Document:

ex4_7.htm

EXHIBIT 4.7

 

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

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE JULY 23, 2012.

THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.  THIS WARRANT MAY NOT BE EXERCISED UNLESS THE WARRANT AND THE UNDERLYING SHARES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE.

THESE WARRANTS WILL EXPIRE AND BECOME NULL AND VOID

AT 5:00 P.M. (VANCOUVER TIME) ON September 22, 2013.

 

2012 SERIES S

SHARE PURCHASE WARRANTS

TO PURCHASE SHARES OF COMMON STOCK

GRYPHON GOLD CORPORATION

 

incorporated in the State of Nevada

 

THIS IS TO CERTIFY THAT _________________________________, (the “Holder”), has the right to purchase, upon and subject to the terms and conditions hereinafter referred to, up to ● fully paid and non-assessable shares of common stock (the “Shares”) in the capital of Gryphon Gold Corporation (hereinafter called the “Company”) on or before 5:00 p.m. (Vancouver time) on September 22, 2013 (the “Expiry Date”) at a price per Share (the “Exercise Price”) of US$0.164, on the terms and conditions attached hereto as Appendix “A” (the “Terms and Conditions”).

 

	
  

	
1.

	
ONE (1) WHOLE SERIES S WARRANT AND THE EXERCISE PRICE ARE REQUIRED TO PURCHASE ONE SHARE.  THIS CERTIFICATE REPRESENTS 2012 SERIES S WARRANTS.

 

	
  

	
2.

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

 

	
  

	
3.

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

 

[Signature Page Follows]

 

 

  

  

  

 

	
  

	
IN WITNESS WHEREOF the Company has executed this Warrant Certificate this 22nd day of March, 2012.

 

 

	 	GRYPHON GOLD CORPORATION
	 	 
	 	

 

Per:                           

James O’Neil, Chief Executive Officer

 

 

 

 

  

  

  

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

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

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE JULY 23, 2012.

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

  

  

  

APPENDIX “A”

TERMS AND CONDITIONS dated March 22, 2012, attached to the Series S Warrants issued by Gryphon Gold Corporation.

 

	
1.  

	
INTERPRETATION

 

	1.1	Definitions

 

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

 

	
(a)

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

 

	
(b)

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

 

	
(c)

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

 

	
(d)

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

 

	
(e)

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

 

	
(f)

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

 

	
(g)

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

 

	
(h)

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

 

	
(i)

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

 

	
(j)

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

 

	
(k)

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

 

 

  

  

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	1.2	Gender

 

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

 

	1.3	Interpretation not affected by Headings

 

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

 

	1.4	Applicable Law

 

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

 

	1.5	Severability

 

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

 

	1.6	Time is of the Essence

 

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

 

	
2.  

	
ISSUE OF WARRANTS

 

	2.1	Additional Warrants

 

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

 

	2.2	Warrants to Rank Pari Passu

 

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

 

	2.3	Issue in substitution for Lost Warrants

 

	
(a)

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

 

	
(b)

	
The applicant for the issue of a new Warrant Certificate pursuant hereto will bear the cost of the issue thereof and in case of loss, destruction or theft furnish to the Company such evidence of

 

  

  

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ownership and of loss, destruction, or theft of the Warrant Certificate so lost, destroyed or stolen as will be satisfactory to the Company in its discretion and such applicant may also be required to furnish indemnity in amount and form satisfactory to the Company in its discretion, and will pay the reasonable charges of the Company in connection therewith.

 

	2.4	Warrant Holder Not a Shareholder

 

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

 

	
3.  

	
NOTICE

 

	3.1	Notice to Holders

 

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

 

	3.2	Notice to the Company

 

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

 

Gryphon Gold Corporation

611 N. Nevada St.

Carson City, Nevada  89703

Attention:  Lisanna Lewis

Fax No. 604-608-3262

 

	
4.  

	
EXERCISE OF WARRANTS

 

	4.1	Method of Exercise of Warrants

 

	
  

	
(a)

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

 

  

  

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(b)           Net Issue Exercise.

 

	
(i)      

	
Section 4.1(b)(ii) shall not apply and shall have no force or effect if the shares issuable upon exercise of these Warrants have been registered for resale under the Securities Act of 1933, as amended (the “1933 Act”), on a Registration Statement on Form S-1, S-3, or another appropriate form and such Registration Statement remains effective under the 1933 Act and available for use by Holder at the time of exercise.

 

	
(ii)      

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

 

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

 

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

 

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

 

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

 

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

 

For purposes of the above calculation, the “Fair Market Value” of one share shall mean (i) the volume weighted average trading price for the shares on the Eligible Market on which the shares are listed or traded as reported by Bloomberg Financial Markets (or a comparable reporting service of national reputation selected by the Company and reasonably acceptable to the Holder if Bloomberg Financial Markets is not then reporting sales prices of such security) (collectively, “Bloomberg”) for the five (5) consecutive Trading Days immediately prior to the date of exercise, or (ii) if an Eligible Market is not the principal Trading Market for the shares, the average of the reported sales prices reported by Bloomberg on the principal Trading Market for the shares during the same period, or (iii) if neither of the foregoing applies, the last sales price of such security as reported by Bloomberg, or if no sales price is so reported for such security, the last bid price of such security as reported by Bloomberg, or (iv) if fair market value cannot be calculated as of such date on any of the foregoing bases, the fair market value shall be as determined by the Board of Directors of the Company in the exercise of its good faith judgment.

 

	4.2	Effect of Exercise of Warrants

 

	
(a)

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

 

	
(b)

	
Within three (3) Business Days after surrender and payment (unless exercise is pursuant to Section 4.1(b)(ii)) as aforesaid, the Company will forthwith cause to be delivered to the person or persons in whose name or names the Shares so subscribed for are to be issued as specified in such Form of Subscription or mailed to him or them at his or their respective addresses specified in such Form

 

  

  

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of Subscription, a certificate or certificates for the appropriate number of Shares not exceeding those which the Holder is entitled to purchase pursuant to the Warrant Certificate surrendered.

