Document:

pershingex102.htm

Exhibit 10.2

 

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXCHANGEABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

5% SECURED PROMISSORY NOTE

 

	
$500,000

	
April 10, 2012

FOR VALUE RECEIVED, Pershing Gold Corporation, a Nevada corporation (the “Maker”), with its primary offices located at 1658 Cole Boulevard, Building 6, Suite 210, Lakewood Co 80401, promises to pay to the order of Edward Karr (the “Payee”) or his or its registered assigns (with the Payee, the “Holder”), upon the terms set forth below, the principal sum of Five Hundred Thousand Dollars ($500,000) plus interest on the unpaid principal sum outstanding at the rate of 5% per annum (this “Note”).  Defined terms not otherwise defined herein shall have the meanings ascribed to such terms in that certain note purchase agreement of even date herewith among the Maker, the Holder (the “Purchase Agreement”).

 

1. Payments.

 

(a) Unless an Event of Default shall have previously occurred and be continuing, the full amount of principal and accrued interest under this Note shall be due and payable on a date (the “Maturity Date”) that shall be the earlier to occur of: (x) the sale of Noble Effort Gold LLC and Arttor Gold LLC, the Company’s wholly-owned subsidiaries (the “Gold Subsidiaries”) (or the sale of all or substantially all of the assets collectively contained in the Gold Subsidiaries) to a third party purchaser or (y) October 10, 2012.

 

(b) The Maker shall pay interest to the Holder on the aggregate and then outstanding principal amount of this Note at the rate of 5% per annum, payable in arrears on the earlier of (i) the Maturity Date or (ii) acceleration of this Note following an Event of Default pursuant to Section 3(b). Interest on this Note shall commence to accrue as of the date of acceptance by the Company of the Purchase Agreement as executed and delivered by the Payee and payment of the purchase price for this Note (the “Original Issue Date”).

 

(c) Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue monthly commencing on the Original Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, and other amounts which may become due hereunder, has been made. Interest hereunder will be paid to the Person in whose name this Note is registered on the records of the Maker regarding registration and transfers of this Note.

 

(d) All overdue accrued and unpaid principal and interest to be paid hereunder shall entail a default rate of interest at the rate of 16% per annum (or such lower maximum amount of interest permitted to be charged under applicable law) which will accrue daily, from the date such principal and/or interest is due hereunder through and including the date of payment. Except as otherwise set forth in this Note, the Maker may prepay any portion of the principal amount of this Note upon written notice to the Holder.

 

2. Secured Obligation. The obligations of the Maker under this Note are secured by the assets of the Gold Subsidiaries, pursuant to a Security Agreement dated as of the date hereof, by and among the Maker, the Gold Subsidiaries and the Holder.

 

  

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3. Events of Default.

 

(a) “Event of Default”, wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

 

(i) any default in the payment of the principal of, or the interest on, this Note, as and when the same shall become due and payable;

 

(ii) Maker shall fail to observe or perform any obligation or shall breach any term or provision of this Note and such failure or breach shall not have been remedied within ten (10) Business Days after the date on which notice of such failure or breach shall have been delivered (other than those occurrences described in other provisions of this Section 3 for which a different grace or cure period is specified, or for which no cure period is specified and which constitute immediate Events of Default);

 

(iii) Maker shall fail to observe or perform any of its material obligations owed to the Holder or any other material covenant, agreement, representation or warranty contained in, or otherwise commit any material breach hereunder or in any other agreement executed in connection herewith, including the Purchase Agreement;

 

(iv) Maker shall commence, or there shall be commenced against the Maker a case under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Maker commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Maker, or there is commenced against the Maker any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of sixty (60) days; or the Maker is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Maker suffers any appointment of any custodian or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of 60 days; or the Maker makes a general assignment for the benefit of creditors; or the Maker shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Maker shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or the Maker shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Maker for the purpose of effecting any of the foregoing; or

 

(v) The occurrence of any event, whether or not such event could have been known through the exercise of due diligence or otherwise, which would reasonably be expected to have a material adverse effect on the business or prospects of the Maker.

 

(b) If any Event of Default occurs and shall be continuing, the full principal amount of this Note, together with all accrued interest thereon, shall become, at the Holder’s election, immediately due and payable in cash.

