20
    

 

i

 

	
5.14
    	
ERISA Obligations
    	
20
    
	
 
    	
 
    	
 
    
	
5.15
    	
Labor Relations
    	
21
    
	
 
    	
 
    	
 
    
	
5.16
    	
Security Interest
    	
21
    
	
 
    	
 
    	
 
    
	
5.17
    	
Lending Relationship
    	
21
    
	
 
    	
 
    	
 
    
	
5.18
    	
Business Loan
    	
21
    
	
 
    	
 
    	
 
    
	
5.19
    	
Taxes
    	
21
    
	
 
    	
 
    	
 
    
	
5.20
    	
Governmental Regulation
    	
21
    
	
 
    	
 
    	
 
    
	
5.21
    	
Place of Business
    	
22
    
	
 
    	
 
    	
 
    
	
5.22
    	
Complete Information
    	
22
    
	
 
    	
 
    	
 
    
	
5.23
    	
Subordinated Debt
    	
22
    
	
 
    	
 
    	
 
    
	
5.24
    	
Material Contracts
    	
22
    
	
 
    	
 
    	
 
    
	
5.25
    	
Compliance with   Applicable Laws
    	
22
    
	
 
    	
 
    	
 
    
	
5.26
    	
No Trigger of Change of   Control
    	
22
    
	
 
    	
 
    	
 
    
	
5.27
    	
Securities Laws and   Exchange Rules
    	
23
    
	
 
    	
 
    	
 
    
	
5.28
    	
Mining Rights
    	
23
    
	
 
    	
 
    	
 
    
	
5.29
    	
Ownership and Use of   Properties; Liens
    	
23
    
	
 
    	
 
    	
 
    
	
5.30
    	
Royalties, etc.
    	
23
    
	
 
    	
 
    	
 
    
	
5.31
    	
No Corrupt Practices
    	
23
    
	
 
    	
 
    	
 
    
	
Section 6. Affirmative Covenants
    	
24
    
	
 
    	
 
    	
 
    
	
6.1
    	
Existence
    	
24
    
	
 
    	
 
    	
 
    
	
6.2
    	
Compliance with Laws
    	
24
    
	
 
    	
 
    	
 
    
	
6.3
    	
Approvals
    	
24
    
	
 
    	
 
    	
 
    
	
6.4
    	
Payment of Taxes and   Liabilities
    	
24
    
	
 
    	
 
    	
 
    
	
6.5
    	
Maintain Property
    	
25
    
	
 
    	
 
    	
 
    
	
6.6
    	
Maintain Insurance
    	
25
    
	
 
    	
 
    	
 
    
	
6.7
    	
ERISA Liabilities;   Employee Plans
    	
25
    
	
 
    	
 
    	
 
    
	
6.8
    	
Financial Statements
    	
26
    
	
 
    	
 
    	
 
    
	
6.9
    	
Notice of Proceedings
    	
26
    
	
 
    	
 
    	
 
    
	
6.10
    	
Notice of Event of   Default or Material Adverse Effect
    	
26
    
	
 
    	
 
    	
 
    
	
6.11
    	
Environmental Matters
    	
27
    
	
 
    	
 
    	
 
    
	
6.12
    	
Shareholder Approval
    	
27
    
	
 
    	
 
    	
 
    
	
6.13
    	
Best Efforts to Raise   Capital through the Sale of Equity
    	
27
    

 

ii

 

	
6.14
    	
Security Interest in   Newly Acquired Assets
    	
27
    
	
 
    	
 
    	
 
    
	
6.15
    	
SEC and Exchange   Required Filings
    	
27
    
	
 
    	
 
    	
 
    
	
6.16
    	
Registration Rights   Agreement
    	
27
    
	
 
    	
 
    	
 
    
	
6.17
    	
Further Assurances
    	
28
    
	
 
    	
 
    	
 
    
	
Section 7. Negative Covenants
    	
28
    
	
 
    	
 
    	
 
    
	
7.1
    	
Use of Proceeds
    	
28
    
	
 
    	
 
    	
 
    
	
7.2
    	
Debt
    	
28
    
	
 
    	
 
    	
 
    
	
7.3
    	
Liens
    	
28
    
	
 
    	
 
    	
 
    
	
7.4
    	
Investments
    	
30
    
	
 
    	
 
    	
 
    
	
7.5
    	
Modification of   Material Agreements
    	
30
    
	
 
    	
 
    	
 
    
	
7.6
    	
Asset   Dispositions, etc.
    	
30
    
	
 
    	
 
    	
 
    
	
7.7
    	
No Change in Control
    	
30
    
	
 
    	
 
    	
 
    
	
7.8
    	
Sale and Leaseback
    	
30
    
	
 
    	
 
    	
 
    
	
7.9
    	
Issuance of Capital   Securities
    	
31
    
	
 
    	
 
    	
 
    
	
7.10
    	
Distributions
    	
31
    
	
 
    	
 
    	
 
    
	
7.11
    	
No Adverse Change to   Employee Benefits
    	
31
    
	
 
    	
 
    	
 
    
	
7.12
    	
Inconsistent Agreements
    	
31
    
	
 
    	
 
    	
 
    
	
7.13
    	
Royalty and Other   Agreements
    	
31
    
	
 
    	
 
    	
 
    
	
7.14
    	
Business Activities;   Change of Legal Status and Organizational Documents
    	
32
    
	
 
    	
 
    	
 
    
	
7.15
    	
Derivatives
    	
32
    
	
 
    	
 
    	
 
    
	
Section 8. Events of Default
    	
32
    
	
 
    	
 
    	
 
    
	
8.1
    	
Nonpayment of   Obligations
    	
32
    
	
 
    	
 
    	
 
    
	
8.2
    	
Misrepresentation
    	
32
    
	
 
    	
 
    	
 
    
	
8.3
    	
Nonperformance
    	
32
    
	
 
    	
 
    	
 
    
	
8.4
    	
Default under Other   Debt
    	
32
    
	
 
    	
 
    	
 
    
	
8.5
    	
Other Material   Obligations
    	
32
    
	
 
    	
 
    	
 
    
	
8.6
    	
Bankruptcy, Insolvency, etc.
    	
33
    
	
 
    	
 
    	
 
    
	
8.7
    	
Judgments
    	
33
    
	
 
    	
 
    	
 
    
	
8.8
    	
Change in Control
    	
33
    
	
 
    	
 
    	
 
    
	
8.9
    	
Guaranty
    	
33
    
	
 
    	
 
    	
 
    
	
8.10
    	
Subordinated Debt
    	
33
    

 

iii

 

	
8.11
    	
Material Agreement
    	
34
    
	
 
    	
 
    	
 
    
	
8.12
    	
Impairment of   Security, etc.
    	
34
    
	
 
    	
 
    	
 
    
	
8.13
    	
Expropriation, etc.
    	
34
    
	
 
    	
 
    	
 
    
	
8.14
    	
Failure to Receive   Approvals
    	
34
    
	
 
    	
 
    	
 
    
	
Section 9. Remedies
    	
34
    
	
 
    	
 
    	
 
    
	
9.1
    	
Rights of Lender
    	
34
    
	
 
    	
 
    	
 
    
	
9.2
    	
Possession and Assembly   of Collateral
    	
35
    
	
 
    	
 
    	
 
    
	
9.3
    	
Sale of Collateral
    	
36
    
	
 
    	
 
    	
 
    
	
9.4
    	
Standards for   Exercising Remedies
    	
36
    
	
 
    	
 
    	
 
    
	
9.5
    	
UCC and Offset Rights
    	
37
    
	
 
    	
 
    	
 
    
	
9.6
    	
Additional Remedies
    	
37
    
	
 
    	
 
    	
 
    
	
9.7
    	
Attorney-in-Fact
    	
38
    
	
 
    	
 
    	
 
    
	
9.8
    	
No Marshaling
    	
39
    
	
 
    	
 
    	
 
    
	
9.9
    	
Application of Proceeds
    	
39
    
	
 
    	
 
    	
 
    
	
9.10
    	
No Waiver
    	
39
    
	
 
    	
 
    	
 
    
	
Section 10. Miscellaneous
    	
39
    
	
 
    	
 
    	
 
    
	
10.1
    	
Obligations Absolute
    	
39
    
	
 
    	
 
    	
 
    
	
10.2
    	
Entire Agreement
    	
40
    
	
 
    	
 
    	
 
    
	
10.3
    	
Assignability
    	
40
    
	
 
    	
 
    	
 
    
	
10.4
    	
Confirmations
    	
41
    
	
 
    	
 
    	
 
    
	
10.5
    	
Binding Effect
    	
41
    
	
 
    	
 
    	
 
    
	
10.6
    	
Governing Law;   Jurisdiction, etc.
    	
41
    
	
 
    	
 
    	
 
    
	
10.7
    	
Waiver of Jury Trial
    	
42
    
	
 
    	
 
    	
 
    
	
10.8
    	
Enforceability
    	
42
    
	
 
    	
 
    	
 
    
	
10.9
    	
Survival of Borrower   Representations
    	
43
    
	
 
    	
 
    	
 
    
	
10.10
    	
Extensions of Lender’s   Commitment
    	
43
    
	
 
    	
 
    	
 
    
	
10.11
    	
Time of Essence
    	
43
    
	
 
    	
 
    	
 
    
	
10.12
    	
Counterparts; Facsimile   Signatures
    	
43
    
	
 
    	
 
    	
 
    
	
10.13
    	
Notices
    	
43
    
	
 
    	
 
    	
 
    
	
10.14
    	
Costs, Fees and   Expenses
    	
44
    
	
 
    	
 
    	
 
    
	
10.15
    	
Indemnification
    	
45
    
	
 
    	
 
    	
 
    
	
10.16
    	
Revival and   Reinstatement of Obligations
    	
46
    

 

iv

 

	
10.17
    	
Document Imaging
    	
46
    

 

v

 

LOAN AGREEMENT

 

This Loan Agreement (the “Agreement”), dated as of October 27, 2015 (“Effective Date”), is by and between GOLDEN MINERALS COMPANY, a Delaware corporation (“Borrower”) and SENTIENT GLOBAL RESOURCES FUND IV, L.P., a Cayman Islands exempted limited partnership (the “Lender”).

 

RECITALS

 

Pursuant to and subject to the terms and conditions of this Agreement, Lender will make the loans described herein and Borrower’s obligations will be secured by the liens and security interests described herein.

 

NOW THEREFORE, in consideration of the premises, and the mutual covenants and agreements set forth herein, Borrower agrees to borrow from the Lender, and the Lender agrees to lend to Borrower, subject to and upon the following terms and conditions:

 

AGREEMENTS

 

Section 1.  Definitions.

 

1.1          Defined Terms. For the purposes of this Agreement, the following capitalized words and phrases shall have the meanings set forth below.

 

“Advance” means the advance of a Loan in a principal amount equal to the Loan Commitment.

 

“Affiliate” of any Person shall mean any other Person which, directly or indirectly, controls or is controlled by or is under common control with such Person.  A Person shall be deemed to be “controlled by” any other Person if such Person possesses, directly or indirectly, power to direct or cause the direction of the management and policies of such Person whether by contract, ownership of voting securities, membership interests or otherwise.

 

“Agreed Form” means, in connection with any document referred to herein, the form of the document acceptable to the Lender, acting reasonably, which is executed and delivered by the Borrower and/or any Guarantor in connection with this Agreement.

 

“Applicable Law” means, with respect to any Person or matter, any supranational, national, federal, state, provincial regional, tribal or local statute, law, rule, treaty, convention, regulation, order, decree, directive, consent decree, request, determination or other requirement (whether or not having the force of law) relating to such Person or matter and, where applicable, any binding interpretation thereof by any Governmental Authority having jurisdiction with respect thereto or charged with the administration or interpretation thereof.

 

“Approval” means an approval, authorization, license, permit, consent, filing or registration by or with any Governmental Agency or other Person whether or not referred to in Schedule 1.1 (Approvals).

 

1

 

“Asset Disposition” shall mean the (a) sale, lease, contribution or other conveyance (including by way of merger), assignment or other transfer (including the grant of options, warrants, or other purchase rights) of any material asset by the Borrower or any Guarantor to any Person or (b) the loss, destruction, damage, condemnation, confiscation, requisition, seizure or taking of a material portion of the Velardeña Operations or the El Quevar Project.

 

“Bankruptcy Code” shall mean the United States Bankruptcy Code, as now existing or hereafter amended and any similar laws, rules, regulations or practices in jurisdictions other than the United States of America.

 

“Borrower” shall mean Golden Minerals Company, a Delaware corporation.

 

“Borrower’s Collateral” shall have the meaning set forth in Section 4.1 hereof.

 

“Business Day” shall mean any day other than a Saturday, Sunday or a legal holiday on which banks are authorized or required to be closed for the conduct of commercial banking business in Denver, Colorado and in the location of Lender’s bank accounts.

 

“Capital Securities” means, with respect to any Person, all shares, interests (including membership interests), participations or other equivalents (however designated, whether voting or non-voting) of such Person’s share capital, whether now outstanding or issued hereafter.

 

“Change in Control” with regard to the Borrower, means an event or series of events by which, (a) other than the Lender or any of its Affiliates, any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3  and 13d-5 under the Exchange Act, except that a “person” or “group” shall be deemed to have “beneficial ownership” of all Capital Securities that such “person” or “group” has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “option right”)), directly or indirectly, of fifty percent (50%) or more of the outstanding Capital Securities of the Borrower entitled to vote in the election of members of the board of directors (or equivalent governing body) of Borrower or (b) a majority of the members of the board of directors of the Borrower shall not constitute Continuing Directors. “Change in Control” with regard to the Guarantors, means (i) any failure of Borrower to own (and to have sole power to vote and dispose of), directly or indirectly through one or more of the Guarantors, one hundred percent of the Capital Securities of each Guarantor, free and clear of all Liens (other than Permitted Liens), or (ii) any transfer of any of the Capital Securities of any of the Guarantor.  For the purpose hereof, (i) the terms “control” or “controlling” shall mean the possession of the power to direct, or cause the direction of, the management and policies of the Borrower by contract or voting of securities or ownership interests; and (ii) the term “Continuing Directors” shall mean the directors of the Borrower as of the Effective Date and each other director of the Borrower, if, in each case, such other director’s appointment or nomination for election to the board of directors (or equivalent governing body) of the Borrower is made or recommended by at least 51% of the then Continuing Directors.

 

“Collateral” shall have the meaning set forth in Section 4.1 hereof.

 

2

 

“Conversion Rights” means the rights further described in the Note whereby the Lender has the right to convert all or any portion of the principal and interest under the Loan into shares of common stock of the Borrower. Notwithstanding anything apparently to the contrary contained herein or in the Note, the rights of conversion described in the Note may not be exercised by the Lender or any holder of the Note unless and until after the shareholders of the Borrower have approved the conversion rights as contemplated by Section 6.12.

 

“Corrupt Practices” means the offering, promising or giving of any undue pecuniary or other advantage, whether directly or through intermediaries, to a foreign public official, for that official or for a third party, in order that the official act or refrain from acting in relation to the performance of official duties, in order to obtain or retain business or other improper advantage in the conduct of international business.

 

“Debt” shall mean, as to any Person, without duplication, (a) all indebtedness of such Person for borrowed money (including principal, interest, fees and charges), whether or not evidenced by bonds, debentures, notes or similar instruments; (b) all obligations to pay the deferred purchase price of property or services (except for obligations due and payable during the term of the Note under joint venture, farm-out and similar type of arrangements that Borrower or any Subsidiary can terminate in its sole discretion but only if doing so will not result in a Material Adverse Effect); (c) all obligations, contingent or otherwise, with respect to the maximum face amount of all letters of credit (whether or not drawn), bankers’ acceptances and similar obligations issued for the account of such Person; (d) all indebtedness secured by any Lien on any property owned by such Person, whether or not such indebtedness has been assumed by such Person (provided, however, if such Person has not assumed or otherwise become liable in respect of such indebtedness, such indebtedness shall be deemed to be in an amount equal to the fair market value of the property subject to such Lien at the time of determination); (e) the aggregate amount of all capitalized lease obligations of such Person; (f) all hedging obligations of such Person, and (g) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (a) through (f) above.  Notwithstanding the foregoing, Debt shall not include trade payables and accrued expenses incurred by such Person in accordance with customary practices and in the ordinary course of business of such Person.

