Document:

ex10-3.htm

    Exhibit
10.3

     

    
      GOLD
CONCENTRATE SUPPLY CONTRACT

      DATED
February 25th
2010

      

      

      This
contract is made as of the 25th day
of February, 2010 (the "Effective Date") between MEGO GOLD, LLC, registered
offices at Suite #2, 2A Tamanian Street, Yerevan, Armenia, 0009
(the "Seller") and INDUSTRIAL
MINERALS SA, c/o Lenz & Staehelin, Rte de Chêne 30, 1208 Genève,
Switzerland  (the
"Buyer").

      

      1.
SCOPE OF THE AGREEMENT AND EXCLUSIVITY

      The Buyer
hereby agrees to buy and the Seller hereby agrees to sell Gold Concentrates on
the following specific terms and conditions. During 2010, 2011 and 2012 the
Seller shall deliver exclusively to the Buyer any and all Gold Concentrates from
its or any affiliate’s mines including but not limited to Toukhmanuk Mine,
Armenia. The Seller shall not deliver and not offer to nor solicit offers from
third parties.

      

      2.
MATERIAL AND QUALITY

      Gold
Concentrates produced from gravitation process (‘Grade A’) and from flotation
process (‘Grade B’) ex Toukhmanuk Mine Armenia, assaying typically as per the
specification in Schedule 1 to this agreement (‘Concentrates’)

      

      The
material shall be otherwise free of constituents deleterious to the smelting and
refining process and be free from Radioactivity. Moisture content of the
material shall be sufficient to avoid blowing and dusting and shall conform to
all local regulations, and the IMO / BC code of safe practice for solid bulk
cargoes. In the event that the quality of the material deviates from the typical
assay as per the above then Seller shall promptly advise Buyer of the revised
provisional assays. In case of adverse changes to the quality of concentrates,
Seller shall inform Buyer promptly of those changes and both parties will meet
to discuss potential solutions.

      

      3. QUANTITY

      A minimum
of 2’250 dmt of Grade A and Grade B.

      In case
the Seller has delivered a lesser quantity in 2010, 2011 and 2012 than 2’250
dmt, then the contract terminates at such time the full quantity has been
delivered.

      In case
the Seller has delivered a higher quantity in 2010, 2011 and 2012 than 2’250
dmt, then the Payables as per 6.A. shall be amended to a higher
percentage.

      

      4. SHIPMENT

      Evenly
spread from January 2010 to December 2012 in big bags of 1-2 mt. The month of
shipment shall be the month in which falls the railway bill of lading
(‘Shipment’).

      

      5. DELIVERY

      Seller
shall deliver concentrates to the Buyer on the basis DAF stowed Yerevan,
Armenia. All customs clearance procedures in Armenia to be performed and paid by
Seller.

      

      6.
PRICE

      The price
per dry metric ton of Gold Concentrates for all shipments shall be the sum of
the following payable metals less the sum of the deductions as listed
below.

      

      6.A)       Payable
Metals:

      6.A.1     Silver: 80% of the final
Silver content subject to a minimum deduction of 30 grams per dmt at the
official London Silver Spot/US Cents equivalent quotation as published in Metal
Bulletin, averaged over the Quotational Period.

      For any
delivered quantity above 2’250 dmt the payable shall be 85% of the final Silver
content subject to a minimum deduction of 30 grams per dmt at the official
London Silver Spot/US Cents equivalent quotation as published in Metal Bulletin,
averaged over the Quotational Period.

      

      
        
          
          

        

        
          Page 1 of
7

          
            

          

        

        
          
          

        

      

      6.A.2     Gold: 80% of the final Gold
content subject to a minimum deduction of 1 gram per dmt at the average of the
London AM/PM Gold Fixation, as published in Metal Bulletin, averaged over the
Quotational Period

      For any
delivered quantity above 2’250 dmt the payable shall be 85% of the final Gold
content subject to a minimum deduction of 1 gram per dmt at the average of the
London AM/PM Gold Fixation, as published in Metal Bulletin, averaged over the
Quotational Period

      

      6.A.3     No
other metals shall be payable.

      

      6.B)       Deductions:

      6.B.1     Treatment
Charge:

      The
Treatment Charge shall be US Dollars 220.00 (two hundred twenty) per dry metric
ton DAF Yerevan.

      6.B.2     Refining
Charge:

      Gold: The Refining Charge
shall be USD 6 (six) per troy ounce of payable Gold.

      Silver:  The
Refining Charge shall be USD 0.40 (fourty US cents) per ounce of payable
Silver

      

      6.B.3.    Penalties

      Arsenic: U.S. Dollars 5.0
(five) per dry metric ton of Gold Concentrates for each 0.1% (zero point one
percent) by which the final arsenic content exceeds 0.3% (zero point three
percent) fractions pro rata.

      Lead: U.S. Dollars 1.0 (one)
per dry metric ton of Gold Concentrates for each 0.1% (zero point one percent)
by which the final arsenic content exceeds 3% (three percent) fractions pro
rata.

      Alumina Al2O3:
Penalties to be agreed after the trial shipments.

      

      7.
QUOTATIONAL PERIOD

      Silver and Gold: First (M+1)
following the deemed ocean Bill of Lading (‘Deemed BL Month’) for all payable
metals (‘QP’). Buyer shall declare the Deemed BL Month in the month following
the railway bill of lading.

      

      8.
PAYMENT

      8.A)    
Prepayment

      Buyer
shall make a prepayment amounting to US$ 450’000 (‘Prepayment’). Any Provisional
and Final Payment as per 8.B. and 8.C. shall count towards the amortization of
such Prepayment until it is fully amortized (‘Amortization’). The Prepayment is
to be fully amortized in 2010 (‘Period of Amortization’).

