Document:

Exhibit 10.39

 

EXECUTION VERSION

 

AMENDMENT NO. 1
 TO THE TERM CREDIT AGREEMENT

 

AMENDMENT NO. 1 (this “Amendment”),  dated as of April 4, 2012, among 99¢ ONLY STORES (the successor by merger with Number Merger Sub, Inc.) (the “Borrower”),  NUMBER HOLDINGS, INC. (“Holdings”),  each other Loan Party party hereto, each Participating Lender (as defined below) party hereto and ROYAL BANK OF CANADA (“Royal Bank”),  as Administrative Agent (in such capacity, the “Administrative Agent”) to the Existing Credit Agreement (as defined below).  Capitalized terms not otherwise defined in this Amendment have the same meanings as specified in the Existing Credit Agreement referred to below.

 

PRELIMINARY STATEMENTS:

 

(1)           Holdings, the Borrower, the Lenders party thereto, Royal Bank, as Administrative Agent and as Collateral Agent and the other agents party thereto, entered into that certain $525,000,000 Credit Agreement dated as of January 13, 2012 (as amended, restated, amended and restated, supplemented, or otherwise modified from time to time prior to the date of this Amendment, the “Existing Credit Agreement”; as amended by this Amendment and as otherwise may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”; and the Lenders party to the Existing Credit Agreement immediately prior to the effectiveness of this Amendment being the “Existing Lenders”).

 

(2)           The Borrower has requested that the Lenders reduce the interest rates applicable to the Initial Loans on the terms and conditions set forth herein, which reduction in interest rates shall be effected by the conversion of Initial Loans into Tranche B-1 Loans otherwise having the same terms (except as otherwise provided in this Amendment) as the Initial Loans.

 

(3)           Each Existing Lender executing and delivering a notice (a “Conversion Notice”) in the form attached as Schedule II hereto to the Administrative Agent (each such Lender in such capacity, a “Converting Lender”) shall be deemed to have converted the aggregate outstanding amount of its Initial Loans under the Existing Credit Agreement, as set forth in such Converting Lender’s Conversion Notice (not to exceed such Converting Lender’s Tranche B-1 Commitment (as defined below)), into an equal aggregate principal amount of Tranche B-1 Loans under the Credit Agreement.

 

(4)           Each Converting Lender may elect in its Conversion Notice to commit to provide Tranche B-1 Commitments (as defined below) in excess of the aggregate outstanding amount of its Initial Loans (each such Lender in such capacity, an “Increasing Lender”; and such excess commitments of such Lender, such Lender’s “Additional Commitments”).

 

(5)           Each Lender party hereto that is providing a Tranche B-1 Commitment, and that is not an Existing Lender (each such lender, an “Additional Lender” and, together with the Converting Lenders, the “Participating Lenders”) shall, by executing and delivering this Amendment, be deemed as of the Amendment Effective Date to have become a party to the

 

 

Credit Agreement as a Lender thereunder and shall have the rights and obligations of a Lender thereunder.

 

(6)           Upon the occurrence of the Amendment Effective Date (as hereinafter defined), each of the Participating Lenders shall have the Commitment in respect of Tranche B-1 Loans shown opposite its name on Schedule I to the Existing Credit Agreement (as amended hereby) (collectively, the “Tranche B-1 Commitments”).

 

Holdings, the Borrower, the Administrative Agent, the Converting Lenders and the other Participating Lenders have agreed to amend the Credit Agreement on the terms and conditions hereinafter set forth.

 

NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

 

SECTION 1.         Amendments to the Existing Credit Agreement.  The Existing Credit Agreement is, effective as of the Amendment Effective Date, hereby amended as follows:

 

(a)           Section 1.1 of the Existing Credit Agreement is amended by inserting the following new definitions in their correct alphabetical order:

 

“Amendment No. 1” means Amendment No. 1 to the Credit Agreement, dated as of April 4, 2012, among Holdings, the Borrower, the other Loan Parties party thereto, the Lenders party thereto and the Administrative Agent.

 

“Amendment No. 1 Effective Date” means the date of satisfaction (or waiver) of the conditions precedent set forth in Section 3 of Amendment No. 1.

 

“Tranche B-1 Commitments” has the meaning specified in Amendment No. 1.

 

“Tranche B-1 Loan” means a Loan made pursuant to Section 2.1(b).

 

(b)           The definitions of “Adjusted Eurocurrency Rate” and “All-In Yield” in Section 1.1 of the Existing Credit Agreement are in each case amended by replacing each reference to “1.50%” therein with “1.25%”.

 

(c)           The definition of “Applicable Margin” in Section 1.1 of the Existing Credit Agreement is amended and restated in its entirety as follows:

 

“Applicable Margin” means a percentage per annum equal to (a) in the case of Initial Loans, (i) for Eurocurrency Rate Loans, 5.50% and (ii) for Base Rate Loans, 4.50% and (b) in the case of Tranche B-1 Loans, (i) for Eurocurrency Rate Loans, 4.00% and (ii) for Base Rate Loans, 3.00%.

 

(d)           Clause (2)(c) of the definition of “Excess Cash Flow” in Section 1.1 of the Existing Credit Agreement is amended by inserting the following at the end thereof:

 

 

“and in each case excluding any prepayments or repayments of Initial Loans made in connection with the conversion or refinancing of such Loans into Tranche B-1 Loans pursuant to Amendment No. 1”.

 

(e)           Clause (2)(j) of the definition of “Excess Cash Flow” in Section 1.1 of the Existing Credit Agreement is amended by inserting the following at the end thereof:

 

“(excluding any such premium, make-whole or penalty payments made in connection with the conversion or refinancing of Initial Loans into Tranche B-1 Loans pursuant to Amendment No. 1, to the extent financed with Tranche B-1 Loans)”.

 

(f)            The definition of “Initial Loan” in Section 1.1 of the Existing Credit Agreement is amended by replacing the reference to “Section 2.1” with “Section 2.1(a)”.

 

(g)           The definition of “Repricing Transaction” in Section 1.1 of the Existing Credit Agreement is amended by inserting “or Tranche B-1 Loans” immediately after “Initial Loans” in each instance in which it appears therein.

 

(h)           Section 2.1 of the Existing Credit Agreement is amended and restated in its entirety as follows:

 

“SECTION 2.1  The Loans.  (a)  Subject to the terms and conditions set forth herein, the Lenders severally made to the Borrower a single loan denominated in Dollars equal to $525,000,000 on the Effective Date.  Amounts borrowed under this Section 2.1(a) and repaid or prepaid may not be reborrowed.  Initial Loans may be Base Rate Loans or Eurocurrency Rate Loans, as further provided herein.

 

(b)           Subject to the terms and conditions set forth herein, each Lender severally agrees to make to the Borrower a single loan denominated in Dollars equal to such Lender’s Tranche B-1 Commitment on the Amendment No. 1 Effective Date.  Amounts borrowed under this Section 2.1(b) and repaid or prepaid may not be reborrowed.  Tranche B-1 Loans may be Base Rate Loans or Eurocurrency Rate Loans, as further provided herein.  Notwithstanding the foregoing, Tranche B-1 Loans shall be made as converted or refinanced Initial Loans on the terms and subject to the conditions set forth in Amendment No. 1.”

 

(i)            Section 2.2(a) of the Existing Credit Agreement is amended by replacing the reference to the “Effective Date” in the second sentence thereof with “the requested date of Borrowing”.