 

“Default Rate” means eighteen (18%) percent per annum, compounded monthly.

 

“Dollars” and “$” mean dollars in lawful currency of the United States of America.

 

“El Quevar Project” means the El Quevar silver exploration project located in the San Antonio de los Cobres municipality, Salta Province, Argentina.

 

“Employee Plan” includes any pension, stock bonus, employee stock ownership plan, retirement, profit sharing, deferred compensation, stock option, bonus or other incentive plan, whether qualified or nonqualified, or any disability, medical, dental or other health plan, life insurance or other death benefit plan, vacation benefit plan, severance plan or other employee benefit plan or arrangement, including those pension, profit-sharing and retirement plans of the Borrower described from time to time in the financial statements of the Borrower and any

 

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pension plan, welfare plan, Defined Benefit Pension Plans (as defined in ERISA) or any multi-employer plan, maintained or administered by the Borrower or to which the Borrower is a party or may have any liability or by which the Borrower is bound.

 

“Environmental Laws” shall mean all Applicable Laws and permits of any Governmental Authority whether in the United States or elsewhere, regulating or relating to: (i) protection of human health or the environment, including air, water or land, or the control of any pollutant or potential pollutant; (ii) the generation, handling, management, treatment, storage, disposal or transportation of Hazardous Substances or other wastes, pollutants, contaminants or chemicals; (iii) emissions, discharges, releases or threatened releases of Hazardous Substances, wastes, pollutants, contaminants or chemicals into the environment or otherwise relating to the manufacture, production, processing, use, recycling, treatment, storage, disposal, transportation or handling of such substances, materials or wastes; (iv) the regulation of hazardous, toxic or other substances alleged to be harmful, including pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq. (“CERCLA”); the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. § 1471 et seq.; the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq.; the Oil Pollution Act, 33 U.S.C. § 2701 et seq.; the Emergency Planning and Community Right to Know Act, 42 U.S.C. § 11001 et seq.; the Safe Drinking Water Act, 42 U.S.C. §§ 300f through 300j; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. § 136 et seq.; and the Atomic Energy Act, 42 U.S.C. § 2011 et seq., any similar state statutes, and any similar or analogous statutes in the Mexico, Argentina, or any other applicable jurisdiction.  The term “Environmental Laws” includes all final and binding judicial and administrative decisions, orders, directives, and decrees issued by a Governmental Authority pursuant to the foregoing.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.

 

“Event of Default” shall mean any of the events or conditions which are set forth in Section 8.  hereof.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Excluded Taxes” shall have the meaning set forth in Section 3.5 hereof.

 

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

 

“Governing Documents” means, for a corporation, its articles or certificate of incorporation and its bylaws, and for a limited liability company, its constitution or articles or certificate of formation or organization and its operating agreement, and in the case of applicable foreign jurisdictions, such documents required to incorporate, form or organize a business entity, in each case as amended to date and as is in current force and effect, together with any incorporation or organization agreements or applications and any other documents or agreements that govern the establishment, operations and decisions of such company.

 

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“Governmental Authority” means any nation, any state, provincial, territorial, divisional, county, regional, municipal, city or other political subdivision thereof, and any native, tribal or aboriginal, government, corporation, association, entity, court, arbitrator, agency, department, commission, board, bureau, regulatory authority or other instrumentality exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government or requirements of law or the management or administration of real property interests, and any securities exchange or securities regulatory authority.

 

“Guaranties” shall mean each Unconditional Guaranty of Payment, of even date herewith, executed by each Guarantor for the benefit of Lender.

 

“Guarantors” shall mean (i) ECU Silver Mining Inc., (ii) Minera William S.A. de C.V., (iii) Minera Labri S.A. de C.V., (iv) Servicios Velardeña S.A. de C.V., (v) ASM Services S.à. r.l., and (vi) any other Person who guarantees any portion of the Obligations.

 

“Guarantors’ Collateral” means the collateral described in any security instrument executed and delivered by the Guarantors as collateral security for the obligations described herein or therein.

 

“Hazardous Substances” shall mean (a) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, dielectric fluid containing levels of polychlorinated biphenyls, radon gas and mold; (b) any chemicals, materials, pollutant or substances defined as or included in the definition of “hazardous substances,” “hazardous waste,” “hazardous materials,” “extremely hazardous substances,” “restricted hazardous waste,” “toxic substances,” “toxic pollutants,” “contaminants,” “pollutants,” or words of similar import, under any applicable Environmental Law; and (c) any other chemical, material or substance, the exposure to, or release of which is prohibited, limited or regulated by any Governmental Authority or for which any duty or standard of care is imposed pursuant to, any Environmental Law.

 

“Indemnified Party” and “Indemnified Parties” shall mean, respectively, each of the Lender and any parent corporation, Affiliate or Subsidiary of the Lender, and each of their respective officers, directors, employees, attorneys and agents, and all of such parties and entities.

 

“Intellectual Property” shall mean the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including copyrights, patents, service marks and trademarks, and all registrations and applications for registration therefor and all licensees thereof, trade names, domain names, technology, know-how and processes, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom, other than “off-the-shelf” software programs or products or other “shrink wrap” software licensed in the ordinary course of business.

 

“Interest Rate” means fourteen percent (14%) per annum, compounded monthly unless the conversion features of the Note are approved by the shareholders of the Borrower in which case the interest rate shall mean nine percent (9%) per annum, compounded monthly.

 

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“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended.

 

“Investment” shall mean, with respect to any Person, any investment in another Person, whether by acquisition of any debt or equity security, by making any loan or advance, by becoming obligated with respect to a contingent liability in respect of obligations of such other Person (other than advances to employees for travel, entertainment, relocation, out-of-pocket or other business-related expenses in the ordinary course of business).

 

“Liabilities” shall mean at all times all liabilities of the Borrower or any of the Guarantors that would be shown as such on a consolidated balance sheet of the Borrower prepared in accordance with GAAP.

 

“Lien” shall mean, with respect to any Person, any interest granted by such Person in any real or personal property, asset or other right owned or being purchased or acquired by such Person which secures payment or performance of any obligation and shall include any mortgage, lien, encumbrance, title retention lien, charge or other security interest of any kind, whether arising by contract, as a matter of law, by judicial process or otherwise.

 

“Loan” shall mean the Loan made by the Lender to the Borrower under and pursuant to this Agreement, and the Note.

 

“Loan Commitment” shall mean Five Million Dollars ($5,000,000.00).

 

“Loan Documents” shall mean (a) this Agreement, (b) the Note, (c) each of the agreements, documents, instruments and certificates set forth in Section 3.6, (d) and any and all such other instruments, documents, certificates and agreements from time to time executed and delivered by the Borrower, any Guarantor, or any of their Subsidiaries for the benefit of the Lender pursuant to any of the foregoing, and (e) all amendments, restatements, supplements and other modifications thereto.

 

“Loan Maturity Date” is October 27, 2016.

 

“Material Adverse Effect” shall mean (a) a material adverse change in, or a material adverse effect upon, the assets, business, properties, condition (financial or otherwise) or results of operations of the Borrower and the Guarantors taken as a whole, (b) a material impairment of the ability of the Borrower or Guarantor to perform any of the Obligations under any of the Loan Documents, or (c) a material adverse effect on (i) any substantial portion of the Collateral, (ii) the legality, validity, binding effect or enforceability against the Borrower of any of the Loan Documents, (iii) the perfection or priority of any material Lien granted to the Lender under any Loan Document, or (iv) the rights or remedies of the Lender under any Loan Document; provided that, that Material Adverse Effect does not include (i) entry into this Agreement or any of the Loan Documents, (ii) cash expenditures by the Borrower and its Subsidiaries as contemplated in this Agreement, (iii) any material changes in prevailing interest rates or commodities prices or in the economy or financial markets generally in the United States (including trading levels in any capital market), (iv) any changes that are the result of factors generally affecting the industries in which the Borrower or any of its Subsidiaries operate, (v)

 

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any changes in any political conditions, including acts of war (whether or not declared), armed hostilities and terrorism, or (vi) any changes that result from natural disasters or “acts of God”.

 

“Material Agreements” shall have the meaning set forth in Section 5.24 hereof.

 

“Mining Rights” means all interests in the surface or subsurface of any lands, the minerals in (or that may be extracted from) any lands, all royalty agreements, water rights, patented and unpatented mining claims, fee interests, mineral leases, mining licenses, profits-a-prendre, joint ventures and other leases, rights-of-way, inurements, licenses and other rights and interests used by or necessary to the Guarantors to construct, develop and operate the Velardeña Operations and to maintain the El Quevar Project.

 

“Multilateral Instrument 61-101” means Canadian Multilateral Instrument 61-101 Protection Of Minority Security Holders In Special Transactions.

 

“Multiemployer Plan” means a multiemployer plan, within the meaning of Section 3(37) of ERISA, to which the Borrower has made any contributions within the prior five (5) years.

 

“Non-Excluded Taxes” shall have the meaning set forth in Section 3.5 hereof.

 

“Note” shall mean the Senior Secured Convertible Note, of even date herewith, in a principal amount equal to the Loan Commitment and maturing on the Maturity Date, duly executed by the Borrower and payable to the order of the Lender, together with any and all renewal, extension, modification or replacement notes executed by the Borrower and delivered to the Lender and given in substitution therefor. The agreed form of the Note attached hereto as Exhibit A.

 

“NYSE MKT” means NYSE MKT, LLC.

 

“Obligations” shall, collectively, mean (a) the Loan, as evidenced by the Note, all interest accrued thereon (including interest which would be payable as post-petition in connection with any bankruptcy or similar proceeding, whether or not permitted as a claim thereunder), any fees due the Lender hereunder, any expenses incurred by the Lender hereunder, including without limitation, all liabilities and obligations under this Agreement, under any other Loan Document, and (b) any and all other liabilities and obligations owed by the Borrower to the Lender from time to time, howsoever created, arising or evidenced, whether direct or indirect, joint or several, absolute or contingent, now or hereafter existing, or due or to become due arising under the Loan Documents, together with any and all renewals, extensions, restatements or replacements of any of the foregoing.

 

“Obligor” shall mean the Borrower and each Guarantor liable with respect to the Obligations.

 

“Other Taxes” shall mean any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from the execution, delivery, enforcement or registration of, or otherwise with respect to, this Agreement or any of the other Loan Documents.

 

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“Permitted Dispositions” shall mean (a) an Asset Disposition of used, worn out, obsolete or surplus assets which are no longer used by or useful to the Borrower or of assets which are to be replaced, (b) the sale or lease of inventory in the ordinary course of business, (c) the expenditures or use of cash or cash equivalents in the ordinary course of business, (d) other Asset Dispositions, the net proceeds of which do not in the aggregate exceed $200,000.00, (e) the Asset Disposition effected by the grant of a Lien or otherwise pursuant to the Loan Documents, (f) the Asset Disposition resulting from any casualty or condemnation or expropriation of assets, except to the extent such disposition will constitute an Event of Default under Section 8.13, and (g) those Asset Dispositions listed in Schedule 1.1 (Permitted Dispositions). Notwithstanding the foregoing, at any time after the existence of any circumstance which constitutes an Event of Default or which would constitute an Event of Default with the giving of notice or the lapse of time or both, as long as any such circumstance has not been remedied or cured, clauses (d) and (g) shall not be included as Permitted Dispositions.

 

“Permitted Debt” shall have the meaning set forth in Section 7.2.

 

“Permitted Liens” shall have the meaning set forth in Section 7.3.

 

“Person” shall mean any natural person, partnership, limited liability company, corporation, trust, joint venture, joint stock company, association, unincorporated organization, government or agency or political subdivision thereof, or other entity, whether acting in an individual, fiduciary or other capacity.

 

“Reportable Event” means any of the events that are reportable under Section 4043 of ERISA and the regulations promulgated thereunder, other than an occurrence for which the thirty (30) day notice has been waived.

 

“SEC” means the United States Securities and Exchange Commission.

 

“Subordinated Debt” shall mean that portion of the Debt of the Borrower or any Guarantor, which is subordinated to the Obligations in a manner satisfactory to the Lender.

 

“Subsidiary” and “Subsidiaries” shall mean, respectively, with respect to any Person, each and all such corporations, partnerships, limited partnerships, limited liability companies, limited liability partnerships, joint ventures or other entities of which or in which such Person owns, directly or indirectly, such number of outstanding Capital Securities as have fifty percent (50.00%) or more of the ordinary voting power for the election of directors or other managers of such corporation, partnership, limited partnership, limited liability company, limited liability partnership, joint venture or other entity.  Unless the context otherwise requires, each reference to Subsidiaries herein shall be a reference to Subsidiaries of the Borrower and any of its Subsidiaries at any level.

 

“Taxes” shall mean any and all present and future taxes, duties, levies, imposts, deductions, assessments, charges or withholdings, and any and all liabilities (including interest and penalties and other additions to taxes) with respect to the foregoing.

 

“TSX” means the Toronto Stock Exchange.

 

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“UCC” shall mean the Uniform Commercial Code in effect in the State of Colorado from time to time.

 

“Unmatured Event of Default” shall mean any event which, with the giving of notice, the passage of time or both, would constitute an Event of Default.

 

“Use of Proceeds” means the Use of Proceeds attached hereto as Schedule 1.1 (Use of Proceeds), as the same may be amended from time to time.

 

“Velardeña Operations” means the two underground mines and two processing plants located in the Velardeña mining district in the municipality of Cuencamé, in the State of Durango, Mexico, including all properties, assets or other rights, whether real or personal, tangible or intangible, now owned or leased or hereafter acquired by or for the benefit of the Borrower, which assets are used or intended for use in the conduct of any of the Guarantors’ mining and related activities at the Velardeña Operations (and, for the avoidance of doubt, shall include all associated facilities, together with all plant sites, waste dumps, crushing circuits, abandoned heaps, preparation plants, wash plants, loadout facilities, power supply systems and ancillary and infrastructure facilities).

 

“Voidable Transfer” shall have the meaning set forth in Section 10.16 hereof.

 

1.2                               Accounting Terms.  The preparation of financial statements to be furnished to the Lender pursuant hereto shall be made and prepared, both as to classification of items and as to amount, in accordance with GAAP as used in the preparation of the financial statements of the Borrower on the date of this Agreement, unless any changes in accounting principles or practices are hereafter occasioned by the promulgation of rules, regulations, pronouncements and opinions by or required by the Financial Accounting Standards Board or the American Institute of Certified Public Accountants (or any successor thereto or agencies with similar functions).

 

1.3                               Other Interpretive Provisions.

 

(a)                                 The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.  Whenever the context so requires, the neuter gender includes the masculine and feminine, the single number includes the plural, and vice versa, and in particular the word “Borrower” shall be so construed.

 

(b)                                 Section and Schedule references are to this Agreement unless otherwise specified.  The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.

 

(c)                                  The term “including” is not limiting, and means “including, without limitation.”

 

(d)                                 In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”; the words “to” and “until” each mean “to but excluding,” and the word “through” means “to and including.”

 

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(e)                                  Unless otherwise expressly provided herein, (i) references to agreements (including this Agreement and the other Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, supplements and other modifications thereto, but only to the extent such amendments, restatements, supplements and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation shall be construed as including all statutory and regulatory provisions amending, replacing, supplementing or interpreting such statute or regulation.

 

(f)                                   To the extent any of the provisions of the other Loan Documents are inconsistent with the terms of this Agreement, the provisions of this Agreement shall govern.

 

(g)                                  This Agreement and the other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters.  All such limitations, tests and measurements are cumulative and each shall be performed in accordance with its terms.

 

Section 2.  Commitment.

 

Lender agrees, on the terms and subject to the conditions contained in this Agreement and the Loan Documents, to make the Loan to the Borrower in a single advance in a principal amount equal to the Loan Commitment upon satisfaction of all conditions precedent to the Advance.