 

	4.3	Restrictions on Exercise of Warrants

 

The Warrants represented by this Warrant Certificate may only be exercised by or for the account or benefit of a holder who, at the time of exercise, represents to the Company, pursuant to subparagraph 1 of the attached Form of Subscription, that (a) the holder was the original holder of the Warrants, and (b) the holder is an accredited investor as defined in Rule 501(a) of Regulation D under the 1933 Act.

 

	4.4	Subscription for Less Than Entitlement

 

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

 

	4.5	Warrants for Fractions of Shares

 

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

 

	4.6	Expiration of Warrants

 

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

 

	4.7	Exercise Price; Beneficial Ownership Limitation

 

Each whole Warrant is exercisable at a price per share (the “Exercise Price”) of US$0.164 if exercised on or before 5:00 p.m. (Vancouver time) on September 22, 2013.  One (1) Warrant and the Exercise Price are required to subscribe for each Share during the term of the Warrants.

 

Notwithstanding any other provision hereof, the Company shall not effect the exercise of Warrants, and no Holder shall exercise Warrants, to the extent that as a result of such exercise, the Holder, together with its affiliates, would then beneficially own in excess of four and ninety-nine hundredths percent (4.99%) (the “Maximum Percentage”) of the Shares outstanding immediately after giving effect to such exercise.

 

For purposes of the foregoing paragraph, the number of Shares beneficially owned by the Holder and its affiliates shall include the number of Shares issuable upon exercise of these Warrants with respect to which such determination is being made, but shall exclude the number of Shares which would be issuable upon (i) exercise of the remaining, nonexercised portion of these Warrants beneficially owned by the Holder or any of its affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 4.7, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 4.7 applies, the determination of whether these Warrants are exercisable (in relation to other securities owned by the Holder together with any affiliates) and of which portion of these Warrants is exercisable shall be in the sole discretion of the Holder, and the submission of a Form of Subscription shall be deemed to be the Holder’s determination of whether these Warrants are exercisable (in relation to other securities owned by the Holder together with any affiliates) and of which portion of these Warrants is exercisable, and the Company shall have no obligation 

 

 

 

 

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to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. For purposes of this Section 4.7, in determining the number of outstanding Shares, a Holder may rely on the number of outstanding Shares as reflected in (A) the Company’s most recent periodic or annual report filed with the Securities and Exchange Commission, as the case may be, (B) a more recent public announcement by the Company, or (C) a more recent written notice by the Company or its transfer agent setting forth the number of Shares outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of Shares then outstanding. In any case, the number of outstanding Shares shall be determined after giving effect to the conversion or exercise of securities of the Company, including these Warrants, by the Holder or its affiliates since the date as of which such number of outstanding Shares was reported.

 

By written notice to the Company, the Holder may from time to time increase or decrease the Maximum Percentage to any other percentage not in excess of nine and ninety-nine hundredths percent (9.99%) specified in such notice; provided that (i) any such increase will not be effective until the sixty-first (61st) day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply only to the Holder and not to any other holder of Warrants.

 

	4.8	Adjustment of Exercise Price

 

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

 

	
(a)

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

 

	
(b)

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

 

	
(c)

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

 

  

  

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(d)

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

 

	
(e)

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

 

	4.9	Determination of Adjustments

 

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

 

	4.10	Charges, Taxes and Expenses

 

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

 

	
5.  

	
REPRESENTATIONS AND WARRANTIES, OTHER AGREEMENTS OF THE COMPANY

 

	5.1	Due Authorization; Consents

 

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

 

  

  

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	5.2	Organization

 

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

 

	5.3	Reservation of Shares

 

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

 

	5.4	Valid Issuance

 

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

 

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

 

	
6.  

	
HOLDER REPRESENTATIONS AND WARRANTIES

 

Holder hereby represents and warrants as follows:

 

	6.1	Securities Not Registered

 

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

 

	6.2	Restricted Shares/Legend

 

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

 

	
7.  

	
MODIFICATION OF TERMS, MERGER, SUCCESSORS

 

	7.1	Modification of Terms and Conditions for Certain Purposes

 

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

 

 

  

  

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	7.2	Warrants Transferable

 

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

 

Any purported transfer of all or any portion of these Warrants in violation of the provisions of this Warrant Certificate shall be null and void.

 

 

[SIGNATURE PAGE FOLLOWS]

 

  

  

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

 

 

	 	GRYPHON GOLD CORPORATION
	 	 
	 	

 

Per:                           

James O’Neil, Chief Executive Officer

 

 

  

  

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SERIES S SHARE PURCHASE WARRANT

 

FORM OF SUBSCRIPTION

 

	
TO:

	
Gryphon Gold Corporation

	
  

	
611 N. Nevada Street

	
  

	
Carson City, Nevada  89703

 

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

 

	
o

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

 

	
o

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

 

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

 

	
_____

	
represents to the Company that (i) the holder was the original holder of the Warrants, and (ii) the holder is an accredited investor as defined in Rule 501(a) of Regulation D under the 1933 Act; or

 

	
_____

	
has been advised by the Company that the Shares to be delivered upon exercise of these Warrants have been registered under the United States Securities Act of 1933, as amended, (the "1933 Act").

 

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

	
NAME(S) IN FULL

	  	
ADDRESS(ES)

	  	
NUMBER OF SHARES

	  	  	  	  	  
	  	  	  	  	  
	  	  	
TOTAL:

	  	  

 

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

 

DATED this ________  day of __________________ , 20__.

 

In the presence of:

 

________________________________            __________________________________

Signature of Witness                                                                           Signature of Holder

 

Please print below your name and address in full.

 

Name (Mr./Mrs./Miss)  ______________________________________________________

 

Address          ______________________________________________________

 

 

  

  

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INSTRUCTIONS FOR SUBSCRIPTION

 

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

 

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

 

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

  

  

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SERIES S SHARE PURCHASE WARRANT

TRANSFER FORM

 Dated ___________ ___, _____

FOR VALUE RECEIVED, ___________________________________ hereby sells, assigns and transfers unto_____________________________,

(please type or print in block letters)

(insert address)

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

The undersigned represents that, as a condition to any transfer of these Warrants, such transfer is exempt from the registration requirements of the 1933 Act.