 

(c) The Holder need not provide and the Maker hereby waives any presentment, demand, protest or other notice of any kind. Such declaration may be rescinded and annulled by the Holder at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

 

4. Negative Covenants. So long as any portion of this Note is outstanding, the Maker will not directly or indirectly amend its articles of incorporation, bylaws or other charter documents so as to adversely affect any rights of the Holder;

 

5. No Waiver of the Holder’s Rights. All payments of principal and interest shall be made without setoff, deduction or counterclaim. No delay or failure on the part of the Holder in exercising any of its options, powers or rights, nor any partial or single exercise of its options, powers or rights shall constitute a waiver thereof or of any other option, power or right, and no waiver on the part of the Holder of any of its options, powers or rights shall constitute a waiver of any other option, power or right.  Maker hereby waives presentment of payment, protest, and all notices or demands in connection with the delivery, acceptance, performance, default or endorsement of this Note. Acceptance by the Holder of less than the full amount due and payable hereunder shall in no way limit the right of the Holder to require full payment of all sums due and payable hereunder in accordance with the terms hereof.

 

  

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6. Modifications. No term or provision contained herein may be modified, amended or waived except by written agreement or consent signed by the party to be bound thereby.

 

7. Cumulative Rights and Remedies; Usury. The rights and remedies of the Holder expressed herein are cumulative and not exclusive of any rights and remedies otherwise available under this Note, or applicable law (including at equity). The election of the Holder to avail itself of any one or more remedies shall not be a bar to any other available remedies, which the Maker agrees the Holder may take from time to time. If it shall be found that any interest paid or payable hereunder violates applicable laws governing usury, the applicable rate of interest due hereunder shall be reduced to the maximum permitted rate of interest under such law, and any interest previously paid in excess of such legal limit shall be returned to the Company by the Holder.

 

8. Use of Proceeds. Maker shall use the proceeds from this Note hereunder for general working capital purposes.

 

9. Severability. If any provision of this Note is declared by a court of competent jurisdiction to be in any way invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances.

 

10. Successors and Assigns. This Note shall be binding upon the Maker and its successors and shall inure to the benefit of the Holder and its successors and assigns. The term “Holder” as used herein, shall also include any endorsee, assignee or other holder of this Note.

 

11. Lost or Stolen Promissory Note. If this Note is lost, stolen, mutilated or otherwise destroyed, the Maker shall execute and deliver to the Holder a new promissory note containing the same terms, and in the same form, as this Note. In such event, the Maker may require the Holder to deliver to the Maker an affidavit of lost instrument and customary indemnity in respect thereof as a condition to the delivery of any such new promissory note.

 

12. Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each of the Maker and the Holder agree that all legal proceedings concerning the interpretations, enforcement and defense of this Note shall be commenced in the state and federal courts sitting in the City of New York, County of New York (the “New York Courts”). Each of the Maker and the Holder hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder (including with respect to the enforcement of this Note), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, or that such suit, action or proceeding is brought in an inconvenient forum. Each of the Maker and the Holder hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to the other at the address in effect for notices to it under the Purchase Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each of the Maker and the Holder hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby.

 

13. Notice. Any notice or other communication required or permitted to be given hereunder shall be in writing. The addresses for such communications shall be: (i) if to the Company to: Pershing Gold Corporation 1658 Cole Boulevard, Building 6, Suite 210, Lakewood Co 80401, with a copy to: Sichenzia Ross Friedman Ference LLP, 61 Broadway, New York, NY 10006, Attn: Harvey Kesner, Esq., facsimile: (212) 930-9725; and (ii) if to the Holder, to:.

 

14. Required Notice to the Holder. The Holder is to be notified by the Maker, within five (5), Business Days, in accordance with Section 13, of the existence or occurrence of any Event of Default.

 

[Signature page follows]

 

  

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The undersigned has executed this Note as a maker and not as a surety or guarantor or in any other capacity.

 

 

 

	 	
PERSHING GOLD CORPORATION

 

	 
	 	By:	 	 
	 	 	Stephen Alfers	 
	 	 	President and Chief Executive Officer	 

 

 

 

 

 4pershingex103.htm

Exhibit 10.3

 

SECURITY AGREEMENT

1.           Identification.

This Security Agreement (the “Agreement”), dated as of April 10, 2012, is entered into by and between Arttor Gold LLC (“Arttor”) and Noble Effort Gold LLC (“Noble Effort, and collectively with Arttor, “Debtor”), and the Lenders signatory hereto (the “Lenders”).