 

Section 3.  Loan.

 

3.1                               Loan Interest and Payments.  The principal amount of the Loan outstanding from time to time shall bear interest at the Interest Rate.  All principal, interest and other amounts due under the Note shall be due and payable on the Loan Maturity Date, unless accelerated as provided herein. Upon any Event of Default, including failure to pay at the Loan Maturity Date, Lender, at its option, may, if permitted under Applicable Law, increase the Interest Rate on the Loan to the Default Rate.

 

3.2                               Prepayment Prohibited.  The Borrower may not prepay all or any part of the principal or interest owed under the Loan, except to the extent conversion by the Lender constitutes prepayment.

 

3.3                               Use of Proceeds. Subject to compliance by the Borrower with all of the terms and conditions hereof, the use of the funds advanced to Borrower pursuant to the Advances shall be exclusively for the purposes set forth in Schedule 1.1 (Use of Proceeds).

 

3.4                               Payment Due Date.  If any payment to be made by the Borrower hereunder or under the Note shall become due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in computing any interest in respect of such payment.  Notwithstanding anything to the contrary contained herein, the final payment due under the Note must be made by wire transfer or other immediately available funds.  All payments made by the Borrower hereunder or under any of the Loan Documents shall be made without setoff, counterclaim, or other defense.  To the extent permitted by Applicable Law, all payments hereunder or under any of the Loan Documents

 

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(including any payment of principal, interest, or fees) to, or for the benefit, of any Person shall be made by the Borrower free and clear of, and without deduction or withholding for, or account of, any taxes now or hereinafter imposed by any taxing authority.

 

3.5                               Payments without Offset. All payments made by the Borrower under the Note shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or Other Taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding (i) net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on the Lender (or any other recipient of a payment hereunder) as a result of a present or former connection between the Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Loan Document) (ii) any withholding tax to the extent that such withholding tax would have been imposed on the relevant payment to the Lender (or any other recipient of a payment hereunder) under the laws and treaties in effect at the time the Lender or such recipient first became a party to this Agreement or otherwise became entitled to any rights hereunder; or (iii) Taxes (other than net income taxes and Other Taxes) imposed solely as a result of a present or former connection between the Lender or other recipient and the jurisdiction imposes such Tax (other than any such connection arising solely from the Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Loan Document), (iv) Taxes attributable to the failure of the Lender or other recipient to comply with the documentation requirements of the final sentence of this Section 3.5, and (v) any withholding tax imposed under Code Sections 1471-1474 (such excluded items being referred to herein as “Excluded Taxes”).  If any taxes, levies, imposts, duties, charges, fees, deductions or withholdings, except Excluded Taxes (collectively, “Non-Excluded Taxes”) or Other Taxes are required to be withheld from any amounts payable to the Lender hereunder, the amounts so payable to the Lender shall be increased to the extent necessary to yield to the Lender (after payment of all Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement.  At the request of the Borrower and at the Borrower’s sole cost, the Lender shall take reasonable steps to (i) contest its liability for any Non-Excluded Taxes or Other Taxes that have not been paid, or (ii) seek a refund of any Non-Excluded Taxes or Other Taxes that have been paid.  Upon receipt of any such refund, the Lender shall promptly pay to the Borrower the amount of such refund.  Whenever any Non-Excluded Taxes or Other Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Lender a certified copy of an original official receipt received by the Borrower showing payment thereof.  If the Borrower fails to pay any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to the Lender the required receipts or other required documentary evidence or if any Governmental Authority seeks to collect a Non-Excluded Tax or Other Tax directly from the Lender for any other reason, the Borrower shall indemnify the Lender on an after-tax basis for any incremental taxes, interest or penalties that may become payable by the Lender.  The agreements in this Section shall survive the satisfaction and payment of the Obligations and the termination of this Agreement. Lender or any other recipient of a payment hereunder that is entitled to an exemption from or reduction of withholding Tax with

 

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respect to payments made under any Loan Document shall deliver to the Borrower such properly completed and executed documentation as will permit such payments to be made without withholding or at a reduced rate of withholding.

 

3.6                               Conditions Precedent to the Advance.  The obligation of the Lender to make the Advance of the Loan is subject to the satisfaction (or waiver by the Lender in its sole discretion) of the following conditions precedent:

 

(a)                                 That the Lender shall have received on or before the Effective Date, in form and substance satisfactory to the Lender:

 

(i)                                     The Note, duly executed on behalf of the Borrower, the form of which is attached hereto as Exhibit A;

 

(ii)                                  An Unconditional Guaranty of Payment from and duly executed by each of the Guarantors, in an Agreed Form.

 

(iii)                               The Borrower’s and each Guarantor’s Certificate in an Agreed Form, duly executed on behalf of the Borrower and each of the Guarantors.

 

(iv)                              Pledge Agreement in an Agreed Form — Borrower, pledging:

 

(A)                               All ownership of ECU Silver Mining Inc.

 

(B)                               All ownership of ASM Services S.à r.l.

 

(v)                                 Pledge Agreement in an Agreed Form - ECU Silver Mining Inc. pledging:

 

(A)                               Ownership of 49,999 shares of fixed capital and 2,002,080,597 shares of variable capital of Minera William S.A. de C.V.

 

(B)                               Ownership of 87 shares of fixed capital and 164,832 shares of variable capital of Minera Labri S.A. de C.V.

 

(C)                               Ownership of 99 shares of fixed capital of Servicios Velardeña S.A. de C.V.

 

(vi)                              Deed of movable hypothec under Quebec law charging all of ECU Silver Mining Inc.’s right title and interest in and to:

 

(A)                               Ownership of 49,999 shares of fixed capital and 2,002,080,597 shares of variable capital of Minera William S.A. de C.V.

 

(B)                               Ownership of 87 shares of fixed capital and 164,832 shares of variable capital of Minera Labri S.A. de C.V.

 

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(C)                               Ownership of 99 shares of fixed capital of Servicios Velardeña S.A. de C.V.

 

(vii)                           Pledge Agreement in an Agreed Form - Minera William S.A. de C.V. pledging:

 

(A)                               Ownership of 13 shares of fixed capital of Minera Labri S.A. de C.V.

 

(B)                               Ownership of one share of fixed capital of Servicios Velardeña S.A. de C.V.

 

(viii)                        Pledge Agreement in an Agreed Form — Minera Labri S.A. de C.V. pledging:

 

(A)                               Ownership of one share of fixed capital of Minera William S.A. de C.V.

 

(ix)                              Ownership certificates (i.e., stock certificates, the registers of shareholders, or the equivalent where ownership is not certificated), duly endorsed in blank representing the foregoing ownership in the following:

 

(A)                               ECU Silver Mining Inc.

 

(B)                               Minera William S.A. de C.V.

 

(C)                               Minera Labri S.A. de C.V.

 

(D)                               Servicios Velardeña S.A. de C.V.

 

(E)                                ASM Services S.à. r.l.

 

(x)                                 Evidence of pledge registration of and secretary’s certificates, as applicable, regarding each of the share pledges describe above.

 

(xi)                              Lien searches to the extent practicable in applicable foreign jurisdictions indicating that all of the material assets of Borrower and each of the Guarantors is free and clear of any Lien except for Liens for the benefit of the Lender and other Permitted Liens.

 

(xii)                           Such other documents as the Lender may reasonably request to effect the purposes of this Agreement and the other Loan Documents.

 

(b)                                 Certified copies of resolutions of the Borrower’s and each Guarantor’s board of directors (or other managing body in the case of a non-corporate entity), then in full force and effect authorizing, to the extent relevant, the execution, delivery and performance of each Loan Document to be executed by such Person and the transactions contemplated hereby and thereby. In the case of the resolutions of the Borrower, such resolutions must have been

 

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approved by no less than a majority of the directors, and pursuant to the provisions of Multilateral Instrument 61-101, by two thirds of the directors considered independent in respect of the Loan who, acting in good faith, determine that (i) the Borrower is in serious financial difficulty; (ii) the Loan is designed to improve the financial position of the Borrower; and (iii) the terms of the Loan are reasonable in the circumstances of the Borrower.

 

(c)                                  Evidence satisfactory to the Lender that the transactions described in the Loan Document are in compliance with the requirements of Multilateral Instrument 61-101, including any exemptions thereto.

 

(d)                                 Evidence satisfactory to the Lender in its sole discretion that the transactions described in the Loan Documents, including but not limited to the Note, the Conversion Rights of the Lender (which are subject to shareholder approval) as set forth in the Note, the approval of the Conversion Rights set forth in the Note by the shareholders of Borrower, and any election by the Lender to exercise any shareholder approved right to convert all or any part of the Note will, upon (i) shareholders of the Company approving such Conversion Rights in accordance with Applicable Law and (ii) the TSX conditionally approving and the NYSE MKT approving the listing of the common shares of the Company issuable upon the exercise of such Conversion Rights, be in compliance with the requirements of the TSX and the NYSE MKT.

 

(e)                                  No change shall have occurred in the financial condition or business of the Borrower or Guarantors which would constitute a Material Adverse Effect.

 

(f)                                   Opinions dated as of the date of the Effective Date addressed to the Lender:

 

(i)                                     Davis Graham & Stubbs LLP, Counsel to the Borrower and the Guarantors, in an Agreed Form;

 

(ii)                                  Local counsel to the Borrower and Guarantors in Canada, from counsel reasonably satisfactory to the Lender and in an Agreed Form;

 

(iii)                               Local counsel to the Borrower and Guarantors in Luxembourg, from counsel reasonably satisfactory to the Lender and in an Agreed Form;

 

(iv)                              Local counsel to the Borrower and Guarantors in Mexico, from counsel reasonably satisfactory to the Lender and in an Agreed Form; and

 

(v)                                 Local counsel to the Borrower and Guarantors in Argentina, from counsel reasonably satisfactory to the Lender and in an Agreed Form.

 

Section 4.  Security for the Obligations.

 

4.1                               Security for Obligations.  As security for the payment and performance of the Obligations, as requested in writing by the Lender, the Borrower will pledge, assign, transfer, deliver and grant to the Lender, a continuing and unconditional pledge of one hundred percent of

 

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the ownership of ECU Silver Mining Inc. and of ASM Services S.à r.l. (“Borrower’s Collateral”) (collectively together with the Guarantors’ Collateral, the “Collateral”).

 

4.2                               Possession and Transfer of Collateral.  Unless an Event of Default exists hereunder, the Borrower shall be entitled to possession or use of the Collateral consisting of certificated securities and other Collateral required to be delivered to the Lender pursuant to this Section 4.  The cancellation or surrender of the Note(s), upon payment or otherwise, shall not affect the right of the Lender to retain the Collateral for any other of the Obligations.

 

4.3                               Preservation of the Collateral.  The Lender may, but is not required, to take such actions from time to time as the Lender deems appropriate to maintain or protect the Collateral.  The Lender shall have exercised reasonable care in the custody and preservation of the Collateral if the Lender takes such action as the Borrower shall reasonably request in writing which is not inconsistent with the Lender’s status as a secured party, but the failure of the Lender to comply with any such request shall not be deemed a failure to exercise reasonable care; provided, however, the Lender’s responsibility for the safekeeping of the Collateral shall (i) be deemed reasonable if such Collateral is accorded treatment substantially equal to that which the Lender accords its own property, and (ii) not extend to matters beyond the control of the Lender, including acts of God, war, insurrection, riot or governmental actions.  In addition, any failure of the Lender to preserve or protect any rights with respect to the Collateral against prior or third parties, or to do any act with respect to preservation of the Collateral, not so requested by the Borrower, shall not be deemed a failure to exercise reasonable care in the custody or preservation of the Collateral.  The Borrower shall have the sole responsibility for taking such action as may be necessary, from time to time, to preserve all rights of the Borrower and the Lender in the Collateral against prior or third parties.  Without limiting the generality of the foregoing, where Collateral consists in whole or in part of securities, the Borrower represents to, and covenants with, the Lender that the Borrower has made arrangements for keeping informed of changes or potential changes affecting the securities (including rights to convert or subscribe, payment of dividends, reorganization or other exchanges, tender offers and voting rights), and the Borrower agrees that the Lender shall have no responsibility or liability for informing the Borrower of any such or other changes or potential changes or for taking any action or omitting to take any action with respect thereto.

 

4.4                               Other Actions as to any and all Collateral.  The Borrower further agrees to take any other action reasonably requested by the Lender to ensure the attachment, perfection and first priority of, and the ability of the Lender to enforce, the Lender’s security interest in any and all of the Collateral, including (a) complying with any provision of any statute, regulation or treaty of the United States as to any Collateral if compliance with such provision is a condition to attachment, perfection or priority of, or ability of the Lender to enforce, the Lender’s security interest in such Collateral, (b) obtaining governmental and other third party consents and approvals, including any consent of any licensor, lessor or other Person obligated on Collateral, (c) using commercially reasonable efforts to obtain waivers from landlords in form and substance reasonably satisfactory to the Lender, and (d) taking all actions required by the UCC in effect from time to time or by other law, as applicable in any relevant UCC jurisdiction, or by other law as applicable in any foreign jurisdiction.  The Borrower further agrees to indemnify

 

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and hold the Lender harmless against claims of any Persons (other than Lender and its Affiliates) concerning disputes arising over the Collateral.

 

4.5                               Financing Statements.  The Borrower shall, at the Lender’s request, at any time and from time to time, execute and deliver to the Lender such financing statements, amendments and other documents and do such acts as the Lender deems necessary in order to establish and maintain valid, attached and perfected first priority security interests in the Collateral in favor of the Lender, free and clear of all Liens and claims and rights of third parties whatsoever, except Permitted Liens.  The Borrower hereby irrevocably authorizes the Lender at any time, and from time to time, to file in any jurisdiction any initial financing statements and amendments thereto without the signature of the Borrower that (a) indicate the Collateral is comprised of all ownership of the Borrower of ECU Silver Mining Inc. and of ASM Services S.à r.l. or words of similar effect, regardless of whether any particular asset comprising a part of the Collateral falls within the scope of Article 9 of the UCC of the jurisdiction wherein such financing statement or amendment is filed, and (b) contain any other information required by Section 5 of Article 9 of the Uniform Commercial Code of the jurisdiction wherein such financing statement or amendment is filed regarding the sufficiency or filing office acceptance of any financing statement or amendment, including whether the Borrower is an organization, the type of organization and any Employer Identification Number issued to the Borrower.  The Borrower hereby agrees that a photocopy or other reproduction of this Agreement is sufficient for filing as a financing statement and the Borrower authorizes the Lender to file this Agreement as a financing statement in any jurisdiction.  The Borrower agrees to furnish any such information to the Lender promptly upon request.  The Borrower further ratifies and affirms its authorization for any financing statements and/or amendments thereto, executed and filed by the Lender in any jurisdiction prior to the date of this Agreement.  In addition, the Borrower shall make appropriate entries on its books and records disclosing the Lender’s security interests in the Collateral. The provisions of this section shall apply to any similar provision under the laws of any jurisdiction which has not adopted the provisions of the UCC.

 

Section 5.  Representations and Warranties.

 

To induce the Lender to make the Loan, the Borrower makes the following representations and warranties to the Lender, each of which shall survive the execution and delivery of this Agreement:

 

5.1                               Organization and Name.  Borrower is a corporation duly organized, existing and in good standing under the laws of the State of Delaware, with full and adequate power to carry on and conduct its business as presently conducted.  Each of the Guarantors has been duly organized and is validly existing under the laws of the jurisdiction under which it was formed. Borrower and each Guarantor is duly licensed or qualified in all foreign jurisdictions wherein the nature of its activities require such qualification or licensing, except for such jurisdictions where the failure to so qualify would not have a Material Adverse Effect.  The exact legal name of Borrower is as set forth in the first paragraph of this Agreement and such name set forth above has been Borrower’s exact legal name for the past five (5) years. Each of the Guarantor’s Certificates is true, accurate and complete.