 

(j)            Section 2.4(a) of the Existing Credit Agreement is amended by inserting the following immediately prior to the proviso thereto:

 

“and excluding prepayments or repayments of Initial Loans made in connection with the conversion or refinancing of such Loans into Tranche B-1 Loans pursuant to Amendment No. 1”.

 

 

(k)           Section 2.6 of the Existing Credit Agreement is amended by (i) renumbering clause (b) thereto as clause (c) and (ii) inserting the following as a new clause (b) thereto:

 

“, (b) on the last Business Day of each March, June, September and December, commencing with the last Business Day of March, 2012, an aggregate principal amount equal to 0.25% of the aggregate principal amount of all Tranche B-1 Loans outstanding on the Amendment No. 1 Effective Date (which payments shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in Section 2.3)”.

 

(l)            Section 2.15 of the Existing Credit Agreement is amended and restated in its entirety as follows:

 

“SECTION 2.15   Loan Repricing Protection.  In the event that, on or prior to the date that is one year after the Amendment No. 1 Effective Date, the Borrower (a) makes any prepayment of Initial Loans or Tranche B-1 Loans in connection with any Repricing Transaction or (b) effects any amendment of this Agreement resulting in a Repricing Transaction, the Borrower shall pay to the Administrative Agent, for the ratable account of each applicable Lender, (i) in the case of clause (a), a prepayment premium of 1.0% of the principal amount of the Initial Loans or Tranche B-1 Loans being prepaid and (ii) in the case of clause (b), a payment equal to 1.0% of the aggregate principal amount of the applicable Initial Loans or Tranche B-1 Loans outstanding immediately prior to such amendment.  Such amounts shall be due and payable on the date of effectiveness of such Repricing Transaction.”

 

(m)          The preamble to Article V of the Existing Credit Agreement, and Sections 5.11, 5.12 and 5.18 of the Existing Credit Agreement, are each amended by inserting “and the Amendment No. 1 Effective Date” immediately after “the Effective Date” in each instance in which in appears therein.

 

(n)           Section 5.15 of the Existing Credit Agreement is amended by inserting the following at the end thereof:

 

“On the Amendment No. 1 Effective Date immediately after giving effect to the Repricing Transaction pursuant to Amendment No. 1, the Borrower and its Subsidiaries, on a Consolidated basis, are Solvent.”

 

(o)           Section 9.14 of the Existing Credit Agreement is amended by deleting the existing table in its entirety and replacing it with the following:

 

 

	
FISCAL YEAR ENDING (ON OR ABOUT)
    	
 
    	
MAXIMUM CAPITAL EXPENDITURES
    	
 
    
	
Fiscal Year ending March 31, 2013
    	
 
    	
$
    	
53,800,000
    	
 
    
	
Fiscal Year ending March 31, 2014
    	
 
    	
$
    	
56,200,000
    	
 
    
	
Fiscal Year ending March 31, 2015
    	
 
    	
$
    	
59,500,000
    	
 
    
	
Fiscal Year ending March 31, 2016
    	
 
    	
$
    	
56,000,000
    	
 
    
	
Fiscal Year ending March 31, 2017
    	
 
    	
$
    	
61,000,000
    	
 
    
	
Fiscal Year ending March 31, 2018   and thereafter
    	
 
    	
$
    	
65,000,000
    	
 
    

 

(p)           For purposes of clause (c) of the definition of “Scheduled Termination Date” in Section 1.1 of the Credit Agreement, the “Scheduled Termination Date” and final maturity date of the Tranche B-1 Loans (to the extent that such Loans are not extended pursuant to Section 2.13 of the Credit Agreement) shall be the date that is seven years after the Effective Date.

 

(q)           The Existing Credit Agreement is further amended by restating Schedule I thereto in its entirety in the form attached hereto as Schedule I.

 

SECTION 2.         Repricing Transaction.  In each case for all purposes of the Credit Agreement and each of the other Loan Documents, (a) this Amendment shall constitute a “Refinancing Amendment”, (b) the Tranche B-1 Loans shall constitute “Other Loans” and “Credit Agreement Refinancing Indebtedness”, (c) the Lenders’ commitments in respect of the Tranche B-1 Loans shall constitute “Other Commitments” and (d) the conversion and/or refinancing of Initial Loans into Tranche B-1 Loans pursuant to this Amendment shall constitute a “Repricing Transaction”.

 

SECTION 3.         Conditions to Effectiveness.  This Amendment shall become effective as of the date (the “Amendment Effective Date”) when, and only when, each of the following conditions have been satisfied (or waived) in accordance with the terms therein:

 

(a)           The Administrative Agent shall have received counterparts of this Amendment executed by Holdings, the Borrower, the other Loan Parties, the Administrative Agent and, subject to Section 4 hereof, the Participating Lenders.

 

(b)           With respect to each Converting Lender, the Administrative Agent shall have received a duly executed Conversion Notice.

 

(c)           The Borrower shall have paid, for the ratable account of each Existing Lender, (i) all accrued and unpaid interest in respect of the Initial Loans owing to each Existing Lender (and it is hereby acknowledged by the parties to this Amendment that this Amendment constitutes notice of such payment in accordance with the terms of the Existing Credit Agreement) and (ii) a prepayment premium equal to 2.0% of the outstanding principal amount of the Initial Loans converted into Tranche B-1 Loans.

 

 

(d)           The Borrower shall have paid (i) all fees payable to the Additional Lenders that the Borrower has separately agreed in writing to pay in connection with this Amendment, (ii) all reasonable, documented and invoiced fees payable to Royal Bank as agreed in writing between Royal Bank and the Borrower and (iii) all reasonable fees, expenses and disbursements of Paul Hastings LLP, as counsel for the Administrative Agent, incurred in connection with the preparation, negotiation and execution of this Amendment to the extent invoiced at least three (3) Business Days prior to the date hereof and as agreed in writing between Royal Bank and the Borrower.

 

(e)           The Administrative Agent shall have received a solvency certificate from the chief financial officer or other Responsible Officer of the Borrower, in form and substance consistent with the solvency certificate delivered at closing of the Existing Credit Agreement, attesting to the Solvency of the Borrower and its Subsidiaries, on a Consolidated basis, immediately after giving effect to the transactions contemplated by this Amendment and the borrowing of the Tranche B-1 Loans.

 

(f)            (i) On and as of the Amendment Effective Date, both immediately before and immediately after giving effect to the application of the proceeds of the Tranche B-1 Loans by, or at the direction of, the Borrower, (A) the representations and warranties of the Borrower and each other Loan Party contained in Article V of the Credit Agreement or any other Loan Document shall be true and correct in all material respects; provided that, to the extent that such representations and warranties specifically refer to an earlier date, they shall be true and correct in all material respects as of such earlier date; and provided, further that, any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language shall be true and correct (after giving effect to any qualification therein) in all respects on such respective dates and (B) no Default shall exist, or would result from the Repricing Transaction or any other transaction contemplated by this Amendment and (ii) the Administrative Agent shall have received a certificate from a Responsible Officer of the Borrower certifying as to the matters set forth in this Section 3(f).

 

(g)           The Administrative Agent shall have received, on behalf of itself and the Lenders, dated as of the Amendment Effective Date, a favorable written opinion of Proskauer Rose, LLP, special counsel for the Loan Parties, in form and substance reasonably acceptable to the Administrative Agent.