2.           Recitals.

2.1           At or about the date hereof, the Lender is making loans (the “Loan”) to Pershing Gold Corporation (“Pershing”), the parent of each of Arttor and Noble Effort. It is beneficial to Debtor that the Loan is made.

               2.2           The Loan will be evidenced by secured promissory note (“Note”) issued by Pershing on or about the date of this Agreement pursuant to a note purchase agreement dated as of the date hereof (the “Purchase Agreement”).  The Note is in the principal amount of to $500,000 and was or will be executed by Pershing as “Maker” or “Debtor” for the benefit of the Lender as the “Holder” or “Payee” thereof.

2.3           In consideration of the Loan made and to be made by Lenders to Pershing and for other good and valuable consideration, and as security for the performance by Pershing of its obligations under the Notes, and as security for the repayment of the Loan and all other sums due from Pershing to Lenders arising under the Transaction Documents (as defined in the Purchase Agreement) and any other agreement between or among them (collectively, the “Obligations”), Debtor, for good and valuable consideration, receipt of which is acknowledged, has agreed to grant to the Lenders a security interest in the Collateral (as such term is hereinafter defined), on the terms and conditions hereinafter set forth.  Obligations include all future advances and loans by Lender to Pershing that may be made pursuant to the Purchase Agreement or any other agreements.

2.4           The following defined terms which are defined in the Uniform Commercial Code in effect in the State of New York on the date hereof are used herein as so defined:  Accounts, Chattel Paper, Documents, General Intangibles, Instruments, Inventory and Proceeds.  Other capitalized terms employed herein shall have the meanings attributed to them in the Purchase Agreement.

3.           Grant of General Security Interest in Collateral.

3.1 As security for the Obligations of Pershing, Debtor hereby grants the Lenders, a security interest in the Collateral.

3.2 “Collateral” shall mean all of the following property of Debtor:

(A)           All now owned and hereafter acquired right, title and interest of Debtor in, to and in respect of all Accounts, Goods, real or personal property, all present and future books and records relating to the foregoing and all products and Proceeds of the foregoing, and as set forth below:

(i)           All now owned and hereafter acquired right, title and interest of Debtor in, to and in respect of all: Accounts, interests in goods represented by Accounts, returned, reclaimed or repossessed goods with respect thereto and rights as an unpaid vendor; contract rights; Chattel Paper; investment property; General Intangibles (including but not limited to, tax and duty claims and refunds, registered and unregistered patents, trademarks, service marks, certificates, copyrights trade names, applications for the foregoing, trade secrets, goodwill, processes, drawings, blueprints, customer lists, licenses, whether as licensor or licensee; Documents; Instruments; letters of credit, bankers’ acceptances or guaranties; cash moneys, deposits; securities, bank accounts, deposit accounts, credits and other property now or hereafter owned or held in any capacity by Debtor, as well as agreements or property securing or relating to any of the items referred to above;

  

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                                        (ii)           Goods:  All now owned and hereafter acquired right, title and interest of Debtor in, to and in respect of goods, including, but not limited to:

(a)           All Inventory, wherever located, whether now owned or hereafter acquired, of whatever kind, nature or description, including all raw materials, work-in-process, finished goods, and materials to be used or consumed in Debtor’s business and all names or marks affixed to or to be affixed thereto for purposes of selling same by the seller, manufacturer, lessor or licensor thereof and all Inventory which may be returned to Debtor by its customers or repossessed by Debtor and all of Debtor’s right, title and interest in and to the foregoing (including all of Debtor’s rights as a seller of goods);

(iii)           Property:  All now owned and hereafter acquired right, title and interests of Debtor in, to and in respect of any other personal property in or upon which Debtor has or may hereafter have a security interest, lien or right of setoff;

                               (iv)           Books and Records:  All present and future books and records relating to any of the above including, without limitation, all computer programs, printed output and computer readable data in the possession or control of the Debtor, any computer service bureau or other third party; and

                               (v)           Products and Proceeds:  All products and Proceeds of the foregoing in whatever form and wherever located, including, without limitation, all insurance proceeds and all claims against third parties for loss or destruction of or damage to any of the foregoing.

 

 

3.3           The Lenders are hereby specifically authorized, after the Maturity Date (defined in the Notes) accelerated or otherwise, and after the occurrence of an Event of Default (as defined herein) and the expiration of any applicable cure period, to transfer any Collateral into the name of the Lenders and to take any and all action deemed advisable to the Lenders to remove any transfer restrictions affecting the Collateral.