 

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5.2                               Authorization.  The Borrower has full right, power and authority to enter into this Agreement and to make the borrowings described herein. The Borrower and each of the Guarantors has the full right, power and authority to execute and deliver the Loan Documents as described herein and to perform each of its respective duties and obligations under the other Loan Documents to which each such entity is a party.  The execution and delivery by each of Borrower and each Guarantor of the Loan Documents to which it is a party will not, nor will the observance or performance of any of the matters and things herein or therein set forth, violate or contravene any provision of Applicable Law or of its articles/certificate of incorporation or bylaws.  All necessary and appropriate corporate or company action has been taken on the part of the Borrower and each of the Guarantors to authorize the execution and delivery of each of the Loan Documents to which it is a party. This Agreement and the transactions contemplated hereby have been approved by a special committee of the board of directors of the Borrower and by the board of directors of the Borrower, with no less than two thirds of the independent directors in respect of the loan voting in favor.

 

5.3                               Validity and Binding Nature.  Each Loan Document is the legal, valid and binding obligation of the Borrower and each Guarantor that is a party thereto, enforceable against the Borrower and each Guarantor that is a party thereto in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting the enforceability of creditors’ rights generally and to general principles of equity. Neither the Borrower, nor any of the Guarantors, nor any of their respective properties or revenues enjoys any right of immunity from suit, set-off, attachment prior to judgment or in aid of execution, or execution on a judgment in respect of their respective obligations under any of the Loan Documents to which it is a party.

 

5.4                               Consent; Absence of Breach.  The execution, delivery and performance of this Agreement, the other Loan Documents and any other documents or instruments to be executed and delivered by the Borrower or any of the Guarantors in connection with the Loan (including the issuance of the Note to which the Borrower or such Guarantor is a party, approval of the conversion right by the shareholders of the Borrower, and any conversion of the Note(s) into shares of common stock of the Borrower), and the borrowings by the Borrower hereunder, do not and will not (a) require any consent, approval, authorization of, or filings with, notice to or other act by or in respect of, any Governmental Authority or any other Person (other than any consent or approval which has been obtained and is in full force and effect or consents or approvals which, if not obtained, could not reasonably be expected to result in Material Adverse Effect, and other than the shareholder approval and conditional approval of the TSX and the approval of the NYSE MKT to list the common shares of the Borrower issuable upon the conversion of the Note); (b) conflict with (i) any material provision of Applicable Law or any applicable order, writ, injunction or decree of any court or Governmental Authority, (ii) the articles of incorporation or bylaws of the Borrower or similar Governing Documents of any of the Guarantors, or (iii) any material agreement, indenture, instrument or other document, or any judgment, order or decree, which is binding upon the Borrower or any of the Guarantors or any of its or their properties or assets; or (c) require, or result in, the creation or imposition of any Lien on any material asset of Borrower or any Guarantor, other than Liens in favor of the Lender created pursuant to the Loan Documents. Notwithstanding the foregoing, Lender understands that the convertibility feature of the Note requires the approval of the shareholders and the listing of the shares on the NYSE MKT and TSX before it may be exercised.

 

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5.5          Ownership of Properties; Liens.  Borrower and each of the Guarantors is the sole owner of (or is licensed or otherwise has the right to use) all of its respective material properties and assets, real and personal, tangible and intangible, of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights), free and clear of all Liens, charges and claims (including infringement claims with respect to patents, trademarks, service marks, copyrights and the like), other than Permitted Liens.

 

5.6          Capital Structure.  As of the Effective Date, the issued and outstanding Capital Securities of Borrower and each of the Guarantors are owned by those Persons as listed in Schedule 5.6, as evidenced (except for the Capital Securities of the Borrower) by the Golden Minerals Company Corporate Structure diagram dated October 22, 2015 which is accurate and complete. Schedule 5.6 includes a description of each class of Capital Securities, the number of shares of each class authorized for issuance, the number of shares of each class that are issued and outstanding, and any Liens against any Capital Securities with respect to the Borrower’s Collateral and the Guarantors’ Collateral. There are no pre-emptive or other outstanding rights, options, warrants, conversion rights or other similar agreements or understandings for the purchase or acquisition of any Capital Securities of the any Guarantor. Other than as described in the Form 10-K and Quarterly Report on Form 10-Q filed with the SEC by the Borrower for the quarter ended June 30, 2015, there are no pre-emptive or other outstanding rights, options, warrants, conversion rights or other similar agreements or understandings for the purchase or acquisition of any Capital Securities of the Borrower.  As of the Effective Date, Borrower does not own any Capital Securities of any Person except as reflected on Schedule 5.6 and all issued and outstanding Capital Securities of the Borrower are duly authorized and validly issued, fully paid, non-assessable. All Capital Securities of the Guarantors and free and clear of all Liens (except for restrictions under securities laws and the liens contemplated hereby).

 

5.7          Intellectual Property.  Schedule 5.7 lists Borrower’s and each of the Guarantor’s Intellectual Property as of the Effective Date.  To the best of its knowledge, the Borrower owns and possesses or has a license or other right to use all Intellectual Property, material to and reasonably necessary for the conduct of the businesses of the Borrower, without any infringement upon and the use thereof by the Borrower does not infringe upon the rights of others except for infringement which could not reasonably be expected to have a Material Adverse Effect upon the Borrower, and no material claim has been asserted and is pending by any Person challenging or questioning the use of any Intellectual Property or the validity or effectiveness of any Intellectual Property nor does the Borrower know of any valid basis for any such claim. All registered Intellectual Property of Borrower is valid, subsisting, unexpired, and enforceable, and has not been abandoned, and Borrower is legally entitled to use each of its registered trademarks. None of Borrowers’ Intellectual Property is the subject of any licensing or franchise agreement. No holding, decision or judgment has been rendered by any Governmental Authority which would materially limit, cancel or question the validity of any Intellectual Property of Borrower. No action or proceeding is pending seeking to limit, cancel or question the validity of any Intellectual Property of Borrower in any material respect, or which, if adversely determined, would have a material adverse effect on the value of any such Intellectual Property. All applications pertaining to any Intellectual Property of Borrower have been duly and properly filed, and all registrations or letters pertaining to such Intellectual Property have been duly and properly filed and issued, and Borrower is not aware of any challenges that would make any of

 

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such Intellectual Property invalid or unenforceable. Borrower has not made any assignment or other agreement respecting any Intellectual Property which would conflict with the security interest of the Lender in such Intellectual Property granted hereunder.

 

5.8          Financial Statements.  All financial statements of the Borrower submitted to the Lender have been prepared in accordance with GAAP and present fairly the financial condition of the Borrower and the results of the operations for the Borrower as of such date and for the periods indicated.  Since the date of the most recent financial statement submitted by the Borrower to the Lender, there has been no change in the financial condition or in the assets or liabilities of the Borrower having a Material Adverse Effect on the Borrower.

 

5.9          Litigation and Contingent Liabilities.  As of the date hereof, there is no litigation, arbitration proceeding, demand, charge, claim, petition or governmental investigation or proceeding pending, or to the knowledge of Borrower or Guarantors, threatened, against the Borrower or any Guarantor, which, if adversely determined, would reasonably be expected to have a Material Adverse Effect upon the Borrower or any of the Guarantors, except as set forth in Schedule 5.9.  Other than any liability incident to such litigation or proceedings, neither the Borrower nor any of the Guarantors has any material guarantee obligations, contingent liabilities, liabilities for taxes, or any long-term leases or unusual forward or long-term commitments, including any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, that are material to the Borrower and Guarantors taken as a whole and that are not fully reflected or fully reserved for in the most recent financial statements of the Borrower delivered to the Lender.

 

5.10        Event of Default.  No Event of Default or Unmatured Event of Default exists or would result thereafter from the incurrence by the Borrower or any of the Guarantors of any of the obligations under any of the Loan Documents or as a result of the Borrower’s issuance of the Note to the Lender or upon the exercise of any right of conversion pursuant to the Note.

 

5.11        Adverse Circumstances.  No event has occurred which has had or could reasonably be expected to have a Material Adverse Effect. Neither the Borrower, nor any Guarantor is a party or subject to any contract, agreement or other restriction which, as of the date of this Agreement, could reasonably be expected to have a Materially Adverse Effect on such Person.

 

5.12        Environmental Laws and Hazardous Substances.  To the knowledge of the Borrower and the Guarantors, after due inquiry, neither the Borrower nor any of the Guarantors has generated, used, stored, treated, transported, manufactured, handled, produced or disposed of any Hazardous Substances, on or off any of the Premises of the Borrower or any Guarantor (whether or not owned by it or any of them) in any manner which at any time violates any Environmental Law or any license, permit, certificate, approval or similar authorization thereunder except where such violation could not reasonably be expected to result in a Material Adverse Effect.  The Borrower will comply in all material respects with all Environmental Laws and will obtain all licenses, permits certificates, approvals and similar authorizations thereunder.  There is no proceeding, complaint, order, directive, claim, citation, notice or, to the Borrower’s knowledge there is no investigation by any Governmental Authority or any other Person, nor is

 

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any pending or, to the best of the Borrower’s knowledge, threatened, and the Borrower shall immediately notify the Lender upon becoming aware of any such investigation, proceeding, complaint, order, directive, claim, citation or notice, and shall take prompt and appropriate actions to respond thereto, with respect to any non-compliance with, or violation of, the requirements of any Environmental Law by the Borrower or any of the Guarantors or the release, spill or discharge, threatened or actual, of any Hazardous Material or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Material or any other environmental, health or safety matter, which affects the Borrower any Guarantor or any of their businesses, operations or assets or any properties at which the Borrower or any Guarantor has transported, stored or disposed of any Hazardous Substances.  To Borrower’s knowledge, after due inquiry, neither the Borrower nor any Guarantor has material liability, contingent or otherwise, in connection with a release, spill or discharge, threatened or actual, of any Hazardous Substances or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Material.  At any time following an Event of Default, the Borrower further agrees to allow the Lender or its agent access to the properties of the Borrower and each of the Guarantors to confirm compliance with all Environmental Laws, and the Borrower shall, following determination by the Lender that there is a material non-compliance, or any condition which requires any action by or on behalf of the Borrower in order to avoid any material non-compliance, with any Environmental Law, at the Borrower’s sole expense, cause an independent environmental engineer acceptable to the Lender to conduct such tests of the relevant site as are appropriate, and prepare and deliver a report setting forth the result of such tests, a proposed plan for remediation and an estimate of the costs thereof.

 

5.13        Solvency, etc.  As of the date hereof, and immediately prior to and after giving effect to the issuance of the Loan hereunder and the use of the proceeds thereof, (a) the fair value of the Borrower’s and each of the Guarantor’s assets is greater than the amount of their respective probable liabilities (including disputed, contingent and unliquidated liabilities) as such value is established and liabilities evaluated as required under the Section 548 of the Bankruptcy Code, (b) the present fair saleable value of the Borrower’s and each of the Guarantor’s assets is not less than the amount that will be required to pay (i) the probable liability on their respective debts as they become absolute and matured and (ii) their probable debts and other liabilities (including disputed, contingent and unliquidated liabilities) as they mature in the ordinary course of business, (c) neither the Borrower nor any of the Guarantors intends to, and Borrower does not believe that it or any of the Guarantors will, incur debts or liabilities beyond its ability to pay as such debts and liabilities mature, and (d) neither the Borrower nor any of the Guarantors is engaged in business or a transaction, and is about to engage in business or a transaction, for which its property would constitute unreasonably small capital.

 

5.14        ERISA Obligations.  All Employee Plans sponsored or maintained by the Borrower subject to the minimum funding standards of Section 302 of ERISA and Section 412 of the Internal Revenue Code meet such standards, where applicable, and each such Employee Plan that is intended to be qualified within the meaning of Section 401 of the Internal Revenue Code is so qualified.  No withdrawal liability has been incurred under any such Employee Plans and no Reportable Event or nonexempt “prohibited transaction” (as defined in Section 406 of ERISA), has occurred with respect to any such Employee Plans, unless approved by the

 

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appropriate governmental agencies and except as could not reasonably be expected to result in a Material Adverse Effect.  The Borrower has promptly paid and discharged all obligations and liabilities arising under ERISA which if unpaid or unperformed would reasonably be expected to result in the imposition of a Lien under Section 412 or 430(k) of the Code or Section 303 of ERISA against any of its properties or assets.

 

5.15        Labor Relations.  Except as could not reasonably be expected to have a Material Adverse Effect, (i) there are no strikes, lockouts or other labor disputes against the Borrower or any Guarantor or to the best knowledge of the Borrower, threatened, (ii) hours worked by and payment made to employees of the Borrower and any Guarantor have not been in violation of the Fair Labor Standards Act or any other Applicable Law, rule or regulation, and (iii) no unfair labor practice complaint is pending against the Borrower or any Guarantor or threatened before the National Labor Relations Board or similar Governmental Authority.

 

5.16        Security Interest.  This Agreement and/or the relevant Loan Documents creates a valid security interest in favor of the Lender in the Collateral and in the Guarantors’ Collateral and, when properly perfected by filing in the appropriate jurisdictions, or by possession or control of such Collateral by the Lender or delivery of such Collateral to the Lender, shall constitute a valid, perfected, first-priority, or an equivalent under applicable foreign law, continuing security interest in such Collateral subject only to the Permitted Liens.

 

5.17        Lending Relationship.  The relationship hereby created between the Borrower and the Lender is and has been conducted on an open and arm’s length basis in which no fiduciary relationship exists, and the Borrower has not relied and is not relying on any such fiduciary relationship in executing this Agreement and in consummating the Loan.

 

5.18        Business Loan.  The Loan, including interest rate, fees and charges as contemplated hereby, (i) are business loans, (ii) are an exempted transaction under the Truth In Lending Act, 12 U.S.C. 1601 et seq., as amended from time to time, and (iii) do not, and when disbursed shall not, violate the provisions of the Colorado usury laws, any consumer credit laws or the usury laws of any state or country which may have jurisdiction over this transaction, the Borrower or any property securing the Loan.

 

5.19        Taxes.  The Borrower has timely filed all tax returns and reports required by law to have been filed by it and has paid all taxes, governmental charges and assessments due and payable with respect to such returns, except any such taxes or charges which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books.  The Borrower has made adequate reserves on its books and records in accordance with GAAP for all taxes that have accrued but which are not yet due and payable.

 

5.20        Governmental Regulation.  The Borrower is not, or after giving effect to any loan, will not be, subject to regulation under the Federal Power Act, the ICC Termination Act of 1995 or the Investment Company Act of 1940 or to any federal or state or other statute or regulation limiting its ability to incur indebtedness for borrowed money.

 

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5.21        Place of Business.  The principal place of business of the Borrower is set forth in the notice provision of this Agreement, and the principal place of business of each Guarantor is set forth in Schedule 5.21. The location of the books and records of the Borrower and each of the Guarantors, including the location of all Collateral, as of the date hereof is set forth on Schedule 5.21 attached hereto and made a part hereof, and the Borrower shall promptly notify the Lender of any addition or change in such locations.  The Borrower will not remove or permit the Collateral to be removed from such locations without the prior written consent of the Lender, except for any Permitted Dispositions or inventory moved from such locations for the purpose of sale in the ordinary course of the Borrower’s or any Guarantor’s business.

 

5.22        Complete Information.  This Agreement and all financial statements, schedules, certificates, confirmations, agreements, contracts, and other materials and information heretofore or contemporaneously herewith furnished in writing by the Borrower to the Lender for purposes of, or in connection with, this Agreement and the transactions contemplated hereby is, and all written information hereafter furnished by or on behalf of the Borrower to the Lender pursuant hereto or in connection herewith will be, true and accurate in every material respect on the date as of which such information is dated or certified, and none of such information is or will be incomplete by omitting to state any material fact necessary to make such information not misleading in light of the circumstances under which made (it being recognized by the Lender that and provided that any projections and forecasts provided by the Borrower are based on good faith estimates and assumptions believed by the Borrower to be reasonable as of the date of the applicable projections or assumptions and that actual results during the period or periods covered by any such projections and forecasts may differ from projected or forecasted results).