	
SPACE FOR GUARANTEES OF SIGNATURES (BELOW)

	
)

)

)

)

	
 

__________________________________

Signature of Transferor

 

	
_________________________________

Guarantor’s Signature/Stamp

	
)

)

)

	
__________________________________

Name of Transferor

THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”) OR THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.  THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

 

  

  

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CERTAIN REQUIREMENTS RELATING TO TRANSFERS – READ CAREFULLY

 

 

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

 

	
●

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

 

	
●

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

 

	
●

	
Outside North America:  For holders located outside North America, present the certificates(s) and/or document(s) that require a guarantee to a local financial institution that has a corresponding Canadian or American affiliate which is a member of an acceptable Medallion Signature Guarantee Program.  The corresponding affiliate will arrange for the signature to be over-guaranteed.ex10_1.htm

 

EXHIBIT 10.1

APN(s):  N/A

property also includes

unpatented mining claims

	
Recording Requested By:

Name: Joel O. Benson, Esq.

Address: 1550 17th Street, Suite 500, Denver, Colorado 80202

 

 

When Recorded Mail to:

Name: Joel O. Benson, Esq., Davis Graham & Stubbs LLP

Address: 1550 17th Street, Suite 500, Denver, Colorado 80202

 

 

	  
	
Affirmation Statement:

The undersigned hereby affirms that this document does not contain the personal information of any person.  (Per NRS 239B.030)

 

 

DEED OF TRUST, SECURITY AGREEMENT,

 

ASSIGNMENT OF PRODUCTION, RENTS AND LEASEHOLD INTERESTS, FINANCING STATEMENT AND FIXTURE FILING

 

FROM

 

BOREALIS MINING COMPANY, as Trustor

 

TO

 

STEWART TITLE OF NEVADA HOLDINGS, INC., as Trustee

 

AND

 

WATERTON GLOBAL VALUE, L.P., BY ITS INVESTMENT MANAGER, ALTITUDE MANAGEMENT LIMITED, as Beneficiary

 

 

DATED AS OF MARCH 20, 2012

 

THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.

 

THIS INSTRUMENT SECURES FUTURE ADVANCES.

 

THIS INSTRUMENT COVERS FIXTURES AND GOODS THAT WILL BECOME FIXTURES ON THE PROPERTY DESCRIBED IN EXHIBIT A.

 

THIS INSTRUMENT COVERS AS-EXTRACTED COLLATERAL.

 

 

  

  

  

DEED OF TRUST, SECURITY AGREEMENT,

ASSIGNMENT OF PRODUCTION, RENTS AND LEASEHOLD INTERESTS, 

FINANCING STATEMENT AND FIXTURE FILING

 

This Deed of Trust, Security Agreement, Assignment of Production, Rents and Leasehold Interests, Financing Statement and Fixture Filing (the “Deed of Trust”) is entered into by and among BOREALIS MINING COMPANY, a corporation formed and existing under the laws of the State of Nevada, and whose address is 611 N Nevada Street, Carson City, Nevada 89703 (herein called “Trustor”), Stewart Title of Nevada Holdings, Inc., whose address is 5335 Kietzke Lane, Ste 110, Reno, NV 89519 (herein called “Trustee”), and WATERTON GLOBAL VALUE, L.P., by its Investment Manager, Altitude Management Limited, whose address is Folio House, P.O. Box 800, Road Town, Tortola, VG 1110  (herein called “Beneficiary”).

 

Recitals

 

A.           Pursuant to that certain Bridge Loan Agreement dated March 20, 2012 among Gryphon Gold Corporation, a Nevada corporation, as the borrower (the “Borrower”), the Trustor, as a guarantor, and the Beneficiary, as the lender (as amended, modified, supplemented or restated from time to time, the “Loan Agreement”), and subject to the satisfaction of the conditions precedent stated therein, the Beneficiary has agreed to advance a Loan to the Borrower in the principal amount of One Million Five Hundred Thousand Dollars ($1,500,000), all on the terms and conditions stated in the Loan Agreement.  This Deed of Trust secures the Trustor’s guarantee of the repayment and performance of the Loan Agreement, as further described herein, including future advances, and advances under the Loan Agreement are obligatory.  Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Loan Agreement.

 

B.           It is a condition precedent to the Beneficiary entering into the Loan Agreement and making and maintaining the Loan thereunder, that the Trustor shall have executed and delivered this Deed of Trust to secure the Trustor’s performance of the Guarantee (defined below), which guarantees the payment and performance of the Loan Agreement and such other payment and performance obligations and liabilities of the Trustor and the Borrower, all as more fully described herein.

 

C.           The Trustor owns, leases or holds, or has an option to purchase, those certain properties consisting of unpatented mining claims, unpatented millsite claims, mineral rights, leasehold and other rights and interests in Mineral County, Nevada as further described herein, including on Exhibit A attached hereto and incorporated herein by reference, which are commonly referred to herein as the “Properties”.

 

D.           The Trustor is a wholly-owned subsidiary of the Borrower, and the Trustor will directly and indirectly benefit from the Loan Agreement and the loans made to the Borrower pursuant thereto.  The Trustor has irrevocably and unconditionally guaranteed the payment and performance obligations of the Borrower arising under the Loan Agreement and each other Loan 

 

 

  

  

  

Document (as defined in the Loan Agreement) pursuant to a Guarantee of even date herewith (the “Guarantee”).

 

E.           The Trustor expects to derive substantial direct and indirect benefit from the amounts made available under the Loan Agreement, including for preservation and development of the Properties, and from such financial and other support as the Borrower may in the future provide to the Trustor.  The Trustor and the Borrower are engaged in related businesses and are integrated to such an extent that the financial strength and flexibility of each of them has a direct, tangible and immediate impact on the success of the other.  The Trustor is interested in and will be financially benefited by the business success of the Borrower and has entered into this Agreement and the other Loan Documents (defined below) for legitimate business purposes.

 

F.           The Trustor and the Beneficiary have entered into that certain Gold and Silver Supply Agreement dated March 20, 2012 (the “Gold and Silver Supply Agreement”), whereby the Trustor has agreed to sell gold and silver to the Beneficiary at the price, and subject to the terms and conditions, stated therein.