      

      The
prepayment shall be secured during the Period of Amortization as per the
Security Agreement dated February 25th 2010
in Schedule 1 to this agreement and the Parent Company Guarantee dated February
25th 2010
in Schedule 2 to this agreement.

      

      8.B)     Provisional
Payment

      Buyer
shall make a provisional payment (‘Provisional Payment’) for 85% (eighty five
percent) of the provisional invoice less the deductions and penalties and based
on

      
        	
                 
      

              	
                -

              	
                the
      Railway Bill of Lading weight at
Yerevan

              

      

      
        	
                 
      

              	
                -

              	
                the
      last shipment’s effective assay for the Annual Tonnage (ASA trial stock
      assay for the Trial Tonnage)

              

      

      
        	
                 
      

              	
                -

              	
                average
      price for gold and silver over the week preceding the week of the railway
      bill of lading date

              

      

      The
provisional payment shall be made within 5 business days against presentation of
the following original documents to the Buyer’s Agent Vienna office (the full
dispatch details shall be advised accordingly to Buyer’s Agent, including
courier Airway bill number):

      
        	
                 
      

              	
                -

              	
                Railway
      Bill of Lading

              

      

      
        	
                 
      

              	
                -

              	
                Provisional
      Commercial Invoice certifying that material is free for
      Export.

              

      

      
        	
                 
      

              	
                -

              	
                Original
      Certificate of Origin issued and legalised by the local Chamber of
      Commerce or EUR .I certificates, if
required.

              

      

      
        	
                 
      

              	
                -

              	
                Provisional
      Assay issued by Producer.

              

      

      

      
        
          
          

        

        
          Page 2 of
7

          
            

          

        

        
          
          

        

      

      8.C)     Final
Payment

      Final
settlement (‘Final Payment’) shall be made promptly by the owing party when all
final details relating to weight, assays and prices become known against the
Final Commercial Invoice and Independent Assayer’s assay/weight
report.

      

      If due
date falls on a Saturday or New York banking holiday other than Monday, payment
shall be made on the preceding New York banking day. If payment due date falls
on a Sunday or Monday bank holiday in New York, payment to be made on the next
New York banking day.

      

      If the
final balance is in favour of the Buyer or the cargo is rejected due to the
material not corresponding to the specification under clause 2, the Seller has
to state these amounts in his final invoice and pay the Buyer within 5 banking
days after the date of the final invoice by wire transfer to the bank account
indicated by the Buyer. If the Seller fails to pay such amounts, the Buyer,
shall be entitled to set off any liability of the Buyer to the Seller against
any liability of the Seller to the Buyer Any exercise by the Buyer of its rights
under this clause shall be without prejudice to any other rights or remedies
available to the Buyer under this agreement or otherwise.

      

      9. WEIGHING SAMPLING AND MOISTURE
DETERMINATION:

      For the
purpose of final settlement, sampling and moisture determination shall be
carried out in Yerevan upon loading rail cars in accordance with standard
international practices under the supervision of approved supervision companies.
Weighing shall be determined by the Railway Bill of Lading weight and the
resulting net dry weight shall apply for final settlement purposes and shall be
final and binding on both parties. Buyer and Seller shall appoint an
internationally recognized supervision company, to be mutually agreed, on a
joint basis to represent them during these operations. The cost for the
supervision charge shall be shared equally between Buyer and
Seller.

      

      The
sample lot size shall be five big bags. Representative sample with a minimum
weight of 250 grams shall be taken from each lot. Five sets of samples shall be
prepared and sealed in order to allow the following distribution unless
otherwise agreed:

      - 2 set
for the Seller

      - 2 set
for the Buyer

      - 1 set
for independent supervision company

      

      10.
ASSAYING

      An
international assayer selected from the list below will make a chemical analysis
of the samples taken in accordance with clause 9 and the results of these
analyses, together with the results of the moisture determination shall be final
and binding for settlement purposes and notified to Buyer and Seller in
writing.  Silver and gold shall be assayed by commercial fire assay
adjusted for cupel absorption and slag losses. The costs for these
services shall be shared equally between both parties.

      

      Alex
Stewart (Assayers) Ltd., UK
or

      Alfred H.
Knight International Ltd, UK
or

      SGS
Laboratory Services, NL

      

      11. SUSPENSION OF
QUOTATIONS:

      The metal
prices and currency quotations specified under this contract are the quotations
in general use for the pricing of the metal content of concentrates. Should any
quotation referred to in this contract cease to be published or cease to be
representative, Buyer and Seller shall negotiate in good faith to establish a
mutually acceptable pricing method and in the event of their inability to agree
within thirty days of cessation of the quotation, the pricing method shall be
determined by arbitration conducted pursuant to arbitration clause of this
Contract.

      

      12.TITLE
AND RISK, INSURANCE

      Title
shall pass from Seller to Buyer upon Buyer making a provisional payment. Risk of
loss shall pass from Seller to Buyer upon loading material into the Railcars at
Yerevan. Insurance shall be covered by Buyer

      

      
        
          
          

        

        
          Page 3 of
7

          
            

          

        

        
          
          

        

      

      13.
TOTAL OR PARTIAL LOSS

      In case
of total or partial loss of shipment after risk passes from Seller to Buyer,
provisional payments and final settlement shall be made in accordance with
Clause No. 8 PAYMENT and otherwise in accordance with the terms of this
contract. Seller undertakes to assist Buyer in providing any documentation Buyer
may request from time to time in order to pursue any insurance
claim.  The insurance settlement shall accrue to Buyer.