 

(h)           The Administrative Agent shall have received (i) certified copies of such resolutions or other corporate action of the Loan Parties as the Administrative Agent may reasonably require and (ii) good standing certificates or certificates of status, as applicable, as of a date reasonably proximate to the Amendment Effective Date, from the applicable Governmental Authority of each Loan Party’s jurisdiction of incorporation, organization or formation.

 

(i)            The Additional Lenders shall have received on or prior to the Amendment Effective Date, all documentation and other information reasonably requested by them in writing at least four (4) Business Days prior to the Amendment Effective Date in order to

 

 

allow the Additional Lenders to comply with applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act.

 

(j)            To the extent that any Existing Lender shall not be a Participating Lender (such Lender, in such capacity, a “Non-Consenting Lender”), such Non-Consenting Lender shall be replaced (and the Loans of such Non-Consenting Lender shall be assumed) by one of more Participating Lenders pursuant to Section 3.7 of the Existing Credit Agreement.

 

SECTION 4.         Participating Lenders.  With respect to each Converting Lender, the signature pages to a Conversion Notice delivered by such Converting Lender shall be deemed for all purposes to be signature pages to this Amendment.

 

SECTION 5.         Mechanics upon Effectiveness.  On the Amendment Effective Date, upon the satisfaction of the conditions set forth in Section 3 hereof:

 

(a)           With respect to each Converting Lender, upon delivery of a Conversion Notice by such Converting Lender:

 

(i)            the outstanding amount of Initial Loans of such Converting Lender (not to exceed such Converting Lender’s Tranche B-1 Commitment) shall be deemed to be converted to an equal outstanding amount of Tranche B-1 Loans under the Credit Agreement;

 

(ii)           such Converting Lender shall have the Tranche B-1 Commitment set forth opposite its name on Schedule I to the Credit Agreement (as amended hereby);

 

(iii)          with respect to each Increasing Lender providing Additional Commitments, such Increasing Lender shall either, at the direction of the Administrative Agent, (i) purchase Initial Loans pursuant to Section 5(d) below and/or (ii) make Tranche B-1 Loans available to the Borrower on the Amendment Effective Date, in an aggregate amount not to exceed such Increasing Lender’s Additional Commitments in respect of the Tranche B-1 Loans; and

 

(iv)          pursuant to the terms of the Conversion Notice, for purposes of Section 12.1 of the Existing Credit Agreement, each Converting Lender shall be deemed to have consented to this Amendment and the amendment of the Existing Credit Agreement contemplated hereby.

 

(b)           Each conversion of Initial Loans pursuant to Section 5(a) above shall be deemed, automatically and without further act by any Person, to constitute a simultaneous (i) Borrowing by the Borrower of Tranche B-1 Loans pursuant to Section 2.1(b) of the Credit Agreement and (ii) prepayment of Initial Loans pursuant to Section 2.3(a) of the Existing Credit Agreement, in each case in the amount of such conversion.  To the extent of any funding of Tranche B-1 Loans by the Increasing Lenders pursuant to Section 5(a)(iii) above, the proceeds therefrom shall first be applied, at the direction of the Administrative Agent, to the prepayment of Initial Loans of Non-Consenting Lenders.

 

 

(c)           With respect to Section 5(a) above, the conversion of outstanding Initial Loans by each Converting Lender shall be effected by book entry to the extent that any portion of the amount converted by such Converting Lender will be an outstanding amount of Tranche B-1 Loans of such Converting Lender after giving effect to this Amendment, in each case in such manner, and with such supporting documentation, as may be reasonably determined by the Administrative Agent.

 

(d)           The Converting Lenders, the Additional Lenders and the Non-Consenting Lenders shall make and receive payments, in immediately available funds, among themselves, as directed by the Administrative Agent, so that, after giving effect thereto, the outstanding amount of Tranche B-1 Loans are held ratably by the Participating Lenders in accordance with such Lenders’ respective Commitments in respect of the Tranche B-1 Loans (in each case after giving effect to this Amendment).

 

(e)           Each Additional Lender shall, by executing and delivering this Amendment, be deemed to have become a party by to the Credit Agreement as a Lender thereunder and shall have the rights and obligations of a Lender thereunder.

 

An Existing Lender may elect to convert all or any portion of its Initial Loans under the Existing Credit Agreement to Tranche B-1 Loans under the Credit Agreement, and in each case shall constitute a Non-Consenting Lender in respect of any portion of its Initial Loans not so converted.

 

If the aggregate amount of Additional Commitments of the Increasing Lenders exceeds the aggregate Tranche B-1 Commitments, then such Additional Commitments shall be allocated among the Increasing Lenders as Royal Bank, acting in its capacity as lead arranger in respect of the Amendment, shall direct in its sole discretion.

 

SECTION 6.         Consent and Affirmation of the Loan Parties.  Each Loan Party (prior to and after giving effect to this Amendment) hereby consents to the amendment of the Existing Credit Agreement effected hereby and confirms and agrees that, notwithstanding the effectiveness of this Amendment, each Loan Document to which such Loan Party is a party is, and the obligations of such Loan Party contained in the Existing Credit Agreement, this Amendment or in any other Loan Document to which it is a party are, and shall continue to be, in full force and effect and are hereby ratified and confirmed in all respects, in each case as amended or modified by this Amendment.  For greater certainty and without limiting the foregoing, each Loan Party hereby confirms that the existing security interests granted by such Loan Party in favor of the Secured Parties pursuant to the Loan Documents in the Collateral described therein shall continue to secure the obligations of the Loan Parties under the Credit Agreement and the other Loan Documents as and to the extent provided in the Loan Documents.

 

SECTION 7.         Representations and Warranties.  (a) Each Loan Party represents and warrants, on and as of the Amendment Effective Date, that: (i) it has the corporate or other organizational power to execute and deliver this Amendment, and all corporate or other organizational action required to be taken by it for the execution, delivery and performance by it of this Amendment and the consummation of the transactions contemplated hereby has been taken; (ii) this Amendment has been duly authorized, executed and delivered by it; and (iii) no

 

 

action, consent or approval of, registration or filing with or any other action by any Governmental Authority is required in connection with the execution and delivery of this Amendment, except for such actions, consents, approvals, registrations or filings as have been taken or the failure of which to be obtained or made could not reasonably be expected to have a Material Adverse Effect.

 

(b)           Each Loan Party hereby represents and warrants that, on and as of the Amendment Effective Date, both immediately before and immediately after giving effect to this Amendment, no Default has occurred and is continuing.

 

SECTION 8.         Reference to and Effect on the Credit Agreement.

 

(a)           On and after the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof’ or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement, as amended and otherwise modified by this Amendment.

 

(b)           The Credit Agreement, as specifically amended and otherwise modified by this Amendment, is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed.  This Amendment shall be a “Loan Document” for purposes of the definition thereof in the Credit Agreement.

 

(c)           The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Administrative Agent or the Collateral Agent under the Credit Agreement or any other Loan Document.

 

SECTION 9.         Execution in Counterparts.  This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement.  Delivery of an executed counterpart of a signature page to this Amendment by facsimile or in “pdf” or similar format by electronic mail shall be effective as delivery of a manually executed counterpart of this Amendment.

 

SECTION 10.       Governing Law.  This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York.

 

SECTION 11.       Headings.  Section headings are included herein for convenience of reference only and shall not constitute a part hereof for any other purpose or be given any substantive effect.

 

SECTION 12.       Severability.  In case any provision in or obligation hereunder shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired hereby.