 

5.23        Subordinated Debt.  Schedule 5.23 lists all Subordinated Debt as of the Effective Date.  The subordination provisions of the Subordinated Debt are enforceable against the holders of the Subordinated Debt by the Lender.  The Obligations constitute senior debt entitled to the benefits of the subordination provisions contained in the Subordinated Debt.  The Borrower acknowledges that the Lender is entering into this Agreement and is making the Loan in reliance upon the subordination provisions of the Subordinated Debt and this Section.

 

5.24        Material Contracts.  Schedule 5.24 identifies and contains a description of all contracts and transactions to which the Borrower is a party or a Guarantor is a party (a) which, if breached or terminated, would reasonably be expected to result in a Material Adverse Effect or (b) in which any Affiliate is also a party (“Material Agreements”).

 

5.25        Compliance with Applicable Laws.  Borrower and each of the Guarantors is in compliance with all Applicable Laws related to it and any of its operations, assets or properties, expect for any non-compliance which would not reasonably be expected to result in a Material Adverse Effect.

 

5.26        No Trigger of Change of Control Provisions.  Except as set forth on Schedule 5.26, none of the transactions described in any of the Loan Documents or contemplated thereunder, including, but not limited to the granting to or exercise by the Lender of any Conversion Rights and any resulting ownership by Lender of shares of common stock of the

 

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Borrower, will constitute a “change of control” pursuant to any plan, agreement or other obligation of the Borrower.

 

5.27        Securities Laws and Exchange Rules.  The transactions described in the Loan Documents, including but not limited to the Loan, the grant of the Conversion Rights to the Lender (which are subject to shareholder approval), the approval of the Conversion Rights by the shareholders of Borrower, and any election by the Lender to exercise any shareholder approved right to convert all or any part of the Loan, and any ownership of shares of Common Stock of the Borrower comply with the provisions of Multilateral Instrument 61-101 and will, upon (i) shareholders of the Company approving such Conversion Rights in accordance with Applicable Law, and (ii) the TSX conditionally approving and the NYSE MKT approving the listing of the common shares of the Company issuable upon the exercise of such Conversion Rights, be in compliance with the requirements of the TSX and the NYSE MKT. None of the transactions contemplated by the Loan Documents requires registration under the Securities Act of 1933.

 

5.28        Mining Rights.  Except to the extent set forth in Schedule 5.28, Minera William S.A. de C.V. and Minera Labri S.A. de C.V. have acquired all Mining Rights, and has obtained such other material surface and other material rights, or has contracts, arrangements, or the ability to acquire the same, as are necessary for access rights, water rights, plant sites, tailings disposal, waste dumps, ore dumps, abandoned heaps or ancillary facilities which are required in connection with the operation of the Velardeña Operations.  All such Mining Rights and other rights, contracts, arrangements or ability to acquire the same, are sufficient in scope and substance for the Velardeña Operations as presently conducted and no part of the purchase price payable in connection with the acquisition of such Mining Rights and other rights (other than any royalty payments, if any, payable by the Borrower pursuant to royalty agreements set forth in Schedule 5.28) remains unpaid.

 

5.29        Ownership and Use of Properties; Liens.  Except for such exceptions that do not, or are not reasonably expected to have a Material Adverse Effect, Minera William S.A. de C.V. has good title (or the equivalent thereof in any relevant jurisdiction) to all of the assets it owns or purports to own, free and clear of all Liens or claims (including infringement claims with respect to patents, trademarks, copyrights and the like) except for Permitted Liens and as otherwise permitted pursuant to this Agreement or the other Loan Documents. Minera William S.A. de C.V. has complied in all material respects with all material contractual obligations relating to any of its material assets which are leased, operated, licensed or used (but not owned) by it or any Subsidiary of the Borrower and all agreements pursuant to which the Borrower is entitled to lease, operate, license or use any such Project Assets are in full force and effect.

 

5.30        Royalties, etc.  Other than as disclosed in Schedule 5.30, neither the Borrower’s nor or any Guarantor’s interest in any material asset or property (specifically including, but not limited to El Quevar Project or the Velardeña Operations) is subject to any royalty, net smelter return obligation, net profit payment, streaming, or similar interest or arrangement.

 

5.31        No Corrupt Practices.  Neither Borrower nor any of its Subsidiaries has engaged in any Corrupt Practices in violation of any Applicable Law.

 

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Section 6.  Affirmative Covenants.

 

So long as any of the commitments hereunder are in effect and until payment in full of the Obligations:

 

6.1          Existence.  The Borrower shall and shall cause each of the Guarantors to, at all times, (a) preserve and maintain its and each of the Guarantor’s existence and good standing in the jurisdiction of its organization, (b) preserve and maintain its and each of the Guarantor’s qualification to do business and good standing in each jurisdiction where the nature of its business makes such qualification necessary (other than such jurisdictions in which the failure to be qualified or in good standing could not reasonably be expected to have a Material Adverse Effect), and (c) continue as a going concern in the business which the Borrower and each of the Guarantors is presently conducting or other businesses reasonably related thereto.

 

6.2          Compliance with Laws.  The Borrower and each of the Guarantors shall comply in all material respects, including the conduct of its business and operations and the use of its and their properties and assets, with all Applicable Laws, rules, regulations, decrees, orders, judgments, licenses and permits, except where failure to comply could not reasonably be expected to have a Material Adverse Effect.  In addition, and without limiting the foregoing sentence, the Borrower shall (a) ensure, and cause each Subsidiary at any level to ensure, that no person who owns a controlling interest in or otherwise controls the Borrower or any Subsidiary is or shall be listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control (“OFAC”), the Department of the Treasury or included in any Executive Orders, (b) not use or permit the use of the proceeds of the Loan to violate any of the foreign asset control regulations of OFAC or any enabling statute or Executive Order relating thereto, and (c) comply, and cause each Subsidiary to comply, with all applicable Bank Secrecy Act (“BSA”) laws and regulations, as amended.

 

6.3          Approvals.  The Borrower and each of the Guarantors will obtain, maintain in full force and effect, and comply in all respects with, all Approvals (including those identified in Schedule 1.1 (Approvals), as may be required or advisable from time to time for the Borrower to (i) execute, deliver, perform and preserve Lender’s rights under any of the Loan Documents executed or to be executed by it, (ii) grant and perfect the Liens granted or purported to be granted and perfected by it pursuant to any Pledge Agreement and (iii) own, lease, use or license the assets in which it holds any interest and operate the Velardeña Operations in accordance with sound mining and business practice except, in the case of (i) and (iii), to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

6.4          Payment of Taxes and Liabilities.  Except as set forth in Schedule 6.4, the Borrower shall pay and discharge, prior to delinquency and before penalties accrue thereon, all property and other taxes, and all governmental charges or levies against it or any of the Guarantors or any of the collateral provided by Borrower or any of the Guarantors, as well as claims of any kind which, if unpaid, could become a Lien on any of its and any of the Guarantor’s property; provided that the foregoing shall not require the Borrower to pay any such tax or charge so long as it or the appropriate Guarantor shall contest the validity thereof in good faith by appropriate proceedings and shall set aside on the books of Borrower adequate reserves

 

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with respect thereto in accordance with GAAP and, in the case of a claim which could become a Lien on any of the Collateral, such contest proceedings as are necessary to stay the foreclosure of such Lien or the sale of any portion of the Collateral to satisfy such claim.

 

6.5          Maintain Property.  Except as set forth in Schedule 6.5, the Borrower shall at all times maintain, preserve and keep its and each of the Guarantor’s plant, properties and equipment, including any Collateral, in good repair, working order and condition, and shall from time to time make all needful and proper repairs, renewals, replacements, and additions thereto so that at all times the efficiency thereof shall be fully preserved and maintained consistent with good business practices.  The Borrower shall permit the Lender to examine and inspect such plant, properties and equipment, including any Collateral, during regular business hours and upon prior written notice to the Borrower.

 

6.6          Maintain Insurance.  The Borrower shall at all times maintain property and liability insurance coverage in accordance with the requirements required under any material agreements binding on Borrower or any of the Guarantors and consistent with its (i) past practices and (ii) reasonably prudent under the circumstances. Upon the request of the Lender, Borrower shall furnish to the Lender a certificate setting forth in reasonable detail the nature and extent of all insurance maintained by the Borrower and the Guarantors, which shall be reasonably acceptable in all respects to the Lender and shall cause each issuer of an insurance policy to provide the Lender with an endorsement (i) showing the Lender as loss payee with respect to each policy of property or casualty insurance; and (ii) providing that thirty (30) days’ notice will be given to the Lender prior to any cancellation of such policy.  In the event the Borrower either fails to provide the Lender with evidence of the insurance coverage required by this Section or at any time hereafter shall fail to obtain or maintain any of the policies of insurance required above, or to pay any premium in whole or in part relating thereto, then the Lender, without waiving or releasing any obligation or default by the Borrower hereunder, may at any time (but shall be under no obligation to so act), obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto, which the Lender reasonably deems advisable.  This insurance coverage (a) may, but need not, protect the Borrower’s interests in such property, including the Collateral, and (b) may not pay any claim made by, or against, the Borrower in connection with such property, including the Collateral. The Borrower may later cancel any such insurance purchased by the Lender, but only after providing the Lender with evidence that the Borrower has obtained the insurance coverage required by this Section.  If the Lender purchases insurance for the Collateral, the Borrower will be responsible for the reasonable and documented costs of that insurance, including interest and any other charges that may be imposed with the placement of the insurance, until the effective date of the cancellation or expiration of the insurance.  The costs of the insurance may be added to the principal amount of the Loan owing hereunder.  The costs of the insurance may be more than the cost of the insurance the Borrower may be able to obtain on its own.

 

6.7          ERISA Liabilities; Employee Plans.  The Borrower shall (i) keep in full force and effect any and all Employee Plans (other than Multiemployer Plans) which are presently in existence or may, from time to time, come into existence under ERISA, and not withdraw from any such Employee Plans, unless such withdrawal can be effected or such Employee Plans can be terminated without liability to the Borrower under Title IV of ERISA; (ii) make contributions

 

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to all of such Employee Plans in a timely manner and in a sufficient amount to comply with the minimum funding standards of Section 302 of ERISA and Section 412 of the Internal Revenue Code; (iii) comply with all material requirements of ERISA which relate to such Employee Plans; (iv) notify the Lender immediately upon receipt by the Borrower of any notice concerning the imposition of any withdrawal liability or of the institution of any proceeding or other action which may result in the termination of a Multiemployer Plan or Employee Plan subject to Title IV of ERISA or the appointment of a trustee by the Pension Benefit Guarantee Corporation to administer such Employee Plans; (v) promptly advise the Lender of the occurrence of any Reportable Event or material non-exempt prohibited transaction (as defined in ERISA), with respect to any such Employee Plans; and (vi) amend any Employee Plan that is intended to be qualified within the meaning of Section 401 of the Internal Revenue Code to the extent necessary to keep the Employee Plan qualified, and to cause the Employee Plan to be administered and operated in a manner that does not cause the Employee Plan to lose its qualified status; except, in each of the preceding clauses (i), (ii), (iii) and (vi), as would not reasonably be expected to result in a Material Adverse Effect.

 

6.8          Financial Statements.  The Borrower shall at all times maintain a system of accounting, based on the accrual basis of accounting and in all respects in accordance with GAAP, and shall upon the reasonable written request of the Lender furnish, or cause to furnished to the Lender or its authorized representatives such information regarding the business affairs, operations and financial condition of the Borrower.  Within thirty (30) days of filing with the Internal Revenue Service Borrower shall furnish a copy of its federal income tax returns, together with all schedules and exhibits.   No change with respect to such accounting principles shall be made by the Borrower or any of the Guarantors without giving prior notification to the Lender.  The Borrower represents and warrants to the Lender that the financial statements of the Borrower delivered to the Lender at or prior to the execution and delivery of this Agreement and to be delivered at all times thereafter accurately reflect and will accurately reflect the financial condition of the Borrower and each of the Guarantors on a consolidated basis.  The Lender shall have the right at all times during business hours, upon reasonable prior written notice to Borrower, to inspect the books and records of the Borrower and each of the Guarantors and make extracts therefrom.

 

6.9          Notice of Proceedings.  The Borrower, promptly upon becoming aware, shall give written notice to the Lender of (a) any matter materially adversely affecting the Borrower, any of the Guarantors, or the Velardeña Operations or the El Quevar Project and (b) any litigation, arbitration or governmental investigation or proceeding not previously disclosed by the Borrower to the Lender which has been instituted or, to the knowledge of the Borrower, is threatened against the Borrower or any Guarantor or to which any of their material properties is subject which could reasonably be expected to have a Material Adverse Effect.

 

6.10        Notice of Event of Default or Material Adverse Effect.  The Borrower shall, promptly after the commencement thereof, give notice to the Lender in writing of the occurrence of any Event of Default or any Unmatured Event of Default, or the occurrence of any condition or event having a Material Adverse Effect.

 

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6.11        Environmental Matters.  If any release or threatened release or other disposal of Hazardous Substances shall occur or shall have occurred on any real property or any other assets of the Borrower or any of the Guarantors, the Borrower shall cause the prompt containment and removal of such Hazardous Substances and the remediation of such real property or other assets as necessary to comply with all Environmental Laws and to preserve the value of such real property or other assets.  Without limiting the generality of the foregoing, the Borrower shall comply with any federal or state or other jurisdiction’s judicial or administrative order requiring the performance at any real property of the Borrower or any of the Guarantors of activities in response to the release or threatened release of a Hazardous Substance.

 

6.12        Shareholder Approval.  Borrower shall file or cause to be filed, a preliminary proxy statement on or before November 23, 2015, for purposes of holding a special meeting of its shareholders in order for the shareholders of the Borrower to consider and vote on approving the Conversion Rights of the Note, and the transactions contemplated thereby (the “Shareholders Meeting”). Borrower will promptly file a definitive proxy statement as soon as practicable (the “Final Proxy Statement Filing Date”). Borrower, as promptly as reasonably practicable after the Final Proxy Statement Filing Date, but no later than January 31, 2016, shall hold the Special Meeting. Borrower’s Board shall (i) recommend to the shareholders of Borrower the approval of the conversion provisions of the Note, and the transactions contemplated thereby, (ii) take all lawful actions to solicit and encourage such approval from the shareholders of Borrower and (iii) not withdraw or modify such favorable recommendation. On or before January 15, 2016, Borrower will apply to the TSX for listing of all shares receivable upon exercise of the Conversion Rights and will diligently pursue the listing of such shares on the TSX. Within five (5) days after receipt of the approval of the shareholders, Borrower will apply to the NYSE MKT for listing of all shares receivable upon exercise of the Conversion Rights and will diligently pursue the listing of such shares on the NYSE MKT.

 

6.13        Best Efforts to Raise Capital through the Sale of Equity.  Borrower will use its commercially reasonable best efforts to raise no less than $5,000,000 through the sale of equity or securities convertible into equity with the closing of such funding to occur prior to the Loan Maturity Date.

 

6.14        Security Interest in Newly Acquired Assets.  If Borrower or any of its Subsidiaries obtains any material assets, upon the reasonable written request of the Lender, Borrower and/or any such subsidiary will grant Lender a Lien against any such assets as collateral security for the Loan.

 

6.15        SEC and Exchange Required Filings.  Borrower will timely file all reports required by the NYSE MKT and the SEC and will not voluntarily de-list from either the NYSE MKT or TSX without the prior written approval of the Lender (not to be unreasonably withheld, delayed or conditioned). For as long as the Loan is outstanding, Borrower will use its commercially reasonable best efforts to maintain its listing with NYSE MKT and the TSX.

 

6.16        Registration Rights Agreement.  Upon any exercise by the Lender of its right to convert all or any portion of the principal and interest under the Note into common stock of the

 

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Borrower, Borrower agrees to enter into a Registration Rights Agreement, the form of which is attached hereto as Exhibit B.

 

6.17        Further Assurances.  The Borrower shall take or cause to be taken and shall cause each of its Subsidiaries, including each of the Guarantors, to take or cause to be taken, such actions as are necessary or as the Lender may reasonably request from time to time to ensure that the Obligations under the Loan Documents are secured by such assets of the Borrower and its Subsidiaries in each case as the Lender may reasonably determine, including (a) the execution and delivery of security agreements, pledge agreements, financing statements, mortgages, and other documents, and the filing any of the foregoing, and (b) the delivery of certificated securities and other collateral with respect to which perfection is obtained by possession.