      

      14. FORCE MAJEURE

      If the
performance of any obligation (other than the obligation to pay for material) by
any party to this Contract is hindered or prevented by reason of any of the
following events, beyond the control of the parties:

      - Act of
God, strike, fire, lockout, flood, war, insurrection, mob violence, combination
of workmen, interference of Unions or Government, suspension of labour,
accident, lack of transportation or delay en route or of any other cause
whatsoever beyond the reasonable control of Buyer or Seller; this shall be
hereinafter referred to as Force Majeure. Such notice shall set forth in
reasonable detail the nature of the Force Majeure and the best estimate by the
party claiming Force Majeure of the duration thereof. The party so affected
shall not be liable to the other for damages on account
thereof.  However, if Seller has commenced loading of the material, or
quotational period has commenced, Buyer may not declare Force
Majeure.

      - Any
event of Force Majeure so preventing or delaying the performance of any such
obligation (other than the obligation to pay for material) shall entitle the
party affected to suspend such performance during the time and to the extent of
the Force Majeure, provided that the party affected shall inform the other
promptly in writing or by telex or facsimile.

      - If the
circumstances giving rise to a Force Majeure declaration continues for more than
60 consecutive days, the party not declaring Force Majeure shall have the right
to renounce any further fulfilment of its obligations hereunder, with the
exception of obligations which shall have accrued hereunder between Buyer and
Seller.

      - Except
by the written agreement of Buyer, this clause shall not apply to any material
for which pricing has been established or vessel space has been booked or the
Quotational Period is running or any advance payment has been made

      

      15. LIQUIDATION

      Without
limiting any other rights that may be available to the liquidating party (as
hereinafter defined), in the event that a party hereto (the defaulting party) is
the subject of a bankruptcy, insolvency or other similar proceedings or fails to
pay its debts generally as they become due, the other party hereto (the
liquidating party) shall have the right, exercisable in its sole discretion and
at any time, to liquidate this and any or all other contracts, then outstanding
between the parties (whether the liquidating party is the seller or buyer
hereunder) by declaring any or all such contracts terminated (whereupon they
shall become automatically terminated, except for the obligation to effect
payment), calculating the difference, if any between the price specified
therein, and the market price for the relevant commodity (as determined by the
liquidating party in a commercially reasonable manner at a time or times
reasonably determined by the liquidating party), and aggregating or netting such
market damages to a single liquidated settlement payment that will be due and
payable upon demand therefore.

      

      16.
CHANGE OF CONTROL

      In the
event of any actual or prospective change in the organisation, control or
management of the Seller including without limitation a change in ownership,
this contract will not be changed or in any way modified and shall continue in
full force and effect.

      

      17. TAXES, DUTIES, CHARGES AND
COMMISSIONS

      If
applicable, all duties, taxes, charges and commissions levied or assessed in the
country of origin on the material shall be for Seller's account; and all similar
levies or assessments outside of the country of origin shall be for Buyer's
account.

      

      
        
          
          

        

        
          Page 4 of
7

          
            

          

        

        
          
          

        

      

      18.
LICENSES

      Seller
undertakes that all the necessary export licenses and all other authorisations
required for the gold concentrates have been obtained and/or will be obtained
for the entire quantity covered by this contract. Seller furthermore guarantees
that such licenses will remain in force for the full life of the
contract.

      

      19. LIABILITIES

      In no
event shall Seller or Buyer be liable for indirect or consequential damages or
for specific performance.

      

      20.
WARRANTIES

      The
Seller warrants that the material conforms, within any tolerances stated, to the
description stated herein.

      

      21.
ASSIGNMENT

      Seller
shall not assign the whole or any part of its rights and obligations hereunder
directly or indirectly without the prior written consent of the
Buyer.  Buyer shall have the right to assign to its designated
financing bank the whole or any part of its rights under this Contract,
including without limitation, its right to receive and take delivery of the
material in accordance with the terms of this Contract and its right, title and
interest on any material delivered or held to Buyer's order and in relation to
which the Buyer has made an Advance Payment.

      

      22.
SET-OFF

      The
Buyer, shall be entitled but not obliged, at any time or times, with notice to
the Seller, to set off any liability of the Buyer to the Seller against any
liability, as determined in a commercially reasonable manner by the Buyer, of
the Seller to the Buyer (in either case howsoever arising, under whatever
contract between the parties and whether any such liability of the Seller is
present or future, liquidated or unliquidated and irrespective of the currency
of its denomination) and the Buyer may for such purpose convert or exchange any
currency. Any exercise by the Buyer of its rights under this clause shall be
without prejudice to any other rights or remedies available to the Buyer or to
the Seller under this agreement or otherwise.

      

      23.
CHOICE OF LAW

      The
construction, validity and performance of the agreement shall be governed by The
Laws of England to the exclusion of any other law which may be imputed in
accordance with Choice of Law Rules applicable in any
jurisdiction.  However, neither party shall be precluded from pursuing
arrest, attachment and/or other conservatory actions in the courts of any other
country or exercising any contractual rights in relation to the goods or vessel
provided for elsewhere in the agreement.

      

      The
United Nations Convention on Contracts for the International Sale of Goods of
Vienna, 11th
April 1980, shall not apply to this transaction.