 

SECTION 13.       Notices; Successors; Waiver of Jury Trial.  All communications and notices hereunder shall be given as provided in the Credit Agreement; provided that each of

 

 

the Administrative Agent and the Lenders party hereto waive any notice, demand or other communication required to request or make a prepayment and borrowing of Loans.  The terms of this Amendment shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and assigns.  Each of the parties hereto irrevocably waives trial by jury in any action or proceeding with respect to this Amendment or any other Loan Document.

 

[Remainder of Page Intentionally Left Blank]

 

 

IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective authorized officers as of the date first above written.

 

 

	
 
    	
NUMBER   HOLDINGS, INC.,
    
	
 
    	
as Holdings
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Eric   Schiffer
    
	
 
    	
Name:
    	
Eric Schiffer
    
	
 
    	
Title:
    	
Chief   Executive Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
99¢ ONLY STORES,
    
	
 
    	
as the Borrower
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Eric   Schiffer
    
	
 
    	
Name:
    	
Eric Schiffer
    
	
 
    	
Title:
    	
Chief   Executive Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
99 CENTS ONLY   STORES,
    
	
 
    	
as a Guarantor
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Eric   Schiffer
    
	
 
    	
Name:
    	
Eric Schiffer
    
	
 
    	
Title:
    	
Chief   Executive Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
99 CENTS ONLY   STORES TEXAS, INC.,
    
	
 
    	
as a Guarantor
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Eric   Schiffer
    
	
 
    	
Name:
    	
Eric Schiffer
    
	
 
    	
Title:
    	
Chief   Executive Officer
    

 

 

	
 
    	
ROYAL BANK OF   CANADA,
    
	
 
    	
as   Administrative Agent
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Susan   Khokher
    
	
 
    	
Name:
    	
Susan Khokher
    
	
 
    	
Title:
    	
Manager,   Agency
    

 

 

Schedule I
 Commitments

 

On file with Administrative Agent.

 

 

Schedule II
 Form of Conversion Notice

 

Date: April       , 2012

 

Royal Bank of Canada, as Administrative Agent
 4th Floor, 20 King Street West
 Toronto, Ontario M5H 1C4
 Attention:              Manager, Agency Service Group
 Facsimile:              (416) 842-4023

 

99¢ Only Stores
 4000 Union Pacific Avenue
 City of Commerce, CA 90023
 Attention:              Frank Schools

 

Conversion Notice

 

Ladies and Gentlemen:

 

Reference is made to Amendment No. 1 (the “Amendment”) to that certain $525,000,000 Credit Agreement, dated as of January 13, 2012 (as amended, restated, amended and restated, supplemented or otherwise modified prior to the date hereof, the “Existing Credit Agreement”; and as amended by the Amendment and as otherwise may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among 99¢ Only Stores (the successor by merger with Number Merger Sub, Inc.) (the “Borrower”), Number Holdings, Inc., the lenders party thereto, Royal Bank of Canada, as administrative agent, and the other agents party thereto.  Unless otherwise specified herein, capitalized terms used but not defined herein are used as defined in the Amendment.

 

By delivery of this Conversion Notice, each of the undersigned (each a “Converting Lender”) (a) hereby consents to the Amendment and the amendment of the Existing Credit Agreement contemplated thereby and (b) in its capacity as an Existing Lender, hereby irrevocably elects, upon the Amendment Effective Date, to convert an outstanding amount of Initial Loans of such Converting Lender (up to an amount not to exceed such Converting Lender’s Tranche B-1 Commitment) to an equal outstanding amount of Tranche B-1 Loans under the Credit Agreement.  In addition, each Converting Lender, to the extent an Increasing Lender, hereby commits to provide additional Tranche B-1 Commitments to the extent specified herein.

 

By executing and delivering this Conversion Notice, each Converting Lender hereby agrees as follows:

 

(a)           such Converting Lender will continue to be a Lender under the Credit Agreement with the same force and effect as if such Converting Lender had executed a counterpart of the Amendment on and as of the Amendment Effective Date;

 

 

(b)           the Tranche B-1 Commitment of such Converting Lender shall be as set forth on Schedule I to the Credit Agreement in respect of such Converting Lender;

 

(c)           such Converting Lender hereby agrees (i) to convert the outstanding amount of Initial Loans of such Converting Lender to the outstanding amount of Tranche B-1 Loans under the Credit Agreement and (ii) to provide additional Tranche B-1 Commitments, in each case as follows (but subject to adjustment, with respect to any Additional Commitments of such Converting Lender, in accordance with Section 5 of the Amendment):

 

	
Name of Converting Lender
    	
 
    	
Outstanding Amount of Existing
   Loans
    	
 
    	
Amount Converted to Tranche
   B-1 Loans*
    	
 
    
	
 
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    
	
 
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    
	
 
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    

 

(d)           such Converting Lender irrevocably acknowledges and unconditionally agrees to be bound by all of the terms and conditions of the Credit Agreement, the Amendment and the other Loan Documents as a Lender as of the Amendment Effective Date;

 

(e)           this Conversion Notice shall be deemed to be such Converting Lender’s written consent to the Amendment for purposes of Section 12.1 of the Existing Credit Agreement; and

 

(f)            on or following the Amendment Effective Date, such Converting Lender shall deliver to the Administrative Agent any Note held by such Converting Lender under the Existing Credit Agreement against delivery by the Borrower of a replacement Note in favor of such Converting Lender evidencing the principal amount of such Converting Lender’s Tranche B-1 Loans in accordance with Section 2.7 of the Credit Agreement.

 

Delivery of an executed signature page to this Conversion Notice by facsimile or other electronic means shall be effective as delivery of a manually executed signature page of this Conversion Notice.

 

This Conversion Notice shall be governed by, and construed in accordance with, the laws of the state of New York.

 

*  If providing an increase in commitments, insert aggregate amount of converted loans plus the desired increase in commitments.

 

 

The agreements contained herein shall be binding upon the undersigned, its successors and assigns.

 

 

[Remainder of Page Intentionally Left Blank]

 

 

	
 
    	
Very truly yours,
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
                                                        , 
    
	
 
    	
as a   Converting Lender
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
                                                        , 
    
	
 
    	
as a   Converting Lender
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
                                                        , 
    
	
 
    	
as a   Converting Lender
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:Passport Potash Inc. - Exhibit 10.1 - Filed by newsfilecorp.com

MINERAL PROPERTY OPTION AGREEMENT 

THIS AGREEMENT is dated for reference as of the 30th day
of September, 2008 

BETWEEN: 

SOUTHWEST EXPLORATION INC., an

Arizona corporation having an address at 19935 E 
Sonoqui Blvd., Queen
Creek, Arizona, 85242 

(the “Optionor”) 

OF THE FIRST PART 

AND: 

PASSPORT METALS INC., a company
duly 
incorporated pursuant to the laws of the Province of 
Quebec and
having an address at 608 – 1199 West 
Pender Street, Vancouver, British
Columbia, V6E 2R1 

(the “Optionee”) 

OF THE SECOND PART 

WHEREAS: 

(A)                   
The Optionor is the recorded and beneficial owner of an undivided 100% interest
in certain potash Leases situated in the State of Arizona, United States of
America, as detailed in the specific description of the Arizona State Land
Department Exploration Permit/Lease attached hereto as Schedule “A” (the
“Property”); 

(B)                   
The Optionor has agreed to grant an exclusive option to the Optionee to acquire
a 100% undivided interest in and to the Property, subject to a retained NSR as
defined below, by paying certain consideration and by incurring certain
exploration Expenditures as detailed herein; 