4.           Perfection of Security Interest.

4.1           Debtor shall prepare, execute and deliver to the Lenders UCC-1 Financing Statements.  The Lenders are instructed to prepare and file at Debtor’s cost and expense, financing statements in such jurisdictions deemed advisable to Lenders, including but not limited to the State of Nevada.

4.2             All other certificates and instruments constituting Collateral from time to time required to be pledged to Lenders pursuant to the terms hereof (the “Additional Collateral”) shall be delivered to Lenders promptly upon receipt thereof by or on behalf of Debtor.  All such certificates and instruments shall be held by or on behalf of Lenders pursuant hereto and shall be delivered in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment or undated stock powers executed in blank, all in form and substance satisfactory to Lenders.  If any Collateral consists of uncertificated securities, unless the immediately following sentence is applicable thereto, Debtor shall cause Lenders (or its custodian, nominee or other designee) to become the registered holder thereof, or cause each issuer of such securities to agree that it will comply with instructions originated by Lenders with respect to such securities without further consent by Debtor.  If any Collateral consists of security entitlements, Debtor shall transfer such security entitlements to Lenders (or its custodian, nominee or other designee) or cause the applicable securities intermediary to agree that it will comply with entitlement orders by Lenders without further consent by Debtor.

4.3           If Debtor shall receive, by virtue of Debtor being or having been an owner of any Collateral, any (i) stock certificate (including, without limitation, any certificate representing a stock dividend or distribution in connection with any increase or reduction of capital, reclassification, merger, consolidation, sale of assets, combination of shares, stock split, spin-off or split-off), promissory note or other instrument, (ii) option or right, whether as an addition to, substitution for, or in exchange for, any Collateral, or otherwise, (iii) dividends payable in cash (except such dividends permitted to be retained by Debtor pursuant to Section 5.2 hereof) or in securities or other property or (iv) dividends or other distributions in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in surplus, Debtor shall receive such stock certificate, promissory note, instrument, option, right, payment or distribution in trust for the benefit of Lenders, shall segregate it from Debtor’s other property and shall deliver it forthwith to Lenders, in the exact form received, with any necessary endorsement and/or appropriate stock powers duly executed in blank, to be held by Lenders as Collateral and as further collateral security for the Obligations.

  

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5.           Distribution.

5.1           So long as an Event of Default does not exist, Debtor shall be entitled to exercise all voting power pertaining to any of the Collateral, provided such exercise is not contrary to the interests of the Lenders and does not impair the Collateral.

5.2.           At any time an Event of Default exists or has occurred and is continuing, all rights of Debtor, upon notice given by Lenders, to exercise the voting power and receive payments, which it would otherwise be entitled to pursuant to Section 5.1, shall cease and all such rights shall thereupon become vested in Lenders, which shall thereupon have the sole right to exercise such voting power and receive such payments.

5.3           All dividends, distributions, interest and other payments which are received by Debtor contrary to the provisions of Section 5.2 shall be received in trust for the benefit of Lenders as security and Collateral for payment of the Obligation, shall be segregated from other funds of Debtor, and shall be forthwith paid over to Lenders as Collateral in the exact form received with any necessary endorsement and/or appropriate stock powers duly executed in blank, to be held by Lenders as Collateral and as further collateral security for the Obligations.

6.           Further Action By Debtor; Covenants and Warranties.

6.1           Subject to the terms of this Agreement, Lenders at all times shall have a perfected security interest in the Collateral. Debtor represents that, other than the security interests described on Schedule 6.1, it has and will continue to have full title to the Collateral free from any liens, leases, encumbrances, judgments or other claims.  The Lenders’ security interest in the Collateral constitutes and will continue to constitute a first, prior and indefeasible security interest in favor of Lenders, subject only to the security interests described on Schedule 6.1.  Debtor will do all acts and things, and will execute and file all instruments (including, but not limited to, security agreements, financing statements, continuation statements, etc.) reasonably requested by Lenders to establish, maintain and continue the perfected security interest of Lenders in the perfected Collateral, and will promptly on demand, pay all costs and expenses of filing and recording, including the costs of any searches reasonably deemed necessary by Lenders from time to time to establish and determine the validity and the continuing priority of the security interest of Lenders, and also pay all other claims and charges that, in the opinion of Lenders are reasonably likely to materially prejudice, imperil or otherwise affect the Collateral or Lenders’ security interests therein.

