Document:

Exhibit 10.5

 

THE

 

ESTEE LAUDER INC.

 

RETIREMENT BENEFITS RESTORATION PLAN

 

 

Effective as of January 1, 1984

 

Amended and Restated effective December 31,
2008

 

 

THE

 

ESTEE LAUDER INC.

 

RETIREMENT BENEFITS RESTORATION PLAN

 

ARTICLE I

 

INTRODUCTION

 

1.     This instrument amends and restates as of December 31,
2008, the terms and conditions of the Estee Lauder Inc. Retirement Benefits
Restoration Plan, as previously adopted effective as of January 1, 1984.

 

2.     The purpose of this Plan is to provide for
certain employees of the Company and its subsidiaries retirement benefits over
and above the benefits provided by the Estee Lauder Inc. Retirement Growth
Account Plan.  This Plan is not intended
to be qualified under Section 401(a) of the Internal Revenue Code of 1986,
as amended (the “Code”).

 

3.     The Plan is intended to be an “excess
benefit plan” as that term is defined in Section 3(36) of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”) with respect to
those employees whose benefits under the Retirement Plan have been limited by Section 415
of the Code, and a “top hat” plan meeting the requirements of Sections 201(2),
301(a)(3), 401(a)(1) and 4021(b)(6) of ERISA with respect to those
employees whose benefits under the Retirement Plan have been limited by Section 401(a)(17)
of the Code.  The Plan intends to comply
and has been administered in accordance with Section 409A of the Code.

 

 

ARTICLE II

 

DEFINITIONS

 

1.     “Actuarial Equivalent” means, with respect
to a Participant’s Retirement Plan Supplemental Benefit, an immediately payable
lump sum which has the same present value as the Participant’s Retirement Plan
Supplemental Benefit when measured on the basis of the interest rate, mortality
table and other factors specified in Appendix A of the Retirement Plan as of
the date of commencement of payment.

 

2.     “Beneficiary” shall mean the individual or
individual’s designated by the Participant to receive their Retirement Plan
Supplemental Benefit in the event of death.

 

3.     “Board” shall mean the Board of Directors
of the Company.

 

4.     “Code” shall mean the Internal Revenue Code
of 1986, as amended.

 

5.     “Company” shall mean Estee Lauder Inc. or
any successor thereto.

 

6.     “Employee Benefits Committee” shall mean
the Estee Lauder Inc. Employee Benefits Committee, which administers the
Retirement Plan.

 

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

 

8.     “Fiduciary Committee” shall mean the Estee
Lauder Inc. Fiduciary Investment Committee, which performs certain fiduciary
functions with respect to the Retirement Plan.

 

9.     “Key Employee” shall mean, consistent with Section 416(i)(1) of
the Code, an employee of the Company or a subsidiary who is: (a) an
officer of the Company or subsidiary 

 

2

 

with an annual compensation greater than
$130,000 (or such greater amount as determined under Section 416(i)(1)(A)(iii) of
the Code), (b) a 5-percent owner of the Company or subsidiary, or (c) a
1-percent owner of the Company or affiliate with an annual compensation from
the Company or affiliate of more than $150,000, at any time during the year.

 

10.   “Participant” shall mean any participant in
the Retirement Plan whose benefit thereunder is limited by Section 415 or Section 401(a)(17)
of the Code.

 

11.   “Plan” shall mean the Estee Lauder Inc.
Retirement Benefits Restoration Plan as hereinafter from time to time amended.

 

12.   “Plan Year” shall mean the period beginning January 1
and ending December 31 of each calendar year.

 

13.   “Prior Plan Participant” shall mean a
Participant (a) who terminated employment prior to January 1, 2008
and (b) whose benefit under the Plan as of December 31, 2008 is
greater than $50,000.00 (on an Actuarial Equivalent basis) and has not been
paid or commenced.

 

14.   “Retirement Plan” shall mean the Estee Lauder
Inc. Retirement Growth Account Plan, as amended and restated as of January 1,
2008, and as amended from time to time thereafter.

 

15.   “Retirement Plan Supplemental Benefits” shall
mean the benefits provided for pursuant to Article III hereof.

 

3

 

ARTICLE III

 

BENEFITS
PAYABLE UNDER THIS PLAN

 

1.     A Participant’s Retirement Plan
Supplemental Benefit shall be an amount equal to the excess of (i)  over
(ii)  where:

 

(i)  is the benefit
which would have been paid to such Participant (or his Beneficiary) under the
Retirement Plan, if the provisions of the Retirement Plan were administered
without regard to the limitations set forth in Section 415 of the Code and
reflected in the Retirement Plan; and

 

(ii)  is the limited
benefit which is payable to such Participant (or his Beneficiary) under the
Retirement Plan after giving effect to the limitations set forth in Section 415
of the Code and reflected in the Retirement Plan.

 

2.    In addition, each Participant shall be
entitled to an additional Retirement Plan Supplemental Benefit equal to the
amount by which the Retirement Plan Supplemental Benefit determined under Section 1
of this Article III would be greater if it were determined:

 

(i) by disregarding, in
addition to Section 415 limitations, any limitations on such Participant’s
“Compensation” and “Average Final Compensation” imposed by reason of Section 401(a)(17)
of the Code, and

 

4

 

(ii) by including in
such Employee’s “Compensation” and “Average Final Compensation,” for the year
in which it is earned, (A) any amount deferred by the Employee pursuant to
a deferred compensation plan sponsored by the Company,  and (B) in the case of an Employee who
served as (1) an executive officer of the Company or its parent company
and (2) as a director of its Swiss subsidiary, Estee Lauder AG Lachen, any
amount paid as base salary, director fee or bonus by such subsidiary.

 

ARTICLE IV

 

PAYMENT
OF BENEFITS

 

1.     Payment
of a Participant’s Retirement Plan Supplemental Benefits shall commence within
90 days following the Participant’s termination of employment provided, that:

 

(a)   in
the case of a Participant whose termination of employment is involuntary and
who receives salary continuation  under a
salary continuation agreement with the Company, payment will be delayed by one
month for each month of the Participant’s service with the Company with a
minimum delay of 3 months and a maximum delay of 24 months.

 

(b) in the case of a Key Employee whose
termination of employment occurs at a time when the stock of the Company is
publicly traded on an established securities market or otherwise, payment will
not commence earlier that the first day of the 7th month following termination
of employment.

 

5

 

(c) in the case of a Prior Plan
Participant payment shall be made as soon as practicable following their
attainment of age 60.

 

2.       Payment
of a Participant’s Retirement Plan Supplemental Benefits shall be made to the
Participant, or in the event of the Participant’s death, to the Participant’s
Beneficiary, in the form of an Actuarial Equivalent lump sum. Notwithstanding
any provision of the Plan or a Participant’s election to the contrary, in the
event the Actuarial Equivalent of a Participant’s Retirement Plan Supplemental
Benefits exceeds $1,000,000.00 payment shall be made in equal annual
installments over a period of five (5) years.

 

ARTICLE V

 

VESTING

 

1.       A
Participant shall be vested in his Retirement Plan Supplemental Benefits to the
same extent such Participant is vested in his accrued benefit under the
Retirement Plan.

 

ARTICLE VI

 

FUNDING

 

1.       Benefit
payment shall be paid in cash from the general funds of the Company and no
special or separate fund shall be established and no segregation of assets
shall be made to assure payment of distributions.  Nothing contained in this Plan and no action
taken pursuant to its provisions shall create or be construed to create a trust
of any kind, nor a fiduciary relationship between the Company and the
Participant or any other person.  To the
extent that any person acquires a right to receive benefits from the Company
under this Plan, such right shall be no greater than the right of an unsecured
creditor of the Company.

 

6

 

ARTICLE VII

 

ADMINISTRATION
OF THE PLAN

 

1.       This
Plan shall be operated under direction of the Board and administered by the
Employee Benefits Committee, in a manner consistent with the operation and
administration of the Retirement Plan as set forth in the appropriate articles
of such plan.  The Employee Benefits
Committee’s decision in any matter involving the interpretation and application
of this Plan shall be final and binding.

 

ARTICLE VIII

 

LOSS
OF BENEFITS

 

1.       Notwithstanding
any provision of this Plan to the contrary, in the sole discretion of the
Company and after written notice to the Participant or such other person
designated by the Participant, rights to receive any benefits under this Plan
may be forfeited, suspended, reduced or terminated in cases of gross misconduct
by the Participant, or of any conduct, activity or competitive occupation which
is reasonably deemed to be prejudicial to the interests of the Company,
including but not limited to the utilization or disclosure of confidential
information for gain or otherwise.

 

ARTICLE IX

 

AMENDMENT
AND TERMINATION

 

1.       The
Company expects to continue this Plan indefinitely but reserves the right to
amend or terminate it if, in its sole judgment, such a change is deemed
necessary or desirable.  If the Company
shall amend this Plan, the rights of a Participant to his accrued benefit under
the Plan, determined as of the date of such amendment, shall be nonforfeitable
to the extent that any 

 

7

 

such amendment would reduce such Participant’s benefit
hereunder.  If the Company shall
terminate this Plan, the rights of an Participant to his accrued benefit
hereunder shall, as of the date of such termination, be non-forfeitable and,
unless the Fiduciary Committee approves earlier payment, such accrued benefit
shall be paid at such time or times as provided in Article IV hereof.

 

2.       If
the Company should terminate the Retirement Plan with respect to Participants
therein, Participants shall cease to accrue additional benefits hereunder and,
unless the Fiduciary Committee approves earlier payment, their accrued benefits
under this Plan as of the date of such termination shall continue to be payable
at the same time or times, in the same manner and with the same limitations as
their benefits would have been paid under the Retirement Plan if such plan had
not terminated.  Notwithstanding the
foregoing, the Fiduciary Committee shall be permitted to pay all benefits that
would be available hereunder if Participants had terminated employment on the
date of termination of the Plan provided, that:

 

(a) the termination does not occur proximate to a
downturn in the financial health of the Company,

 

(b) the Company terminates and liquidates all
other plans and arrangements that are required to be aggregated with this Plan
pursuant to Treas. Reg. § 1.409A-1(c),

 

(c) no payments may be made within the first twelve
months following such termination that would not otherwise have been made if
the termination did not occur,

 

(d) all payments are made within twenty four
months of the termination of this Plan, and

 

(e) the Company may not establish any new plan or
arrangement covering any Participant

 

8

 

covered by this Plan or any Plan required to be
terminated and liquidated under (b) above that would be aggregated with
such plans pursuant to Treas. Reg.§ 1.409A-1(c) within three years
following the date of termination.

 

ARTICLE X

 

MISCELLANEOUS

 

1.                     (a)       No right to payment or any other interest
of a Participant shall be assignable or subject to attachment, execution or
levy of any kind, except to the extent permitted by law or a court ruling.

 

(b)       No
contribution to or benefit payable under this Plan shall be deemed salary or
other compensation to the Participant for the purpose of computing benefits to
which he may be entitled under the Retirement Plan.  This Plan shall be binding upon and inure to
the benefit of the Company and its successors and assigns and the Participant
and his Beneficiary.

 

(c)       Neither
the eligible Participant nor his Beneficiary shall encumber, sell or dispose of
the right to receive the payments provided under this Plan, which payments and
the rights thereto are expressly declared to be nontransferable and
nonassignable.

 

(d)       The
Company may withhold from any benefits payable under the Plan any taxes
required to be withheld pursuant to any law or governmental regulation or
ruling.

 

(e)       Nothing
in this Plan shall be construed as giving any Participant the right to be
retained in the employ of the Company or any other “Employer” (within the
meaning of the Retirement Plan).  Each
Employer expressly reserves the right to dismiss any Participant at any time
without regard to the effect which such dismissal might have upon him under the
Plan.

 

(f)        This
Plan shall be construed, administered and enforced according to the laws of the
State of New York.

 

9Exhibit 10.1

 

Thompson Creek Metals Company
Inc.

26 W. Dry Creek, Suite 810

Littleton, Co.   80120

 

August 16, 2010

 

Royal Gold, Inc.

1660 Wynkoop St.

Denver, CO 80202

 

Re:                             Milligan Project Gold Streaming

 

Gentlemen:

 

On July 15, 2010, Royal Gold Inc. (“Royal Gold”) and Thompson Creek Metals Company Inc. (“Thompson Creek”) entered into a letter agreement (the “Letter Agreement”) regarding the terms and conditions under
which Royal Gold will purchase Refined Gold from Terrane Metals Corp. (“Terrane”) or an Affiliate of Thompson Creek who holds a
direct interest in the Milligan Property (the “Milligan Sub”)
pursuant to a form of Purchase and Sale Agreement between Royal Gold, a wholly
owned subsidiary of Royal Gold to be identified after the date hereof (“Royal Gold Sub”), Milligan Sub and Thompson Creek that was
attached to the Letter Agreement as Exhibit 1 (the “Initial Form of Gold Purchase Agreement”).

 

Each of Royal Gold and Thompson Creek are referred
to herein as a “Party,” and collectively, the “Parties”.  All
capitalized terms used in this letter not otherwise defined herein are defined
in Schedule “A”.

 

In consideration of the mutual promises,
representations, warranties, covenants, and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Parties mutually agree as follows:

 

1.                                       Amendment.

 

1.1                               Exhibit 1
Amendment.  The Initial Form of Gold Purchase
Agreement (including the Schedules thereto) attached to the Letter Agreement as
Exhibit 1 is hereby deleted in its entirety and replaced with the revised
form of Gold Purchase Agreement (including the Schedules thereto) attached
hereto as Schedule “A”.

 

2.                                       Miscellaneous.

 

2.1                               Entire
Agreement; Amendment.

 

(a)                                  This letter agreement, the Letter Agreement and the Mutual
Non-Disclosure Agreement between Thompson Creek and Royal Gold effective as of June 1,
2010 together constitute the entire agreement between the Parties hereto with
respect to the subject matter hereof and supersedes all other prior agreements
and 

 

 

understandings, both written and oral,
between the Parties with respect to the subject matter hereof.

 

(b)                                 This letter agreement may not be changed, amended, supplemented, or
otherwise modified except pursuant to an instrument in writing signed by each of
the Parties.  No course of dealing
between or among any Persons having any interest in this letter agreement shall
be deemed effective to modify or amend any part of this letter agreement or any
rights or obligations of any Person under or by reason of this letter
agreement.

 

2.2                               Governing
Law.  The
Parties agree that this letter agreement shall be governed by and construed in
accordance with the laws of Colorado, excluding any rule or principle that
might refer the governance or the construction of this Agreement to the laws of
another jurisdiction.

 

2.3                               Parties
in Interest.  This letter agreement shall be binding upon
and inure solely to the benefit of each Party hereto and its successors and
permitted assigns, and nothing in this letter agreement, express or implied, is
intended to or shall confer upon any other Person any rights, benefits or
remedies of any nature whatsoever under or by reason of this letter agreement.

 

2.4                               Assignment.  Prior to the Closing, no Party
may assign this letter agreement, nor any of the rights, interests or
obligations hereunder, by operation of law (including, but not limited to, by
merger or consolidation) or otherwise, without the prior written consent of the
other Party hereto; provided, however, that either Party shall have the right,
without the consent of the other Party 
to assign all or any portion of its rights, duties and obligations under
this letter agreement to any of its direct or indirect subsidiaries; provided,
that no such assignment shall relieve the assigning Party of its obligations
hereunder.  Any assignment in violation
of the preceding sentence shall be void.

 

[Remainder of page left
intentionally blank]

 

2

 

If the foregoing conforms to your
understanding of our agreement, please countersign this letter agreement in the
space provided below.

 

 

	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  Thompson Creek Metals Company Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  [s] Kevin Lougherty

  
	
   

  	
  Date: August 16, 2010

  
	
   

  	
  Title: Chairman and CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
  Accepted and Agreed:

  	
   

  
	
   

  	
   

  
	
  Royal Gold, Inc.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By: 

  	
  [s] Bill Heissenbuttel

  	
   

  
	
  Date: August 16, 2010

  	
   

  
	
  Title: Vice President Corporate Development

  	
   

  
				

 

3

 

Schedule “A” — Revised Form of
Gold Purchase Agreement

 

 

PURCHASE AND SALE AGREEMENT

 

 

BY AND AMONG

 

[TERRANE METALS CORP.(1)],

 

[RG NEWCO.],

 

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

 

ROYAL GOLD, INC.

 

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

 

THOMPSON CREEK METALS
COMPANY INC.

 

DATED:  ·,
2010

 

(1)                                  Corporate party
holding title to Milligan Property may be reorganized.