      

      24. ARBITRATION

      Any
dispute arising out of or in connection with this agreement including any
question regarding its existence, validity or termination, shall be referred to
and finally resolved by arbitration under the rules of conciliation and
arbitration of the London Court of International Arbitration (LCIA), which rules
are deemed  to be incorporated by reference into this section. The
tribunal shall consist of three arbitrators, one to be nominated by the Seller,
one by the Buyer and one by the President of the LCIA. The place of arbitration
shall be London. The language of the arbitration shall be English. The
arbitrator shall give a written record of the award and the reasons therefore.
The award shall be final and binding.

      

      25. DEFINITIONS

      The
following terms shall have the following meanings when used in this
Contract:

      
        	
                a) 

              	
                Wet
      metric ton or wmt means 2,204.62 pounds avoirdupois, natural
      state.

              

      

      
        	
                b) 

              	
                Dry
      metric ton or dmt means 2,204.62 pounds avoirdupois, dry
      state.

              

      

      
        	
                c) 

              	
                Dollars
      and Cents means the lawful currency of the United States of
      America.

              

      

      
        	
                d) 

              	
                A
      Troy Ounce equals 31.1035 grams.

              

      

      
        	
                e) 

              	
                A
      pound equals 453.593 grams

              

      

       

      
        
          
          

        

        
          Page 5 of
7

          
            

          

        

        
          
          

        

      

       

      
        	
                f) 

              	
                A
      Gram equals 1/1000 of a kilogram.

              

      

      
        	
                g) 

              	
                A
      unit equals 1% of the dry net
weight

              

      

      
        	
                h) 

              	
                A
      Calendar month refers to a named month in the Gregorian
      calendar.

              

      

      
        	
                i) 

              	
                A
      calendar week refers to the calendar days Monday to and including
      Friday.

              

      

      
        	
                j)

              	
                A
      business day refers to any calendar day Monday to and including Friday,
      which is not a legal and recognised
holiday.

              

      

      
        	
                k)

              	
                Metal
      Bulletin refers to the publication known as "METAL BULLETIN" which is
      published twice a week in London by Metal Bulletin Journal,
      Ltd.

              

      

      
        	
                l) 

              	
                LME
      refers to London Metal Exchange

              

      

      
        	
                m)

              	
                Date
      of Shipment shall be the date on which the last Railway Bill of Lading of
      the current shipment is issued, stamped and
  signed.

              

      

      
        	
                n)

              	
                Date
      of arrival at discharge port shall be the month during which the carrying
      vessel reports to the Customs at the discharge
  port.

              

      

      
        	
                o) 

              	
                Normal
      Office Hours means 8:00 - 17:00 on Monday through
  Friday.

              

      

      
        	
                p)

              	
                INCOTERMS
      2000 means International rules for the interpretation of the most commonly
      used trade terms in international trade, published by
      the  International Chamber of  Commerce in 1936 and
      amended in 1953, 1967, 1976, 1980, 1990 and
  2,000

              

      

      
        	
                q)

              	
                TML
      means the Transportable Moisture Limit valid in Buyer’s sole option for
      current shipment.

              

      

      
        	
                r) 

              	
                FMP
      means Flow Moisture Point valid in Buyer’s sole opinion for current
      shipment

              

      

      
        	
                s)

              	
                IMP/BC
      Code refers to a cargo shipped/loaded in accordance with latest
      International Maritime Organisation / Bulk Cargo
  Code.

              

      

      

      26. WAIVER

      No party
shall be deemed to have waived any right, power or privilege under this
agreement unless such waiver is in writing and duly executed by it. No failure
or delay in exercising any right hereunder shall be deemed a waiver thereof by
any party. No exercise or partial exercise of any right, power or privilege
shall preclude any other or further exercise thereof or of any other right,
power or privilege.

      

      27. ENTIRE AGREEMENT

      Notwithstanding
anything contained in any other agreement to the contrary this contract contains
the entire agreement between the parties with respect to the subject matter
hereof and all representations relating thereto are merged herein.

      

      28.
CONFIDENTIALITY

      The Buyer
and the Seller shall keep confidential and not disclose to any other person any
business secrets or other confidential information it acquires about the other
party. The parties shall not be bound by the foregoing confidentiality
obligation in those cases where the other party has consented to disclosure,
disclosure is required by any applicable law or relevant government authority or
the secrets or information are obtained or available from any other source
(other than as a result of the breach of this Contract).

      

      29.
FUTURE PRODUCTION

      Both
parties are in agreement to continue the commercial relationship beyond the
contract period and agree to extend the frame contract for the full production
of Gold Concentrates by one year at the end of each contractual year. The
parties agree to negotiate terms during the 4th
quarter of the year for the following year’s production. The parties will make
good faith attempts to reach agreement on the terms and conditions for treating
similar qualities and shall be based on the international market for smelters
treating such material.  In the event the Seller receives other bids,
the Buyer shall have the right of first and last refusal to match such terms on
that year’s production of concentrates. Buyer agrees to cooperate with and
reasonably accommodate requirements set in Seller’s financing
obligations.

      

      30.
NOTICES

      All
notices shall be made to the addresses of the parties set forth below or such
subsequent address as any party may subsequently advise the other party in
writing by first class mail, postage paid or via telefax:

      

      
        
          
          

        

        
          Page 6 of
7

          
            

          

        

        
          
          

        

      

      Buyer:    Industrial Minerals SA, c/o
Lenz & Staehelin,
Rte de Chêne 30,
1208 Genève, Switzerland 

      ..                                                      .