NOW THEREFORE THIS AGREEMENT WITNESSES that in
consideration of $10.00 now paid by Optionee to Optionor and for other good and
valuable consideration, the receipt and sufficiency whereof is by Optionor
hereby acknowledged, the parties agree as follows: 

- 2 - 

PART 1 

DEFINITIONS 

1.1                   
In this Agreement, except as otherwise expressly provided or as the context
otherwise requires, 

(a)        “Area of
Common Interest” means, subject to Part 17 the area included within five (5)
miles of the boundaries of the Property, but excluding any third party mineral
claims in good standing as of the date of this Agreement; 

(b)        “Effective
Date” means the date upon which the TSX Venture Exchange grants to the
Optionee its acceptance respecting this Agreement subject to §4.4; 

(c)      
 “Expenditures” means all direct or indirect costs and expenses
incurred by the Optionee in respect of prospecting and exploring the Property
(plus an allowance of 10% of such costs and expenses for a general overhead
allowance) after the date of this Agreement pursuant to Part 4 hereof. The
certificate of the Controller or other financial officer of the Optionee,
together with a statement of Expenditures in reasonable detail shall be prima
facie evidence of such Expenditures; 

(d)        “Force
Majeure” has the meaning set forth in Part 13; 

(e)      
 “Leases” means collectively those Exploration Permits/Leases
situate in Arizona, all of which are listed and more particularly described in
Schedule “A”; 

(f)      
 “Net Smelter Returns” means the proceeds received by the Optionee
from any smelter or other purchaser from the sale of any ores, concentrates or
minerals produced from the Claims after deducting from such proceeds the
following charges only to the extent that they are not deducted by the smelter
or other purchaser in computing the proceeds: 

(i)        charges for
treatment in the smelting, refining and other beneficiation process (including
handling, processing, interest, and provisional settlement fees, weighing,
sampling, assaying samples and representation costs, penalties, and other
processor deductions); 

(ii)       actual costs of
transportation (including loading freight, insurance, security, transaction
taxes, handling, port, damages, delay and forwarding expenses incurred by reason
of or in the course of transportation) of products from the Leases to the place
of treatment and then to the place of sale; 

(iii)    
 costs or charges of any nature for or in connection with insurance,
storage, or representation at a smelter or refinery of products or refused
metals; and 

- 3 - 

(iv)     
 sales, use, severance, excise, net proceeds of mine, and ad valorem taxes
and any other tax on or measured by minerals production, but not including
income taxes of the Optionee or the holder of the NSR Royalty; 

(g)      
 “NSR Royalty” means a net smelter returns royalty to be paid by the
Optionee to the Optionor pursuant to Part 5 of this Agreement; 

(h)      
 “Option” means the exclusive right herein granted by the Optionor
to the Optionee to permit the Optionee to acquire the 100% right, title and
interest of the Optionor to and in the Property all as provided in Part 4; 

(i)      
 “Option Period” means the period during the term of this Agreement
from the date hereof to and including the date of exercise of the Option; 

(j)      
 “Property” means the mineral Leases described in Schedule ”A”
hereto, and all other mining interests derived from any such Leases, any
reference to any mineral Leases comprised in the Property to include any mineral
leases or other interests into which the mineral Leases may have been converted,

(k)      
 “Property Rights” means all licenses, permits, easements,
rights-of-way, surface or water rights and other rights, approvals obtained by
either of the parties either before or after the date of this Agreement and
necessary or desirable for the development of the Property, or for the purpose
of placing the Property into production or continuing production therefrom; and

PART 2 

REPRESENTATIONS, WARRANTIES AND COVENANTS OF OPTIONOR

2.1                   
The Optionor represents and warrants to the Optionee that: 

(a)      
 it has been duly incorporated and validly exists as a corporation in good
standing under the laws of Arizona and is authorized to hold mineral Leases in
the State of Arizona, and it is exclusively legally entitled to hold the
Property and all mineral claims comprised therein, and all Property Rights held
by it and will remain so entitled until all interests of the Optionor in the
Property earned by the Optionee have been duly transferred to the Optionee as
contemplated hereby or this Option has terminated, 

(b)        it is, and will be
at the time of transfer to the Optionee of mineral Leases comprising the
Property, the recorded holder and beneficial owner of all of the mineral Leases
comprising the Property free and clear of all liens, charges and claims of
others and no taxes or rentals are due in respect of any thereof and the mineral
Leases comprised in the Property have been duly and validly located and recorded
pursuant to the Mineral Tenure Laws of Arizona and, are in good standing
in the office of the Arizona State Land Department on the date hereof and until
the dates set opposite the respective names thereof in Schedule “A”, 

- 4 - 

(c)        there is no adverse
claim or challenge against or to the ownership of or title to any of the mineral
Leases comprising the Property, nor to the knowledge of the Optionor is there
any basis therefor, and there are no outstanding agreements or options to
acquire or purchase the Property or any portion thereof, and no person other
than the Optionor, pursuant to the provisions hereof, has any royalty or other
interest whatsoever in production from any of the mineral Leases comprising the
Property, 

(d)      
 no third party consent of any kind is required by the Optionor to enter
into this Agreement and grant the Option contemplated hereby, 

(e)      
 upon request by the Optionee, the Optionor shall deliver or cause to be
delivered to the Optionee copies of all available maps and other documents and
data in its possession respecting the Leases, 

(f)      
 the Optionor shall assume sole responsibility and liability for any
obligations outstanding as of the date hereof with respect to reclamation of the
property comprising the Leases, 

(g)      
 the execution and delivery of this Agreement and the agreements
contemplated hereby by the Optionor will not violate or result in the breach of
the laws of any jurisdiction applicable or pertaining thereto or of its
constating documents, and 

(h)      
 this Agreement constitutes a legal, valid and binding obligation of the
Optionor. 

2.2                   
The representations and warranties contained in §2.1 are provided for the
exclusive benefit of the Optionee, and a breach of any one or more thereof may
be waived by the Optionee in whole or in part at any time without prejudice to
its rights in respect of any other breach of the same or any other
representation or warranty; and the representations and warranties contained in
§2.1 will survive the execution hereof and continue throughout the Option
Period. 

2.3                   
This Agreement constitutes a legal, valid, and binding obligation to the
Optionor. 

PART 3 

REPRESENTATIONS AND WARRANTIES OF OPTIONEE 

3.1                   
The Optionee represents and warrants to the Optionor that 

(a)      
 it has been duly incorporated and validly exists as a corporation in good
standing under the laws of Quebec and on exercise of the option and transfer of
title to the Leases will be authorized to hold mineral Leases in the State of
Arizona; 

(b)        neither the
execution and delivery of this Agreement by the Optionee nor the performance by
the Optionee of its obligations hereunder conflicts with the Optionee’s
constating documents or any agreement to which it is bound; 

- 5 - 

3.2                   
The representations and warranties contained in §3.1 are provided for the
exclusive benefit of the Optionor and a breach of any one or more thereof may be
waived by the Optionor in whole or in part at any time without prejudice to its
rights in respect of any other breach of the same or any other representation or
warranty; and the representations and warranties contained in §3.1 will survive
the execution hereof and continue throughout the Option Period. 