 

 

TABLE OF CONTENTS

 

	
  Article 1
  INTERPRETATION

  	
  2

  
	
  1.1

  	
  Definitions

  	
  2

  
	
  1.2

  	
  Certain Rules of
  Interpretation

  	
  12

  
	
   

  	
   

  
	
  Article 2 PURCHASE AND
  SALE

  	
  13

  
	
  2.1

  	
  Purchase and Sale of Refined
  Gold

  	
  13

  
	
  2.2

  	
  Delivery Obligations

  	
  14

  
	
  2.3

  	
  Statements

  	
  15

  
	
  2.4

  	
  Gold Purchase Price

  	
  16

  
	
  2.5

  	
  Payment

  	
  16

  
	
  2.6

  	
  Sales Tax

  	
  16

  
	
   

  	
   

  
	
  Article 3 DEPOSIT

  	
  16

  
	
  3.1

  	
  Payment Deposit

  	
  16

  
	
  3.2

  	
  Initial Deposit

  	
  16

  
	
  3.3

  	
  Scheduled Deposits

  	
  17

  
	
  3.4

  	
  No Interest

  	
  17

  
	
  3.5

  	
  Use of Payment Deposit

  	
  17

  
	
  3.6

  	
  Deposit Record

  	
  17

  
	
  3.7

  	
  Deposit at Expiry of Initial
  Term

  	
  17

  
	
   

  	
   

  
	
  Article 4 DELIVERIES

  	
  18

  
	
  4.1

  	
  Deliveries of Vendor

  	
  18

  
	
  4.2

  	
  Deliveries of Purchaser

  	
  19

  
	
   

  	
   

  
	
  Article 5 PAYMENT OF
  SCHEDULED DEPOSITS

  	
  19

  
	
  5.1

  	
  Achievement of Deposit
  Events

  	
  19

  
	
  5.2

  	
  Payment of Scheduled
  Deposits

  	
  20

  
	
  5.3

  	
  Closing Conditions for
  Payment of Scheduled Deposits

  	
  20

  
	
   

  	
   

  
	
  Article 6 TERM

  	
  21

  
	
  6.1

  	
  Term

  	
  21

  
	
   

  	
   

  
	
  Article 7 REPORTING;
  BOOKS AND RECORDS; INSPECTIONS

  	
  21

  
	
  7.1

  	
  Monthly Reporting

  	
  21

  
	
  7.2

  	
  Annual Reporting

  	
  22

  
	
  7.3

  	
  Additional Reporting
  Requirements

  	
  22

  
	
  7.4

  	
  Books and Records

  	
  22

  
	
  7.5

  	
  Inspections

  	
  23

  
	
   

  	
   

  
	
  Article 8 COVENANTS

  	
  23

  
	
  8.1

  	
  Conduct of Operations

  	
  23

  
	
  8.2

  	
  Preservation of Corporate
  Existence

  	
  24

  
	
  8.3

  	
  Processing/Commingling

  	
  24

  
	
  8.4

  	
  Mineral Offtake Agreements

  	
  25

  
	
  8.5

  	
  Insurance

  	
  25

  
	
  8.6

  	
  Permitted Debt Financings and Permitted Encumbrances

  	
  26

  
	
  8.7

  	
  Confidentiality

  	
  29

  
	
  8.8

  	
  Compliance with Law

  	
  31

  

 

 

	
  8.9

  	
  Unprocessed Ore

  	
  31

  
	
   

  	
   

  
	
  Article 9 RIGHT OF
  FIRST OFFER

  	
  32

  
	
  9.1

  	
  Right of First Offer on Gold
  Interest

  	
  32

  
	
   

  	
   

  
	
  Article 10 TRANSFERS
  AND ASSIGNMENTS

  	
  33

  
	
  10.1

  	
  General

  	
  33

  
	
  10.2

  	
  Transfers to Affiliates

  	
  34

  
	
  10.3

  	
  Transfers of the Milligan
  Project

  	
  34

  
	
  10.4

  	
  Exceptions Based on
  Intercreditor Agreements

  	
  35

  
	
  10.5

  	
  Assignment by Purchaser
  Group

  	
  35

  
	
  10.6

  	
  Assignment by Vendor Group

  	
  35

  
	
   

  	
   

  
	
  Article 11
  REPRESENTATIONS AND WARRANTIES

  	
  35

  
	
  11.1

  	
  Representations and
  Warranties of Vendor

  	
  35

  
	
  11.2

  	
  Representations and
  Warranties of Thompson Creek

  	
  35

  
	
  11.3

  	
  Representations and
  Warranties of the Purchaser

  	
  36

  
	
  11.4

  	
  Representations and
  Warranties of Royal Gold

  	
  36

  
	
  11.5

  	
  Survival of Representations
  and Warranties

  	
  36

  
	
  11.6

  	
  Knowledge

  	
  36

  
	
   

  	
   

  
	
  Article 12 VENDOR
  EVENTS OF DEFAULT

  	
  36

  
	
  12.1

  	
  Vendor Events of Default

  	
  36

  
	
  12.2

  	
  Remedies

  	
  37

  
	
   

  	
   

  	
   

  
	
  Article 13 PURCHASER
  EVENTS OF DEFAULT

  	
  37

  
	
  13.1

  	
  Purchaser Events of Default

  	
  37

  
	
  13.2

  	
  Remedies

  	
  38

  
	
   

  	
   

  	
   

  
	
  Article 14 INDEMNITIES

  	
  38

  
	
  14.1

  	
  Indemnity of Purchaser

  	
  38

  
	
  14.2

  	
  Indemnity of Vendor

  	
  38

  
	
  14.3

  	
  Limited Indemnity for Losses
  Related to Incidental Connection to Property

  	
  39

  
	
  14.4

  	
  Limitations on Indemnification

  	
  39

  
	
   

  	
   

  	
   

  
	
  Article 15 INDEPENDENT
  ENGINEER; ADDITIONAL PAYMENT TERMS; DISPUTES

  	
  40

  
	
  15.1

  	
  Independent Engineer

  	
  40

  
	
  15.2

  	
  Payments

  	
  40

  
	
  15.3

  	
  Overdue Payments and Set-Off

  	
  40

  
	
  15.4

  	
  Statement Disputes

  	
  41

  
	
  15.5

  	
  Disputes and Arbitration

  	
  42

  
	
   

  	
   

  	
   

  
	
  Article 16 TAXES

  	
  42

  
	
  16.1

  	
  Taxes

  	
  42

  
	
   

  	
   

  	
   

  
	
  Article 17 GENERAL

  	
  43

  
	
  17.1

  	
  Further Assurances

  	
  43

  
	
  17.2

  	
  Survival

  	
  43

  
	
  17.3

  	
  No Joint Venture

  	
  43

  
	
  17.4

  	
  Governing Law

  	
  43

  
	
  17.5

  	
  Notices

  	
  43

  
	
  17.6

  	
  [Reserved]

  	
  45

  

 

ii

 

	
  17.7

  	
  Amendments

  	
  45

  
	
  17.8

  	
  Beneficiaries; Successors
  and Assigns

  	
  45

  
	
  17.9

  	
  Contests

  	
  46

  
	
  17.10

  	
  Entire Agreement

  	
  46

  
	
  17.11

  	
  Waivers

  	
  46

  
	
  17.12

  	
  Severability

  	
  46

  
	
  17.13

  	
  Counterparts

  	
  46

  
	
  17.14

  	
  Thompson Creek Guarantee

  	
  46

  
	
  17.15

  	
  Royal
  Gold Guarantee

  	
  47

  

 

iii

 

THIS PURCHASE AND SALE AGREEMENT dated as of ·, 2010.

 

BY AND AMONG:

 

[RG NEWCO]., a ·

 

(the “Purchaser”),

 

- and-

 

TERRANE METALS CORP.(2), a corporation incorporated under the laws of
British Columbia

 

(the “Vendor”)

 

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

 

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

 

(“Royal Gold”)

 

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

 

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

 

(“Thompson Creek”)

 

WITNESSES THAT:

 

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

 

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

 

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

 

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

 

(2)                                  See Footnote 1.

 

 

Article 1

INTERPRETATION

 

1.1                               Definitions

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Deposit Suspension Event”
means an event that is reasonably beyond the control of the Vendor and its
Affiliates that prevents the Vendor and its Affiliates from continuing to advance
the Development Program, including (i) acts of God, earthquake, cyclone,
fire, explosion, flood, landslide, lightening storm, tempest, drought or
meteor, (ii) war 

 

3

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Effective Date”
means the date of this Agreement.

 

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

 

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

 

4

 

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

 

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

 

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

 

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

 

“Gold Payment”  means (i) with
respect to Minerals purchased by an Offtaker from the Vendor or any of its
Affiliates, the receipt by the Vendor or any of its Affiliates of payment,
whether provisional or final, or other consideration from the Offtaker in
respect of any Produced Gold, including amounts received in respect of
warehouse holding certificates, and (ii) with respect to Minerals refined,
smelted or otherwise beneficiated by an Offtaker on behalf of the Vendor or any
of its Affiliates, the receipt by the Vendor or any of its Affiliates of
Refined Gold, whether provisional or final settlement, in accordance with the
applicable Mineral Offtake Agreement.

 

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

 

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

 

5

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

6

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Mineral Offtake Agreement”
means any agreement entered into by Vendor or any of its Affiliates with an
Offtaker (i) for the sale of Minerals to such Offtaker, or (ii) for
the 

 

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

 

7

 

smelting, refining or other beneficiation of
Minerals by such Offtaker for the benefit of the Vendor or any of its
Affiliates, and all amendments or addendums thereto.

 

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

 

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

 

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

 

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

 

	
  (i)

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

  
	
   

  	
   

  
	
  (ii)

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

  
	
   

  	
   

  
	
  (iii)

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

  
	
   

  	
   

  
	
  (iv)

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

  
	
   

  	
   

  
	
  (v)

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

  

 

8

 

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

 

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

 

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

 

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

 

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

 

“Parties” means
the parties to this Agreement.

 

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

 

“Permits” means
all material licenses, permits, Approvals (including environmental Approvals)
rights (including surface and access rights), privileges, concessions or
franchises necessary for the construction, development, operation and
reclamation of the Milligan Project.

 

“Permitted Encumbrances”
means at any time from time to time: (i) the Lender Security, (ii) undetermined
or inchoate Encumbrances incidental to construction, maintenance or operations
which have not at the time been filed pursuant to law, (iii) the
Encumbrance of taxes and assessments for the then current year, the Encumbrance
for taxes and assessments not at the time overdue and Encumbrances securing
worker’s compensation assessments which are not overdue, (iv) cash or
governmental obligations deposited in the ordinary course of business in
connection with contracts, bids, tenders or to secure worker’s compensation,
unemployment insurance, surety or appeal bonds, costs of litigation, when
required by law, public and statutory obligations, Encumbrances or claims
incidental to current construction, mechanics’, warehousemen’s, carriers’ and
other similar Encumbrances, (v) security given in the ordinary course of
business to a public utility or any Governmental Authority when required by
such utility or Governmental Authority in connection with the operations of the
Vendor in the ordinary course of business, (vi) easements, rights of way
and servitudes in existence at the date hereof and future easements, rights of way
and servitudes, (vii) all rights reserved to or 

 

9

 

vested in any Governmental Authority by the
terms of any lease, licence, franchise, grant or permit held by the Vendor or
by any statutory provision to terminate any such lease, licence, franchise
grant or permit or to require annual or periodic payments as a condition of the
continuance thereof or to distrain against or to obtain an Encumbrance on any
property or assets of the Vendor in the event of failure to make such annual or
other periodic payments, (viii) such other Encumbrances as may from time
to time be consented to in writing by the Purchaser, and (ix) Encumbrances
noted on Schedule E.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

10

 

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

 

“Restricted Person”
means any person or entity that:

 

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

 

	
  (i)

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

  
	
   

  	
   

  
	
  (ii)

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

  
	
   

  	
   

  
	
  (iii)

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

  
	
   

  	
   

  
	
  (iv)

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

  
	
   

  	
   

  
	
  (v)

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

  

 

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

 

	
  (i)

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

  
	
   

  	
   

  
	
  (ii)

  	
  the
  Trading with the Enemy Act, 50 U.S.C. App. 1 et seq.; or any other enabling
  legislation or executive order relating thereto, including the Uniting and
  Strengthening America by Providing Appropriate Tools Required to Intercept
  and Obstruct Terrorism Act of 2001, Title III of Pub. L. 107-56; or

  

 

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

 

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

 

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

 

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

 

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

 

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

 

11

 

and any lease to the surface of the Milligan
Property or license of occupation or other occupation right and includes any
fee simple rights over any part of the Milligan Property.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

1.2                               Certain Rules of
Interpretation

 

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

 

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

 

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

 

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

 

12

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

	
  Schedule A1

  	
  -

  	
  Vendor Representations and Warranties

  
	
  Schedule A2

  	
  -

  	
  Thompson Creek Representations and Warranties

  
	
  Schedule A3

  	
  -

  	
  Purchaser Representations and Warranties

  
	
  Schedule A4

  	
  -

  	
  Royal Gold Representations and Warranties

  
	
  Schedule B

  	
  -

  	
  Description of Milligan Property (with Maps)

  
	
  Schedule C1

  	
  -

  	
  Form of Security Agreement for Milligan
  Property

  
	
  Schedule C2

  	
  -

  	
  Form of Security Agreement for Personal
  Property

  
	
  Schedule C3

  	
  -

  	
  Form of Security Agreement - Floating
  Charge

  
	
  Schedule D

  	
  -

  	
  Development Program and Scheduled Deposits

  
	
  Schedule E

  	
  -

  	
  Permitted Encumbrances

  
	
  Schedule F

  	
  -

  	
  Provisional Payment Illustration

  

 

Article 2

PURCHASE AND SALE

 

2.1                               Purchase
and Sale of Refined Gold

 

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

 

(b)                                 For
each sale of Refined Gold pursuant to Section 2.1(a), the amount of
Produced Gold used as the basis for calculating the Designated Percentage of
Produced 

 

13

 

Gold shall be determined
by the amount of contained gold in the Minerals received at the Offtaker as
determined by the Offtaker Documents. 
Produced Gold shall not be reduced for, and the Purchaser shall not be
responsible for, any Refining Adjustments.

 

2.2                               Delivery
Obligations

 

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

 

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

 

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

 

(iii)            *[Redacted]*;

 

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

 

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

 

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

 

14

 

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

 

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

 

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

 

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

 

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

 

2.3                               Statements

 

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

 

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

 

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

 

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

 

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

 

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

 

15

 

2.4                               Gold
Purchase Price

 

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

 

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

 

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

 

2.5                         Payment

 

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

 

2.6                               Sales Tax

 

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

 

Article 3

DEPOSIT

 

3.1                               Payment
Deposit

 

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

 

3.2                               Initial
Deposit

 

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

 

16

 

3.3                               Scheduled
Deposits

 

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

 

3.4                               No
Interest

 

No interest shall be payable on the Payment Deposit.

 

3.5                               Use of
Payment Deposit

 

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

 

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

 

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

 

3.6                               Deposit
Record

 

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

 

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

 

3.7                               Deposit at
Expiry of Initial Term

 

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

 

17

 

Article 4

DELIVERIES

 

4.1                               Deliveries
of Vendor

 

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

 

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

 

(b)                                 as
security for the performance of its obligations to the Purchaser under this
Agreement, the executed Security Agreements in substantially the form attached
as Schedules C1, C2 and C3 (the “Security
Agreements”), which Security Agreements shall have been registered,
filed or recorded in all offices, and all actions shall have been taken, that
may be prudent or necessary to preserve, protect or perfect the security
interest of the Purchaser under the Security Agreements.  Without limiting the foregoing, the Security
Agreements on the Milligan Property shall also be registered in: (i) British
Columbia’s Mineral Titles Online Registry against each of the Mineral Claims
and Mineral Leases that are part of the Milligan Property, (ii) British
Columbia’s Personal Property Registry against all personal property of Vendor,
and (iii) in the Land Title Office with respect to any Surface Rights that
are registered in the Land Title Office from time to time, in which case the
Vendor will grant to the Purchaser a mortgage over its interest in such Surface
Rights as security for the performance of its obligations to the Purchaser
under this Agreement in a form acceptable to the Parties, acting reasonably;

 

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

 

(d)                                 evidence
of the satisfaction and discharge of the following charges in favour of the
Bank of Montreal and related obligations of the Vendor:

 

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

 

18

 

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

 

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

 

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

 

4.2                               Deliveries
of Purchaser

 

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

 

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

 

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

 

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

 

Article 5

PAYMENT OF SCHEDULED DEPOSITS

 

5.1                               Achievement
of Deposit Events

 

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

 

(a)                                  the date of the Deposit
Event;

 

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

 

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

 

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

 

19

 

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

 

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

 

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

 

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

 

5.2                               Payment of
Scheduled Deposits

 

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

 

5.3                               Closing
Conditions for Payment of Scheduled Deposits

 

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

 

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

 

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

 

	
  (i)

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

  
	
   

  	
   

  
	
  (ii)

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

  
	
   

  	
   

  
	
  (iii)

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

  
	
   

  	
   

  
	
  (iv)

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

  
	
   

  	
   

  
	
  (v)

  	
  all
  material Permits have been obtained and are in good standing for the conduct
  of the activities conducted in the Development Program to date and for the
  use of funds contemplated by the Deposit Event, and no 

  

 

20

 

material Permit has been revoked or rescinded that
is necessary for the commencement of commercial production of Minerals from the
Milligan Project;

 

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

 

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

 

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

 

Article 6

TERM

 

6.1                               Term

 

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

 

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

 

Article 7

REPORTING; BOOKS AND RECORDS; INSPECTIONS

 

7.1                               Monthly
Reporting

 

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

 

21

 

7.2                               Annual
Reporting

 

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

 

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

 

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

 

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

 

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

 

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

 

7.3                               Additional
Reporting Requirements

 

(a)                                  The Vendor shall
provide to Purchaser a copy of any life of mine plan or similar comprehensive
operating plan produced by or on behalf of Vendor detailing the production and
development plan for the Milligan Property reserves and resource, including all
supportive narrative, assumptions and strategies, and any update thereto,
within 15 days after any life of mine plan or update is prepared.

 

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

 

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

 

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

 

7.4                               Books and
Records

 

(a)                                  Vendor
and its Affiliates shall, in all material respects, keep true, complete and
accurate books and records of all of its operations and activities with respect
to the Milligan Project, including the mining and production of Minerals and
the treatment, processing, milling, concentrating, transportation and sale of
Minerals.

 

22

 

Vendor and its Affiliates
shall permit the Purchaser and its authorized representatives and agents to
perform audits no more than once each year and additional limited reviews and
examinations of its books and records and other information relevant to the
production, Delivery and determination of Produced Gold and Refined Gold from
time to time at reasonable times, all at the Purchaser’s sole risk and expense
and upon reasonable notice to confirm compliance with the terms of this
Agreement. The Purchaser shall diligently complete any audit or other reviews
and examination permitted hereunder.

