Document:

Exhibit 4.1

 

 

THE MANITOWOC COMPANY, INC.,

as Issuer,

 

the Guarantors named herein,

as Guarantors

 

and

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Trustee

 

Second Supplemental Indenture

 

Dated as of October 18, 2010

 

 

 8.50% Senior Notes due 2020

 

 

 

TABLE OF CONTENTS

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE ONE

  
	
   

  
	
  DEFINITIONS AND INCORPORATION BY REFERENCE

  
	
   

  	
   

  	
   

  
	
  SECTION 1.01.

  	
  Definitions

  	
  1

  
	
  SECTION 1.02.

  	
  Incorporation by Reference of Trust Indenture Act

  	
  28

  
	
  SECTION 1.03.

  	
  Rules of Construction

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE TWO

  
	
   

  
	
  THE NOTES

  
	
   

  	
   

  	
   

  
	
  SECTION 2.01.

  	
  The Notes

  	
  29

  
	
  SECTION 2.02.

  	
  Legends

  	
  30

  
	
  SECTION 2.03.

  	
  Execution and Authentication

  	
  31

  
	
  SECTION 2.04.

  	
  Transfer and Exchange

  	
  31

  
	
  SECTION 2.05.

  	
  Defaulted Interest

  	
  34

  
	
  SECTION 2.06.

  	
  Issuance of Additional Notes

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE THREE

  
	
   

  
	
  REDEMPTION

  
	
   

  	
   

  	
   

  
	
  SECTION 3.01.

  	
  Optional Redemption

  	
  35

  
	
  SECTION 3.02.

  	
  [reserved]

  	
  36

  
	
  SECTION 3.03.

  	
  Selection of Notes to Be Redeemed

  	
  36

  
	
  SECTION 3.04.

  	
  Notice of Redemption

  	
  36

  
	
  SECTION 3.05.

  	
  Effect of Notice of Redemption

  	
  37

  
	
   

  	
   

  	
   

  
	
  ARTICLE FOUR

  
	
   

  
	
  COVENANTS

  
	
   

  	
   

  	
   

  
	
  SECTION 4.01.

  	
  Payment of Notes

  	
  37

  
	
  SECTION 4.02.

  	
  Maintenance of Office or Agency

  	
  38

  
	
  SECTION 4.03.

  	
  Limitation on Incurrence of Additional Indebtedness

  	
  38

  
	
  SECTION 4.04.

  	
  RESERVED

  	
  38

  
	
  SECTION 4.05.

  	
  Limitation on Restricted Payments

  	
  38

  
	
  SECTION 4.06.

  	
  Limitation on Dividend and Other Payment Restrictions
  Affecting Restricted Subsidiaries

  	
  41

  
	
  SECTION 4.07.

  	
  Limitation on Preferred Stock of Restricted Subsidiaries

  	
  43

  

 

i

 

	
  SECTION 4.08.

  	
  Limitation on Transactions with Affiliates

  	
  43

  
	
  SECTION 4.09.

  	
  Limitation on Liens

  	
  44

  
	
  SECTION 4.10.

  	
  Limitation on Asset Sales

  	
  45

  
	
  SECTION 4.11.

  	
  Repurchase of Notes upon a Change of Control

  	
  49

  
	
  SECTION 4.12.

  	
  Additional Subsidiary Guarantees

  	
  50

  
	
  SECTION 4.13.

  	
  Existence

  	
  50

  
	
  SECTION 4.14.

  	
  Payment of Taxes and Other Claims

  	
  50

  
	
  SECTION 4.15.

  	
  Reports to Holders

  	
  51

  
	
  SECTION 4.16.

  	
  Conduct of Business

  	
  51

  
	
  SECTION 4.17.

  	
  Waiver of Stay, Extension or Usury Laws

  	
  52

  
	
  SECTION 4.18.

  	
  Compliance Certificates

  	
  52

  
	
  SECTION 4.19.

  	
  Maintenance of Properties

  	
  52

  
	
  SECTION 4.20.

  	
  Insurance

  	
  53

  
	
  SECTION 4.21.

  	
  Changes in Covenants when Notes Rated Investment Grade

  	
  53

  
	
   

  
	
  ARTICLE FIVE

  
	
   

  
	
  SUCCESSOR CORPORATION

  
	
   

  
	
  SECTION 5.01.

  	
  Merger, Consolidation and Sale of Assets

  	
  54

  
	
  SECTION 5.02.

  	
  Successor Substituted

  	
  56

  
	
   

  
	
  ARTICLE SIX

  
	
   

  
	
  DEFAULT AND REMEDIES

  
	
   

  
	
  SECTION 6.01.

  	
  Events of Default

  	
  56

  
	
  SECTION 6.02.

  	
  Notice of Defaults

  	
  59

  
	
  SECTION 6.03.

  	
  Other Remedies

  	
  59

  
	
  SECTION 6.04.

  	
  Waiver of Past Defaults

  	
  59

  
	
  SECTION 6.05.

  	
  Control by Majority

  	
  59

  
	
  SECTION 6.06.

  	
  Limitation on Suits

  	
  59

  
	
  SECTION 6.07.

  	
  Rights of Holders to Receive Payment

  	
  60

  
	
  SECTION 6.08.

  	
  Collection Suit by Trustee

  	
  60

  
	
  SECTION 6.09.

  	
  Trustee May File Proofs of Claim

  	
  61

  
	
  SECTION 6.10.

  	
  Priorities

  	
  61

  
	
  SECTION 6.11.

  	
  Undertaking for Costs

  	
  61

  
	
  SECTION 6.12.

  	
  Restoration of Rights and Remedies

  	
  62

  
	
  SECTION 6.13.

  	
  Rights and Remedies Cumulative

  	
  62

  
	
  SECTION 6.14.

  	
  Delay or Omission Not Waiver

  	
  62

  
	
   

  
	
  ARTICLE SEVEN

  
	
   

  
	
  RESERVED

  

 

ii

 

	
  ARTICLE EIGHT

  
	
   

  
	
  DISCHARGE OF INDENTURE

  
	
   

  
	
  SECTION 8.01.

  	
  Termination of Company’s Obligations

  	
  62

  
	
  SECTION 8.02.

  	
  Defeasance and Discharge of Indenture

  	
  63

  
	
  SECTION 8.03.

  	
  Defeasance of Certain Obligations

  	
  65

  
	
  SECTION 8.04.

  	
  Application of Trust Money

  	
  66

  
	
  SECTION 8.05.

  	
  Repayment to Company

  	
  66

  
	
  SECTION 8.06.

  	
  Reinstatement

  	
  67

  
	
   

  
	
  ARTICLE NINE

  
	
   

  
	
  AMENDMENTS, SUPPLEMENTS AND WAIVERS

  
	
   

  
	
  SECTION 9.01.

  	
  Without Consent of Holders

  	
  67

  
	
  SECTION 9.02.

  	
  With Consent of Holders

  	
  68

  
	
  SECTION 9.03.

  	
  Revocation and Effect of Consent

  	
  69

  
	
  SECTION 9.04.

  	
  Notation on or Exchange of Notes

  	
  70

  
	
  SECTION 9.05.

  	
  Trustee to Sign Amendments, Etc.

  	
  70

  
	
  SECTION 9.06.

  	
  Conformity with Trust Indenture Act

  	
  70

  
	
  SECTION 9.07.

  	
  Base Indenture

  	
  70

  
	
   

  
	
  ARTICLE TEN

  
	
   

  
	
  [RESERVED]

  
	
   

  
	
  ARTICLE ELEVEN

  
	
   

  
	
  GUARANTEE OF NOTES

  
	
  SECTION 11.01.

  	
  Guarantee

  	
  70

  
	
  SECTION 11.02.

  	
  Execution and Delivery of Guarantee

  	
  71

  
	
  SECTION 11.03.

  	
  Waiver of Subrogation

  	
  72

  
	
  SECTION 11.04.

  	
  Immediate Payment

  	
  72

  
	
  SECTION 11.05.

  	
  No Set-Off

  	
  72

  
	
  SECTION 11.06.

  	
  Obligations Absolute

  	
  72

  
	
  SECTION 11.07.

  	
  Obligations Continuing

  	
  73

  
	
  SECTION 11.08.

  	
  Obligations Not Reduced

  	
  73

  
	
  SECTION 11.09.

  	
  Obligations Reinstated

  	
  73

  
	
  SECTION 11.10.

  	
  Obligations Not Affected

  	
  73

  
	
  SECTION 11.11.

  	
  Waiver

  	
  74

  
	
  SECTION 11.12.

  	
  No Obligation to Take Action Against Company

  	
  74

  
	
  SECTION 11.13.

  	
  Default and Enforcement

  	
  75

  
	
  SECTION 11.14.

  	
  Costs and Expenses

  	
  75

  

 

iii

 

	
  SECTION 11.15.

  	
  No Merger or Waiver; Cumulative Remedies

  	
  75

  
	
  SECTION 11.16.

  	
  Survival of Obligations

  	
  75

  
	
  SECTION 11.17.

  	
  Guarantee in Addition to Other Obligations

  	
  75

  
	
  SECTION 11.18.

  	
  Successors and Assigns

  	
  76

  
	
  SECTION 11.19.

  	
  Limitation of Guarantor’s Liability

  	
  76

  
	
  SECTION 11.20.

  	
  Release of Guarantee

  	
  76

  
	
   

  
	
  ARTICLE TWELVE

  
	
   

  
	
  RESERVED

  
	
   

  
	
  ARTICLE THIRTEEN

  
	
   

  
	
  MISCELLANEOUS

  
	
   

  
	
  SECTION 13.01.

  	
  Payment Date Other Than a Business Day

  	
  76

  
	
  SECTION 13.02.

  	
  Governing Law

  	
  77

  
	
  SECTION 13.03.

  	
  No Adverse Interpretation of Other Agreements

  	
  77

  
	
  SECTION 13.04.

  	
  No Recourse Against Others

  	
  77

  
	
  SECTION 13.05.

  	
  Successors

  	
  77

  
	
  SECTION 13.06.

  	
  Duplicate Originals

  	
  77

  
	
  SECTION 13.07.

  	
  Separability

  	
  78

  
	
  SECTION 13.08.

  	
  Table of Contents, Headings, Etc.

  	
  78

  
	
  SECTION 13.09.

  	
  Waiver of Jury Trial

  	
  78

  
	
  SECTION 13.10.

  	
  Unclaimed Money; Prescription

  	
  78

  
	
  SECTION 13.11.

  	
  Force Majeure

  	
  78

  
	
  SECTION 13.12.

  	
  U.S.A. Patriot Act

  	
  78

  

 

iv

 

	
  EXHIBIT A

  	
  -

  	
   

  	
  Form of
  Note

  
	
  EXHIBIT B

  	
  -

  	
   

  	
  Form of
  Guarantee

  

 

v

 

SECOND
SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”) dated as of October 18,
2010 among The Manitowoc Company, Inc., a Wisconsin corporation, the
Guarantors (as defined herein) and Wells Fargo Bank, National Association, as
Trustee.

 

WHEREAS,
the Company and the Trustee have entered into a Base Indenture, dated as of February 8,
2010 (the “Base Indenture”);

 

WHEREAS,
Sections 2.01, 2.02, 3.01 and 10.01 of the Base Indenture provide, among other
things, that the Company, the Guarantors and the Trustee may enter into a
supplemental indenture to the Base Indenture for, among other things, the
purpose of establishing the designation, form, terms and provisions of Debt
Securities (as defined in the Base Indenture) of any series as permitted by
Sections 2.01, 2.02, 3.01 and 10.01 of the Base Indenture;

 

WHEREAS,
clause (i) of Section 10.01 of the Base Indenture provides that the
Company and the Trustee may enter into a supplemental indenture changing or
eliminating any provision of the Base Indenture; provided,
that any such change shall become effective only when there is no Debt Security
Outstanding (as defined in the Base Indenture) which is entitled to the
benefits of such provisions;

 

WHEREAS,
the Company desires to establish and issue a new series of the Company’s 8.50%
Senior Notes due 2020 pursuant to the Base Indenture, as modified by this
Supplemental Indenture; and

 

WHEREAS,
the Company and the Guarantors desire to enter into a supplemental indenture
pursuant to Sections 2.01, 2.02, 3.01 and 10.01 of the Base Indenture to
establish the designation, form, terms and provisions of the Notes and to make
deletions, modifications and additions to the Base Indenture pertaining to the
Notes, as contemplated by Sections 2.01, 2.02, 3.01 and 10.01 of the Base
Indenture;

 

NOW,
THEREFORE, in consideration of the foregoing, the parties hereto, for the
benefit of each other and for the equal and proportionate benefit of all
Persons who hereafter become Holders (as defined herein) of Notes, hereby enter
into this Supplemental Indenture, which amends, modifies, supplements and
restates (as applicable) the Base Indenture with respect to (and only with
respect to) the Notes, as follows:

 

ARTICLE ONE

 

DEFINITIONS AND
INCORPORATION BY REFERENCE

 

SECTION 1.01.                                    Definitions.

 

The
terms defined in this Section 1.01 (except as herein otherwise expressly
provided or unless the context of this Supplemental Indenture otherwise
requires) for all purposes of this Supplemental Indenture and of any indenture
supplemental hereto have the respective meanings specified in this Section 1.01.  All other terms used in this Supplemental
Indenture that are defined in the Base Indenture or the Trust Indenture Act, either
directly or by reference therein (except as herein otherwise expressly provided
or unless the context of this 

 

 

Supplemental
Indenture otherwise requires), have the respective meanings assigned to such
terms in the Base Indenture or the Trust Indenture Act, as the case may be, as
in force at the date of this Supplemental Indenture as originally executed.

 

“Acceleration
Notice” has the meaning given such term in Section 6.01(b).

 

“Acquired
Indebtedness” means Indebtedness of a Person or any of its Subsidiaries
existing at the time such Person becomes a Restricted Subsidiary of the Company
or at the time it merges or consolidates with or into the Company or any of its
Restricted Subsidiaries or that is assumed in connection with the acquisition
of assets from such Person and in each case not incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary of the Company or such acquisition, merger or
consolidation.

 

“Additional
Notes” means, subject to the Company’s compliance with Section 4.03,
8.50% Senior Notes due 2020, substantially in the form of Exhibit A,
issued from time to time after the Issue Date under the terms of this
Supplemental Indenture (other than issuances pursuant to Sections 3.05, 3.06 or
3.07 of the Base Indenture).

 

“Affiliate
Transaction” has the meaning given such term in Section 4.08.

 

“Agent”
means any Registrar, Paying Agent, Transfer Agent, authenticating agent or
co-Registrar.

 

“amend”
means to amend, supplement, restate, amend and restate or otherwise modify; and
“amendment” shall have a correlative meaning.

 

“Applicable Premium” means, with
respect to a Note at any date of redemption, the greater of (1) 1.0% of
the principal amount of such Note; and (2) the excess of (a) the
present value at such Redemption Date of (i) the redemption price of such
Note on November 1, 2015 (such redemption price being that described in Section 3.01(b))
plus (ii) all required
remaining scheduled interest payments due on such note through November 1,
2015, computed using a discount rate equal to the Treasury Rate (as defined
below) plus 50 basis points; over (b) the principal amount of such Note on
such Redemption Date. Calculation of the Applicable Premium will be made by the
Company or on behalf of the Company by such Person as the Company shall
designate; provided, however, that such calculation, or
determination of the Treasury Rate referenced below, shall not be a duty or
obligation of the Trustee.

 

“Applicable
Procedures” means with respect to any transfer, exchange or other
transaction involving a Global Note or beneficial interest therein, the rules and
procedures of the Depository that may apply to such transfer or exchange.

 

“Asset
Acquisition” means (1) an Investment by the Company or any Restricted
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (2) the acquisition by the
Company or any Restricted Subsidiary of the Company of the assets of any 

 

2

 

Person
(other than a Restricted Subsidiary of the Company) that constitute all or
substantially all of the assets of such Person or comprises any division or
line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.

 

“Asset
Sale” means any direct or indirect sale, issuance, conveyance, transfer,
lease, assignment or other transfer for value by the Company or any of its
Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any
Person other than the Company or a Wholly Owned Restricted Subsidiary of the
Company of:  (1) any Capital Stock
of any Restricted Subsidiary of the Company; or (2) any other property or
assets of the Company or any Restricted Subsidiary of the Company other than in
the ordinary course of business; provided, however, that Asset Sales or other dispositions shall not
include:

 

(a)                                  a transaction
or series of related transactions for which the Company or its Restricted
Subsidiaries receive aggregate consideration of less than $25.0 million;

 

(b)                                 the sale,
lease, conveyance, disposition or other transfer of all or substantially all of
the assets of the Company as permitted under Section 5.01;

 

(c)                                  the sale or
discount, in each case without recourse, of accounts receivable arising in the
ordinary course of business, but only in connection with the compromise or
collection thereof;

 

(d)                                 sales of
accounts receivable and related assets (including contract rights) of the type
specified in the definition of “Qualified Securitization Transaction” to a
Securitization Entity for the fair market value thereof;

 

(e)                                  sales of
accounts receivable and related assets (including contract rights) to the
Factor pursuant to the Factoring Agreement;

 

(f)                                    disposals or
replacements of obsolete equipment in the ordinary course of business;

 

(g)                                 the sale or
other disposition of cash or Cash Equivalents; and

 

(h)                                 any Restricted
Payment permitted by Section 4.05 or that constitutes a Permitted
Investment.

 

“Bankruptcy
Law” means Title 11 of the United States Code, as amended, or any similar
federal or state law for the relief of debtors.

 

“Board
of Directors” means, as to any Person, the board of directors of such    Person or any duly authorized committee
thereof, or, with respect to any Person that is not a corporation, the Person
or Persons performing corresponding functions.

 

“Board
Resolution” means, with respect to any Person, a copy of a resolution
certified by the Secretary or an Assistant Secretary of such Person to have
been duly adopted by 

 

3

 

the
Board of Directors of such Person and to be in full force and effect on the
date of such certification, and delivered to the Trustee.

 

“Book-Entry
Interest” means a beneficial interest held by or through a Participant in a
Global Note.

 

“Capitalized
Lease Obligations” means, as to any Person, the obligations of such Person
under a lease that are required to be classified and accounted for as capital
lease obligations under GAAP and, for purposes of this definition, the amount
of such obligations at any date shall be the capitalized amount of such
obligations at such date, determined in accordance with GAAP.

 

“Cash
Equivalents” means:

 

(1)                                  marketable
direct obligations issued by, or unconditionally guaranteed by, the United
States Government or issued by any agency thereof and backed by the full faith
and credit of the United States, in each case maturing within one year from the
date of acquisition thereof;

 

(2)                                  marketable
direct obligations issued by any state of the United States of America or any political
subdivision of any such state or any public instrumentality thereof maturing
within one year from the date of acquisition thereof and, at the time of
acquisition, having one of the two highest ratings obtainable from either
S&P or Moody’s;

 

(3)                                  commercial
paper maturing no more than one year from the date of creation thereof and, at
the time of acquisition, having a rating of at least A-1 from S&P or at
least P-1 from Moody’s;

 

(4)                                  certificates of
deposit or bankers’ acceptances maturing within one year from the date of
acquisition thereof issued by any bank organized under the laws of the United
States of America or any state thereof or the District of Columbia or any U.S.
branch of a foreign bank having at the date of acquisition thereof combined
capital and surplus of not less than $250.0 million;

 

(5)                                  repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clause (1) above entered into with any bank meeting
the qualifications specified in clause (4) above;

 

(6)                                  Investments in
money market funds that invest substantially all their assets in securities of
the types described in clauses (1) through (5) above; and

 

(7)                                  Foreign Cash
Equivalents.

 

“Change
of Control” means the occurrence of one or more of the following events:

 

4

 

(1)                                  any sale,
lease, exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Company to any
Person or group of related Persons for purposes of Section 13(d) of
the Exchange Act (a “Group”), together with any Affiliates thereof
(whether or not otherwise in compliance with the provisions of this
Supplemental Indenture);

 

(2)                                  the approval by
the holders of Capital Stock of the Company of any plan or proposal for the
liquidation or dissolution of the Company (whether or not otherwise in
compliance with the provisions of this Supplemental Indenture);

 

(3)                                  any Person or
Group shall become the owner, directly or indirectly, beneficially or of
record, of shares representing more than 50% of the aggregate ordinary voting
power represented by the issued and outstanding Capital Stock of the Company;
or

 

(4)                                  the replacement
of a majority of the Board of Directors of the Company over a two-year period
from the directors who constituted the Board of Directors of the Company at the
beginning of such period, and such replacement shall not have been approved by
a vote of at least a majority of the Board of Directors of the Company then
still in office who either were members of such Board of Directors at the
beginning of such period or whose election as a member of such Board of
Directors was previously so approved.

 

“Change
of Control Offer” has the meaning given to such term in Section 4.11.

 

“Change
of Control Payment Date” has the meaning given to such term in Section 4.11.

 

“Common
Stock” of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person’s common stock, and includes, without limitation,
all series and classes of such common stock.

 

“Consolidated
EBITDA” means, with respect to any Person, for any period, the sum (without
duplication) of:

 

(1)                                  Consolidated
Net Income; and

 

(2)                                  to the extent
Consolidated Net Income has been reduced thereby:

 

(a)                                  all income
taxes of such Person and its Restricted Subsidiaries paid or accrued in
accordance with GAAP for such period (other than income taxes attributable to
extraordinary, unusual or nonrecurring gains or losses or taxes attributable to
sales or dispositions outside the ordinary course of business);

 

(b)                                 Consolidated
Interest Expense;

 

5

 

(c)                                  Consolidated
Non-cash Charges less any non-cash items increasing Consolidated Net Income for
such period, all as determined on a consolidated basis for such Person and its
Restricted Subsidiaries in accordance with GAAP, and

 

(d)                                 cash
restructuring charges incurred in the year ended December 31, 2009.

 

“Consolidated
Fixed Charge Coverage Ratio” means, with respect to any Person, the ratio
of Consolidated EBITDA of such Person during the four full fiscal quarters (the
“Four Quarter Period”) ending prior to the date of the transaction
giving rise to the need to calculate the Consolidated Fixed Charge Coverage
Ratio for which financial statements are available (the “Transaction Date”)
to Consolidated Fixed Charges of such Person for the Four Quarter Period.  In addition to and without limitation of the
foregoing, for purposes of this definition, “Consolidated EBITDA” and “Consolidated
Fixed Charges” shall be calculated after giving effect on a pro forma basis for the period of such calculation to:

 

(1)                                  the incurrence
or repayment of any Indebtedness of such Person or any of its Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of
the  Four Quarter Period and on or prior
to the Transaction Date, as if such incurrence or repayment, as the case may be
(and the application of the proceeds thereof), occurred on the first day of the
Four Quarter Period; and

 

(2)                                  any asset sales
or Asset Acquisitions (including, without limitation, any Asset Acquisition
giving rise to the need to make such calculation as a result of such Person or
one of its Restricted Subsidiaries (including any Person who becomes a
Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming
or otherwise being liable for Acquired Indebtedness and also including any
Consolidated EBITDA (including any pro forma
expense and cost reductions calculated on a basis consistent with Regulation
S-X promulgated under the Exchange Act) attributable to the assets that are the
subject of the Asset Acquisition or asset sale during the Four Quarter Period)
occurring during the Four Quarter Period or at any time subsequent to the last
day of the Four Quarter Period and on or prior to the Transaction Date, as if
such asset sale or Asset Acquisition (including the incurrence or assumption of
any such Acquired Indebtedness) occurred on the first day of the Four Quarter
Period.  If such Person or any of its
Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, the preceding sentence shall give effect to the incurrence of
such guaranteed Indebtedness as if such Person or any Restricted Subsidiary of
such Person had directly incurred or otherwise assumed such other Indebtedness
that was so guaranteed.

 

Furthermore,
in calculating “Consolidated Fixed Charges” for purposes of determining the
denominator (but not the numerator) of this “Consolidated Fixed Charge Coverage
Ratio”:

 

6

 

(1)                                  interest on
outstanding Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter shall
be deemed to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date; and

 

(2)                                  notwithstanding
clause (1) of this paragraph, interest on Indebtedness determined on a
fluctuating basis, to the extent such interest is covered by agreements
relating to Interest Swap Obligations, shall be deemed to accrue at the rate
per annum resulting after giving effect to the operation of such agreements.

 

“Consolidated
Fixed Charges” means, with respect to any Person for any period, the sum,
without duplication, of:

 

(1)                                  Consolidated
Interest Expense; plus

 

(2)                                  the product of (x) the
amount of all dividend payments on any series of Preferred Stock of such Person
and, to the extent permitted under this Supplemental Indenture, its Restricted
Subsidiaries (other than dividends paid in Qualified Capital Stock) paid,
accrued or scheduled to be paid or accrued during such period, times (y) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current effective consolidated federal, state and local income
tax rate of such Person, expressed as a decimal.

 

“Consolidated
Interest Expense” means, with respect to any Person for any period, the sum
of, without duplication:

 

(1)                                  the aggregate
of the interest expense of such Person and its Restricted Subsidiaries for such
period determined on a consolidated basis in accordance with GAAP, including
without limitation:  (a) any
amortization of debt discount and amortization or write-off of deferred
financing costs; (b) the net costs under Interest Swap Obligations; (c) all
capitalized interest; and (d) the interest portion of any deferred payment
obligation; and

 

(2)                                  the interest
component of Capitalized Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by such Person and its Restricted Subsidiaries during such
period as determined on a consolidated basis in accordance with GAAP.

 

“Consolidated
Net Income” means, with respect to any Person, for any period, the
aggregate net income (or loss) of such Person and its Restricted Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP; provided that there shall be excluded therefrom:

 

(1)                                  after-tax gains
from Asset Sales (without regard to the $5.0 million limitation set forth in
the definition thereof) or abandonments or reserves relating thereto;

 

(2)                                  after-tax items
classified as extraordinary or nonrecurring gains or losses;

 

7

 

(3)                                  the net income
of any Person acquired in a “pooling of interests” transaction accrued prior to
the date it becomes a Restricted Subsidiary of the referent Person or is merged
or consolidated with the referent Person or any Restricted Subsidiary of the
referent Person;

 

(4)                                  the net income
(but not loss) of any Restricted Subsidiary of the referent Person to the
extent that the declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is restricted by contract, operation of
law or otherwise;

 

(5)                                  the net income
of any Person, other than a Restricted Subsidiary of the Company, except to the
extent of cash dividends or distributions paid to the Company or to a
Restricted Subsidiary of the Company by such Person;

 

(6)                                  income or loss
attributable to discontinued operations (including, without limitation,
operations disposed of during such period whether or not such operations were
classified as discontinued);

 

(7)                                  in the case of
a successor to the referent Person by consolidation or merger or as a
transferee of the referent Person’s assets, any earnings of the successor
entity prior to such consolidation, merger or transfer of assets; and

 

(8)                                  non-cash
charges relating to compensation expense in connection with benefits provided
under employee stock option plans, restricted stock option plans and other
employee stock purchase or stock incentive plans.

 

“Consolidated
Net Worth” of any Person means the consolidated stockholders’ equity of
such Person, determined on a consolidated basis in accordance with GAAP, less
(without duplication) amounts attributable to Disqualified Capital Stock of
such Person.

 

“Consolidated
Non-cash Charges” means, with respect to any Person, for any period, the
aggregate depreciation, amortization and other non-cash expenses of such Person
and its Restricted Subsidiaries reducing Consolidated Net Income of such Person
and its Restricted Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP (excluding any such charges that require an
accrual of or a reserve for cash charges for any future period).

 

“Consolidated
Secured Debt Ratio” as of any date of determination means the ratio of (1) Consolidated
Total Indebtedness of the Company and its Restricted Subsidiaries that is
secured by Liens as of the end of the most recent fiscal period for which
internal quarterly financial statements are available immediately preceding the
date on which such event for which such calculation is being made to (2) the
Company’s Consolidated EBITDA for the most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date on which such event for which such calculation is being
made, in each case with such pro forma
adjustments to Consolidated Total Indebtedness and Consolidated EBITDA as are
appropriate and consistent with the pro forma
adjustment provisions set forth in the definition of “Consolidated Fixed Charge
Coverage Ratio.”

 

8

 

“Consolidated
Total Assets” means the total consolidated assets of the Company and its
Restricted Subsidiaries, as shown on the most recent consolidated balance sheet
of the Company and its Restricted Subsidiaries.

 

“Consolidated
Total Indebtedness” means, as at any date of determination, an amount equal
to the sum of (1) the aggregate amount of all outstanding Indebtedness of
the Company and its Restricted Subsidiaries on a consolidated basis consisting
of Indebtedness for borrowed money, obligations in respect of Capitalized Lease
Obligations and debt obligations evidenced by promissory notes and similar
instruments and (2) the aggregate amount of all outstanding Disqualified
Capital Stock of the Company and all Preferred Stock of its Restricted
Subsidiaries on a consolidated basis, with the amount of such Disqualified
Capital Stock and Preferred Stock equal to the greater of their respective
voluntary or involuntary liquidation preferences and maximum fixed repurchase
prices, in each case determined on a consolidated basis in accordance with
GAAP.  For purposes hereof, the “maximum
fixed repurchase price” of any Disqualified Capital Stock or Preferred Stock
that does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Disqualified Capital Stock or Preferred Stock as if such
Disqualified Capital Stock or Preferred Stock were purchased on any date on
which Consolidated Total Indebtedness shall be required to be determined
pursuant to this Supplemental Indenture, and if such price is based upon, or
measured by, the Fair Market Value of such Disqualified Capital Stock or
Preferred Stock, such Fair Market Value shall be determined reasonably and in
good faith by the Company.

