Document:

PLEDGE AND SECURITY AGREEMENT

 

THIS PLEDGE AND SECURITY AGREEMENT (this “Agreement”), dated as of July 27, 2011 (the “Effective Date”), is by and among Gryphon Gold Corporation, a Nevada corporation (“Debtor”), and Computershare Trust Company of Canada (“Trustee”), as trustee to the holders (collectively, “Holders”) of 10% Subordinate Secured Notes, due July 28, 2012, issued by the Debtor.

 

Recitals

 

A.           Holders advanced Debtor the aggregate amount of CAD$3,000,000 (the “Loan”) pursuant to the terms of that certain Note and Warrant Purchase Agreement dated July 27, 2011 (as amended, restated, supplemented, or otherwise modified from time to time, the “Purchase Agreement”).

 

B.           The indebtedness is evidenced by 10% Subordinate Secured Notes, due July 28, 2012 (“Notes”), in the aggregate principal amount of CAD$3,000,000, issued by Debtor to Holders pursuant to the terms of a Note Indenture dated July 27, 2011, by and between Debtor and Trustee, for the benefit of Holders (as amended, restated, supplemented, or otherwise modified from time to time, the “Note Indenture”).

 

C.           Borealis Mining Company, a Nevada corporation (“Borealis Mining”), is a wholly-owned subsidiary of Debtor, and Debtor owns all of the issued and outstanding shares of common stock of Borealis Mining (the “Borealis Securities”).

 

D.           Under the terms of the Purchase Agreement, Debtor has agreed to grant, for the benefit of Holder, as secured party, a security interest in all of its property and assets as set forth herein, including a pledge of 100% of the Borealis Securities.

 

E.           As a condition precedent to advancing the Loan and the issuance of the Notes, the Debtor is required to execute and deliver this Agreement.

 

Agreement

 

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

 

1.           Grant of Security. Debtor hereby grants to Trustee, for the benefit of Holders, a lien on and security interest in all of Debtor’s right, title and interest in, to and under the following, whether now or hereafter owned, existing, arising or acquired and wherever located (all of the following, collectively, the “Collateral”):

 

(a)           Inventory.  All (i) inventory in all its forms and of any kind, (ii) goods in which Debtor has an interest in mass or a joint or other interest or right of any kind, (iii) goods which are returned to or repossessed by Debtor, and (iv) accessions thereto and products thereof and documents therefor (any and all of the foregoing herein collectively called the “Inventory”).

 

(b)           Equipment.  All equipment in any form and of any kind, including all office machinery, production and printing equipment and delivery vehicles (any and all of the foregoing herein collectively called the “Equipment”).

 

(c)           Receivables.  All (i) accounts of any kind, (ii) chattel paper, documents and instruments of any kind relating to such accounts or arising out of or in connection with the sale or lease of goods or the rendering of services, and (iii) rights in, to or under all security agreements, leases and other contracts securing or otherwise relating to any such accounts, chattel paper, documents, or instruments (any and all of the foregoing herein collectively called the “Receivables”).

  

  

 

(d)           Contract Rights, General Intangibles, etc.  All  (i) contract rights and general intangibles of any kind (including choses in action, tax refunds, and insurance proceeds), (ii) chattel paper, documents, instruments (including promissory notes, drafts, bills of exchange and trade acceptances), security agreements, leases, other contracts and money, all other rights of Debtor (except those constituting Receivables) to receive payments of money or the ownership of property, and (iii) intellectual property of Debtor (any and all of the foregoing herein collectively called the “General Intangibles”).

 

(e)           Investment Property.  All investment property, including the Pledge Securities (as defined below), all other securities, security entitlements, securities accounts, commodity contracts, commodity accounts, stocks, partnership interests, limited liability company interests, bonds, mutual fund shares, money market shares and U.S. government securities (any and all of the foregoing herein collectively called the “Investment Property”).

 

(f)           Pledged Borealis Securities.  The entire interest of Debtor in Borealis Mining, as described in Schedule 1(f) and as the same is updated from time to time, all additional interests in Borealis Mining or any successor from time to time acquired by Debtor, and all warrants, options or other rights, whether now owned or hereafter acquired, of Debtor entitling the holder thereof to purchase or acquire any such interest or interests, including (i) Debtor’s capital account, its interest as a shareholder, as applicable, in the net cash flow, net profit and net loss, any items of income, gain, loss, deduction and credit of Borealis Mining, Debtor’s interest in all distributions made or to be made by Borealis Mining to Debtor and all of the other economic rights, titles and interests of Debtor as a shareholder whether set forth in the articles of incorporation or bylaws, as applicable, of Borealis Mining, by separate agreement or otherwise, (ii) Debtor’s voting and other control rights as a shareholder of Borealis Mining, and (iii) all certificates, agreements (including operating agreements), books, records, writings, data bases, information and other property relating to, used or useful in connection with, evidencing, embodying, incorporating or referring to, any of the foregoing (collectively, the “Pledged Securities”).

 

(g)           Other Property.  To the extent not included in the foregoing, all of the personal property, rights and interests, present and future, tangible and intangible, which are owned by Debtor or in which Debtor otherwise has any rights, including all goods, fixtures and deposit accounts, cash, funds, checks, notes and instruments from time to time on deposit in any of such deposit accounts, and letter of credit rights and all commercial tort claims.

 

(h)           Proceeds.  All proceeds, products and supporting obligations of or with respect to any and all of the foregoing and, to the extent not otherwise included, any payments under insurance (whether or not Holder is the loss payee thereof) or under any indemnity, warranty or guaranty by reason of loss to or otherwise with respect to any of the foregoing.

 

In each case, the foregoing shall be covered by this Agreement, whether any Debtor’s ownership or other rights therein are presently held or hereafter acquired (by operation of law or otherwise) and howsoever any Debtor’s interests therein may arise or appear (whether by ownership, security interest, claim or otherwise).  For purposes hereof, the terms inventory, goods, equipment, accounts, chattel paper, documents, instruments, general intangibles, investment property, securities, security entitlements, securities accounts, commodity contracts, commodity accounts, fixtures, deposit accounts, letter of credit rights, commercial tort claims, supporting obligations and proceeds shall have the meanings set forth in the Uniform Commercial Code as enacted from time to time in the state of New York or in any other applicable jurisdiction (“UCC”).

 

  

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Notwithstanding anything herein to the contrary, other than to the extent that any such term would be rendered ineffective pursuant to Section 9-406, 9-407, 9-408 or 9-409 of the UCC or any other applicable law or principle of equity, in no event shall the lien or security interest granted hereunder attach to, and the Collateral shall not include:  (i) any lease, license, intellectual property, contract, right, claim or benefit to which any Debtor is a party or beneficiary of or any of Debtor’s rights or interest thereunder if, and for so long as, the grant of such lien or security interest shall constitute or result in (A) the abandonment, invalidation or unenforceability of any right, title or interest of Debtor therein or (B) a breach or termination pursuant to the terms of, or a default under, any such lease, license, intellectual property, contract, right, claim or benefit; provided, however, that such lien and security interest shall attach immediately at such time as the condition causing such abandonment, invalidation, unenforceability, breach or termination shall be remedied and, to the extent severable, shall attach immediately to any portion of such lease, license, intellectual property, contract, right, claim or benefit that does not result in any of the consequences specified in clauses (A) or (B) of this clause (i) including any proceeds of such lease, license, intellectual property, contract, right, claim or benefit; or (ii) any government approval or permit, if and for so long as the grant of such lien or security interest shall constitute or result in (A) the abandonment, invalidation or unenforceability of any right, title or interest of Debtor therein, (B) a violation of, or termination pursuant to, the terms of such government approval or permit or (C) a violation of any applicable law; provided, however, that such lien and security interest shall attach immediately at such time as the condition causing such abandonment, invalidation, unenforceability, violation or termination shall be remedied and, to the extent severable, shall attach immediately to such portion of any such government approval or permit that does not result in any of the consequences specified in clause (A), (B) or (C) of this clause (ii).