6.2           Except (i) in connection with sales of Collateral, in the ordinary course of business, for fair value and in cash and (ii) for Collateral which is substituted by assets of identical or greater value (subject to the consent of the Lenders) or which is inconsequential in value, Debtor will not sell, transfer, assign or pledge those items of Collateral (or allow any such items to be sold, transferred, assigned or pledged), without the prior written consent of Lenders other than a transfer of the Collateral to a wholly-owned United States formed and located subsidiary on prior notice to Lenders, and provided the Collateral remains subject to the security interest herein described.  Although Proceeds of Collateral are covered by this Agreement, this shall not be construed to mean that Lenders consent to any sale of the Collateral, except as provided herein.  Sales of Collateral in the ordinary course of business and as described above shall be free of the security interest of Lenders and Lenders shall promptly execute such documents (including without limitation releases and termination statements) as may be required by Debtor to evidence or effectuate the same.

6.3           Debtor will, at all reasonable times during regular business hours and upon reasonable notice, allow Lenders or their representatives free and complete access to the Collateral and all of Debtor’s records that in any way relate to the Collateral, for such inspection and examination as Lenders reasonably deem necessary.

6.4           Debtor, at its sole cost and expense, will protect and defend this Security Agreement, all of the rights of Lenders hereunder, and the Collateral against the claims and demands of all other persons.

6.5           Debtor will promptly notify Lenders of any levy, distraint or other seizure by legal process or otherwise of any part of the Collateral, and of any threatened or filed claims or proceedings that are reasonably likely to affect or impair any of the rights of Lenders under this Security Agreement in any material respect.

 

  

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6.6           Debtor, at its own expense, will obtain and maintain in force insurance policies covering losses or damage to those items of Collateral which constitute physical personal property, which insurance shall be of the types customarily insured against by companies in the same or similar business, similarly situated, in such amounts (with such deductible amounts) as is customary for such companies under the same or similar circumstances, similarly situated.  Debtor shall make the Lenders loss payee thereon to the extent of its interest in the Collateral. Lenders are hereby irrevocably (until the Obligations are indefeasibly paid in full) appointed Debtor’s attorney-in-fact to endorse any check or draft that may be payable to Debtor so that Lenders may collect the proceeds payable for any loss under such insurance.  The proceeds of such insurance, less any costs and expenses incurred or paid by Lenders in the collection thereof, shall be applied either toward the cost of the repair or replacement of the items damaged or destroyed, or on account of any sums secured hereby, whether or not then due or payable.

6.7           In order to protect the Collateral and Lenders’ interest therein, Lenders may, at Lenders’ option, and without any obligation to do so, pay, perform and discharge any and all amounts, costs, expenses and liabilities herein agreed to be paid or performed by Debtor upon Debtor’s failure to do so.  All amounts expended by Lenders in so doing shall become part of the Obligations secured hereby, and shall be immediately due and payable by Debtor to Lenders upon demand and shall bear interest at the lesser of 12% per annum or the highest legal amount allowed from the dates of such expenditures until paid.

6.8           Upon the request of Lenders, Debtor will furnish to Lenders within five (5) business days thereafter, or to any proposed assignee of this Security Agreement, a written statement in form reasonably satisfactory to Lenders, duly acknowledged, certifying the amount of the principal and interest and any other sum then owing under the Obligations, whether to its knowledge any claims, offsets or defenses exist against the Obligations or against this Security Agreement, or any of the terms and provisions of any other agreement of Debtor securing the Obligations.  In connection with any assignment by Lenders of this Security Agreement, Debtor hereby agrees to cause the insurance policies required hereby to be carried by Debtor, if any, to be endorsed in form satisfactory to Lenders or to such assignee, with loss payable clauses in favor of such assignee, and to cause such endorsements to be delivered to Lenders within ten (10) calendar days after request therefor by Lenders.

6.9           Debtor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Lenders from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other reasonable assurances or instruments and take further steps relating to the Collateral and other property or rights covered by the security interest hereby granted, as the Lenders may reasonably require to perfect their security interest hereunder.

6.10           Debtor represents and warrants that they are the true and lawful exclusive owners of the Collateral, free and clear of any liens, encumbrances and claims other than those listed on Schedule 6.1.

6.11           Debtor hereby agrees not to divest itself of any right under the Collateral except as permitted herein absent prior written approval of the Lenders, except to a subsidiary organized and located in the United States on prior notice to Lenders provided the Collateral remains subject to the security interest herein described.