 

“Covenant
Defeasance” has the meaning given such term in Section 8.03.

 

“Credit
Agreement” means the Amended and Restated Credit Agreement, dated as of August 25,
2008 (as previously and hereafter amended), between the Company, the subsidiary
borrowers signatory thereto, JPMorgan Chase Bank, N.A., as administrative agent
and collateral agent, and the other financial institutions party thereto,
together with the related documents thereto (including, without limitation, any
guarantee agreements and security documents), in each case as amended through October 18,
2010 and as such agreements may be amended (including any amendment and
restatement thereof), supplemented or otherwise modified from time to time,
including any agreement extending the maturity of, refinancing, replacing or
otherwise restructuring (including increasing the amount of available
borrowings thereunder or adding Restricted Subsidiaries of the Company as
additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.

 

“Credit
Facilities” means one or more debt facilities, including the Credit
Agreement, or other financing arrangements (including, without limitation,
commercial paper facilities or indentures) providing for revolving credit
loans, term loans, letters of credit or other indebtedness, including any
notes, mortgages, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and any amendments, supplements,
modifications, extensions, renewals, restatements or refundings thereof and any
indentures or credit facilities or commercial paper facilities that replace,
refund or refinance any part of the loans, notes, other credit facilities or
commitments thereunder, including any such replacement, refunding or 

 

9

 

refinancing
facility or indenture that increases the amount permitted to be borrowed
thereunder or alters the maturity thereof, whether by the same or any other
agent, investor, lender or group of lenders.

 

“Currency
Agreement” means any foreign exchange contract, currency swap agreement or
other similar agreement or arrangement designed to protect the Company or any
Restricted Subsidiary of the Company against fluctuations in currency values.

 

“Custodian”
has the meaning provided in Section 2.01.

 

“Default”
means an event or condition the occurrence of which is, or with the lapse of
time or the giving of notice or both would be, an Event of Default.

 

“Definitive
Registered Note” means any Note that is not a Global Note and that is
registered in the Register, the form of which is attached hereto as Exhibit A.

 

“Designated
Non-Cash Consideration” means the Fair Market Value of non-cash
consideration received by the Company or one of its Restricted Subsidiaries in
connection with an Asset Sale that is so designated as “Designated Non-Cash
Consideration” pursuant to an Officers’ Certificate, setting forth the basis of
such valuation, less the amount of cash or Cash Equivalents received in
connection with a subsequent sale of such Designated Non-Cash Consideration.

 

“Disqualified
Capital Stock” means that portion of any Capital Stock which, by its terms
(or by the terms of any security into which it is convertible or for which it
is exchangeable at the option of the holder thereof), or upon the happening of
any event (other than an event which would constitute a Change of Control),
matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is redeemable at the sole option of the holder thereof (except,
in each case, upon the occurrence of a Change of Control), on or prior to the
final maturity date of the Notes.

 

“Domestic
Restricted Subsidiary” means any Restricted Subsidiary of the Company
incorporated or otherwise existing under the laws of the United States, any
state thereof or the District of Columbia.

 

“Events
of Default” has the meaning provided in Section 6.01.

 

“Exchange
Act” means the Securities Exchange Act of 1934, as amended, or any
successor statute or statutes thereto.

 

“Existing
2018 Notes” means the Company’s $400.0 million 9.50% Senior Notes due 2018.

 

“Existing
Notes” means the Existing 2018 Notes and the Company’s $150.0 million
7.125% Senior Notes due 2013.

 

10

 

“Factor”
means, collectively, one or more purchasers of receivables under the Factoring
Agreement.

 

“Factoring
Agreement” means one or more receivables purchase agreements (or similar
agreements) entered into by the Company or any of its Restricted Subsidiaries
with one or more Factors, as the same may be amended, modified, supplemented
and/or replaced from time to time so long as any such replacement agreement is
on terms no less favorable to the Company or any of its Restricted Subsidiaries
in any material respect than those terms set forth in the Factoring Agreements
as in effect on the Issue Date.

 

“Fair
Market Value” means, with respect to any asset or property, the price which
could be negotiated in an arm’s-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction.  Fair Market Value shall be determined by the
Board of Directors of the Company acting reasonably and in good faith and shall
be evidenced by a Board Resolution of the Board of Directors of the Company
delivered to the Trustee.

 

“Foreign
Cash Equivalents” means certificates of deposit or bankers’ acceptances of
any bank organized under the laws of Canada, Singapore, Australia, China or any
country that is a member of the European Union, whose short-term commercial
paper rating from S&P is at least A-1 or the equivalent thereof or from
Moody’s is at least P-1 or the equivalent thereof, in each case with maturities
of not more than one year from the date of acquisition.

 

“Foreign
Restricted Subsidiary” means any Restricted Subsidiary of the Company that
is not a Domestic Restricted Subsidiary.

 

“Four
Quarter Period” has the meaning given such term in the definition of “Consolidated
Fixed Charge Coverage Ratio.”

 

“GAAP”
means generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
may be approved by a significant segment of the 
accounting profession of the United States, which are in effect as of
the Issue Date.

 

“guarantee”
means a direct or indirect guarantee by any Person of any Indebtedness of any
other Person and includes any obligation, direct or indirect, contingent or
otherwise, of such Person:  (1) to
purchase or pay (or advance or supply funds for the purchase or payment of)
Indebtedness of such other Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services (unless such purchase arrangements are on arm’s-length
terms and are entered into in the ordinary course of business), to take-or-pay,
or to maintain financial statement conditions or otherwise); or (2) entered
into for purposes of assuring in any other manner the obligee of such
Indebtedness of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part). 
When used as  verbs, “guarantee”
and “guaranteed” have correlative meanings.

 

11

 

“Guarantee”
means any guarantee of the Obligations of the Company under this Supplemental
Indenture and the Notes by a Guarantor. 
When used as a verb, “Guarantee” shall have a corresponding
meaning.

 

“Guarantor”
means:  (1) each of Manitowoc Crane
Companies, LLC; Manitowoc Foodservice Companies, LLC; Manitowoc Cranes, LLC;
Grove U.S. LLC; Manitowoc FP, Inc.; Manitowoc FSG Operations, LLC; MMG
Holding Co., LLC; McCann’s Engineering &     Manufacturing Co., LLC; Manitowoc FSG
Services, LLC; Manitowoc FSG International Holdings, Inc.; Kysor Nevada
Holding Corp.; Cleveland Range, LLC; The Delfield Company LLC; Frymaster LLC;
Kysor Industrial Corporation; Welbilt Walk-ins, LP; MTW County Limited; Enodis
Limited; Enodis Corporation; Enodis Holdings, Inc.; Manitowoc FSG U.S.
Holding, LLC;  Manitowoc Crane Group U.S.
Holding, LLC; Environmental Rehab, Inc.; Manitowoc CP, Inc.;
Manitowoc MEC, Inc.; Manitowoc Re-Manufacturing, LLC; and Manitowoc
Equipment Works, Inc.; and (2) each of the Company’s Domestic
Restricted Subsidiaries that in the future executes a supplemental indenture in
which such Domestic Restricted Subsidiary agrees to be bound by the terms of
this Supplemental Indenture as a Guarantor; provided that
any Person constituting a Guarantor as described above shall cease to
constitute a Guarantor when its respective Guarantee is released in accordance
with the terms of this Supplemental Indenture.

 

“Holder”
means any Person shown on the Register as the registered holder, from time to
time, of the Notes.

 

“incur”
has the meaning given such term in Section 4.03.

 

“Indebtedness”
means, with respect to any Person, without duplication:

 

(1)                                  all Obligations
of such Person for borrowed money;

 

(2)                                  all Obligations
of such Person evidenced by bonds, debentures, notes or other similar
instruments;

 

(3)                                  all Capitalized
Lease Obligations of such Person;

 

(4)                                  all Obligations
of such Person issued or assumed as the deferred purchase price of property,
all conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business);

 

(5)                                  all Obligations
for the reimbursement of any obligor on any letter of credit, banker’s
acceptance or similar credit transaction which is issued in respect of
Indebtedness referred to in clauses (1) through (4) above and clause (8) below;

 

(6)                                  guarantees and
other contingent obligations in respect of Indebtedness referred to in clauses (1) through
(5) above and clause (8) below;

 

12

 

(7)                                  all Obligations
of any other Person of the type referred to in clauses (1) through (6) above
that are secured by any Lien on any property or asset of such Person, the
amount of such Obligation being deemed to be the lesser of the fair market
value of such property or asset or the amount of the Obligation so secured;

 

(8)                                  all net
Obligations under Currency Agreements and interest swap agreements of such
Person; and

 

(9)                                  all
Disqualified Capital Stock issued by such Person, with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to the
greater of its voluntary or involuntary liquidation preference and its maximum
fixed repurchase price, but excluding accrued dividends, if any.

 

For
purposes hereof, the “maximum fixed repurchase price” of any
Disqualified Capital Stock which does not have a fixed repurchase price shall
be calculated in accordance with the terms of such Disqualified Capital Stock
as if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to this Supplemental
Indenture, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital 
Stock, such fair market value shall be determined reasonably and in good
faith by the Board of Directors of the Company.

 

“Indenture”
means the Base Indenture, as amended and supplemented by this Supplemental
Indenture and one or more supplemental indentures thereto applicable to the
Notes, if any.

 

“Indenture
Obligations” has the meaning given such term in Section 11.01.

 

“Independent
Financial Advisor” means a firm:  (1) that
does not, and whose directors, officers and employees or Affiliates do not,
have a direct or indirect financial interest in the Company; and (2) that,
in the judgment of the Board of Directors of the Company, is otherwise
independent and qualified to perform the task for which it is to be engaged.

 

“Indirect
Participant” is defined to mean a Person who holds a Book-Entry Interest
through a Participant.

 

“Initial
Notes” means (i) $600,000,000 aggregate principal amount of 8.50%
Senior Notes due 2020 issued on the Issue Date, substantially in the form of Exhibit A,
and (ii) Additional Notes.

 

“interest”
means, with respect to the Notes, interest on the Notes.

 

“Interest
Payment Date” means each semi-annual interest payment date on May 1
and November 1 of each year, commencing May 1, 2011.

 

“Interest
Swap Obligations” means the obligations of any Person pursuant to any
arrangement with any other Person, whereby, directly or indirectly, such Person
is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed

 

13

 

rate
of interest on a stated notional amount in exchange for periodic payments made
by such other Person calculated by applying a fixed or a floating rate of
interest on the same notional amount and shall include, without limitation,
interest rate swaps, caps, floors, collars and similar agreements.

 

“Investment”
means, with respect to any Person, any direct or indirect loan or other
extension of credit (including, without limitation, a guarantee) or capital
contribution to (by means of any transfer of cash or other property to others
or any payment for property or services for the account or use of others), or
any purchase or acquisition by such Person of any Capital Stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued by, any
other Person.  “Investment” shall exclude
extensions of trade credit by the Company and its Restricted Subsidiaries on
commercially reasonable terms.  If the
Company or any Restricted Subsidiary of the Company sells or otherwise disposes
of any Common Stock of any direct or indirect Wholly Owned Restricted
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, the Company no longer owns, directly or indirectly, 100% of the
outstanding Common Stock of such Restricted Subsidiary, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Common Stock of such Restricted
Subsidiary not sold or disposed of.

 

“Investment
Grade Rating” means a rating of Baa3 or better by Moody’s and BBB- or
better by S&P (or its equivalent under any successor rating categories of
S&P) (or, in each case, if such Rating Agency ceases to rate the Notes for
reasons outside of the control of the Company, the equivalent investment grade
credit rating from any Rating Agency selected by the Company as a replacement
Rating Agency).

 

“Issue
Date” means October 18, 2010.

 

“Legal
Defeasance” has the meaning given such term in Section 8.02.

 

“Lien”
means any lien, mortgage, deed of trust, pledge, security interest, charge or
encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).

 

“Moody’s”
means Moody’s Investors Service, Inc. or any successor to the rating
agency business thereof.

 

“Net
Cash Proceeds” means, with respect to any Asset Sale, the proceeds in the
form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents
(other than the portion of any such deferred payment constituting interest)
received by the Company or any of its Restricted Subsidiaries from such Asset
Sale net of:

 

(1)           reasonable
out-of-pocket expenses and fees relating to such Asset Sale (including, without
limitation, legal, accounting and investment banking fees and sales
commissions);

 

14

 

(2)           taxes paid or
payable after taking into account any reduction in consolidated tax liability
due to available tax credits or deductions and any tax sharing arrangements;

 

(3)           repayment of
Indebtedness that is secured by the property or assets that are the subject of
such Asset Sale; and

 

(4)           appropriate amounts
to be provided by the Company or any Restricted Subsidiary, as the case may be,
as a reserve, in accordance with GAAP, against any liabilities associated with
such Asset Sale and retained by the Company or any Restricted Subsidiary, as
the case may be, after such Asset Sale, including, without limitation, pension
and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale.

 

“Net
Proceeds Offer” has the meaning provided in Section 4.10(b).

 

“Net
Proceeds Offer Amount” has the meaning provided in Section 4.10(b).

 

“Net
Proceeds Offer Payment Date” has the meaning provided in Section 4.10(b).

 

“Net
Proceeds Offer Trigger Date” has the meaning provided in Section 4.10(b).

 

“Non-payment
Default” has the meaning provided in Section 10.02(b).

 

“Notes”
means the Initial Notes and the Additional Notes, if any.  The Initial Notes and any Additional Notes
shall be treated as a single class for all purposes under this Supplemental
Indenture, and unless the context otherwise requires, all references to the
Notes shall include the Initial Notes and any Additional Notes.

 

“Obligations”
means all obligations for principal, premium, interest, penalties, fees,
indemnification, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.

 

“Officer”
means any of the following of the Company: 
the Chairman of the Board of Directors, Vice Chairman of the Board of
Directors, Chief Executive Officer, President, Chief Operating Officer, Chief
Financial Officer, Vice President, Treasurer, Secretary, Assistant Secretary or
Assistant Treasurer (including interim officers).

 

“Pari
Passu Indebtedness” means any Indebtedness of the Company or any Guarantor
that ranks pari passu in right of payment with the
Notes or the Guarantee of such Guarantor, as applicable.

 

“Participants”
means, with respect to the Depository, Persons who have accounts with the
Depository.

 

“Paying
Agent” has the meaning provided in Section 2.04, except that, for the
purposes of Article Eight, the Paying Agent shall not be the Company, any
Guarantor or any 

 

15

 

Subsidiary
of the Company, a Guarantor or an Affiliate of any of them.  The term “Paying Agent” includes any
additional Paying Agent.

 

“Permitted
Indebtedness” means, without duplication, each of the following:

 

(1)           Indebtedness under
the Notes issued on the Issue Date in an aggregate principal amount not to
exceed $600.0 million and the related Guarantees;

 

(2)           Indebtedness
incurred pursuant to Credit Facilities in an aggregate principal amount at any
time outstanding not to exceed $2,675.0 million (i) less the amount of all
mandatory principal payments actually made by the Company or any Restricted
Subsidiary with the Net Cash Proceeds from Asset Sales in respect of the term
loans thereunder (excluding any such payments to the extent refinanced at the
time of payment under a replaced Credit Facility); and (ii) reduced by any
mandatory permanent repayments of revolving loans made by the Company
thereunder (which are accompanied by a corresponding permanent commitment
reduction) with the Net Cash Proceeds from Asset Sales (excluding any such
payments and commitment reductions to the extent refinanced at the time of
payment under a replaced Credit Agreement).

 

(3)           Indebtedness of the
Company and its Restricted Subsidiaries outstanding on the Issue Date (other
than Indebtedness under clauses (1) and (2) above) reduced by the
amount of any scheduled amortization payments or mandatory prepayments when
actually paid or permanent reductions therein;

 

(4)           Interest Swap
Obligations of the Company or any of its Restricted Subsidiaries covering
Indebtedness of the Company or such Restricted Subsidiary; provided, however,
that such Interest Swap Obligations are entered into to protect the Company and
its Restricted Subsidiaries from fluctuations in interest rates on Indebtedness
incurred without violation of this Supplemental Indenture to the extent the
notional principal amount of such Interest Swap Obligation does not exceed, at
the time of the incurrence thereof, the principal amount of the Indebtedness to
which such Interest Swap Obligation relates;

 

(5)           Indebtedness under
Currency Agreements; provided that
in the case of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and its Restricted
Subsidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;

 

(6)           Indebtedness of a
Restricted Subsidiary of the Company to the Company, to a Guarantor or to
another Wholly Owned Restricted Subsidiary of the Company for so long as such
Indebtedness is held by the Company, such Guarantor, such Wholly Owned
Restricted Subsidiary or the holders of a Lien permitted under this
Supplemental Indenture, in each case subject to no Lien held by a Person other
than the Company, a Guarantor, such Wholly Owned Restricted Subsidiary or
holders of a Lien permitted under this Supplemental Indenture; provided that if as of any date any Person other than the
Company, a Guarantor, a Wholly Owned Restricted Subsidiary of the Company or 

 

16

 

the
holder of a Lien permitted under this Supplemental Indenture owns or holds any
such Indebtedness or holds a Lien in respect of such Indebtedness, such date
shall be deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by the issuer of such Indebtedness pursuant to this clause (6);

 

(7)           Indebtedness of the
Company to a Wholly Owned Restricted Subsidiary of the Company for so long as
such Indebtedness is held by a Wholly Owned Restricted Subsidiary of the
Company or the holders of a Lien permitted under this Supplemental Indenture,
in each case subject to no Lien other than a Lien permitted under this
Supplemental Indenture; provided that (a) any
Indebtedness of the Company to any Wholly Owned Restricted Subsidiary of the
Company that is not Guarantor is unsecured and subordinated, pursuant to a
written agreement, to the Company’s obligations under this Supplemental
Indenture and the Notes and (b) if as of any date any Person other than a
Wholly Owned Restricted Subsidiary of the Company or the holders of a Lien
permitted under this Supplemental Indenture owns or holds any such Indebtedness
or any Person holds a Lien in respect of such Indebtedness, such date shall be
deemed the incurrence of Indebtedness not constituting Permitted Indebtedness
by the Company pursuant to this clause (7);

 

(8)           Indebtedness arising
from the honoring by a bank or other financial institution of a check, draft or
similar instrument inadvertently (except in the case of daylight overdrafts)
drawn against insufficient funds in the ordinary course of business; provided, however, that
such  Indebtedness is extinguished within
four business days of incurrence;

 

(9)           Indebtedness of the
Company or any of its Restricted Subsidiaries represented by letters of credit
for the account of the Company or such Restricted Subsidiary, as the case may
be, in order to provide security for workers’ compensation claims, payment
obligations in connection with self-insurance, the purchase of goods or similar
requirements in the ordinary course of business;

 

(10)         Indebtedness
represented by guarantees by the Company or its Restricted Subsidiaries of
Indebtedness otherwise permitted to be incurred under this Supplemental
Indenture; provided that, in the case of a
guarantee by a Restricted Subsidiary, such Restricted Subsidiary complies with Section 4.12
(to the extent applicable);

 

(11)         Indebtedness of the
Company or any of its Restricted Subsidiaries in respect of bid, payment and performance
bonds, bankers’ acceptances, workers’ compensation claims, surety or appeal
bonds, payment obligations in connection with self-insurance or similar
obligations, and bank overdrafts (and letters of credit in respect thereof) in
the ordinary course of business;

 

(12)         Indebtedness of the
Company or any Restricted Subsidiary consisting of guarantees, indemnities or
obligations in respect of purchase price adjustments in connection with the
acquisition or disposition of assets;

 

17

 

(13)         Indebtedness
represented by Capitalized Lease Obligations and Purchase Money Indebtedness of
the Company and its Restricted Subsidiaries incurred in the ordinary course of
business not to exceed $25.0 million at any one time outstanding;

 

(14)         Indebtedness of
Foreign Restricted Subsidiaries of the Company in an aggregate principal amount
not to exceed $50.0 million under lines of credit to any such Foreign
Restricted Subsidiary from Persons other than the Company or any of its
Subsidiaries, the proceeds of which Indebtedness are used for such Foreign
Restricted Subsidiary’s working capital and other general corporate purposes;

 

(15)         Indebtedness that may
be deemed to exist pursuant to the Factoring Agreements and Indebtedness by a
Securitization Entity in a Qualified Securitization Transaction that is not
recourse (except for Standard Securitization Undertakings) to the Company or
any of its Restricted Subsidiaries; provided that
any amounts incurred under this clause (15) in excess of $125.0 million will
reduce the amounts available for borrowing under clause (2) above in an
equal amount;

 

(16)         Indebtedness of the
Company evidenced by commercial paper issued by the Company; provided that the aggregate outstanding principal amount of
Indebtedness incurred pursuant to clause (2) of this definition and this
clause (16) does not exceed the maximum amount of Indebtedness permitted under
clause (2) of this definition;

 

(17)         Refinancing
Indebtedness;

 

(18)         Indebtedness of the
Company or any of its Restricted Subsidiaries consisting of obligations to
repurchase equipment or guarantees of the residual value of equipment incurred
in the ordinary course of business, to the extent such obligations do not
exceed the fair market value of such equipment; and

 

(19)         additional
Indebtedness of the Company and its Restricted Subsidiaries in an aggregate
principal amount not to exceed $200.0 million at any one time outstanding
(which amount may, but need not, be incurred in whole or in part under Credit
Facilities).

 

For
purposes of determining any particular amount of Indebtedness under Section 4.03,
guarantees, Liens or letter of credit obligations supporting Indebtedness
otherwise included in the determination of such particular amount shall not be
included.  For purposes of determining
compliance with Section 4.03, in the event that all or a portion of an
item of Indebtedness meets the criteria of more than one of the categories of
Permitted Indebtedness described in clauses (1) through (19) above or is
permitted to be incurred pursuant to the Consolidated Fixed Charge Coverage
Ratio provisions of such section, the Company shall, in its sole discretion,
classify (or later reclassify) such item or portion of such item of
Indebtedness in any manner that complies with such section, except that
Indebtedness outstanding under the Existing 2018 Notes and the Credit Agreement
on the Issue Date shall be deemed to have been incurred under clause (2) above.
Accrual of interest, accretion or amortization of original issue discount, the
payment of interest on any Indebtedness in the form of additional Indebtedness
with the same terms, the payment of dividends on Disqualified Capital Stock in
the form of additional shares of the same class of Disqualified Capital Stock
and change in the amount 

 

18

 

outstanding
due solely to the result of fluctuations in the exchange rates of currencies
will not be deemed to be an incurrence of Indebtedness or an issuance of
Disqualified Capital Stock for purposes of Section 4.03.

 

“Permitted
Investments” means:

 

(1)           Investments by the
Company or any Restricted Subsidiary of the Company in any Person that is or
will become after such Investment a Wholly Owned Restricted Subsidiary of the
Company or that will merge or consolidate into the Company or a Wholly Owned
Restricted Subsidiary of the Company and other Investments to the extent
constituting intercompany Indebtedness permitted under clause (6) or (7) of
the definition of “Permitted Indebtedness”;

 

(2)           Investments in the
Company by any Restricted Subsidiary of the Company; provided
that any Indebtedness evidencing such Investment, to the extent held by a
Restricted Subsidiary that is not a Guarantor, is unsecured and subordinated,
pursuant to a written agreement, to the Company’s obligations under the Notes
and this Supplemental Indenture;

 

(3)           Investments in cash
and Cash Equivalents;

 

(4)           loans and advances
to employees and officers of the Company and its Restricted Subsidiaries in the
ordinary course of business for bona fide business purposes not in excess of
$5.0 million at any one time outstanding;

 

(5)           Currency Agreements
and Interest Swap Obligations entered into in the ordinary course of the
Company’s or its Restricted Subsidiaries’ businesses and otherwise in
compliance with this Supplemental Indenture;

 

(6)           additional
Investments not to exceed $25.0 million at any one time outstanding;

 

(7)           Investments in
securities of trade creditors or customers received pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such
trade creditors or customers or in good faith settlement of delinquent
obligations of such trade creditors or customers;

 

(8)           Investments made by
the Company or its Restricted Subsidiaries as a result of consideration
received in connection with an Asset Sale made in compliance with Section 4.10;

 

(9)           Investments
represented by guarantees that are otherwise permitted under this Supplemental
Indenture;

 

(10)         Investments the
payment for which is Qualified Capital Stock of the Company;

 

19

 

(11)         any Investment by the
Company or a Wholly Owned Subsidiary of the Company in a Securitization Entity
or any Investment by a Securitization Entity in any other Person in connection
with a Qualified Securitization Transaction; provided
that any Investment in a Securitization Entity is in the form of a Purchase
Money Note or an equity interest;

 

(12)         Investments by the
Company consisting of obligations of one or more officers, directors or other
employees of the Company or any of its Subsidiaries in connection with such
officers’, directors’ or employees’ acquisition of shares of capital stock of
the Company so long as no cash is paid by the Company or any of its
Subsidiaries to such officers, directors or employees in connection with the
acquisition of any such obligations;

 

(13)         Investments in
existence on the date of this Supplemental Indenture; and

 

(14)         Investments in joint
ventures not to exceed $50.0 million at any one time outstanding.

 

“Permitted
Liens” means the following types of Liens:

 

(1)           Liens for taxes,
assessments or governmental charges or claims either (a) not delinquent or
(b) contested in good faith by appropriate proceedings and as to which the
Company or its Restricted Subsidiaries shall have set aside on its books such
reserves as may be required pursuant to GAAP;

 

(2)           statutory Liens of
landlords and Liens of carriers, warehousemen, mechanics, suppliers,
materialmen and repairmen and other Liens imposed by law incurred in the
ordinary course of business for sums not yet delinquent or being contested in
good faith, if such reserve or other appropriate provision, if any, as shall be
required by GAAP has been made in respect thereof;

 

(3)           Liens incurred or
deposits made in the ordinary course of business in connection with workers’
compensation, unemployment insurance and other types of social security,
including any Lien securing letters of credit issued in the ordinary course of
business in connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);

 

(4)           judgment Liens not
giving rise to an Event of Default so long as such Lien is adequately bonded
and any appropriate legal proceedings which may have been duly initiated for
the review of such judgment shall not have been finally terminated or the
period within which such proceedings may be initiated shall not have expired;

 

(5)           easements,
rights-of-way, zoning restrictions and other similar charges or encumbrances in
respect of real property not interfering in any material respect with the
ordinary conduct of the business of the Company or any of its Restricted
Subsidiaries;

 

20

 

(6)           Liens upon specific
items of inventory or other goods and proceeds of any Person securing such
Person’s obligations in respect of bankers’ acceptances issued or created for
the account of such Person to facilitate the purchase, shipment or storage of
such inventory or other goods;

 

(7)           Liens securing
reimbursement obligations with respect to commercial letters of credit which
encumber documents and other property relating to such letters of credit and
products and proceeds thereof;

 

(8)           Liens encumbering
deposits made to secure obligations arising from statutory, regulatory,
contractual or warranty requirements of the Company or any of its Restricted
Subsidiaries, including rights of offset and set-off;

 

(9)           Liens securing
Interest Swap Obligations which Interest Swap Obligations relate to
Indebtedness that is otherwise permitted under this Supplemental Indenture;

 

(10)         Liens securing
Capitalized Lease Obligations and Purchase Money Indebtedness permitted
pursuant to clause (13) of the definition of “Permitted Indebtedness”; provided, however, that
in the case of Purchase Money Indebtedness (a) the Indebtedness shall not
exceed the cost of such property or assets and shall not be secured by any
property or assets of the Company or any Restricted Subsidiary of the Company
other than the property and assets so acquired or constructed and the proceeds
thereof and (b) the Lien securing such Indebtedness shall be created
within 90 days of such acquisition or construction or, in the case of a
refinancing of any Purchase Money Indebtedness, within 90 days of such
refinancing;

 

(11)         Liens securing Indebtedness
under Currency Agreements;

 

(12)         Liens securing
Acquired Indebtedness incurred in accordance with Section 4.03; provided that:

 

(a)           such
Liens secured such Acquired Indebtedness at the time of and prior to the
incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary of the Company and were not granted in connection with, or in
anticipation of, the incurrence of such Acquired Indebtedness by the Company or
a Restricted Subsidiary of the Company; and

 

(b)           such
Liens do not extend to or cover any property or assets of the Company or of any
of its Restricted Subsidiaries other than the property or assets that secured
the Acquired Indebtedness prior to the time such Indebtedness became Acquired
Indebtedness of the Company or a Restricted Subsidiary of the Company and are
no more favorable to the lienholders than those securing the Acquired
Indebtedness prior to the incurrence of such Acquired Indebtedness by the
Company or a Restricted Subsidiary of the Company;

 

21

 

(13)         Liens on assets of a
Restricted Subsidiary of the Company that is not a Guarantor to secure
Indebtedness of such Restricted Subsidiary that is otherwise permitted under
this Supplemental Indenture;

 

(14)         Liens on assets
transferred to a Securitization Entity or on assets of a Securitization Entity,
in either case incurred in connection with a Qualified Securitization
Transaction, and Liens in favor of a Factor solely on those accounts receivable
(and the rights ancillary thereto) of the Company and its Restricted
Subsidiaries that are purchased by a Factor pursuant to a Factoring Agreement
from time to time;

 

(15)         leases, subleases,
licenses and sublicenses granted to others that do not materially interfere
with the ordinary course of business of the Company and its Restricted
Subsidiaries;

 

(16)         banker’s Liens,
rights of set-off and similar Liens with respect to cash and Cash Equivalents
on deposit in one or more bank accounts in the ordinary course of business;

 

(17)         Liens arising from
filing Uniform Commercial Code financing statements regarding leases;

 

(18)         Liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
custom duties in connection with the importation of goods;

 

(19)         rights of customers
with respect to inventory which arise from deposits and progress payments made
in the ordinary course of business;

 

(20)         Liens securing
Indebtedness permitted pursuant to clause (14) of the definition of “Permitted
Indebtedness”; and

 

(21)         additional Liens not
to exceed $25.0 million at any one time.