 

G.           THIS DEED OF TRUST IS GOVERNED BY THE PROVISIONS OF NRS 106.300 TO 106.400, INCLUSIVE, AND SECURES FUTURE ADVANCES TO A MAXIMUM PRINCIPAL AMOUNT OF TWENTY MILLION DOLLARS ($20,000,000).

 

THIS DEED OF TRUST COVERS GOOD WHICH ARE OR ARE TO BECOME FIXTURES ON THE REAL ESTATE DESCRIBED IN THIS DEED OF TRUST AND ALSO COVERS AS-EXTRACTED COLLATERAL AND MINERALS OR THE LIKE TO BE FINANCED AT THE MINEHEAD OF THE MINE OR MINES LOCATED ON THE REAL ESTATE DESCRIBED IN THIS DEED OF TRUST.  THIS DEED OF TRUST IS TO BE FILED FOR RECORD IN THE REAL ESTATE RECORDS AS, AMONG OTHER THINGS, A FINANCING STATEMENT AND A FIXTURE FILING.

 

H.           This Deed of Trust is intended to act and operate as either a deed of trust or as a mortgage (but not both), at the sole option and direction of the Beneficiary.  Upon foreclosure, pursuant to the terms and conditions stated herein, the Beneficiary may elect to treat this instrument either as a deed of trust and pursue a non-judicial foreclosure pursuant to the power of sale granted herein, or as a mortgage and pursue a judicial foreclosure.

 

Agreement

 

NOW, THEREFORE, in consideration of the premises, to induce the Beneficiary to enter into the Loan Agreement and the other Loan Documents, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE 1 – CREATION OF SECURITY

 

Section 1.1   Grant.  In consideration of the moneys and credit advanced under the Loan Agreement for  the benefit of the Trustor, and in consideration of the mutual covenants contained herein, and for the purpose of securing payment and performance of the Obligations (as defined below in Section 1.4), Trustor hereby grants, bargains, sells, warrants, assigns, pledges, transfers 

 

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and conveys to the Trustee, IN TRUST, with power of sale and right of entry and possession subject to the terms hereof, for the benefit of the Beneficiary, all of Trustor’s right, title and interest in and to the following real and personal property, rights, title and interests (collectively, the “Collateral”), whether presently owned or held or hereafter acquired:

 

(a)           Lands and Realty.  All lands and real property, including all leasehold, option rights, mineral interests, unpatented mining claims (lode and placer), unpatented millsites, tunnel sites and rights, amended claims, relocated claims, royalties and other real property interests (whether surface, underground, mineral, or other), as more particularly described on Exhibit A attached hereto and incorporated herein by reference (collectively, the “Lands”);

 

(b)           Gold, Silver and Minerals.  All gold, silver and other ores, minerals, metals, mineral elements and compounds, dore, concentrate, veins, lodes and mineral deposits that are on, in, under, extending from or into, produced or to be produced from, stored, stacked, handled, processed, refined, beneficiated, transported or marketed on or from all or any part of the Lands, including “As-Extracted Collateral” as defined in N.R.S. 104.9102, Section 9102 of the Nevada Uniform Commercial Code (the “UCC”), all whether in place, extracted, produced, processed, stored or otherwise severed (collectively, the “Minerals”);

 

(c)           Leases.  All leases and subleases (howsoever named or characterized), licenses of use, exploration agreements, joint venture agreements and other agreements and rights in, to or relating to the Lands or the use of any part thereof (the “Leases”), including any extensions or renewals

 

(d)           Fixtures and Improvements.  All buildings, structures, mills, crushers, facilities, offices, shops, tanks, pipelines, fixtures and other improvements, howsoever designated, now or hereafter located or constructed on the Lands (collectively, the “Improvements”);

 

(e)           Water Rights.  All water, water rights (whether vested, certificated, permitted or otherwise, whether or not adjudicated, and whether or not with a place of use or point of diversion on the Lands), water right applications, reservoirs and reservoir rights, ditches and ditch rights, irrigation systems and irrigation rights, wells, well permits and other rights of use appertaining or belonging to or used in connection with the Lands and all wells, pumps, pumping stations, machinery and equipment associated therewith, and all shares of stock or similar interest (if any) evidencing reservoir, ditch, irrigation or other water rights or rights of use (collectively, the “Water Rights”);

 

(f)           Access Rights.  All rights of way, easements, licenses, profits, privileges, tenements, hereditaments, appurtenances, roads, trails, transportation improvements, and other access rights or rights of use appertaining or belonging to or used in connection with the Lands, the Water Rights and/or the Improvements (collectively, the “Access Rights”);

 

(g)           Property Data.  All records, data, reports and information relating to or associated with all or any portion of the Lands, the Minerals or the Water Rights, including maps, surveys, drilling data, drill logs, core samples and core data, technical, engineering and 

 

 

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permitting information and reports, and all geological, metallurgical, geophysical, geochemical and analytical data and reports (collectively, the “Data”);

 

(h)           Permits and Approvals.  All approvals, authorizations, licenses, permits, consents, variances, land use entitlements, applications, plans, bonds, filings or registrations by, with or from any governmental authority (federal, state or local) or other person associated with or necessary for the use or development of all or any portion of the Lands, Minerals, Improvements, Water Rights or Access Rights and all bonds, letters of credit and other financial accommodations that secure the performance of the foregoing (collectively, the “Permits”);

 

(i)           Accounts; Contract Rights; General Intangibles.  All accounts, accounts receivable, contracts and contract rights, option and purchase rights, agreements, documents, instruments, income, receipts, revenues, earnings, rents, profits, deposits, security deposits, royalties and revenue arising from the use or enjoyment of all or any portion of the Lands, the Improvements or other Collateral, from the production, crushing, milling, treatment, storage, marketing, hedging, sale or transfer of all or any portion of the Minerals and from the use, sale, assignment, conveyance or transfer of all or any portion of any other Collateral (collectively, the “Accounts”);

 

(j)           Machinery; Equipment; Personal Property.  All goods, machinery, equipment, drilling rigs and equipment, facilities, parts, supplies, power lines, tools, vehicles, rolling stock, furnishings, apparatus, inventory, fixtures and other personal property of every kind and nature, howsoever defined and whether or not attached or affixed in any manner to any building, structure or Improvement on the Lands (collectively, the “Personal Property”);

 

(k)           All Associated Property.  All other property (whether real, personal or mixed), right, title or interest of any kind, nature or character, howsoever defined or identified, related to or associated with the Properties, the Lands, the Minerals, the Improvements, the Water Rights, the Access Rights, the Data, the Permits, the Accounts, the Personal Property or other property described herein; and

 

(l)           Proceeds and Products.  All proceeds and products of the Lands, Minerals, Improvements, Water Rights, Access Rights, Data, Permits, Personal Property, Accounts and other property rights and interests described herein.