           

6.12           Debtor will notify Lenders within ten (10) days of the occurrence of any change of Debtor’s name, domicile, address or jurisdiction of incorporation.  The timely giving of this notice is a material obligation of Debtor.

7.           Power of Attorney.

At any time an Event of Default has occurred, and only after the applicable cure period as set forth in this Agreement and the other Transaction Documents, and is continuing, Debtor hereby irrevocably constitutes and appoints Lenders as the true and lawful attorney of Debtor, with full power of substitution, in the place and stead of Debtor and in the name of Debtor or otherwise, at any time or times, in the discretion of the Lenders, to take any action and to execute any instrument or document which the Lenders may deem necessary or advisable to accomplish the purposes of this Agreement.  This power of attorney is coupled with an interest and is irrevocable until the Obligations are satisfied.

 

8.           Performance By The Lenders.

If Debtor fails to perform any material covenant, agreement, duty or obligation of Debtor under this Agreement, Lenders may, after any applicable cure period, at any time or times in its discretion, take action to effect performance of such obligation.  All reasonable expenses of the Lenders incurred in connection with the foregoing authorization shall be payable by Debtor as provided in Paragraph 12.1 hereof.  No discretionary right, remedy or power granted to the Lenders under any part of this Agreement shall be deemed to impose any obligation whatsoever on the Lenders with respect thereto, such rights, remedies and powers being solely for the protection of the Lenders.

  

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9.           Event of Default.

An event of default (“Event of Default”) shall be deemed to have occurred hereunder upon the occurrence of any event of default as defined and described in this Agreement, in the Notes, the Purchase Agreement, Transaction Documents (as defined in the Purchase Agreement), and any other agreement to which Debtor, Pershing and Lenders are parties.   Upon and after any Event of Default, after the applicable cure period, if any, any or all of the Obligations shall become immediately due and payable at the option of the Lenders, and the Lenders may dispose of Collateral as provided below.  A default by Debtor of any of its material obligations pursuant to this Agreement and any of the Transaction Documents shall be an Event of Default hereunder and an “Event of Default” as defined in the Notes and Purchase Agreement.

10.           Disposition of Collateral.

Upon and after any Event of Default which is then continuing,

10.1           The Lenders may exercise their rights with respect to each and every component of the Collateral, without regard to the existence of any other security or source of payment for, in order to satisfy the Obligations.  In addition to other rights and remedies provided for herein or otherwise available to it, the Lenders shall have all of the rights and remedies of a lender on default under the Uniform Commercial Code then in effect in the State of New York.

10.2           If any notice to Debtor of the sale or other disposition of Collateral is required by then applicable law, five (5) business days prior written notice (which Debtor agrees is reasonable notice within the meaning of Section 9.612(a) of the Uniform Commercial Code) shall be given to Debtor of the time and place of any sale of Collateral which Debtor hereby agrees may be by private sale.  The rights granted in this Section are in addition to any and all rights available to Lenders under the Uniform Commercial Code.

10.3           The Lenders are authorized, at any such sale, if the Lenders deem it advisable to do so, in order to comply with any applicable securities laws, to restrict the prospective bidders or purchasers to persons who will represent and agree, among other things, that they are purchasing the Collateral for their own account for investment, and not with a view to the distribution or resale thereof, or otherwise to restrict such sale in such other manner as the Lenders deem advisable to ensure such compliance.  Sales made subject to such restrictions shall be deemed to have been made in a commercially reasonable manner.

10.4           All proceeds received by the Lenders in respect of any sale, collection or other enforcement or disposition of Collateral, shall be applied (after deduction of any amounts payable to the Lenders pursuant to Paragraph 12.1 hereof) against the Obligations.   Upon payment in full of all Obligations, Debtor shall be entitled to the return of all Collateral, including cash, which has not been used or applied toward the payment of Obligations or used or applied to any and all costs or expenses of the Lenders incurred in connection with the liquidation of the Collateral (unless another person is legally entitled thereto).  Any assignment of Collateral by the Lenders to Debtor shall be without representation or warranty of any nature whatsoever and wholly without recourse.  To the extent allowed by law, Lenders may purchase the Collateral and pay for such purchase by offsetting the purchase price with sums owed to Lenders by Debtor arising under the Obligations or any other source.