 

“Person”
means an individual, partnership, corporation, limited liability company,
unincorporated organization, trust or joint venture, or a governmental agency
or political subdivision thereof.

 

“Preferred
Stock” of any Person means any Capital Stock of such Person that has
preferential rights to any other Capital Stock of such Person with respect to
dividends or redemptions or upon liquidation.

 

“principal”
means, with respect to the Notes, the principal of, and premium, if any, on the
Notes.

 

“Prior
Issue Date” means November 6, 2003.

 

“Public
Equity Offering” means an underwritten public offering of Qualified Capital
Stock of the Company pursuant to a registration statement filed with the
Commission in accordance with the Securities Act.

 

22

 

“Purchase
Money Indebtedness” means Indebtedness of the Company and its Restricted
Subsidiaries incurred in the normal course of business for the purpose of
financing all or any part of the purchase price, or the cost of installation,
construction or improvement, of property or equipment.

 

“Purchase
Money Note” means a promissory note of a Securitization Entity evidencing a
line of credit, which may be irrevocable, from the Company or any Subsidiary of
the Company in connection with a Qualified Securitization Transaction to a
Securitization Entity, which note shall be repaid from cash available to the
Securitization Entity other than amounts required to be established as reserves
pursuant to agreements, amounts paid to investors in respect of interest and
principal and amounts paid in connection with the purchase of newly generated
receivables or newly acquired equipment.

 

“Qualified
Capital Stock” means any Capital Stock that is not Disqualified Capital
Stock.

 

“Qualified
Securitization Transaction” means any transaction or series of transactions
that may be entered into by the Company, any of its Restricted Subsidiaries or
a Securitization Entity pursuant to which the Company or such Restricted
Subsidiary or that Securitization Entity may, pursuant to customary terms,
sell, convey or otherwise transfer to, or grant a security interest in for the
benefit of, (1) a Securitization Entity or the Company or any of its
Restricted Subsidiaries that subsequently transfers to a Securitization Entity
(in the case of a transfer by the Company or such Restricted Subsidiary) and (2) any
other Person (in the case of transfer by a Securitization Entity), any accounts
receivable (whether now existing or arising or acquired in the future) of the
Company or any of its Restricted Subsidiaries that arose in the ordinary course
of business of the Company and its Restricted Subsidiaries, and any assets
related thereto, including, without limitation, all collateral securing such
accounts receivable, all contracts and contract rights and all guarantees or
other obligations in respect of such accounts receivable, proceeds of such
accounts receivable and other assets (including contract rights) that are
customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transactions
involving accounts receivable.

 

“Rating
Agency” means (1) each of Moody’s and S&P and (2) if Moody’s
or S&P ceases to rate the Notes for reasons outside of the control of the
Company, a “nationally recognized statistical rating organization” within the
meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act selected
by the Company as a replacement agency for Moody’s or S&P, as the case may
be.

 

“redeem”
means to redeem, repurchase, purchase, defease, retire, discharge or otherwise
acquire or retire for value; and “redemption” shall have a correlative
meaning.

 

“Redemption
Date,” when used with respect to any Note to be redeemed, means the date
fixed for such redemption by or pursuant to this Supplemental Indenture.

 

“Redemption
Price,” when used with respect to any Note to be redeemed, means the price
at which such Note is to be redeemed pursuant to this Supplemental Indenture.

 

23

 

“Reference
Date” has the meaning provided in Section 4.05.

 

“Refinance”
means, in respect of any security or Indebtedness, to refinance, extend, renew,
refund, repay, prepay, redeem, defease or retire, or to issue a security or
Indebtedness in exchange or replacement for, such security or Indebtedness in
whole or in part.  “Refinanced”
and “Refinancing” shall have correlative meanings.

 

“Refinancing
Indebtedness” means any Refinancing by the Company or any Restricted
Subsidiary of the Company of Indebtedness incurred in accordance with Section 4.03
(other than pursuant to clause (2), (4), (5), (6), (7), (8), (9), (10), (11),
(12), (13), (14), (15), (16), (18) or (19) of the definition of “Permitted
Indebtedness”), in each case to the extent that it does not:

 

(1)                                  result in an
increase in the aggregate principal amount of Indebtedness of such Person as of
the date of such proposed Refinancing (plus the amount of any premium required
to be paid under the terms of the instrument governing such Indebtedness and plus
the amount of reasonable expenses incurred by the Company in connection with
such Refinancing); or

 

(2)                                  create
Indebtedness with:  (a) a Weighted
Average Life to Maturity that is less than the Weighted Average Life to
Maturity of the Indebtedness being Refinanced; or (b) a final maturity
earlier than the final maturity of the Indebtedness being Refinanced; provided that (x) if such Indebtedness being Refinanced
is Indebtedness solely of the Company, then such Refinancing Indebtedness shall
be Indebtedness solely of the Company and (y) if such Indebtedness being
Refinanced is subordinate or junior to the Notes, then such Refinancing
Indebtedness shall be subordinate to the Notes at least to the same extent and
in the same manner as the Indebtedness being Refinanced.

 

“Register”
has the meaning provided in Section 2.04.

 

“Registrar”
has the meaning provided in Section 2.04.

 

“Regular
Record Date” for the interest payable on any Interest Payment Date means
the April 15 or October 15 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date.

 

“Restricted
Payment” has the meaning provided in Section 4.05.

 

“Restricted
Subsidiary” of any Person means any Subsidiary of such Person which at the
time of determination is not an Unrestricted Subsidiary.

 

“S&P”
means Standard & Poor’s Ratings Services, a division of the
McGraw-Hill Companies, Inc., or any successor to the rating agency
business thereof.

 

“Sale
and Leaseback Transaction” means any direct or indirect arrangement with
any Person or to which any such Person is a party, providing for the leasing to
the Company or a Restricted Subsidiary of any property, whether owned by the
Company or any Restricted 

 

24

 

Subsidiary
at the Issue Date or later acquired, which has been or is to be sold or
transferred by the Company or such Restricted Subsidiary to such Person or to
any other Person from whom funds have been or are to be advanced by such Person
on the security of such Property.

 

“Securities
Act” means the United States Securities Act of 1933, as amended.

 

“Securitization
Entity” means a Wholly Owned Subsidiary of the Company (or another Person
in which the Company or any Subsidiary of the Company makes an Investment and
to which the Company or any Subsidiary of the Company transfers accounts
receivable and related assets) that engages in no activities other than in
connection with the financing of accounts receivable and that is designated by
the Board of Directors of the Company (as provided below) as a Securitization
Entity; and

 

(1)                                  no portion of
the Indebtedness or any other obligations (contingent or otherwise) of which:

 

(a)                                  is guaranteed by the Company
or any Restricted Subsidiary of the Company (other than the Securitization
Entity) (excluding guarantees of obligations (other than the principal of, and
interest on, Indebtedness)) pursuant to Standard Securitization
Undertakings,

 

(b)                                 is recourse to or obligates
the Company or any Restricted Subsidiary of the Company (other than the
Securitization Entity) in any way other than pursuant to Standard
Securitization Undertakings or

 

(c)                                  subjects any asset of the
Company or any Restricted Subsidiary of the Company (other than the
Securitization Entity), directly or indirectly, contingently or otherwise, to
the satisfaction thereof, other than pursuant to Standard Securitization
Undertakings and other than any interest in the accounts receivable and related
assets being financed (whether in the form of an equity interest in such assets
or subordinated indebtedness payable primarily from such financed assets),
retained or acquired by the Company or any Restricted Subsidiary of the
Company;

 

(2)                                  with which
neither the Company nor any Restricted Subsidiary of the Company has any material
contract, agreement, arrangement or understanding other than on terms no less
favorable to the Company or such Restricted Subsidiary than those that might be
obtained at the time from Persons that are not Affiliates of the Company, other
than fees payable in the ordinary course of business in connection with
servicing receivables of such entity; and

 

(3)                                  to which
neither the Company nor any Restricted Subsidiary of the Company has any
obligation to maintain or preserve such entity’s financial condition or cause
such entity to achieve certain levels of operating results.

 

Any
such designation by the Board of Directors of the Company shall be evidenced to
the Trustee by filing with the Trustee a certified copy of the Board Resolution
giving effect to such 

 

25

 

designation
and an Officers’ Certificate certifying that such designation complied with the
foregoing conditions.

 

“Significant
Subsidiary,” with respect to any Person, means any Restricted Subsidiary of
such Person that satisfies the criteria for a “significant subsidiary” set
forth in Rule 1-02(w) of Regulation S-X under the Securities Act.

 

“Standard
Securitization Undertakings” means representations, warranties, covenants
and indemnities entered into by the Company or any Subsidiary of the Company
that are reasonably customary in an accounts receivable securitization
transaction.

 

“Subordinated
Indebtedness” means Indebtedness of the Company or any Guarantor that is
subordinated or junior in right of payment to the Notes or the Guarantee of
such Guarantor, as the case may be.

 

“Subsidiary,”
with respect to any Person, means:

 

(1)                                  any corporation
of which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or through another Subsidiary, by such
Person; or

 

(2)                                  any other
Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or through another Subsidiary, owned by
such Person.

 

“Surviving
Entity” has the meaning given such term in Section 5.01(a)(1)(B).

 

“TIA”
or “Trust Indenture Act” means the Trust Indenture Act of 1939, as
amended (15 U.S. Code Sections 77aaa-77bbb), as in effect on the date this
Supplemental Indenture was executed, except as provided in Section 9.06.

 

“Transaction
Date” has the meaning given such term in the definition of “Consolidated
Fixed Charge Coverage Ratio.”

 

“Transfer
Agent” means Wells Fargo Bank, National Association in its capacity as
transfer agent.

 

“Treasury Rate” means, with
respect to a date of redemption, the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15(519) that has become publicly available at least two business days
prior to such date of redemption (or, if such Statistical Release is no longer
published, any publicly available source of similar market data)) most nearly
equal to the period from such date of redemption to November 1, 2015; provided, however,
that if the period from such date of redemption to November 1, 2015 is not
equal to the constant maturity of the United States Treasury security for which
a weekly average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-

 

26

 

twelfth
of a year) from the weekly average yields of United States Treasury securities
for which such yields are given, except that if the period from such date of
redemption to November 1, 2015 is less than one year, the weekly average
yield on actually traded United States Treasury securities adjusted to a
constant maturity of one year shall be used.

 

“Unrestricted
Subsidiary” of any Person means:

 

(1)                                  any Subsidiary
of such Person that at the time of determination shall be or continue to be
designated an Unrestricted Subsidiary by the Board of Directors of such Person
in the manner provided below; and

 

(2)                                  any Subsidiary
of an Unrestricted Subsidiary.

 

The
Board of Directors of the Company may designate any Subsidiary (including any
newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, the Company or any other Subsidiary of the Company that is not
a Subsidiary of the Subsidiary to be so designated; provided
that:

 

(1)                                  the Company
certifies to the Trustee that such designation complies with Section 4.05;
and

 

(2)                                  each Subsidiary
to be so designated and each of its Subsidiaries has not at the time of
designation, and does not thereafter, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable with respect to any
Indebtedness pursuant to which the lender has recourse to any of the assets of
the Company or any of its Restricted Subsidiaries.

 

The
Board of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary only if:

 

(1)                                  immediately
after giving effect to such designation, the Company is able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with Section 4.03; and

 

(2)                                  immediately
before and immediately after giving effect to such designation, no Default or
Event of Default shall have occurred and be continuing.

 

Any
such designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the Board Resolution giving effect
to such designation and an Officers’ Certificate certifying that such
designation complied with the foregoing provisions.

 

“U.S.
Government Obligations” means securities issued or directly and fully
guaranteed or insured by the government of the United States of America rated
AAA or better by S&P and Aaa or better by Moody’s.

 

27

 

“Weighted
Average Life to Maturity” means, when applied to any Indebtedness at any
date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the
total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.

 

“Wholly
Owned Restricted Subsidiary” of any Person means any Wholly Owned
Subsidiary of such Person which at the time of determination is a Restricted
Subsidiary of such Person.

 

“Wholly
Owned Subsidiary” of any Person means any Subsidiary of such Person of
which all the outstanding voting securities (other than in the case of a
Restricted Subsidiary that is incorporated in a jurisdiction other than a State
in the United States or the District of Columbia, directors’ qualifying shares
or an immaterial amount of shares required to be owned by other Persons
pursuant to applicable law are owned by such Person or any Wholly Owned
Subsidiary of such Person.

 

SECTION 1.02.                                    Incorporation
by Reference of Trust Indenture Act.  Whenever this Supplemental Indenture refers
to a provision of the TIA, the provision is incorporated by reference in and
made a part of this Supplemental Indenture. 
The following TIA term used in this Supplemental Indenture has the
following meaning:

 

“obligor”
on the indenture securities means the Company or any other obligor on the
Notes.

 

All
other TIA terms used in this Supplemental Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by a rule of
the Commission and not otherwise defined herein have the meanings assigned to
them therein.

 

SECTION 1.03.                                    Rules of
Construction.  Unless the
context otherwise requires:

 

(i)                                     a term has the
meaning assigned to it;

 

(ii)                                  an accounting
term not otherwise defined has the meaning assigned to it in accordance with
GAAP;

 

(iii)                               “or” is not
exclusive;

 

(iv)                              words in the
singular include the plural, and words in the plural include the singular;

 

(v)                                 provisions
apply to successive related events and transactions;

 

28

 

(vi)                              “herein,” “hereof”
and other words of similar import refer to this Supplemental Indenture as a
whole and not to any particular Article, Section or other subdivision;

 

(vii)                           all ratios and
computations based on GAAP contained in this Supplemental Indenture shall be
computed in accordance with the definition of “GAAP” set forth in Section 1.01;

 

(viii)                        all references
to Sections or Articles refer to Sections or Articles of this Supplemental
Indenture unless otherwise indicated;

 

(ix)                                all references
to “$,” “Dollars,” “U.S. Dollars” or money refer to the lawful currency of the
United States, unless the content expressly contemplates otherwise.

 

ARTICLE TWO

 

THE NOTES

 

SECTION 2.01.                                    The Notes.

 

(a)                                  Form and
Dating.  The Notes and the Trustee’s
certificate of authentication thereon shall be substantially in the form
annexed hereto as Exhibit A with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Supplemental Indenture.  The Notes
may have notations, legends or endorsements required by law, stock exchange
agreements to which the Company is subject or usage.  The Company shall approve the form of the
Notes and any notation, legend or endorsement on the Notes.  Each Note shall be dated the date of its
authentication.

 

The
terms and provisions contained in the forms of the Notes annexed hereto as Exhibit A
shall constitute, and are hereby expressly made, a part of this Supplemental
Indenture.  The Global Notes and the
Definitive Registered Notes shall be issued only in registered form.  The Notes shall be issued without
coupons.  The Notes shall be issued only
in denominations of $2,000 principal amount or any integral multiple of $1,000
in excess thereof.  To the extent
applicable, the Company, the Guarantors and the Trustee, by their execution and
delivery of this Supplemental Indenture, expressly agree to such terms and
provisions and to be bound thereby.

 

(b)                                 Global Notes.  Notes issued in global form will be
substantially in the form of Exhibit A attached hereto (including the
Global Note Legend thereon and the “Schedule of Exchanges of Interests in the
Global Note” attached thereto).  Notes
issued in definitive form will be substantially in the form of Exhibit A
attached hereto (but without the Global Note Legend thereon and without the “Schedule
of Exchanges of Interests in the Global Note” attached thereto).  Each Global Note will represent such of the
outstanding Notes as will be specified therein and each shall provide that it
represents the aggregate principal amount of outstanding Notes from time to
time endorsed thereon and that the aggregate principal amount of outstanding
Notes represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions.  Any endorsement of a Global Note to reflect 

 

29

 

the
amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby will be made by the Trustee or the
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.

 

(c)                                  Definitive
Registered Notes.  Definitive
Registered Notes issued upon transfer of a Book-Entry Interest or a Definitive
Registered Note, or in exchange for a Book-Entry Interest or a Definitive
Registered Note, shall be issued in accordance with this Supplemental
Indenture, duly executed by the Company and authenticated by the Trustee as
hereinafter provided.  The Definitive
Registered Notes shall be typed, printed, lithographed or engraved or produced
by any combination of these methods or may be produced in any other manner
permitted by the rules of any securities exchange on which the Notes may
be listed, all as determined by the Officers executing such Notes, as evidenced
by their execution of such Notes.

 

(d)                                 Book-Entry
Provisions. 
Participants and Indirect Participants shall have no rights either under
this Supplemental Indenture or under any Global Note with respect to such
Global Note held on their behalf by the Custodian.  Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any Agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Participants, the operation of customary practices of the Depository
governing the exercise of the rights of an owner of a beneficial interest in
any Global Note.

 

SECTION 2.02.                                    Legends.

 

(1)                                  Global Note
Legend.  Each Global Note will bear a
legend in substantially the following form:

 

“THIS GLOBAL NOTE IS HELD BY
THE DEPOSITORY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE
IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT
TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (1) THE
TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO
SECTION 2.04 OF THE SUPPLEMENTAL INDENTURE, (2) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.04(a) OF
THE SUPPLEMENTAL INDENTURE, (3) THIS GLOBAL NOTE MAY BE DELIVERED TO
THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 3.10 OF THE BASE
INDENTURE AND (4) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR
DEPOSITORY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.

 

UNLESS AND UNTIL IT IS
EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT
BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY.  UNLESS THIS CERTIFICATE IS PRESENTED BY 

 

30

 

AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (“DTC”),
TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.”

 

SECTION 2.03.                                    Execution and
Authentication.  The Trustee
or an authenticating agent shall, upon receipt of a Company Order, authenticate
(i) Initial Notes for original issue in an unlimited aggregate principal
amount, of which $600,000,000 are being issued on the Issue Date and
(ii) Additional Notes issued pursuant to Section 2.06.  Each such Company Order shall specify the amount
of Notes to be authenticated and the date on which the Notes are to be
authenticated and whether the Notes are to be issued as Definitive Registered
Notes or Global Notes or such other information as the Trustee may reasonably
request.

 

SECTION 2.04.                                    Transfer and
Exchange.

 

(a)                                  Transfer and
Exchange of Global Notes.  A
Global Note may not be transferred as a whole except by the Depository to a
nominee of the Depository, by a nominee of the Depository to the Depository or
to another nominee of the Depository, or by the Depository or any such nominee
to a successor Depository or a nominee of such successor Depository.  All Global Notes will be exchanged by the
Company for Definitive Registered Notes if:

 

(1)                                  the Company
delivers to the Trustee notice from the Depository that it is unwilling or
unable to continue to act as Depository or that it is no longer eligible or in
good standing under the Exchange Act or other applicable statute or regulation
and, in either case, a successor Depository is not appointed by the Company
within 90 days after the date of such notice from the Depository; or

 

(2)                                  the Company in
its sole discretion determines that the Global Notes (in whole but not in part)
should be exchanged for Definitive Notes and delivers a written notice to such
effect to the Trustee.

 

Upon
the occurrence of either of the preceding events in (1) or (2) above,
Definitive Registered Notes shall be issued in such names as the Depository
shall instruct the Trustee.  Global Notes
also may be exchanged or replaced, in whole or in part, as provided in Sections
3.05 and 3.07 of the Base Indenture. 
Every Note authenticated and delivered in exchange for, or in lieu of, a
Global Note or any portion thereof, pursuant to this Section 2.04 or
Sections 3.05 or 3.07 of the Base Indenture, shall be authenticated and
delivered in the form of, and shall be, a Global Note.  A Global Note may not be exchanged for
another Note other than as provided in this Section 2.04(a), however,
beneficial interests in a Global Note may be transferred and exchanged as
provided in Section 2.04(b) or (c) hereof.

 

31

 

(b)                                 Transfer and
Exchange of Book Entry Interests in the Global Notes.  The transfer and exchange of Book Entry
Interests in the Global Notes will be effected through the Depository, in
accordance with the provisions of this Supplemental Indenture and the
Applicable Procedures.  Transfers of Book
Entry Interests in the Global Notes also will require compliance with
subparagraph (1) below, as well as one or more of the other following
subparagraphs, as applicable.

 

(1)                                  Transfer of
Beneficial Interests in the Same Global Note.  Beneficial interests in a Global Note may be
transferred to Persons who take delivery thereof in the form of a beneficial
interest in a Global Note.  No written
orders or instructions shall be required to be delivered to the Registrar to
effect the transfers described in this Section.

 

(2)                                  All Other
Transfers and Exchanges of Book-Entry Interests in Global Notes.  In connection with all transfers and
exchanges of Book-Entry Interests that are not subject to Section 2.04(b)(1) above,
the transferor of such Book-Entry Interest must deliver to the Registrar either
(A)(1) a written order from a Participant or an Indirect Participant given
to the Depository in accordance with the Applicable Procedures directing the
Depository to credit or cause to be credited a Book-Entry Interest in another
Global Note in an amount equal to the Book-Entry Interest to be transferred or exchanged
and (2) instructions given in accordance with the Applicable Procedures
containing information regarding the Participant account to be credited with
such increase or (B)(1) a written order from a Participant or an Indirect
Participant given to the Depository in accordance with the Applicable
Procedures directing the Depository to cause to be issued a Definitive
Registered Note in an amount equal to the Book-Entry Interest to be transferred
or exchanged and (2) instructions given by the Depository to the Registrar
containing information regarding the Person in whose name such Definitive
Registered Note shall be registered to effect the transfer or exchange referred
to in (1) above.  Upon satisfaction
of all of the requirements for transfer or exchange of Book-Entry Interests in
Global Notes contained in this Supplemental Indenture and the Notes or
otherwise applicable under the Securities Act, the Trustee shall adjust the
principal amount of the relevant Global Note(s) pursuant to Section 2.11.

 

(c)                                  Transfer or
Exchange of Book-Entry Interests for Definitive Registered Notes.

 

(i)                                     Book-Entry
Interests in Unrestricted Global Notes to Unrestricted Definitive Registered
Notes.  If any
holder of a Book-Entry Interest in a Global Note proposes to exchange such
Book-Entry Interest for a Definitive Registered Note or to transfer such
Book-Entry Interest to a Person who takes delivery thereof in the form of a
Definitive Registered Note, then, upon satisfaction of the conditions set forth
in Section 2.04(b)(2), the Trustee shall cause the aggregate principal
amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.11,
and the Company shall execute and the Trustee shall authenticate and deliver to
the Person designated in the instructions a Definitive Registered Note in the
appropriate principal amount.  Any
Definitive Registered Note issued in exchange for a Book-Entry Interest
pursuant to this Section 2.04(c)(i) shall be registered in such name
or names and in such authorized denomination or denominations as the holder of
such Book-Entry Interest shall instruct the 

 

32

 

Registrar
through instructions from the Depository and the Participant or Indirect
Participant.  The Trustee shall deliver
such Definitive Registered Notes to the Persons in whose names such Notes are
so registered.

 

(d)                                 Transfer and
Exchange of Definitive Registered Notes for Book-Entry Interests.

 

(i)                                     Definitive
Registered Notes to Book-Entry Interests in Global Notes.  A Holder of a Definitive Registered Note may
exchange such Note for a Book-Entry Interest in a Global Note or transfer such
Definitive Registered Notes to a Person who takes delivery thereof in the form
of a Book-Entry Interest in a Global Note at any time.  Upon receipt of a request for such an exchange
or transfer, the Trustee shall cancel the applicable Definitive Registered Note
and increase or cause to be increased the aggregate principal amount of one of
the Global Notes.

 

If
any such exchange or transfer from a Definitive Registered Note to a Book-Entry
Interest is effected pursuant to subparagraphs (ii)(b), (ii)(c) or (ii)(d) above
at a time when a Global Note has not yet been issued, the Company shall issue
and, upon receipt of a Company Order in accordance with Section 2.03, the
Trustee shall authenticate one or more Global Notes in an aggregate principal
amount equal to the principal amount of Definitive Registered Notes so
transferred.

 

(e)                                  Transfer and
Exchange of Definitive Registered Notes for Definitive Registered Notes.  Upon written request by a Holder of
Definitive Registered Notes and such Holder’s compliance with the provisions of
this Section 2.04(e), the Registrar shall register the transfer or
exchange of Definitive Registered Notes. 
Prior to such registration of transfer or exchange, the requesting
Holder shall present or surrender to the Registrar the Definitive Registered
Notes duly endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Registrar duly executed by such Holder or by its attorney,
duly authorized in writing.  In addition,
the requesting Holder shall provide any additional certifications, documents
and information, as applicable, required pursuant to the following provisions
of this Section 2.04(e).

 

(f)                                    General
Provisions Relating to All Transfers and Exchanges

 

(i)                                     To permit
registrations of transfers and exchanges, the Company shall execute and the
Trustee shall authenticate Global Notes or Definitive Registered Notes, as the
case may be, in each case, in accordance with Section 2.03.

 

(ii)                                  No service
charge shall be made to a Holder for any registration of transfer or exchange,
but the Company may require payment of a sum sufficient to cover any stamp or
transfer tax, duty or governmental charge payable in connection therewith
(other than any such stamp or transfer taxes, duties or similar governmental
charge payable upon exchange or transfer pursuant to Sections 3.05, 3.08, 4.10,
4.11 and 9.04 and Section 3.05 of the Base Indenture).

 

33

 

(iii)                               All Global
Notes and Definitive Registered Notes issued upon any registration of transfer
or exchange of Global Notes or Definitive Registered Notes shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same
benefits under this Supplemental Indenture, as the Global Notes or Definitive
Registered Notes surrendered upon such registration of transfer or exchange.

 

(iv)                              The Company
shall not be required (A) to register the transfer of or to exchange Notes
during a period beginning at the opening of business 15 days before any
redemption date under Section 3.08 and ending at the close of business on
the redemption date, (B) to register the transfer of or to exchange any
Note during a period beginning at the opening of business 15 days before any
mailing of a notice of redemption of Notes for partial redemption under Section 3.08
and ending on the day of such selection, (C) to register the transfer of
or to exchange a Note during a period beginning at the opening of business on a
record date for the payment of interest and the applicable succeeding Interest
Payment Date, or (D) to register the transfer of or to exchange a Note
that has been tendered in an Asset Sale Offer or a Change of Control Offer.

 

(v)                                 Prior to due presentment
for the registration of a transfer of any Note, the Trustee, the Paying Agents,
the Registrar, any Agent and the Company may deem and treat the Person in whose
name any Note is registered as the absolute owner of such Note for the purpose
of receiving payment of principal of and interest on such Notes and for all
other purposes, and none of the Trustee, the Paying Agents, the Registrar, any
Agent or the Company shall be affected by notice to the contrary.

 

(vi)                              The Trustee
shall have no obligation or duty to monitor, determine or inquire as to
compliance with any restrictions on transfer imposed under this Supplemental
Indenture or under applicable law with respect to any transfer of any interest
in any Note other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if and
when expressly required by the terms of, this Supplemental Indenture, and to
examine the same to determine substantial compliance as to form with the express
requirement hereof.

 

SECTION 2.05.                                    Defaulted
Interest.  If the
Company defaults on a payment of interest on the Notes, it shall pay, or shall
deposit with the Paying Agent money in immediately available funds sufficient
to pay the defaulted interest, plus (to the extent lawful) any interest payable
on the defaulted interest, to the Persons who are Holders on a subsequent
special record date.  A special record
date, as used in this Section 2.05 with respect to the payment of any
defaulted interest, shall mean the 15th day next preceding the date fixed by
the Company for the payment of defaulted interest, whether or not such day is a
Business Day.  At least 15 days before
the subsequent special record date, the Company shall mail to each Holder and
to a Responsible Officer of the Trustee a notice that states the subsequent
special record date, the payment date and the amount of defaulted interest to
be paid.

 

SECTION 2.06.                                    Issuance of
Additional Notes.  The Company
shall be entitled to issue Additional Notes under this Supplemental Indenture
that shall have identical terms as the Notes issued on the Issue Date, other
than with respect to the date of issuance, issue price and amount of interest
payable on the first payment date applicable thereto; provided
that such 

 

34

 

issuance is not prohibited by
Section 4.03.  The Initial Notes
issued on the Issue Date and any Additional Notes shall be treated as a single
class for all purposes under this Supplemental Indenture.