 

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

 

7.5          Inspections

 

Subject at all times to the workplace rules and
supervision of Vendor, and provided any rights of access do not interfere with
any exploration, development, mining or processing work conducted on the
Milligan Property, Vendor shall grant to the Purchaser and its representatives
and agents, including, without limitation, the Independent Engineer, at
reasonable times and upon reasonable notice and at the Purchaser’s sole risk
and, subject to Section 15.1, expense, the right to access and inspect the
Milligan Property and to monitor Vendor’s mining and processing operations on
the Milligan Project.  The Vendor shall
not be responsible for injuries to or damages suffered by the Purchaser and its
representatives and agents, including, without limitation, the Independent
Engineer, while visiting the Milligan Property unless such injuries or damages
are caused or contributed to by the gross negligence or wilful misconduct of
the Vendor or its representatives. The Purchaser may avail itself of such right
of access a maximum of twice per calendar year, other than as required by the
Independent Engineer.  To the extent
permitted under Mineral Offtake Agreements, Purchaser and its representatives
and agents, including without limitation, the Independent Engineer, shall also
have the right to be present or to be represented at any smelter, refinery or
other processing facility at which the weighing, sampling and assaying of
metals and the calculation of the Refined Gold will be determined (i) at
any time that the Vendor or any Affiliate, its representatives or agents is
present, provided, that the Vendor or any such Affiliate shall give the
Purchaser reasonable advanced notice of any such visit, and (ii) at such
other time as the Purchaser may request, provided, that the Purchaser shall
give the Vendor reasonable advanced notice of the date on which Purchaser
intends to conduct such visit.  Vendor
shall grant to the Independent Engineer such access to the Milligan Project and
its site, facilities and employees, and to construction and other contractors
at such times and on such notice as the Independent Engineer considers
reasonable for the performance of the Independent Engineer’s duties with
respect to this Agreement.

 

Article 8

COVENANTS

 

8.1          Conduct of Operations

 

(a)           All decisions
regarding the Milligan Project, including all decisions concerning the methods,
extent, times, procedures and techniques of any (i) exploration,

 

23

 

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

 

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

 

(c)           Notwithstanding Section 8.1(a),
Vendor and its Affiliates shall operate the Milligan Project as though the
Vendor had a full economic interest in all the gold produced from the Milligan
Property and shall not consider the economic impact of the Agreement in its
reserves and resources calculations or mine planning provided, that the Vendor
may seek the Purchaser’s written consent (which consent may be withheld in the
Purchaser’s sole discretion) to consider the economic impact of this Agreement
with respect to a material expansion of the Milligan Project or the
reprocessing of tailings, waste
rock or other waste products.

 

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

 

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

 

8.2          Preservation of Corporate
Existence

 

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

 

8.3          Processing/Commingling

 

The Vendor may, and may cause each of its
Affiliates to, process Other Minerals through the Milligan Facilities in
priority to, or commingle Other Minerals with, Minerals mined, produced,
extracted or otherwise recovered from the Milligan Property, provided: (i) Vendor
(or such Affiliate) has adopted and employs best industry practices and
procedures for weighing, determining moisture content, sampling and assaying
and determining recovery factors (a “Commingling Plan”),
(ii) the Purchaser has approved the Commingling Plan, such approval

 

24

 

not to be unreasonably withheld, and (iii) Vendor
or such Affiliate keeps records required by the Commingling Plan.

 

8.4          Mineral Offtake Agreements

 

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

 

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

 

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

 

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

 

8.5          Insurance

 

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

 

(b)           Vendor shall ensure
that each shipment of Produced Gold is adequately insured, in such amounts and
with such coverage as is customary in the Canadian mining

 

25

 

industry, until the time
that risk of loss and damage for such Produced Gold is transferred to the
Offtaker pursuant to a Mineral Offtake Agreement.

 

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

 

8.6          Permitted Financings and
Permitted Encumbrances

 

8.6           Permitted Financings and Permitted Encumbrances

 

(a)           With respect to any
one or more secured Financings that either the Vendor or its Affiliates
arranges for the Milligan Project from time to time, or that are secured
against or by the assets of the Milligan Project, the Vendor agrees that any
such Financing shall provide that the Lenders (or any agent or trustee that
holds the Lender Security) will agree to enter into an intercreditor agreement
with the Purchaser that will be acknowledged by the Vendor, and such
intercreditor agreement will be on terms
reasonable in the syndicated secured lending market prevailing at the time such
intercreditor agreement is negotiated taking into account the purpose and
comparative size of the Financing and that such intercreditor agreement shall
contain the following terms:

 

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

 

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

 

26

 

(B) responsive pleadings to any objections to
Purchaser’s claim in connection with such bankruptcy or other insolvency
proceeding,

 

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

 

(iv)          an agreement by the
Purchaser that, in the event of a bankruptcy or other insolvency proceeding of
the Vendor or its subsidiaries, whether voluntary or involuntary, (A) if
Lenders were to desire to consent to the use of their cash collateral or to
consent to the Vendor or any other subsidiary obtaining debtor in possession
financing (a “DIP Financing”),
then Purchaser would agree to not raise any objection to such use of such cash
collateral or to such DIP Financing and would subordinate its liens on the
Collateral (other than the Gold Security Interest) to any such DIP Financing on
the same terms (but on a basis junior to the liens of Lenders that are
participating as lenders in such DIP Financing) as the prepetition liens of the
Lenders are subordinated thereto; provided, that, if the Lenders were to be
granted adequate protection in the form of replacement liens on any of the
assets constituting Collateral, then the Purchaser may seek adequate protection
in the form of a replacement lien on the same assets but subordinated to the
liens securing the Financing and the DIP Financing, and (B) the Purchaser
would not raise any objection or opposition to any sale of assets consented to
by the Lenders or made in connection with the enforcement of rights by the
Lenders in the Collateral (other than the Gold Security Interest); provided,
that the proceeds of all such sales shall become subject to the liens securing
the obligations owed to Purchaser to the same extent as any assets so disposed,

 

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

 

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

 

(vii)         an agreement by each of the
Purchaser and the Lenders to promptly notify the other party in writing of any
material breach under this Agreement or

 

27

 

any event of default as defined in any document,
instrument or agreement delivered in connection with this Agreement or any event
of default as defined in any document, instrument or agreement delivered in
connection with the Financing, as applicable, and

 

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

 

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

 

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

 

28

 

the Purchaser’s receipt
of the Intermediate Intercreditor Agreement shall be construed as an acceptance
of the Intermediate Intercreditor Agreement; and, in either instance, the
Purchaser shall thereafter be bound to execute and deliver the applicable
intercreditor agreement in furtherance of the Financing.

 

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

 

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

 

(e)           Notwithstanding any
of the foregoing:  (i) any Financing
that the Vendor arranges for assets (including without limitation, mobile
mining equipment, motor vehicles and office equipment) subject to operating
leases or purchase money financing or other similar financing arrangements
shall also be entitled to priority over the Purchaser’s security interest with
respect to such assets under the Security Agreements (other than the Gold
Security Interest) and there shall be no requirement for any such lessor or
lender to enter into an intercreditor agreement with the Purchaser; and
(ii) the Purchaser’s security interest in any asset of the Vendor under
any of the Security Agreements and any existing intercreditor agreements
related thereto (other than the Gold Security Interest and any provision of any
intercreditor agreement related thereto) shall terminate upon the Deposit
Reduction Time, at which time, except for intercreditor agreements relating to
the Gold Security Interest which shall be no less favourable to the Lenders
than the intercreditor agreements previously entered into hereunder, there will
be no further requirement under this Section 8.6 for the Lenders to enter
into intercreditor agreements.

 

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

 

8.7          Confidentiality

 

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

 

29

 

Section 8.4(a) and
the information received by it pursuant to the Confidentiality Agreement (“Confidential Information”), provided that a
Receiving Party may disclose Confidential Information in the following
circumstances:

 

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

 

(ii)           subject to Section 8.7(c),
where that disclosure is necessary to comply, in a Party’s reasonable judgment,
with Applicable Laws, including rules and regulations promulgated by the
U.S. Securities and Exchange Commission (the “SEC”),
the Canadian Securities Administrators (the “CSA”),
a provincial securities commission, court order or the policies of any relevant
stock exchange, provided that such disclosure is limited to only that
Confidential Information so required to be disclosed and that the Receiving
Party will have evaluated the availability of any laws, rules, regulations or
contractual rights as to disclosure on a confidential basis to which it may be
entitled and sought such treatment for portions of such documents it reasonably
believes are eligible for such treatment;

 

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

 

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

 

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

 

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

 

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

 

30

 

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

 

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

 

8.8          Compliance with Law

 

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

 

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

 

8.9          Unprocessed Ore

 

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

 

31

 

Article 9

RIGHT OF FIRST OFFER

 

9.1          Right of First Offer on Gold
Interest

 

(a)           Subject to Section 10.4,
if

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(i)            the Vendor may commence
negotiations with a third party for the sale of the Milligan Gold Right which
is the subject of the Vendor Offer, and, either directly or through an
Affiliate, sell the Milligan Gold Right that is the subject of the Vendor Offer
to a third party, provided that the terms of

 

32

 

	
   

  	
   

  	
  sale
  are no more favourable to such third party than those offered to the
  Purchaser in the Vendor Offer, or

  
	
   

  	
   

  	
   

  
	
  (ii)

  	
   

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

  

 

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

 

Article 10

TRANSFERS AND ASSIGNMENTS

 

10.1                        General.

 

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

 

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

 

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

 

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

 

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

 

33

 

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

 

10.2                        Transfers
to Affiliates.

 

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

 

10.3                        Transfers
of the Milligan Project

 

(a)                                  Subject
to Sections 10.1, 10.2 and 10.4(b), (i) the Vendor may sell, transfer, assign,
convey, grant any right, title or interest in or to, or otherwise dispose of,
all or any part of the Milligan Project, and (ii) Thompson Creek or Vendor may
sell, transfer, assign, grant any right, title or interest in or to, or
otherwise dispose of any equity interest in the Vendor (each of clauses (i) and
(ii), a “Transfer”), unless
Purchaser demonstrates to Vendor, acting reasonably, that at the time of the
Transfer the transferee does not have sufficient financial resources and
operational expertise
to continue developing and operating the Milligan Project in a manner that
provides reasonable assurance that the Development will be completed in
accordance with the Development Program and, after Development, operate the
Milligan Project in accordance with Section 8.1(b).

 

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

 

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

 

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

 

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

 

34

 

10.4                        Exceptions
Based on Intercreditor Agreements

 

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

 

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

 

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

 

10.5                        Assignment
by Purchaser Group

 

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

 

10.6                        Assignment
by Vendor Group

 

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

 

Article 11

REPRESENTATIONS AND WARRANTIES

 

11.1                        Representations
and Warranties of Vendor

 

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

 

11.2                        Representations
and Warranties of Thompson Creek

 

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

 

35

 

11.3                        Representations
and Warranties of the Purchaser

 

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

 

11.4                        Representations
and Warranties of Royal Gold

 

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

 

11.5                        Survival
of Representations and Warranties

 

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

 

11.6                        Knowledge

 

Where any representation or warranty contained
in this Agreement is expressly qualified by reference to the “knowledge” of
Vendor to refer to the actual knowledge of any of the Chief Executive, Chief
Financial and Chief Operating Officers of Thompson Creek.(3)

 

Article 12

VENDOR EVENTS OF DEFAULT

 

12.1                        Vendor
Events of Default

 

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

 

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

 

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

 

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

 

(3) Potentially, officers of
Vendor to be added.

 

36

 

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

 

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

 

12.2                        Remedies

 

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

 

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

 

Article 13

PURCHASER EVENTS OF DEFAULT

 

13.1                        Purchaser
Events of Default

 

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

 

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

 

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

 

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

 

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

 

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

 

37

 

13.2                        Remedies

 

In addition to Vendor’s rights and remedies
available to it at law or in equity, if a Purchaser Event of Default described
in Sections 13.1(a), 13.1(b) or 13.1(c) occurs and is continuing, Vendor shall
have the right, upon written notice to the Purchaser, to suspend its
obligations under this Agreement; provided, however, that those obligations
that existed prior to the date of such written notice and such other provisions
of this Agreement as are required to give effect thereto, shall not be
suspended and provided that, if suspension is as a result of a Purchaser Event
of Default for a breach of Article 10, the provisions of Article 7 shall also
be suspended and Vendor shall not be obligated to sell or Deliver any Refined
Gold to the Purchaser during such suspension. 
If the Purchaser cures the Purchaser Event of Default in full within 60
days, then Vendor’s obligations under this Agreement shall recommence as of the
date the Purchaser cures the Purchaser Event of Default in full. If the
Purchaser fails to cure the Purchaser Event of Default described in Sections
13.1(a) or 13.1(b) in full within 60 days then Vendor may elect at any time
thereafter to suspend its obligations to Deliver Refined Gold under this
Agreement for the remainder of the Term of the Agreement, and thereupon the
Purchaser shall only have the right or conversely, Vendor shall only have the
obligation, to refund the outstanding balance of the Payment Deposit, as set
forth in the Deposit Record, on the Default Deposit Reduction Date.  In addition, Purchaser shall indemnify
Vendor, and save it harmless, on an after-tax basis, from and against any tax
liability of Vendor to the extent that it arises (i) as a consequence of Vendor
electing to suspend its obligations to Deliver Refined Gold for the reminder of
the Term of the Agreement, and (ii) in the taxation year of Vendor in which
such suspension occurs.  If a Purchaser
Event of Default under Sections 13.1(d) and 13.1(e) has occurred and is
continuing, then Vendor shall have no right to terminate this Agreement, but it
shall be entitled to all other remedies available to it at law or in equity.

 

Article 14

INDEMNITIES

 

14.1                        Indemnity
of Purchaser

 

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

 

14.2                        Indemnity
of Vendor

 

Subject to Section 14.4, the Purchaser agrees
to indemnify the Vendor and Thompson Creek from and against, and to hold the
Vendor harmless from, any and all Losses which may at any time be imposed on,
incurred by or asserted against the Vendor in any way to the extent relating

 

38

 

to or arising out of (A) any breach by the
Purchaser or Royal Gold or any misrepresentation or inaccuracy of any
representation or warranty of the Purchaser contained in this Agreement,
including without limitation the representations and warranties set forth on
Schedules A3 and A4 hereto, or in any document, instrument or agreement
delivered pursuant hereto; and (B) any breach, including breach due to
non-performance, by the Purchaser or Royal Gold of any covenant or agreement to
be performed by the Purchaser or Royal Gold contained in this Agreement or in
any document, instrument or agreement delivered pursuant hereto.

 

14.3                        Limited
Indemnity for Losses Related to Incidental Connection to Property

 

Subject to Section 14.4, the Vendor agrees to
indemnify the Purchaser and Royal Gold from and against, and to hold the
Purchaser and Royal Gold harmless from, any and all Losses which may at any
time be imposed on, incurred by or asserted against the Purchaser and Royal
Gold in any way to the extent relating to or arising out of (A) the failure of
the Vendor or Thompson Creek to comply with any Applicable Law, including any
Applicable Law relating to environmental protection and reclamation
obligations, with respect to the Milligan Property; (B) the physical
environmental condition of the Milligan Project and matters of health or safety
related to the Milligan Project or any action or claim brought with respect
thereto; and (C) any actual or threatened withdrawal by any Governmental
Authority of any material Approval under Environmental Laws which is necessary
for the construction or operation of the Milligan Project, or any actual or
threatened challenge by any person to any material Approval under Environmental
Laws which is necessary for the construction or operation of the Milligan
Project.  Vendor’s indemnification
obligation pursuant to this Section 14.3 shall arise to the extent such Losses
are direct, such as but not limited to Losses incurred from defending
enforcement actions or defending lawsuits joined against Purchaser or Royal
Gold.  Vendor’s indemnification
obligation pursuant to this Section 14.3 shall not arise (i) where
indemnification is available to Purchaser pursuant to Section 14.1, and
(ii) where Losses are incidental or consequential to the occurrence of the
matters listed in this Section 14.3 (A), (B) and (C), such as but not limited
to lost profits from the resulting failure of Vendor to develop the Milligan
Project, to extract or process Minerals, or to deliver or sell Minerals to an
Offtaker.

 

14.4                        Limitations
on Indemnification

 

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

 

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

 

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

 

39

 

Article 15

INDEPENDENT ENGINEER; ADDITIONAL PAYMENT TERMS; DISPUTES

 

15.1                        Independent
Engineer

 

(a)                                  Following
the Effective Date, the Parties will select by mutual agreement an individual
to serve as an independent engineer under this Agreement (the “Independent Engineer”). To the extent he is
no longer available to perform the service or if agreed by the Purchaser and
Vendor, a replacement Independent Engineer will be selected by the mutual
agreement of the Purchaser and Vendor. If the Purchaser and Vendor cannot agree
upon an initial Independent Engineer within 45 days following the date of this
Agreement or a replacement Independent Engineer within 15 days after an
existing Independent Engineer ceases to perform such service, the Independent
Engineer shall be selected by the following procedure: the Purchaser will
nominate three Qualified Candidates, one of which Vendor will elect within 10
days after Vendor shall have received notice of the Purchaser’s nomination,
failing which the Purchaser shall appoint one of the nominees as the
Independent Engineer. For purposes hereof, a “Qualified
Candidate” shall mean an individual with not less than 15 years of
relevant mineral engineering expertise in the precious metals industry. The
Qualified Candidate will not have been a director, officer, employee of, or
contractor or service provider to, or director, officer, beneficial owner or
close relative of a beneficial owner of any contractor or service provider to
the Purchaser or Vendor or any Affiliate thereof for a period of five years
preceding his or her nomination by the Purchaser unless mutually agreed between
the Purchaser and Vendor.