10.5           Rights of Lenders to Appoint Receiver.   Without limiting, and in addition to, any other rights, options and remedies Lenders have under the Transaction Documents, the UCC, at law or in equity, or otherwise, upon the occurrence and continuation of an Event of Default, Lenders shall have the right to apply for and have a receiver appointed by a court of competent jurisdiction.  Debtor expressly agrees that such a receiver will be able to manage, protect and preserve the Collateral and continue the operation of the business of Debtor to the extent necessary to collect all revenues and profits thereof and to apply the same to the payment of all expenses and other charges of such receivership, including the compensation of the receiver, until a sale or other disposition of such Collateral shall be finally made and consummated.  Debtor waives any right to require a bond to be posted by or on behalf of any such receiver.

  

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11.           Waiver of Automatic Stay.   Debtor acknowledges and agrees that should a proceeding under any bankruptcy or insolvency law be commenced by or against Debtor, or if any of the Collateral should become the subject of any bankruptcy or insolvency proceeding, then the Lenders should be entitled to, among other relief to which the Lenders may be entitled under the Notes, Purchase Agreement, Transaction Documents, and any other agreement to which the Debtor and/or Pershing and Lenders are parties (collectively “Loan Documents”) and/or applicable law, an order from the court granting immediate relief from the automatic stay pursuant to 11 U.S.C. Section 362 to permit the Lenders to exercise all of their rights and remedies pursuant to the Loan Documents and/or applicable law.  DEBTOR EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC STAY IMPOSED BY 11 U.S.C. SECTION 362.  FURTHERMORE, DEBTOR EXPRESSLY ACKNOWLEDGES AND AGREES THAT NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE BANKRUPTCY CODE OR OTHER STATUTE OR RULE (INCLUDING, WITHOUT LIMITATION, 11 U.S.C. SECTION 105) SHALL STAY, INTERDICT, CONDITION, REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF THE LENDERS TO ENFORCE ANY OF ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS AND/OR APPLICABLE LAW.   Debtor hereby consents to any motion for relief from stay which may be filed by the Lenders in any bankruptcy or insolvency proceeding initiated by or against Debtor, and further agrees not to file any opposition to any motion for relief from stay filed by the Lenders.  Debtor represents, acknowledges and agrees that this provision is a specific and material aspect of this Agreement, and that the Lenders would not agree to the terms of this Agreement if this waiver were not a part of this Agreement.  Debtor further represents, acknowledges and agrees that this waiver is knowingly, intelligently and voluntarily made, that neither the Lenders nor any person acting on behalf of the Lenders has made any representations to induce this waiver, that Debtor has been represented (or has had the opportunity to be represented) in the signing of this Agreement and in the making of this waiver by independent legal counsel selected by Debtor and that Debtor has had the opportunity to discuss this waiver with counsel.   Debtor further agrees that any bankruptcy or insolvency proceeding initiated by Debtor will only be brought in the Federal Court within the Southern District of New York.

12.           Miscellaneous.

12.1           Expenses.  Debtor shall pay to the Lenders, on demand, the amount of any and all reasonable expenses, including, without limitation, attorneys’ fees, legal expenses and brokers’ fees, which the Lenders may incur in connection with (a) sale, collection or other enforcement or disposition of Collateral; (b) exercise or enforcement of any the rights, remedies or powers of the Lenders hereunder or with respect to any or all of the Obligations upon breach or threatened breach; or (c) failure by Debtor to perform and observe any agreements of Debtor contained herein which are performed by Lenders.

12.2           Waivers, Amendment and Remedies.  No course of dealing by the Lenders and no failure by the Lenders to exercise, or delay by the Lenders in exercising, any right, remedy or power hereunder shall operate as a waiver thereof, and no single or partial exercise thereof shall preclude any other or further exercise thereof or the exercise of any other right, remedy or power of the Lenders.  No amendment, modification or waiver of any provision of this Agreement and no consent to any departure by Debtor therefrom shall, in any event, be effective unless contained in a writing signed by the Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. The rights, remedies and powers of the Lenders, not only hereunder, but also under any instruments and agreements evidencing or securing the Obligations and under applicable law are cumulative, and may be exercised by the Lenders from time to time in such order as the Lenders may elect.

12.3           Notices.  All notices or other communications given or made hereunder shall be in writing and shall be personally delivered or deemed delivered the first business day after being faxed (provided that a copy is delivered by first class mail) to the party to receive the same at its address set forth below or to such other address as either party shall hereafter give to the other by notice duly made under this Section:

 

	 	To Debtor:  	1640 Terrace Way	 
	 	 	Walnut Creek, CA 94597	 
	 	 	 	 
	 	To Lender:	To the address on the signature page attached	 
	 	 	hereto.	 
	 	 	 	 