 

TO HAVE AND TO HOLD all of the Collateral, together with all and singular the rights, privileges, benefits, contracts, hereditaments and appurtenances now or hereafter at any time before the foreclosure or release hereof, in any way appertaining or belonging thereto, unto the Trustee and to its substitutes or successors, forever, IN TRUST, upon the terms and conditions herein set forth; and Trustor hereby binds and obligates itself and its successors and assigns, to warrant and to defend, all and singular, title to the Collateral unto the Trustee, its substitutes or successors, forever, against the claims of any and all persons whomsoever claiming any part thereof.

 

Section 1.2   Creation of Security Interest.  In addition to the grant contained in Section 1.1, and for the same consideration and purpose, the Trustor hereby grants to the Beneficiary, a first and prior continuing security interest in all Collateral constituting personal 

 

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property, now owned or hereafter acquired by the Trustor, and in all Proceeds thereof (as defined below).  The Trustor, without limiting the foregoing provisions of this Section 1.2, stipulates that the grant made by this Section 1.2 includes a grant of a security interest in all Minerals extracted or produced from or otherwise attributable to or severed from the Lands and in the Proceeds resulting from sale of such Minerals, such security interest to attach to such Minerals as-extracted, at the minehead of any mine located thereon, and to the Accounts resulting from such sales.  “Proceeds” shall have the meaning given to such term in Article 9 of the UCC, and includes whatever is received or receivable upon the sale, exchange, collection or other disposition of the Collateral and insurance payable or damages or other payments by reason of loss or damage to the Collateral, and all additions thereto, substitutions and replacements thereof or accessions thereto.

 

Section 1.3   Pledge and Assignment.  The Trustor hereby grants and makes a common law pledge and assignment to the Beneficiary of all Refinery Accounts (defined below) and all credit balances therein from time to time.  “Refinery Accounts” means any account or allocation, and the credit balances in dollars or Minerals therein, of or for the benefit of the Trustor at or with any refinery or processing facility to which Minerals severed from or attributable to the Lands are delivered or held, expressly including all accounts of the Trustor presently in effect, or hereafter constituted, at Johnson Matthey in Salt Lake City, Utah.

 

Section 1.4   Obligations Secured.  This instrument is executed and delivered by the Trustor to secure and enforce the irrevocable, full, punctual and complete payment and performance when due (whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise) of:

 

(a)           All amounts due or to become due under the Loan Agreement, including the payment of all indebtedness, liabilities and amounts due or to become due under the Loan Agreement, in the original principal amount of One Million Five Hundred Dollars ($1,500,000) and under any other Loan Document, together with any amendment, modification, renewal, restatement, replacement, extension or increase thereof, and all advances shall be governed by NRS Sections 106.380 through 106.400. Notwithstanding the amount outstanding at any particular time, this Deed of Trust secures all amounts due under the Loan Agreement plus all costs, fees, expenses and charges provided therein, which is made a part hereof by reference.  All advances under the Loan Agreement are obligatory and are secured by this Deed of Trust.  All such obligatory advances, including future advances, and interest, fees, costs and charges thereon will have the same priority as the funds initially advanced under the Loan Agreement;

 

(b)           Any and all other or additional indebtedness, liabilities or sums for which Trustor is now or may become liable to any Beneficiary or Trustee in any manner, whether under this instrument, the Guarantee, the Loan Agreement, any Loan Document or any other or future instrument or document, either primarily or secondarily, absolutely or contingently, directly or indirectly, jointly, severally, or jointly and severally, and whether matured or unmatured, and whether or not created after payment in full of the Obligations if this instrument shall not have been released of record by Beneficiary;

 

(c)           All sums advanced and costs and expenses incurred by the Beneficiary or the Trustee (directly or indirectly), including all legal, accounting, engineering, management, 

 

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consulting or like fees and expenses made or incurred in connection with the Loan Documents or the Obligations or any part thereof, any amendment, modification, renewal, restatement, replacement or extension thereof,  the acquisition or perfection of any security therefor or otherwise in connection with the administration, preservation, perfection, enforcement and realization of the rights of the Trustee or the Beneficiary hereunder or under any of the other obligations secured hereby, including reasonable attorneys fees, courts costs and other litigation and foreclosure expenses;

 

(d)           All renewals, extensions, amendments, modifications, restatements and changes of, or substitutions or replacements for, all or any part of the items described above; and

 

(e)           Each and every covenant and agreement of Trustor contained in any Loan Document.

 

The indebtedness, liabilities and obligations secured hereby, as described in the foregoing clauses (a) – (e) are sometimes referred to herein as the “Obligations”.

 

Section 1.5   Proceeds.  The security interest of the Beneficiary hereunder in the Proceeds shall not be construed to mean that the Beneficiary consents to the sale or other disposition of any part of the Collateral other than Minerals extracted from or attributable to the Lands and sold in the ordinary course of business.

 

Section 1.6   Substitution of Beneficiary for Trustor.  This instrument shall be effective, at the Beneficiary’s option and as allowed by applicable law, either as a mortgage or as a deed of trust, and every grant herein to the Trustee of interests, powers, rights and remedies shall likewise be a grant of the same interests, powers, rights and remedies to the Beneficiary, as mortgagee.  Subject to applicable law, the Beneficiary shall in all instances, and in its sole discretion, elect whether this instrument shall be effective as a mortgage or as a deed of trust.