 

2.           Security for Secured Obligations.  This Agreement secures the payment and performance of (a) all subordinate Secured Note Indebtedness (as defined in the Note Indenture), and all other obligations and liabilities of Debtor (now or hereafter existing) arising under, out of, pursuant to, or in connection with the Notes or the Note Indenture and (b) all indebtedness, obligations and liabilities of the Debtor now or hereafter existing under this Agreement (all such indebtedness, obligations and liabilities being the “Secured Obligations”).  Notwithstanding the foregoing, the security interest granted under this Agreement is subordinate to any security interest granted to a Senior Creditor under any Senior Creditor Obligation (as such terms are defined in the Note Indenture).

 

3.           Debtor Remains Liable. Anything herein to the contrary notwithstanding, (a) Debtor shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by Holder of any of its rights hereunder shall not release Debtor from any of its duties or obligations under the contracts and agreements included in the Collateral, and (c) Holder shall not have any obligation or liability under the contracts and agreements included in the Collateral by reason of this Agreement nor shall Holder be obligated to perform any of the obligations or duties of Debtor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.

 

4.           Representations and Warranties.  Debtor hereby continuously represents and warrants as follows:

 

(a)           (i)           Debtor is a corporation duly organized, validly existing and in good standing under the laws of the state of Nevada.  The principal place of business and chief executive office of the Debtor and the office where Debtor keeps all of its records are located at 611 N. Nevada Street, Carson City, NV, 89703.  Debtor’s tax identification number is 92-0185596 and its organizational identification number is NV20031328264.

 

  

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(ii)           Borealis Mining is a corporation duly organized, validly existing and in good standing under the laws of the state of Nevada.

 

(b)           As of the Effective Date, the Pledged Securities constitute all of the issued and outstanding equity and non-equity securities of Borealis Mining.

 

(c)           Debtor has no securities account and none of the Collateral is deposited in, credited to or otherwise subject to any securities account.

 

(d)           Debtor is the sole legal and beneficial owner of the Collateral owned by it, and has good and marketable title to (or valid right in and the power to transfer such rights to) the Collateral, free and clear of any lien, security interest, option or other charge or encumbrance except for the security interest created by this Agreement, Permitted Encumbrances (as defined in the Note Indenture) and the liens arising in the ordinary course of business or otherwise disclosed or contemplated in the Note Indenture.

 

(e)           This Agreement creates a valid security interest in the Collateral, which, upon the filing of all related UCC-1 financing statements in the state of Nevada pursuant to the applicable provisions of the UCC and the delivery to the Trustee of all certificates representing the Pledged Securities, shall constitute a perfected, first priority security interest in the Collateral, securing the payment of the Secured Obligations, subject to Permitted Encumbrances, and all filings and other actions necessary or desirable to perfect and protect such security interest have been duly taken.

 

(f)           No consent of any other person or entity and no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required (i) for the grant by Debtor of the security interest created hereby or for the execution, delivery or performance of this Agreement by Debtor, (ii) for the perfection or maintenance of the security interest created hereby (including the first priority nature of such security interest), other than the filing of UCC-1 financing statements or UCC-3 amendments describing the Collateral, in accordance with the applicable provisions of the UCC or (iii) for the exercise by Holder of its rights and remedies hereunder.

 

(g)           There are no conditions precedent to the effectiveness of this Agreement that have not been satisfied or waived.

 

(h)           Debtor has, independently and without reliance upon Holder and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and represents and warrants that it benefits from the transactions contemplated under the Purchase Agreement and Note Indenture.

 

  

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5.           Covenants; Further Assurances.

 

(a)           Debtor shall keep its principal place of business and chief executive office and the office where it keeps its records concerning the Receivables, if any, at 611 N. Nevada Street, Carson City, NV, 89703. Debtor shall not change its name in any manner whatsoever or its jurisdiction of organization, formation or incorporation without 10 business days written notice to Trustee.  Until Holder notifies Debtor to the contrary, each Debtor shall make collection of all Receivables and other Collateral in the ordinary course of business.  Holder may, at any time after the occurrence and during the continuance of any “default” or “event of default” under the Notes or the Note Indenture (each an “Event of Default”), notify all account debtors relating to any Receivables that Debtor’s Receivables have been assigned to Trustee for the benefit of Holders and of Holders’ security interest therein, and may collect them directly and charge the collection costs and expenses to Debtor.  So long as an Event of Default has occurred and is continuing, Debtor, at Trustee’s request, shall execute and deliver to Trustee for the benefit of Holders such documents as Trustee shall require to grant Trustee access to any post office box in which collections of Receivables are received.

 

(b)           Debtor shall maintain good and marketable title to its Collateral free and clear of all liens, security interests, options, and other charges or encumbrances, except for the security interests created by this Agreement, and Permitted Encumbrances (as defined in the Note Indenture).  No Debtor shall sell, assign (by operation of law or otherwise) or otherwise dispose of all or any portion of the Pledged Securities to any person unless (i) no Change of Control will occur as a result of such disposition, (ii) no Event of Default exists as of the date of such disposition or would exist as a result thereof, (iii) the proposed third party transfer is approved in advance by Holder, (iv) the Pledged Securities conveyed remain subject to a first priority, perfected security interest in favor of Holder (subordinate only to Senior Creditor Debt (as defined in the Note Indenture) and Senior Creditor Obligations (as defined in the Note Indenture)), and (v) each party acquiring Pledged Securities shall enter into a pledge agreement with Trustee on behalf of Holder granting such security interest, which pledge agreement shall be in form and substance satisfactory to Trustee. Debtor shall use its best efforts to resolve any dispute, right of setoff, counterclaim, or defense with respect to all or any part of the Collateral.  Debtor shall cause to be terminated any financing statement or other security instrument with respect to its Collateral, except such as may exist or as may have been filed in favor of Holder.  Debtor shall defend Holder’s right, title, and special property and security interest in and to the Collateral against the claims of any person or entity.

 

(c)           Debtor shall maintain its Collateral in good condition and shall not use the same in violation of any law or any policy of insurance thereon, and shall make such Collateral available for inspection by Holder. Debtor shall not permit any of its Collateral or any part thereof to be affixed to or otherwise become a part of any real or personal property, without first making arrangements satisfactory to Holder to protect Holder’s security interest therein.  Upon Trustee’s request, Debtor shall make appropriate notations in its ledger to indicate Holder’s interest in the Collateral.

 

(d)           All and any Pledged Securities shall be delivered to the Trustee, along with duly executed powers of attorney.  Collateral shall remain at the location(s) designated by Debtor. Debtor shall not cause or permit the removal of any item of the Collateral from its possession, control or risk of loss, or from the location specified herein, other than removal in connection with possession of Collateral by Trustee for the benefit of Holders or by a bailee selected by Trustee who is holding the Collateral for the benefit of Holder as agent for Holder.

 

  

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(e)           Debtor agrees that from time to time, at the expense of Debtor, Debtor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that Trustee for the benefit of Holder may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable Trustee to exercise and enforce its rights and remedies hereunder with respect to any Collateral.  Without limiting the generality of the foregoing, Debtor will upon such request execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as Trustee may request, in order to perfect and preserve the security interest granted or purported to be granted hereby. Debtor shall furnish to Trustee any information that Trustee may from time to time request concerning any covenant, provision or representation contained herein or any other matter in connection with the Collateral or the Note Indenture.

 

(f)           Debtor hereby authorizes Trustee, but Trustee shall have no obligation, to file one or more financing or continuation statements, and amendments thereto, related to all or any part of the Collateral without the signature of Debtor.  A photocopy or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.

 

(g)           Debtor will furnish to Holder from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Holder may reasonably request, all in reasonable detail.

 

(h)           Debtor hereby agrees to and makes the covenants regarding the operations and assets of Borealis Mining set forth in Section 8.2 (d) – (h) of the Note Indenture as if set forth fully herein.

 

6.           Insurance.  Debtor shall maintain and shall require Borealis Mining to maintain adequate insurance on all of its properties in such amounts with such insurers as are standard practice within the industry of the Debtor.  If Debtor receives benefits arising from any insurance policy covering Collateral, the net cash proceeds shall be deemed Collateral under this Agreement and paid to the Trustee for the benefit of the Holders.