 

Section 7.  Negative Covenants.

 

So long as any of the commitments hereunder are in effect and until payment in full of the Obligations (other than contingent indemnification obligations for which no claim has been asserted), Borrower and each of the Guarantors shall comply with each of the following unless Borrower has obtained Lender’s prior written consent in each instance:

 

7.1          Use of Proceeds.  Neither Borrower nor any of its Subsidiaries shall use the proceeds of the Loan except as set forth in Schedule 1.1 (Use of Proceeds); provided that, Borrower and its Subsidiaries may vary from the amount set forth in any line item of the Use of Proceeds set forth in Schedule 1.1 (Use of Proceeds) by no more than 20%.

 

7.2          Debt.  Neither the Borrower nor any of the Guarantors or other Subsidiaries of the Borrower, shall, either directly or indirectly, create, assume, incur or have outstanding any Debt, or become liable, whether as endorser, guarantor, surety or otherwise, for any Debt of any other Person, except for the following (“Permitted Debt”):

 

(a)           the Obligations under this Agreement and the other Loan Documents;

 

(b)           obligations for Taxes, assessments, municipal or other governmental charges;

 

(c)           Intercompany Debt among the Borrower and its Subsidiaries or among each of the Subsidiaries;

 

(d)           obligations for accounts payable and trade payables, other than for money borrowed, incurred in the ordinary course of business;

 

(e)           Debt not otherwise permitted that does not exceed $100,000; and

 

(f)            the Permitted Debt listed in Schedule 7.2.

 

7.3          Liens.  Neither the Borrower nor any Guarantor shall, either directly or indirectly, create, assume, incur or suffer or permit to exist any Lien or charge of any kind or character upon

 

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any material asset of the Borrower or any Guarantor, whether owned at the date hereof or hereafter acquired, except for the following (“Permitted Liens”):

 

(a)           Liens created under the Loan Documents;

 

(b)           Liens imposed by a Governmental Authority for Taxes, assessments, pension or severance obligations, or other charges not at the time delinquent or thereafter payable without penalty or being contested in good faith by appropriate proceedings and, in each case, for which the Borrower maintains adequate reserves in accordance with GAAP;

 

(c)           Liens arising in the ordinary course of business (such as (i) Liens of carriers, warehousemen, mechanics and materialmen and other similar Liens imposed by law, and (ii) Liens in the form of deposits or pledges incurred in connection with worker’s compensation, unemployment compensation and other types of social security (excluding Liens arising under ERISA) or in connection with surety bonds, bids, performance bonds and similar obligations) for sums not overdue or being contested in good faith by appropriate proceedings and not involving any advances or borrowed money or the deferred purchase price of property or services, which do not in the aggregate materially detract from the value of the property or assets of the Borrower or materially impair the use thereof in the operation of the Borrower’s business and, in each case, for which the Borrower maintains adequate reserves in accordance with GAAP;

 

(d)           easements, rights of way, restrictions, minor defects or irregularities in title and other similar Liens not interfering in any material respect with the ordinary conduct of the business of the Borrower;

 

(e)           purchase money security interests securing payment by the Borrower or any Guarantor of a portion of the purchase price of any asset, provided that (i) any such Lien attaches to such property concurrently with or within thirty (30) days after the acquisition thereof, (ii) such Lien attaches solely to the property so acquired in such transaction, and (iii) the principal amount of the debt secured thereby does not exceed 100% of the cost of such property;

 

(f)            Liens, deposits or pledges to secure the non-delinquent performance of bids, tenders, contracts (other than contracts for the payment of money), leases (permitted under this Agreement), public or statutory obligations, surety, stay, appeal, indemnity, performance or other similar bonds, or other similar obligations arising in the ordinary course of business;

 

(g)           Liens arising out of the lease of capital equipment;

 

(h)           attachments, appeal bonds, judgments and other similar Liens, for sums not exceeding Twenty-Five Thousand and 00/100 Dollars ($25,000.00) arising in connection with court proceedings, provided the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings and to the extent such judgments or awards do not constitute an Event of Default;

 

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(i)            pledges, deposits or Liens arising or made to secure payment of workers’ compensation, unemployment insurance or other forms of governmental insurance or benefits or to participate in any fund in connection with workers’ compensation, unemployment insurance, pensions or other social security programs;

 

(j)            to the extent permitted under this Agreement, leasehold interests in leases or subleases and licenses granted in the ordinary course of business and not interfering in any material respect with the business of the licensor;

 

(k)           with respect to real property, zoning restrictions, easements, licenses, encumbrances or other restrictions on the use of such real property or other minor irregularities in the title thereto, so long as the same do not impair in any material respect the use or value of such property for its intended purpose;

 

(l)            Liens on insurance proceeds securing the payment of financed insurance premiums that are promptly paid on or before the date they become due (provided that such Liens extend only to such insurance proceeds and not to any other property or assets); and

 

(m)          those Liens identified in Schedule 7.3.

 

7.4          Investments.  Except as set forth in Schedule 7.4, the Borrower will not and will not permit any of its Subsidiaries, either directly or indirectly, to make or have outstanding any Investment.

 

7.5          Modification of Material Agreements.  Borrower shall not and shall not permit any of its Subsidiaries to modify any Material Agreement as listed on Schedule 5.24.

 

7.6          Asset Dispositions, etc.  The Borrower will not and will not permit any of its Subsidiaries, either directly or indirectly, to have any Asset Disposition (including accounts receivable) to any Person (other than another Obligor) except for a Permitted Disposition.

 

7.7          No Change in Control Agreements.  Without the prior written consent of the Lender (not to be unreasonably withheld, delayed or conditioned), neither Borrower nor any of the Guarantors will (i) adopt any compensation related plan or policy containing “change of control” or “change in control” provisions, or (ii) enter into any compensation or other agreement, plan or policy pursuant to which any of the transactions described in the Loan Documents or contemplated thereunder, including without limitation the granting to or exercise by the Lender of any Conversion Rights and any resulting ownership by Lender of shares of common stock of the Borrower, will constitute a “change of control” of the Borrower.

 

7.8          Sale and Leaseback.  Except as set forth in Schedule 7.8, the Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into any agreement or arrangement providing for the sale or transfer by it of any property (now owned or hereafter acquired) to a Person (other than another Obligor) and the subsequent lease or rental, in a related transaction, of such property or other substantially similar property from such Person.

 

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7.9          Issuance of Capital Securities.  Any proceeds from the sale of Capital Securities of the Borrower up to the amount of principal and all interest payable under the Note shall be deposited in a separate account, with disbursements from such account not permitted without the signature of an authorized person on behalf of the Lender and then only to repay the Note at maturity or to release all or part of the proceeds upon a conversion of all or part of the Loan into shares of common stock of the Borrower as described in the Note. Other than settlement of intercompany contributions and distributions between the Subsidiaries or between the Borrower and any Subsidiary, none of the Guarantors shall issue any Capital Securities to any Person.

 

7.10        Distributions.  Other than distributions between the Subsidiaries or between the Borrower and any Subsidiary, neither the Borrower nor any Guarantor shall, (a) make any distribution or dividend, whether in cash or otherwise, to any of its equity holders, (b) purchase or redeem any of its equity interests or any warrants, options or other rights in respect thereof, (c) pay any management fees or similar fees to any of its equity holders or any Affiliate thereof, (d) pay or prepay interest on, principal of, premium, if any, redemption, conversion, exchange, purchase, retirement, defeasance, sinking fund or any other payment in respect of any Subordinated Debt, or (e) set aside restricted funds for any of the foregoing.  The foregoing shall not prohibit the transfer of funds to enable the Borrower to repay the Loan at maturity.

 

7.11        No Adverse Change to Employee Benefits.  Neither Borrower nor any of the Guarantors will amend or revise (including re-pricing any options granted to any present or former officer, director, employee or any person similarly situated) any terms of employment including compensation and benefits in a manner that benefits any such person or is adverse to the best interests of the Company.

 

7.12        Inconsistent Agreements.  Neither the Borrower nor any Guarantor shall enter into any material agreement containing any provision which would (a) be violated or breached by any borrowing by the Borrower hereunder or by the performance by the Borrower or any Guarantor of any of its Obligations hereunder or under any other Loan Document, (b) prohibit the Borrower or any Guarantor from granting to the Lender a Lien on any of its assets or (c) create or permit to exist or become effective any encumbrance or restriction on the ability of any Subsidiary to (i) pay dividends or make other distributions to the Borrower or any other Subsidiary, or pay any Debt owed to the Borrower or any Guarantor, (ii) make loans or advances to the Borrower or any other Guarantor, or (iii) transfer any of its assets or properties to the Borrower or any other Guarantor, other than (A) customary restrictions and conditions contained in agreements relating to the sale of all or a substantial part of the assets of any Subsidiary pending such sale, provided that such restrictions and conditions apply only to the Subsidiary to be sold and such sale is permitted hereunder, (B) restrictions or conditions imposed by any agreement relating to purchase money Permitted Debt, and other secured Permitted Debt by this Agreement if such restrictions or conditions apply only to the property or assets securing such Permitted Debt, and (C) customary provisions in leases and other contracts restricting the assignment thereof.

 

7.13        Royalty and Other Agreements.  Neither the Borrower nor any of the Guarantors shall enter into any agreement relating to the granting of royalties, net profits, streaming, or similar interests in connection with the Velardeña Operations or the El Quevar Project.

 

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7.14        Business Activities; Change of Legal Status and Organizational Documents.  Neither the Borrower nor any Guarantor shall (a) engage in any line of business other than the businesses engaged in on the date hereof and businesses reasonably related thereto, (b) change its name, its Employer Identification Number, if it has one, its type of organization, its jurisdiction of organization or other legal structure, or (c) permit its charter, bylaws or other organizational documents to be amended or modified in any way which could reasonably be expected to materially adversely affect the interests of the Lender.

 

7.15        Derivatives.  Borrower shall not and shall not permit any of its Subsidiaries to enter into any derivative contracts, including, but not limited to interest rate swaps and hedging arrangements.

 

Section 8.  Events of Default.

 

The Borrower, without notice or demand of any kind, shall be in default under this Agreement upon the occurrence of any of the following events (each an “Event of Default”).

 

8.1          Nonpayment of Obligations.  Borrower shall fail to pay principal, interest, or any other amount due, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise; when and as the same shall become due and payable, within three (3) days of the date when it becomes due and payable under any Loan Document.

 

8.2          Misrepresentation.  Any written warranty, representation, certificate or statement of any Obligor in this Agreement, the other Loan Documents shall be false in any material respect when made or at any time thereafter, or if any financial data or any other information now or hereafter furnished to the Lender by or on behalf of any Obligor in connection with any Loan Document shall prove to be false, inaccurate or misleading in any material respect.

 

8.3          Nonperformance.  Any failure to perform or default in the performance of any material covenant, condition or agreement contained in this Agreement or in any Loan Document, and such failure to perform or default in performance (except for any obligation to pay money) continues for a period of thirty (30) days after the Borrower receives notice or knowledge from the Lender of such failure to perform or default in performance or, if longer, the period of time permitted for a cure under the Loan Document under which such failure to perform or default occurs.

 

8.4          Default under Other Debt.  Any default by any Obligor in the payment of any Debt for any other obligation, in an aggregate principal amount exceeding $100,000 beyond any period of grace provided with respect thereto or in the performance of any other material term, condition or covenant contained in any agreement (including any capital or operating lease or any agreement in connection with the deferred purchase price of property) under which any such obligation is created, the effect of which default is to cause or permit the holder of such obligation (or the other party to such other agreement) to cause such obligation to become due prior to its stated maturity or terminate such other agreement.

 

8.5          Other Material Obligations.  Any default in the payment when due, or in the performance or observance of, any material obligation of, or condition agreed to by, any Obligor

 

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with respect to any material purchase or lease of goods or services where such default, singly or in the aggregate with all other such defaults, would reasonably be expected to have a Material Adverse Effect.

 

8.6          Bankruptcy, Insolvency, etc.  Any Obligor shall:

 

(a)           become insolvent, or generally fail to pay, or admit in writing its inability or unwillingness generally to pay, debts as they become due;

 

(b)           apply for, consent to, or acquiesce in the appointment of a trustee, receiver, sequestrator or other custodian for any substantial part of the property of such Obligor; make a general assignment for the benefit of its creditors or take any action authorizing, or in furtherance of, any of the foregoing;

 

(c)           in the absence of such application, consent or acquiescence in, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for a substantial part of the property of such Obligor, and such trustee, receiver, sequestrator or other custodian shall not be discharged within 60 days; provided that, each Obligor hereby expressly authorizes Borrower to appear in any court conducting any relevant proceeding during such 60 day period to preserve, protect and defend their rights under the Loan Documents;

 

(d)           permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law or any dissolution, winding up or liquidation proceeding, in respect thereof, and, if any such case or proceeding is not commenced by any Obligor, such case or proceeding shall be consented to or acquiesced in by such Obligor, as the case may be, or shall result in the entry of an order for relief or shall remain for 60 days undismissed; provided that, each Obligor hereby expressly authorizes Borrower to appear in any court conducting any such case or proceeding during such 60 day period to preserve, protect and defend their rights under the Loan Documents; or

 

(e)           take any action authorizing, or in furtherance of, any of the foregoing.

 

8.7          Judgments.  The entry of any final judgment, decree, levy of execution, attachment, garnishment or other similar process with respect to the payment of money in an amount in excess of $250,000 against any Obligor, other than as listed in Schedule 8.7.

 

8.8          Change in Control.  The occurrence of any Change in Control with respect to the Borrower or any Guarantor, except as contemplated hereby.

 

8.9          Guaranty.  Any guaranty provided by a Guarantor shall for any reason be revoked, terminated or become invalid or otherwise cease to be in full force and effect. Any Guarantor shall contest in any manner the validity or enforceability of a Guaranty or deny that it has continuing liability thereunder.

 

8.10        Subordinated Debt.  The subordination provisions of any Subordinated Debt shall for any reason be revoked or invalid or otherwise cease to be in full force and effect.  The

 

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Borrower shall contest in any manner, or any other holder thereof shall contest in any judicial proceeding, the validity or enforceability of the Subordinated Debt or deny that it has any further liability or obligation thereunder, or the Obligations shall for any reason not have the priority contemplated by the subordination provisions of the Subordinated Debt.

 

8.11        Material Agreement.  The provisions of any agreement shall for any reason, other than in accordance with the terms of such agreement, be revoked, terminated or otherwise cease to be in full force and effect, if such revocation, termination or cessation would reasonably be expected to have a Material Adverse Effect.

 

8.12        Impairment of Security, etc.  Any Loan Document or any Lien granted to the Lender hereunder or thereunder shall, in whole or in part, terminate, cease to be effective or cease to be the legally valid, binding and enforceable obligation of any Obligor party thereto; the Borrower or any Guarantor shall, directly or indirectly, contest in any manner such effectiveness, validity, binding nature or enforceability; or, except as permitted under any Loan Document, any Lien securing any Obligation shall, in whole or in part, cease to be a perfected first priority Lien; provided that the Borrower shall have thirty (30) days to cure any such impairment after the Borrower receives notice or knowledge from the Lender of such impairment.

 

8.13        Expropriation, etc.  Any Governmental Authority or other person purporting to be or act as a Governmental Authority condemns, nationalizes, seizes or otherwise expropriates all or any material portion of the assets or ownership of, or assumes custody of, a material portion of the Velardeña Operations or El Quevar Project, or the ownership of the owner of the Velardeña Operations or El Quevar Project, if such action (together with any prior similar action) would prevent the Borrower from carrying on its obligations under the Loan Documents or would reasonably be expected to have a Material Adverse Effect, and such condemnation, nationalization, seizure, expropriation, assumption or action is not withdrawn, rescinded, reversed, or in the case of any such action with respect to property or assets, the same are not replaced with equivalent property or assets within thirty (30) days.