 

Section 1.7   Future Advances.  Trustor, and each party at any time claiming an interest in or lien or encumbrances against the Collateral, agrees that all advances made by the Beneficiary from time to time under any Loan Document, and all other portions of the Obligations herein referred to, shall be secured by this Deed of Trust with priority as if all of the same had been advanced, had arisen or became owing or performable on the date of this Deed of Trust.  No reduction of the outstanding principal balance under the Loan Agreement shall extinguish, release or subordinate any rights, titles, interests, liens, security interests, powers or privileges intended, created or arising hereunder or under any other Loan Document, and this Deed of Trust shall remain in full force and effect as to any subsequent advances or subsequently arising portions of the indebtedness without loss of priority until all Obligations are fully paid, performed and satisfied, all agreements and obligations, if any, of Beneficiary for future advances have been terminated, and this Deed of Trust has been released of record by Beneficiary.  THIS DEED OF TRUST IS TO BE GOVERNED BY THE PROVISIONS OF THE FUTURE ADVANCES STATUTES IN THE STATE OF NEVADA REVISED STATUTES 106.300-106.400, INCLUSIVE.  THIS DEED OF TRUST SECURES FUTURE ADVANCES AND THE MAXIMUM AMOUNT OF PRINCIPAL TO BE SECURED IS TWENTY MILLION DOLLARS ($20,000,000).

 

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Section 1.8   Continuing Status of Lien, Security Interest and Pledge.  So long as the commitment to advance funds under the Loan Agreement remains in effect, whether or not subject to the satisfaction of any conditions precedent, the lien on the Collateral constituting real property and the security interest in and pledge relating to the Collateral constituting personal property created hereby shall remain in effect with the priority date established by the recording or filing hereof, notwithstanding the fact that from time to time the outstanding balance of the loans outstanding under the Loan Agreement may be zero.

 

ARTICLE 2 – ASSIGNMENT OF PRODUCTION PROCEEDS, RENTS AND LEASEHOLD INTERESTS

 

Section 2.1   Assignment of Production Proceeds.  As further security for the payment and performance of the Obligations, the Trustor hereby absolutely and unconditionally assigns and transfers to the Beneficiary, effective upon and during the continuance of an Event of Default, all Minerals (and the Proceeds therefrom) which are produced, extracted or severed from or attributable to the Lands and, effective automatically upon and during the continuance of an Event of Default, the Trustor hereby transfers, assigns, warrants and conveys to the Beneficiary all Minerals (and the Proceeds therefrom) which are produced, extracted or severed from or attributable to the Lands.  Upon the occurrence and during the continuance of an Event of Default, all persons producing, purchasing or receiving such Minerals or the Proceeds therefrom are authorized and directed to treat the Beneficiary as the person entitled in the Trustor’s place and stead to receive the same; and further, those persons will be fully protected in so treating the Beneficiary and will be under no obligation to see to the application by Beneficiary of any Proceeds received by it.  The Trustor agrees that, if, after the occurrence and during the continuance of an Event of Default, any Proceeds from such Minerals are paid to the Trustor, such proceeds shall constitute trust funds in the hands of the Trustor, shall be segregated from all other funds of the Trustor and separately held by the Trustor, and shall be forthwith paid over by the Trustor to the Beneficiary.  Upon the occurrence and during the continuance of an Event of Default, the Trustor shall, if and when requested by the Beneficiary, execute and file with any production purchaser a transfer order or other instrument declaring the Beneficiary to be entitled to the Proceeds of severed Minerals and instructing such purchaser to pay such Proceeds to the Beneficiary.  After the occurrence and during the continuance of an Event of Default, should any purchaser fail to make payment promptly to the Beneficiary of the proceeds derived from the sale thereof, the Beneficiary shall have the right, subject only to any contractual rights of such purchaser or any operator, to designate another purchaser to purchase and take such Products, without liability of any kind on the Beneficiary in making such selection so long as ordinary care is used in respect thereof.

 

Section 2.2   Assignment of Rents and Leasehold Interests.  As further security for the payment and performance of the Obligations, the Trustor hereby absolutely and unconditionally assigns and transfers to Trustee, for the benefit of the Beneficiary, all the leases, income, rent, issues, deposits, profits and proceeds of the Lands and the Improvements to which the Trustor may be entitled, whether now due or to become due, and hereby gives to and confers upon the Trustee, on the occurrence of an Event of Default, the right, power and authority to collect such income, rents, issues, deposits, profits and proceeds of the Lands and the Improvements to which the Trustor may be entitled, whether now due, past due or to become due.  This assignment constitutes an irrevocable direction and authorization of all tenants, account payors and other 

 

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Persons, under any lease, contract, agreement or other Instrument to pay all income, rent, issues, deposits, profits and proceeds into an account specified by the Trustee upon demand and without further consent or other action by the Trustor.  This assignment of rents and leasehold interests shall be governed by NRS Sections 107A.010 through 107A.370.

 

Section 2.3   Power-of-Attorney; Collection.  The Trustor hereby irrevocably appoints the Trustee its true and lawful attorney, at the option of the Trustee upon the occurrence and during the continuance of an Event of Default, to demand, receive and enforce payment, to give receipts, releases, and satisfactions, and to sue, either in the name of the Trustor or in the name of the Trustee, for all such income, rents, issues, deposits, profits and proceeds and apply the same to the Obligations secured hereby.  It is understood and agreed that neither the foregoing assignments in Sections 2.1 and 2.2 nor the exercise by the Trustee of any of its rights or remedies under this Article 2 or otherwise hereunder shall be deemed to make the Trustee a “mortgagee-in-possession” or otherwise responsible or liable in any manner with respect to the Collateral or the use, occupancy, enjoyment, or operation of all or any portion thereof.  Notwithstanding anything to the contrary contained herein, so long as no Event of Default shall have occurred and be continuing, the Trustor shall have a license to collect all Proceeds from the Collateral as trustee for the benefit of the Trustee and shall apply such Proceeds in the following order of priority: (a) first, to the payment of the Obligations then due and payable, and (b) second, to such other obligations or matters as Trustor may reasonably determine.  Upon the occurrence and during the continuance of an Event of Default, such license shall be deemed automatically revoked and any income, rents, issues, deposits, profits and proceeds received thereafter by the Trustor shall be delivered in kind to the Trustee.  The Trustor hereby irrevocably constitutes and appoints the Trustee its true and lawful attorney-in-fact to enforce in the Trustor’s name or in the Beneficiary’s name or otherwise all rights of the Trustor and to do any and all things necessary and proper to carry out and implement the purposes hereof, which Trustee may exercise at any time after the occurrence and during the continuance of an Event of Default.