 

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

 

15.2                        Payments

 

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

 

15.3                        Overdue
Payments and Set-Off

 

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

 

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

 

40

 

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

 

15.4                        Statement
Disputes

 

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

 

(i)                                     the Purchaser may notify
Vendor in writing (the “Dispute Notice”)
of such dispute within one year from the date of delivery of the applicable
Deposit Record Report (in the case of a dispute regarding the calculation of
the outstanding balance of the Payment Deposit as set forth in the Deposit
Record) or the applicable statement under Section 2.3 (in the case of a dispute
regarding any statement or the number of ounces of Refined Gold to be Delivered
to the Purchaser hereunder), as applicable (the “Dispute Period”);

 

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

 

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

 

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

 

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

 

41

 

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

 

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

 

(b)                                 If
the Purchaser does not deliver a Dispute Notice within the applicable Dispute
Period, then each statement provided pursuant to Section 2.3, the number of
ounces of Refined Gold to be Delivered in any Delivery of Refined Gold to the
Purchaser hereunder or the calculation of the outstanding balance of the
Payment Deposit, as set forth in any Deposit Record Report, as applicable, will
be deemed final and binding on the Parties after the expiry of the applicable
Dispute Period.

 

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

 

15.5                        Disputes
and Arbitration

 

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

 

Article 16

TAXES

 

16.1                        Taxes

 

(a)                                  Except
as described in Section 16.1(c), all Deliveries of Refined Gold or payments
made by a Party shall be made without any deduction, withholding, charge or
levy for or on account of any tax, duty or other charges of whatever

 

42

 

nature imposed by any
taxing or Governmental Authority, all of which shall be for the account of the
Party making the Delivery or payment.

 

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

 

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

 

Article 17

GENERAL

 

17.1                        Further
Assurances

 

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

 

17.2                        Survival

 

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

 

17.3                        No Joint
Venture

 

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

 

17.4                        Governing
Law

 

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

 

17.5                        Notices

 

(a)                                  Unless
otherwise specifically provided in this Agreement, any notice or other
correspondence required or permitted by this Agreement shall be deemed to have

 

43

 

been properly given or
delivered when made in writing and hand-delivered to the Party to whom
directed, or when given by facsimile transmission, with all necessary delivery
charges fully prepaid (or in the case of a facsimile, upon confirmation of
receipt), and addressed to the Party to whom directed at the following address:

 

(i)                                     if to Vendor to:

 

[26 W. Dry Creek Circle

Suite 810

Littleton, CO  80120   USA

Attention:  ·]

Facsimile:  (303) 761-7420

 

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

 

Goodmans

Barristers and Solicitors

1900 — 355 Burrard Street

Vancouver, BC  V6C 2G8

 

(ii)                                  if to Thompson Creek to:

 

26 W. Dry Creek Circle

Suite 810

Littleton, CO  80120   USA

Attention:  ·

Facsimile:  (303) 761-7420

 

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

 

Goodmans

Barristers and Solicitors

1900 — 355 Burrard Street

Vancouver, BC  V6C 2G8

 

(iii)                               if to the Purchaser to:

 

[RG Newco]

c/o Royal Gold, Inc.

1660 Wynkoop Street, Suite 1000

Denver, CO 80202-1132 USA

Attention: Vice President and General Counsel

Facsimile: (303) 595-9385

 

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

 

44

 

Hogan Lovells US LLP

One Tabor Center

1200 Seventeenth Street, Suite 1500

Denver, CO 80202   USA

Attention: 
Paul Hilton, Esq.

Facsimile: 
(303) 899-7333

 

(iv)                              if to Royal Gold, to:

 

Royal Gold, Inc.

1660 Wynkoop Street, Suite 1000

Denver, CO 80202-1132 USA

Attention: Vice President and General Counsel

Facsimile: (303) 595-9385

 

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

 

Hogan Lovells US LLP

One Tabor Center

1200 Seventeenth Street, Suite 1500

Denver, CO 80202   USA

Attention: 
Paul Hilton, Esq.

Facsimile: 
(303) 899-7333

 

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

 

17.6                        [Reserved]

 

17.7                        Amendments

 

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

 

17.8                        Beneficiaries;
Successors and Assigns

 

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

 

45

 

17.9                        Contests

 

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

 

17.10                 Entire
Agreement

 

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

 

17.11                 Waivers

 

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

 

17.12                 Severability

 

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

 

17.13                 Counterparts

 

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

 

17.14                 Thompson
Creek Guarantee

 

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

 

46

 

17.15                 Royal Gold
Guarantee

 

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

 

47

 

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

 

	
   

  	
   

  	
  [PURCHASER]

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Per:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [VENDOR]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Per:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Per:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

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

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ROYAL GOLD, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Per:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

48

 

	
   

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  THOMPSON CREEK METALS COMPANY
  INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Per:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Per:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

49

 

ANNEX 1

 

RULES OF ARBITRATION

 

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

 

1.                                      Initiation of Arbitration
Proceedings

 

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

 

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

 

2.                                      Submission of Written Statements

 

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

 

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

 

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

 

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

 

 

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

 

3.                                      Meetings and Hearings

 

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

 

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

 

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

 

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

 

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

 

4.                                      The Decision

 

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

 

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

 

(c)                                  The
decision shall determine and award costs.

 

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

 

5.                                      Jurisdiction and Powers of the Arbitrator

 

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

 

	
  (i)

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

  
	
   

  	
   

  
	
  (ii)

  	
  determine any question as to the Arbitrator’s
  jurisdiction;

  

 

 

	
  (iii)

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

  
	
   

  	
   

  
	
  (iv)

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

  
	
   

  	
   

  
	
  (v)

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

  
	
   

  	
   

  
	
  (vi)

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

  
	
   

  	
   

  
	
  (vii)

  	
  make
  one or more interim awards;

  
	
   

  	
   

  
	
  (viii)

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

  
	
   

  	
   

  
	
  (ix)

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

  
	
   

  	
   

  
	
  (x)

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

  
	
   

  	
   

  
	
  (xi)

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

  

 

6.                                      Confidentiality

 

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

 

 

and shall have availed
itself of the full benefits of any laws, rules, regulations or contractual
rights as to disclosure on a confidential basis to which it may be entitled.

 

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

 

 

ANNEX 2

 

RULES OF ARBITRATION - SECTION 8.6

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

9.  The sole issues for resolution by the arbitrator shall be
whether the Purchaser has met its burden of proving, by a preponderance of the
evidence, that (i) the Intermediate Intercreditor Agreement does not
contain each of the terms set forth in Section 8.6(a)(i) through
8.6(a)(viii) of the Agreement (the “Required Terms”), unless such omission
was not included in the Stipulation and Proposal; (ii) the provisions of
the Intermediate Intercreditor Agreement containing the Required Terms are set
forth in an unreasonable manner, as measured by any criteria which the
arbitrator deems to be relevant or material (so long as any such criteria does
not conflict with the

 

 

terms set forth in Section 8.6 of the Agreement); or (iii) the
Intermediate Intercreditor Agreement is unreasonable as a whole, as measured by
similar terms prevailing in the syndicated secured lending market.  If the arbitrator finds that the Purchaser
did not prove (i), (ii), or (iii) in the preceding sentence, then the
arbitrator shall immediately enter a final order and judgment requiring
Purchaser to fully execute the Intermediate Intercreditor Agreement in all
respects within one Business Day of receiving a written request from the Vendor
that the Purchaser execute the Intermediate Intercreditor Agreement (the “Arbitrator
Compel Order”).  Vendor and Purchaser
agree that the Arbitrator Compel Order will be specifically enforceable by any
court of competent jurisdiction.  Any appeal of the Arbitrator Compel
Order shall be made on an expedited basis.  It is agreed that no stay will
issue or be applied for pending any such appeal.

 

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

 

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

 

 

Schedule A1 — Vendor
Representations and Warranties

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(i)                                     other
than the Haslinger Royalty, no person has any agreement, option, right of first
refusal or right, title or interest or right capable of becoming an agreement,

 

 

option, right of first
refusal or right, title or interest, in or to all or any part of the Milligan
Project or the gold produced from the Milligan Project;

 

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

 

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

 

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

 

(m)                               the
Milligan Tenures are in full force and effect and it has complied in all
respects with its obligations in respect thereof under Applicable Laws
(including without limitation Environmental Laws) and the terms thereof except
to the extent such non-compliance would not be reasonable expected to result in
a Material Adverse Effect on the operation of the Milligan Project;

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

 

Schedule A2 — Thompson Creek
Representations and Warranties

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

Schedule A3 — Purchaser
Representations and Warranties

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

Schedule A4 — Royal Gold
Representations and Warranties

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

Schedule B — Description of
Milligan Property (with Maps)

 

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

 

Mineral Lease Tenure Identification: 631503

 

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

 

	
  1.

  	
   

  	
  512884

  	
   

  	
  35.

  	
   

  	
  521177

  	
   

  	
  69.

  	
   

  	
  521213

  
	
  2.

  	
   

  	
  512887

  	
   

  	
  36.

  	
   

  	
  521178

  	
   

  	
  70.

  	
   

  	
  579598

  
	
  3.

  	
   

  	
  512888

  	
   

  	
  37.

  	
   

  	
  521179

  	
   

  	
  71.

  	
   

  	
  579599

  
	
  4.

  	
   

  	
  512890

  	
   

  	
  38.

  	
   

  	
  521180

  	
   

  	
  72.

  	
   

  	
  579600

  
	
  5.

  	
   

  	
  512891

  	
   

  	
  39.

  	
   

  	
  521181

  	
   

  	
  73.

  	
   

  	
  579602

  
	
  6.

  	
   

  	
  512897

  	
   

  	
  40.

  	
   

  	
  521182

  	
   

  	
  74.

  	
   

  	
  580741

  
	
  7.

  	
   

  	
  512907

  	
   

  	
  41.

  	
   

  	
  521183

  	
   

  	
  75.

  	
   

  	
  580742

  
	
  8.

  	
   

  	
  512909

  	
   

  	
  42.

  	
   

  	
  521184

  	
   

  	
  76.

  	
   

  	
  580743

  
	
  9.

  	
   

  	
  512913

  	
   

  	
  43.

  	
   

  	
  521185

  	
   

  	
  77.

  	
   

  	
  580744

  
	
  10.

  	
   

  	
  512919

  	
   

  	
  44.

  	
   

  	
  521186

  	
   

  	
  78.

  	
   

  	
  580745

  
	
  11.

  	
   

  	
  512921

  	
   

  	
  45.

  	
   

  	
  521187

  	
   

  	
  79.

  	
   

  	
  580746

  
	
  12.

  	
   

  	
  512923

  	
   

  	
  46.

  	
   

  	
  521189

  	
   

  	
  80.

  	
   

  	
  580747

  
	
  13.

  	
   

  	
  512924

  	
   

  	
  47.

  	
   

  	
  521190

  	
   

  	
  81.

  	
   

  	
  580748

  
	
  14.

  	
   

  	
  512925

  	
   

  	
  48.

  	
   

  	
  521191

  	
   

  	
  82.

  	
   

  	
  580749

  
	
  15.

  	
   

  	
  512927

  	
   

  	
  49.

  	
   

  	
  521192

  	
   

  	
  83.

  	
   

  	
  580750

  
	
  16.

  	
   

  	
  512930

  	
   

  	
  50.

  	
   

  	
  521193

  	
   

  	
  84.

  	
   

  	
  595146

  
	
  17.

  	
   

  	
  512931

  	
   

  	
  51.

  	
   

  	
  521194

  	
   

  	
  85.

  	
   

  	
  595163

  
	
  18.

  	
   

  	
  512932

  	
   

  	
  52.

  	
   

  	
  521195

  	
   

  	
  86.

  	
   

  	
  677107

  
	
  19.

  	
   

  	
  512933

  	
   

  	
  53.

  	
   

  	
  521196

  	
   

  	
  87.

  	
   

  	
  677785

  
	
  20.

  	
   

  	
  512934

  	
   

  	
  54.

  	
   

  	
  521197

  	
   

  	
  88.

  	
   

  	
  678524

  
	
  21.

  	
   

  	
  512935

  	
   

  	
  55.

  	
   

  	
  521198

  	
   

  	
  89.

  	
   

  	
  678527

  
	
  22.

  	
   

  	
  512936

  	
   

  	
  56.

  	
   

  	
  521199

  	
   

  	
  90.

  	
   

  	
  678536

  
	
  23.

  	
   

  	
  512937

  	
   

  	
  57.

  	
   

  	
  521200

  	
   

  	
  91.

  	
   

  	
  678564

  
	
  24.

  	
   

  	
  512938

  	
   

  	
  58.

  	
   

  	
  521201

  	
   

  	
  92.

  	
   

  	
  678583

  
	
  25.

  	
   

  	
  512939

  	
   

  	
  59.

  	
   

  	
  521202

  	
   

  	
  93.

  	
   

  	
  678588

  
	
  26.

  	
   

  	
  512940

  	
   

  	
  60.

  	
   

  	
  521203

  	
   

  	
  94.

  	
   

  	
  678603

  
	
  27.

  	
   

  	
  512941

  	
   

  	
  61.

  	
   

  	
  521204

  	
   

  	
  95.

  	
   

  	
  679483

  
	
  28.

  	
   

  	
  512942

  	
   

  	
  62.

  	
   

  	
  521205

  	
   

  	
  96.

  	
   

  	
  679484

  
	
  29.

  	
   

  	
  512943

  	
   

  	
  63.

  	
   

  	
  521206

  	
   

  	
  97.

  	
   

  	
  679485

  
	
  30.

  	
   

  	
  512944

  	
   

  	
  64.

  	
   

  	
  521207

  	
   

  	
  98.

  	
   

  	
  679505

  
	
  31.

  	
   

  	
  512945

  	
   

  	
  65.

  	
   

  	
  521208

  	
   

  	
  99.

  	
   

  	
  679506

  
	
  32.

  	
   

  	
  512960

  	
   

  	
  66.

  	
   

  	
  521209

  	
   

  	
  100.

  	
   

  	
  679509

  
	
  33.

  	
   

  	
  521164

  	
   

  	
  67.

  	
   

  	
  521210

  	
   

  	
   

  	
   

  	
   

  
	
  34.

  	
   

  	
  521165

  	
   

  	
  68.

  	
   

  	
  521212

  	
   

  	
   

  	
   

  	
   

  

 

 

Schedule C1 — Form of
Security Agreement for Milligan Property

 

SECURITY AGREEMENT [MINING CLAIMS
AND LEASES]

 

THIS AGREEMENT is made as of the [ 
] day of [  ], 2010 by TERRANE
METALS CORP. (herein called “Vendor”)
a company incorporated under the laws of British Columbia [ADDRESS], [FAX NO.]
in favour of [RG NEWCO], a [  ] (herein
called the “Purchaser”).
[address], [fax].

 

BACKGROUND:

 

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

 

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

 

ARTICLE 1

INTERPRETATION

 

1.1                               Definitions

 

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

 

1.2                               Statutes

 

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

 

1.3                               Headings

 

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

 

 

1.4                               Number and
Gender

 

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

 

1.5                               Reference
to Agreements

 

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

 

ARTICLE 2

GRANT OF SECURITY

 

2.1                               Security

 

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

 

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

 

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

 

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

 

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

 

 

2.2                               Attachment

 

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

 

2.3                               Permitted
Dispositions

 

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

 

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

 

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

 

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

 

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

 

	
  (i)

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

  
	
   

  	
   

  
	
  (ii)

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

  
	
   

  	
   

  
	
  (iii)

  	
  provide to the Vendor written confirmation
  (and addressed to persons having acquired an interest in the Disposed
  Collateral) confirming that the Purchaser no longer has nor will assert any
  security interest in the Disposed Collateral

  

 

depending on the circumstances as determined by
the Vendor acting reasonably.

 

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

 

 

2.4                               Proceeds
Held in Trust

 

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

 

2.5                               Surface
Rights, Mineral Claims and Mining Leases

 

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

 

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

 

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

 

 

Mining Lease (“Related Rights”),
if and to the extent and as at the time such attachment to the Related Rights
is not illegal or would not result in a breach or default thereunder.

 

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

 

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

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

 

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

 

3.1                               Incorporation

 

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

 

3.2                               Corporate
Power

 

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

 

3.3                               Licences
and Permits

 

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

 

3.4                               No
Conflict

 

Neither the issuance nor the performance of
this Security Agreement nor the granting of the Security requires the
Authorization of any Governmental Authority having jurisdiction over Vendor or
its Business Assets, nor is this Security Agreement in contravention or breach
of or in conflict with the constating documents, any unanimous shareholder
agreement, by-laws or resolutions of the directors or shareholders of Vendor or
of the provisions of any agreement or License or Permit to which Vendor is a
party as at the date hereof or by which it or any of its Business Assets may be
bound as at the date hereof (except, in relation to any agreement or License or
Permit, for any contravention, breach or conflict which does not, and could not
reasonably be expected to have a Material Adverse Effect on Vendor or any of its
Business

 

 

Affairs) or of any Applicable Law to which
Vendor or any of its Business Assets may be subject. No such action will oblige
Vendor to grant any Lien to any Person other than the Purchaser.