      Buyer’s agent for shipping and
back-office matters: Trade Service Consult GmbH, Kaerntnerring 5-7, 1010
Vienna, Austria

      Mr.
Stephan Lehmden

      Phone:         +43
1 2950905

      Mobile:       +43
664 3023591

      Facsimile:   +43
1 29509059

      Email:
stephan.lehmden@sl-tsc.com

      

      Seller:     Mego Gold LLC registered
offices at Suite #2, 2A Tamanian Street, Yerevan, Armenia,
0009

      Phone      :  +
374 10 58 98 56

      Fax           :  +
374 10 54 56 98

      Email:
aboghossian@ggm.am

      

      

      IN WITNESS WHEREOF, the
parties hereto have caused their duly authorised representatives to execute this
Contract of Purchase and Conditions of Purchase.

       

       

      

       

       

       

      Page
7 of 7ex10-4.htm

    Exhibit
10.4

     

    
      
        	 
      
	 
	 
	 
	
                DATED
      25 FEBRUARY 2010

              
	 
	 
	 
	 
	
                MEGO
      GOLD LLC

                and

                INDUSTRIAL
      MINERALS SA

              
	 
	 
	 
	 
      

                
    
	 
	
                SECURITY
      AGREEMENT

              
	 
	 
      

                
    

      

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      THIS AGREEMENT is made on
25FEBRUARY 2010

       

      BY
AND BETWEEN

       

      
        	
                (1)

              	
                MEGO GOLD LLC,
      registered offices at Suite#2, 2A Tamanyan Street, Yerevan, Armenia
      ( hereinafter referred to us "Mego");
    and

              

      

       

      
        	
                (2)

              	
                Industrial Minerals SA,
      ac/o Lenz & Staehelin, Rte de Chene 30, 1208 Geneva,
      Switzerland (hereinafter referred to us “Secured
      Party”).

              

      

       

      IT IS AGREED as
follows:

       

      
        	
                1.

              	
                DEFINITIONS AND
      INTERPRETATION

              

      

       

      
        	
                1.1

              	
                Definitions

              

      

       

      In this
Agreement:

       

      "Business Day" means a day
(other than Saturday or Sunday) on which banks are open for general business in
Switzerland and Armenia.

       

      "GCSC" means Gold Concentrate
Supply Contract concluded between the parties and dated as of February 1,
2010

       

      "Civil Code" means the Civil
Code of the Republic of Armenia.

       

      "Collateral Rights" means all
rights, powers and remedies of the Secured Party provided by this Agreement or
by law.

       

      "Enforcement Event" means the
non-performance or improper performance by Mego.

       

      "Collateral/Security" means the
Stockpile secured under or pursuant to or evidenced by this
Agreement.

       

      "Stockpile" means 20,000 tones
of ore stockpiled and held by, to the order or on behalf of the Secured Party at
any time.

       

      
        
          	
                  1.2

                	
                  Construction

                

        

      

      
        In this
Agreement,

      

       

      
        
          	
                	
                  (a)

                	
                  Unless
      a contrary indication appears, a reference
to:

                

        

      

       

      
        	
                 
      

              	
                (i)

              	
                "assets" includes present
      and future properties, revenues and rights of every
      description;

              

      

       

      
        	
                 
      

              	
                (ii)

              	
                "indebtedness" includes
      any obligation (whether incurred as principal or as surety) for the
      payment or repayment of money, whether present or future, actual or
      contingent;

              

      

       

      
        
          
          

        

        
          -2-

          
            

          

        

        
          
          

        

      

      
        	
                 
      

              	
                (iii)

              	
                a
      "person" includes
      any person, firm, company, corporation, government, state or agency of a
      state or any association, trust or partnership (whether or not having
      separate legal personality) of two or more of the
    foregoing;

              

      

       

      
        	
                 
      

              	
                (iv)

              	
                a
      "regulation"
      includes any regulation, rule, official directive, request or guideline
      (whether or not having the force of law but, if not having the force of
      law, with which persons who are subject thereto are accustomed to comply)
      of any governmental, intergovernmental or supranational body, agency,
      department or regulatory, self-regulatory or other authority or
      organisation;

              

      

       

      
        	
                 
      

              	
                (v)

              	
                the
      "winding-up",
      "dissolution",
      "administration"
      or "reorganisation" of a
      company or corporation shall be construed so as to include any equivalent
      or analogous proceedings under the laws and regulations of Armenia or any
      jurisdiction in which the Mego carry on business including the seeking of
      liquidation, winding-up, reorganisation, bankruptcy, dissolution,
      administration, arrangement, adjustment, protection or relief of
      debtors;

              

      

       

      
        	
                 
      

              	
                (vi)

              	
                a
      reference to a clause, paragraph or schedule, unless the context otherwise
      requires, is a reference to a clause, a paragraph of or a schedule to this
      Agreement.

              

      

       

      
        	
                 
      

              	
                (b)

              	
                General
      words shall not be given a restrictive meaning by reason of their being
      preceded or followed by words indicating a particular class of acts,
      matters or things or by examples falling within the general
      words.  Any phrase introduced by the terms "other", "including"
      and "include" or any similar expression shall be construed as illustrative
      and shall not limit the sense of the words preceding those
      terms.

              

      

       

      
        	
                 
      

              	
                (c)

              	
                Section,
      Clause and Schedule headings are for ease of reference
    only.

              

      

       

      
        	
                2.

              	
                SECURED
      OBLIGATIONS

              

      

       

      The Mego
charge the Stockpile with full title guarantee and mortgages as of first ranking
security in favour of the Secured Party, as continuing security for the payment
of an amount USD 450 000 /four hundred fifty thousands/ received under the
“Gold Concentrate Supply Contract” concluded between the parties and dated as of
February 1, 2010 a copy of which is attached hereto and made a part hereof
(GCSC).