 

7.           Holder Appointed Attorney-in-Fact. Debtor hereby irrevocably appoints Trustee, for the benefit of Holders, the attorney-in-fact of Debtor, coupled with an interest and with full authority in the place and stead of Debtor and in the name of Debtor, Holder or otherwise, from time to time in Trustee’s discretion, to take any action and to execute any instrument which Trustee may deem necessary or advisable to accomplish the purposes of this Agreement, including:

 

(a)           To obtain and adjust insurance required to be paid to Holders pursuant to Section 6;

 

(b)           To ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in connection with the Collateral;

 

(c)           To receive, endorse, and collect any drafts or other instruments, documents and chattel paper, in connection therewith; and

 

(d)           To file any claims or take any action or institute any proceedings which Trustee may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of Holder with respect to any of the Collateral.

 

The provisions of this Section 7 shall terminate upon termination of the Note Indenture and the complete and final satisfaction and repayment of all obligations of any of Debtor under the Notes and Note Indenture, whether for principal, interest, expenses or otherwise.

 

  

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8.           Holder May Perform.  If any Debtor fails to perform any agreement contained herein, Trustee, for the benefit of Holders, may perform, or cause performance of, such agreement, and the expenses of Trustee incurred in connection therewith shall be payable by Debtor.

 

9.           Trustee/Holder’s Duties.  The powers conferred on Trustee hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers.  Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, Trustee shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral.  Trustee shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if such Collateral is accorded treatment substantially equal to that which Trustee accords its own property.

 

10.        Remedies.

 

(a)           If any Event of Default shall have occurred and be continuing:

 

(i)         Trustee, for the benefit of Holders, shall have all of the rights, remedies and privileges with respect to repossession, retention and sale of the Collateral and disposition of the proceeds thereof as are afforded to Trustee or Holders by this Agreement and the applicable sections of the UCC (whether or not the UCC applies to the affected Collateral).

 

(ii)         Without limiting the scope of the foregoing clause (i):

 

(1)           Trustee, for the benefit of Holders, shall have the right to sell, resell, assign, and deliver the Collateral for sale, provided that only such portion of the Collateral as is necessary to satisfy the obligations arising under the Notes or Note Indenture may be sold by Trustee, for the benefit of Holders.  Trustee will give Debtor, to the extent notice of sale shall be required by law, at least ten (10) days’ prior written notice of the time and place of any sale of the Collateral or the time after which any private sale or any other intended disposition of the Collateral is to be made.  Any such notice shall be deemed to meet any requirement hereunder or under any applicable law (including the UCC) that reasonable notification be given of the time and place of such sale or other disposition.  Such notice may be given without any demand for performance or other demand, all such demands being hereby expressly waived by Debtor. Trustee shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Trustee may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

 

(2)           In the event of any such sale or sales, the Collateral so purchased shall be held by the purchaser absolutely free from any and all claims or rights of Debtor of every kind and nature whatsoever, including any equity of redemption or similar rights, all such equity of redemption and similar rights being hereby expressly waived and released by Debtor.  Trustee may disclaim warranties of title, possession, quiet enjoyment and the like.  The proceeds of the sale of any Collateral, together with any other additional collateral security at the time received and held hereunder, shall be received and applied: first, to the payment of all of the Trustee’s costs and expenses of sale, including reasonable attorneys’ fees; second, to the payment of the obligations of Debtor and the other parties under the Notes or Note Indenture, in such order of priority as Trustee shall determine; and third, any remaining proceeds shall be paid to shall be paid over to the applicable Debtor or to whomsoever may be lawfully entitled to receive such surplus.

 

  

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(3)           Debtor recognizes that Trustee may be unable to effect a public sale of all or any part of the Collateral by reason of certain prohibitions contained in the Securities Act of 1933, as amended (the “Securities Act”), or other applicable laws, rules or regulations, but may be compelled to resort to one or more private sales to a restricted group of purchasers who will, among other things, be obliged to agree to acquire the Collateral or any part thereof for their own account, for investment and not with a view to the distribution or resale thereof.  Debtor agrees that private sales so made may be at prices and on terms less favorable than if the Collateral were sold at public sales, and that Holder has no obligation to delay the sale of any Collateral for the period of time necessary to permit the Collateral to be registered for public sale under the Securities Act or any other applicable law, rule or regulation.  Debtor agrees that private sales made under the foregoing circumstances shall be deemed to have been made in a commercially reasonable manner.

 

(iii)       Debtor shall take any action that Trustee may request in the exercise of its rights and remedies under this Agreement in order to transfer and assign to Trustee, or to such one or more third parties as Trustee may designate, or to a combination of the foregoing, any or all of the Collateral.

 

(iv)       Trustee shall have the right, for and in the name, place and stead of Debtor, to execute endorsements, assignments and other instruments of conveyance or transfer with respect to all or any of the Collateral, and in connection therewith, Debtor hereby irrevocably appoints Trustee, its officers, employees and agents, or any of them, as attorneys-in-fact for Debtor to execute, deliver, file and record such items for Debtor and in Debtor’s name, place and stead.  This power of attorney, being coupled with an interest, shall be irrevocable.

 

(b)           If in connection with the exercise by Trustee of any power, right, provision or remedy granted pursuant to this Agreement, or in order to effectuate the purposes and intent of this Agreement, any consent, approval, registration, filing, qualification or authorization of any governmental authority is required, Debtor will execute and deliver all applications, certificates, instruments and other documents and papers that Trustee may be required to obtain for such governmental consent, approval, registration, filing, qualification or authorization.

 

11.         Waivers and Amendments.   No provision of this Agreement may be amended, waived or modified without the written consent of all the Holders and the Debtor.  Trustee, for the benefit of Holders, may exercise its rights with respect to the Collateral held hereunder without first or simultaneously resorting to any other collateral or sources of repayment or reimbursement; and without being obligated to consider or take notice of any right of contribution, reimbursement, subrogation or marshaling of assets which Debtor may have or claim to have against any person or persons or with respect to any other collateral; and Trustee, for the benefit of Holders, may release any and all other collateral it may now or hereafter have to secure repayment of the Notes, all without affecting  or impairing its rights with respect to the Collateral.  The failure by Trustee to insist upon Debtor’s strict performance of this Agreement or the delay or the failure by Trustee, for the benefit of Holders, to exercise Holder’s remedies hereunder shall not be deemed a waiver of such default, and shall not be a waiver by Holder of any of Holder’s rights or remedies hereunder or at law or in equity.  A waiver on any one occasion shall not be construed as a bar to or waiver of any right and/or remedy on any future occasion.

  

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12.         Addresses for Notices.

 

(a)           Except in the case of notices and other communications expressly permitted to be given by telephone (and subject to Section 12(b)) all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile, as follows:

 

If to any Debtor:

Gryphon Gold Corporation

611 N. Nevada Street

Carson City, NV, 89703

Attention: President

Facsimile No.:  (775) 883-1456

If to Trustee:

Computershare Trust Company of Canada

510 Burrard Street, 3rd Floor

Vancouver, British Columbia

Attention:  Manager, Corporate Trust Department

Facsimile No.:  (604) 661-9403

(b)           Each party hereto may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

 

(c)           Each party hereto may change its address or facsimile number for notices and other communications hereunder by notice to the other parties hereto.  All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.

 

13.        Security Interest Absolute; Continuing Security Interest.  All rights of Holders and security interests hereunder, and all obligations of Debtor hereunder, shall be absolute and unconditional irrespective of, and unaffected by any other circumstance which might otherwise constitute a defense available to, or a discharge of Debtor in respect of the Notes, Note Indentures and this Agreement.  This Agreement shall create a continuing assignment of and security interest in the Collateral and shall remain in full force and effect until the payment in full of the Secured Obligations, subject to the rights of Senior Creditors, Senior Creditor Debt and Senior Creditor Obligations (as defined in the Note Indenture).  Upon any termination of the Agreement, Trustee will, at Debtor’s expense, execute and deliver to Debtor such documents as Debtor shall reasonably request to evidence such termination.