 

With
respect to any Additional Notes, the Company shall set forth in a resolution of
its Board of Directors and in a Company Order, a copy of each of which shall be
delivered to the Trustee, the following information:

 

(1)                                  the aggregate
principal amount of such Additional Notes to be authenticated and delivered
pursuant to this Supplemental Indenture; and

 

(2)                                  the issue price
and the issue date of such Additional Notes and the amount of interest payable
on the first payment date applicable thereto; provided, however, that no Additional Notes may be issued at a price
that would cause such Additional Notes to have “original issue discount” within
the meaning of Section 1273 of the Internal Revenue Code of 1986, as
amended.

 

ARTICLE THREE

 

REDEMPTION

 

SECTION 3.01.                                    Optional
Redemption.

 

(a)                                  The Notes will
be redeemable, at the Company’s option, in whole or in part from time to time,
at any time prior to November 1, 2015, upon not less than 30 nor more than
60 days’ written notice, at a price equal to 100% of the principal amount
thereof plus the Applicable Premium and accrued but unpaid interest, if any, to
the date of redemption (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date).

 

(b)                                 In addition,
the Company may redeem the Notes at its option, in whole or in part, upon not
less than 30 nor more than 60 days’ written notice to the Holders, at the
following redemption prices (expressed as percentages of the principal amount thereof)
if redeemed during the 12-month period commencing on November 1 of the
year set forth below:

 

	
  Year

  	
   

  	
  Percentage

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2015

  	
   

  	
  104.250

  	
  %

  
	
  2016

  	
   

  	
  102.833

  	
  %

  
	
  2017

  	
   

  	
  101.417

  	
  %

  
	
  2018 and thereafter

  	
   

  	
  100.000

  	
  %

  

 

In
addition, the Company must pay accrued and unpaid interest on the Notes
redeemed.

 

(c)                                  At any time, or
from time to time, on or prior to November 1, 2013, the Company may, at
its option, use the Net Cash Proceeds of one or more Public Equity Offerings 

 

35

 

(as defined below) to redeem up to 35% of the
principal amount of the Notes outstanding under this Supplemental Indenture at
a redemption price of 108.500% of the principal amount thereof plus accrued and
unpaid interest thereon, if any, to the date of redemption; provided that:

 

(1)                                  at least 65% of
the principal amount of Notes outstanding under this Supplemental Indenture
remains outstanding immediately after any such redemption; and

 

(2)                                  the Company
makes such redemption not more than 90 days after the consummation of any such
Public Equity Offering.

 

SECTION 3.02.                                    [reserved].

 

SECTION 3.03.                                    Selection of
Notes to Be Redeemed.  In the case
of any partial redemption pursuant to Section 3.01(a), (b) or (c),
selection of the Notes for redemption will be made by the Trustee in compliance
with the requirements of the principal securities exchange, if any, on which
the Notes are listed or, if the Notes are not so listed, pro rata,
by lot or by such other method as the Trustee shall deem fair and appropriate; provided that no Note of $2,000 in principal amount or less
shall be redeemed in part; and provided, further, that any redemption following a Public Equity
Offering will be made on a pro rata or on
as nearly a pro rata basis as applicable (subject to
the procedures of the Depository).  The
Trustee shall make the selection from the Notes outstanding and not previously
called for redemption.  Provisions of
this Supplemental Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.  The Trustee shall notify the Company and the
Registrar promptly in writing of the Notes or portions of Notes to be called
for redemption.

 

SECTION 3.04.                                    Notice of
Redemption.  With
respect to any redemption of Notes pursuant to Section 3.01(a), (b) or
(c), at least 30 days but not more than 60 days before a Redemption Date, the
Company shall mail a notice of redemption by first class mail to each Holder
whose Notes are to be redeemed at its registered address.  For Notes that are represented by Global
Notes, notices may be given by delivery of the relevant notices to the
Depository for communication to its Participants.

 

The
notice shall identify the Notes to be redeemed (including CUSIP Number) and
shall state:

 

(i)                                     the Redemption Date;

 

(ii)                                  the Redemption
Price;

 

(iii)                               the name and
address of each Paying Agent;

 

(iv)                              that Notes
called for redemption must be surrendered to the applicable Paying Agent in
order to collect the Redemption Price;

 

(v)                                 that, unless
the Company defaults in making the redemption payment, interest on Notes called
for redemption ceases to accrue on and after the Redemption Date and the only
remaining right of the Holders is to receive payment of the Redemption 

 

36

 

Price plus accrued interest,
to the Redemption Date upon surrender of the Notes to the Paying Agent;

 

(vi)                              that, in the
case of a redemption pursuant to Section 3.01(a) or Section 3.01(b) of
Definitive Registered Notes, if any such Note is being redeemed in part, the
portion of the principal amount (equal to $2,000 in principal amount or
integral multiples of $1,000 in excess thereof) of such Note to be redeemed and
that, on and after the Redemption Date, upon surrender of such Note, a new Note
or Notes in principal amount equal to the unredeemed portion thereof with a
minimum denomination of $2,000 will be issued, and that, in the case of such a
partial redemption of Global Notes, the Trustee shall endorse Schedule A to
each Global Note surrendered for redemption to reflect the decrease in
principal amount resulting from such redemption;

 

(vii)                           that, if any
such Notice contains a CUSIP, no representation is being made as to the
correctness of the CUSIP either as printed on the Notes or as contained in the
notice of redemption and that reliance may be placed only on the other
identification numbers printed on the Notes; and

 

(viii)                        if the
redemption is conditioned upon any subsequent event, a description of such
condition or event.

 

At
the Company’s request (which request may be revoked by the Company at any time
prior to the time at which the Trustee shall have given such notice to the
Holders), made in writing to the Trustee at least 60 days (or such shorter
period as shall be satisfactory to the Trustee) before a Redemption Date, the
Trustee shall give the notice of redemption in the name and at the expense of
the Company.  If, however, the Company
gives such notice to the Holders, the Company shall concurrently deliver to the
Trustee an Officers’ Certificate stating that such notice has been given.

 

SECTION 3.05.                                    Effect of
Notice of Redemption.  Once notice
of redemption is mailed, Notes called for redemption become due and payable on
the Redemption Date and at the Redemption Price, unless the redemption is
conditioned upon the occurrence of a subsequent event.  Upon surrender of any Notes to the Paying
Agent, unless such redemption is conditioned upon the occurrence of a
subsequent event, such Notes shall be paid at the Redemption Price, plus
accrued interest, to the Redemption Date.

 

Notice
of redemption shall be deemed to be given when mailed, whether or not the
Holder receives the notice.  In any
event, failure to give such notice, or any defect therein, shall not affect the
validity of the proceedings for the redemption of Notes held by Holders to whom
such notice was properly given.

 

ARTICLE FOUR

 

COVENANTS

 

SECTION 4.01.                                    Payment of
Notes.  The Company shall pay the
principal of and interest on the Notes on or before 12:00 noon (New York City
time) one Business Day prior to 

 

37

 

the dates due for such payments and in the manner
provided in the Notes and this Supplemental Indenture.  An installment of principal or interest shall
be considered paid on the date due if the Trustee or Paying Agent (other than
the Company, a Subsidiary of the Company, or any Affiliate of any of them)
holds on that date money designated for and sufficient to pay the installment
unless the provisions of Article Ten hereof prohibit such payment.  Upon a bankruptcy or reorganization procedure
relative to the Company, the Trustee shall serve as the Paying Agent, if any,
for the Notes.

 

The
Company shall pay interest on overdue principal and interest on overdue
installments of interest, to the extent lawful, at the rate per annum then
borne upon the Notes.

 

SECTION 4.02.                                    Maintenance of
Office or Agency.  The Company
shall maintain the offices and agencies specified in Section 2.04.

 

SECTION 4.03.                                    Limitation on
Incurrence of Additional Indebtedness.  The Company shall not, and shall not permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume, guarantee, acquire, become liable, contingently or otherwise, with
respect to, or otherwise become responsible for payment of (collectively, “incur”) any Indebtedness (other than Permitted
Indebtedness); provided, however,
that if no Default or Event of Default shall have occurred and be continuing at
the time of or as a consequence of the incurrence of any such Indebtedness, the
Company and the Guarantors may incur Indebtedness (including, without
limitation, Acquired Indebtedness) and any Restricted Subsidiary of the Company
that is not or will not, upon such incurrence, become a Guarantor may incur
Acquired Indebtedness, in each case if on the date of the incurrence of such
Indebtedness, after giving effect to the incurrence thereof, the Consolidated
Fixed Charge Coverage Ratio of the Company is greater than 2.0 to 1.0.

 

The
Company will not, and will not permit any Guarantor to, directly or indirectly,
incur any Indebtedness which by its terms (or by the terms of any agreement
governing such Indebtedness) is expressly subordinated in right of payment to
any other Indebtedness of the Company or such Guarantor, as the case may be,
unless such Indebtedness is also by its terms (or by the terms of any agreement
governing such Indebtedness) made expressly subordinate to the Notes or the
applicable Guarantee, as the case may be, to the same extent and in the same
manner as such Indebtedness is subordinated to other Indebtedness of the
Company or such Guarantor, as the case may be. 
For purposes of the foregoing, no Indebtedness will be deemed to be
subordinated in right of payment to any other Indebtedness of the Company or
any Guarantor solely by virtue of such Indebtedness being unsecured or by
virtue of the fact that the holders of such Indebtedness have entered into one
or more intercreditor agreements giving one or more of such holders priority
over the other holders in the collateral held by them.

 

SECTION 4.04.                                    RESERVED.

 

SECTION 4.05.                                    Limitation on
Restricted Payments.

 

(a)                                  The Company
shall not, and shall not cause or permit any of its Restricted Subsidiaries to,
directly or indirectly:

 

38

 

(1)                                  declare or pay
any dividend or make any distribution (other than dividends or distributions
payable in Qualified Capital Stock of the Company) on or in respect of shares
of the Company’s Capital Stock to holders of such Capital Stock;

 

(2)                                  purchase,
redeem or otherwise acquire or retire for value any Capital Stock of the
Company or any warrants, rights or options to purchase or acquire shares of any
class of such Capital Stock;

 

(3)                                  make any
principal payment on, purchase, defease, redeem, prepay, decrease or otherwise
acquire or retire for value, earlier than one year prior to any scheduled final
maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Indebtedness; or

 

(4)                                  make any
Investment (other than Permitted Investments)

 

(each
of the foregoing actions set forth in clauses (1), (2), (3) and (4) being
referred to as a “Restricted Payment”), if at the time of such
Restricted Payment or immediately after giving effect thereto,

 

(i)                                     a Default or an
Event of Default shall have occurred and be continuing; or

 

(ii)                                  the Company is
not able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with Section 4.03; or

 

(iii)                               the aggregate
amount of Restricted Payments (including such proposed Restricted Payment) made
subsequent to the Issue Date (the amount expended for such purposes, if other
than in cash, being the fair market value of such property as determined in
good faith by the Board of Directors of the Company) shall exceed the sum of:

 

(w)                               50% of the cumulative
Consolidated Net Income (or if cumulative Consolidated Net Income shall be a
loss, minus 100% of such loss) of the Company earned subsequent to the Prior
Issue Date and on or prior to the date the Restricted Payment occurs (the “Reference
Date”) (treating such period as a single accounting period); plus

 

(x)                                   100% of the aggregate net
cash proceeds received by the Company from any Person (other than a Subsidiary
of the Company) from the issuance and sale subsequent to the Prior Issue Date
and on or prior to the Reference Date of Qualified Capital Stock of the
Company; plus

 

(y)                                 without duplication of any
amounts included in clause (iii)(x) above, 100% of the aggregate net cash
proceeds of any equity contribution received by the Company from a holder of
the Company’s Capital Stock (excluding, in the case of clauses (iii)(x) and
(y), any net cash proceeds from a Public Equity Offering to the extent used to
redeem the Notes in compliance with the provisions set forth under Section 3.01);
plus

 

39

 

(z)                                   without duplication, the sum
of:

 

(1)                                  the aggregate amount
returned in cash on or with respect to Investments (other than Permitted
Investments) made subsequent to the Prior Issue Date whether through interest
payments, principal payments, dividends or other distributions or payments;

 

(2)                                  the net cash proceeds
received by the Company or any of its Restricted Subsidiaries from the
disposition of all or any portion of such Investments (other than to a
Subsidiary of the Company); and

 

(3)                                  upon redesignation of an
Unrestricted Subsidiary as a Restricted Subsidiary (except to the extent the
Investment constituted a Permitted Investment), the fair market value of such
Subsidiary;

 

provided, however, that
the sum of clauses (z) (1), (2) and (3) above shall not exceed
the aggregate amount of all such Investments made subsequent to the Prior Issue
Date.

 

(b)                                 Notwithstanding
the foregoing, the provisions set forth in the immediately preceding paragraph
do not prohibit:

 

(1)                                  the payment of
any dividend within 60 days after the date of declaration of such dividend if
the dividend would have been permitted on the date of declaration;

 

(2)                                  if no Default
or Event of Default shall have occurred and be continuing, the acquisition of
any shares of Capital Stock of the Company, either (i) solely in exchange
for shares of Qualified Capital Stock of the Company or (ii) through the
application of net proceeds of a substantially concurrent sale for cash (other
than to a Subsidiary of the Company) of shares of Qualified Capital Stock of
the Company;

 

(3)                                  if no Default
or Event of Default shall have occurred and be continuing, the acquisition of
any Indebtedness of the Company or a Guarantor that is subordinate or junior in
right of payment to the Notes or such Guarantor’s Guarantee, as the case may
be, either (i) solely in exchange for shares of Qualified Capital Stock of
the Company, or (ii) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the Company) of
(a) shares of Qualified Capital Stock of the Company or
(b) Refinancing Indebtedness;

 

(4)                                  if no Default
or Event of Default shall have occurred and be continuing, repurchases by the
Company of Common Stock of the Company (or options or warrants to purchase such
Common Stock) from directors, officers and employees of the Company or any of
its Subsidiaries or their authorized representatives upon the death,
disability, retirement or termination of employment of such directors, officers
or employees, in an aggregate amount not to exceed $2.5 million in any calendar
year;

 

40

 

(5)                                  if no Default
or Event of Default shall have occurred and be continuing, other Restricted
Payments in an amount not to exceed $15.0 million;

 

(6)                                  in the event of
a Change of Control, and if no Default or Event of Default shall have occurred
and be continuing, the payment, purchase, redemption, defeasance or other
acquisition or retirement of Subordinated Indebtedness of the Company or any
Guarantor, in each case at a purchase price not greater than 101% of the
principal amount of such Subordinated Indebtedness, plus accrued and unpaid
interest thereon; provided, however,
that prior to such payment, purchase, redemption, defeasance or other
acquisition or retirement, the Company (or a third party to the extent
permitted by the Indenture) has made a Change of Control Offer with respect the
notes offered hereby as a result of such Change of Control and has repurchased
all notes validly tendered and not withdrawn in connection with such Change of
Control Offer;

 

(7)                                  in the event of
an Asset Sale that requires the Company to offer to repurchase notes pursuant
to the covenant described under “Limitation on Asset Sales,” and if no Default
or Event of Default shall have occurred and be continuing, the payment,
purchase, redemption, defeasance or other acquisition or retirement of
Subordinated Indebtedness of the Company or any Guarantor, in each case at a
purchase price not greater than 100% of the principal amount of such
Subordinated Indebtedness, plus accrued and unpaid interest thereon; provided, however, that (A) prior
to such payment, purchase, redemption, defeasance or other acquisition or
retirement, the Company has made an offer with respect to the notes offered
hereby pursuant to the provisions of the covenant described under Section 4.10
and has repurchased all notes validly tendered and not withdrawn in connection
with such offer and (B) the aggregate amount of all such payments,
purchases, redemptions, defeasances or other acquisitions or retirements of all
such Subordinated Indebtedness may not exceed the amount of the Net Cash
Proceeds Amount remaining after the Company has complied with clause (3) of
Section 4.10; and

 

(8)                                  repurchases of
Common Stock deemed to occur upon the exercise of stock options if the Common
Stock represents a portion of the exercise price thereof.

 

In
determining the aggregate amount of Restricted Payments made subsequent to the
Prior Issue Date in accordance with Section 4.05(a)(4)(iii), amounts
expended pursuant to Section 4.05(b) (1), (2)(ii), 3(ii)(a), (4),
(5), (6) and (7) shall be included in such calculation.

 

SECTION 4.06.                                    Limitation on
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries. The Company
shall not, and shall not cause or permit any of its Restricted Subsidiaries to,
directly or indirectly, create or otherwise cause or permit to exist or become
effective any encumbrance or restriction on the ability of any Restricted
Subsidiary of the Company to:

 

(1)                                  pay dividends
or make any other distributions on or in respect of its Capital Stock;

 

(2)                                  make loans or
advances or to pay any Indebtedness or other obligation owed to the Company or
any other Restricted Subsidiary of the Company; or

 

41

 

(3)                                  transfer any of
its property or assets to the Company or any other Restricted Subsidiary of the
Company;

 

in
each case except for such encumbrances or restrictions existing under or by
reason of:

 

(a)                                  applicable law;

 

(b)                                 the Notes or
this Supplemental Indenture;

 

(c)                                  customary
non-assignment provisions of any contract or any lease governing a leasehold
interest of any Restricted Subsidiary of the Company;

 

(d)                                 any instrument
governing Acquired Indebtedness, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person or the properties or assets of the Person so acquired;

 

(e)                                  agreements
existing on the Issue Date to the extent and in the manner such agreements are
in effect on the Issue Date;

 

(f)                                    the Credit
Agreement or an agreement governing other Pari Passu Indebtedness permitted to
be incurred under this Supplemental Indenture; provided
that, with respect to any agreement governing such other Pari Passu
Indebtedness, the provisions relating to such encumbrance or restriction are no
less favorable to the Company in any material respect as determined by the
Board of Directors of the Company in its reasonable and good faith judgment
than the provisions contained in the Credit Agreement as in effect on the Issue
Date;

 

(g)                                 restrictions on
the transfer of assets subject to any Lien permitted under this Supplemental
Indenture imposed by the holder of such Lien;

 

(h)                                 restrictions
imposed by any agreement to sell assets or Capital Stock permitted under this
Supplemental Indenture to any Person pending the closing of such sale;

 

(i)                                     restrictions
imposed by agreements governing obligations of Foreign Restricted Subsidiaries
which are permitted under this Supplemental Indenture;

 

(j)                                     restrictions on
cash or other deposits or net worth imposed by customers under contracts
entered into in the ordinary course of business;

 

(k)                                  any Purchase
Money Note or other Indebtedness or other contractual requirements of a
Securitization Entity in connection with a Qualified Securitization
Transaction; provided that such restrictions
apply only to such Securitization Entity;

 

42

 

(l)                                     customary
provisions in joint venture agreements and other similar agreements (in each
case relating solely to the respective joint venture or similar entity or the
equity interests therein) entered into in the ordinary course of business; and

 

(m)                               an agreement
governing Indebtedness incurred to Refinance the Indebtedness issued, assumed
or incurred pursuant to an agreement referred to in clauses (b) and (d) through
(l) above; provided, however,
that the provisions relating to such encumbrance or restriction contained in
any such agreements are no less favorable to the Company in any material
respect as determined by the Board of Directors of the Company in their
reasonable and good faith judgment than the provisions relating to such
encumbrance or restriction contained in agreements referred to in such clauses (b) and
(d) through (l) above.

 

SECTION 4.07.                                    Limitation on
Preferred Stock of Restricted Subsidiaries.  The Company shall not permit any of its Restricted
Subsidiaries that are not Guarantors to issue any Preferred Stock (other than
to the Company or to a Wholly Owned Restricted Subsidiary of the Company) or
permit any Person (other than the Company or a Wholly Owned Restricted
Subsidiary of the Company) to own any Preferred Stock of any Restricted
Subsidiary of the Company that is not a Guarantor.

 

SECTION 4.08.                                    Limitation on
Transactions with Affiliates.

 

(a)                                  The Company
shall not, and shall not permit any of its Restricted Subsidiaries to, directly
or indirectly, enter into or permit to exist any transaction or series of
related transactions (including, without limitation, the purchase, sale, lease
or exchange of any property or the rendering of any service) with, or for the
benefit of, any of its Affiliates (each, an “Affiliate Transaction”),
other than (x) Affiliate Transactions permitted under Section 4.08(b) and
(y) Affiliate Transactions on terms that are no less favorable than those
that might reasonably have been obtained in a comparable transaction at such
time on an arm’s-length basis from a Person that is not an Affiliate of the
Company or such Restricted Subsidiary; provided that (i) if any such
Affiliate Transaction (or a series of related Affiliate Transactions which are
similar or part of a common plan) involves aggregate payments or other property
with a fair market value in excess of $10.0 million, the Company or such
Restricted Subsidiary, as the case may be, shall file with the Trustee an
Officers’ Certificate certifying that such Affiliate Transaction complies with
this Section 4.08 and (ii) if any such Affiliate Transaction (or a
series of related Affiliate Transactions which are similar or part of a common
plan) involves aggregate payments or other property with a fair market value in
excess of $25.0 million, the Company or such Restricted Subsidiary, as the case
may be, shall file with the Trustee a Board Resolution of the Board of
Directors of the Company or such Restricted Subsidiary, as the case may be, set
forth in an Officers’ Certificate certifying that such Affiliate Transaction
complies with this Section 4.08 and that such Affiliate Transaction has
been approved by a majority of the disinterested members of the Board of
Directors of the Company or such Restricted Subsidiary, as the case may be.

 

(b)                                 The
restrictions set forth in Section 4.08(a) shall not apply to:

 

43

 

(1)                                  reasonable fees
and compensation paid to and indemnity provided on behalf of, officers,
directors, employees or consultants of the Company or any Restricted Subsidiary
of the Company as determined in good faith by the Company’s Board of Directors
or senior management;

 

(2)                                  transactions
exclusively between or among the Company and any of its Restricted Subsidiaries
or exclusively between or among such Restricted Subsidiaries; provided such
transactions are not otherwise prohibited by this Supplemental Indenture;

 

(3)                                  any agreement
as in effect as of the Issue Date or any amendment thereto or any transaction
contemplated thereby (including pursuant to any amendment thereto) or any
replacement agreement thereto so long as any such amendment or replacement agreement
is not more disadvantageous to the Holders in any material respect than the
original agreement as in effect on the Issue Date;

 

(4)                                  Restricted
Payments or Permitted Investments permitted by this Supplemental Indenture; and

 

(5)                                  transactions
between the Company or any of its Subsidiaries and any Securitization Entity in
connection with a Qualified Securitization Transaction, in each case provided
that such transactions are not otherwise prohibited by this Supplemental
Indenture.

 

SECTION 4.09.                                    Limitation on
Liens.  The Company shall not, and
shall not cause or permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume or permit or suffer to exist any Liens of any
kind against or upon any property or assets of the Company or any of its
Restricted Subsidiaries whether owned on the Issue Date or acquired after the
Issue Date, or any proceeds therefrom, or assign or otherwise convey any right
to receive income or profits therefrom unless:

 

(1)                                  in the case of
Liens securing Subordinated Indebtedness, the Notes or the Guarantees are
secured by a Lien on such property, assets or proceeds that is senior in
priority to such Liens; and

 

(2)                                  in all other
cases, the Notes or Guarantees, as the case may be, are equally and ratably secured,
except for:

 

(a)                                  Liens existing
as of the Issue Date to the extent and in the manner such Liens are in effect
on the Issue Date;

 

(b)                                 (i) Liens
securing existing or future borrowings under Credit Facilities incurred
pursuant to clause (2) of the definition of “Permitted Indebtedness,” (ii) Liens
securing Indebtedness incurred pursuant to the first paragraph of Section 4.03;
provided that, with respect to this
subclause (ii), at the time of incurrence and after giving pro forma effect
thereto, the Consolidated Secured Debt Ratio would be no greater than 3.50 to
1.0 and (iii) Liens securing 

 

44

 

Indebtedness incurred
pursuant to clause (19) of the definition of “Permitted Indebtedness;”

 

(c)                                  Liens securing
the Notes and the Guarantees;

 

(d)                                 Liens of the
Company or a Wholly Owned Restricted Subsidiary of the Company on assets of any
Restricted Subsidiary of the Company and Liens on assets of the Company in
favor of a Wholly Owned Restricted Subsidiary that is a Guarantor;

 

(e)                                  Liens securing
Refinancing Indebtedness which is incurred to Refinance any Indebtedness that
has been secured by a Lien permitted under this Supplemental Indenture and that
has been incurred without violation of this Supplemental Indenture; provided, however, that
such Liens:  (i) are no less
favorable to the Holders and are not more favorable to the lienholders, in each
case in any material respect, with respect to such Liens than the Liens in
respect of the Indebtedness being Refinanced; and (ii) do not extend to or
cover any categories of property or assets of the Company or any of its
Restricted Subsidiaries not securing the Indebtedness so Refinanced; and

 

(f)                                    Permitted
Liens.

 

SECTION 4.10.                                    Limitation on
Asset Sales.

 

(a)                                  The Company
shall not, and shall not permit any of its Restricted Subsidiaries to,
consummate an Asset Sale unless:

 

(1)                                  the Company or
the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of (as determined in good faith
by the Company’s Board of Directors);

 

(2)                                  at least 75% of
the consideration received by the Company or the Restricted Subsidiary, as the
case may be, from such Asset Sale shall be in the form of cash or Cash
Equivalents and shall be received at the time of such disposition. For purposes
of this clause (2) each of the following shall be deemed to be cash:

 

(a)                                  any
liabilities, as shown on the most recent consolidated balance sheet of the
Company or any Restricted Subsidiary (or would be shown on such consolidated
balance sheet as of the date of such Asset Sale), other than contingent
liabilities and liabilities that are by their terms subordinated to the notes
or any Guarantee, or any Guarantees of Indebtedness of Persons other than the
Company or any Restricted Subsidiary, that are assumed by the person acquiring
such assets to the extent that the Company and its Restricted Subsidiaries have
no further liability with respect to such liabilities;

 

45

 

(b)                                 any securities,
notes or other obligations received by the Company or any such Restricted
Subsidiary from such transferee that are converted by the Company or such
Restricted Subsidiary into cash or Cash Equivalents (to the extent of the cash
or Cash Equivalents received) within 90 days after receipt; and

 

(c)                                  any Designated Non-Cash
Consideration received by the Company or its Restricted Subsidiaries in such
Asset Sale having an aggregate Fair Market Value, taken together with all other
Designated Non-Cash Consideration received pursuant to this clause (c) that
is at that time outstanding in the aggregate, not to exceed the greater of
(i) $35 million and (ii) 1.0% of the Company’s Consolidated
Total Assets, in each case at the time of receipt of such Designated Non-Cash
Consideration, with the Fair Market Value of each item of Designated Non-Cash
Consideration measured at the time received and without giving effect to
subsequent changes in value;

 

(3)                                  upon the
consummation of an Asset Sale, the Company shall apply, or cause such
Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset
Sale within 365 days of receipt thereof either:

 

(a)                                  to permanently reduce
Indebtedness (x) under any Credit Facility and, in the case of any such
Indebtedness under any revolving credit facility, effect a permanent reduction
in the availability under such revolving credit facility (provided, however
that, if there shall not be any term loan Indebtedness outstanding under any
Credit Facility, in the case of such Indebtedness under any revolving credit
facility such prepayment shall not be required to effect a permanent reduction
in the availability under such revolving credit facility) or (y) of a
Subsidiary that does not guarantee the Notes;

 

(b)                                 to make an investment
in  properties and assets that replace
the properties and assets that were the subject of such Asset Sale or in
properties and assets (including Capital Stock) that will be used in the
business of the Company and its Restricted Subsidiaries as existing on the
Issue Date or in businesses reasonably related thereto (“Replacement Assets”);
or

 

(c)                                  a combination of prepayment
and investment permitted by the foregoing clauses (3)(a) and (3)(b).

 

(b)                                         On the 366th
day after an Asset Sale or such earlier date, if any, as the Board of Directors
of the Company or of such Restricted Subsidiary determines not to apply the Net
Cash Proceeds relating to such Asset Sale as set forth in clauses (3)(a), (3)(b) and
(3)(c) of Section 4.10(a) (each, a “Net Proceeds Offer
Trigger Date”), such aggregate amount of Net Cash Proceeds that have not
been applied on or before such Net Proceeds Offer Trigger Date as permitted in
clauses (3)(a), (3)(b) and (3)(c) of Section 4.10(a) or
the last proviso of this paragraph (each, a “Net Proceeds Offer Amount”)
shall be applied by the Company or such Restricted Subsidiary to make an offer
to purchase (the “Net Proceeds Offer”) to all Holders and, to the extent
required by the terms of any Pari Passu Indebtedness, to all holders of such
Pari Passu Indebtedness, on a date (the “Net Proceeds Offer Payment Date”)
not less than 30 nor 

 

46

 

more than 45 days following the applicable Net
Proceeds Offer Trigger Date, from all Holders (and holders of any such Pari
Passu Indebtedness) on a pro rata basis,
the maximum amount of Notes and Pari Passu Indebtedness that may be purchased
with the Net Proceeds Offer Amount at a price equal to 100% of the principal
amount of the Notes and Pari Passu Indebtedness to be purchased, plus accrued
and unpaid interest thereon, if any, to the date of purchase; provided, however, that
if at any time any non-cash consideration received by the Company or any
Restricted Subsidiary of the Company, as the case may be, in connection with
any Asset Sale is converted into or sold or otherwise disposed of for cash
(other than interest received with respect to any such non-cash consideration),
then such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance with
this Section 4.10.