       

      
        	
                3.

              	
                RELEASE

              

      

       

      
        	
                3.1

              	
                Release

              

      

      Upon
performance in full by the Mego of their obligations under the GCSC Contract or
otherwise upon termination of such Contract, the Secured Party shall, at the
request and cost of the Mego, release all the security granted under this
Agreement and deliver to the Secured Party all documents necessary to effect the
release of security without any recourse to, and without any representations or
warranties by, the Secured Party or any of its nominees.

       

      
        
          
          

        

        
          -3-

          
            

          

        

        
          
          

        

      

      
        	
                4.

              	
                ENFORCEMENT
      EVENT

              

      

       

      
        	
                4.1

              	
                Enforcement
      Event

              

      

      Mego
shall be in default under this agreement upon the occurrence of any of the
following events or conditions, namely: (a) default in the performance of any of
the Obligations or of any agreements or liabilities contained or referred to
herein or in GSCS; (b) any warranty, representation or statement made or
furnished to Secured Party by or on behalf of Mego proving to have been false in
any material respect when made or furnished; (c) loss, theft, substantial
damage, destruction, sale or encumbrance to or any of the Collateral, or the
making of any levy, seizure or attachment thereof or thereon; or (d)
dissolution, termination of existence, filing by Mego or by any third party
against Mego of any petition under any bankruptcy statute, insolvency, business
failure, appointment of a receiver of any part of the property of, or assignment
for the benefit of creditors by Mego.

       

      Upon the
occurrence of an Enforcement Event, the Mego must:

       

      
        
          	
                	
                  (a)

                	
                  transfer
      to the Secured Party any interest and other monies and benefits it may
      receive thereafter in connection with the
  Stockpile

                

        

      

       

      
        
          	
                	
                  (b)

                	
                  notwithstanding
      Clause 5.2 of this Agreement, not take any decisions as the owner of
      Stockpile except in accordance with the instructions of the Secured
      Party.

                

        

      

       

      
        	
                5.

              	
                MEGOS' REPRESENTATIONS AND
      UNDERTAKINGS

              

      

       

      
        	
                5.1

              	
                Representations

              

      

      Mego
makes the following representations and warranties to the Secured Party and
acknowledges that the Secured Party has become party to this Agreement in
reliance on these representations and warranties:

       

      
        
          	
                	
                  (a)

                	
                  Non-conflict
      with other obligations

                

        

      

       

      The entry
into and performance by it of, and the transactions contemplated by, this
Agreement  do not and shall not result in the existence of, or oblige
it to create, any security over the Collateral other than as permitted under
this Agreement.

       

      Except
for the security interest granted hereby, Mego is the owner of the Collateral
free from any adverse lien, security interest or encumbrance; and Mego will
defend the Collateral against all claims and demands of all persons at any time
claiming the same or any interest therein.

       

      
        
          
          

        

        
          -4-

          
            

          

        

        
          
          

        

      

      
        
          	
                	
                  (b)

                	
                  No
      Financing Statement covering any of the Collateral or any proceeds thereof
      is on file in any public office. Mego shall immediately notify the Secured
      Party in writing of any change in name, address, identity or corporate
      structure from that shown in this Agreement and shall also upon demand
      furnish to the Secured Party such further information and shall execute
      and deliver to Secured Party such financing statements and other documents
      in form satisfactory to Secured Party and shall do all such acts and
      things as Secured Party may at any time or from time to time reasonably
      request or as may be necessary or appropriate to establish and maintain a
      perfected security interest in the Collateral as security for the
      Obligations, subject to no adverse liens or encumbrances; and Mego will
      pay the cost of filing the same or filing or recording this agreement in
      all public offices wherever filing or recording is deemed by Secured Party
      to be necessary or desirable.  A carbon, photographic or other
      reproduction of this agreement is sufficient as a financing
      statement.

                

        

      

       

      
        
          	
                	
                  (c)

                	
                  Except
      as contemplated by the GCSC between the parties, Mego will not sell,
      assign, pledge, lease or otherwise transfer or encumber the Collateral or
      any interest therein, without the prior written consent of Secured
      Party.

                

        

      

       

      
        
          	
                	
                  (d)

                	
                  Mego
      will keep the Collateral free from any adverse lien, security interest or
      encumbrance and in good order and repair, shall not waste or destroy the
      Collateral or any part thereof, and shall not use the Collateral in
      violation of any statute, ordinance or policy of insurance thereon.
      Secured Party may examine and inspect the Collateral at any reasonable
      time or times, wherever
located.

                

        

      

       

      
        
          	
                	
                  (e)

                	
                  Mego
      will pay promptly when due all taxes and assessments upon the Collateral
      or for its use or operation or upon this Agreement or upon any note or
      notes evidencing the
Obligations.

                

        

      

      

      
        	
              	
                (f) 

              	
                Repetition

              

      

       

      The
representations set out in Clauses 5.1 (Non-conflict with other
obligations) are deemed to be made by the Mego by reference to the facts
and circumstances then existing on the date of this Agreement.

       

      
        	
                5.2

              	
                Undertakings

              

      

      
        
          	
                	
                  (a)

                	
                  Disposals
      and Negative pledge

                

        

      

       

      The Mego
shall not enter into a single transaction or a series of transactions (whether
related or not) whether voluntarily or involuntarily, to sell, lease, transfer
or otherwise dispose of the whole or any part of the Collateral and will not
create or permit to subsist any security interest on any part of the Collateral
or otherwise deal with any part of the Collateral, save as may be permitted
under this Agreement or instructions received by the Secured Party.