3.3                   
This Agreement constitutes a legal, valid and binding obligation of the
Optionee. 

PART 4 

GRANT AND EXERCISE OF OPTION 

4.1                   
The Optionor hereby grants to the Optionee the sole and exclusive right and
option, subject to the terms of this Agreement, to earn a 100% undivided
interest in the Property free and clear of all charges and encumbrances, save
and except the NSR Royalty defined above, by: 

(a)        paying to the
Optionor: 

(i)        US$100,000 upon
execution of this Agreement; and 

(ii)     
 1,000,000 options, exercisable for three years, at the 10-day trading
average of the Optionee from the signing of this Agreement which options will be
granted on receipt of regulatory approval; 

(b)      
 (i)        on April 1st,
2009 pay the Optionor US$125,000 in cash and 250,000 shares of the Optionee;

(ii)       on October
1st, 2009 pay the Optionor US$225,000 in cash; 

(iii) on April
  1st, 2010 pay the Optionor US$250,000 in cash; and 

(iv) on October
  1st, 2010 pay the Optionor US$350,000 in cash; 

(c)      
 funding Expenditures of a minimum of US$200,000 which is to complete a
National Instrument 43-101 technical report (the “43-101 Report”) on the
Property; and 

(d)      
 on completion of the 43-101 Report the Optionee shall have thirty (30)
days from the date of the final 43-101 Report to pay the Optionor 250,000
shares. 

4.2                   
The Optionor acknowledges that each share certificate issued pursuant to this
Part 4 shall have imprinted thereon a legend restricting transfer in Canada for
four months plus one day from the date of the issuance of the shares. 

- 6 - 

4.3                   
All issuances of shares to be made by the Optionee pursuant to this Part 4 shall
be registered in the name of Southwest Exploration Inc. 

4.4                   
If the Effective Date has not occurred within 90 days of the date of execution
hereof, then either party may terminate this Option Agreement without liability,
by notice to the other party. 

4.5                   
If Optionee acquires title to the Leases by exercising its Option granted
herein, Optionee will pay to Optionor a 1% NSR Royalty as set out in Part 5.

PART 5 

NSR ROYALTY 

5.1                   
The Optionee pay to the Optionor a royalty (the “NSR Royalty” ) equal to a 1%
percent in aggregate of Net Smelter Returns (as defined in Subsection 1.1),
subject to §5.4 of this Agreement. This NSR Royalty will be payable for so long
as the Optionee and/or its successors and assigns hold any interest in the
Leases. 

5.2                   
Payment of the NSR Royalty will be made quarterly 70 days after the end of each
quarter of the Optionee. Within 70 days after the end of each quarter for which
the NSR Royalty is payable, the records relating to the calculation of the NSR
Royalty for such quarter will be paid by the Optionee and any adjustments in the
payment of the NSR Royalty will be made forthwith after completion of the annual
audit. All payments of the NSR Royalty for a year will be deemed final and in
full satisfaction of all obligations of the Optionee in respect thereof if such
payments or calculations thereof are not disputed by the Optionor within 30 days
after receipt by the Optionor of the said payment. The Optionee will maintain
accurate records relevant to the determination of the NSR Royalty and the
Optionor, or its authorized agent, shall be permitted the right to examine such
records at all reasonable times. 

5.3                   
The determination of the NSR Royalty hereunder is based on the premise that
production will be developed solely on the Leases except that the Optionee will
have the right to commingle ore mined from the Leases with ore mined and
produced from other properties provided the Optionee will adopt and employ
reasonable practices an procedures weighing, sampling and assaying, in order to
determine the amounts of products derived from, or attributable to ore mined and
produced from the Leases. The Optionee will deliver the Optionor a description
of Optionee’s commingling plan not less than 30 days before commencing of
commingling. The Optionee will maintain accurate records of the results of such
sampling, weighing and analysis with respect to any ore mined and produced from
the Leases. The Optionor or its authorized agents will be permitted the right to
examine at all reasonable time such records pertaining to commingling of ore or
to the calculation of Net Smelter Returns. 

5.4                   
The Optionee shall have the right to purchase the 1% NSR Royalty for
US$1,000,000, at any time. 

- 7 - 

PART 6 

ASSIGNMENT OF OPTION 

6.1                   
Subject to Part 11, the Optionee may assign all or part of its obligations under
this Option Agreement during the Option Period to a third party (the “Assignee”)
with consent of the Optionor, such consent not to be unreasonably withheld,
providing also that the Assignee agrees to execute an acknowledgement to be
bound by the terms hereof insofar as the Optionor’s rights hereunder are
concerned. Such Assignee shall issue shares in its capital to fulfill the share
obligations in §4.1. 

PART 7 

EXERCISE OF OPTION 

7.1                   
The Optionee may in its sole discretion at any time accelerate the payment of
the consideration and incur the Expenditures on the Property required by §4.1 to
exercise the Option and thereby earlier acquire its interest in the Property.

7.2                   
If and when the Option has been exercised, the 100% right, title and interest in
and to the Property will vest in the Optionee free and clear of all charges,
encumbrances and claims, except for the NSR Royalty. 

7.3                    
The cost of transfer of title to the Optionee shall be paid by the Optionee.

PART 8 

RIGHT OF ENTRY 

8.1                   
Throughout the Option Period, the Directors and Officers of the Optionee and its
servants, agents and independent contractors, abiding by the rules and
regulations set forth by the Arizona State Land Department, will have the sole
and exclusive right in respect of the Property to 

(a)      
 enter thereon, 

(b)        have exclusive and
quiet possession thereof, 

(c)        do such
prospecting, exploration, development and/or other mining work thereon and
thereunder as the Optionee in its sole discretion may determine advisable, 

(d)        bring upon and erect
upon the Property buildings, plant, machinery and equipment as the Optionee may
deem advisable, and 

(e)      
 remove therefrom and dispose of reasonable quantities of ores, mineral and
metals for the purpose of obtaining assays or making other tests. 

- 8 - 

PART 9 

OBLIGATIONS OF OPTIONEE DURING OPTION PERIOD 

9.1                   
During the Option Period the Optionee will 

(a)        maintain in good
standing those mineral Leases comprised in the Property that are in good
standing on the date hereof by the doing and filing of the maximum available
assessment work credits on the Property or by making of payments in lieu of the
minimum requirements, by the payment of taxes and rentals and the performance of
all other actions which may be necessary in that regard and in order to keep
such mineral Leases free and clear of all liens and other charges arising from
the Optionee’s activities thereon except those at the time contested in good
faith by the Optionee, 

(b)      
 permit the directors, officers, employees and designated consultants of
the Optionor, at their own risk, access to the Property at all reasonable times
subject always to Part 15, and providing the Optionor agrees to indemnify the
Optionee against and to save the Optionee harmless from all costs, claims,
liabilities and expenses that the Optionee may incur or suffer as a result of
any injury (including injury causing death) to any director, officer, employee
or designated consultant of the Optionor while on the Property, 

(c)        deliver to the
Optionor on or before six months after each anniversary hereof, a report
(including up-to-date maps if there are any) describing the results of work done
in the last completed expenditure year, together with reasonable details of
Expenditures made, 

(d)      
 do all work on the Property in a good and workmanlike fashion and in
accordance with all applicable laws, regulations, orders and ordinances of any
governmental authority and file for all available assessment credits, and 

(e)      
 indemnify and save the Optionor harmless in respect of any and all costs,
claims, liabilities and expenses arising out of the Optionee’s activities on the
Property and, without limiting the generality of the foregoing will, during the
currency of this Agreement, cause any of its independent contractors to carry
not less than $1 million in third party liability insurance in respect of their
operations conducted on the Property on behalf of the Optionee, such insurance
to be for the benefit of the Optionee and the Optionor as their interests
appear; provided that neither the Optionee nor its independent contractors will
incur any obligation thereunder in respect of claims arising or damages suffered
after termination of the Option if upon termination of the Option any workings
on or improvements to the Property made by the Optionee are left in a safe
condition and substantially in the same condition as existed on the date hereof.