 

The
Company may defer the Net Proceeds Offer until there is an aggregate unutilized
Net Proceeds Offer Amount equal to or in excess of $25.0 million resulting
from one or more Asset Sales (at which time, the entire unutilized Net Proceeds
Offer Amount, and not just the amount in excess of $25.0 million, shall be
applied as required pursuant to this Section 4.10(b)).

 

In
the event of the transfer of substantially all (but not all) of the property
and assets of the Company and its Restricted Subsidiaries as an entirety to a
Person in a transaction permitted under Section 5.01, which transaction
does not constitute a Change of Control, the successor entity shall be deemed
to have sold the properties and assets of the Company and its Restricted
Subsidiaries not so transferred for purposes of this Section 4.10 and
shall comply with the provisions of this Section 4.10 with respect to such
deemed sale as if it were an Asset Sale. 
In addition, the fair market value of such properties and assets of the
Company or its Restricted Subsidiaries deemed to be sold shall be deemed to be Net
Cash Proceeds for purposes of this Section 4.10.

 

(c)                                          Notwithstanding
Sections 4.10(a) and (b), the Company and its Restricted Subsidiaries
will be permitted to consummate an Asset Sale without complying with such
Sections to the extent that:

 

(1)                                  at least 75% of
the consideration for such Asset Sale constitutes Replacement Assets; and

 

(2)                                  such Asset Sale
is for fair market value; provided that
any consideration not constituting Replacement Assets received by the Company
or any of its Restricted Subsidiaries in connection with any Asset Sale
permitted to be consummated under this Section 4.10(c) shall
constitute Net Cash Proceeds subject to the provisions of Sections 4.10(a) and
(b).

 

Each
Net Proceeds Offer will be mailed to the record Holders as shown on the
register of Holders within 25 days following the Net Proceeds Offer Trigger
Date, with a copy to the Trustee, and shall comply with the procedures set
forth in this Supplemental Indenture. 
The notice to the Holders shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Net Proceeds
Offer.  Such notice shall state:

 

47

 

(1)                                  that the Net
Proceeds Offer is being made pursuant to this Section 4.10 and that
(subject to the provisions hereof) all Notes tendered will be accepted for
payment;

 

(2)                                  the purchase
price (including the amount of accrued interest) and the purchase date (which
shall be the Net Proceeds Offer Payment Date);

 

(3)                                  that any Note
not tendered will continue to accrue interest if interest is then accruing;

 

(4)                                  that, unless
the Company defaults in making payment therefor, any Note accepted for payment
pursuant to the Net Proceeds Offer shall cease to accrue interest after the Net
Proceeds Offer Payment Date;

 

(5)                                  that Holders
electing to have a Note purchased pursuant to a Net Proceeds Offer will be
required to surrender the Note, with the form entitled “Option of Holder to
Elect Purchase” on the reverse of the Note completed, to the Paying Agent at
the address specified in the notice prior to the close of business on the third
business day prior to the Net Proceeds Offer Payment Date;

 

(6)                                  that Holders
will be entitled to withdraw their election if the Paying Agent receives, not
later than 5:00 p.m., New York City time, on the second Business Day
preceding the Net Proceeds Offer Date, a facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Notes the
Holder delivered for purchase and a statement that such Holder is withdrawing
his election to have such Note purchased; and

 

(7)                                  the
circumstances and relevant facts regarding such Net Proceeds Offer.

 

Upon
receiving notice of the Net Proceeds Offer, Holders may elect to tender their
Notes in whole or in part in integral multiples of $1,000 in exchange for
cash.  To the extent Holders properly
tender Notes and holders of Pari Passu Indebtedness properly tender such Pari
Passu Indebtedness in an amount exceeding the Net Proceeds Offer Amount, the
tendered Notes and Pari Passu Indebtedness will be purchased on a pro rata basis (based on amounts tendered) in an aggregate
amount equal to the Net Proceeds Offer Amount (if any).  A Net Proceeds Offer shall remain open for a
period of 20 Business Days or such longer period as may be required by law.

 

The
Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer.  To the extent that the provisions of any
securities laws or regulations conflict with this Section 4.10, the
Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under this
Section 4.10 by virtue thereof.

 

48

 

SECTION 4.11.                                    Repurchase of
Notes upon a Change of Control.

 

(a)                                  Upon the
occurrence of a Change of Control, each Holder will have the right to require
that the Company purchase all or a portion of such Holder’s Notes pursuant to
the offer described below (the “Change of Control Offer”), at a purchase
price equal to 101% of the principal amount thereof plus accrued and unpaid
interest thereon to the date of purchase.

 

Within
30 days following the date upon which the Change of Control occurred, the
Company must send, by first class mail, a notice to each Holder, with a copy to
the Trustee, which notice shall govern the terms of the Change of Control
Offer.  Such notice shall state, among
other things, the purchase date, which, unless otherwise required by law, must
be no earlier than 30 days nor later than 60 days from the date such notice is
mailed (the “Change of Control Payment Date”).  The notice to the Holders shall contain all
instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Change of Control Offer. 
Such notice shall state:

 

(1)                                  that the Change
of Control Offer is being made pursuant to this Section 4.11 and that all
Notes tendered will be accepted for payment;

 

(2)                                  the purchase
price (including the amount of accrued interest) and the purchase date (which
shall be no earlier than the Change of Control Payment Date);

 

(3)                                  that any Note
not tendered will continue to accrue interest if interest is then accruing;

 

(4)                                  that, unless
the Company defaults in making payment therefor, any Note accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest after
the Change of Control Payment Date;

 

(5)                                  that Holders
electing to have a Note purchased pursuant to a Change of Control Offer will be
required to (a) surrender the Note, with the form entitled “Option of
Holder to Elect Purchase” on the reverse of the Note completed, to the Paying
Agent at the address specified in the notice prior to the close of business on
the third Business Day prior to the Change of Control Payment Date and (b) if
the Note is a Global Note, to comply with applicable DTC procedures;

 

(6)                                  that Holders
will be entitled to withdraw their election if the Paying Agent receives, not
later than 5:00 p.m., New York City time, on the second Business Day
preceding the Change of Control Payment Date, a facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the Notes
the Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Note purchased; and

 

(7)                                  the
circumstances and relevant facts regarding such Change of Control.

 

(b)                                         The Company
shall comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the repurchase of Notes
pursuant to a Change of Control Offer. 
To the extent that the provisions of any securities laws or regulations 

 

49

 

conflict with this Section 4.11, the Company
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under this Section 4.11 by
virtue thereof.

 

Notwithstanding
anything to the contrary in this section, the Company shall not be required to
make a Change of Control Offer upon a Change of Control if a third party makes
the Change of Control Offer in the manner, at the times and otherwise in
compliance with the requirements set forth in this section and purchases all
notes validly tendered and not withdrawn under such Change of Control Offer.

 

SECTION 4.12.                                    Additional
Subsidiary Guarantees.  If
any existing or future Domestic Restricted Subsidiary shall, after the Issue
Date, guarantee any Indebtedness of the Company or a Guarantor, then the
Company shall cause such Domestic Restricted Subsidiary to:

 

(1)                                  execute and
deliver to the Trustee a supplemental indenture in form satisfactory to the
Trustee pursuant to which such Domestic Restricted Subsidiary shall
unconditionally guarantee all of the Company’s obligations under the Notes and
this Supplemental Indenture on the terms set forth herein; and

 

(2)                                  deliver to the
Trustee an Officers’ Certificate and an Opinion of Counsel that such
supplemental indenture has been duly authorized, executed and delivered by such
Domestic Restricted Subsidiary and constitutes a legal, valid, binding and
enforceable obligation of such Domestic Restricted Subsidiary.

 

Thereafter,
such Domestic Restricted Subsidiary shall be a Guarantor for all purposes of
this   Indenture until such Domestic
Restricted Subsidiary is released from its Guarantee as provided in this
Supplemental Indenture.

 

SECTION 4.13.                                    Existence.  Subject to Article Five of this
Supplemental Indenture, the Company shall do or cause to be done all things
necessary to preserve and keep in full force and effect its existence and the
existence of each Restricted Subsidiary in accordance with the respective
organizational documents of the Company and each Restricted Subsidiary and the
rights (whether pursuant to charter, partnership certificate, agreement,
statute or otherwise), material licenses and franchises of the Company and each
Restricted Subsidiary; provided that
the Company shall not be required to preserve any such right, license or
franchise, or the existence of any Restricted Subsidiary, if the maintenance or
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Restricted Subsidiaries taken as a whole.

 

SECTION 4.14.                                    Payment of
Taxes and Other Claims.  The
Company shall pay or discharge and shall cause each of its Restricted
Subsidiaries to pay or discharge, or cause to be paid or discharged, before the
same shall become delinquent (i) all material taxes, assessments and
governmental charges levied or imposed upon (a) the Company or any such
Restricted Subsidiary, (b) the income or profits of any such Restricted
Subsidiary which is a corporation or (c) the property of the Company or
any such Restricted Subsidiaries and (ii) all material lawful claims for
labor, materials and supplies that, if unpaid, might by law become a Lien upon
the property of the Company or any such Restricted Subsidiary; provided that neither the Company 

 

50

 

nor any such Restricted Subsidiary shall be required
to pay or discharge, or cause to be paid or discharged, any such tax,
assessment, charge or claim the amount, applicability or validity of which is
being contested in good faith by appropriate proceedings and for which adequate
reserves have been established in accordance with GAAP.

 

SECTION 4.15.                                    Reports to
Holders.  Whether or not required by the
rules and regulations of the Commission, so long as any Notes are
outstanding, the Company shall furnish the Holders of Notes and to the Trustee:

 

(1)                                  all quarterly
and annual financial information that would be required to be contained in a
filing with the Commission on Forms 10-Q and 10-K if the Company were required
to file such Forms, including a “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” that describes the financial
condition and results of operations of the Company and its consolidated
Subsidiaries (showing in reasonable detail, either on the face of the financial
statements or in the footnotes thereto and in Management’s Discussion and
Analysis of Financial Condition and Results of Operations, the financial
condition and results of operations of the Company and its Restricted
Subsidiaries separate from the financial condition and results of operations of
the Unrestricted Subsidiaries of the Company, if any) and, with respect to the
annual information only, a report thereon by the Company’s certified
independent accountants; and

 

(2)                                  all current
reports that would be required to be filed with the Commission on Form 8-K
if the Company were required to file such reports, in each case within the time
periods specified in the Commission’s rules and regulations.

 

In
addition, whether or not required by the rules and regulations of the
Commission, the Company shall file a copy of all such information and reports
with the Commission for public availability within the time periods specified
in the Commission’s rules and regulations (unless the Commission will not
accept such a filing) and make such information available to securities
analysts and prospective investors upon request.  In addition, the Company has agreed that, for
so long as any Notes remain outstanding, it shall furnish to the Holders, the
Trustee and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4) under
the Securities Act.

 

The
Trustee shall have no responsibility whatsoever to determine if any such
filings have taken place, provided, however, that the Company shall promptly
notify the Trustee in writing whenever it shall have made such filings with the
Commission.  Delivery of such reports,
information and documents to the Trustee is for informational purposes only and
the Trustee’s receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company’s compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers’
Certificates).

 

SECTION 4.16.                                    Conduct of
Business.  The Company
shall not, and shall not permit any of its Restricted Subsidiaries to, engage
in any businesses that are not the same, 

 

51

 

similar or reasonably related to the businesses in
which the Company and its Restricted Subsidiaries are engaged on the Issue
Date.

 

SECTION 4.17.                                    Waiver of Stay,
Extension or Usury Laws.  Each
of the Company and any Guarantor covenants (to the extent that it may lawfully
do so) that it shall not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
or any usury law or other law that would prohibit or forgive the Company or
such Guarantor from paying all or any portion of the principal of, premium, if
any, or interest on the Notes as contemplated herein, wherever enacted, now or
at any time hereafter in force, or that may affect the covenants or the
performance of this Supplemental Indenture; and (to the extent that it may lawfully
do so) each of the Company and any Guarantor hereby expressly waives all
benefit or advantage of any such law and covenants that it shall not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
shall suffer and permit the execution of every such power as though no such law
had been enacted.

 

SECTION 4.18.                                    Compliance
Certificates.

 

(a)                                  The Company shall deliver to the Trustee within 90
days after the end of each fiscal year, commencing with the fiscal year ending
December 31, 2010, an Officers’ Certificate (which shall be signed by the
Chief Financial Officer of the Company) stating (i) that, a review has
been conducted of the activities of the Company and its Restricted Subsidiaries
under the supervision of the signing Officer with a view to determining whether
the Company has kept, observed, performed and fulfilled its obligations under this
Supplemental Indenture and the Base Indenture, and (ii) that, to the best knowledge of the Officer signing such
certificate, the Company has kept, observed, performed and fulfilled each and
every covenant and condition contained in this Supplemental Indenture and is not in default in the performance or observance
(without regard to any grace period or notice requirements) of any of the
terms, provisions, conditions and covenants hereof (or, if a Default or Event
of Default shall have occurred, specifying each such Default or Event of
Default and describing its status and what action the Company is taking or
proposes to take with respect thereto).

 

(b)                                         The Company shall, so long as any of the Notes are
outstanding, deliver to the Trustee, promptly after any Officer of the Company
becomes aware of any Default or Event of Default, an Officers’ Certificate
specifying such Default or Event of Default and what action the Company is
taking or proposes to take with respect thereto.

 

SECTION 4.19.                                    Maintenance of
Properties.  The Company
shall cause all material properties owned by it or any Restricted Subsidiary or
used or held for use in the conduct of its business or the business of any
Restricted Subsidiary to be maintained and kept in good condition, repair and
working order (ordinary wear and tear and damage by casualty excepted) and
supplied with all necessary equipment and shall cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as
in the judgment of the Company may be necessary so that the business carried on
in connection therewith may be properly and advantageously conducted at all times;
provided, however,
that nothing in this Section 4.19 shall prevent the Company from
discontinuing the maintenance of any such properties if such discontinuance is,
in the judgment of the Company, desirable in the conduct of 

 

52

 

the business of the Company and the Restricted
Subsidiaries as a whole and not disadvantageous in any material respect to the
Holders.

 

SECTION 4.20.                                    Insurance.  The Company shall maintain, and shall cause
its Restricted Subsidiaries to maintain, insurance with carriers believed by
the Company to be responsible, against such risks and in such amounts, and with
such deductibles, retentions, self-insured amounts and coinsurance provisions,
as the Company believes are customarily carried by similar businesses, of
similar size, including as appropriate general liability, property and casualty
loss and interruption of business insurance.

 

SECTION 4.21.                                    Changes in
Covenants when Notes Rated Investment Grade.  Beginning on the date that:

 

(a)                                  the Notes have
an Investment Grade Rating; and

 

(b)                                 no Default or
Event of Default shall have occurred and be continuing,

 

and
ending on the date (the “Reversion Date”) that either Rating Agency
ceases to have Investment Grade Ratings on the Notes (such period of time, the “Suspension
Period”), the following Sections of this Supplemental Indenture will no
longer be applicable to the Notes:

 

(1)                                  Section 4.03;

 

(2)                                  Section 4.05;

 

(3)                                  Section 4.06;

 

(4)                                  Section 4.08;

 

(5)                                  Section 4.10;
and

 

(6)                                  Section 5.01(a)(2).

 

During a Suspension Period, the Company’s Board of Directors may not
designate any of its Subsidiaries as Unrestricted Subsidiaries.

 

On the Reversion Date, all Indebtedness incurred during the Suspension
Period will be classified to have been incurred pursuant to and permitted under
the Consolidated Fixed Charge Coverage Ratio or one of the clauses set forth in
the definition of Permitted Indebtedness (to the extent such Indebtedness would
be permitted to be incurred thereunder as of the Reversion Date and after
giving effect to Indebtedness incurred prior to the Suspension Period and
outstanding on the Reversion Date). To the extent any Indebtedness would not be
permitted to be incurred pursuant to the Consolidated Fixed Charge Coverage
Ratio or any of the clauses set forth in the definition of Permitted
Indebtedness, such Indebtedness will be deemed to have been outstanding on the
Issue Date, so that it is classified as Permitted Indebtedness under
clause (3) of the definition of “Permitted Indebtedness” and
permitted to be refinanced under clause (17) of the definition of “Permitted
Indebtedness.”

 

53

 

Notwithstanding
the fact that covenants suspended during a Suspension Period may be reinstated,
no Default or Event of Default will be deemed to have occurred as a result of a
failure to comply with the covenants during the Suspension Period or at the time
the covenants are reinstated.

 

ARTICLE FIVE

 

SUCCESSOR CORPORATION

 

SECTION 5.01.                                    Merger,
Consolidation and Sale of Assets.

 

(a)                                  The Company
shall not, in a single transaction or series of related transactions,
consolidate or merge with or into any Person, or sell, assign, transfer, lease,
convey or otherwise dispose of (or cause or permit any Restricted Subsidiary of
the Company to sell, assign, transfer, lease, convey or otherwise dispose of)
all or substantially all of the Company’s assets (determined on a consolidated
basis for the Company and the Company’s Restricted Subsidiaries) whether as an
entirety or substantially as an entirety to any Person unless:

 

(1)                                  either:

 

(A)                              the Company shall be the
surviving or continuing corporation; or

 

(B)                                the Person (if other than
the Company) formed by such consolidation or into which the Company is merged
or the Person which acquires by sale, assignment, transfer, lease, conveyance
or other disposition the properties and assets of the Company and of the
Company’s Restricted Subsidiaries substantially as an entirety (the “Surviving
Entity”):

 

(x)                                   shall be an entity organized
and validly existing under the laws of any country that is a member of the
European Union as currently constituted, Canada or any province thereof, the
United States or any State thereof or the District of Columbia; provided that in the case where the Surviving Entity is not
a corporation, a co-obligor of the Notes is a corporation; and

 

(y)                                 shall expressly assume, by
supplemental indenture (in form and substance satisfactory to the Trustee),
executed and delivered to the Trustee, the due and punctual payment of the
principal of, and premium, if any, and interest on all of the Notes and the
performance of every covenant of the Notes, this Supplemental Indenture on the
part of the Company to be performed or observed;

 

(2)                                  immediately
after giving effect to such transaction and the assumption contemplated by Section 5.01(a)(1)(B)(y) above
(including giving effect to any Indebtedness and Acquired Indebtedness incurred
or anticipated to be incurred in connection with or in respect of such
transaction), the Company or such Surviving Entity, as the case may be, (a) shall
have a Consolidated Net Worth equal to or greater than the 

 

54

 

Consolidated
Net Worth of the Company immediately prior to such transaction and
(b) shall be able to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to Section 4.03;

 

(3)                                  immediately
before and immediately after giving effect to such transaction and the
assumption contemplated by Section 5.01(a)(1)(B)(y) above (including,
without limitation, giving effect to any Indebtedness and Acquired Indebtedness
incurred or anticipated to be incurred and any Lien granted in connection with
or in respect of the transaction), no Default or Event of Default shall have
occurred or be continuing; and

 

(4)                                  the Company or
the Surviving Entity shall have delivered to the Trustee an Officers’ Certificate
and an Opinion of Counsel, each stating that such consolidation, merger, sale,
assignment, transfer, lease, conveyance or other disposition and, if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture comply with the applicable provisions of this
Supplemental Indenture and the Base Indenture and that all conditions precedent
in this Supplemental Indenture relating to such transaction have been
satisfied.

 

For
purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.

 

(b)                                         Upon any
consolidation, combination or merger or any transfer of all or substantially
all of the assets of the Company in accordance with Section 5.01(a) in
which the Company is not the continuing corporation, the successor Person
formed by such consolidation or into which the Company is merged or to which
such conveyance, lease or transfer is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this
Supplemental Indenture and the Notes with the same effect as if such surviving
entity had been named as such and all financial information and reports
required by this Supplemental Indenture shall be provided by and for such
Surviving Entity.

 

(c)                                          Each Guarantor
(other than any Guarantor whose Guarantee is to be released in accordance with
the terms of its Guarantee and this Supplemental Indenture in connection with
any transaction complying with Section 4.10) shall not, and the Company
shall not cause or permit any Guarantor to, consolidate with or merge with or
into any Person other than the Company or any other Guarantor unless:

 

(1)                                  the entity formed
by or surviving any such consolidation or merger (if other than the Guarantor)
or to which such sale, lease, conveyance or other disposition shall have been
made is an entity organized and existing under the laws of any country that is
a member of the European Union as currently constituted, Canada or any province
thereof or of the United States or any State thereof or the District of
Columbia;

 

(2)                                  such entity
assumes by supplemental indenture all of the obligations of the Guarantor on
its Guarantee;

 

55

 

(3)                                  immediately
after giving effect to such transaction, no Default or Event of Default shall
have occurred and be continuing; and

 

(4)                                  immediately
after giving effect to such transaction and the use of any net proceeds
therefrom on a pro forma basis, the Company
could satisfy Section 5.01(a)(2).

 

Any
merger or consolidation of a Guarantor with and into the Company (with the
Company being the surviving entity) or another Guarantor that is a Wholly Owned
Restricted Subsidiary of the Company need only comply with Section 5.01(a)(4).

 

SECTION 5.02.                                    Successor
Substituted.  In the
event of a sale, assignment, transfer, conveyance or other disposition (other
than a lease) described in and complying with the conditions listed in
Section 5.01 in which the Company is not the Surviving Entity and the
Surviving Entity assumes all the obligations of the Company under the Notes and
this Supplemental Indenture, the Surviving Entity will succeed to, and be
substituted for, and may exercise every right and power of, the Company under
such agreements and the Company shall be discharged from its obligations under
the Notes and this Supplemental Indenture.

 

Article 11
of the Base Indenture shall not apply to the Notes.

 

ARTICLE SIX

 

DEFAULT AND REMEDIES

 

SECTION 6.01.                                    Events of
Default.

 

(a)                                  The following
events are defined as “Events of Default”:

 

(1)                                  the failure to
pay interest on any Notes when the same becomes due and payable and the default
continues for a period of 30 days;

 

(2)                                  the failure to
pay the principal on any Notes, when such principal becomes due and payable, at
maturity, upon redemption or otherwise (including the failure to make a payment
to purchase Notes tendered pursuant to a Change of Control Offer or a Net Proceeds
Offer) on the date specified for such payment in the applicable offer to
purchase;

 

(3)                                  a default in
the observance or performance of any other covenant or agreement contained in
this Supplemental Indenture which default continues for a period of 45 days
after the Company receives written notice specifying the default (and demanding
that such default be remedied) from the Trustee or the Holders of at least 25%
of the outstanding principal amount of the Notes (except in the case of a
default with respect to Section 5.01, which will constitute an Event of
Default with such notice requirement but without such passage of time
requirement);

 

(4)                                  the failure to
pay at final stated maturity (giving effect to any applicable grace periods and
any extensions thereof) the principal amount of any Indebtedness of the 

 

56

 

Company
or any Restricted Subsidiary of the Company, or the acceleration of the final
stated maturity of any such Indebtedness (which acceleration is not rescinded,
annulled or otherwise cured within 20 days of receipt by the Company or such
Restricted Subsidiary of notice of any such acceleration) if the aggregate
principal amount of such Indebtedness, together with the principal amount of
any other such Indebtedness in default for failure to pay principal at final
stated maturity or which has been accelerated (in each case with respect to
which the 20-day period described above has passed), aggregates $25.0 million
or more at any time;

 

(5)                                  one or more
judgments in an aggregate amount in excess of $25.0 million shall have been
rendered against the Company or any of its Significant Subsidiaries and such
judgments remain undischarged, unpaid or unstayed for a period of 60 days after
such judgment or judgments become final and non-appealable;

 

(6)                                  the Company or
any of its Significant Subsidiaries, pursuant to or within the meaning of any
Bankruptcy Law,

 

(i)                                     commences a
voluntary case,

 

(ii)                                  consents to the
entry of an order for relief against it in an involuntary case,

 

(iii)                               consents to the
appointment of a Custodian of it or for all or substantially all of its assets,
or

 

(iv)                              makes a general
assignment for the benefit of its creditors;

 

(7)                                  a court of
competent jurisdiction enters an order or decree under any Bankruptcy Law that:

 

(i)                                     is for relief
against the Company or any of its Significant Subsidiaries as debtor in an
involuntary case,

 

(ii)                                  appoints a
Custodian of the Company or any of its Significant Subsidiaries or a Custodian
for all or substantially all of the assets of the Company or any Restricted
Subsidiary, or

 

(iii)                               orders the
liquidation of the Company or any of its Significant Subsidiaries, and in each
case, the order or decree remains unstayed and in effect for 60 days; or

 

(8)                                  any Guarantee
of a Significant Subsidiary ceases to be in full force and effect or any
Guarantee of a Significant Subsidiary is declared to be null and void and
unenforceable or any Guarantee of a Significant Subsidiary is found to be
invalid or any Guarantor that is a Significant Subsidiary denies its liability
under its Guarantee (other than by reason of release of a Guarantor in
accordance with the terms of this Supplemental Indenture).

 

57

 

(b)                                         If an Event of
Default (other than an Event of Default specified in Section 6.01(a)(6) or
6.01 (a)(7) above with respect to the Company) shall occur and be
continuing, the Trustee or the Holders of at least 25% in principal amount of
outstanding Notes may declare the principal of and accrued interest on all the
Notes to be due and payable by notice in writing to the Company and the Trustee
(if sent by the Holders) specifying the applicable Event of Default and that it
is a “notice of acceleration” (the “Acceleration Notice”), and the same
shall become immediately due and payable.

 

If
an Event of Default specified in Section 6.01(a)(6) or 6.01(a)(7) above
with respect to the Company occurs and is continuing, then all unpaid principal
of, and premium, if any, and accrued and unpaid interest on all of the
outstanding Notes shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holder.

 

(c)                                         At any time
after a declaration of acceleration with respect to the Notes as described in Section 6.01(b),
the Holders of a majority in principal amount of the Notes may rescind and
cancel such declaration and its consequences:

 

(1)                                  if the
rescission would not conflict with any judgment or decree;

 

(2)                                  if all existing
Events of Default have been cured or waived except nonpayment of principal or
interest that has become due solely because of the acceleration;

 

(3)                                  to the extent
the payment of such interest is lawful, interest on overdue installments of
interest and overdue principal, which has become due otherwise than by such
declaration of acceleration, has been paid;

 

(4)                                  if the Company
has paid the Trustee its reasonable compensation and reimbursed the Trustee for
its expenses, disbursements and advances; and

 

(5)                                  in the event of
the cure or waiver of an Event of Default of the type described in
Section 6.01(a)(6) or 6.01(a)(7), the Trustee shall have  received an Officers’ Certificate and an
Opinion of Counsel that such Event of Default has been cured or waived.

 

No
such rescission shall affect any subsequent Default or impair any right
consequent thereto.

 

The
Holders of a majority in principal amount of the Notes may waive any existing
Default or Event of Default under this Supplemental Indenture, and its
consequences, except a default in the payment of the principal of or interest
on any Notes.

 

Holders
of the Notes may not enforce this Supplemental Indenture or the Notes except as
provided in this Supplemental Indenture and under the TIA.  Subject to the provisions of this
Supplemental Indenture relating to the duties of the Trustee, the Trustee is
under no obligation to exercise any of its rights or powers under this
Supplemental Indenture at the request, order or direction of any of the
Holders, unless such Holders have offered to the Trustee 

 

58

 

indemnity
satisfactory to it.  Subject to all
provisions of this Supplemental Indenture and applicable law, the Holders of a
majority in aggregate principal amount of the then outstanding Notes have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee.

 

SECTION 6.02.                                    Notice of
Defaults.  The Trustee
shall, within 90 days after the occurrence of any Default with respect to the
Notes, give the Holders notice of all uncured Defaults thereunder known to it; provided, however, that,
except in the case of an Event of Default in payment with respect to the Notes
or a Default in complying with Section 5.01, the Trustee shall be
protected in withholding such notice if and so long as a committee of its trust
officers in good faith determines that the withholding of such notice is in the
interest of the Holders.

 

SECTION 6.03.                                    Other Remedies.  If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy by proceeding at law or
in equity to collect the payment of principal of, premium, if any, or interest
on the Notes or to enforce the performance of any provision of the Notes or
this Supplemental Indenture.

 

The
Trustee may maintain a proceeding even if it does not possess any of the Notes
or does not produce any of them in the proceeding.  Holders of the Notes may not enforce this
Supplemental Indenture or the Notes except as provided in Sections 6.02,
6.05, 6.06 and 6.07.