 

3.5                               Title

 

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

 

3.6                               Enforceability

 

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

 

3.7                               Mineral
Tenures

 

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

 

3.8                               Reliance
and Survival

 

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

 

ARTICLE 4

COVENANTS OF VENDOR

 

4.1                               Maintenance

 

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

 

 

4.2                               Access to
Records

 

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

 

4.3                               Taxes

 

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

 

4.4                               Liens

 

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

 

4.5                               Compliance
with Governmental Requirements

 

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

 

4.6                               Further
Assurances

 

Vendor shall at all times do, execute,
acknowledge and deliver or cause to be done, executed, acknowledged or
delivered all such further acts, deeds, transfers, mortgages and charges,
security agreements, assignments, agreements and assurances as the Purchaser
may reasonably require in order to give effect to the provisions of this
Security Agreement and for the better, confirming, registering, securing or
perfecting, or maintaining the perfection of, the

 

 

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

 

4.7                               Notice of
Change

 

Vendor shall notify the Purchaser in writing:

 

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

 

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

 

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

 

4.8                               Costs

 

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

 

 

4.9                               Reimbursements
as Obligations

 

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

 

4.10                        General
Indemnity

 

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

 

4.11                        Updated
Lists

 

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

 

 

ARTICLE 5

DEFAULT

 

5.1                               Acceleration
on Event of Default

 

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

 

5.2                               Waiver

 

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

 

ARTICLE 6

REMEDIES ON
DEFAULT

 

6.1                               Remedies
of Purchaser

 

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

 

6.2                               Right to
Appoint a Receiver

 

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

 

 

6.3                               Rights of
a Receiver

 

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

 

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

 

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

 

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

 

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

 

(i)                                     appoint and engage superintendents, architects,
engineers, miners, geologists, consultants, contractors, managers, advisors and
such

 

 

other personnel which, in the discretion of the Receiver, may be
required to construct, furnish or operate the Collateral;

 

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

 

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

 

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

 

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

 

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

 

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

 

(g)                                 Powers re Collateral. Any Receiver may have, enjoy and exercise all of the
rights of and enjoyed by Vendor with respect to the Collateral or incidental,
ancillary, attaching or deriving from the ownership by Vendor

 

 

of the Collateral, the right to commence or
continue Litigation to preserve or protect Collateral and the right to grant or
agree to Liens and grant or reserve profits
a prendre, easements, rights of ways, rights in the nature of
easements and licenses over or pertaining to the whole or any part of the
Collateral.

 

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

 

6.4                               Right to
have Court Appoint a Receiver

 

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

 

6.5                               Purchaser
may exercise rights of a Receiver

 

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

 

6.6                               Retention
of Collateral

 

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

 

6.7                               Limitation
of Liability

 

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

 

 

Receiver shall have any liability as a
mortgagee in possession or be accountable for anything except actual receipts.

 

6.8                               Extensions
of Time

 

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

 

6.9                               Application
of Payments against Obligations

 

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

 

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

 

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

 

6.11                        Deficiency

 

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

 

6.12                        Validity
of Sale

 

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

 

6.13                        Purchaser
or Receiver may Perform

 

If Vendor fails to perform any Obligations,
without limiting any other provision hereof, the Purchaser or any Receiver may
perform those Obligations as attorney for Vendor in accordance with Section 4.6.
Vendor shall remain liable under each agreement, Surface Right, Mineral Claim,
Mining Lease and License to which it is party or by which it or any of its

 

 

Business Assets is bound and shall perform all
of its obligations thereunder, and shall not be released from any of its
obligations under any such agreement, Surface Right, Mineral Claim or Mining
Lease by the exercise of any rights by the Purchaser or any Receiver. Neither
the Purchaser nor any Receiver shall have any obligation under any such
agreement, Surface Right, Mineral Claim or Mining Lease by reason of this
Security Agreement, nor shall the Purchaser or any Receiver be obliged to
perform any of the obligations of Vendor thereunder or to take any action to
collect or enforce any claim made subject to the security of this Security
Agreement. The rights conferred on the Purchaser and any Receiver under this
Security Agreement are for the purpose of protecting the Security in the
Collateral and shall not impose any obligation upon the Purchaser or any
Receiver to exercise any such rights.

 

6.14                        Effect of
Appointment of Receiver

 

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

 

6.15                        Time for
Payment

 

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

 

6.16                        Rights in
Addition

 

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

 

6.17                        Application
of Proceeds

 

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

 

(a)                                  first, to be applied to the Payment in Full of the
Obligations due and owing to the Purchaser under the Purchase Agreement,
including all reasonable fees of the Purchaser and all reasonable out-of-pocket

 

 

disbursements, fees, costs and expenses
incurred by the Purchaser in connection with the preservation of the Security
or the Collateral or any enforcement proceedings and all amounts for which the
Purchaser is entitled to payment or indemnity from Vendor pursuant to any other
provision of this Security Agreement;

 

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

 

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

 

ARTICLE 7

GENERAL

 

7.1                               Security
in Addition

 

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

 

7.2                               No Merger

 

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

 

7.3                               Notices

 

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

 

7.4                               Time of
the Essence

 

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

 

 

7.5                               Governing
Law

 

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

 

7.6                               Doctrine
of Consolidation

 

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

 

7.7                               Security
Effective Immediately

 

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

 

7.8                               Entire
Agreement

 

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

 

7.9                               Provisions
Reasonable

 

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

 

7.10                        Invalidity

 

If any provision of this Security Agreement is
found to be invalid or unenforceable, by a court of competent jurisdiction from
which no further appeal right lies, that provision shall be

 

 

deemed to be severed herefrom and the remaining
provisions of this Security Agreement shall not be affected thereby but shall
remain valid and enforceable.

 

7.11                        Binding
Effect

 

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

 

7.12                        Survival

 

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

 

7.13                        Statutory
Waivers

 

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

 

7.14                        Currency

 

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

 

7.15                        Currency
Conversions

 

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

 

7.16                        Judgment
Currency

 

If, for the purposes of obtaining or enforcing
judgment in any court in any jurisdiction, it becomes necessary to convert into
the currency of the country giving such judgment (the “Judgment
Currency”) an amount due hereunder in a different currency (the “Agreed Currency”), then the date on which
the rate of exchange for conversion is selected by the court

 

 

is referred to herein as the “Conversion Date”. If there is a change in
the rate of exchange between the Judgment Currency and the Agreed Currency
between the Conversion Date and the actual receipt by the Purchaser or any
Receiver of the amount due hereunder or under any such judgment, Vendor will,
notwithstanding any such judgment, pay all such additional amounts as may be
necessary to ensure that the amount received by the Purchaser or Receiver in
the Judgment Currency, when converted at the rate of exchange prevailing on the
date of receipt, will produce the amount due in the Agreed Currency. Vendor’s
liability hereunder constitutes a separate and independent liability which
shall not merge with any judgment or any partial payment or enforcement of
payment of sums due under this Security Agreement.

 

7.17                        Amendment

 

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

 

7.18                        Information

 

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

 

7.19                        Discharge

 

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

 

7.20                        Date of
Reference

 

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

 

7.21                        Vendor
Acknowledgment

 

The Vendor:

 

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

 

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

 

 

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

 

	
  OFFICER
  SIGNATURE(S)

  	
   

  	
  TRANSFEROR(S) SIGNATURE(S)

  
	
   

  	
   

  	
   

  
	
   

  	
  Y

  	
  M

  	
  D

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TERRANE
  METALS CORP.

  by its authorized signatory(ies)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
						

 

(as to all signatures)

 

OFFICER CERTIFICATION

 

Your signature constitutes a representation
that you are a solicitor, notary public or other person authorized by the Evidence Act, R.S.B.C. 1996, c. 124,
to take affidavits for use in British Columbia and certifies the matters set
out in Part 5 of the Land Title Act
as they pertain to execution of this instrument.

 

 

SCHEDULE 1.1

 

DEFINITIONS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

2.                                       Extended Meanings

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

 

SCHEDULE 2.1

 

[MINERAL CLAIMS]

 

See attached
Table G-1.

 

 

[MINING LEASES]

 

MINING LEASES
LEGALLY AND BENEFICIALLY OWNED AND HELD BY VENDOR: o

 

 

[SURFACE RIGHTS]

 

SURFACE RIGHTS LEGALLY AND BENEFICIALLY OWNED AND HELD BY VENDOR: o.

 

 

Schedule C2 — Form of
Security Agreement for Personal Property

 

SECURITY AGREEMENT [COLLATERAL]

 

THIS AGREEMENT is made as of the [ 
] of [  ], 2010 by TERRANE METALS
CORP (herein called “Vendor”) a
company incorporated under the laws of British Columbia, [address], [fax] in
favour of [RG NEWCO], a [·]
(herein called the “Purchaser”)
[address], [fax].

 

BACKGROUND:

 

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

 

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

 

ARTICLE 1

INTERPRETATION

 

1.1                               Definitions

 

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

 

1.2                               Statutes

 

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

 

1.3                               Headings

 

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

 

 

1.4                               Number and
Gender

 

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

 

1.5                               Reference
to Agreements

 

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

 

ARTICLE 2

GRANT OF SECURITY

 

2.1                               Security

 

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

 

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

 

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

 

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

 

(d)                                 all Accounts;

 

(e)                                  all Equipment;

 

(f)                                    all Inventory;

 

 

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

 

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

 

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

 

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

 

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

 

2.2                               Attachment

 

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

 

2.3                               Permitted
Dispositions

 

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

 

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

 

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

 

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

 

 

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

 

	
  (i)

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

  
	
   

  	
   

  
	
  (ii)

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

  
	
   

  	
   

  
	
  (iii)

  	
  provide to the Vendor written confirmation
  (and addressed to persons having acquired an interest in the Disposed
  Collateral) confirming that the Purchaser no longer has nor will assert any
  security interest in the Disposed Collateral

  

depending on the circumstances as determined by
the Vendor acting reasonably.

 

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

 

2.4                               Proceeds
Held in Trust

 

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

 

2.5                               Agreements,
Licenses and Permits

 

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

 

(b)                                 Notwithstanding anything to the contrary contained
herein, if Vendor cannot lawfully grant the Security in any agreement, License
or Permit, comprised in the Collateral in which it now or hereafter has rights
because the agreement, License or Permit prohibits or restricts such Security,
the agreement, License or Permit requires the consent of any Person which has
not been obtained or the grant of such Security in the agreement, License or
Permit would contravene Applicable Law, that agreement, License or Permit shall
not, to the extent it would be illegal or result in a breach of or default
under that agreement, License or Permit (each, a “Prescribed Agreement”), be subject to the Security (save to
the extent

 

 

provided below) unless and until such
agreements, consents, waivers and approvals as may be required to avoid such
illegality, breach or default have been obtained (“Required Approvals”). The Security shall nonetheless
immediately attach to any rights of Vendor arising under, by reason of, or
otherwise in respect of such agreement, License or Permit such as the right to
receive payments thereunder and all Proceeds and Replacements of the agreement,
License or Permit (“Related Rights”),
if and to the extent and as at the time such attachment to the Related Rights
is not illegal or would not result in a breach or default thereunder.

 

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

 

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

 

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

 

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

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

 

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

 

3.1                               Incorporation

 

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

 

 

3.2                               Corporate
Power

 

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

 

3.3                               Licenses
and Permits

 

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

 

3.4                               No
Conflict

 

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

 

3.5                               Title

 

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

 

3.6                               Enforceability

 

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

 

3.7                               Locations
of Collateral

 

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

 

 

3.8                               List of
Licenses and Permits

 

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

 

3.9                               Reliance
and Survival

 

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

 

ARTICLE 4

COVENANTS OF VENDOR

 

4.1                               Maintenance

 

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

 

4.2                               Access to
Records

 

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

 

4.3                               Taxes

 

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

 

4.4                               Liens

 

Vendor shall keep the Collateral free at all
times from Liens, except Permitted Encumbrances, and shall defend the title to
the Collateral against all Persons. Vendor shall not

 

 

permit any Collateral to become an accession to
or commingled with any property other than other Collateral or to become a
fixture unless the Security ranks prior to the interests of all Persons in the
subject realty. Neither the foregoing nor Section 3.5 shall in any way
prevent the Purchaser from, at any time, contesting the validity,
enforceability or priority of any Lien. Subject to the Purchase Agreement, no
Lien shall be entitled to priority over the Security except to the extent that
it is a Permitted Encumbrance entitled to such priority as a purchase-money
security interest under the PPSA. Nothing in this Security Agreement is
intended to create any rights (including subordination rights) in favour of any
Person other than the Purchaser, any Receiver and the other Indemnified
Parties.

 

4.5                               Compliance
with Governmental Requirements

 

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

 

4.6                               Further
Assurances

 

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

 

4.7                               Notice of
Change

 

Vendor shall notify the Purchaser in writing:

 

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

 

 

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

 

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

 

4.8                               Costs

 

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

 

4.9                               Reimbursements
as Obligations

 

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

 

4.10                        General
Indemnity

 

In addition to any indemnity contained in the
Purchase Agreement, Vendor will indemnify the Purchaser, any Receiver and their
respective Representatives, (each, an “Indemnified
Party”) in respect of, and save each Indemnified Party fully
harmless from and against, all loss and expense which an Indemnified Party may
suffer or incur in connection with (a) the exercise by the Purchaser or
any Receiver of any of its rights hereunder, (b) any breach by Vendor of
the representations or warranties of Vendor contained herein, or (c) any
breach by Vendor of, or any failure by Vendor to observe or perform, any of the
Obligations, save that Vendor shall not be obliged to so indemnify any
Indemnified Party to the extent such losses and expenses are determined by a
final Award (from which no appeal may be made or the applicable

 

 

appeal periods have lapsed without any appeal
therefrom having been perfected) to have directly resulted from the willful misconduct
or gross negligence of the Indemnified Party. The Purchaser shall be
constituted as the trustee of each Indemnified Party, other than itself, and
shall hold and enforce each such other Indemnified Party’s rights under this Section 4.10
for their respective benefits.  In no event will Vendor be liable
to Purchaser for any lost profits or incidental, indirect, speculative,
consequential, special, punitive, or exemplary damages of any kind (whether
based in contract, tort, including negligence, strict liability, fraud, or
otherwise, or statutes, regulations, or any other theory) arising out of or in
connection with this Security Agreement, even if advised of such potential
damages.

 

4.11                        Updated
Lists

 

As soon as Vendor acquires any rights in any
License or Permit, a written description describing that License or Permit
shall be deemed to have been incorporated into Schedule 2.1 and Vendor shall
promptly deliver to the Purchaser an updated version of such Schedule 2.1,
showing additions and deletions to the Collateral since the prior version
forming a part hereof, provided however that any such addition shall not result
in increasing the physical or subsurface area of the Milligan Project outside
of the area existing as of the date hereof. Each such version approved of by
the Purchaser shall be deemed to be part of this Security Agreement as of its
preparation date.

 

ARTICLE 5

DEFAULT

 

5.1                               Acceleration
on Event of Default

 

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

 

5.2                               Waiver

 

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

 

 

ARTICLE 6

REMEDIES ON DEFAULT

 

6.1                               Remedies
of Purchaser

 

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

 

6.2                               Right to
Appoint a Receiver

 

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

 

6.3                               Rights of
a Receiver

 

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

 

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

 

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

 

 

preclude the Receiver from further exercise of
its power of sale in accordance with this clause.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(e)                                  Pay Liens. Any Receiver may pay any liability secured by any
actual or threatened Lien against any Collateral. A Receiver may borrow money
for

 

 

the maintenance, preservation or protection of
any Collateral or for carrying on any of the business or undertaking of Vendor
with respect to, and to the extent of the Collateral and the Milligan Property
and may grant Liens in any Collateral in priority to the Security as security
for the money so borrowed. Vendor will forthwith on demand reimburse the
Receiver for all such payments and borrowings.

 

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

 

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

 

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

 

6.4                               Right to
have Court Appoint a Receiver

 

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

 

6.5                               Purchaser
may exercise rights of a Receiver

 

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

 

 

6.6                               Retention
of Collateral

 

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

 

6.7                               Limitation
of Liability

 

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

 

6.8                               Extensions
of Time

 

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

 

6.9                               Application
of Payments against Obligations

 

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

 

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

 

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

 

 

6.11                        Deficiency

 

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

 

6.12                        Validity
of Sale

 

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

 

6.13                        Purchaser
or Receiver may Perform

 

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

 

6.14                        Effect of
Appointment of Receiver

 

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

 

6.15                        Time for
Payment

 

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

 

 

6.16                        Rights in
Addition

 

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

 

6.17                        Application
of Proceeds

 

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

 

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

 

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

 

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

 

ARTICLE 7

GENERAL

 

7.1                               Security
in Addition

 

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

 

 

affect any of the other Liens held by the
Purchaser for the payment or performance of the Obligations.

 

7.2                               No Merger

 

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

 

7.3                               Notices

 

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

 

7.4                               Time of
the Essence

 

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

 

7.5                               Governing
Law

 

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

 

7.6                               Security
Effective Immediately

 

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

 

7.7                               Entire
Agreement

 

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

 

 

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

 

7.8                               Provisions
Reasonable

 

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

 

7.9                               Invalidity

 

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

 

7.10                        Binding
Effect

 

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

 

7.11                        Survival

 

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

 

7.12                        Statutory
Waivers

 

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

 

7.13                        Currency

 

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

 

 

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

 

7.14                        Currency
Conversions

 

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

 

7.15                        Judgment
Currency

 

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

 

7.16                        Amendment

 

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

 

7.17                        Receipt of
Copy

 

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

 

 

7.18                        Information

 

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

 

7.19                        Discharge

 

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

 

7.20                        Date of
Reference

 

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

 

 

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

 

	
  OFFICER 

  SIGNATURE(S)

  	
   

  	
   

  	
   

  	
  TRANSFEROR(S) SIGNATURE(S)

  
	
   

  	
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  TERRANE METALS CORP.

  by its authorized signatory(ies)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  

 

(as to all signatures)

 

OFFICER CERTIFICATION

 

Your signature constitutes a representation
that you are a solicitor, notary public or other person authorized by the Evidence Act, R.S.B.C. 1996, c. 124,
to take affidavits for use in British Columbia and certifies the matters set
out in Part 5 of the Land Title Act
as they pertain to execution of this instrument.

 

 

SCHEDULE 1.1

 

DEFINITIONS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

“Designated Percentage of Produced Gold” has the meaning
assigned to it in the Purchase Agreement.

 

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

 

“Equipment”
means goods and equipment, including all machinery, fixtures, plants, tools,
furniture, vehicles of any kind or description relating to or arising out of
the Milligan Project, all spare parts, accessions and accessories located at or
installed in or affixed or attached to any of the foregoing, and all drawings,
specifications, plans and manuals relating thereto and any other goods that are
not Inventory.