 

14.         Governing Law.   This Agreement, and its validity, enforcement, and interpretation, shall be governed by New York law (without regard to any conflict of law principles that would result in the application of substantive law of another jurisdiction) and applicable United States federal law.

 

  

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15.         Jurisdiction; Consent to Service of Process; Waiver of Jury Trial.

 

(a)           DEBTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN, CITY OF NEW YORK, NEW YORK AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND DEBTOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.

 

(b)           DEBTOR HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING IN ANY OF THE ABOVE-MENTIONED COURTS BY THE MAILING THEREOF BY HOLDER BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEVADA, AT ITS ADDRESS SPECIFIED IN SECTION 12.  NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

 

(c)           EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  DEBTOR HEREBY (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF HOLDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT HOLDER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT HOLDERS ARE NOT PARTIES, ONLY TRUSTEE HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS OF DEBTOR IN THIS SECTION 15.

 

(d)           DEBTOR HEREBY WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF HOLDER IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF HOLDER, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER, OR PRELIMINARY OR PERMANENT INJUNCTION, THIS AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT BETWEEN HOLDER AND ANY DEBTOR.

 

16.         Advice of Counsel.  Debtor represents and warrants that it has consulted with its legal counsel regarding all provisions of this Agreement, including those under Section 15.

 

17.         Successors and Assigns.  The provisions of this Agreement shall be binding upon Debtor and its successors and assigns and inure to the benefit of, and be enforceable by, Holders and their successors, transferees and assigns.  No Debtor shall assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of Trustee (and any attempted assignment or transfer by Debtor without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any person or entity, other than the parties hereto, their respective successors and assigns permitted hereby, any legal or equitable right, remedy or claim under or by reason of this Agreement.

 

  

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18.         Severability.  Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement.

 

19.         Interpretation.   Capitalized terms used, but not defined, herein shall have the meanings ascribed to them in the Note Indenture.  As used in this Agreement, except as otherwise indicated in this Agreement or as the context may otherwise require:

 

(a)           the words “include,” “includes” and “including” are deemed to be followed by “without limitation” whether or not they are in fact followed by such words or words of similar import,

 

(b)           the word “or” is not exclusive,

 

(c)           references to an “Article,” “Section,” “preamble,” “recital” or any other subdivision, or to an “Appendix,” “Annex,” “Exhibit” or “Schedule” are to an article, section, preamble, recital or subdivision of this Agreement, or to an appendix, annex, exhibit or schedule to this Agreement,

 

(d)           the words “this Agreement,” “hereby,” “hereof,” “herein,” “hereunder” and comparable words refer to all of this Agreement, including the Appendices, Annexes, Exhibits and Schedules to this Agreement, and not to any particular Article, Section, preamble, recital or other subdivision of this Agreement or Appendix, Exhibit or Schedule to this Agreement,

 

(e)           any pronoun in masculine, feminine or neuter form shall include any other gender,

 

(f)           any word in the singular form include the plural and vice versa,

 

(g)           references to any agreement or other document, including this Agreement, are to such agreement or document as amended, modified, supplemented and restated now or from time to time after the Effective Date,

 

(h)           references to any law are to it as amended, modified, supplemented and restated now or from time to time after the Effective Date, and to any corresponding provisions of successor laws, and, unless the context requires otherwise, any reference to any law shall be deemed also to refer to all rules and regulations promulgated thereunder,

 

(i)           references to any person or entity include such person’s or entity’s respective successors and assigns permitted hereby,

 

(j)           references to a “day” or number of “days” (without the explicit qualification of “Business”) refer to a calendar day or number of calendar days, and

 

(k)           any financial or accounting term that is not otherwise defined herein shall have the meaning given such term under generally accepted accounting principles in the United States of America consistently applied.

 

20.         Headings.  Titles and Article, Section and other subdivision headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

 

  

11

 

21.         Counterparts; Integration.  This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  This Agreement, the Purchase Agreement, the Notes and the Note Indenture collectively constitute the entire contract among the parties hereto relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, between the parties hereto relating to the subject matter hereof.  Delivery of an executed counterpart of a signature page of this Agreement by facsimile or by PDF shall be effective as delivery of a manually executed counterpart of this Agreement.

 

Signature pages follow

  

12

 

This Agreement has been duly executed and delivered to be effective as of the Effective Date. 

 

	
DEBTOR:

	  
	
GRYPHON GOLD CORPORATION, a Nevada 

corporation

	  
	
By:

	    
	  	  
	
Its:

	      
	  
	
TRUSTEE:

	  
	
COMPUTERSHARE TRUST COMPANY OF

CANADA, a trust company existing under the laws of

Canada, as trustee for the Holders

	  
	
By:

	  

[Signature Page of Pledge and Security Agreement]

  

13

 

Schedule 1(f)

Pledged Securities

	
Registered Holder

(Debtor)

	 	
Corporation (Issuer)

	 	
Jurisdiction of

Organization of

Issuer

	 	
Ownership of Debtor in Issuer

(common shares of Issuer)

	  	 	  	 	  	 	
1,000,000 shares of common stock 

(“Shares”) with power of attorney to 

transfer securities

	  	 	  	 	  	 	  
	  	 	  	 	  	 	
Certificate No. 1 – 100 Shares

	  	 	  	 	  	 	  
	  	 	  	 	  	 	
Certificate No. 2 – 849,900 Shares

	  	 	  	 	  	 	  
	
Gryphon Gold 

Corporation

	 	
Borealis Mining 

Company

	 	
Nevada

	 	
Certificate No. 3 – 37,500 Shares

	  	 	  	 	  	 	  
	  	 	  	 	  	 	
Certificate No. 4 – 37,500 Shares

	  	 	  	 	  	 	  
	  	 	  	 	  	 	
Certificate No. 5 – 37,500 Shares

	  	 	  	 	  	 	  
	  	 	  	 	  	 	
Certificate No. 6 – 37,500 Shares

	  	 	  	 	  	 	  
	  	 	  	 	  	 	
6 Certificates to be deposited

 

  

14Unassociated Document

THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AND, IF REQUESTED BY THE COMPANY, THE SELLER FURNISHES TO THE COMPANY AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY TO SUCH EFFECT.

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE [THE DATE THAT IS FOUR (4) MONTHS AND A DAY AFTER THE DISTRIBUTION DATE.]

THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.  THIS WARRANT MAY NOT BE EXERCISED UNLESS THE WARRANT AND THE UNDERLYING SHARES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE, AND THE HOLDER HAS DELIVERED AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE CORPORATION TO SUCH EFFECT.

THESE WARRANTS WILL EXPIRE AND BECOME NULL AND VOID

AT 5:00 P.M. (VANCOUVER TIME) ON JANUARY 27, 2013.

 

 ● SERIES P SHARE PURCHASE WARRANTS

TO PURCHASE SHARES OF COMMON STOCK

GRYPHON GOLD CORPORATION

 

incorporated in the State of Nevada

 

THIS IS TO CERTIFY THAT _________________________________, (the “Holder”), has the right to purchase, upon and subject to the terms and conditions hereinafter referred to, up to ● fully paid and non-assessable shares of common stock (the “Shares”) in the capital of Gryphon Gold Corporation (hereinafter called the “Company”) on or before 5:00 p.m. (Vancouver time) on January 27, 2013 (the “Expiry Date”) at a price per Share (the “Exercise Price”) of US$0.20, on the terms and conditions attached hereto as Appendix “A” (the “Terms and Conditions”).

 

	
  

	
1.

	
ONE (1) WHOLE SERIES P WARRANT AND THE EXERCISE PRICE ARE REQUIRED TO PURCHASE ONE SHARE.  THIS CERTIFICATE REPRESENTS ● SERIES P WARRANTS.

 

	
  

	
2.

	
These Warrants are issued subject to the Terms and Conditions, and the Warrant Holder may exercise the right to purchase Shares only in accordance with those Terms and Conditions.

 

	
  

	
3.