 

8.14        Failure to Receive Approvals.  Failure of (i) the shareholders of the Borrower to approve the Conversion Rights of the Lender prior to January 31, 2016, or (ii) the Borrower to receive the NYSE MKT and the TSX conditional approval for listing of all shares receivable upon exercise of the Conversion Rights on or before February 15, 2016; provided that the Borrower shall have up to fourteen (14) days to extend the Shareholders Meeting in order to meet the quorum requirement for purposes of obtaining approval of the Conversion Rights.

 

Section 9.  Remedies.

 

9.1          Rights of Lender.  Upon the occurrence and during the continuance of an Event of Default, the Lender shall have all rights, powers and remedies set forth in the Loan Documents, in any written agreement or instrument (other than this Agreement or the Loan Documents) relating to any of the Obligations or any security therefor, as a secured party under the UCC or as otherwise provided at law or in equity.  Without limiting the generality of the foregoing, the Lender may, at its option upon the occurrence and during the continuance of an Event of Default, declare its commitments to the Borrower to be terminated and all Obligations to be immediately due and payable, all without demand, notice or further action of any kind required on the part of

 

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the Lender.  The Borrower hereby waives any and all presentment, demand, notice of dishonor, protest, and all other notices and demands in connection with the enforcement of Lender’s rights under the Loan Documents, and hereby consents to, and waives notice of release, with or without consideration, of the Guarantor or of any Collateral, notwithstanding anything contained herein or in the Loan Documents to the contrary.

 

9.2          Possession and Assembly of Collateral.  Upon the occurrence and during the continuance of an Event of Default, the Lender, in person, by agent, or by a properly appointed receiver, shall be entitled, without notice, demand or legal process of any kind (other than as required by law), take possession of any or all of the Collateral (in addition to Collateral of which the Lender already has possession), wherever it may be found, and for that purpose may pursue the same wherever it may be found, and may at any time enter into any of the Borrower’s or Guarantors’ premises where any of the Collateral may be or is supposed to be, and search for, take possession of, remove, keep and store any of the Collateral until the same shall be sold or otherwise disposed of and the Lender shall have the right to store and conduct a sale of the same in any of the Borrower’s or Guarantor’s premises without cost to the Lender.  At the Lender’s request, the Borrower will, at the Borrower’s sole expense, assemble the Collateral and make it available to the Lender at a place or places to be designated by the Lender which is reasonably convenient to the Lender and the Borrower.  Lender may apply for and obtain, without regard to the adequacy of any security for the obligations or the solvency of the Borrower or any other person or entity, a receiver to be appointed by any court of competent jurisdiction to take charge of all the premises, to manage, operate and carry on any business then being conducted or that could be conducted on the premises, to carry on, protect, preserve, replace and repair any of the Collateral and to apply the same to pay the receiver’s reasonable and documented expenses and all such amounts shall become obligations due under the Loan Documents.  Such receiver may be appointed by any court of competent jurisdiction upon ex parte application and without notice to Borrower, notice being hereby expressly waived.  Borrower hereby consents to the appointment of such receiver and waives any and all defenses, including, but not limited to, defenses based upon venue, to such appointment and agrees not to oppose any application therefor, other than the defense that there does not then exist an Event of Default.  Borrower consents to the receivership pursuant to CRS § 38-38-602(3) and agrees that it shall not be necessary for Lender to plead or prove any other basis for a receiver under CRS § 38-38-601 or 602(1) and (2) or CRCP Rule 66, all of which are waived.  Lender shall not be required to commence a judicial foreclosure as a condition precedent to its right to have a receiver appointed.  In no event shall the receiver be obligated to post a bond in excess of one and one-half times the gross revenues or $100,000, whichever is less.  The receiver shall be authorized to operate the business as deemed necessary or desirable to complete the improvements; pay, settle or compromise all existing invoices, charges and claims relating to the premises and/or the improvements as it deems necessary for the completion of the improvements and a clear title to the premises; prosecute and defend all actions and proceedings in connection with the construction and the improvements and apply the proceeds of any judgment in such action against any of the Obligations as it determines in its sole discretion; execute, acknowledge and deliver all leases, instruments and documents in the name of Borrower; and, with court approval, to sell the collateral.  Upon appointment of said receiver, Borrower shall immediately deliver possession of all of the premises to such receiver.  Neither the appointment of a receiver for the premises by any court at the request of Lender or by agreement with Borrower nor the entering

 

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into possession of all or any part of the premises by such receiver shall constitute Lender a “mortgagee in possession” or otherwise make Lender responsible or liable in any manner with respect to the premises or the occupancy, operation or use thereof.  Borrower agrees that Lender shall have the absolute and unconditional right to the appointment of a receiver in any independent and/or separate action brought by Lender regardless of whether Lender seeks any relief in such action other than the appointment of a receiver.  In that respect, Borrower waives any express or implied requirement under common law that a receiver may be appointed only ancillary to other judicial or non-judicial relief.

 

9.3          Sale of Collateral.  The Lender may sell any or all of the Collateral at public or private sale, upon such terms and conditions as the Lender may deem proper and the Lender may purchase any or all of the Collateral at any such sale.  The Borrower acknowledges that the Lender may be unable to effect a public sale of all or any portion of the Collateral because of certain legal and/or practical restrictions and provisions which may be applicable to the Collateral and, therefore, may be compelled to resort to one or more private sales to a restricted group of offerees and purchasers.  The Borrower consents to any such private sale so made even though at places and upon terms less favorable than if the Collateral were sold at public sale.  The Lender shall have no obligation to clean-up or otherwise prepare the Collateral for sale.  The Lender may apply the net proceeds, after deducting all costs, expenses, reasonable and documented attorneys’ and paralegals’ fees incurred or paid at any time in the collection, protection and sale of the Collateral and the Obligations, to the payment of the Note and/or any of the other Obligations, returning the excess proceeds, if any, to the Borrower.  The Borrower shall remain liable for any amount remaining unpaid after such application, with interest at the Default Rate.  Any notification of intended disposition of the Collateral required by law shall be conclusively deemed reasonably and properly given if given by the Lender at least ten (10) calendar days before the date of such disposition.  The Borrower hereby confirms, approves and ratifies all acts and deeds of the Lender relating to the foregoing, and each part thereof, and expressly waives any and all claims of any nature, kind or description which it has or may hereafter have against the Lender or its representatives, by reason of taking, selling or collecting any portion of the Collateral.  The Borrower consents to releases of the Collateral at any time (including prior to default) and to sales of the Collateral in groups, parcels or portions, or as an entirety, as the Lender shall deem appropriate.  The Borrower expressly absolves the Lender from any loss or decline in market value of any Collateral by reason of delay in the enforcement or assertion or non-enforcement of any rights or remedies under this Agreement.

 

9.4          Standards for Exercising Remedies.  To the extent that Applicable Law imposes duties on the Lender to exercise remedies in a commercially reasonable manner, the Borrower acknowledges and agrees that it is not commercially unreasonable for the Lender (a) to fail to incur expenses reasonably deemed significant by the Lender to prepare Collateral for disposition or otherwise to complete raw material or work-in-process into finished goods or other finished products for disposition, (b) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of, (c) to fail to exercise collection remedies against account debtors or other Persons obligated on Collateral or to remove liens or encumbrances on or any adverse claims against Collateral, (d) to exercise collection remedies against account debtors and other Persons obligated on Collateral

 

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directly or through the use of collection agencies and other collection specialists, (e) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (f) to contact other Persons, whether or not in the same business as the Borrower, for expressions of interest in acquiring all or any portion of the Collateral, (g) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the collateral is of a specialized nature, (h) to dispose of Collateral by utilizing internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets, (i) to dispose of assets in wholesale rather than retail markets, (j) to disclaim disposition warranties, including any warranties of title, (k) to purchase insurance or credit enhancements to insure the Lender against risks of loss, collection or disposition of Collateral or to provide to the Lender a guaranteed return from the collection or disposition of Collateral, or (l) to the extent deemed appropriate by the Lender, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist the Lender in the collection or disposition of any of the Collateral.  The Borrower acknowledges that the purpose of this section is to provide non-exhaustive indications of what actions or omissions by the Lender would not be commercially unreasonable in the Lender’s exercise of remedies against the Collateral and that other actions or omissions by the Lender shall not be deemed commercially unreasonable solely on account of not being indicated in this section.  Without limitation upon the foregoing, nothing contained in this section shall be construed to grant any rights to the Borrower or to impose any duties on the Lender that would not have been granted or imposed by this Agreement or by Applicable Law in the absence of this section.

 

9.5          UCC and Offset Rights.  The Lender may exercise, from time to time, any and all rights and remedies available to it under the UCC or under any other Applicable Law in addition to, and not in lieu of, any rights and remedies expressly granted in this Agreement or in any other agreements between any Obligor and the Lender, and may, without demand or notice of any kind, appropriate and apply toward the payment of such of the Obligations, whether matured or unmatured, including costs of collection and reasonable attorneys’ and paralegals’ fees, and in such order of application as the Lender may, from time to time, elect, any indebtedness of the Lender to any Obligor, however created or arising, including balances, credits, deposits, accounts or moneys of such Obligor in the possession, control or custody of, or in transit to the Lender.  The Borrower, on behalf of itself and each Obligor, hereby waives the benefit of any law that would otherwise restrict or limit the Lender in the exercise of its right, which is hereby acknowledged, to appropriate at any time hereafter any such indebtedness owing from the Lender to any Obligor.

 

9.6          Additional Remedies.  The Lender shall have the right and power to:

 

(a)           instruct the Borrower, at its own expense, to notify any parties obligated on any of the Collateral, including any account debtors, to make payment directly to the Lender of any amounts due or to become due thereunder, or the Lender may directly notify such obligors of the security interest of the Lender, and/or of the assignment to the Lender of the Collateral and direct such obligors to make payment to the Lender of any amounts due or to become due with respect thereto, and thereafter, collect any such amounts due on the Collateral directly from such Persons obligated thereon;

 

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(b)           enforce collection of any of the Collateral, including any Accounts, by suit or otherwise, or make any compromise or settlement with respect to any of the Collateral, or surrender, release or exchange all or any part thereof, or compromise, extend or renew for any period (whether or not longer than the original period) any indebtedness thereunder;

 

(c)           take possession or control of any proceeds and products of any of the Collateral, including the proceeds of insurance thereon;

 

(d)           extend, renew or modify for one or more periods (whether or not longer than the original period) the Note, any other of the Obligations, any obligation of any nature of any other obligor with respect to the Note or any of the Obligations;

 

(e)           grant releases, compromises or indulgences with respect to the Note, any of the Obligations, any extension or renewal of any of the Obligations, any security therefor, or to any other obligor with respect to the Note or any of the Obligations;

 

(f)            make an election with respect to the Collateral under Section 1111 of the Bankruptcy Code or take action under Section 364, 365 or any other section of the Bankruptcy Code; provided, however, that any such action of the Lender as set forth herein shall not, in any manner whatsoever, impair or affect the liability of the Borrower hereunder, nor prejudice, waive, nor be construed to impair, affect, prejudice or waive the Lender’s rights and remedies at law, in equity or by statute, nor release, discharge, nor be construed to release or discharge, the Borrower, any guarantor or other Person liable to the Lender for the Obligations; and

 

(g)           at any time, and from time to time, accept additions to, releases, reductions, exchanges or substitution of the Collateral, without in any way altering, impairing, diminishing or affecting the provisions of this Agreement, the Loan Documents, or any of the other Obligations, or the Lender’s rights hereunder, under the Note or under any of the other Obligations.

 

The Borrower hereby ratifies and confirms whatever the Lender may do with respect to the Collateral and agrees that the Lender shall not be liable for any error of judgment or mistakes of fact or law with respect to actions taken in connection with the Collateral.

 

9.7          Attorney-in-Fact.  The Borrower hereby irrevocably makes, constitutes and appoints the Lender (and any officer of the Lender or any Person designated by the Lender for that purpose) as the Borrower’s true and lawful proxy and attorney-in-fact (and agent-in-fact) in the Borrower’s name, place and stead, with full power of substitution, to (i) take such actions as are permitted in this Agreement and the other Loan Documents, (ii) execute such financing statements and other documents and to do such other acts as the Lender may reasonably require to perfect and preserve the Lender’s security interest in, and to enforce such interests in the Collateral, (iii) to affirm or make any elections under section 365 of the Bankruptcy Code pertaining to any agreements in the event of a bankruptcy filed by or against the Borrower or any Guarantor, and (iv) carry out any remedy provided for in this Agreement, including endorsing the Borrower’s name to checks, drafts, instruments and other items of payment, and proceeds of the Collateral, executing change of address forms with the postmaster of the United States Post Office serving the address of the Borrower, changing the address of the Borrower to that of the

 

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Lender, opening all envelopes addressed to the Borrower and applying any payments contained therein to the Obligations.  The Borrower hereby acknowledges that the constitution and appointment of such proxy and attorney-in-fact are coupled with an interest and are irrevocable.  The Borrower hereby ratifies and confirms all that such attorney-in-fact may do or cause to be done by virtue of any provision of this Agreement.

 

9.8          No Marshaling.  The Lender shall not be required to marshal any present or future collateral security (including this Agreement and the Collateral) for, or other assurances of payment of, the Obligations or any of them or to resort to such collateral security or other assurances of payment in any particular order.  To the extent that it lawfully may, the Borrower hereby agrees that it will not invoke any law relating to the marshaling of collateral which might cause delay in or impede the enforcement of the Lender’s rights under this Agreement or under any other instrument creating or evidencing any of the Obligations or under which any of the Obligations is outstanding or by which any of the Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, the Borrower hereby irrevocably waives the benefits of all such laws.

 

9.9          Application of Proceeds.  The Lender will within three (3) Business Days after receipt of cash or solvent credits from collection of items of payment, proceeds of Collateral or any other source, apply the whole or any part thereof against the Obligations secured hereby.  The Lender shall further have the exclusive right to determine how, when and what application of such payments and such credits shall be made on the Obligations, and such determination shall be conclusive upon the Borrower.  Any proceeds of any disposition by the Lender of all or any part of the Collateral may be first applied by the Lender to the payment of expenses incurred by the Lender in connection with the Collateral, including reasonable attorneys’ fees and legal expenses as provided for in Section 10.14 hereof.

 

9.10        No Waiver.  No Event of Default shall be waived by the Lender except in writing. No failure or delay on the part of the Lender in exercising any right, power or remedy hereunder shall operate as a waiver of the exercise of the same or any other right at any other time; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder.  There shall be no obligation on the part of the Lender to exercise any remedy available to the Lender in any order.  The remedies provided for herein are cumulative and not exclusive of any remedies provided at law or in equity.  The Borrower agrees that in the event that the Borrower fails to perform, observe or discharge any of its Obligations or liabilities under this Agreement or any Loan Document, no remedy of law will provide adequate relief to the Lender, and further agrees that the Lender shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages.

 

Section 10.  Miscellaneous.

 

10.1        Obligations Absolute.  None of the following shall affect the Obligations of the Borrower to the Lender under this Agreement or the Lender’s rights with respect to the Collateral:

 

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(a)           acceptance or retention by the Lender of other property or any interest in property as security for the Obligations;

 

(b)           release by the Lender of all or any part of the Collateral or of any party liable with respect to the Obligations;

 

(c)           release, extension, renewal, modification or substitution by the Lender of the Note, or the Note evidencing the Obligations, or the compromise of the liability of any Obligor of the Obligations; or

 

(d)           failure of the Lender to resort to any other security or to pursue the Borrower or any other Obligor liable for any of the Obligations before resorting to remedies against the Collateral.