 

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

 

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

 

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

 

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

 

“Inventory” means inventory of
whatever kind relating to or arising out of the Milligan Project, including all
raw materials, materials used or consumed in the business or profession of
Vendor, goods, work in progress, finished goods, returned goods, repossessed
goods, goods used for packing, all packaging materials, supplies and
containers, materials used in the business of Vendor whether or not intended
for sale and 

 

 

goods acquired or held for sale, lease or
resale or furnished or to be furnished under contracts of rental or service.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

Agreement,
whether or not such interest is an allowable claim in such Bankruptcy
Proceeding), expenses, legal fees and any other sum chargeable to Vendor under
the Purchase Agreement, this Security Agreement or any other security agreement
granted by Vendor to the Purchaser, and (as the context so admits) each and any
item or part of any thereof.

 

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

 

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

 

“Payment in Full” in relation to any
Obligations means permanent, indefeasible and irrevocable delivery of Refined
Gold or payment in cash (or other freely available funds transfer as may be
expressly provided for in the Purchase Agreement) to the Purchaser in full of
all Obligations (other than contingent indemnification obligations) in
accordance with the express provisions of the Purchase Agreement, without
regard to any compromise, reduction or disallowance of all or any item or part
thereof by virtue of the application of any bankruptcy, insolvency or other
similar such laws, any law affecting creditors’ rights generally or general
principles of equity, and the cancellation or expiry of all commitments by the
Purchaser to advance any portion of the Payment Deposit to or for the benefit
or at the request of Vendor, and “paid in full” shall (to the extent the
context so admits) be construed in like manner.

 

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

 

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

 

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

 

“PPSA” means the Personal Property Security Act (British Columbia).

 

“Produced Gold” means any and all gold in
whatever form or state that is mined, produced, extracted or otherwise
recovered from the Milligan Property during the Term, including any gold
derived from any processing or reprocessing of any tailings, waste rock or
other waste products originally derived from the Milligan Property, and
including gold contained in any ore or other products requiring further
milling, processing, smelting, refining or other beneficiation of Minerals
mined, produced, extracted or otherwise recovered from the Milligan Property,
including concentrates and doré bars. 
The gold content of doré, concentrate or other product containing gold
shall be considered Produced Gold at the time it leaves the Milligan Project
mine site.

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

2.                                      Extended Meanings

 

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

 

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

 

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

 

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

 

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

 

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

 

“losses and expenses” shall be construed as
losses, costs, expenses, damages, penalties, Awards, Orders, Litigation,
claims, claims over, demands and liabilities, including any 

 

 

applicable
court costs and legal fees and disbursements on a full indemnity basis, and “loss and expense” shall be construed in
like manner.

 

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

 

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

 

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

 

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

 

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

 

 

SCHEDULE 2.1

 

[PERMITS AND LICENSES]

 

PERMITS AND
LICENSES LEGALLY AND BENEFICIALLY OWNED AND HELD BY VENDOR:

 

See attached
Table D-1 for Licenses and Permits listed as “Received”.

 

 

SCHEDULE 3.7

 

LOCATIONS OF REGISTERED OFFICE,
PLACES OF BUSINESS,

CHIEF EXECUTIVE OFFICE, RECORDS AND

OTHER COLLATERAL

 

Registered Office

 

British
Columbia

 

Chief Executive Office

 

British
Columbia

 

Places of Business

 

British
Columbia

 

Locations of Records

 

British
Columbia

 

Locations of Collateral

 

British
Columbia

 

 

Schedule C3 — Form of
Security Agreement — Floating Charge

 

SECURITY AGREEMENT [FLOATING
CHARGE]

 

THIS AGREEMENT is made as of the [ 
] of [  ], 2010 by TERRANE METALS
CORP (herein called “Vendor”) a
company incorporated under the laws of British Columbia, [address], [fax] in
favour of [RG NEWCO], a [·] (herein called the “Purchaser”)
[address], [fax].

 

BACKGROUND:

 

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

 

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

 

ARTICLE 1

INTERPRETATION

 

1.1                               Definitions

 

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

 

1.2                               Statutes

 

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

 

1.3                               Headings

 

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

 

 

1.4                               Number and
Gender

 

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

 

1.5                               Reference
to Agreements

 

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

 

ARTICLE 2

GRANT OF SECURITY

 

2.1                               Security

 

As general and continuing collateral security,
without impairment or novation, for the due payment and performance of the
Obligations, and subject to the exceptions in Section 2.5 and 2.6, Vendor
charges, mortgages, assigns and transfers and grants a security interest in the
following Collateral as and by way of a floating charge to and in favour of
Purchaser:

 

(a)                                  all of Vendor’s right, title and interest in and to
all presently owned or held and after acquired or held real property, whether
in fee or of a less estate, relating to or comprising the Milligan Property or
any part thereof, together with all commons, ways, profits, easements,
rights-of-way, privileges, benefits, licenses, improvements, immunities and
rights connected therewith or appurtenant thereto and all structures,
buildings, plant, fixed machinery, fixtures, appurtenances and other assets
belonging, affixed or appurtenant to the said real property (the “Real Property Rights”), provided such
floating charge shall in no way hinder or prevent Vendor, subject to the
Purchase Agreement or until the security hereof shall have become enforceable,
from selling, disposing of or otherwise dealing with any and all of such Real
Property Rights in the ordinary course of Vendor’s business and for the purpose
of carrying on and extending the same, provided, however, that such floating
charge shall prevent Vendor, unless it has the express written consent of the
Purchaser, from granting, creating, assuming, or permitting to exist any
encumbrance, other than Permitted Encumbrances, upon the whole or any part of
the Real Property Rights; and

 

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

 

 

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

 

2.2                               Attachment

 

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

 

2.3                               Permitted
Dispositions

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(iii)                               provide to the Vendor written confirmation (and
addressed to persons having acquired an interest in the Disposed Collateral)
confirming that the Purchaser no longer has nor will assert any security
interest in the Disposed Collateral

 

depending on the circumstances as determined by
the Vendor acting reasonably.

 

 

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

 

2.4                               Proceeds
Held in Trust

 

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

 

2.5                               Leases

 

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

 

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

 

2.6                               Agreements

 

(a)                                  Notwithstanding anything to the contrary contained
herein, if Vendor cannot lawfully grant the Security in any agreement comprised
in the Collateral in which it now or hereafter has rights because the agreement
prohibits or restricts such Security, the agreement requires the consent of any
Person which has not been obtained or the grant of such Security in the
agreement would contravene Applicable Law, that agreement shall not, to the
extent it would be illegal or result in a breach or default under that
agreement (each, a “Prescribed Agreement”),
be subject to the Security (save to the extent provided below) unless and until
such agreements, consents, waivers and approvals as may be required to avoid 

 

 

such illegality, breach or default have been
obtained (“Required Approvals”).
The Security shall nonetheless immediately attach to any rights of Vendor
arising under, by reason of, or otherwise in respect of such agreement such as
the right to receive payments thereunder and all Proceeds and Replacements of
the agreement (“Related Rights”),
if and to the extent and as at the time such attachment to the Related Rights
is not illegal or would not result in a breach or default thereunder.

 

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

 

(c)                                  Vendor shall forthwith use commercially reasonable
best efforts to obtain, as soon as reasonably practicable, all such Required
Approvals and acknowledgements of the nature referred to in Subsection 2.6(a).

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

 

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

 

3.1                               Incorporation

 

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

 

3.2                               Corporate
Power

 

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

 

3.3                               Licences
and Permits

 

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

 

3.4                               No
Conflict

 

Neither the issuance nor the performance of
this Security Agreement nor the granting of the Security requires the
Authorization of any Governmental Authority having jurisdiction over Vendor or
its Business Assets, nor is this Security Agreement in contravention or breach
of or in conflict with the constating documents, any unanimous shareholder
agreement, by-laws or resolutions of the directors or shareholders of Vendor or
of the provisions of any agreement or 

 

 

License to which Vendor is a party as at the
date hereof or by which it or any of its Business Assets may be bound as at the
date hereof (except, in relation to any agreement or License, for any
contravention, breach or conflict which does not, and could not reasonably be
expected to have a Material Adverse Effect on Vendor or any of its Business
Affairs) or of any Applicable Law to which Vendor or any of its Business Assets
may be subject. No such action will oblige Vendor to grant any Lien to any
Person other than the Purchaser.

 

3.5                               Title

 

Subject only to Permitted Encumbrances, Vendor
has and will have good and marketable title to the Collateral free and clear of
all Liens whatsoever.

 

3.6                               Enforceability

 

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

 

3.7                               Real
Property Rights

 

Schedule 2.1 includes a complete list of all
Real Property Rights owned, held or used by Vendor as at the date hereof in
carrying on Vendor’s business related to the Milligan Property that are
registered at the applicable Land Title Office in British Columbia. Upon Vendor’s
acquisition of rights in any additional Real Property Right registered at the
applicable Land Title Office in British Columbia, Vendor will promptly give
written notice to the Purchaser of full particulars of the same.

 

3.8                               Reliance and
Survival

 

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

 

ARTICLE 4

COVENANTS OF VENDOR

 

4.1                               Maintenance

 

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

 

 

4.2                               Access to
Records

 

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

 

4.3                               Taxes

 

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

 

4.4                               Liens

 

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

 

4.5                               Compliance
with Governmental Requirements

 

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

 

4.6                               Further
Assurances

 

Vendor shall at all times do, execute,
acknowledge and deliver or cause to be done, executed, acknowledged or
delivered all such further acts, deeds, transfers, mortgages and charges,
security agreements, assignments, agreements and assurances as the Purchaser
may reasonably require in order to give effect to the provisions of this
Security Agreement and for the better, confirming, registering, securing or
perfecting, or maintaining the perfection of, the 

 

 

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

 

4.7                               Notice of
Change

 

Vendor shall notify the Purchaser in writing:

 

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

 

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

 

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

 

4.8                               Costs

 

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

 

 

4.9                               Reimbursements
as Obligations

 

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

 

4.10                        General
Indemnity

 

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

 

4.11                        Updated
Lists

 

As soon as Vendor acquires any rights in any
Real Property Right registered at the applicable Land Title Office in British
Columbia, a written description describing that Real Property Right shall be
deemed to have been incorporated into Schedule 2.1 and Vendor shall promptly
deliver to the Purchaser an updated version of such Schedule 2.1, showing
additions and deletions to the Collateral since the prior version forming a
part hereof, provided however that any such addition shall not result in
increasing the physical or subsurface area of the Milligan Project outside of
the area existing as of the date hereof. Each such version approved of by the
Purchaser shall be deemed to be part of this Security Agreement as of its
preparation date.

 

 

ARTICLE 5

DEFAULT

 

5.1                               Acceleration
on Event of Default

 

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

 

5.2                               Waiver

 

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

 

ARTICLE 6

REMEDIES ON DEFAULT

 

6.1                               Remedies
of Purchaser

 

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

 

6.2                               Right to
Appoint a Receiver

 

The Purchaser may appoint by instrument in
writing one or more Receivers of any Collateral. Any such Receiver shall have
the rights set out in this Article 6. In exercising such rights, any
Receiver shall act as and for all purposes shall be deemed to be the agent of
Vendor and the Purchaser shall not be responsible for any act or default of any
Receiver. The Purchaser may remove any Receiver and appoint another from time
to time. An officer or employee of the Purchaser may be appointed as a
Receiver. No Receiver appointed by the Purchaser need be appointed by, nor need
its appointment be ratified by, or its actions in any way supervised by, a
court. If two or more Receivers are appointed to act concurrently, they shall,
unless otherwise expressly provided in the instrument appointing them, so act
severally and not jointly and severally. The appointment of any Receiver or
anything done by a Receiver or the removal or termination of any Receiver shall
not have the effect of constituting the Purchaser a mortgagee in possession in
respect of the Collateral.

 

 

6.3                               Rights of
a Receiver

 

Any Receiver appointed by the Purchaser shall
have the following rights:

 

(a)                                  Power of Entry. Vendor shall forthwith upon demand deliver to a
Receiver possession of any Collateral at the place specified by the Receiver.
Any Receiver may at any time enter upon any premises owned, leased or otherwise
occupied by Vendor or where any Collateral is located to take possession of,
disable or remove any Collateral, and may use whatever means the Receiver
considers advisable to do so.

 

(b)                                 Power of Sale. Any Receiver may sell, lease, consign, license,
assign or otherwise dispose of any Collateral by public auction, private tender
or private contract with or without notice, advertising or any other formality,
all of which are hereby waived by Vendor to the extent permitted by Applicable
Law. Any Receiver may, at its discretion, establish the terms of such
disposition, including terms and conditions as to credit, upset, reserve bid or
price. All payments made pursuant to such dispositions shall be credited
against the Obligations only as they are actually received. Any Receiver may
buy in, rescind or vary any contract for the disposition of any Collateral and
may dispose of any Collateral again without being answerable for any loss
occasioned thereby. Any such disposition may take place whether or not the
Receiver has taken possession of the Collateral. The exercise by the Receiver
of any power of sale does not preclude the Receiver from further exercise of
its power of sale in accordance with this clause.

 

(c)                                  Carrying on Business. With respect to, and to the extent of, the
Collateral and the Milligan Property, any Receiver may carry on, or concur in
the carrying on of, any of the business or undertaking of Vendor and may, to
the exclusion of all others, including Vendor after five Business Days’ written
notice, enter upon, occupy and use any of the premises, buildings, plant and
undertaking of, or occupied or used by, Vendor and, for such time and such
purposes as the Receiver sees fit, may use any of the equipment and intangibles
of Vendor that Vendor has not removed from the Milligan Property within five
Business Days after the Purchaser or the Receiver has given Vendor written
notice to do so. No Receiver shall be liable to Vendor for any negligence in so
doing or in respect of any rent, charges, costs, depreciation or damages in
connection with any such action.

 

(d)                                 Any Receiver may complete any unfinished construction
upon or in the Collateral including having the power to:

 

(i)                                     appoint and engage superintendents, architects,
engineers, miners, geologists, consultants, contractors, managers, advisors and
such 

 

 

other personnel which, in the discretion of the
Receiver, may be required to construct, furnish or operate the Collateral;

 

(ii)                                  enter into contracts for the supply of materials and
services which the Receiver deems necessary to complete or operate the
Collateral;

 

(iii)                               enter into and enforce and take the benefit of Real
Property Rights, agreements and other arrangements in respect of the Collateral
from municipal or other Governmental Authorities or from any other source
whatsoever which provide loans, grants or Licenses;

 

(iv)                              enter into, enforce, use and take the benefit of
construction contracts, contracts for services or materials, performance bonds,
insurance contracts, development agreements, plans, studies, reports,
information or any other matter, material or arrangement in respect of the
Collateral; and

 

(v)                                 with the approval of a court of competent
jurisdiction, if required by Applicable Law, terminate any Real Property Rights
or other arrangements made by Vendor in connection with the Collateral on such
terms as the Receiver deems reasonable.

 

(e)                                  Pay Liens. Any Receiver may pay any liability secured by any
actual or threatened Lien against any Collateral. A Receiver may borrow money
for the maintenance, preservation or protection of any Collateral or for
carrying on any of the business or undertaking of Vendor with respect to, and
to the extent of, the Collateral and the Milligan Property and may grant Liens
in any Collateral in priority to the Security as security for the money so
borrowed. Vendor will forthwith on demand reimburse the Receiver for all such
payments and borrowings.

 

(f)                                    Dealing with Collateral. Any Receiver may seize, collect, realize, dispose
of, enforce, release to third parties or otherwise deal with any Collateral in
such manner, upon such terms and conditions and at such time as it deems
advisable without notice to Vendor (except as otherwise required by Applicable
Law), and may charge on its own behalf and pay to others its costs and expenses
(including legal, Receiver’s and accounting fees and expenses on a full
indemnity basis) incurred in connection with such actions. Vendor will
forthwith upon demand reimburse the Receiver for all such costs or expenses.

 

(g)                                 Powers re Collateral. Any Receiver may have, enjoy and exercise all of the
rights of and enjoyed by Vendor with respect to the Collateral or incidental,
ancillary, attaching or deriving from the ownership by Vendor of the
Collateral, the right to commence or continue Litigation to preserve or protect
Collateral and the right to grant or agree to Liens and grant or 

 

 

reserve profits a prendre, easements, rights of
ways, rights in the nature of easements and licenses over or pertaining to the
whole or any part of the Collateral.

 

(h)                                 Retain Services. Any Receiver may retain the services of such real
estate brokers and agents, lawyers, accountants, appraisers and other
consultants as the Receiver may deem necessary or desirable in connection with
anything done or to be done by the Receiver or with any of the rights of the
Receiver set out herein and pay their commissions, fees and disbursements
(which payment shall constitute part of the Receiver’s disbursements
reimbursable by Vendor hereunder). Vendor shall forthwith on demand reimburse
the Receiver for all such payments.

 

6.4                               Right to
have Court Appoint a Receiver

 

The Purchaser may, at any time, apply to a
court of competent jurisdiction for the appointment of a Receiver, or other
official, who may have powers the same as, greater or lesser than, or otherwise
different from, those capable of being granted to a Receiver appointed by the
Purchaser pursuant to this Security Agreement.

 

6.5                               Purchaser may
exercise rights of a Receiver

 

In lieu of or in addition to, exercising its
rights under Sections 6.3 and 6.4, the Purchaser has, and may exercise, any of
the rights which are capable of being granted to a Receiver appointed by the
Purchaser pursuant to this Security Agreement.

 

6.6                               Retention
of Collateral

 

The Purchaser may elect to retain any
Collateral in satisfaction of the Obligations. The Purchaser may designate any
part of the Obligations to be satisfied by the retention of particular
Collateral which the Purchaser considers to have a net realizable value
approximating the amount of the designated part of the Obligations, in which
case only the designated part of the Obligations shall be deemed to be
satisfied by the retention of the particular Collateral.