	
Nothing contained herein or in the Terms and Conditions will confer any right upon the Holder hereof or any other person to subscribe for or purchase any Shares at any time subsequent to the Expiry Date, and from and after such time, these Warrants and all rights hereunder will be void and of no value.

 

	
  

	
IN WITNESS WHEREOF the Company has executed this Warrant Certificate this 27th day of July,  2011.

 

	
  

	
GRYPHON GOLD CORPORATION

 

	
  

	
Per:

	
  

	
John L. Key, Chief Executive Officer

 

  

  

  

 

PLEASE NOTE THAT ALL SHARE CERTIFICATES MUST BE LEGENDED AS FOLLOWS DURING THE CURRENCY OF APPLICABLE HOLD PERIODS:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AND, IF REQUESTED BY THE COMPANY, THE SELLER FURNISHES TO THE COMPANY AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY TO SUCH EFFECT.

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE [THE DATE THAT IS FOUR (4) MONTHS AND A DAY AFTER THE DISTRIBUTION DATE.]

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO STOCK EXCHANGE (“TSX”); HOWEVER, THE SAID SECURITIES CANNOT BE TRADED THROUGH THE FACILITIES OF TSX SINCE THEY ARE NOT FREELY TRANSFERABLE, AND, CONSEQUENTLY, ANY CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON TSX.

  

- 2 -

  

APPENDIX “A”

TERMS AND CONDITIONS dated July 27, 2011, attached to the Series P Warrants issued by Gryphon Gold Corporation

 

	
1.  

	
INTERPRETATION

 

	
1.1

	
Definitions

 

In these Terms and Conditions, unless there is something in the subject matter or context inconsistent therewith:

 

	 	
(a)  

	
“Business Day” means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York, New York are generally authorized or obligated by law or executive order to close;

 

	 	
(b)  

	
“Company” means Gryphon Gold Corporation until a successor corporation will have become such as a result of consolidation, amalgamation or merger with or into any other corporation or corporations, or as a result of the conveyance or transfer of all or substantially all of the properties and estates of the Company as an entirety to any other corporation and thereafter “Company” will mean such successor corporation;

 

	 	
(c)  

	
“Company’s Auditors” means an independent firm of accountants duly appointed as auditors of the Company;

 

	 	
(d)  

	
“Director” means a director of the Company for the time being, and reference, without more, to action by the directors means action by the directors of the Company as a Board, or whenever duly empowered, action by an executive committee of the Board;

 

	 	
(e)  

	
“Eligible Market” means any of NYSE, the NYSE Amex, The NASDAQ Global Market, The NASDAQ Global Select Market, The NASDAQ Capital Market or the Toronto Stock Exchange;

 

	 	
(f)  

	
“herein”, “hereby” and similar expressions refer to these Terms and Conditions as the same may be amended or modified from time to time; and the expression “Article” and “Section,” followed by a number refer to the specified Article or Section of these Terms and Conditions;

 

	 	
(g)  

	
“person” means an individual, corporation, partnership, trustee or any unincorporated organization and words importing persons have a similar meaning;

 

	 	
(h)  

	
“shares” means the common shares in the capital of the Company as constituted at the date hereof and any shares resulting from any subdivision or consolidation of the shares;

 

	 	
(i)  

	
“Trading Day” shall mean (a) any day on which the Common Stock is listed or quoted and traded on its primary Trading Market, (b) if the Common Stock is not then listed or quoted and traded on any Eligible Market, then a day on which trading occurs on the OTC Bulletin Board (or any successor thereto), or (c) if trading does not occur on the OTC Bulletin Board (or any successor thereto), any Business Day;

 

	 	
(j)  

	
“Trading Market” shall mean the OTC Bulletin Board or any Eligible Market or any other national securities exchange, market or trading or quotation facility on which the shares are then listed or quoted; and

 

	 	
(k)  

	
“Warrants” means the Series P warrants of the Company issued and presently authorized and for the time being outstanding.

 

  

- 3 -

  

 

	
1.2

	
Gender

 

Words importing the singular number include the plural and vice versa and words importing the masculine gender include the feminine and neuter genders.

 

	
1.3

	
Interpretation not affected by Headings

 

The division of these Terms and Conditions into Articles and Sections, and the insertion of headings are for convenience of reference only and will not affect the construction or interpretation thereof.

 

	
1.4

	
Applicable Law

 

The Warrants will be construed in accordance with the laws of the State of New York without regard to its conflicts of law principles, and the federal law of the United States of America. The Company and Holder each irrevocably consents to the jurisdiction of the courts of the State of New York in connection with any action or proceeding arising out of, or relating to, these Warrants, any document or instrument delivered pursuant to, in connection with, or simultaneously with these Warrants, or a breach of the Terms and Conditions of these Warrants or any such document or instrument.

 

	
1.5

	
Severability

 

In the event that any one or more of the provisions contained in this Warrant Certificate or in any other document referenced in this Warrant Certificate shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Warrant Certificate or any other such document.

 

	
1.6

	
Time is of the Essence

 

Time is absolutely of the essence in construing each provision of this Warrant Certificate.

 

	
2.  

	
ISSUE OF WARRANTS

 

	
2.1

	
Additional Warrants

 

The Company may at any time and from time to time issue additional warrants or grant options or similar rights to purchase shares of its capital stock.

 

	
2.2

	
Warrants to Rank Pari Passu

 

All Warrants and additional warrants, options or similar rights to purchase shares from time to time issued or granted by the Company, will rank pari passu whatever may be the actual dates of issue or grant thereof, or of the dates of the certificates by which they are evidenced.

 

	
2.3

	
Issue in substitution for Lost Warrants

 

	 	
(a)  

	
In case a Warrant Certificate becomes mutilated, lost, destroyed or stolen, the Company, at its discretion, may issue and deliver a new Warrant Certificate of like date and tenor as the one mutilated, lost, destroyed or stolen, in exchange for and in place of and upon cancellation of such mutilated Warrant Certificate, or in lieu of, and in substitution for such lost, destroyed or stolen Warrant Certificate and the substituted Warrant Certificate will be entitled to the benefit hereof and rank equally in accordance with its terms with all other Warrants issued or to be issued by the Company.

 

	 	
(b)  

	
The applicant for the issue of a new Warrant Certificate pursuant hereto will bear the cost of the issue thereof and in case of loss, destruction or theft furnish to the Company such evidence of ownership and of loss, destruction, or theft of the Warrant Certificate so lost, destroyed or stolen as will be satisfactory to the Company in its discretion and such applicant may also be required to furnish indemnity in amount and form satisfactory to the Company in its discretion, and will pay the reasonable charges of the Company in connection therewith.

 

  

- 4 -

  

 

	
2.4

	
Warrant Holder Not a Shareholder

 

The holding of a Warrant will not constitute the Holder thereof a shareholder of the Company, nor entitle him to any right or interest in respect thereof except as in the Warrant Certificate expressly provided.

 

	
3.  

	
NOTICE

 

	
3.1

	
Notice to Holders

 

Any notice required or permitted to be given to the Holders will be in writing and may be given by prepaid registered post, electronic facsimile transmission, portable document format (pdf) transmission or other means of electronic communication capable of producing a printed copy to the address of the Holder appearing on the Holder’s Warrant Certificate or to such other address as any Holder may specify by notice in writing to the Company, and any such notice will be deemed to have been given and received by the Holder to whom it was addressed if mailed, on the third day following the mailing thereof, if by facsimile, pdf or other electronic communication, on successful transmission, or, if delivered, on delivery; but if at the time of mailing or between the time of mailing and the third business day thereafter there is a strike, lockout, or other labour disturbance affecting postal service, then the notice will not be effectively given until actually delivered.

 

	
3.2

	
Notice to the Company

 

Any notice required or permitted to be given to the Company will be in writing and may be given by prepaid registered post, electronic facsimile transmission, portable document format (pdf) transmission or other means of electronic communication capable of producing a printed copy to the address of the Company set forth below or such other address as the Company may specify by notice in writing to the Holder, and any such notice will be deemed to have been given and received by the Company to whom it was addressed if mailed, on the third day following the mailing thereof, if by facsimile, pdf or other electronic communication, on successful transmission, or, if delivered, on delivery; but if at the time or mailing or between the time of mailing and the third business day thereafter there is a strike, lockout, or other labour disturbance affecting postal service, then the notice will not be effectively given until actually delivered:

 

Gryphon Gold Corporation

 

Suite711, 675 West Hastings Street

Vancouver, B.C.