       

      
        
          
          

        

        
          -5-

          
            

          

        

        
          
          

        

      

      
        	
                6.

              	
                FURTHER
      ASSURANCE

              

      

       

      
        	
              	
                (a)

              	
                The
      Mego will promptly at their own cost do all such acts or execute all such
      documents as the Secured Party may specify (and in such form as the
      Secured Party may require in favour of the Secured Party or its
      nominee(s)) for the purpose of exercising the Collateral Rights or
      perfecting the Security created or intended to be created in respect of
      the Collateral or for the exercise of the rights, powers and remedies of
      the Secured Party provided by or pursuant to this Agreement or by law in
      each case in accordance with the rights vested in it under this
      Agreement.

              

      

       

      
        	
              	
                (b)

              	
                The
      Mego shall promptly take all such action available to them as may be
      necessary for the purpose of the creation, perfection, protection or
      maintenance of the Collateral as a first-ranking security over the
      Stockpile.

              

      

       

      
        	
                7.

              	
                SECURITY
      ENFORCEMENT

              

      

       

      
        	
                7.1

              	
                Enforcement out of
      court

              

      

      Upon and
at any time after the occurrence of an Enforcement Event, the Secured Party may
in its sole discretion, by written notice to the Mego in accordance with the
Article 249 of the Civil Code of RA (which, at the date of this Security,
requires that two-months' notice be given before security can be enforced) and
without recourse to any court, in its absolute discretion enforce all or any
part of the Collateral by securing and perfecting its title to all or any part
of the Collateral (including transferring the Collateral into its name or the
name of third persons designated by it or by instructing Mego to sell/export the
Collateral to the person designated by the Secured Party) or selling (direct
sale), or otherwise disposing of all or any part of the Collateral at a fair
market value prevailing at the material time.

       

      
        	
                7.2

              	
                Enforcement through
      court

              

      

      Upon the
occurrence of an Enforcement Event, the Secured Party shall be entitled in its
sole discretion to select the enforcement the Security by taking proceedings in
any competent court in Armenia.

       

      
        	
                8.

              	
                EFFECTIVENESS OF
      COLLATERAL

              

      

       

      
        	
                8.1

              	
                No
  Waiver

              

      

      No
failure to exercise, nor any delay in exercising, on the part of the Secured
Party, any right or remedy under this Agreement shall operate as a waiver of any
such right or remedy or constitute an election to affirm this Agreement. No
single or partial exercise of any right or remedy shall prevent any further or
other exercise or the exercise of any other right or remedy of the Secured
Party. The rights and remedies provided in this Agreement are cumulative and not
exclusive of any rights or remedies provided by law.

       

      
        
          
          

        

        
          -6-

          
            

          

        

        
          
          

        

      

      
        	
                8.2

              	
                Illegality, Invalidity,
      Unenforceability

              

      

      If, at
any time, any provision of this Agreement is or becomes illegal, invalid or
unenforceable in any respect under the law of any jurisdiction, neither the
legality, validity or enforceability of the remaining provisions of this
Agreement nor the legality, validity or enforceability of such provision under
the law of any other jurisdiction will in any way be affected or
impaired.

       

      
        	
                8.3

              	
                No
    liability

              

      

      None of
the Secured Party or its nominee(s) shall be liable by reason of (a) taking any
action permitted by this Agreement or (b) any neglect or default in connection
with the Collateral or (c) realisation of all or any part of the Collateral,
except in the case of gross negligence or wilful default upon its
part.

       

      
        	
                8.4

              	
                Implied Covenant for
      Title

              

      

      It shall
be implied in respect of this Agreement that the Mego are charging the
Collateral free from all charges and encumbrances (whether monetary or not) and
from all other rights exercisable by third parties (including liabilities
imposed and rights conferred by or under any enactment).

       

      
        	
                8.5

              	
                Continuing
      security

              

      

      
        	
              	
                (a)

              	
                The
      Security from time to time constituted by this Agreement is a continuing
      security and will remain in full force and effect as a continuing security
      until the date of full and final discharge of the
  GCSC.

              

      

       

      
        	
              	
                (b)

              	
                No
      part of the Security from time to time constituted by this Agreement will
      be considered satisfied or discharged by any intermediate payment,
      discharge or satisfaction of any part of the
  CCSC.

              

      

       

      
        	
              	
                (c)

              	
                In
      accordance with Article 233 of the Civil Code, the Security shall secure
      the Secured Party’s claim to the extent of the amount it will be worth of
      at the time of actual satisfaction.

              

      

       

      
        	
                8.6

              	
                Immediate
      recourse

              

      

      The Mego
waives any right it may have of first requiring the Secured Party to proceed
against or enforce any other rights or Security or claim payment from any person
before claiming from the Mego under this Agreement.

       

      
        	
                8.7

              	
                No
    prejudice

              

      

      The
Collateral created by or pursuant to this Agreement and the rights, powers and
remedies of the Secured Party provided by or pursuant to this Agreement or by
law shall not be prejudiced by any unenforceability or invalidity of any other
agreement or document (other than the agreements and documents under which the
GCSC are created) or by any time or indulgence granted to the Mego or any other
person by the Secured Party or by any other thing which might otherwise
prejudice the Security or any rights, powers and remedies of the Secured Party
provided by or pursuant to this Agreement or by law.

       

      
        
          
          

        

        
          -7-

          
            

          

        

        
          
          

        

      

      
        	
                8.8

              	
                Discretion

              

      

      Any
liberty or power which may be exercised or any determination which may be made
under this Agreement by the Secured Party may be exercised or made in its
absolute and unfettered discretion without any obligation to give
reasons.