 

6.7                               Limitation
of Liability

 

Except for any loss or expense resulting from
any gross negligence, bad faith or willful misconduct of the Purchaser, any
Receiver or any of their respective Representatives,  neither the Purchaser nor any Receiver shall
be liable or accountable for any failure of the Purchaser or any Receiver to
seize, collect, realize, dispose of, enforce or otherwise deal with any
Collateral nor shall any of them be bound to institute Litigation for any such
purposes or for the purpose of preserving any rights of the Purchaser, Vendor
or any other Person in respect of any Collateral. Neither the Purchaser nor any
Receiver shall be liable or responsible for any loss and expense whatever which
may accrue in consequence of any such failure resulting from any negligence of
the Purchaser, any Receiver or any of their respective Representatives or
otherwise. If any Receiver or the Purchaser takes possession of any Collateral,
neither the Purchaser nor any Receiver shall have any liability as a mortgagee
in possession or be accountable for anything except actual receipts.

 

 

6.8                               Extensions
of Time

 

The Purchaser and any Receiver may grant
renewals, extensions of time and other indulgences, take and give up Liens,
accept compositions, grant releases and discharges, perfect or fail to perfect
any Liens, release any Collateral to third parties and otherwise deal or fail
to deal with Vendor, debtors of Vendor, guarantors, sureties and others and
with any Collateral and other Liens as the Purchaser may see fit, all without
prejudice to the liability of Vendor to the Purchaser or the rights of the
Purchaser and any Receiver under this Security Agreement.

 

6.9                               Application
of Payments against Obligations

 

Any Recovery received by the Purchaser in respect
of the Obligations from time to time and any Recovery realized by the Purchaser
on any Collateral shall be appropriated and applied by the Purchaser in
accordance with Section 6.17.

 

6.10                        Set-Off,
Combination of Accounts met and/or Crossclaims

 

The Obligations will be paid by Vendor without
regard to any equities between Vendor and the Purchaser or any right of set-off
or cross-claim. Any indebtedness owing by the Purchaser to Vendor, direct or
indirect, extended or renewed, actual or contingent, mutual or not, may be set
off or applied against, or combined with, the Obligations by the Purchaser at
any time either before or after maturity, without demand upon or notice to
anyone.

 

Deficiency

 

If the proceeds of the realization of any
Collateral are insufficient to repay all liquidated Obligations, Vendor shall
forthwith pay or cause to be paid to the Purchaser such deficiency.

 

6.11                        Validity
of Sale

 

No Person dealing with the Purchaser or any
Receiver or with any Representative of the Purchaser or any Receiver shall be
concerned to inquire whether the Security has become enforceable, whether any
right of the Purchaser or any Receiver has become exercisable, whether any
Obligations remain outstanding or otherwise as to the propriety or regularity
of any dealing by the Purchaser or any Receiver with any Collateral or to see
to the application of any money paid to the Purchaser or any Receiver, and in
the absence of fraud on the part of such Person such dealings shall be deemed,
as regards such Person, to be within the rights hereby conferred and to be
valid and effective accordingly.

 

6.12                        Purchaser
or Receiver may Perform

 

If Vendor fails to perform any Obligations,
without limiting any other provision hereof, the Purchaser or any Receiver may
perform those Obligations as attorney for Vendor in accordance with Section 4.6.
Vendor shall remain liable under each agreement and Real Property Right to
which it is party or by which it or any of its Business Assets is bound and
shall perform all of its obligations thereunder, and shall not be released from
any of its obligations under any such agreement or Real Property Right by the
exercise of any rights by the Purchaser or any Receiver. Neither the Purchaser
nor any Receiver shall have any obligation under any such 

 

 

agreement or Real Property Right by reason of
this Security Agreement, nor shall the Purchaser or any Receiver be obliged to
perform any of the obligations of Vendor thereunder or to take any action to
collect or enforce any claim made subject to the security of this Security
Agreement. The rights conferred on the Purchaser and any Receiver under this
Security Agreement are for the purpose of protecting the Security in the
Collateral and shall not impose any obligation upon the Purchaser or any Receiver
to exercise any such rights.

 

6.13                        Effect of
Appointment of Receiver

 

As soon as the Purchaser takes possession of
any Collateral or appoints a Receiver over any Collateral, all rights of each
of the Representatives of Vendor with respect to that Collateral shall cease,
unless specifically continued by the written consent of the Purchaser or the
Receiver.

 

6.14                        Time for
Payment

 

If any Obligations are due by maturity, demand
or acceleration, it shall be deemed reasonable for the Purchaser to exercise its
rights under this Security Agreement immediately if such payment is not made,
and any days of grace or any time for payment which might otherwise be required
to be afforded to Vendor by any agreement or Applicable Law is hereby
irrevocably waived to the extent permitted by law.

 

6.15                        Rights in
Addition

 

The rights conferred by this Article 6 are
in addition to, and not in substitution for, any other rights the Purchaser may
have under this Security Agreement, at law, in equity or by or under Applicable
Law or the Purchase Agreement or any other security agreement. The Purchaser
may proceed by way of any action, suit or other proceeding at law or in equity
including (a) the right to take proceedings in any court of competent
jurisdiction for the sale or foreclosure of the Collateral and (b) filing
proofs of claim and other documentation to establish the claims of the
Purchaser in any Litigation relating to Vendor. No right of the Purchaser or
any Receiver shall be exclusive of or dependent on any other. Any such right
may be exercised separately or in combination, and at any time. The exercise by
the Purchaser or any Receiver of any right hereunder does not preclude the
Purchaser or any Receiver from further exercise of such right in accordance
with this Security Agreement.

 

6.16                        Application
of Proceeds

 

Each Recovery received by the Purchaser will be
held and dealt with by or applied and paid to the relevant parties or Persons
indicated below promptly following receipt by the Purchaser in the following
order:

 

(a)                                  first, to be applied to the Payment in Full of the
Obligations due and owing to the Purchaser under the Purchase Agreement,
including all reasonable fees of the Purchaser and all reasonable out-of-pocket
disbursements, fees, costs and expenses incurred by the Purchaser in connection
with the preservation of the Security or the Collateral or any enforcement
proceedings and all amounts for which the Purchaser is 

 

 

entitled to payment or indemnity from Vendor
pursuant to any other provision of this Security Agreement;

 

(b)                                 second, after Payment in Full of all Obligations in
accordance with paragraph (a) above, the surplus, if any, remaining from
that Recovery will be paid to Vendor, unless otherwise directed by any Order of
any competent Governmental Authority, or as required by Applicable Law.

 

The fact that the Purchaser may make a payment
pursuant to paragraph (b) above or may determine that the Obligations have
been paid in full, will not thereafter prevent the Purchaser from applying any
further Recovery in the order set out in this Section 6.17.

 

ARTICLE 7

GENERAL

 

7.1                               Security
in Addition

 

The Security does not replace or otherwise
affect any existing or future Lien held by the Purchaser. Neither the taking of
any Litigation, judicial or extra-judicial, nor the refraining from so doing,
nor any dealing with any other security for any Obligations shall release or
affect the Security. Neither the taking of any Litigation, judicial or
extra-judicial, pursuant to this Security Agreement, nor the refraining from so
doing, nor any dealing with any Collateral shall release or affect any of the
other Liens held by the Purchaser for the payment or performance of the
Obligations.

 

7.2                               No Merger

 

This Security Agreement shall not operate by
way of a merger of the Obligations or of any agreement or other document by
which the Obligations now or at any time hereafter may be represented or
evidenced. Neither the taking of any judgment nor the exercise of any power of
seizure or disposition shall extinguish the liability of Vendor to pay and
perform the Obligations nor shall the acceptance of any payment or alternate
security constitute or create any novation. No covenant, representation or
warranty of Vendor herein shall merge in any judgment.

 

7.3                               Notices

 

Any notice, demand, consent, approval or other
communication to be made or given under or in connection with this Security
Agreement shall be given in accordance with the Purchase Agreement.

 

7.4                               Time of
the Essence

 

Time is and shall remain of the essence of this
Security Agreement and each of its provisions.

 

 

7.5                               Governing
Law

 

This Security Agreement shall be governed by,
and interpreted in accordance with, the laws in force in the Province of
British Columbia, including the federal laws of Canada applicable therein
(excluding any conflict of laws rule or principle which might refer such
construction to the laws of another jurisdiction). Vendor irrevocably attorns
to and submits to the non-exclusive jurisdiction of the Courts of British
Columbia with respect to any matter arising hereunder or related hereto. Such
choice of law shall, however, be without prejudice to or limitation of any
other rights available to the Purchaser under the laws of any other
jurisdiction where Collateral may be located.

 

7.6                               Doctrine
of Consolidation

 

Pursuant to section 31(2) of the Property Law Act (British Columbia), the
doctrine of consolidation shall apply to this Security Agreement.

 

7.7                               Security
Effective Immediately

 

Neither the issuance nor registration of, or
any filings with respect to, this Security Agreement, nor any partial advance
of the Payment Deposit by the Purchaser, shall bind the Purchaser to advance
any amounts of the Payment Deposit to Vendor, but the Security shall take
effect forthwith upon the issuance of this Security Agreement by Vendor.

 

7.8                               Entire
Agreement

 

There are no representations, warranties,
covenants, agreements or acknowledgments whether direct or collateral, express
or implied, that form part of or affect this Security Agreement or any Collateral,
other than as expressed herein or in the Purchase Agreement or other security
agreements granted contemporaneously herewith by Vendor to the Purchaser and
other than as may be expressed in any other written agreement entered into
between Vendor and the Purchaser contemporaneously herewith. The execution of
this Security Agreement has not been induced by, nor does Vendor rely upon or
regard as material, any representations, warranties, conditions, other
agreements or acknowledgments not expressly made in this Security Agreement and
the other written agreements and other documents to be delivered pursuant
hereto or contemporaneously herewith.  In
the event of any inconsistency between the terms of this Security Agreement and
the terms of the Purchase Agreement with respect to the subject matter herein,
the terms of the Purchase Agreement shall control

 

7.9                               Provisions
Reasonable

 

Vendor acknowledges that the provisions of this
Security Agreement and, in particular, those respecting rights of the Purchaser
or any Receiver against Vendor and any Collateral upon an Event of  Default, are commercially reasonable and not
manifestly unreasonable.

 

7.10                        Invalidity

 

If any provision of this Security Agreement is
found to be invalid or unenforceable, by a court of competent jurisdiction from
which no further appeal right lies, that provision shall be 

 

 

deemed to be severed herefrom and the remaining
provisions of this Security Agreement shall not be affected thereby but shall
remain valid and enforceable.

 

7.11                        Binding
Effect

 

This Security Agreement shall enure to the
benefit of the Purchaser and any Receiver and their respective successors and
assigns permitted under the Purchase Agreement and shall be binding on Vendor,
its legal representatives (including receivers) and its successors and assigns
permitted under the Purchase Agreement. Each reference to Vendor in this
Security Agreement shall be construed so as to include the successors and such
permitted assigns of Vendor to the extent the context so admits.

 

7.12                        Survival

 

The Obligations payable under Sections 4.10 and
6.17 (the “Indemnity Obligations”)
shall survive the Payment in Full of all other Obligations and shall continue
in full force and effect until Payment in Full has been irrevocably made of
such Indemnity Obligations.

 

7.13                        Statutory
Waivers

 

To the fullest extent permitted by Applicable
Law, Vendor waives all of the rights, benefits and protections given by the
provisions of any existing or future statute which imposes limitations upon the
rights of a secured party or upon the methods of realization of security,
including any seize or sue or anti-deficiency statute or any similar provisions
of any other statute.

 

7.14                        Currency

 

All references in this Security Agreement to
monetary amounts, unless specifically provided, are to lawful currency of the
United States of America. All sums of money payable under this Security
Agreement shall be paid in the currency in which such sums are incurred or
expressed as due hereunder.

 

7.15                        Currency
Conversions

 

If the Purchaser receives or recovers any
amount payable under this Security Agreement in a currency (the “Recovered Amount”) which is different than
the currency of the United States of America (the “Contract Currency”), the Purchaser may convert the Recovered
Amount to the Contract Currency at the rate of exchange which the Purchaser is
able, acting in a reasonable manner and in good faith, to purchase the relevant
amount of the Contract Currency. The amount of the Contract Currency resulting
from any such conversion shall then be applied in accordance with the
provisions of Section 6.9.

 

7.16                        Judgment
Currency

 

If, for the purposes of obtaining or enforcing
judgment in any court in any jurisdiction, it becomes necessary to convert into
the currency of the country giving such judgment (the “Judgment Currency”) an amount due hereunder
in a different currency (the “Agreed Currency”),
then the date on which the rate of exchange for conversion is selected by the
court 

 

 

is referred to herein as the “Conversion Date”. If there is a change in
the rate of exchange between the Judgment Currency and the Agreed Currency
between the Conversion Date and the actual receipt by the Purchaser or any
Receiver of the amount due hereunder or under any such judgment, Vendor will,
notwithstanding any such judgment, pay all such additional amounts as may be
necessary to ensure that the amount received by the Purchaser or Receiver in
the Judgment Currency, when converted at the rate of exchange prevailing on the
date of receipt, will produce the amount due in the Agreed Currency. Vendor’s
liability hereunder constitutes a separate and independent liability which
shall not merge with any judgment or any partial payment or enforcement of
payment of sums due under this Security Agreement.

 

7.17                        Amendment

 

Subject to Section 1.5, no agreement
purporting to change this Security Agreement shall be binding upon either
Vendor or the Purchaser unless that agreement is in writing and signed by
Vendor and the Purchaser.

 

7.18                        Information

 

At any time the Purchaser may provide to any
Person that claims an interest in Collateral copies of this Security Agreement
or information about it or about the Collateral or the Obligations.

 

7.19                        Discharge

 

Forthwith following the Deposit Reduction Time,
the Purchaser shall discharge all security interests in the Collateral.  Upon the discharge of the security interests
in the Collateral, the Purchaser shall discharge or authorize Vendor to
discharge, any applicable registrations in respect of the Collateral and shall
execute and deliver to Vendor such other documents or instruments as Vendor may
reasonably require to reflect such discharge.

 

7.20                        Date of
Reference

 

For convenience of reference, this Security
Agreement may be referred to as being dated for reference [  ], 2010 irrespective of its actual date of
execution.

 

7.21                        Vendor
Acknowledgment

 

The Vendor:

 

(a)           acknowledges receiving a copy of this Security Agreement; and

 

(b)           waives all rights to receive from the Purchaser a copy of any financing
statement, financing change statement or verification statement filed or
issued, as the case may be, at any time in respect of this Security Agreement
or any amendments to it.

 

 

TO WITNESS THIS AGREEMENT, Vendor has caused this Security Agreement to be duly
executed.

 

 

	
  OFFICER 

  SIGNATURE(S)

  	
   

  	
   

  	
   

  	
  TRANSFEROR(S) SIGNATURE(S)

  
	
   

  	
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  TERRANE METALS CORP.

  by its authorized signatory(ies)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  

 

(as to all signatures)

 

OFFICER CERTIFICATION

 

Your signature constitutes a representation
that you are a solicitor, notary public or other person authorized by the Evidence Act, R.S.B.C. 1996, c. 124,
to take affidavits for use in British Columbia and certifies the matters set
out in Part 5 of the Land Title Act
as they pertain to execution of this instrument.

 

 

SCHEDULE 1.1

 

DEFINITIONS

 

1.                                       Unless the context otherwise requires, in
this Security Agreement the following terms are used with their corresponding
defined meanings:

 

“Applicable Law” means any international,
federal, state, provincial, or municipal law, regulation, ordinance, code,
order or other requirement or rule of law or the rules, policies, orders
or regulations of any Governmental Authority or stock exchange, including any
judicial or administrative interpretation thereof, applicable to a Person or
any of its properties, assets, business or operations.

 

“Authorizations” means any authorization,
approval, consent, exemption, license, permit, franchise or no-action letter
from any Governmental Authority having jurisdiction with respect to any specified
Person, property, transaction or event, or with respect to any of such Person’s
Business Affairs or from any Person in connection with any easements or
contractual rights.

 

“Award” means any judgment, decree,
injunction, rule, award or order of any Governmental Authority, arbitrator or
other decision-making authority of competent jurisdiction.

 

“Bankruptcy Proceeding” means, with respect
to any Person, any proceeding contemplated by any application, petition,
assignment, filing of notice or other means, whether voluntary or involuntary
and whether or not under the Bankruptcy and
Insolvency Act (Canada), the Companies’
Creditors Arrangement Act (Canada), the Winding-Up and Restructuring Act (Canada) or any other like,
equivalent or analogous legislation of any jurisdiction seeking any moratorium,
reorganization, adjustment, composition, proposal, compromise, arrangement or
other like or similar relief in respect of any or all of the obligations of
that Person, seeking the winding up, liquidation or dissolution of that Person
or all or any part of its Business Assets, seeking any Award declaring, finding
or adjudging that Person insolvent or bankrupt, seeking the appointment
(provisional, interim or permanent) of any receiver or resulting, by operation
of law, in the bankruptcy of that Person.

 

“Business Affairs” means the Business
Assets, liabilities, financial condition, and results of operations of Vendor.

 

“Business Assets” means the business,
operations, undertaking, property and assets of the Vendor in relation to the
Milligan Project.

 

“Business Day” means a day other than a
Saturday or a Sunday or a day (i) that is a statutory holiday under the
laws of the Province of British Columbia or (ii) on which national banking
institutions in New York and Colorado are closed to the public for conducting
business.

 

 

“Collateral” means all of the property made
subject to the Liens created under Section 2.1, wherever located, now or
hereafter owned by Vendor or in or to which Vendor now or hereafter has rights,
including all such rights, and (as the context so admits) any item or part
thereof.

 

“Default Rate” means the interest rate per
annum payable by Vendor pursuant to Section 15.3(a) of the Purchase
Agreement.