	 	With a copy to:	Sichenzia Ross Friedman Ference LLP	 
	 	 	61 Broadway, 32nd Floor 

New York, NY10006

Attn: Harvey Kesner, Esq.

T: 212.930.9700

F: 212.930.9725

	 

 

Any party may change its address by written notice in accordance with this paragraph.

  

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12.4           Term; Binding Effect.  This Agreement shall (a) remain in full force and effect until payment and satisfaction in full of all of the Obligations; (b) be binding upon Debtor, and its successors and permitted assigns; and (c) inure to the benefit of the Lenders and its successors and assigns.

12.5           Captions.  The captions of Paragraphs, Articles and Sections in this Agreement have been included for convenience of reference only, and shall not define or limit the provisions of this agreement and have no legal or other significance whatsoever.

12.6           Governing Law; Venue; Severability.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to conflicts of laws principles that would result in the application of the substantive laws of another jurisdiction, except to the extent that the perfection of the security interest granted hereby in respect of any item of Collateral may be governed by the law of another jurisdiction.  Any legal action or proceeding against Debtor with respect to this Agreement must be brought only in the courts in the State of New York or of the United States for the Southern District of New York, and, by execution and delivery of this Agreement, Debtor hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Debtor hereby irrevocably waives any objection which they may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement brought in the aforesaid courts and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum.  If any provision of this Agreement, or the application thereof to any person or circumstance, is held invalid, such invalidity shall not affect any other provisions which can be given effect without the invalid provision or application, and to this end the provisions hereof shall be severable and the remaining, valid provisions shall remain of full force and effect.

12.7           Entire Agreement.  This Agreement contains the entire agreement of the parties and supersedes all other agreements and understandings, oral or written, with respect to the matters contained herein.

12.8           Counterparts/Execution.  This Agreement may be executed in any number of counterparts and by the different signatories hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument.  This Agreement may be executed by facsimile signature and delivered by electronic transmission.

13.           Termination; Release.  When the Obligations have been indefeasibly paid and performed in full, this Agreement shall be terminated, and the Lenders, at the request and sole expense of the Debtor, will execute and deliver to the Debtor the proper instruments (including UCC termination statements) acknowledging the termination of the Security Agreement, and duly assign, transfer and deliver to the Debtor, without recourse, representation or warranty of any kind whatsoever, such of the Collateral,  as may be in the possession of the Lenders.

14.           Lenders Powers.

14.1           Lenders Powers.  The powers conferred on the Lenders hereunder are solely to protect Lenders’ interest in the Collateral and shall not impose any duty on it to exercise any such powers.

14.2           Reasonable Care.  The Lenders are required to exercise reasonable care in the custody and preservation of any Collateral in its possession; provided, however, that the Lenders shall be deemed to have exercised reasonable care in the custody and preservation of any of the Collateral if it takes such action for that purposes as any owner thereof reasonably requests in writing at times other than upon the occurrence and during the continuance of any Event of Default, but failure of the Lenders to comply with any such request at any time shall not in itself be deemed a failure to exercise reasonable care.

14.3           Majority in Interest.   The rights of the Lenders hereunder, except as otherwise set forth herein shall be exercised upon the approval of Lenders holding 70% of the outstanding Obligations (“Majority in Interest”) at the time such approval is sought or given.

[THIS SPACE INTENTIONALLY LEFT BLANK]

  

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IN WITNESS WHEREOF, the undersigned have executed and delivered this Security Agreement, as of the date first written above.

“DEBTOR”

 

	  

ARTTOR GOLD LLC

	 	 
	 	 	 	 
	 By: 	 	 	 
	 Name:  	 	 	 
	 Title:   	 	 	 
	 	 	 	 
	 	 	 	 
	  

NOBLE EFFORT GOLD LLC

	 	 
	 By: 	 	 	 
	 Name: 	 	 	 
	 Title:  	 	 	 
	 	 	 	 

 

This Security Agreement may be signed by facsimile signature and

delivered by confirmed facsimile transmission.

  

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LENDERS

 

 

	
Address of Lender:

	  
	  	
By:                                                         

 

Title:                                                         

	  	  

 

 

 

 

9

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