- 9 - 

PART 10 

TERMINATION OF OPTION 

10.1                 
If the Option is terminated otherwise than upon the exercise thereof pursuant to
Part 4, the Optionee will 

(a)      
 leave in good standing for a period of at least two years from the
termination of the Option Period those mineral Leases comprised in the Property
that are in good standing on the date hereof and any other mineral Leases
comprised in the Property that the Optionee acquires after the date hereof, and

(b)        deliver at no cost
to the Optionor within 90 days of such termination copies of all reports, maps,
assay results and other relevant technical data compiled by or in the possession
of the Optionee with respect to the Property and not theretofore furnished to
the Optionor. 

10.2                 
Notwithstanding termination of the Option, the Optionee will have the right,
within a period of 90 days following the end of the Option Period, to remove
from the Property all buildings, plant, equipment, machinery, tools, appliances
and supplies which have been brought upon the Property by or on behalf of the
Optionee, and any such property not removed within such 90-day period will
thereafter, only if the Optionor elects in writing, become the property of the
Optionor. 

PART 11 

TRANSFERS 

11.1                 
The Optionee may at any time (and from time to time) either during the Option
Period or thereafter, sell, transfer or otherwise dispose of all or any portion
of its interest in and to the Property and this Agreement provided that any
purchaser, grantee or transferee of any such interest will have first delivered
to the Optionor its agreement related to this Agreement and to the Property,
containing 

(a)      
 a covenant by such transferee to perform all the obligations of the
Optionee to be performed under this Agreement in respect of the interest to be
acquired by it from the Optionee to the same extent as if this Agreement had
been originally executed by the Optionee and such transferee as joint and
several obligors making joint and several covenants, and 

(b)      
 a provision subjecting any further sale, transfer or other disposition of
such interest in the Property and this Agreement or any portion thereof to the
restrictions contained in this §11.1. 

11.2                 
No assignment by the Optionee of any interest less than its entire interest in
this Agreement and in the Property will, as between the Optionee and the
Optionor, discharge it from any of its obligations hereunder, but upon the
transfer by the Optionee of the entire interest at the time held by it in this Agreement (whether to one or more
transferees and whether in one or in a number of successive transfers), the
Optionee will be deemed to be discharged from all obligations hereunder save and
except for the fulfilment of contractual commitments accrued due before the date
on which the Optionee will have no further interest in this Agreement. 

- 10 - 

PART 12 

SURRENDER AND ACQUISITION OF PROPERTY INTERESTS BEFORE
TERMINATION OF AGREEMENT 

12.1                 
The Optionee may during the Option Period, elect to abandon any one or more of
the mineral Leases comprised in the Property by giving 30 days notice to the
Optionor of such intention. 

12.2                 
For a period of 30 days after the date of delivery of such notice the Optionor
may elect to have any or all of the mineral Leases in respect of which such
notice has been given transferred to it by delivery of a request therefor to the
Optionee, whereupon the Optionee will deliver to the Optionor a quit claim or
Bill of Sale or other appropriate Deed or assurance in registrable form
transferring such mineral Leases to the Optionor if the Optionor is not then
already the registered owner of such mineral Leases. 

12.3                 
Any Leases so transferred, if in good standing at the date hereof or if the
Optionee causes the same to be placed in good standing after the date hereof,
will be in good standing under the Mineral Tenure Act of Arizona for at
least six months from the date of transfer. If the Optionor fails to make
request for the transfer of any mineral Leases as aforesaid within such 30-day
period, the Optionee may then abandon such mineral Leases without further notice
to the Optionor. Upon any such transfer or abandonment the mineral Leases so
transferred or abandoned will for all purposes of this Agreement cease to form
part of the Property. 

PART 13 

FORCE MAJEURE 

13.1                 
If the Optionee is at any time either during the Option Period prevented or
delayed in complying with the work requirement provisions of this Agreement in
Part 4 by reason of strikes, walk-outs, labour shortages, power shortages, fuel
shortages, fires, wars, acts of God, governmental regulations restricting normal
operations, shipping delays or any other reason or reasons beyond the control of
the Optionee (and for greater certainty excluding factors related to a lack of
funding), the time limited for the performance by the Optionee of its
obligations hereunder will be extended by a period of time equal in length to
the period of each such prevention or delay, provided however that nothing
herein will discharge the Optionee from its obligation to timely pay the cash
and share consideration under §4.1. 

13.2                 
The Optionee will within seven days give notice to the Optionor of each event of
force majeure under §13.1 and upon cessation of such event will furnish the
Optionor with notice to that effect together with particulars of the number of
days by which the obligations of the Optionee hereunder have been extended by virtue of such event
of force majeure and all preceding events of force majeure. 

- 11 - 

PART 14 

CONFIDENTIAL INFORMATION 

14.1                 
No information furnished by the Optionee to the Optionor hereunder in respect of
the activities carried out on the Property by the Optionee, will be published by
the Optionor without the written consent of the Optionee, but such consent in
respect of the reporting of factual data will not be unreasonably withheld, and
will not be withheld in respect of information required to be publicly disclosed
pursuant to applicable securities or corporation laws. 

PART 15 

ARBITRATION 

15.1                 
All questions or matters in dispute with respect to the interpretation of this
agreement will, insofar as lawfully possible, be submitted to arbitration
pursuant to the terms hereof. 

15.2                 
It will be a condition precedent to the right of any party to submit any matter
to arbitration pursuant to the provisions hereof, that any party intending to
refer any matter to arbitration will have given not less than 30 days’ prior
written notice of its intention so to do to the other party together with
particulars of the matter in dispute. 

15.3                 
On the expiration of such 30 days, the party who gave such notice may proceed to
refer the dispute to arbitration as provided in this Part 15. 

15.4                 
The party desiring arbitration will appoint one arbitrator, and will notify the
other party of such appointment, and the other party will, within 30 days after
receiving such notice, appoint an arbitrator, and the two arbitrators so named,
before proceeding to act, will, within 30 days of the appointment of the last
appointed arbitrator, unanimously agree on the appointment of a third arbitrator
to act with them and be chairman of the arbitration herein provided for. 

15.5                 
If the other party fails to appoint an arbitrator within 30 days after receiving
notice of the appointment of the first arbitrator, and if the two arbitrators
appointed by the parties fail to agree on the appointment of the chairman, the
chairman will be appointed under the provision of the Commercial Arbitration Act
(British Columbia). 

15.6                 
Except as specifically otherwise provided in this Part 16 the arbitration herein
provided for will be conducted in accordance with such Act. 

15.7                 
The chairman, or in the case where only one arbitrator is appointed, the single
arbitrator, will fix a time and place in Vancouver, British Columbia, for the
purpose of hearing the evidence and representations of the parties, and he will
preside over the arbitration and determine all questions of procedure not
provided for under Part 15. 

- 12 - 

15.8                 
After hearing any evidence and representations that the parties may submit, the
single arbitrator, or the arbitrators, as the case may be, will make an award
and reduce the same to writing, and deliver one copy thereof to each of the
parties. 