 

Section 2.4   Trustor’s Payment Duties.  Nothing contained herein will limit the Trustor’s duty to make payment on the Obligations when the Proceeds received pursuant to this Article 2 are insufficient to pay the costs, interest, principal and any other portion of the Obligations then owing, and the receipt of Proceeds pursuant hereto will be in addition to all other security now or hereafter existing to secure payment of the Obligations.

 

Section 2.5   Liability of Trustee and Beneficiary.  Neither the Trustee nor the Beneficiary has any obligation to enforce collection of any of the Proceeds or other amounts described in this Article 2, and the Trustee and the Beneficiary are hereby released from all liability and responsibility in connection therewith, except the responsibility to account to Trustor for Proceeds and other amounts actually received.

 

Section 2.6   Indemnification.  The Trustor agrees to indemnify and save and hold harmless the Trustee, the Beneficiary, their respective successors and affiliates and their respective directors, partners, managers, principals, officers, employees, agents, consultants and representatives (collectively, the “Indemnified Parties”) from and against all claims, actions, liabilities, losses, judgments, reasonable attorneys’ fees, costs and expenses and other charges of any description whatsoever (all of which are hereafter referred to in this Section 2.6 as “Claims”) 

 

 

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made against or sustained or incurred by any such Indemnified Party as a consequence of the assertion, either before or after the payment in full of the Obligations, that the Beneficiary received Minerals, Proceeds or rents, profits, income or proceeds of Collateral pursuant to this instrument, except to the extent any Claims arise out of any Indemnified Party’s gross negligence or willful misconduct.  The Indemnified Parties have the right to employ attorneys and to defend against any Claims and unless furnished with satisfactory indemnity, after notice to the Trustor, the Indemnified Parties will have the right to pay or compromise and adjust all Claims in its sole reasonable discretion. The Trustor shall indemnify and pay to the Indemnified Parties all amounts paid by any Indemnified Party in compromise or adjustment of any of the Claims or amounts adjudged against any Indemnified Party in respect of any of the Claims.  The liabilities of Trustor as set forth in this Section 2.6 will constitute Obligations and will survive the termination of this instrument.

 

ARTICLE 3 – TRUSTOR’S REPRESENTATIONS AND WARRANTIES

 

The Trustor hereby represents and warrants as follows (except as set forth in, and subject to the disclosures in, the Loan Agreement and the Schedules thereto):

 

Section 3.1   Due Organization, Good Standing and Authority.  The Trustor is duly organized, validly existing and in good standing under the laws of Delaware and is qualified to do business in Nevada and every other jurisdiction where necessary in light of its business and properties.  The Trustor has full power, authority and legal right (i) to own or lease its assets and properties (including the Lands owned or leased by the Trustor) and to conduct its business as now being conducted, and (ii) to enter into its obligations under this Deed of Trust and each other agreement, document and instrument executed or to be executed by it pursuant hereto or in connection herewith and to perform the terms hereof and thereof applicable to it.

 

Section 3.2   Authorization and No Conflict.  The execution and delivery by the Trustor of this Deed of Trust, and the performance of all transactions contemplated hereby and the fulfillment of and compliance with the terms of this Deed of Trust, have been duly authorized by all necessary action, corporate, partnership or otherwise, and do not and will not (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, (iii) give any third party any right to accelerate any obligation under, (iv) result in a violation of, or (v) require any authorization, consent, approval, exemption or other action by or notice to any court or administrative or governmental body pursuant to (A) the operating agreement or other constating documents of the Trustor, (B) any law, statute or rule, or (C) any agreement, instrument, order, judgment or decree to which the Trustor is subject or by which any of its properties are bound.

 

Section 3.3   No Approvals.  No authorization or approval or other action by, and no notice to or filing with, any governmental authority, regulatory body or other person or entity is required for the due execution, delivery and performance by the Trustor under this Deed of Trust.

 

Section 3.4   Validity.  This Deed of Trust is, and when delivered hereunder will be, the legal, valid and binding obligation of the Trustor enforceable against the Trustor in accordance with its terms, subject to applicable bankruptcy, reorganization, insolvency or similar laws 

 

 

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affecting the enforcement of creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in equity or law).

 

Section 3.5   Name and Location of Office.  The Trustor has not used any corporate name or done business under any name other than its own, and the Trustor further covenants and agrees that it will not do so, nor will it change its state of organization outside of the State of Delaware or relocate its chief executive office outside of the State of Nevada without at least thirty days’ prior notice to the Trustee and the Beneficiary.

 

Section 3.6   Litigation.  Except as disclosed to the Beneficiary in Schedule 6.1(f) to the Loan Agreement, there is no action, suit or proceeding at law or in equity, by or before any governmental or regulatory authority, court, arbitral tribunal or other body now pending (or, to the knowledge of the Trustor, threatened) against or affecting the Trustor, the Lands or any of the other Collateral which may materially adversely impact the Trustor or its business or the Lands or otherwise affect the legality, validity or enforceability of this Deed of Trust.

 

Section 3.7   Title.

 

(i)           Exhibit A attached hereto and incorporated herein accurately and completely sets forth and describes all real property owned, held or controlled by the Trustor, including all fee interests, patented mining claims, unpatented mining claims, unpatented millsite claims, leasehold interests, option rights and other real property interests, and such Exhibit A is in a form that, when appended to this instrument, is adequate and sufficient for acceptance by Mineral County, Nevada for the recording of real property instruments.