Canada  V6B 1N2

 

Attention:  Lisanna Lewis

 

Fax No. (604) 608-3262

 

	
4.  

	
EXERCISE OF WARRANTS

 

4.1 Method of Exercise of Warrants

 

	
  

	
(a)

	
The right to purchase shares conferred by the Warrants may be exercised by the Holder surrendering the Warrant Certificate representing same, with a duly completed and executed Form of Subscription in the form attached hereto and a bank draft or certified cheque payable to or to the order of the Company, at par, in Vancouver, BC, Canada, for the purchase price applicable at the time of surrender in respect of the shares subscribed for in lawful money of the United States of America, to the Company at the address set forth in, or from time to time specified by the Company pursuant to, Section 3.2.

 

  

- 5 -

  

 

	
  

	
(b)

	
Net Issue Exercise.

 

	 	
(i)  

	
Section 4.1(b)(ii) shall not apply and shall have no force or effect if the shares issuable upon exercise of these Warrants have been registered for resale under the Securities Act of 1933, as amended (the “1933 Act”), on a Registration Statement on Form S-1, S-3, or another appropriate form and such Registration Statement remains effective under the 1933 Act and available for use by Holder at the time of exercise or the shares issuable upon exercise of these Warrants may otherwise be immediately resold upon exercise pursuant to available exemptions from the 1933 Act and any applicable securities laws of any state of the United States.

 

	 	
(ii)  

	
Subject to Section 4.1(b)(i), if, at any time after the issuance of these Warrants but prior to the Expiry Date, the Fair Market Value of one share is greater than the Exercise Price, in lieu of exercising these Warrants for cash, the Holder may elect to receive shares equal to the value (as determined below) of these Warrants (or the portion thereof being exercised) by surrender of this Warrant Certificate at the principal office of the Company with a duly completed and executed Form of Subscription in the form attached hereto in which event the Company shall issue to the Holder a number of shares computed using the following formula:

 

X = (Y (A - B)) / A

 

Where X = the number of shares to be issued to Holder

 

Y = the number of shares purchasable under the Warrants or, if only a portion of the Warrants are being exercised, the portion of the Warrants being exercised (at the date of such calculation)

 

A = the Fair Market Value of one share (at the date of such calculation)

 

B = Exercise Price (at the date of such calculation)

 

For purposes of the above calculation, the “Fair Market Value” of one share shall mean (i) the average of the closing sales prices for the shares on the Eligible Market on which the shares are listed or traded as reported by Bloomberg Financial Markets (or a comparable reporting service of national reputation selected by the Company and reasonably acceptable to the Holder if Bloomberg Financial Markets is not then reporting sales prices of such security) (collectively, “Bloomberg”) for the ten (10) consecutive Trading Days immediately prior to the Exercise Date, or (ii) if an Eligible Market is not the principal Trading Market for the shares, the average of the reported sales prices reported by Bloomberg on the principal Trading Market for the shares during the same period, or, if there is no sales price for such period, the last sales price reported by Bloomberg for such period, or (iii) if neither of the foregoing applies, the last sales price of such security in the over-the-counter market on the pink sheets or bulletin board for such security as reported by Bloomberg, or if no sales price is so reported for such security, the last bid price of such security as reported by Bloomberg, or (iv) if fair market value cannot be calculated as of such date on any of the foregoing bases, the fair market value shall be as determined by the Board of Directors of the Company in the exercise of its good faith judgment.

 

  

- 6 -

  

 

	
4.2

	
Effect of Exercise of Warrants

 

	 	
(a)  

	
Upon surrender and payment (unless exercise is pursuant to Section 4.1(b)(ii)) as aforesaid the shares so subscribed for will be deemed to have been issued and such person or persons will be deemed to have become the Holder or Holders of record of such shares on the date of such surrender and payment, and such shares will be issued based on the Exercise Price in effect on the date of such surrender and payment.

 

	 	
(b)  

	
Within ten (10) business days after surrender and payment (unless exercise is pursuant to Section 4.1(b)(ii)) as aforesaid, the Company will forthwith cause to be delivered to the person or persons in whose name or names the Shares so subscribed for are to be issued as specified in such Form of Subscription or mailed to him or them at his or their respective addresses specified in such Form of Subscription, a certificate or certificates for the appropriate number of Shares not exceeding those which the Holder is entitled to purchase pursuant to the Warrant Certificate surrendered.

 

	
4.3

	
Restrictions on Exercise of Warrants

The Warrants represented by this Warrant Certificate may only be exercised by or for the account or benefit of a holder who, at the time of exercise, either:

	 	
(a)  

	
represents to the Company, pursuant to subparagraph 1 of the attached Form of Subscription, that (i) the holder was the original subscriber for the Warrants from the Company, and (ii) the representations, warranties and covenants set forth in the debenture and warrant purchase agreement pursuant to which the holder purchased the Warrants from the Company (the “Purchase Agreement”) are true and correct on the date of exercise in relation to the exercise of the Warrants, including, without limitation, the representations and warranties in the U.S. Accredited Investor Questionnaire attached to the Purchase Agreement as Exhibit H; or

	 	
(b)  

	
provides, pursuant to subparagraph 2 of the attached Form of Subscription, a written opinion of counsel or other evidence of exemption in form and substance reasonably satisfactory to the Company that the Shares to be delivered upon exercise of the Warrants have been registered under the 1933 Act and the securities laws of all applicable states of the United States or are exempt from such registration requirements.

 

	
4.4

	
Subscription for Less Than Entitlement

 

The Holder of any Warrant may subscribe for and purchase a number of shares less than the number which he is entitled to purchase pursuant to the surrendered Warrant Certificate. In the event of any purchase of a number of shares less than the number which can be purchased pursuant to a Warrant Certificate, the Holder thereof upon exercise thereof will in addition be entitled to receive a new Warrant Certificate in respect of the balance of the shares which he was entitled to purchase pursuant to the surrendered Warrant Certificate and which were not then purchased.

 

	
4.5

	
Warrants for Fractions of Shares

 

To the extent that the Holder of any Warrant is entitled to receive on the exercise or partial exercise thereof a fraction of a share, such right may be exercised in respect of such fraction only in combination with another Warrant or other Warrants which in the aggregate entitle the Holder to receive a whole number of such shares.

 

	
4.6

	
Expiration of Warrants

 

After the expiration of the period within which a Warrant is exercisable, all rights thereunder will wholly cease and terminate and such Warrant will be void and of no effect.

 

  

- 7 -

  

 

	
4.7

	
Exercise Price; Beneficial Ownership Limitation

 

Each whole Warrant is exercisable at a price per share (the “Exercise Price”) of US$0.20 if exercised on or before 5:00 p.m. (Vancouver time) on January 26, 2013.  One (1) Warrant and the Exercise Price are required to subscribe for each Share during the term of the Warrants.

 

Notwithstanding any other provision hereof, no Holder shall exercise Warrants if as a result of such exercise the Holder would then become a “ten percent beneficial owner” (as defined in Rule 16a-2 under the Securities Exchange Act of 1934, as amended) of Shares.  For greater certainty, the Warrants shall not be exercised by the Holder, and the Company shall not give effect to any exercise of Warrants, if, after giving effect to such exercise, the Holder of such securities, together with its affiliates, would in aggregate beneficially own, or exercise control or direction over that number of voting securities of the Company which is 10% or greater of the total issued and outstanding voting securities of the Company, immediately after giving effect to such exercise.