 

“Deposit Reduction Time” has the meaning assigned to it in
the Purchase Agreement.

 

“Documents of Title” means all documents of
title, whether negotiable or non-negotiable, including all warehouse receipts
and bills of lading, in which Vendor now or hereafter has rights, and (as the
context so admits) any item or part thereof.

 

“Event of Default” means a Vendor Event of
Default as defined in the Purchase Agreement.

 

“Governmental Authority” means any federal,
provincial, or local government, agency, department, ministry, authority,
tribunal, commission, official, court or securities commission.  For the avoidance of doubt, “tribunal” shall
not be deemed to include First Nations.

 

“Income Taxes” means taxes based on or
measured by income or profit of any nature or kind, including Canadian federal
and provincial income taxes and similar such taxes imposed by any foreign
jurisdiction (including any union of nations).

 

“Indemnified Party” has the defined meaning
assigned to it in Section 4.10.

 

“License” means (i) any Authorization
from any Governmental Authority having jurisdiction with respect to Vendor’
interest in the Milligan Property, and (ii) any Authorization from any
Person granting any easement or license with respect to any real or immovable
property in relation to the Milligan Project.

 

“Lien” means (i) any right of set-off
intended to secure the payment or performance of an obligation, (ii) any
interest in property created by way of mortgage, pledge, charge (fixed or
floating), lien, assignment by way of security, hypothecation, security
interest, hire purchase agreement, conditional sale agreement, Sale/Lease Back
Transaction, deposit arrangement, title retention, capital lease or discount,
factoring or securitization arrangement on recourse terms, (iii) any
statutory deemed trust or lien, (iv) any preference, priority, adverse
claim, levy, execution, seizure, attachment, garnishment or other encumbrance
which binds property, and (v) any agreement to grant any of the rights or
interests described in clauses (i) to (iv) inclusive of this
definition.

 

“Litigation” means any grievance,
investigation, litigation, legal action, lawsuit, mediation, alternative
dispute resolution proceeding or other proceeding (whether civil,
administrative, quasi-criminal or criminal) by or before any Governmental
Authority, arbitrator or other decision-making authority.

 

 

“Material Adverse Effect” has the meaning assigned to it in
the Purchase Agreement.

 

“Milligan
Project” has the meaning assigned to it in the Purchase Agreement.

 

“Milligan Property” has the meaning assigned
to it in the Purchase Agreement.

 

“Minerals” has the meaning assigned to it in the Purchase
Agreement.

 

“Obligations” means all advances of the
Payment Deposit and all obligations for the performance of covenants, tasks or
duties including, without limitation, for the delivery of Refined Gold, payment
of monetary amounts, debts and liabilities (whether or not such performance is
then required or contingent, or such amounts are liquidated or determinable),
including, for greater certainty, the return of the uncredited amount of the
Payment Deposit, if applicable, owing by Vendor to the Purchaser pursuant to
the Purchase Agreement, and all covenants, duties regarding such Refined Gold
or amounts, of any kind or nature, present or future, absolute or contingent,
joint or several or joint and several, direct or indirect, matured or not,
extended or renewed, whenever and however incurred, whether or not evidenced by
any note, agreement, letter of credit agreement or other instrument, arising
under, by reason of, pursuant to or otherwise in respect of the Purchase
Agreement, this Security Agreement or any other security agreement granted by
Vendor to the Purchaser, and (as the context so admits) each and every item or
part of any thereof. This term includes all principal, interest (including all
interest that accrues after the commencement of, or which would have accrued
but for the commencement of, any Bankruptcy Proceeding in accordance with and
at the rate, including the Default Rate to the extent lawful, specified herein
or in the Purchase Agreement, whether or not such interest is an allowable
claim in such Bankruptcy Proceeding), expenses, legal fees and any other sum
chargeable to Vendor under the Purchase Agreement, this Security Agreement or
any other security agreement granted by Vendor to the Purchaser, and (as the
context so admits) each and any item or part of any thereof.

 

“Order” means any order, directive,
direction or request of any Governmental Authority, arbitrator or other
decision-making authority of competent jurisdiction.

 

“Payment Deposit” has the meaning assigned
to it in the Purchase Agreement.

 

“Payment in Full” in relation to any
Obligations means permanent, indefeasible and irrevocable delivery of Refined
Gold or payment in cash (or other freely available funds transfer as may be
expressly provided for in the Purchase Agreement) to the Purchaser in full of
all Obligations (other than contingent indemnification obligations) in
accordance with the express provisions of the Purchase Agreement, without
regard to any compromise, reduction or disallowance of all or any item or part
thereof by virtue of the application of any bankruptcy, insolvency or other
similar such laws, any law affecting creditors’ rights generally or general
principles of equity, and the cancellation or expiry of all commitments by the
Purchaser to advance any portion of the Payment Deposit to or for the benefit
or at the request of Vendor, and “paid in full” shall (to the extent the
context so admits) be construed in like manner.

 

 

“Permits” has the meaning assigned to it in
the Purchase Agreement.

 

“Permitted Encumbrances” has (i) the
defined meaning assigned to it in the Purchase Agreement and (ii) means
any right of title retention or any purchase money security in connection with
the purchase price of assets in the ordinary course of business which the
purchase price is promptly paid when due.

 

“Person” means an individual, corporation,
company (limited, unlimited, unlimited liability or other), limited liability
corporation, other body corporate, estate, limited or general partnership,
business trust, trustee, joint venture, other legal entity, unincorporated
association or Governmental Authority.

 

“Prescribed Agreement” has the defined
meaning assigned to it in Section 2.6(a).

 

“Proceeds” means all proceeds and real or
personal property in any form derived directly or indirectly from any disposal
of or other dealing with any Collateral, or that indemnifies or compensates for
such Collateral stolen, lost, destroyed or damaged, and proceeds of Proceeds
whether or not of the same type, class or kind as the original Proceeds, and
(as the context so admits) any item or part thereof.

 

“Purchase Agreement” has the defined meaning
assigned to it in the Background to this Security Agreement.

 

“Purchaser” means [RG NEWCO], and if such
Purchaser shall assign all or any portion of its rights, benefits or
obligations under the Purchase Agreement as permitted thereunder, such term
shall include any assignee of such Purchaser, whether immediate or derivative,
relative to such rights, benefits and obligations.

 

“Receiver” means any receiver for the
Collateral or any of the business, undertakings, property and assets of Vendor
appointed by the Purchaser pursuant to this Security Agreement or by a court on
application by the Purchaser.

 

“Records” means all books, accounts,
invoices, letters, papers, security certificates, documents and other records
in any form evidencing or relating in any way to any item or part of the
Collateral and all agreements, Licenses and other rights and benefits in
respect thereof, and (as the context so admits) any item or part thereof.

 

“Recovery” means any monies received or
recovered by the Purchaser pursuant to this Security Agreement on account of
the Obligations, whether pursuant to any enforcement of the Security, any
Litigation, any settlement thereof or otherwise.

 

“Refined Gold” has the defined meaning
assigned to it in the Purchase Agreement.

 

“Replacements” means all increases,
additions and accessions to, and all substitutions for and replacements of, any
item or part of the Collateral, and any item or part thereof.

 

 

“Representative” of any Person means any
director, officer, employee, agent, legal counsel, accountant, financial
advisor, expert, manager, consultant or other representative appointed, engaged
or employed by such Person.

 

“Sale/Lease Back Transaction” means any
transaction, series of transactions (related or not) or arrangement pursuant to
which Business Assets of a Person are disposed of and are thereafter leased
back, or are otherwise made available for use, to that Person.

 

“Sales Taxes” means sales, transfer,
turnover or value added taxes of any nature or kind, including Canadian goods
and services taxes and federal, state and provincial sales and excise taxes, or
harmonized Canadian and provincial taxes.

 

“Scheduled Deposit” has the meaning assigned to it in the
Purchase Agreement.

 

“Security” means any and all Liens granted
by Vendor to the Purchaser in this Security Agreement.

 

“Security Agreement” means this security
agreement and all schedules attached hereto. All uses of the words “hereto”, “herein”,
“hereof”, “hereby” and “hereunder” and similar expressions refer to this Security
Agreement and not to any particular section or portion of it. References to an “Article”, “Section”, “Subsection”
or “Schedule” refer to the
applicable article, section, subsection or schedule of this Security Agreement.

 

“Taxes” means all taxes of any kind or
nature whatsoever including federal large corporation taxes, provincial capital
taxes, realty taxes (including utility charges which are collectible like
realty taxes), business taxes, property transfer taxes, Income Taxes,
Sales Taxes, custom duties, payroll taxes, levies, stamp taxes, royalties, duties,
and all fees, deductions, compulsory loans and withholdings imposed, levied,
collected, withheld or assessed as of the date hereof or at any time in the
future, by any Governmental Authority of or within Canada or any other
jurisdiction whatsoever having power to tax, together with penalties, fines,
additions to tax and interest thereon.

 

2.                                       Extended Meanings

 

To the extent
the context so admits, any reference in this Security Agreement to:

 

“agreement” shall be construed as any
agreement, oral or written, any simple contract or specialty, and includes any
bond, bill of exchange, indenture, instrument or undertaking.

 

“arm’s length” shall be construed in the
same manner it is used in the Income Tax Act (Canada).

 

“change” shall be construed as change,
modify, alter, amend, supplement, extend, renew, compromise, novate, replace,
terminate, release, discharge, cancel, suspend or waive or (where the context
so admits) the noun or participle form of any of the foregoing, and “changed” shall be construed in like manner.

 

 

“dispose” shall be construed as lease, sell,
transfer, license or otherwise dispose of any property, or the commercial
benefits of use or ownership of any property, including the right to profit or
gain therefrom, whether in a single transaction or in a series of related
transactions, and “disposed”, “disposition” and “disposal” shall be construed in like
manner.

 

“include”, “includes” and “including”
shall be construed to be followed by the statement “without limitation” and
none of such terms shall be construed to limit any word or statement which it
follows to the specific items or matters immediately following it or similar
terms or matters.

 

“losses and expenses” shall be construed as
losses, costs, expenses, damages, penalties, Awards, Orders, Litigation,
claims, claims over, demands and liabilities, including any applicable court
costs and legal fees and disbursements on a full indemnity basis, and “loss and expense” shall be construed in
like manner.

 

“rate of exchange” shall be construed so as
to include any premiums or costs payable in connection with any currency
conversion being effected.

 

a “receiver” means a privately appointed or
court appointed receiver or receiver and manager, interim receiver, liquidator,
trustee-in-bankruptcy, administrator, administrative receiver, monitor and any
other like or similar official.

 

“rights” shall be construed as rights,
titles, benefits, interests, powers, authorities, discretions, privileges,
immunities and remedies (actual or contingent, direct or indirect, matured or
unmatured, now existing or arising hereafter), whether arising by agreement or
statute, at law, in equity or otherwise, and “right”
shall be construed in like manner.

 

“set-off” means any right or obligation of
set-off, compensation, offset, combination of accounts, netting, retention,
withholding, reduction, deduction or any similar right or obligation, or (as
the context requires) any exercise of any such right or performance of such
obligation.

 

“successor” of a Person (the “relevant party”) shall be construed so as
to include (i) any amalgamated or other body corporate of which the
relevant party or any of its successors is one of the amalgamating or merging
body corporates, (ii) any body corporate resulting from any court approved
arrangement of which the relevant party or any of its successors is party, (iii) any
Person to whom all or substantially all the undertakings, property and assets
of the relevant party is transferred, (iv) any body corporate resulting
from the continuance of the relevant party or any successor of it under the
laws of another jurisdiction of incorporation and (v) any successor
(determined as aforesaid or in any similar or comparable procedure under the
laws of any other jurisdiction) of any Person referred to in clause (i), (ii), (iii) or
(iv) of this definition. Each reference in this Security Agreement to any
party hereto or any other Person shall (where the context so admits) include
its successors.

 

 

SCHEDULE 2.1

 

[REAL PROPERTY RIGHTS]

 

NIL.

 

 

Schedule D — Development
Program and Scheduled Deposits

 

1.               Development
Program: The Vendor shall deliver the Development Program to the Purchaser and
the Independent Engineer at least 30 days prior to the first Scheduled Deposit.

 

2.               Modifications
to the Development Program:  The Vendor
and Purchaser acknowledge that the Development Program may require
modifications throughout Development. 
Immediately when known, the Vendor shall provide the Independent
Engineer and Purchaser written notice of any material change to the Development
Program and reconcile the changes in a report. 
The Independent Engineer shall review and provide to the Purchaser an
opinion as to whether such changes are reasonable and shall keep a record of
the current and prior Development Program.

 

3.               Basis for
making Scheduled Deposits:

 

a.               Promptly when
received, the Independent Engineer shall review the Development Program and
will establish a method for tracking the overall Project Costs in consultation
with the Vendor and the Purchaser;

 

b.              The Independent
Engineer shall keep a record of all funding sources and the calculations of the
Independent Engineer shall represent the definitive record of the Purchaser’s
Pro Rata Share of Funding;

 

c.               The Purchaser shall
contribute Scheduled Deposits no more frequently than every 30 days in an
amount consistent with the Purchaser’s Pro Rata Share of Funding after
accounting for the use of proceeds contemplated in the relevant Deposit Event
along with all proceeds concurrently being funded by Vendor and third parties
for the Development Program, payable in accordance with each Deposit Event;

 

d.              Notwithstanding any
other provision of this Agreement, Purchaser’s obligation to make a Scheduled
Deposit shall be suspended if:

 

i.                  Vendor has not delivered
to Purchaser copies of executed Mineral Offtake Agreements representing at
least 75% of the Minerals projected to be produced during the first five years
of operation of the Milligan Project, and at such time as the Development has
surpassed the cumulative investment of 50% of Project Costs; or

 

ii.               after March 31,
2011, the Vendor shall have failed to obtain and keep in good standing the
Fishery and Oceans Permits.

 

e.               If Purchaser’s
obligation to make Scheduled Deposits are suspended in accordance with 3.d.i.
or 3.d.ii. above, Purchaser will make a Scheduled Deposit in the amount to
regain the Purchaser’s Pro Rata Share of Funding on the Deposit Event occurring
subsequent to the time that the Vendor satisfies the conditions set forth in
3.d.i. or 3.d.ii. above (a “Catch-Up Payment”).  Interest shall accrue on any Catch-Up Payment
from the date the Scheduled Deposits are suspended at an 

 

 

interest rate
equivalent to the average three month United States Treasury bill yield, as
quoted daily in the Wall Street Journal during such suspension, compounded
annually, and shall be paid with the Catch-Up Payment.  The “Fishery and Oceans Permits” means (i) an
authorization pursuant to section 35(2) of the Fisheries Act for the harmful alteration, disruption or destruction
of fish habitat in respect of tailings impoundment area for the Milligan
Project as described in the Milligan Report, and (ii) the addition of the
area of the tailings impoundment area for the Milligan Project as described in
the Milligan Report to Schedule 2 to the Metal Mining Effluent Regulations for
the purposes of section 5(1) thereof, and the approval pursuant to section
27.1(1) of the Metal Mining Effluent Regulations of a habitat compensation
plan for such tailings impoundment area that complies with the requirements of
section 27.1 of the Metal Mining Effluent Regulations.

 

f.                 Notwithstanding
anything to the contrary, if Vendor completes the Development, Vendor will be
entitled to establish a Deposit Event for the outstanding balance of Scheduled
Deposits that have not been funded to date.

 

 

Schedule E — Permitted
Encumbrances

 

	
  Personal Property Registry (BC)

  	
   

  	
  Base Registration No.: 166686D

  Registration Date: August 8, 2006

  Registration Length: 5 years 

  Secured Party: Canadian Imperial Bank of Commerce

  Debtor(s): Terrane Metals Corp.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Base Registration No.: 262518D

  Registration Date: September 27, 2006

  Registration Length: Infinity

  Secured Party: Kennecott Canada Exploration Inc

  Debtor(s): Terrane Metals Corp.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Base Registration No.: 478928E

  Registration Date: July 15, 2008

  Registration Length: 5 years

  Secured Party: Bank of Montreal, as Administrative Agent

  Debtor(s): Terrane Metals Corp.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Base Registration No.: 605381F

  Registration Date: June 10, 2010

  Registration Length: 4 years

  Secured Party: Key Lease Canada Ltd.

  Debtor(s): Terrane Metals Corp.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Base Registration No.: 605397F

  Registration Date: June 10, 2010

  Registration Length: 4 years

  Secured Party: Key Lease Canada Ltd.

  Debtor(s): Terrane Metals Corp.

  
	
   

  	
   

  	
   

  
	
  Personal Property Registry (Nunavut)

  	
   

  	
  Registration No.: 123380

  Registration Date: July 30, 2008

  Registration Length: 5 years

  Secured Parties: Bank of Montreal, as Administrative Agent, Bank of Montreal

  Debtor(s): Terrane Metals Corp.

  
	
   

  	
   

  	
   

  
	
  Personal Property Registry (Yukon)

  	
   

  	
  Registration No.: 2008/07/30 14865

  Registration Date: July 30, 2008

  Registration Length: 5 years

  Secured Parties: Bank of Montreal, as Administrative Agent, Bank of Montreal

  Debtor(s): Terrane Metals Corp.

  
	
   

  	
   

  	
   

  
	
  Personal Property Registry (Northwest
  Territories)

  	
   

  	
  Registration No.: 625251

  Registration Date: July 30, 2008

  Registration Length: 5 years

  Secured Parties: Bank of Montreal, as Administrative Agent, Bank of Montreal

  Debtor(s): Terrane Metals Corp.

  

 

 

Schedule F — Provisional
Payment Illustration

 

*[Redacted]*

 

*[Redacted]*
indicates confidential information that has been omitted in reliance on Rule
24b-2 of the Securities Exchange Act of 1934. 
The confidential information has been submitted separately to the U.S.
Securities and Exchange Commission.

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