 

SECTION 6.04.                                    Waiver of Past
Defaults.  Subject to
Sections 6.02, 6.07 and 9.02, the Holders of at least a majority in principal
amount of the outstanding Notes, by notice to the Trustee, may waive an
existing Default or Event of Default and its consequences, except a Default in
the payment of principal of, premium, if any, or interest on any Note as
specified in clause (a) or (b) of Section 6.01 which cannot be
waived without the consent of the Holder of such Note or in respect of a
covenant or provision of this Supplemental Indenture which cannot be modified
or amended without the consent of the Holder of each outstanding Note
affected.  Upon any such waiver, such
Default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been cured, for every purpose of this Supplemental Indenture;
but no such waiver shall extend to any subsequent or other Default or Event of
Default or impair any right consequent thereto.

 

SECTION 6.05.                                    Control by
Majority.  Subject to
Section 8.02(d) of the Base Indenture, the Holders of a majority in
aggregate principal amount of the Notes may direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee.  However, the Trustee may refuse to follow any
direction that conflicts with law or this Supplemental Indenture or that the Trustee
determines is unduly prejudicial to the rights of other Holders or would
involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed
proper by the Trustee.

 

SECTION 6.06.                                    Limitation on
Suits.  A Holder may not pursue any
proceeding, judicial or otherwise, with respect to this Supplemental Indenture
and the Notes or for the appointment of a receiver or trustee, or for any other
remedy hereunder unless:

 

59

 

(i)                                     the Holder
gives the Trustee written notice of a continuing Event of Default;

 

(ii)                                  the Holders of
at least 25% in aggregate principal amount of outstanding Notes make a written
request to the Trustee to pursue the remedy;

 

(iii)                               such Holder or
Holders offer the Trustee indemnity satisfactory to the Trustee against any
costs, liability or expense;

 

(iv)                              the Trustee
does not comply with the request within 15 days after receipt of the request
and the offer of indemnity; and

 

(v)                                 during such
15-day period, the Holders of a majority in aggregate principal amount of the
outstanding Notes do not give the Trustee a direction that is inconsistent with
the request.

 

However,
such limitations do not apply to a suit instituted by a Holder of any Note for
enforcement of payment of the principal of or interest on such Note on or after
the due date therefor (after giving effect to any grace period specified in
Section 6.01(a) and only with respect to the amount of such missed
payment).

 

For
purposes of Section 6.05 and this Section 6.06, the Trustee shall
comply with TIA Section 316(a) in making any determination of whether
the Holders of the required aggregate principal amount of outstanding Notes
have concurred in any request or direction of the Trustee to pursue any remedy
available to the Trustee or the Holders with respect to this Supplemental
Indenture and the Notes or otherwise under the law.

 

A
Holder may not use this Supplemental Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.

 

SECTION 6.07.                                    Rights of
Holders to Receive Payment.  Notwithstanding any other provision of this
Supplemental Indenture, the right of any Holder of a Note to receive payment of
the principal amount of or interest on, such Note or to bring suit for the
enforcement of any such payment, on or after the due date expressed in the
Notes, shall not be impaired or affected without the consent of such Holder.

 

SECTION 6.08.                                    Collection Suit
by Trustee.  If an Event
of Default in payment of principal, premium or interest specified in clause (1) or
(2) of Section 6.01(a) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or any other obligor of the Notes for the whole amount of principal,
premium, if any, and accrued interest remaining unpaid, together with interest
on overdue principal and premium and, to the extent that payment of such
interest is lawful, interest on overdue installments of interest, in each case
at the rate specified in the Notes, and such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.

 

60

 

SECTION 6.09.                                    Trustee May File
Proofs of Claim.  The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any claim
for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under Section 8.06
of the Base Indenture) and the Holders allowed in any judicial proceedings
relative to the Company (or any other obligor of the Notes), its creditors or
its property and shall be entitled and empowered to collect and receive any
monies, securities or other property payable or deliverable upon conversion or
exchange of the Notes or upon any such claims and to distribute the same, and
any custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it for the reasonable compensation expenses,
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 8.06 of the Base Indenture.  Nothing herein contained shall be deemed to
empower the Trustee to authorize or consent to, or accept or adopt on behalf of
any Holder, any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.

 

SECTION 6.10.                                    Priorities.  If the Trustee collects any money pursuant to
this Article Six, it shall pay out the money in the following order:

 

First:  to the Trustee for all
amounts due under Section 8.06 of the Base Indenture and any receiver,
manager, administrative receiver, liquidator or agent appointed subject to this
Supplemental Indenture;

 

Second:  to Holders for amounts
then due and unpaid for principal of, premium, if any, and interest on the
Notes in respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind, according to
the amounts due and payable on such Notes for principal, premium, if any, and
interest, respectively; and

 

Third:  to the Company or as a
court of competent jurisdiction may direct.

 

The
Trustee, upon prior written notice to the Company, may fix a record date and
payment date for any payment to Holders pursuant to this Section 6.10.

 

SECTION 6.11.                                    Undertaking for
Costs.  In any suit for the
enforcement of any right or remedy under this Supplemental Indenture or in any
suit against the Trustee for any action taken or omitted by it as Trustee, a
court may require any party litigant in such suit to file an undertaking to pay
the costs of the suit, and the court may assess reasonable costs, including
reasonable attorneys’ fees and expenses, against any party litigant in the suit
having due regard to the merits and good faith of the claims or defenses made
by the party litigant.  This Section 6.11
does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07,
or a suit by Holders of more than 10% in principal amount of the outstanding
Notes.

 

61

 

SECTION 6.12.                                    Restoration of
Rights and Remedies.  If the
Trustee or any Holder has instituted any proceeding to enforce any right or
remedy under this Supplemental Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then, and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Company, the Trustee
and the Holders shall continue as though no such proceeding had been
instituted.

 

SECTION 6.13.                                    Rights and
Remedies Cumulative.  Except as
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or wrongfully taken Notes in Section 3.07 of the Base
Indenture, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. 
The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any
other appropriate right or remedy.

 

SECTION 6.14.                                    Delay or
Omission Not Waiver.  No delay or
omission of the Trustee or of any Holder to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence
therein.  Every right and remedy given by
this Article Six or by law to the Trustee or to the Holders may be
exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders, as the case may be.

 

Article 7
of the Base Indenture shall not apply to the Notes.

 

ARTICLE SEVEN

 

RESERVED

ARTICLE EIGHT

 

DISCHARGE OF INDENTURE

 

SECTION 8.01.                                    Termination of
Company’s Obligations. 
Except as otherwise provided in this Section 8.01, the Company may
terminate its and the Guarantors’ obligations under this Supplemental Indenture
and the Notes if:

 

(1)                                  either:

 

(a)                                  all the Notes
theretofore authenticated and delivered (except lost, stolen or destroyed Notes
that have been replaced or paid and Notes for whose payment money has
theretofore been deposited in trust or segregated and held in 

 

62

 

trust by the Company and
thereafter repaid to the Company or discharged from such trust) have been
delivered to the Trustee for cancellation; or

 

(b)                                 all Notes not
theretofore delivered to the Trustee for cancellation have become due and
payable, and the Company has irrevocably deposited or caused to be deposited
with the Trustee funds in an amount sufficient to pay and discharge the entire
Indebtedness on the Notes not theretofore delivered to the Trustee for
cancellation, for principal of, premium, if any, and interest on the Notes to
the date of deposit together with irrevocable instructions from the Company
directing the Trustee to apply such funds to the payment thereof at maturity or
redemption, as the case may be;

 

(2)                                  the Company has
paid all other sums payable under this Supplemental Indenture by the Company;
and

 

(3)                                  the Company has
delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel
stating that all conditions precedent under this Supplemental Indenture
relating to the satisfaction and discharge of this Supplemental Indenture have
been complied with.

 

With
respect to the foregoing clause (1), the Company’s and the Guarantors’
obligations under Section 8.06 of the Base Indenture shall survive such
satisfaction and discharge to the extent provided in the Base Indenture.  With respect to the foregoing clause (2), the
Company’s and the Guarantors’ obligations in Sections 2.13, 4.01, 4.02, 4.13,
8.05 and 8.06 hereof and Section 8.06 of the Base Indenture shall survive
until the Notes are no longer outstanding. 
Thereafter, only the Company’s and the Guarantors’ obligations in
Sections 8.05 and 8.06 hereof and Section 8.06 of the Base Indenture shall
survive.  After any such irrevocable
deposit, the Trustee upon written request of the Company shall acknowledge in
writing the discharge of the Company’s and the Guarantors’ obligations under
the Notes and this Supplemental Indenture, except for those surviving
obligations specified above.

 

SECTION 8.02.                                    Defeasance and
Discharge of Indenture.  The
Company will be deemed to have paid and will, together with the Guarantors, be
discharged from any and all obligations in respect of this Supplemental
Indenture and the Notes on the date of the deposit referred to in clause (A) of
this Section 8.02, and the provisions of this Supplemental Indenture will
no longer be in effect with respect to the Notes (“Legal Defeasance”),
and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging the same, except for the following provisions which
shall survive until otherwise terminated or discharged hereunder:  (a) the rights of Holders of outstanding
Notes to receive solely from the trust fund described in clause (A) below
payments in respect of the principal of, premium, if any, and interest on such
Notes when such payments are due, (b) the Company’s obligations with
respect to such Notes under Article Two and Section 4.02, (c) the
rights, powers, trusts, duties, indemnities and immunities of the Trustee
hereunder, including, without limitation, Section 8.06 of the Base
Indenture and the Company’s obligations in connection therewith and (d) this
Article Eight.  Subject to
compliance with this Article Eight, the Company may exercise its option
under this Section 8.02 notwithstanding the prior exercise of its option
under Section 8.03 hereof.  The
following conditions shall apply to Legal Defeasance:

 

63

 

(A)                              the Company
must irrevocably deposit with the Trustee, in trust, for the benefit of the
Holders cash, non-callable U.S. Government Obligations, or a combination
thereof, in such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal of,
premium, if any, and interest on the Notes on the stated date for payment
thereof or on the applicable redemption date, as the case may be;

 

(B)                                the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that:

 

(i)                            the Company has
received from, or there has been published by the United States Internal
Revenue Service, a ruling, or

 

(ii)                              since the date
of this Supplemental Indenture, there has been a change in the applicable U.S.
federal income tax law,

 

in either case to the effect that, and based thereon this Opinion of
Counsel shall confirm that, the Holders will not recognize income, gain or loss
for U.S. federal income tax purposes as a result of the Legal Defeasance and
will be subject to U.S. federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;

 

(C)                                no Default or
Event of Default shall have occurred and be continuing on the date of such
deposit (other than a Default or an Event of Default resulting from the
borrowing of funds to be applied to such deposit and the grant of any Lien
securing such borrowing);

 

(D)                               the Legal
Defeasance shall not result in a breach or violation of, or constitute a
default under this Supplemental Indenture (other than a Default or an Event of
Default resulting from the borrowing of funds to be applied to such deposit and
the grant of any Lien securing such borrowings) or any other material agreement
or instrument (including, without limitation, the Credit Agreement) to which
the Company or any of its Subsidiaries is a party or by which the Company or
any of its Subsidiaries is bound;

 

(E)                                 the Company
shall have delivered to the Trustee an Officers’ Certificate stating that the
deposit was not made by it with the intent of preferring the Holders over any
other of its creditors or with the intent of defeating, hindering, delaying or
defrauding any other of its creditors or others;

 

(F)                                 the Company
shall have delivered to the Trustee an Officers’ Certificate and an Opinion of
Counsel, each stating that the conditions provided for in, in the case of the
Officers’ Certificate, clauses (A) through (E) and, in the case of
the Opinion of Counsel, clauses (A) (with respect to the validity and
perfection of the security interest), (B) and (D) of this Section 8.02
have been complied with; and

 

64

 

(G)                                the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect that
assuming no intervening bankruptcy of the Company between the date of deposit
and the 124th day following the date of deposit and that no Holder is an
insider of the Company, after the 124th day following the date of deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors’ rights
generally.

 

The
Company’s and the Guarantors’ obligations in Sections 3.07, 5.02, 5.04, 6.01,
8.06, 8.10 and 8.11 of the Base Indenture, Article 4 of the Base Indenture
and Sections 4.01, 4.02, 4.13, 8.05 and 8.06 hereunder shall survive until the
Notes are no longer outstanding. 
Thereafter, only the Company’s and the Guarantors’ obligations in
Sections 5.04 and 8.06 of the Base Indenture and Sections 8.05 and 8.06
hereunder shall survive.

 

After
any such irrevocable deposit, the Trustee upon written request shall
acknowledge in writing the discharge of the Company’s obligations under the
Notes and this Supplemental Indenture except for those surviving obligations in
the immediately preceding paragraph.

 

Notwithstanding
the foregoing, the Opinion of Counsel required by Section 8.02(B) with
respect to a Legal Defeasance need not be delivered if all Notes not
theretofore delivered to the Trustee for cancellation (1) have become due
and payable or (2) will become due and payable on the maturity date or a
redemption date within one year under arrangements satisfactory to the Trustee
for the giving of notice of redemption by the Trustee in the name, and at the
expense, of the Company.

 

SECTION 8.03.                                    Defeasance of
Certain Obligations.  The Company
may omit to comply with any term, provision or condition set forth in Section 5.01(a)(3) and
Sections 4.03 through 4.16 and Sections 4.18 through 4.21 and breach of
clauses (a)(4), (a)(5) and (a)(8) under Section 6.01 shall
be deemed not to be Events of Default (“Covenant Defeasance”), in each
case with respect to the outstanding Notes if:

 

(A)                              the Company
irrevocably deposits with the Trustee, in trust, for the benefit of the Holders
cash, non-callable U.S. Government Obligations, or a combination thereof, in
such amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, premium, if
any, and interest on the Notes on the stated date for payment thereof or on the
applicable redemption date, as the case may be;

 

(B)                                the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
acceptable to such Trustee confirming that the Holders will not recognize
income, gain or loss for U.S. federal income tax purposes as a result of such
Covenant Defeasance and will be subject to U.S. federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if the Covenant Defeasance had not occurred;

 

(C)                                no Default or
Event of Default shall have occurred and be continuing on the date of such
deposit (other than a Default or Event of Default resulting from the 

 

65

 

borrowing of funds to be
applied to such deposit and the grant of any Lien securing such borrowings);

 

(D)                               the Covenant
Defeasance shall not result in a breach or violation of, or constitute a
default under this Supplemental Indenture (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such deposit and
the grant of any Lien securing such borrowing) or any other material agreement
or instrument (including, without limitation, the Credit Agreement) to which
the Company or any of its Subsidiaries is a party or by which the Company or
any of its Subsidiaries is bound;

 

(E)                                 the Company
shall have delivered to the Trustee an Officers’ Certificate stating that the
deposit was not made by it with the intent of preferring the Holders over any
other of its creditors or with the intent of defeating, hindering, delaying or
defrauding any other of its creditors or others;

 

(F)                                 the Company
shall have delivered to the Trustee an Officers’ Certificate and an Opinion of
Counsel, each stating that the conditions provided for in, in the case of the
Officers’ Certificate, clauses (A) through (E) and, in the case of
the Opinion of Counsel, clauses (A) (with respect to the validity and
perfection of the security interest), (B) and (D) of this Section 8.03
have been complied with; and

 

(G)                                the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect that
assuming no intervening bankruptcy of the Company between the date of deposit
and the 124th day following the date of deposit and that no Holder is an
insider of the Company, after the 124th day following the date of deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors’ rights
generally.

 

If
the funds deposited with the Trustee to effect Covenant Defeasance are
insufficient to pay the principal of and interest on the Notes when due, then
the Company’s obligations and the obligations of the Guarantors under this
Supplemental Indenture will be revived and no such defeasance will be deemed to
have occurred.

 

SECTION 8.04.                                    Application of
Trust Money.  Subject to Section 8.06,
the Trustee or Paying Agent shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Section 8.01, 8.02 or 8.03, as
the case may be, and shall apply the deposited money and the money from U.S.
Government Obligations in accordance with the Notes and this Supplemental
Indenture to the payment of principal of, premium, if any, and interest on the
Notes.

 

SECTION 8.05.                                    Repayment to
Company.  Subject to Sections 8.01, 8.02
and 8.03 and Section 8.06 of the Base Indenture, the Trustee and the
Paying Agent shall promptly pay to the Company upon request set forth in an
Officers’ Certificate any excess money held by them at any time and thereupon
shall be relieved from all liability with respect to such money.  The Trustee and the Paying Agent shall pay to
the Company upon written request any money held by them for the payment of
principal, premium, if any, or interest that remains unclaimed for two years; provided that the Trustee or such Paying Agent before being
required to make any 

 

66

 

payment shall cause to be published at the expense
of the Company once in a newspaper of general circulation in the City of New
York or mail to each Holder entitled to such money at such Holder’s address (as
set forth in the Register) notice that such money remains unclaimed and that
after a date specified therein (which shall be at least 30 days from the date
of such publication or mailing) any unclaimed balance of such money then remaining
will be repaid to the Company.  After
payment to the Company, Holders entitled to such money must look to the Company
for payment as general creditors unless an applicable law designates another
Person, and all liability of the Trustee and such Paying Agent with respect to
such money shall cease.

 

SECTION 8.06.                                    Reinstatement.  If the Trustee or Paying Agent is unable to
apply any money or U.S. Government Obligations in accordance with Section 8.01,
8.02 or 8.03, as the case may be, by reason of any legal proceeding or by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the Company’s
obligations under this Supplemental Indenture and the Notes shall be revived
and reinstated as though no deposit had occurred pursuant to Section 8.01,
8.02 or 8.03, as the case may be, until such time as the Trustee or Paying
Agent is permitted to apply all such money or U.S. Government Obligations in
accordance with Section 8.01, 8.02 or 8.03, as the case may be; provided that if the Company has made any payment of
principal of, premium, if any, or interest on any Notes because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.

 

Article 12
of the Base Indenture shall not apply to the Notes

 

ARTICLE NINE

 

AMENDMENTS, SUPPLEMENTS AND
WAIVERS

 

SECTION 9.01.                                    Without Consent
of Holders.  The
Company, when authorized by a resolution of its Board of Directors (as
evidenced by a Board Resolution), and the Trustee may amend or supplement this
Supplemental Indenture, the Notes and any Guarantee without notice to or the
consent of any Holder:

 

(1)                                  to cure any
ambiguity, defect or inconsistency;

 

(2)                                  to provide for
uncertificated Notes in addition to or in place of certificated Notes;

 

(3)                                  to provide for
the assumption of the Company’s or any Guarantor’s obligations to Holders in the
case of a merger, consolidation, amalgamation or other combination of the
Company or any Guarantor or sale of all or substantially all of the Company’s
or such Guarantor’s assets;

 

(4)                                  to make any
change that would provide any additional rights or benefits to the Holders of
Notes or that does not materially adversely affect the rights or interests
under this Supplemental Indenture of any such Holder;

 

67

 

(5)                                  to alter the
form of Notes to provide for any changes in applicable tax laws to the extent
that such changes do not materially adversely affect the rights or interests of
any Holder; or

 

(6)                                  to comply with
requirements of the Commission in order to effect or maintain the qualification
of this Supplemental Indenture under the Trust Indenture Act.

 

This
Section 9.01 is subject to Section 9.05.

 

SECTION 9.02.                                    With Consent of
Holders.  Subject to Sections 6.04 and
6.07 and without prior notice to the Holders, the Company, when authorized by
its Board of Directors (as evidenced by a Board Resolution), and the Trustee
may amend this Supplemental Indenture, the Notes or the Guarantees with the
written consent of the Holders of a majority in aggregate principal amount of
the Notes then outstanding, and the Holders of a majority in aggregate
principal amount of the Notes then outstanding by written notice to the Trustee
may waive compliance by the Company with any provision of this Supplemental
Indenture, the Notes or the Guarantees.

 

Notwithstanding
the foregoing provisions of this Section 9.02, without the consent of each
Holder affected, an amendment or waiver, including a waiver pursuant to Section 6.04,
may not:

 

(1)                                  reduce the
amount of Notes whose Holders must consent to an amendment;

 

(2)                                  reduce the rate
of or change or have the effect of changing the time for payment of interest,
including defaulted interest, on any Notes;

 

(3)                                  reduce the
principal of or change or have the effect of changing the fixed maturity of any
Notes, or change the date on which any Notes may be subject to redemption or
reduce the redemption price therefor;

 

(4)                                  make any Notes
payable in money other than that stated in the Notes;

 

(5)                                  make any change
in provisions of this Supplemental Indenture protecting the right of each
Holder to receive payment of principal of and interest on such Note on or after
the due date thereof or to bring suit to enforce such payment, or permitting
Holders of a majority in principal amount of Notes to waive Defaults or Events
of Default;

 

(6)                                  after the
Company’s obligation to purchase Notes arises thereunder, amend, change or
modify in any material respect the obligation of the Company to make and
consummate a Change of Control Offer in the event of a Change of Control or
make and consummate a Net Proceeds Offer with respect to any Asset Sale that
has been consummated or, after such Change of Control has occurred or such
Asset Sale has been consummated, modify any of the provisions or definitions
with respect thereto;

 

68

 

(7)                                  modify or
change any provision of this Supplemental Indenture or the related definitions
affecting the ranking of the Notes or the Guarantees in a manner which
adversely affects the Holders;

 

(8)                                  release any
Guarantor that is a Significant Subsidiary from any of its obligations under
its Guarantee or this Supplemental Indenture otherwise than in accordance with
the terms of this Supplemental Indenture; or

 

(9)                                  modify or
change any provision of Section 9.01 or Section 9.02.

 

It
shall not be necessary for the consent of the Holders under this Section 9.02
to approve the particular form of any proposed amendment, supplement or waiver,
but it shall be sufficient if such consent approves the substance thereof.

 

After
an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver.  The Company shall mail supplemental
indentures to Holders upon request.  Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture or waiver.

 

This
Section 9.02 is subject to Section 9.05.

 

SECTION 9.03.                                    Revocation and
Effect of Consent.  Until an
amendment or waiver becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder of a Note or
portion of a Note that evidences the same debt as the Note of the consenting
Holder, even if notation of the consent is not made on any Note.  However, any such Holder or subsequent Holder
may revoke the consent as to its Note or portion of its Note.  Such revocation shall be effective only if
the Trustee receives the notice of revocation before the date the amendment,
supplement or waiver becomes effective. 
An amendment, supplement or waiver shall become effective on receipt by
the Trustee of written consents from the Holders of the requisite percentage in
principal amount of the outstanding Notes and any other conditions thereto
specified in the notice relating thereto.

 

The
Company may, but shall not be obligated to, fix a record date for the purpose
of determining the Holders entitled to consent to any amendment, supplement or
waiver.  If a record date is fixed, then,
notwithstanding the last two sentences of the immediately preceding paragraph,
those persons who were Holders at such record date (or their duly designated
proxies) and only those persons shall be entitled to consent to such amendment,
supplement or waiver or to revoke any consent previously given, whether or not
such persons continue to be Holders after such record date.  No such consent shall be valid or effective
for more than 90 days after such record date.

 

After
an amendment, supplement or waiver becomes effective, it shall bind every
Holder unless it is of the type described in any of clauses (i) through (ix) of
Section 9.02.  In case of an
amendment or waiver of the type described in clauses (i) through (ix) of
Section 9.02, the amendment or waiver shall bind each Holder who has
consented to it and every subsequent Holder of a Note that evidences the same
indebtedness as the Note of the consenting Holder.

 

69

 

SECTION 9.04.                                    Notation on or
Exchange of Notes.  If an
amendment, supplement or waiver changes the terms of a Note, the Trustee may
require the Holder to deliver it to the Trustee.  The Trustee shall, if directed in writing by
the Company, place an appropriate notation on the Note about the changed terms
and return it to the Holder and the Trustee shall, if directed in writing by
the Company, place an appropriate notation on any Note thereafter
authenticated.  Alternatively, if the
Company so determines, the Company in exchange for the Note shall issue and the
Trustee upon the Company’s written direction in the form of a Company Order
shall authenticate a new Note that reflects the changed terms.

 

SECTION 9.05.                                    Trustee to Sign
Amendments, Etc.  The Trustee
shall receive, and shall be fully protected in relying upon an Officers’
Certificate and an Opinion of Counsel stating that the execution of any
amendment, supplement or waiver authorized pursuant to this Article Nine
is authorized and permitted by this Supplemental Indenture (and otherwise in
form and substance satisfactory to the Trustee).  Subject to the preceding sentence, the
Trustee shall sign such amendment, supplement or waiver if the same does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.  The Trustee may, but shall not be obligated
to, execute any such amendment, supplement or waiver that affects the Trustee’s
own rights, duties or immunities under this Supplemental Indenture or
otherwise.

 

SECTION 9.06.                                    Conformity with
Trust Indenture Act.  Every
supplemental indenture executed pursuant to this Article Nine shall
conform to the requirement of the TIA as then in effect.

 

SECTION 9.07.                                    Base Indenture.  Nothing in this Article 9 shall limit
the rights of the Company and the Trustee to enter into an indenture or
indentures supplemental to the Base Indenture pursuant to Article 10 of
the Base Indenture; provided that
no such indenture or supplement shall affect the Notes unless such amendment or
supplement complies with Section 9.01 or 9.02 hereof, as applicable.  The provisions of this Supplemental Indenture
are solely for the benefit of the Trustee and the Holders of the Notes.

 

ARTICLE TEN

 

[RESERVED]

 

ARTICLE ELEVEN

 

GUARANTEE OF NOTES

 

SECTION 11.01.                              Guarantee.  Each Guarantor hereby fully and
unconditionally guarantees, as a primary obligor and not merely a surety, to
each Holder of a Note authenticated and delivered by a Trustee and to the
Trustee and their successors, that: 
(a) the principal of, premium, if any, and interest on the Notes
will be duly and punctually paid in full when due, whether at maturity, by
acceleration or otherwise, and interest on the overdue principal and (to the
extent permitted by law) interest on the Notes and all other obligations of the
Company to the Holders or the Trustee hereunder (including amounts due the
Trustee under Section 7.07) and all other obligations under this
Supplemental Indenture (the “Indenture Obligations”) will be promptly
paid in full or performed, all in accordance with the terms hereof and thereof;
and 

 

70

 

(b) in case of any extension of time of payment
or renewal of any Notes or any of such other Obligations hereunder, the same
will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at the maturity date of the Notes,
by acceleration or otherwise.  An Event
of Default under this Supplemental Indenture or the Notes shall constitute an
event of default under any of the Guarantees, and shall entitle the Holders of
Notes to accelerate the obligations of each Guarantor hereunder in the same
manner and to the same extent as the obligations of the Company hereunder.

 

Each
Guarantor hereby agrees that its obligations hereunder shall be unconditional,
irrespective of the absence of any action to enforce the Notes or this
Supplemental Indenture, any release of any other Guarantor, the recovery of any
judgment against the Company, any action to enforce the same, whether or not
its Guarantee is affixed to any particular Note, or any other circumstance
(other than payment in full) which might otherwise constitute a legal or
equitable discharge or defense of each Guarantor.  Each Guarantor hereby waives the benefit of
diligence, presentment, demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands
whatsoever and covenants that its Guarantee will not be discharged except by
complete performance of the obligations contained in the Notes, this
Supplemental Indenture and its Guarantee or as otherwise provided herein for
the release of such Guarantee.  The
Guarantees are guarantees of payment and not of collection.  If any Holder or the Trustee is required by
any court or otherwise to return to the Company or to the Guarantors, or any
custodian, trustee, liquidator or other similar official acting in relation to
the Company or the Guarantors, any amount paid by the Company or the Guarantors
to the Trustee or such Holder, each Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect.  Each Guarantor further agrees that, as
between it, on the one hand, and the Holders of Notes and the Trustee, on the
other hand, (a) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Six for the purposes of each Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (b) in
the event of any acceleration of such obligations as provided in Article Six,
such obligations (whether or not due and payable) shall forthwith become due
and payable by each Guarantor for the purpose of its Guarantee.

 

The
obligations of each Guarantor to the Holders and to the Trustee pursuant to the
Guarantee of such Guarantor and this Supplemental Indenture are expressly
subordinate and subject in right of payment to the prior payment in full of all
Guarantor Senior Debt of such Guarantor, to the extent and in the manner
provided in Article Twelve.

 

SECTION 11.02.                              Execution and
Delivery of Guarantee. 
Guarantees, substantially in the form included in Exhibit B
of this Supplemental Indenture, shall be executed by either manual or facsimile
signature of an Officer of each Guarantor. 
The validity and enforceability of each Guarantee shall not be affected
by the fact that it is not affixed to any particular Note.

 

Guarantees
set forth in Section 11.01 shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Guarantee.

 

If
an Officer of a Guarantor whose signature is on this Supplemental Indenture or
a Guarantee no longer holds that office at the time a Trustee authenticates the
Note on which 

 

71

 

such
Guarantee is endorsed or at any time thereafter, such Guarantor’s Guarantee of
such Note shall be valid nevertheless.

 

The
delivery of any Note by a Trustee, after the authentication thereof hereunder,
shall constitute due delivery of each Guarantee set forth in this Supplemental
Indenture on behalf of its respective Guarantor.