 

For purposes of the foregoing paragraph, the number of Shares beneficially owned by the Holder and its affiliates shall include the number of Shares issuable upon exercise of these Warrants with respect to which such determination is being made, but shall exclude the number of Shares which would be issuable upon (i) exercise of the remaining, nonexercised portion of these Warrants beneficially owned by the Holder or any of its affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 4.7, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 4.7 applies, the determination of whether these Warrants are exercisable (in relation to other securities owned by the Holder together with any affiliates) and of which portion of these Warrants is exercisable shall be in the sole discretion of the Holder, and the submission of a Form of Subscription shall be deemed to be the Holder’s determination of whether these Warrants are exercisable (in relation to other securities owned by the Holder together with any affiliates) and of which portion of these Warrants is exercisable, in each case subject to the “ten percent beneficial owner” limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. For purposes of this Section 4.7, in determining the number of outstanding Shares, a Holder may rely on the number of outstanding Shares as reflected in (A) the Company’s most recent periodic or annual report filed with the Securities and Exchange Commission, as the case may be, (B) a more recent public announcement by the Company, or (C) a more recent written notice by the Company or its transfer agent setting forth the number of Shares outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of Shares then outstanding. In any case, the number of outstanding Shares shall be determined after giving effect to the conversion or exercise of securities of the Company, including these Warrants, by the Holder or its affiliates since the date as of which such number of outstanding Shares was reported.

 

	
4.8

	
Adjustment of Exercise Price

 

The Exercise Price and the number of Shares purchasable hereunder (or any shares of stock or other securities or property receivable or issuable upon exercise of this Warrant) are subject to adjustment from time to time as follows:

 

	 	
(a)  

	
Reclassification of Shares. If the Company at any time shall, by reclassification or exchange of securities or otherwise, change all of the outstanding Shares into the same or a different number of securities of any other class or classes, this Warrant Certificate shall thereafter represent the right to acquire such number and kind of securities as would have been issuable hereunder had the Holder exercised its rights with respect to all of the Shares then represented by this Warrant Certificate immediately prior to such combination, reclassification, exchange, subdivision or other change.

 

  

- 8 -

  

 

	 	
(b)  

	
Subdivision, Split, Reverse Split or Combination of Shares. If the Company at any time shall subdivide or split its Shares into a larger number of outstanding Shares, the Exercise Price shall be proportionately decreased and the number of Shares issuable upon exercise of these Warrants (or any shares of stock or other securities at the time issuable upon exercise of these Warrants) shall be proportionally increased to reflect any such subdivision or stock split. If the Company at any time shall reverse split or combine its Shares into a smaller number of outstanding Shares, the Exercise Price of these Warrants shall be proportionally increased and the number of Shares issuable upon exercise of these Warrants (or any shares of stock or other securities at the time issuable upon exercise of these Warrants) shall be proportionally decreased to reflect any such reverse stock split or combination.

 

	 	
(c)  

	
Stock Dividends or Other Non-Cash Distributions. If the Company at any time shall make, issue, fix a record date for or pay a dividend or other distribution with respect to the Shares (or any shares of stock or other securities at the time issuable upon exercise of the Warrants) payable in (i) securities of the Company or (ii) assets (excluding cash dividends), then, in each such case, the Holder on exercise of these Warrants at any time after the consummation, effective date or record date of such dividend or other distribution, shall receive, in addition to the Shares (or such other stock or securities) issuable on such exercise prior to such date, and without the payment of additional consideration therefor, the securities or such other assets of the Company to which such Holder would have been entitled upon such date if such Holder had exercised these Warrants on the date hereof and had thereafter, during the period from the date hereof to and including the date of such exercise, retained such shares and all such additional securities or other assets distributed with respect to such shares as aforesaid during such period giving effect to all adjustments called for by this Section 4.8.

 

	 	
(d) 

	
Capital Reorganization, Merger or Consolidation. In case of any capital reorganization of the capital stock of the Company (other than a combination, stock split, reverse stock split, reclassification or subdivision of shares otherwise provided for herein), or any merger or consolidation of the Company with or into another corporation, or the sale of all or substantially all the assets of the Company then, and in each such case, as a part of such reorganization, merger, consolidation, sale or transfer, lawful provision shall be made so that the Holder shall thereafter be entitled to receive upon exercise of these Warrants until the Expiry Date and upon payment of the Exercise Price (or use of net exercise if then permitted hereunder), the number of shares or other securities or property of the successor corporation resulting from such reorganization, merger, consolidation, sale or transfer that a holder of the Shares deliverable upon exercise of these Warrants would have been entitled to receive in such reorganization, consolidation, merger, sale or transfer if these Warrants had been exercised immediately before such reorganization, merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 4.8. The foregoing provisions of this Section 4.8(d) shall similarly apply to successive reorganizations, consolidations, mergers, sales and transfers and to the stock or securities of any other corporation that are at the time receivable upon the exercise of these Warrants. If the per-Share consideration payable to the Holder hereof for Shares in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by the Company’s Board of Directors. In addition to the adjustments set forth above, appropriate adjustments (as determined in good faith by the Company’s Board of Directors) shall be made in the application of the provisions of this Warrant Certificate with respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Warrant Certificate shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of these Warrants.

 

	 	
(e) 

	
Certificate as to Adjustments. In each case of any adjustment in the Exercise Price, or number or type of Shares or other securities or property issuable upon exercise of these Warrants, the Chief Financial Officer or Controller of the Company shall compute such adjustment in accordance with the terms of this Warrant Certificate and prepare a certificate setting forth such adjustment and showing in detail the facts upon which such adjustment is based, including a statement of the adjusted Exercise Price and/or Shares, other securities or property issuable upon exercise, as applicable. The Company shall promptly send a copy of each such certificate to the Holder.

 

  

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4.9

	
Determination of Adjustments

 

If any questions will at any time arise with respect to the Exercise Price or any adjustment provided for in Section 4.8, such questions will be conclusively determined by the Company’s Auditors, or, if they decline to so act any other firm of certified public accountants in the United States of America that the Company may designate and who will have access to all appropriate records and such determination will be binding upon the Company and the Holders of the Warrants.

 

	
4.10

	
Charges, Taxes and Expenses

 

Issuance of certificates for Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder (or in such name or names as may be directed by the Holder).

 

	
5.  

	
REPRESENTATIONS AND WARRANTIES, OTHER AGREEMENTS OF THE COMPANY

 

	
5.1

	
Due Authorization; Consents

 

The Company hereby represents and warrants to the Holder that all corporate authorizations necessary for the execution and delivery of, and the performance of all obligations of the Company under, this Warrant have been obtained. This Warrant constitutes a valid and binding obligation of the Company enforceable in accordance with its terms, subject, as to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and similar laws affecting creditors’ rights generally and to general equitable principles.

 

	
5.2

	
Organization

 

The Company hereby represents and warrants to Holder that the Company is a corporation duly organized and validly existing under the laws of the State of Nevada and has all requisite corporate power to own, lease and operate its property and to carry on its business as now being conducted and as currently proposed to be conducted.

 

	
5.3

	
Reservation of Shares

 

The Company has duly authorized and reserved, and shall at all times have authorized and reserved, a sufficient number of shares of its Common Stock to provide for the exercise of the rights to purchase the Shares as provided in this Warrant Certificate.

 

	
5.4

	
Valid Issuance

 

All Shares issued upon the exercise of these Warrants shall be validly issued, fully paid and nonassessable when issued consistent with the terms hereof, and free from all taxes, liens and charges created by the Company in respect of the issue thereof. The Company will take all such reasonable action as may be necessary to assure that such Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any Trading Market upon which the Shares may be listed.

 

Before taking any action which would result in an adjustment in the number of Shares for which these Warrants are exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

  

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6.  

	
HOLDER REPRESENTATIONS AND WARRANTIES

 

Holder hereby represents and warrants as follows:

 

	
6.1

	
Securities Not Registered

 

The Holder understands that neither the Warrants nor the Shares have been registered under the 1933 Act or the securities laws of any state of the United States and are being issued in reliance on exemptions or exclusions from such registration requirements.

 

	
6.2

	
Restricted Shares/Legend

 

The Holder understands that the Company will treat the Shares issuable upon the exercise of the Warrants under this Warrant Certificate as “restricted securities” as that term is defined in Rule 144 promulgated under the 1933 Act, and the Share certificates representing the Shares shall bear a legend in the form substantially set forth on the second page of this Warrant Certificate.