 

10.2        Entire Agreement.  This Agreement and the other Loan Documents (i) constitute the entire agreement between the parties with respect to the subject matter hereof and thereof; and (ii) are the final expression of the intentions of the Obligor and the Lender.  No promises, either expressed or implied, exist between the Obligor and the Lender, unless contained herein or therein.  Without limiting the generality of the foregoing, Lender and Borrower each disclaim and waive any implied covenants with respect to this Agreement and the other Loan Documents, including, without limitation, the implied covenant of good faith and fair dealing.  This Agreement, together with the other Loan Documents, supersedes all negotiations, representations, warranties, commitments, term sheets, discussions, negotiations, offers or contracts (of any kind or nature, whether oral or written) prior to or contemporaneous with the execution hereof with respect to any matter, directly or indirectly related to the terms of this Agreement and the other Loan Documents.  The Borrower specifically acknowledges that this Agreement relates to a “credit agreement” for a principal amount exceeding twenty-five thousand dollars as defined in C.R.S. § 38-10-124 and that the statute of frauds provided in such statute applies to this Agreement.  This Agreement and the other Loan Documents are the result of negotiations among the Lender, the Obligors and the other parties thereto, and have been reviewed (or have had the opportunity to be reviewed) by counsel to all such parties, and are the products of all parties.  Accordingly, this Agreement and the other Loan Documents shall not be construed more strictly against the Lender merely because the Lender’s involvement in their preparation.

 

10.3        Assignability.  (a) The Lender may at any time assign the Lender’s rights in this Agreement, the other Loan Documents, the Obligations, or any part thereof and transfer the Lender’s rights in any or all of the Collateral, and the Lender thereafter shall be relieved from all liability with respect to such Collateral.  In addition, the Lender may at any time sell one or more participations in the Loan.  In the event that a transfer by Lender of its rights and/or obligations under this Agreement (and any relevant Loan Documents) occurred or was deemed to occur by way of novation, the Parties explicitly agree that all securities and guarantees created under any Loan Documents shall be preserved for the benefit of the new lender, new secured party, participant or their successors or assignees, in accordance with the provisions of Article 1278 of the Luxembourg Civil Code. (b) The Borrower may not sell or assign this Agreement, or any other agreement with the Lender or any portion thereof, either voluntarily or by operation of law,

 

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without the prior written consent of the Lender.  (c) This Agreement shall be binding upon the Lender and the Borrower and their respective legal representatives and successors, provided that a successor to the Lender shall be entitled to rely upon the provisions of Section 3.5 only if the successor has satisfied requirements imposed by the final sentence of Section 3.5. If the Lender assigns rights under this Agreement, the Lender shall, acting solely for this purpose as an agent of the Borrower, maintain a register on which it enters the name and address of each assignee’s interest in the Loan and the principal amounts (and stated interest) of each assignee’s interest in the Loans or other obligations under the Loan Documents (the “Register”); provided that the  Lender shall not have any obligation to disclose all or any portion of the Register to any Person except to the extent that such disclosure is necessary to establish that such loan or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. Any sale or transfer of an interest in the Loan, however evidenced, shall be effective only upon appropriate entries with respect thereto being made in the Register.  The entries in the Register shall be conclusive absent manifest error, and the Lender shall treat each Person whose name is recorded in the Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. All references herein to the Borrower shall be deemed to include any successors, whether immediate or remote.  In the case of a joint venture or partnership, the term “Borrower” shall be deemed to include all joint venturers or partners thereof, who shall be jointly and severally liable hereunder.  Notwithstanding the above, Lender agrees that, so long as no Event of Default has occurred and is continuing, that prior to any assignment of this Agreement or the Note to, or any loan participation with, a Person other than a financial institution whose deposits are insured by the FDIC, Lender agrees to obtain Borrower’s prior written approval of the proposed assignee or participant, which approval shall not be unreasonably withheld.

 

10.4        Confirmations.  The Borrower and the Lender agree from time to time, upon written request received by it from the other, to confirm to the other in writing the aggregate unpaid principal amount of the Loan then outstanding under such Note.

 

10.5        Binding Effect.  This Agreement shall become effective upon execution by the Borrower and the Lender.  If this Agreement is not dated or contains any blanks when executed by the Borrower, the Lender is hereby authorized, without notice to the Borrower, to date this Agreement as of the date when it was executed by the Borrower, and to complete any such blanks according to the terms upon which this Agreement is executed.

 

10.6        Governing Law; Jurisdiction, etc.

 

(a)           This Agreement and the other Loan Documents and any claim, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement or any other Loan Document (except, as to any other Loan Document, as expressly set forth therein) and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the law of the State of Colorado.

 

(b)           The Borrower and each Guarantor irrevocably and unconditionally agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, against the Lender in any way

 

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relating to this Agreement or any other Loan Document or the transactions relating hereto or thereto, in any forum other than the courts of the State of Colorado sitting in County, and of the United States District Court of the District of Colorado, and any appellate court from any thereof, and each of the parties hereto irrevocably and unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such Colorado State court or, to the fullest extent permitted by Applicable Law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action, litigation or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or in any other Loan Document shall affect any right that the Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or Guarantor or its properties in the courts of any jurisdiction.

 

(c)           The Borrower irrevocably and unconditionally waives, to the fullest extent permitted by Applicable Law, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by Applicable Law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

(d)           Each party hereto irrevocably consents to service of process in the manner provided for notices in Section 10.13. Nothing in this Agreement will affect the right of any party hereto to serve process in any other manner permitted by Applicable Law.

 

10.7        Waiver of Jury Trial.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

10.8        Enforceability.  Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision of this Agreement shall be prohibited by, unenforceable or invalid under any jurisdiction, such provision shall as to such jurisdiction, be severable and be ineffective to the extent of such prohibition or invalidity, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

 

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10.9        Survival of Borrower Representations.  All covenants, agreements, representations and warranties made by the Borrower herein shall, notwithstanding any investigation by the Lender, be deemed material and relied upon by the Lender and shall survive the making and execution of this Agreement and the Loan Documents and the issuance of the Note.  Each of the representations and warranties contained herein shall be deemed reaffirmed as of the date of each borrowing under this Agreement.  The Lender, in extending financial accommodations to the Borrower, is expressly acting and relying on the aforesaid representations and warranties.

 

10.10      Extensions of Lender’s Commitment.  This Agreement shall secure and govern the terms of (i) any extensions or renewals of the Lender’s commitment hereunder, and (ii) any replacement note executed by the Borrower and accepted by the Lender in its sole and absolute discretion in substitution for the Note.

 

10.11      Time of Essence.  Time is of the essence in making payments of all amounts due the Lender under this Agreement and in the performance and observance by the Borrower of each covenant, agreement, provision and term of this Agreement.

 

10.12      Counterparts; Facsimile Signatures.  Borrower has requested that Lender permit this Agreement and the other Loan Documents be signed in counterpart signature pages and that they be delivered electronically.  Lender is willing to permit the use of electronically delivered counterpart signature pages on the following terms, each of which is accepted by Borrower by the delivery of any counterpart signature page: (a) This Agreement and the other Loan Documents may be signed in any number of counterparts and delivered electronically, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument; (b) Borrower agrees that the version of the documents to which the counterpart signature pages are attached according to Lender’s records shall conclusively be deemed to be the final versions agreed upon by all parties; (c) Borrower waives any claim or defense that it may have against Lender or any other person involved in handling the counterpart signature pages, even if such claims are based in whole or in part upon negligence or fraud, that the versions of the documents as reflected in Lender’s records are not the final complete versions of such documents; (d) Borrower waives any right to object to the introduction of electronic copies of such documents in any action or proceeding based on any theory that Lender should have to produce the originals; and (e) Borrower agrees that it shall, within fifteen (15) days of the date hereof furnish Lender with original fully executed versions of Loan Documents and failure to do so shall constitute an Event of Default.

 

10.13      Notices.  Except as otherwise provided herein, the Borrower waives all notices and demands in connection with the enforcement of the Lender’s rights hereunder.  All notices, requests, demands and other communications provided for hereunder shall be in writing and addressed as follows:

 

	
To   the Borrower:
    	
Golden   Minerals Company
    
	
 
    	
Mr. Robert   Vogels, CFO
    
	
 
    	
350   Indiana Street, Suite 800
    
	
 
    	
Golden,   Colorado  80401
    

 

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With copies to (which shall not be deemed to   constitute notice):
    
	
 
    	
 
    
	
 
    	
Deborah   Friedman
    
	
 
    	
Davis   Graham & Stubbs LLP
    
	
 
    	
1550   17th Street, Suite 500
    
	
 
    	
Denver,   CO 80202
    
	
 
    	
 
    
	
To   the Lender:
    	
Sentient   Global Resources Fund IV, L.P.
    
	
 
    	
Attn:   Mr. Andrew Pullar
    
	
 
    	
Landmark   Square, 1st Floor
    
	
 
    	
64   Earth Close, West Bay Beach South
    
	
 
    	
P.O. Box   10795
    
	
 
    	
George   Town, Grand Cayman KY1-1007
    
	
 
    	
Cayman   Islands
    
	
 
    	
 
    
	
With copies to (which shall not be deemed to   constitute notice):
    
	
 
    	
 
    
	
 
    	
Gregory   A. Smith
    
	
 
    	
Quinn &   Brooks P.L.L.C.
    
	
 
    	
P.O. Box   590
    
	
 
    	
Larkspur,   CO 80118
    

 

Or, as to each party, at such other address as shall be designated by such party in a written notice to each other party complying as to delivery with the terms of this subsection.  All notices addressed as above shall be deemed to have been properly given (i) if served in person, upon acceptance or refusal of delivery; (ii) if mailed by certified or registered mail, return receipt requested, postage prepaid, on the third (3rd) Business Day following the day such notice is deposited in any post office station or letter box; or (iii) if sent by recognized overnight courier, on the first (1st) Business Day following the day such notice is delivered to such carrier.  No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances.

 

10.14      Costs, Fees and Expenses.  The Borrower shall pay or reimburse the Lender for all reasonable and documented costs, fees and expenses incurred by the Lender or for which the Lender becomes obligated in connection with the negotiation, preparation, consummation, collection of the Obligations or enforcement of this Agreement,  the other Loan Documents and all other documents provided for herein or delivered or to be delivered hereunder or in connection herewith (including any amendment, supplement or waiver to any Loan Document), or during any workout, restructuring or negotiations in respect thereof, including reasonable and documented consultants’ fees and attorneys’ fees and time charges of counsel to the Lender, which shall also include attorneys’ fees and time charges of attorneys who may be employees of the Lender or any Affiliate of the Lender, plus reasonable and documented costs and expenses of such attorneys or of the Lender; search fees, costs and expenses; and all taxes payable in connection with this Agreement or the other Loan Documents, whether or not the transaction contemplated hereby shall be consummated.  In furtherance of the foregoing, the Borrower shall

 

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pay any and all stamp and other taxes, UCC search fees, filing fees and other costs and expenses in connection with the execution and delivery of this Agreement, the Note and the other Loan Documents to be delivered hereunder, and agrees to save and hold the Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such reasonable and documented costs and expenses.  That portion of the Obligations consisting of reasonable and documented costs, expenses or advances to be reimbursed by the Borrower to the Lender pursuant to this Agreement or the other Loan Documents which are not paid on or prior to the date hereof shall be payable by the Borrower to the Lender on demand.  If at any time or times hereafter the Lender: (a) employs counsel for advice or other representation (i) with respect to this Agreement or the other Loan Documents, (ii) to represent the Lender in any litigation, contest, dispute, suit or proceeding or to commence, defend, or intervene or to take any other action in or with respect to any litigation, contest, dispute, suit, or proceeding (whether instituted by the Lender, the Borrower, or any other Person) in any way or respect relating to this Agreement, the other Loan Documents or the Borrower’s business or affairs, or (iii) to enforce any rights of the Lender against the Borrower or any other Person that may be obligated to the Lender by virtue of this Agreement or the other Loan Documents; (b) takes any action to protect, collect, sell, liquidate, or otherwise dispose of any of the Collateral; and/or (c) attempts to or enforces any of the Lender’s rights or remedies under the Agreement or the other Loan Documents, the reasonable and documented costs and expenses incurred by the Lender in any manner or way with respect to the foregoing, shall be part of the Obligations, payable by the Borrower to the Lender on demand.

 

10.15      Indemnification.  The Borrower agrees to defend (with counsel satisfactory to the Lender), protect, indemnify, exonerate and hold harmless each Indemnified Party from and against any and all liabilities, obligations, losses (other than loss of profits), damages, penalties, actions, judgments, suits, claims, costs, expenses and distributions of any kind or nature (including the disbursements and the reasonable and documented fees of counsel for each Indemnified Party thereto, which shall also include, without limitation, reasonable and documented attorneys’ fees and time charges of attorneys who may be employees of any Indemnified Party), which may be imposed on, incurred by, or asserted against, any Indemnified Party (whether direct, indirect or consequential and whether based on any federal, state or local laws or regulations, including securities laws, Environmental Laws, commercial laws and regulations, under common law or in equity, or based on contract or otherwise) in any manner relating to or arising out of this Agreement or any of the Loan Documents, or any act, event or transaction related or attendant thereto, the preparation, execution and delivery of this Agreement and the Loan Documents, including the making or issuance and management of the Loan, the use or intended use of the proceeds of the Loan, the enforcement of the Lender’s rights and remedies under this Agreement, the Loan Documents, the Note, any other instruments and documents delivered hereunder; provided, however, (i) this Section shall not apply to Excluded Taxes, and (ii) that the Borrower shall not have any obligations hereunder to any Indemnified Party with respect to matters determined by a court of competent jurisdiction by final and non-appealable judgment to have been caused solely by or resulting solely from the willful misconduct, bad faith, or gross negligence of such Indemnified Party or a material breach by such Indemnified Party of its obligations in connection with the Loan Documents.  To the extent that the undertaking to indemnify set forth in the preceding sentence may be unenforceable because it violates any law or public policy, the Borrower shall satisfy such undertaking to the maximum

 

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extent permitted by Applicable Law.  Any liability, obligation, loss, damage, penalty, cost or expense covered by this indemnity shall be paid to each Indemnified Party on demand, and failing prompt payment, together with interest thereon at the Default Rate from the date incurred by each Indemnified Party until paid by the Borrower, shall be added to the Obligations of the Borrower and be secured by the Collateral.  The provisions of this Section shall survive the satisfaction and payment of the other Obligations and the termination of this Agreement.

 

10.16      Revival and Reinstatement of Obligations.  If the incurrence or payment of the Obligations by any Obligor or the transfer to the Lender of any property should for any reason subsequently be declared to be void or voidable under any state or federal law relating to creditors’ rights, including provisions of the Bankruptcy Code relating to fraudulent conveyances, preferences, or other voidable or recoverable payments of money or transfers of property (collectively, a “Voidable Transfer”), and if the Lender is required to repay or restore, in whole or in part, any such Voidable Transfer, or elects to do so upon the reasonable advice of its counsel, then, as to any such Voidable Transfer, or the amount thereof that the Lender is required or elects to repay or restore, and as to all reasonable costs, expenses, and reasonable attorneys’ fees of the Lender, the Obligations shall automatically shall be revived, reinstated, and restored and shall exist as though such Voidable Transfer had never been made.

 

10.17      Document Imaging.  Lender shall be entitled, in its sole discretion, to image all or any selection of the instruments, Related Documents, other loan documents, and items and records governing, arising from or relating to any of Borrower’s loans, and may destroy or archive the paper originals.  The parties hereto waive any right to insist Lender produce paper originals, agree that such images shall be accorded the same force and effect as the paper originals, and further agree that Lender is entitled to use such images in lieu of destroyed or archived originals for any purpose, including as admissible evidence in any demand, presentment or proceedings.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the Borrower and the Lender have executed this Loan Agreement as of the date first above written.

 

	
GOLDEN   MINERALS COMPANY, a   Delaware corporation
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ Warren M. Rehn
    	
 
    
	
 
    	
Name:   Warren M. Rehn
    	
 
    
	
 
    	
Title:   President and Chief Executive Officer
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
SENTIENT GLOBAL RESOURCES FUND   IV, L.P., a Cayman   Islands exempted limited partnership
    
	
 
    	
 
    
	
By:   Sentient GP IV, L.P., General Partner
    	
 
    
	
By:   Sentient Executive GP IV, Limited, General Partner
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ Andrew Pullar
    	
 
    
	
 
    	
Name:   Andrew Pullar
    	
 
    
	
 
    	
Title:   Director
    	
 
    

 

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