 

SECTION 11.03.                              Waiver of
Subrogation.  Until the
Notes are paid in full, each Guarantor hereby irrevocably waives and agrees not
to exercise any claim or other rights which it may now or hereafter acquire
against the Company or any other Restricted Subsidiary that arise from the
existence, payment, performance or enforcement of the Company’s obligations
under the Notes or this Supplemental Indenture and such Guarantor’s obligations
under its Guarantee and this Supplemental Indenture, in any such instance
including, without limitation, any right of subrogation, reimbursement,
exoneration, contribution, indemnification, and any right to participate in any
claim or remedy of the Holders, any Agent and the Trustee against the Company
or any other Restricted Subsidiary, whether or not such claim, remedy or right
arises in equity, or under contract, statute or common law, including, without
limitation, the right to take or receive from the Company or any other
Restricted Subsidiary, directly or indirectly, in cash or other property or by
set-off or in any other manner, payment or security on account of such claim or
other rights.  If any amount shall be
paid to any Guarantor in violation of the preceding sentence and any amounts
owing to the Trustee, any Agent or the Holders of Notes under the Notes, this
Supplemental Indenture, or any other document or instrument delivered under or
in connection with such agreements or instruments, shall not have been paid in
full, such amount shall have been deemed to have been paid to such Guarantor
for the benefit of, and held in trust for the benefit of, the Holders, such
Agent, and the Trustee and shall, subject to the provisions of the last
paragraph of Section 11.01, forthwith be paid to the Trustee for the
benefit of such Holders, such Agent and the Trustee to be credited and applied
to the obligations in favor of the Holders, such Agent and the Trustee, whether
matured or unmatured, in accordance with the terms of this Supplemental
Indenture.  Each Guarantor acknowledges
that it will receive direct and indirect benefits from the financing
arrangements contemplated by this Supplemental Indenture and that the waiver
set forth in this Section 11.03 is knowingly made in contemplation of such
benefits.

 

SECTION 11.04.                              Immediate
Payment.  Each Guarantor shall make
immediate payment to the Trustee on behalf of the Holders and the Trustee of
all obligations with respect to its Guarantee owing or payable to the
respective Holders upon receipt of a demand for payment therefor by the Trustee
to such Guarantor in writing.

 

SECTION 11.05.                              No Set-Off.  Each payment to be made by a Guarantor
hereunder in respect of any obligations with respect to its Guarantee shall be
payable in the currency or currencies in which such obligations are
denominated, and shall be made without set-off, counterclaim, reduction or
diminution of any kind or nature.

 

SECTION 11.06.                              Obligations
Absolute.  The
obligations of each Guarantor hereunder are and shall be absolute and
unconditional and any monies or amounts expressed to be owing or payable by
such Guarantor hereunder which may not be recoverable from such 

 

72

 

Guarantor on the basis of a Guarantee shall be
recoverable from such Guarantor as a primary obligor and principal debtor in
respect thereof.

 

SECTION 11.07.                              Obligations
Continuing.  The
obligations of each Guarantor hereunder shall be continuing and shall remain in
full force and effect until all of the obligations with respect thereto have
been paid and satisfied in full.  Each
Guarantor agrees with the Trustee that it will from time to time deliver to the
Trustee suitable acknowledgments of this continued liability hereunder and
under any other instrument or instruments in such form as counsel to the
Trustee may advise and as will prevent any action brought against it in respect
of any default hereunder being barred by any statute of limitations now or
hereafter in force in the jurisdiction of incorporation or organization of such
Guarantor or elsewhere and, in the event of the failure of such Guarantor so to
do, it hereby irrevocably appoints the Trustee and each of them the attorneys
and agents of such Guarantor to make, execute and deliver such written
acknowledgment or acknowledgments or other instruments as may from time to time
become necessary or advisable, in the judgment of the Trustee on the advice of
counsel, to fully maintain and keep in force the liability of such Guarantor
hereunder.

 

SECTION 11.08.                              Obligations Not
Reduced.  The obligations of each
Guarantor hereunder shall not be satisfied, reduced or discharged by any intermediate
payment or satisfaction of the whole or any part of the principal, interest,
fees and other monies or amounts which may at any time be or become owing or
payable under or by virtue of or otherwise in connection with the Notes or this
Supplemental Indenture.

 

SECTION 11.09.                              Obligations
Reinstated.  The
obligations of each Guarantor hereunder shall continue to be effective or shall
be reinstated, as the case may be, if at any time any payment which would
otherwise have reduced the obligations of each Guarantor hereunder (whether
such payment shall have been made by or on behalf of the Company or by or on
behalf of such Guarantor) is rescinded or reclaimed from any of the Holders and
the Trustee upon the insolvency, bankruptcy, liquidation or reorganization of
the Company or such Guarantor or otherwise, all as though such payment had not
been made.  If demand for, or
acceleration of the time for, payment by the Company is stayed upon the
insolvency, bankruptcy, liquidation or reorganization of the Company, all such
indebtedness otherwise subject to demand for payment or acceleration shall
nonetheless be payable by each Guarantor as provided herein.

 

SECTION 11.10.                              Obligations Not
Affected.  The
obligations of each Guarantor hereunder shall not be affected, impaired or
diminished in any way by any act, omission, matter or thing whatsoever,
occurring before, upon or after any demand for payment hereunder (and whether
or not known or consented to by such Guarantor or any of the Holders and the
Trustee) which, but for this provision, might constitute a whole or partial
defense to a claim against each Guarantor hereunder or might operate to release
or otherwise exonerate such Guarantor from any of its obligations hereunder or
otherwise affect such obligations, whether occasioned by default of any of the
Holders and the Trustee or otherwise, including, without limitation:

 

(i)                                     any limitation
of status or power, disability, incapacity or other circumstance relating to
the Company or any other person, including any insolvency, bankruptcy,
liquidation, reorganization, readjustment, composition, dissolution, winding-up
or other proceeding involving or affecting the Company or any other person;

 

73

 

(ii)           any failure of the Company, whether or not without fault
on its part, to perform or comply with any of the provisions of this
Supplemental Indenture or the Notes, or to give notice thereof to any
Guarantor;

 

(iii)          the taking or enforcing or exercising or the refusal or
neglect to take or enforce or exercise any right or remedy from or against the
Company or any other Person or their respective assets or the release or
discharge of any such right or remedy;

 

(iv)          the granting of time, renewals, extensions, compromises,
concessions, waivers, releases, discharges and other indulgences to the Company
or any other person;

 

(v)           any change in the time, manner or place of payment of, or
in any other term of, any of the Notes, or any other amendment, variation,
supplement, replacement or waiver of, or any consent to departure from, any of
the Notes or this Supplemental Indenture, including, without limitation, any
increase or decrease in the principal amount of or premium, if any, or interest
on any of the Notes;

 

(vi)          any change in the ownership, control, name, objects,
businesses, assets, capital structure or constitution of the Company or any
Guarantor;

 

(vii)         any merger or amalgamation of the Company or any Guarantor
with any Person or Persons;

 

(viii)        the occurrence of any change in the
laws, rules, regulations or ordinances of any jurisdiction by any present or
future action of any governmental authority or court amending, varying,
reducing or otherwise affecting, or purporting to amend, vary, reduce or otherwise
affect, any of the obligations of any Guarantor under its Guarantee; and

 

(ix)           any other circumstance (other than by complete,
irrevocable payment) that might otherwise constitute a legal or equitable
discharge or defense of the Company under this Supplemental Indenture or the
Notes or of any Guarantor in respect of its guarantee hereunder.

 

SECTION 11.11.          Waiver.  Without in any way limiting the provisions of
Section 11.01, each Guarantor hereby waives notice of acceptance hereof,
notice of any liability of such Guarantor hereunder, notice or proof of
reliance by the Holders and the Trustee upon the obligations of such Guarantor
hereunder, and diligence, presentment, demand for payment on the Company,
protest, notice of dishonor or non-payment of any of the obligations under its
Guarantee, or other notice or formalities to the Company or such Guarantor of
any kind whatsoever.

 

SECTION 11.12.          No Obligation to Take Action
Against Company.  Neither the Trustee
nor any of the Holders shall have any obligation to enforce or exhaust any
rights or remedies or to take any other steps under any security for the
obligations under the Guarantees or against the Company or any other person or
any property of the Company or any other person before the Trustee is entitled
to demand payment and performance by any Guarantor of its 

 

74

 

liabilities and obligations under its Guarantee, and
each Guarantor hereby waives all benefit of discussion.

 

SECTION 11.13.          Default and Enforcement.

 

(a)              If any Guarantor fails to pay in accordance with
Section 11.01, the Trustee may proceed in its name as trustee hereunder in
the enforcement of such Guarantee and such Guarantor’s obligations thereunder
and hereunder by any remedy provided by law, whether by legal proceedings or
otherwise, and to recover from any Guarantor the obligations of such Guarantor
with respect to its Guarantee.

 

(b)              No Holder shall have the right to institute any suit,
action or proceeding against any Guarantor for any default hereunder except in
the manner and subject to the conditions set forth in Article Six, it
being understood and intended that no one or more Holders shall have any right
in any manner whatsoever to enforce any right hereunder by his or their action
except as aforesaid and that all powers and trusts hereunder shall be exercised
and all proceedings at law or in equity shall be instituted, had and maintained
by the Trustee, only as aforesaid and in any event for the benefit of all
Holders as provided in this Supplemental Indenture.

 

SECTION 11.14.          Costs and Expenses.  Each Guarantor shall pay on demand by the
Trustee any and all costs, fees and expenses (including, without limitation,
the fees and the expenses of its counsel) incurred by the Trustee or any of the
Holders in enforcing any of their rights under its Guarantee.

 

SECTION 11.15.          No Merger or Waiver; Cumulative
Remedies.  No Guarantee shall operate
by way of merger of any of the obligations of any Guarantor under any other
agreement, including, without limitation, this Supplemental Indenture.  No failure to exercise and no delay in
exercising, on the part of the Trustee or the Holders, any right, remedy, power
or privilege hereunder or under this Supplemental Indenture or the Notes, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder or under this Supplemental
Indenture or the Notes preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges
herein and under this Supplemental Indenture, the Notes and any other document
or instrument between any Guarantor and/or the Company and the Trustee, are
cumulative and not exclusive of any rights, remedies, powers and privilege
provided by law.

 

SECTION 11.16.          Survival of Obligations.  Without prejudice to the survival of any of
the other obligations of any Guarantor hereunder, the obligations of each
Guarantor under Section 11.01 shall survive the payment in full of any
obligations with respect to its Guarantee and shall be enforceable against each
Guarantor without regard to and without giving effect to any defense, right of
offset or counterclaim available to or which may be asserted by the Company or
any Guarantor.

 

SECTION 11.17.          Guarantee in Addition to Other
Obligations.  The obligations of each
Guarantor under its Guarantee and this Supplemental Indenture are in addition
to and not in substitution for any other obligations to the Trustee or to any
of the Holders in relation to this 

 

75

 

Supplemental Indenture or the Notes and any
guarantees or security at any time held by or for the benefit of any of them.

 

SECTION 11.18.          Successors and Assigns.  Each Guarantee shall be binding upon and
inure to the benefit of each Guarantor and the Trustee and the other Holders
and their respective successors and permitted assigns, except that no Guarantor
may assign any of its obligations hereunder except in accordance with the
provisions of Section 9.01 or 9.02 , as applicable, or Section 5.01(c).

 

SECTION 11.19.          Limitation of Guarantor’s Liability.  Any term or provision of this Supplemental
Indenture to the contrary notwithstanding, the maximum aggregate amount of the
obligations guaranteed hereunder by any Guarantor shall not exceed the maximum
amount that can be hereby guaranteed without rendering this Supplemental
Indenture, as it relates to such Guarantor, voidable under applicable law relating
to fraudulent conveyance or fraudulent transfer or similar laws affecting the
rights of creditors generally.  To
effectuate the foregoing intention, the obligations of each Guarantor shall be
limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor (including, but not limited
to, all Guarantor Senior Debt of such Guarantor) and after giving effect to any
collections from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its Guarantee or
pursuant to its contribution obligations hereunder, result in the obligations
of such Guarantor under its Guarantee not constituting a fraudulent conveyance
or fraudulent transfer under federal, state or foreign law.  Each Guarantor that makes a payment or
distribution under a Guarantee shall be entitled to a contribution from each
other Guarantor in an amount based on the consolidated net worth of each Guarantor.

 

SECTION 11.20.          Release of Guarantee.

 

(a)           Each Guarantor may consolidate with
or merge into or sell its assets to the Company or another Guarantor that is a
Wholly Owned Restricted Subsidiary of the Company without limitation, or with
other Persons, upon the terms and conditions set forth in Section 5.01.

 

(b)           In the event all of the Capital Stock
of a Guarantor is sold by the Company and the sale complies with Section 4.10
or a Restricted Subsidiary that is a Guarantor is properly designated as an
Unrestricted Subsidiary pursuant to this Supplemental Indenture, the Guarantor’s
Guarantee will be released.

 

ARTICLE TWELVE

 

RESERVED

 

ARTICLE THIRTEEN

 

MISCELLANEOUS

 

SECTION 13.01.          Payment Date Other Than a Business
Day.  If an Interest Payment Date,
Redemption Date, Stated Maturity or date of maturity or repurchase of any Note
or any other payment date shall not be a Business Day, then payment of
principal of, premium, if 

 

76

 

any, or interest on such Note, as the case may be,
need not be made on such date, but may be made on the next succeeding Business
Day with the same force and effect as if made on the Interest Payment Date or
Redemption Date, or at the Stated Maturity or date of maturity or repurchase of
such Note; provided that no interest shall accrue
for the period from and after such Interest Payment Date, Redemption Date,
Stated Maturity or date of maturity or repurchase, as the case may be.

 

SECTION 13.02.          Governing Law.  This Supplemental Indenture, the Notes and
the Guarantees will be governed by, and construed in accordance with, the laws
of the State of New York but without giving effect to applicable principles of
conflicts of law to the extent that the application of law of another
jurisdiction would be required thereby. 
The Trustee, the Company and the Guarantors agree to submit to the
jurisdiction of any federal or state court situated in the State of New York,
the City of New York, the Borough of Manhattan in any action or proceeding
arising out of or relating to this Supplemental Indenture, the Notes and the
Guarantees.  Each of the Company and each
Guarantor hereby irrevocably submits to the non-exclusive jurisdiction of each
such court for the purpose of any such action or proceeding.  Each of the Company and each Guarantor
irrevocably waives, to the fullest extent it may effectively do so, any
objection to the laying of venue of any such action or proceeding in any such
court and the defense of inconvenient forum to the maintenance of any such
action or proceeding in any such court.

 

SECTION 13.03.          No Adverse Interpretation of Other
Agreements.  This Supplemental
Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company.  Any such
indenture, loan or debt agreement may not be used to interpret this
Supplemental Indenture.

 

SECTION 13.04.          No Recourse Against Others.  No recourse for the payment of the principal
of, premium, if any, or interest on any of the Notes, or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Company or the Guarantors contained in
this Supplemental Indenture or in any of the Notes, or because of the creation
of any Indebtedness represented thereby, shall be had against any incorporator
or against any past, present or future partner, shareholder, other
equityholder, officer, director, employee, management board member, supervisory
board member or controlling person, as such, of the Company or the Guarantors
or of any successor Person, either directly or through the Company, the
Guarantors or any successor Person, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty
or otherwise; it being expressly understood that all such liability is hereby
expressly waived and released as a condition of, and as a consideration for,
the execution of this Supplemental Indenture and the issue of the Notes.

 

SECTION 13.05.          Successors.  All agreements of the Company and the
Guarantors in this Supplemental Indenture and the Notes shall bind their
respective successors.  All agreements of
the Trustee in this Supplemental Indenture shall bind its successor.

 

SECTION 13.06.          Duplicate Originals.  The parties may sign any number of copies of
this Supplemental Indenture.  Each signed
copy shall be an original, but all of them together represent the same
agreement.  The exchange of copies of
this Supplemental Indenture 

 

77

 

and of signature pages by facsimile or PDF
transmission shall constitute effective execution and delivery of this
Supplemental Indenture as to the parties hereto and may be used in lieu of the
original Indenture for all purposes. 
Signatures of the parties hereto transmitted by facsimile or PDF shall
be deemed to be their original signatures for all purposes.

 

SECTION 13.07.          Separability.  In case any provision in this Supplemental
Indenture, in the Base Indenture, in the Guarantees or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

 

SECTION 13.08.          Table of Contents, Headings, Etc.  The Table of Contents and headings of the
Articles and Sections of this Supplemental Indenture have been inserted for
convenience of reference only, are not to be considered a part hereof and shall
in no way modify or restrict any of the terms and provisions hereof.

 

SECTION 13.09.          Waiver of Jury Trial.  Each of the Company, the Guarantors, Trustee,
Paying Agent, and Registrar hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Supplemental Indenture, the
Notes, the Guarantees or the transactions contemplated hereby.

 

SECTION 13.10.          Unclaimed Money; Prescription.  If money deposited with the Trustee or any
Paying Agent for the payment of principal, premium (if any) or interest remains
unclaimed for two years, the Trustee and such Paying Agent shall, upon written
request of the Company, pay such money back to the Company.  Following such repayment to the Company,
Holders of the Notes entitled to such payment must look to the Company for such
payment unless applicable abandoned property law designates another Person and
all liability of the Trustee and Paying Agent shall cease.  Other than as set forth in this paragraph,
this Supplemental Indenture does not provide for any prescription period for
the payment of principal, premium (if any) or interest on the Notes.

 

SECTION 13.11.          Force Majeure.  In no event shall the Trustee be responsible
or liable for any failure or delay in the performance of its obligations
hereunder arising out of or caused by, directly or indirectly, forces beyond
its control, including, without limitation, strikes, work stoppages, accidents,
acts of war or terrorism, civil or military disturbances, nuclear or natural
catastrophes or acts of God, and interruptions, loss or malfunctions of
utilities, communications or computer (software and hardware) services; it
being understood that the Trustee shall use reasonable efforts which are
consistent with accepted practices in the banking industry to resume
performance as soon as practicable under the circumstances.

 

SECTION 13.12.          U.S.A. Patriot Act.  The parties hereto acknowledge that in
accordance with Section 326 of the U.S.A. Patriot Act, the Trustee, like
all financial institutions and in order to help fight the funding of terrorism
and money laundering, is required to obtain, verify, and record information
that identifies each person or legal entity that establishes a relationship or
opens an account with the Trustee.  The
parties to this Supplemental Indenture agree that they will provide the Trustee
with such information as it may request in order for the Trustee to satisfy the
requirements of the U.S.A. Patriot Act.

 

78

 

[Signature Pages Follow]

 

79

 

SIGNATURES

 

IN
WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to
be duly executed, all as of the date first written above.

 

 

	
   

  	
  THE
  MANITOWOC COMPANY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Maurice D. Jones

  
	
   

  	
   

  	
  Name:

  	
  Maurice
  D. Jones

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President, General Counsel

  
	
   

  	
   

  	
   

  	
  and
  Secretary

  

 

S-1

 

	
   

  	
  MANITOWOC
  CRANE COMPANIES, LLC,

  
	
   

  	
  MANITOWOC
  FOODSERVICE COMPANIES, LLC,

  
	
   

  	
  MANITOWOC
  CRANES, LLC,

  
	
   

  	
  GROVE
  U.S. LLC,

  
	
   

  	
  MANITOWOC
  FP, INC.,

  
	
   

  	
  MANITOWOC
  FSG OPERATIONS, LLC,

  
	
   

  	
  MMG
  HOLDING CO., LLC,

  
	
   

  	
  MCCANN’S
  ENGINEERING & MANUFACTURING CO., LLC,

  
	
   

  	
  MANITOWOC
  FSG SERVICES, LLC,

  
	
   

  	
  MANITOWOC
  FSG INTERNATIONAL HOLDINGS, INC.,

  
	
   

  	
  KYSOR
  NEVADA HOLDING CORP.

  
	
   

  	
  CLEVELAND
  RANGE, LLC,

  
	
   

  	
  THE
  DELFIELD COMPANY LLC,

  
	
   

  	
  FRYMASTER
  LLC,

  
	
   

  	
  KYSOR
  INDUSTRIAL CORPORATION

  
	
   

  	
  ENODIS
  CORPORATION,

  
	
   

  	
  ENODIS
  HOLDINGS, INC.,

  
	
   

  	
  MANITOWOC
  FSG U.S. HOLDING, LLC,

  
	
   

  	
  MANITOWOC
  CRANE GROUP U.S. HOLDING, LLC,

  
	
   

  	
  ENVIRONMENTAL
  REHAB, INC.,

  
	
   

  	
  MANITOWOC
  CP, INC.,

  
	
   

  	
  MANITOWOC
  MEC, INC.,

  
	
   

  	
  MANITOWOC
  RE-MANUFACTURING, LLC,

  
	
   

  	
  MANITOWOC
  EQUIPMENT WORKS, INC.,

  
	
   

  	
  as Guarantors

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Maurice D. Jones

  
	
   

  	
   

  	
  Name:

  	
  Maurice
  D. Jones

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President and Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WELBILT
  WALK-INS, LP

  
	
   

  	
  as Guarantor

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  WESTRAN
  CORPORATION

  
	
   

  	
   

  	
  as General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Maurice D. Jones

  
	
   

  	
   

  	
  Name:

  	
  Maurice
  D. Jones

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President and Secretary

  

 

S-2

 

	
   

  	
  MTW
  COUNTY LIMITED,

  
	
   

  	
  ENODIS
  LIMITED,

  
	
   

  	
  as Guarantors

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Maurice D. Jones

  
	
   

  	
   

  	
  Name:

  	
  Maurice
  D. Jones

  
	
   

  	
   

  	
  Title:

  	
  Director

  

 

S-3

 

	
   

  	
  WELLS
  FARGO BANK, NATIONAL 

  
	
   

  	
  ASSOCIATION,
  as Trustee, Registrar, Transfer 

  
	
   

  	
  Agent
  and Paying Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Lynn M. Steiner

  
	
   

  	
   

  	
  Name:

  	
  Lynn
  M. Steiner

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President

  

 

S-4

 

EXHIBIT A

 

[FACE OF NOTE]

 

THE MANITOWOC COMPANY, INC.

 

8.50% Senior Note due 2020

 

$

 

CUSIP
No.

 

No.

 

THE
MANITOWOC COMPANY, INC., a Wisconsin corporation (the “Company”,
which term includes any successor under the Indenture hereinafter referred to),
for value received, promise to pay to
                              ,
or its registered assigns, the principal sum of
$           on November 1,
2020.

 

Interest
Payment Dates:  May 1 and November 1
beginning May 1, 2011.

 

Regular
Record Dates:  April 15 and October 15.

 

[Insert
Global Note Legend, if applicable pursuant to the provisions of the Indenture]

 

Reference
is hereby made to the further provisions of this Note set forth on the reverse
hereof, which further provisions shall for all purposes have the same effect as
if set forth at this place.

 

A-1

 

IN
WITNESS WHEREOF, the Company has caused this Note to be signed manually by its
duly authorized signatories.

 

	
   

  	
  THE
  MANITOWOC COMPANY, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 

(Trustee’s Certificate of Authentication)

 

This
is one of the 8.50% Senior Notes due 2020 described in the within-mentioned
Supplemental Indenture.

 

Date:

 

	
   

  	
  WELLS
  FARGO BANK, NATIONAL 

  ASSOCIATION,
  as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Authorized
  Signatory

  

 

A-2

 

{REVERSE SIDE OF NOTE}

 

THE MANITOWOC COMPANY, INC.

 

8.50% Senior Note due 2020

 

1.                                       Principal and
Interest.

 

The
Company shall pay the principal of this Note on November 1, 2020.

 

The
Company promises to pay interest on the principal amount of this Note on each
Interest Payment Date, as set forth below, at the rate per annum shown above.

 

Interest will be paid semi-annually in arrears
on each Interest Payment Date, commencing May 1, 2011.  Interest on
this Note will accrue from the latest date to which interest has been paid on
the Notes or, if no interest has been paid, the Issue Date.  Interest will be computed on the basis of a
360-day year of twelve 30-day months.

 

The
Company shall pay interest on overdue principal and premium, if any, and
interest on overdue installments of interest, to the extent lawful, at a rate
per annum that is the then applicable interest rate borne by the Notes.

 

2.                                       Method of
Payment.

 

The
Company shall pay interest on the principal amount of the Notes on each May 1
and November 1 to the persons who are Holders of the relevant Notes on the
April 15 or October 15, as the case may be, immediately preceding
such Interest Payment Date (as reflected in the Register at the close of
business on the Regular Record Date), in each case, even if the Note is
canceled on registration of transfer or registration of exchange after such
record date.  The Company shall make
payments of principal on the Notes to Holders that surrender Notes to the
Paying Agent.

 

If
a Holder has given wire transfer instructions to the Paying Agent at least 15
days prior to any payment, the Company shall make all principal, premium and
interest payments on the Notes owned by such Holder in accordance with those
instructions.  All other payments on the
Notes shall be made by check mailed to the Holders at their address set forth
in the register of Holders, or in the case of the final payment of principal
and interest, if any, on any Note, upon presentation and surrender of such Note
at the office of the Paying Agent.  All
payments on the Notes will be made in Dollars.

 

3.                                       Paying Agent
and Registrar.

 

Initially,
the Company has appointed the corporate trust office of the Trustee as Paying
Agent.

 

A-3

 

4.                                       Indenture;
Limitations.

 

The
Company issued the Notes under a Base Indenture dated as of February 8,
2010 as supplemented and amended, including by the Second Supplemental Indenture
(the “Supplemental Indenture”) thereto dated as of October 18, 2010
among the Company, the Guarantors named therein and Wells Fargo Bank, National
Association, as trustee (the “Trustee”), among the Company and the
Trustee (the “Base Indenture”). 
Capitalized terms herein are used as defined in the Supplemental
Indenture unless otherwise indicated. 
This Note is one of a duly authorized issue of Notes of the Company
designated as its 8.50% Senior Notes due 2020 (the “Initial Notes”).  The Initial Notes are initially being issued
in the aggregate principal amount of $600,000,000.  Subject to Section 4.03 of the
Supplemental Indenture, the Company shall be entitled to issue Additional Notes
pursuant to Section 2.06 of the Supplemental Indenture (the “Additional
Notes”).  The Initial Notes issued on
the Issue Date, any Additional Notes are treated as a single class of
securities under the Supplemental Indenture. 
The terms of the Notes include those stated in the Supplemental
Indenture and those made part of the Supplemental Indenture by reference to the
Trust Indenture Act.  The Notes are
subject to all such terms, and Holders are referred to the Supplemental
Indenture and the Trust Indenture Act for a statement of all such terms.  To the extent permitted by applicable law, in
the event of any inconsistency between the terms of this Note and the terms of
the Supplemental Indenture, the terms of the Supplemental Indenture shall
control.  This is one of the Notes
referred to in the Supplemental Indenture. 
The Notes are unsecured.

 

5.                                       Redemption.

 

Optional Redemption.

 

(a)                          The Notes will
be redeemable, at the Company’s option, in whole or in part from time to time,
at any time prior to November 1, 2015, upon not less than 30 nor more than
60 days’ written notice, at a price equal to 100% of the principal amount
thereof plus the Applicable Premium and accrued but unpaid interest, if any, to
the date of redemption (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date).

 

(b)                                 In addition,
the Company may redeem the Notes at its option, in whole or in part, upon not
less than 30 nor more than 60 days’ written notice to the Holders, at the
following redemption prices (expressed as percentages of the principal amount
thereof) if redeemed during the 12-month period commencing on November 1
of the year set forth below:

 

	
  Year

  	
   

  	
  Percentage

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2015

  	
   

  	
  104.250

  	
  %

  
	
  2016

  	
   

  	
  102.833

  	
  %

  
	
  2017

  	
   

  	
  101.417

  	
  %

  
	
  2018 and thereafter

  	
   

  	
  100.000

  	
  %

  

 

A-4

 

In
addition, the Company must pay accrued and unpaid interest on the Notes
redeemed.

 

Optional Redemption upon Public Equity Offerings.  At any time, or from time to time, on or
prior to November 1, 2013, the Company may, at its option, use the net
cash proceeds of one or more Public Equity Offerings (as defined below) to
redeem up to 35% of the principal amount of the Notes (including any Additional
Notes) outstanding under the Supplemental Indenture at a redemption price of
108.500% of the principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of redemption; provided that:

 

(1)                                  at least 65% of
the principal amount of Notes (including any Additional Notes) outstanding
under the Supplemental Indenture remains outstanding immediately after any such
redemption; and

 

(2)                                  the Company
makes such redemption not more than 90 days after the consummation of any such
Public Equity Offering.

 

In
the event that the Company chooses to redeem less than all of the Notes,
selection of the Notes for redemption will be made by the Trustee either:

 

(1)                                  in compliance
with the requirements of the principal national securities exchange, if any, on
which the Notes are listed; or,

 

(2)                                  on a pro rata basis, by lot or by such method as the Trustee
shall deem fair and appropriate.

 

No
Notes of a principal amount of $2,000 or less shall be redeemed in part.  If a partial redemption is made with the
proceeds of a Public Equity Offering, the Trustee will select the Notes only on
a pro rata basis or on as nearly a pro rata basis as is practicable (subject to the Depository’s
procedures, if any).

 

Notice
of any optional redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each Holder of Notes to be redeemed at its
last address as it appears in the Register. 
On and after the Redemption Date, interest ceases to accrue on Notes or
portions of Notes called for redemption so long as the Company has deposited
with the Paying Agent funds in satisfaction of the Redemption Price pursuant to
the terms of the Supplemental Indenture, unless the Company defaults in the
payment of the Redemption Price.  The
Trustee may select for redemption portions of the principal amount of the Notes
that have denominations equal to $1,000 integral multiples thereof in
accordance with Section 3.03 of the Supplemental Indenture.