15.9                 
The expense of the arbitration will be paid as specified in the award. 

15.10                The
parties may agree that the award of a majority of the arbitrators, or in the
case of a single arbitrator, of such arbitrator, will be final and binding upon
each of them. 

PART 16 

DEFAULT AND TERMINATION 

16.1                 
If at any time during the Option Period the Optionee fails to perform any
obligation hereunder or any representation or warranty given by it proves to be
untrue, then the Optionor may terminate this Agreement providing 

(a)      
 it first gives to the Optionee a notice of default containing particulars
of the obligation which the Optionee has not performed, or the warranty
breached, and 

(b)      
 if it is reasonably possible to cure the default, the Optionee does not,
within 30 days after delivery of such notice of default, cure such default by
appropriate payment or performance if such default reasonably requires more than
30 days. 

16.2                 
If the Optionee fails to comply with the provisions of §16.1 the Optionor may
thereafter terminate this Agreement, and the provisions of Part 10 will then be
applicable. 

16.3                 
The Optionee may at any time terminate this Option by giving notice of
termination to the Optionor and shall thereupon be relieved of any further
obligations in connection herewith but shall remain liable for obligations which
have accrued to the date of notice. 

PART 17 

AREA OF COMMON INTEREST 

17.1                 
There shall exist an area of common interest within the area included within
five (5) miles of the boundaries of the Property (as detailed in the specific
description of the mineral Leases attached hereto as Schedule “A”), but
excluding any third party mineral claims in good standing as of the date of this
Agreement. If either Party (or permitted assignee) beneficially acquires any
interest in mineral claims within such area they shall, at the election of the
other party (made by it within 10 days of written notice), be made part of the
Property for all purposes and may be referred to as Additional Property. That
is, if acquired by the Optionee, such additional claims shall be transferred to the Optionor on
termination hereof without additional cost and if acquired by the Optionor shall
be optioned to the Optionee as if part of the Property (and without additional
consideration being demanded from the Optionee, save and except reimbursement of
the stating costs). 

- 13 - 

PART 18 

NOTICES 

18.1                 
Each notice, demand or other communication required or permitted to be given
under this Agreement will be in writing and will be sent by personal delivery,
fax or prepaid registered mail to the addresses of the parties written on page
1. 

18.2                 
The date of receipt of such notice, demand or other communication will be the
date of delivery or fax thereof if delivered or faxed during business hours, or,
if given by registered mail as aforesaid, will be deemed conclusively to be the
third day after the same will have been so mailed except in the case of
interruption of postal services for any reason whatever, in which case the date
of receipt will be the date on which the notice, demand or other communication
is actually received by the addressee. 

18.3                 
Either party may at any time and from time to time notify the other party in
writing of a change of address and the new address to which notice will be given
to it thereafter until further change. 

PART 19 

GENERAL 

19.1                 
This Agreement will supersede and replace any other agreement or arrangement,
whether oral or written, heretofore existing between the parties in respect of
the subject matter of this Agreement. 

19.2                 
No consent or waiver expressed or implied by either party in respect of any
breach or default by the other in the performance of such other of its
obligations hereunder will be deemed or construed to be a consent to or a waiver
of any other breach or default. 

19.3                 
The parties will promptly execute or cause to be executed all documents, deeds,
conveyances and other instruments of further assurance which may be reasonably
necessary or advisable to carry out fully the intent of this Agreement or to
record wherever appropriate the respective interests from time to time of the
parties in the Property. 

19.4                 
This Agreement will enure to the benefit of and be binding upon the parties and
their respective successors and permitted assigns. 

19.5                 
This Agreement will be construed in accordance with the laws of the Province of
British Columbia and the laws of Canada applicable therein. This agreement is to
be construed as an option only and nothing herein shall obligate the
Optionee to do anything or pay any amount except where expressly herein
provided. 

- 14 - 

19.6                 
All sums of money referred to herein are expressed in United States currency.

19.7                 
The headings appearing in this Agreement are for general information and
reference only and this Agreement will not be construed by reference to such
headings. 

19.8                 
In interpreting this Agreement and the schedule hereto attached, where the
context so requires, the singular will include the plural, and the masculine
will include the feminine, the neuter, and vice versa. 

19.9                 
Nothing herein will constitute or be taken to constitute the Parties as partners
or create any fiduciary relationship between them provided, however, that this
qualification will not limit the express duty of each Party to act toward the
other Party at all times in good faith with respect to all their obligations
under this Agreement. 

19.10               
No modification, alteration or waiver of the terms herein contained will be
binding unless the same is in writing, dated subsequently hereto, and fully
executed by the Parties. 

19.11                This
Agreement may be executed in counterpart and by facsimile. 

19.12               
Time is of the essence hereof. 

19.13               
This Agreement remains subject to the approval of the TSX Venture Exchange. 

- 15 - 

IN WITNESS WHEREOF this Option Agreement has been
executed on behalf of the Optionor and the Optionee by their duly authorized
officers on the day and year first above written. 

	THE COMMON SEAL of SOUTHWEST 	) 	  
	MINERAL EXPLORATION was hereto 	) 	  
	affixed in the presence of: 	) 	  
	  	) 	  
	  	) 	c/s 
	Per:   /s/ Floyd R.
      Bleak                                                              	) 	  
	               
         Authorized Signatory 	) 	  
	  	) 	  
	Per:  
________________________________________	) 	  
	               
         Authorized Signatory 	) 	  
	 	)	 
	THE COMMON SEAL of PASSPORT 	) 	  
	METALS INC. was hereto affixed in the 	) 	  
	presence of: 	) 	  
	  	) 	c/s 
	Per:   /s/ Laara
      Shaffer                                                               	) 	  
	               
         Authorized Signatory 	) 	  
	  	) 	  
	Per:   /s/
      signed                                                                           	) 	  
	               
         Authorized Signatory 	) 	  
	  	) 	  

SCHEDULE A 
Mineral Leases Comprising the Property

08-113251 – T.16N-R.23E- Sec.6; Lots 1-7; SENW; S2NE; E2SW;
SE; 727.03 acres 
08-113252 – T.16N-R.23E- Sec.14; US Hwy. 180 (Patent
5813); N2; NENENESE LY NE of US Hwy.

                       
180 (Patent 5813); S2N2; SE LY SW of US Hwy. 180 (Patent 5813); 480.0 acres

08-113254 – T.16N-R.23E- Sec.16; ALL; 640.0 acres

08-113255 – T.16N-R.23E- Sec.18; Lots 1-4; E2; E2W2; 725.34 acres

08-113256 – T.16N-R.23E- Sec.20; ALL; 640.0 acres

08-113257 – T.16N-R.23E- Sec.22; ALL; 640.0 acres

08-113258 – T.16N-R.23E- Sec.24; ALL; 640.0 acres

08-113259 – T.16N-R.23E- Sec.26; ALL; 640.0 acres

08-113260 – T.16N-R.23E- Sec.28; ALL; 640.0 acres

08-113261 – T.16N-R.23E- Sec.30; Lots 1-4; E2; E2W2; 720.94 acres

08-113262 – T.16N-R.23E- Sec.32; ALL; 640.0 acres

08-113263 – T.16N-R.23E- Sec.34; ALL; 640.0 acres

  08-113264 – T.16N-R.23E- Sec.36; ALL; 640.0 acres

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00208-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00208-of-00352.parquet"}]]