       

      
        	
                9.

              	
                EXPENSES, STAMP TAXES,
      INDEMNITY

              

      

       

      
        	
                9.1

              	
                Expenses

              

      

      The Mego
shall promptly on demand pay the Secured Party the amount of all costs and
expenses (including legal fees) reasonably incurred by the Secured Party in
connection with the negotiation, preparation and execution of this Agreement and
the completion of the transactions and perfection of the security contemplated
in this Agreement.

       

      
        	
                9.2

              	
                Enforcement
      expenses

              

      

      The Mego
shall, within 5 (five) Business Days of demand pay to the Secured Party for all
the costs and expenses (including legal fees) on a full indemnity basis incurred
by it in connection with the exercise, preservation and/or enforcement of any of
the rights, powers or remedies of the Secured Party or the Security or any
proceedings instituted by or against the Secured Party as a consequence of
taking the Security.

       

      
        	
                9.3

              	
                Indemnity

              

      

      The Mego
shall, notwithstanding any release or discharge of all or any part of the
security, indemnify the Secured Party, its attorneys against any action,
proceeding, claims, losses, liabilities and costs which they may sustain as a
consequence of any breach by the Mego of the provisions of this Agreement, the
exercise or purported exercise of any of the rights and powers conferred on them
by this Agreement or otherwise relating to the Collateral.

       

      
        	
                9.4

              	
                Interest on
      Demands

              

      

      If the
Mego fails to perform any of its Obligations under the GCSC and consequently
repay the amount due on the due date for payment of that amount the Mego shall
pay interest on any such sum (before and after any judgment and to the extent
interest at a default rate is not otherwise being paid on such sum) from the
date of demand until the date of payment calculated on a daily basis at the
interest rate of 8% annually.

       

      
        	
                9.5

              	
                Payments Free Of
      Deduction

              

      

      All
payments to be made to the Secured Party under this Agreement shall be made free
and clear of and without deduction for or on account of tax unless the Mego are
required to make such payment subject to the deduction or withholding of tax, in
which case the sum payable by the Mego in respect of which such deduction or
withholding is required to be made shall be increased to the extent necessary to
ensure that, after the making of such deduction or withholding, the person on
account of whose liability to tax such deduction or withholding has been made
receives and retains (free from any liability in respect of any such deduction
or withholding) a net sum equal to the sum which it would have received and so
retained had no such deduction or withholding been made or required to be
made.

       

      
        
          
          

        

        
          -8-

          
            

          

        

        
          
          

        

      

       

      
        	
                10.

              	
                APPLICATION OF
      PROCEEDS

              

      

       

      All
moneys received or recovered by the Secured Party as a result of enforcement of
the Security shall be:

       

      
        	
              	
                (a)

              	
                first,
      reimbursing the Secured Party any costs incurred in connection with the
      enforcement of the Security; and

              

      

       

      
        	
              	
                (b)

              	
                second,
      paying the amount due to the Secured Party under the GSCS as well as
      interest incurred, if any; and

              

      

       

      
        	
              	
                (c)

              	
                if any amount is left from the
      enforcement of Security in excess of the amounts due to Secured Party, it
      shall be transferred to
Mego.

              

      

       

      
        	
                11.

              	
                ASSIGNMENT

              

      

       

      
        	
                11.1

              	
                Permitted
      Successors

              

      

      This
Agreement shall be binding upon and shall inure to the benefit of each party and
its legal successors, permitted transferees and permitted assigns and despite
any amalgamation or merger (however effected) relating to such
party.

       

      
        	
                11.2

              	
                Disclosure

              

      

      The
Secured Party shall be entitled to disclose such information concerning the Mego
or any other person and this Agreement as the Secured Party considers
appropriate to any actual or proposed direct or indirect successor or to any
person to whom information may be required to be disclosed by applicable
law.

       

      
        	
                12.

              	
                NOTICES

              

      

       

      
        	
                12.1

              	
                Communications in
      writing

              

      

      Any
communication to be made under or in connection with the present Agreement shall
be made in writing form.

       

      
        	
                13.

              	
                WAIVERS AND
      COUNTERPARTS

              

      

       

      
        	
                13.1

              	
                Waivers

              

      

      No waiver
by the Secured Party of any of its rights under this Agreement shall be
effective unless given in writing.

       

      
        	
                13.2

              	
                Counterparts, Governing
      language

              

      

      This
Agreement is made in three original copies in the Armenian and English
languages, all having the same legal effect. Each party holds a copy. A fourth
copy shall be provided to, and kept with, the notary public. In the event of any
discrepancies between the English and Armenian language versions of this
Agreement, the Armenian language version shall prevail.

       

      
        
          
          

        

        
          -9-

          
            

          

        

        
          
          

        

      

      
        	
                14.

              	
                GOVERNING
      LAW

              

      

       

      This
Agreement shall be governed by the laws of Republic of Armenia.

       

      
        	
                15.

              	
                DISPUTE
      RESOLUTION

              

      

       

      Any
dispute, controversy or claim which may arise out of or in connection with this
Agreement, or the execution, breach, termination or invalidity of this Agreement
shall be referred to, and finally resolved by, relevant Armenian
courts.

      

       

      THIS AGREEMENT has been signed
by the Mego and the Secured Party on the date specified above in February 25,
2010.

       

      

      
        
          
          

        

        
          -10-

          
            

          

        

        
          
          

        

      

       

      EXECUTION
PAGE

       

      

       

       

      -11-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00169-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00169-of-00352.parquet"}]]