 

6.                                       Repurchase upon
Change in Control.

 

Upon
the occurrence of a Change of Control, each Holder shall have the right,
subject to the terms and conditions set forth in the Supplemental Indenture, to
require the Company to repurchase its Notes in cash pursuant to the offer
described in the Supplemental 

 

A-5

 

Indenture
at a purchase price equal to 101% of the principal amount thereof, plus accrued
and unpaid interest, to the date of purchase (the “Change of Control Payment”).

 

A
notice of such Change of Control will be mailed within 30 days after any Change
of Control occurs to each Holder at its last address as it appears in the
Register and to the Trustee.  The notice
to the Holders shall contain all instructions and materials necessary to enable
such Holders to tender Notes pursuant to the Change of Control Offer.  Such notice shall state:

 

(1)                                  that the Change
of Control Offer is being made pursuant to Section 4.11 of the
Supplemental Indenture and that all Notes tendered will be accepted for
payment;

 

(2)                                  the purchase
price (including the amount of accrued interest) and the purchase date (which
shall be no earlier than the Change of Control Payment Date);

 

(3)                                  that any Note
not tendered will continue to accrue interest if interest is then accruing;

 

(4)                                  that, unless
the Company defaults in making payment therefor, any Note accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest after
the Change of Control Payment Date;

 

(5)                                  that Holders
electing to have a Note purchased pursuant to a Change of Control Offer will be
required to surrender the Note, with the form entitled “Option of Holder to
Elect Purchase” on the reverse of the Note completed, to the Paying Agent at
the address specified in the notice prior to the close of business on the third
Business Day prior to the Change of Control Payment Date;

 

(6)                                  that Holders
will be entitled to withdraw their election if the Paying Agent receives, not
later than 5:00 p.m., New York City time, on the second Business Day
preceding the Change of Control Payment Date, a facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the Notes
the Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Note purchased; and

 

(7)                                  the
circumstances and relevant facts regarding such Change of Control.

 

7.                                       Denominations;
Transfer; Exchange.

 

The
Notes are in registered form without coupons in denominations of $2,000
principal amount and multiples of $1,000 in excess thereof.  A Holder may register the transfer or
exchange of Notes in accordance with the Supplemental Indenture.  The Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and to
pay any taxes and fees required by law or permitted by the Supplemental Indenture.

 

A-6

 

8.                                       Persons Deemed
Owners.

 

A
Holder shall be treated as the owner of a Note for all purposes.

 

9.                                       Unclaimed Money.

 

If
money deposited with the Trustee or any Paying Agent for the payment of
principal, premium (if any), interest remains unclaimed for two years, the
Trustee and each such Paying Agent shall pay such money back to the Company
upon written request of the Company. 
Following such repayment to the Company, Holders of the Notes entitled
to such payment must look to the Company for such payment unless applicable
abandoned property law designates another Person and all liability of the
Trustee and such Paying Agent shall cease. 
Other than as set forth in this paragraph, the Supplemental Indenture
does not provide for any prescription period for the payment of principal,
premium (if any), interest on the Notes.

 

10.                                 Discharge Prior
to Redemption or Maturity.

 

If
the Company deposits with the Trustee money or U.S. Government Obligations
sufficient to pay the then outstanding principal of and accrued interest on the
Notes to redemption or maturity, the Company and the Guarantors will be
discharged from the Supplemental Indenture, the Notes and the Guarantees except
in certain circumstances set forth in the Supplemental Indenture.

 

11.                                 Legal
Defeasance and Covenant Defeasance.

 

The
Company and each Guarantor may be discharged from their obligations under the
Supplemental Indenture, the Notes and the Guarantees except for certain
provisions thereof, and the Company may be discharged from its obligations to
comply with certain covenants contained therein, in each case upon satisfaction
of certain conditions specified in the Supplemental Indenture.

 

12.                                 Successor
Persons.

 

When
a successor person or other entity assumes all the obligations of its
predecessor under the Notes and the Supplemental Indenture, the predecessor
person will be released from those obligations.

 

13.                                 Defaults and
Remedies.

 

If
an Event of Default (other than an Event of Default specified in clause (a)(6) or
(a)(7) of Section 6.01 of the Supplemental Indenture that occurs with
respect to the Company) 

 

A-7

 

occurs
and is continuing, the Trustee by notice to the Company, or the Holders of at
least 25% in aggregate principal amount of the Notes then outstanding under the
Supplemental Indenture by notice to the Company and the Trustee, may declare
the principal of, premium, if any, and accrued interest, if any, on all Notes
to be due and payable.  If an Event of
Default specified in clause (a)(6) or (a)(7) of
Section 6.01 occurs and is continuing with respect to the Company, such
amount with respect to all the Notes shall, ipso facto,
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holders. 
Holders may not enforce the Supplemental Indenture, the Notes or the
Guarantees except as provided in the Supplemental Indenture.  The Trustee may require indemnity
satisfactory to it before it enforces the Supplemental Indenture, the Notes or
the Guarantees.  Subject to certain
limitations, Holders of at least a majority in principal amount of the Notes
then outstanding may direct the Trustee in its exercise of any trust or power.

 

14.                                 No Recourse
Against Others.

 

No
recourse for the payment of the principal of, premium, if any, or interest on
any of the Notes or the Guarantees, or for any claim based thereon or otherwise
in respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company contained in the Supplemental Indenture, in any of the
Notes or the Guarantees, or because of the creation of any Indebtedness
represented thereby, shall be had against any incorporator or against any past,
present or future partner, shareholder, other equityholder, officer, director,
employee, management board member, supervisory board member or controlling
person, as such, of the Company, the Guarantors or of any successor Person,
either directly or through the Company or any successor Person, whether by virtue
of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise.

 

15.                                 Authentication.

 

This
Note shall not be valid until the Trustee or authenticating agent signs the
certificate of authentication on the other side of this Note.

 

16.                                 Abbreviations.

 

Customary
abbreviations may be used in the name of a Holder or an assignee, such as:  TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian) and U/G/M/A
(= Uniform Gifts to Minors Act).

 

17.                                 Choice of Law.

 

The
Supplemental Indenture and this Note shall be governed by, and construed in
accordance with, the laws of the State of New York but without giving effect to
applicable principles of conflicts of law to the extent that the application of
law of another jurisdiction would be required thereby.

 

A-8

 

18.                                 Definitions.

 

Capitalized
terms not otherwise defined herein shall have the respective meanings specified
in the Supplemental Indenture and the Base Indenture. 

 

A-9

 

ASSIGNMENT
FORM

 

I
or we assign and transfer this Note to

 

	
   

  
	
   

  
	
   

  
	
  (Print
  or type name, address and zip code of assignee or transferee)

  

 

	
   

  
	
  (Insert
  Company Registration, Social Security or other identifying number of assignee
  or transferee)

  

 

and
irrevocably appoint

agent to transfer this Security on the books of the Company.  The agent may substitute another to act for
him.

 

	
  Dated:

  	
   

  	
   

  	
  Signed:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (Sign exactly as name appears on the other side of this Note)

  

 

	
  Signature
  Guarantee:

  	
   

  
	
   

  	
  Participant in a recognized Signature Guarantee Medallion Program (or
  other signature guarantor program reasonably acceptable to the Trustee)

  

 

A-10

 

OPTION OF HOLDER TO ELECT PURCHASE

 

If
you wish to have this Note purchased by the Company pursuant to Section 4.10
or Section 4.11 of the Supplemental Indenture, check the box:   o

 

If
you wish to have a portion of this Note purchased by the Company pursuant to Section 4.10
or Section 4.11 of the Supplemental Indenture, state the amount (in
principal amount): 
$                  .

 

	
  Date:

  	
   

  	
   

  

Your
Signature:

 

 

(Sign exactly as your name appears on the other side of this Note)

 

	
  Signature
  Guarantee:

  	
   

  	
   

  

 

A-11

 

SCHEDULE A

 

SCHEDULE OF PRINCIPAL AMOUNT

OF INDEBTEDNESS EVIDENCED BY THIS NOTE

 

The initial principal amount of indebtedness
evidenced by this Note shall be
$          .  The following decreases/increases in the
principal amount of indebtedness evidenced by this Note have been made:

 

	
  Date of

  Decrease/Increase

  	
   

  	
  Decrease in

  Principal Amount

  of Indebtedness

  Evidenced

  	
   

  	
  Increase in

  Principal Amount

  of Indebtedness

  Evidenced

  	
   

  	
  Total Principal

  Amount of

  Indebtedness

  Evidenced

  Following Such

  Decrease/Increase

  	
   

  	
  Notation Made

  by or on Behalf of

  Trustee

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

A-12

 

EXHIBIT B

 

FORM OF GUARANTEE

 

For
value received, the undersigned hereby fully and unconditionally guarantees to
the Holder of this Note the cash payments in Dollars of principal of, premium,
if any, and interest on this Note in the amounts and at the time when due and
interest on the overdue principal and premium and, to the extent lawful,
interest, if any, on this Note, if lawful, and the payment or performance of
all other obligations of the Company under the Supplemental Indenture or the
Notes, to the Holder of this Note and the Trustee, all in accordance with and
subject to the terms and limitations of this Note and Article Eleven of
the Supplemental Indenture and this Guarantee. 
This Guarantee will become effective in accordance with Article Eleven
of the Supplemental Indenture and its terms shall be evidenced therein.  The validity and enforceability of each
Guarantee shall not be affected by the fact that it may not be affixed to any
particular Note.  Capitalized terms used
but not defined herein shall have the meanings ascribed to them in the Base
Indenture dated as of February 8, 2010, between The Manitowoc Company, Inc.
and Wells Fargo Bank, National Association, as Trustee, as amended or
supplemented by the Second Supplemental Indenture (the “Supplemental
Indenture”) thereto dated as of October 18, 2010 among the Company, the
Guarantors named therein and the Trustee (the “Indenture”).

 

The
obligations of the undersigned to the Holders of Notes and to the Trustee
pursuant to this Guarantee and the Supplemental Indenture are expressly set
forth in Article Eleven of the Supplemental Indenture and reference is
hereby made to the Supplemental Indenture for the precise terms of this
Guarantee and all of the other provisions of the Supplemental Indenture to
which this Guarantee relates.

 

THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT APPLICATION OF LAW OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY. 
EACH GUARANTOR HEREUNDER AGREES TO SUBMIT TO THE JURISDICTION OF ANY
FEDERAL OR STATE COURT SITUATED IN THE STATE OF NEW YORK, THE CITY OF NEW YORK,
THE BOROUGH OF MANHATTAN FOR THE PURPOSES SET FORTH IN THE SUPPLEMENTAL
INDENTURE, THE NOTES OR THIS GUARANTEE.

 

Date:  October 18, 2010

 

	
   

  	
   

  
	
   

  	
  as
  Guarantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:Exhibit 10.1

 

EXECUTION VERSION

 

PURCHASE AND SALE AGREEMENT

 

BY AND AMONG

 

TERRANE METALS CORP.,

 

RGL ROYALTY AG,

 

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: as of
October 20, 2010

 

 

 

TABLE OF CONTENTS

 

	
  Article 1
  INTERPRETATION

  	
  2

  
	
  1.1

  	
  Definitions

  	
  2

  
	
  1.2

  	
  Certain Rules of
  Interpretation

  	
  13

  
	
   

  	
   

  	
   

  
	
  Article 2
  PURCHASE AND SALE

  	
  14

  
	
  2.1

  	
  Purchase and Sale of Refined
  Gold

  	
  14

  
	
  2.2

  	
  Delivery Obligations

  	
  14

  
	
  2.3

  	
  Statements

  	
  16

  
	
  2.4

  	
  Gold Purchase Price

  	
  16

  
	
  2.5

  	
  Payment

  	
  17

  
	
  2.6

  	
  Sales Tax

  	
  17

  
	
   

  	
   

  	
   

  
	
  Article 3
  DEPOSIT

  	
  17

  
	
  3.1

  	
  Payment Deposit

  	
  17

  
	
  3.2

  	
  Initial Deposit

  	
  17

  
	
  3.3

  	
  Scheduled Deposits

  	
  17

  
	
  3.4

  	
  No Interest

  	
  17

  
	
  3.5

  	
  Use of Payment Deposit

  	
  17

  
	
  3.6

  	
  Deposit Record

  	
  18

  
	
  3.7

  	
  Deposit at Expiry of Initial
  Term

  	
  18

  
	
   

  	
   

  	
   

  
	
  Article 4
  DELIVERIES

  	
  18

  
	
  4.1

  	
  Deliveries of Vendor

  	
  18

  
	
  4.2

  	
  Deliveries of Purchaser

  	
  19

  
	
   

  	
   

  	
   

  
	
  Article 5
  PAYMENT OF SCHEDULED DEPOSITS

  	
  20

  
	
  5.1

  	
  Achievement of Deposit
  Events

  	
  20

  
	
  5.2

  	
  Payment of Scheduled
  Deposits

  	
  20

  
	
  5.3

  	
  Closing Conditions for
  Payment of Scheduled Deposits

  	
  20

  
	
   

  	
   

  	
   

  
	
  Article 6
  TERM

  	
  22

  
	
  6.1

  	
  Term

  	
  22

  
	
   

  	
   

  	
   

  
	
  Article 7
  REPORTING; BOOKS AND RECORDS; INSPECTIONS

  	
  22

  
	
  7.1

  	
  Monthly Reporting

  	
  22

  
	
  7.2

  	
  Annual Reporting

  	
  22

  
	
  7.3

  	
  Additional Reporting
  Requirements

  	
  22

  
	
  7.4

  	
  Books and Records

  	
  23

  
	
  7.5

  	
  Inspections

  	
  23

  
	
   

  	
   

  	
   

  
	
  Article 8
  COVENANTS

  	
  24

  
	
  8.1

  	
  Conduct of Operations

  	
  24

  
	
  8.2

  	
  Preservation of Corporate
  Existence

  	
  25

  
	
  8.3

  	
  Processing/Commingling

  	
  25

  
	
  8.4

  	
  Mineral Offtake Agreements

  	
  25

  
	
  8.5

  	
  Insurance

  	
  26

  
	
  8.6

  	
  Permitted Financings and
  Permitted Encumbrances

  	
  26

  
	
  8.7

  	
  Confidentiality

  	
  30

  
	
  8.8

  	
  Compliance with Law

  	
  32

  

 

 

	
  8.9

  	
  Unprocessed Ore

  	
  32

  
	
   

  	
   

  	
   

  
	
  Article 9
  RIGHT OF FIRST OFFER

  	
  32

  
	
  9.1

  	
  Right of First Offer on Gold
  Interest

  	
  32

  
	
   

  	
   

  	
   

  
	
  Article 10
  TRANSFERS AND ASSIGNMENTS

  	
  34

  
	
  10.1

  	
  General

  	
  34

  
	
  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

  	
  36

  
	
  10.6

  	
  Assignment by Vendor Group

  	
  36

  
	
   

  	
   

  	
   

  
	
  Article 11
  REPRESENTATIONS AND WARRANTIES

  	
  36

  
	
  11.1

  	
  Representations and
  Warranties of Vendor

  	
  36

  
	
  11.2

  	
  Representations and
  Warranties of Thompson Creek

  	
  36

  
	
  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

  	
  37

  
	
  11.6

  	
  Knowledge

  	
  37

  
	
   

  	
   

  	
   

  
	
  Article 12
  VENDOR EVENTS OF DEFAULT

  	
  37

  
	
  12.1

  	
  Vendor Events of Default

  	
  37

  
	
  12.2

  	
  Remedies

  	
  37

  
	
   

  	
   

  	
   

  
	
  Article 13
  PURCHASER EVENTS OF DEFAULT

  	
  38

  
	
  13.1

  	
  Purchaser Events of Default

  	
  38

  
	
  13.2

  	
  Remedies

  	
  38

  
	
   

  	
   

  	
   

  
	
  Article 14
  INDEMNITIES

  	
  39

  
	
  14.1

  	
  Indemnity of Purchaser

  	
  39

  
	
  14.2

  	
  Indemnity of Vendor

  	
  39

  
	
  14.3

  	
  Limited Indemnity for Losses
  Related to Incidental Connection to Property

  	
  39

  
	
  14.4

  	
  Limitations on
  Indemnification

  	
  40

  
	
   

  	
   

  	
   

  
	
  Article 15
  INDEPENDENT ENGINEER; ADDITIONAL PAYMENT TERMS; DISPUTES

  	
  40

  
	
  15.1

  	
  Independent Engineer

  	
  40

  
	
  15.2

  	
  Payments

  	
  41

  
	
  15.3

  	
  Overdue Payments and Set-Off

  	
  41

  
	
  15.4

  	
  Statement Disputes

  	
  41

  
	
  15.5

  	
  Disputes and Arbitration

  	
  43

  
	
   

  	
   

  	
   

  
	
  Article 16
  TAXES

  	
  43

  
	
  16.1

  	
  Taxes

  	
  43

  
	
   

  	
   

  	
   

  
	
  Article 17
  GENERAL

  	
  44

  
	
  17.1

  	
  Further Assurances

  	
  44

  
	
  17.2

  	
  Survival

  	
  44

  
	
  17.3

  	
  No Joint Venture

  	
  44

  
	
  17.4

  	
  Governing Law

  	
  44

  
	
  17.5

  	
  Notices

  	
  44

  

 

ii

 

	
  17.6

  	
  [Reserved]

  	
  46

  
	
  17.7

  	
  Amendments

  	
  46

  
	
  17.8

  	
  Beneficiaries; Successors
  and Assigns

  	
  46

  
	
  17.9

  	
  Contests

  	
  46

  
	
  17.10

  	
  Entire Agreement

  	
  46

  
	
  17.11

  	
  Waivers

  	
  47

  
	
  17.12

  	
  Severability

  	
  47

  
	
  17.13

  	
  Counterparts

  	
  47

  
	
  17.14

  	
  Thompson Creek Guarantee

  	
  47

  
	
  17.15

  	
  Royal Gold Guarantee

  	
  47

  

 

iii

 

THIS PURCHASE AND SALE AGREEMENT dated as of October 20, 2010.

 

BY AND AMONG:

 

RGL ROYALTY AG, a Swiss Corporation

 

(the “Purchaser”),

 

- and-

 

TERRANE METALS CORP., a corporation amalgamated under the laws of British
Columbia by amalgamation of 0888046 B.C. Ltd. and Terrane Metals Corp.

 

(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:

 

 

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, 

 

3

 

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) 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).

 

*[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

 

“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.

 

“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 

 

5

 

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).

 

“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 

 

6

 

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.

 

“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 

 

*[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

 

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 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;

 

8

 

(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.

 

“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 

 

9

 

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 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.

 

10

 

“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.

 

“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 

 

11

 

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, 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).

 

12

 

“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;

 

(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

  

 

13

 

	
  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 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;

 

14

 

(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.

 

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 

 

*[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.

 

15

 

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.

 

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.

 

16

 

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”).

 

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:

 

17

 

(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.

 

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 

 

18

 

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 arrangements, satisfactory to the Purchaser, for 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;

 

(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

 

19

 

(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;

 

(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:

 

20

 

(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 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.

 

21

 

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.

 

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, 

 

22

 

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. 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 

 

23

 

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, 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 

 

24

 

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 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.

 

25

 

(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 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

 

(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 

 

26

 

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 (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 

 

27

 

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 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 

 

28

 

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
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 

 

29

 

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 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 

 

30

 

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.

 

(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.

 

31

 

(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.

 

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,

 

32

 

((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 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.

 

33

 

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.

 

(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”),

 

34

 

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.

 

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.

 

35

 

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.

 

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.

 

36

 

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.

 

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;

 

(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.

 

37

 

(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.

 

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 

 

38

 

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 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 

 

39

 

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.

 

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 

 

40

 

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.

 

(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 

 

41

 

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;

 

(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 

 

42

 

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
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 

 

43

 

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
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:

 

Terrane Metals Corp.

c/o Thompson Creek Metals Company Inc.

 

44

 

26 W. Dry Creek Circle

Suite 810

Littleton, CO 80120   USA

Attention:  General Counsel

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:  Wendy Cassity, General
Counsel

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:

 

RGL Royalty AG

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:

 

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

 

45

 

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.

 

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 

 

46

 

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.

 

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.

 

	
   

  	
  RGL ROYALTY AG

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Per:

  	
  /s/ Tony Jensen

  
	
   

  	
   

  	
  Name:  Tony
  Jensen

  
	
   

  	
   

  	
  Authorized Signatory: Chairman

  
	
   

  	
  Per:

  	
  /s/ Martin Weber

  
	
   

  	
   

  	
  Name:  Martin
  Weber

  
	
   

  	
   

  	
  Authorized Signatory: Board Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TERRANE METALS CORP.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Per:

  	
  /s/ Pamela Saxton

  
	
   

  	
   

  	
  Name:  Pamela
  Saxton

  
	
   

  	
   

  	
  Title: 
    Chief Financial Officer and
  Vice President, Finance

  
	
   

  	
   

  
	
   

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

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ROYAL GOLD, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Per:

  	
  /s/ William H. Heissenbuttel

  
	
   

  	
   

  	
  Name:  William
  H. Heissenbuttel

  
	
   

  	
   

  	
  Title:   
  Vice President Corporate Development

  
	
   

  	
   

  
	
   

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

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THOMPSON CREEK METALS COMPANY
  INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Per:

  	
  /s/ Pamela Saxton

  
	
   

  	
   

  	
  Name:  Pamela
  Saxton

  
	
   

  	
   

  	
  Title:   
  Chief Financial Officer and Vice President, Finance

  

 

[SIGNATURE
PAGE — PURCHASE AND SALE AGREEMENT]

 

 

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.

 

(c)                                  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.

 

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

 

(e)                                  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.

 

 

(f)                                   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 legal 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, and, within ten (10) Business Days
of the Effective Date, it will be the registered and recorded holder of the
Milligan Tenures in the registry (as defined in the Mineral Tenure Act (British Columbia));

 

(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 20 day of October, 2010 by TERRANE
METALS CORP. (herein called “Vendor”)
a company amalgamated under the laws of British Columbia by amalgamation of
0888046 B.C. Ltd. and Terrane Metals Corp., Suite 1500 - 999 West Hastings
Street, Vancouver, British Columbia, (Fax No. 604-630-2090) in favour of
RGL ROYALTY AG, (herein called the “Purchaser”)
a corporation incorporated under the laws of Switzerland, c/o SchelPart AG,
Baarerstrasse 53, P O Box 4559, CH - 6304 Zug, Switzerland (Fax No. +41 41
729 20 77).

 

BACKGROUND:

 

Pursuant to the gold purchase and sale
agreement dated October 20, 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 October 20, 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.

 

[SIGNATURE PAGE FOLLOWS]

 

 

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

 

	
  TERRANE METALS CORP.

  
	
   

  
	
  Per:

  
	
   

  
	
   

  
	
   

  	
   

  
	
   

  
	
  Authorized Signatory

  

 

 

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 RGL Royalty AG, 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

 

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 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

  	
   

  	
   

  	
   

  	
   

  

 

 

MINING LEASES

 

MINING LEASES
LEGALLY AND BENEFICIALLY OWNED AND HELD BY VENDOR:

 

Mineral Lease Tenure Identification: 631503.

 

SURFACE RIGHTS

 

SURFACE
RIGHTS LEGALLY AND BENEFICIALLY OWNED AND HELD BY VENDOR:

 

·      Realignment Rainbow Forest Service Road Permit #2009-01177

 

·      Provincial Permit No. 2009-05414 for Power Line Crossing

 

·      Provincial Licence of Occupation No. 705959

 

·      Forest and Range Practices Act permit for timber cutting and road
construction for Forest Service Roads 10663 and 10679

 

·      Road Use Permit OTH10006 authorizing use of Forest Service roads

 

 

Schedule C2

 

Form of Security Agreement
for Personal Property

 

 

SECURITY AGREEMENT COLLATERAL

 

THIS AGREEMENT is made as of the 20 day of October, 2010 by TERRANE
METALS CORP. (herein called “Vendor”)
a company amalgamated under the laws of British Columbia by the amalgamation of
0888046 B.C. Ltd. and Terrane Metals Corp., Suite 1500 - 999 West Hastings
Street, Vancouver, British Columbia, (Fax No. 604-630-2090) in favour of
RGL ROYALTY AG, (herein called the “Purchaser”)
a corporation incorporated under the laws of Switzerland, c/o SchelPart AG,
Baarerstrasse 53, P O Box 4559, CH - 6304 Zug, Switzerland (Fax No. +41 41
729 20 77).

 

BACKGROUND:

 

Pursuant to the gold purchase and sale
agreement dated October 20, 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;

 

(i)            (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:

 

(b)           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.

 

(c)           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.

 

(d)           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.

 

(e)           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

 

(v)           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.

 

(f)            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.

 

(g)           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.

 

(h)           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.

 

(i)            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 October 20, 2010
irrespective of its actual date of execution.

 

[SIGNATURE PAGE FOLLOWS]

 

 

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

 

	
  TERRANE METALS CORP.

  
	
   

  
	
  Per:

  
	
   

  
	
   

  	
   

  
	
   

  
	
  Authorized Signatory

  

 

 

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 RGL Royalty AG, 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:

 

·      Provincial Environmental Assessment Certificate #M09-01

 

·      Realignment Rainbow Forest Service Road Permit #2009-01177

 

·      Provincial Mine Permit Approving Mine Plan and Reclamation Program
Permit #M-236

 

·      Proposed 230kV Aerial Electric Cable Crossing No. 09-041 Permit
from Spectra Energy Transmission

 

·      Provincial Permit No. 2009-05414 for Power Line Crossing

 

·      Provincial Licence of Occupation No. 705959

 

·      Federal Environmental Assessment Decision Statement dated December 1.
2009

 

·      Federal Decision from Fisheries and Oceans Canada and Natural Resources
Canada dated December 14, 2009

 

·      Provincial Occupant Licence to Cut and Remove Timber L48253

 

·      Navigable
Waters Protection Act
Permit for Aerial Cable located at Colbourne Creek

 

·      Navigable
Waters Protection Act
Permit for Aerial Cable located at Pack River

 

·      Navigable
Waters Protection Act
Permit for Aerial Cable located at Parsnip River

 

·      Provincial Forestry Licence to Cut Permit A86092

 

·      Occupant Licence to Cut L48226, including Provincial Forest Tenure
Administration — Exhibit A Clearance to Occupant Licence to Cut L48226

 

·      Notification to Commence Work under Mine Permit M-236 (pursuant to
section 6.2.1 of the Health, Safety and Reclamation Cod for Mines in British
Columbia)

 

·      Regulatory Impact Analysis Statement in Canada Gazette regarding
amendment to the Metal Mining Effluent Regulations

 

·      Forest and Range Practices Act permit for timber cutting and road
construction for Forest Service Roads 10663 and 10679

 

·      Permit No. PR104778 under Provincial Environmental
Management Act to discharge refuse

 

 

·      Permit No. PA104779 under Provincial
Environmental Management Act to discharge air contaminants

 

·      Permit No. PE104777 under Provincial
Environmental Management Act to discharge liquid effluent

 

·      Mining Lease Tenure No. 631503

 

·      Road Use Permit OTH10006 authorizing use of Forest Service roads

 

·      Water
Act licences C125689 and
C125690 (issued September 10, 2010)

 

 

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 20 day of October, 2010 by TERRANE METALS CORP.
(herein called “Vendor”) a company
amalgamated under the laws of British Columbia by amalgamation of 0888046 B.C.
Ltd. and Terrane Metals Corp., Suite 1500 - 999 West Hastings Street,
Vancouver, British Columbia, (Fax No. 604-630-2090) in favour of RGL
ROYALTY AG, (herein called the “Purchaser”)
a corporation incorporated under the laws of Switzerland, c/o SchelPart AG,
Baarerstrasse 53, P O Box 4559, CH - 6304 Zug, Switzerland (Fax No. +41 41
729 20 77).

 

BACKGROUND:

 

Pursuant to
the gold purchase and sale agreement dated October 20, 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:

 

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

 

(b)           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

 

(c)           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.

 

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 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.

 

6.14        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 October 20, 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.

 

[SIGNATURE PAGE FOLLOWS]

 

 

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

 

	
  TERRANE METALS CORP.

  
	
  Per:

  
	
   

  	
   

  
	
  Authorized
  Signatory

  

 

 

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 RGL Royalty AG, 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.: 262518D

  Registration Date: September 27, 2006

  Registration Length: Infinity

  Secured Party: International Royalty Corporation

  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.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Base Registration No.: 764748F

  Registration Date: September 15, 2010

  Registration Length: 4 years

  Secured Party: Key Lease Canada Ltd.

  Debtor(s): Terrane Metals Corp.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Base Registration No.: 815225F

  Registration Date: October 15, 2010

  Registration Length: Infinity

  Secured Party: RGL Royalty AG

  Debtor(s): Terrane Metals Corp.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Base Registration
  No.: 815230F

  Registration Date: October 15, 2010

  Registration Length: 20 years

  Secured Party: RGL Royalty AG

  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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