 

	
7.  

	
WAIVER OF CERTAIN RIGHTS

 

	
7.1

	
Immunity of Shareholders, etc.

 

The Holder, as part of the consideration for the issue of the Warrants, waives and will not have any right, cause of action or remedy now or hereafter existing in any jurisdiction against any past, present or future incorporator, shareholder, Director or Officer (as such) of the Company for the issue of shares pursuant to any Warrant or on any covenant, agreement, representation or warranty by the Company herein contained or in the Warrant.

 

	
8.  

	
MODIFICATION OF TERMS, MERGER, SUCCESSORS

 

	
8.1

	
Modification of Terms and Conditions for Certain Purposes

 

From time to time the Company may, subject to the provisions hereof, modify the Terms and Conditions hereof, for the purpose of correction or rectification of any ambiguities, defective provisions, errors or omissions herein of a non-substantive nature.

 

	
8.2

	
Warrants Transferable

 

These Warrants are transferable on the books of the Company at its principal office by the Holder upon surrender of this Warrant Certificate properly endorsed, and subject to compliance with this Section 7.2 and applicable federal and state securities laws. The Company shall issue and deliver to the transferee a new Warrant Certificate representing the Warrants so transferred (a “New Warrant Certificate”). Upon any partial transfer, the Company will issue and deliver to the Holder a New Warrant Certificate with respect to the portion of the Warrants not so transferred.

 

As a condition to any transfer of these Warrants or any or all of the Shares issuable upon exercise of these Warrants, other than a transfer registered under the 1933 Act, the Company may request a legal opinion, in form and substance reasonably satisfactory to the Company and its counsel, stating that such transfer is exempt from the registration requirements of the 1933 Act.  Any purported transfer of all or any portion of these Warrants in violation of the provisions of this Warrant Certificate shall be null and void.

 

 

[SIGNATURE PAGE FOLLOWS]

 

  

- 11 -

  

 

DATED as of the date first above written in these Terms and Conditions.

 

GRYPHON GOLD CORPORATION

 

 

 

By:

 

John L. Key, Chief Executive Officer

 

  

- 12 -

  

 

FORM OF SUBSCRIPTION

 

	
TO:

	
Gryphon Gold Corporation

	
  

	
Suite 711, 875 West Hastings Street

	
  

	
Vancouver, B.C., Canada  V6B 1N2

 

The undersigned Holder of the within Series P Warrants hereby subscribes for _______ shares of common stock (the “Shares”) of Gryphon Gold Corporation (the “Company) pursuant to the within Warrants at the Exercise Price on the terms specified in the said Warrants.  This subscription is (check one):

 

	
 ̈

	
accompanied by a certified cheque or bank draft payable to or to the order of the Company for the whole amount of the purchase price of the Shares; or

 

	
 ̈

	
being exercised pursuant to Section 4.1(b)(ii) of the Warrant Certificate.

 

In connection with this exercise, the undersigned hereby (check one):

 

	
_____1.

	
represents to the Company that (i) the holder was the original subscriber for the Warrants from the Company, and (ii) the representations, warranties and covenants set forth in the debenture and warrant purchase agreement pursuant to which the holder purchased the Warrants from the Company (the “Purchase Agreement”) are true and correct on the date of exercise in relation to the exercise of the Warrants, including, without limitation, the representations and warranties in the U.S. Accredited Investor Questionnaire attached to the Purchase Agreement as Exhibit H; or

 

	
_____2.

	
confirms that the undersigned is tendering with this form of subscription a written opinion of counsel reasonably satisfactory to the Company to the effect that the Shares to be delivered upon exercise of these Warrants have been registered under the United States Securities Act of 1933, as amended, (the "1933 Act") and the securities laws of all applicable states of the United States or are exempt from such registration requirements.

 

The undersigned hereby directs that the Shares be registered as follows:

	
NAME(S) IN FULL

	  	
ADDRESS(ES)

	  	
NUMBER OF SHARES

	  	  	  	  	  
	  	  	  	  	  
	  	  	
TOTAL:

	  	  

 

(Please print full name in which share certificates are to be issued, stating whether Mr., Mrs. or Miss is applicable).

 

DATED this ________  day of __________________ , 20__.

 

In the presence of:

 

 

 

	 	 	 	 	 
	
Signature of Witness

	
 

	
Signature of Holder

	
 

	
 

                                                                           

Please print below your name and address in full.

 

Name (Mr./Mrs./Miss)                                                                                                                     

 

Address                                                                                                                                                

                   

  

- 13 -

  

 

INSTRUCTIONS FOR SUBSCRIPTION

 

The signature to the subscription must correspond in every particular with the name written upon the face of the Warrant Certificate without alteration or enlargement or any change whatever.  If there is more than one subscriber, all must sign.

 

In the case of persons signing by agent or attorney or by personal representative(s), the authority of such agent, attorney or representative(s) to sign must be proven to the satisfaction of the Company.

 

If the Warrant Certificate and the form of subscription are being forwarded by mail, registered mail must be employed.

 

  

- 14 -

  

TRANSFER FORM

 Dated ___________ ___, _____

FOR VALUE RECEIVED, ___________________________________ hereby sells, assigns and transfers unto_____________________________(the “Transferee”),

(please type or print in block letters)

 

	
 

	
 

(insert address)

the Warrants represented by these Series P Warrants and does hereby irrevocably constitute and appoint _______________________ Attorney, to transfer the same on the books of the Company, with full power of substitution in the premises.

The undersigned understands that, as a condition to any transfer of these Warrants, the Company may request a legal opinion, in form and substance reasonably satisfactory to the Company and its counsel, stating that such transfer is exempt from the registration requirements of the 1933 Act.

	
SPACE FOR GUARANTEES OF SIGNATURES (BELOW)

	
)

)

)

)

	
 

__________________________________

Signature of Transferor

 

	
_________________________________

Guarantor’s Signature/Stamp

	
)

)

)

	
__________________________________

Name of Transferor

THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”) OR THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.  THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AND, IF REQUESTED BY THE COMPANY, THE SELLER FURNISHES TO THE COMPANY AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY TO SUCH EFFECT.

 

  

- 15 -

  

 

CERTAIN REQUIREMENTS RELATING TO TRANSFERS – READ CAREFULLY

 

 

The signature(s) of the transferor(s) must correspond with the name(s) as written upon the face of this certificate(s), in every particular, without alteration or enlargement, or any change whatsoever.  The signature(s) on this form must be guaranteed in accordance with the transfer agent’s then current guidelines and requirements at the time of transfer.  Notarized or witnessed signatures are not acceptable as guaranteed signatures.  As at the time of closing, you may choose one of the following methods (although subject to change in accordance with industry practice and standards):

 

	
·  

	
Canada and the USA: A Medallion Signature Guarantee obtained from a member of an acceptable Medallion Signature Guarantee Program (STAMP, SEMP, NYSE MSP).  Many commercial banks, savings banks, credit unions, and all broker dealers participate in a Medallion Signature Guarantee Program.  The Guarantor must affix a stamp bearing the actual words “Medallion Guaranteed”, with the correct prefix covering the face value of the certificate.

 

	
·  

	
Canada:  A Signature Guarantee obtained from the Guarantor must affix a stamp bearing the actual words “Signature Guaranteed”.  Signature Guarantees are not accepted from Treasury Branches, Credit Unions or Caisse Populaires unless they are members of a Medallion Signature Guarantee Program. For corporate holders, corporate signing resolutions, including certificate of incumbency, are also required to accompany the transfer, unless there is a “Signature & Authority to Sign Guarantee” Stamp affixed to the transfer (as opposed to a “Signature Guarantee” Stamp) obtained from an authorized officer of a major Canadian Schedule 1 chartered bank.

 

	
·  

	
Outside North America:  For holders located outside North America, present the certificates(s) and/or document(s) that require a guarantee to a local financial institution that has a corresponding Canadian or American affiliate which is a member of an acceptable Medallion Signature Guarantee Program.  The corresponding affiliate will arrange for the signature to be over-guaranteed.

 

  

- 16 -

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