 

(ii)           The Trustor is the exclusive owner or lessee of, and has good title to an undivided one hundred percent (100%) of unpatented mining claims and millsite claims set forth on Exhibit A to this Deed of Trust, which title is, subject to Permitted Liens and the matters disclosed on Schedule 6.1(j) to the Loan Agreement, superior and paramount to any adverse claim or right of title which may be asserted, subject only to the paramount title of the United States as to any unpatented mining claims and millsite claims and the rights, if any, of third parties to the lands within such unpatented mining claims pursuant to the Multiple Mineral Development Act of 1954 and the Surface Resources and Multiple Use Act of 1955.  With respect to any lease or option to purchase identified on Exhibit A, except as disclosed in writing to Beneficiary in Schedule 6.1(j) to the Loan Agreement, each such lease creates a valid and subsisting leasehold estate in the lands described in such lease and each option creates a valid right to purchase the lands described in such option, each such lease and option is in full force and effect, no event has occurred that, with the giving of notice or the passage of time, would constitute a default under such lease or option and all rent, royalties or other payments due under such lease or option have been timely paid;

 

(iii)           With respect to the unpatented mining claims and unpatented millsite claims listed on the attached Exhibit A, except as disclosed to Beneficiary in Schedule 6.1(j) to the Loan Agreement: (A) subject to the paramount title of the United States, the Trustor is in exclusive possession thereof, free and clear of all Liens, claims, 

 

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encumbrances or other burdens on production, other than Permitted Liens; (B) all such claims were located, staked, filed and recorded on available public domain land in compliance with all applicable state and federal laws and regulations; (C) assessment work, intended in good faith to satisfy the requirements of state and federal laws and regulations and generally regarded in the mining industry as sufficient, for all assessment years up to and including the assessment year ending September 1, 1992, was timely and properly performed on or for the benefit of the claims, and affidavits evidencing such work were timely recorded; (D) claim rental and maintenance fees required to be paid under federal law in lieu of the performance of assessment work, in order to maintain the claims commencing with the assessment year ending on September 1, 1993 and through the assessment year ending on September 1, 2011, have been timely and properly paid, and affidavits or other notices evidencing such payments and required under federal or state laws or regulation have been timely and properly filed and recorded; (E) all filings with the BLM with respect to such claims which are required under FLPMA have been timely and properly made; and (F) there are no actions or administrative or other proceedings pending or to the best of the Trustor’s knowledge threatened against or affecting any of the claims.  Nothing herein shall be deemed a representation that any unpatented mining claim contains a discovery of valuable minerals or that any unpatented millsite claim is located on non-mineral land;

 

(iv)           The Trustor has good and marketable title to the Improvements and the Personal Property.  The Lands, the Improvements located thereon and the Personal Property constitute all of the properties and assets, tangible or intangible, real or personal, which are used in the conduct of the business of the Trustor, as such business is presently being conducted and as pertains to the Lands.  No other material properties or assets, whether or not owned by the Trustor, are required for the operation of such business or the Lands as presently being operated or developed.  All such properties and assets are owned free and clear of all clouds to title and of all Liens, except Permitted Liens or Liens permitted under the provisions of this Deed of Trust.  All Improvements and Personal Property owned or held by the Trustor are in a state of repair adequate for normal operations and are in all material respects in good working order and condition for the conduct of the business of the Trustor as such business is presently being conducted.

 

Section 3.8   Leases and Royalties.  Except as disclosed in writing to Beneficiary in Schedule 6.1(j) to the Loan Agreement, the Leases are in full force and effect, in good standing and free from breach or default, and except as disclosed in writing to Beneficiary in Schedule 6.1(j) to the Loan Agreement, the Trustor is not aware of, and has not received notice of, any act or omission, which would constitute a material breach or default under the Lease or which would otherwise allow the lessor to terminate any Lease.  Trustor has good right and full power and authority to assign, convey, grant and to transfer the interests in the Leases, without consent of the lessor (or Trustor has obtained sufficient consent from the lessor).  Except as disclosed in writing to Beneficiary in Schedule 6.1(j) to the Loan Agreement, there are no Royalties (as defined below) burdening or otherwise associated with such Lands.  For purposes hereof, “Royalties” shall mean any amount payable as a share of the product or profit from the Lands or any Minerals produced therefrom and includes without limitation, production payments, net 

 

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profits interests, net smelter return royalties, landowner’s royalties, minimum royalties, overriding royalties and royalty bonuses.

 

Section 3.9   Transportation, Utilities and Water Supply.  All utility services, means of transportation, ingress and egress roadways, easements, servitudes, rights of passage, facilities, water rights and other materials necessary for the operation of and access to the Lands (including, without limitation, gas, electrical, water supply and sewage services and facilities) are available on commercially reasonable terms in compliance with all applicable legal requirements, and the Trustor is not aware of any information that would lead it to believe that any of the foregoing will not be available in the future.

 

Section 3.10   Payment of Taxes.  The Trustor has filed or caused to be filed all federal, state and local tax returns which to the knowledge of the Trustor are required to be filed and has paid or caused to be paid all taxes as shown on such returns or any assessment received by the Trustor to the extent that such taxes or assessments have become due, except such as may be diligently contested in good faith and by appropriate proceedings or as to which a bona fide dispute may exist and for which adequate reserves are being maintained.

 

Section 3.11   Compliance with Laws.  With respect to the Lands and operations thereon, the Trustor has complied in all material respects with all applicable local, state and federal laws, including Environmental Laws (as defined in the Loan Agreement), and regulations relating to the operation of the Lands, and the Trustor is not aware of any investigation (other than a routine inspection) of the Trustor or the Lands by any local, state or federal agency with respect to enforcement of such laws and regulations.  The existing and planned use of the Properties complies or will comply with all applicable legal requirements, including but not limited to applicable regulations and restrictive covenants affecting the Lands, as well as all environmental, ecological, landmark and other applicable laws and regulations; and all requirements for such use have been satisfied to the extent necessary for the current operations involving the Lands.  No release, emission or discharge into the environment of hazardous substances, as defined under any Environmental Law, has occurred or is presently occurring or will occur in operating the Properties in its intended form in excess of federally or state permitted releases or reportable quantities, or other concentrations, standards or limitations under the foregoing laws or under any other federal, state or local laws, regulations or governmental approvals in connection with the construction, operation, ore treatment, heap leaching, fuel supply, power generation and transmission or waste disposal, or any other operations or processes relating to the Properties, other than as allowed by or in compliance with applicable federal, state and local laws.  The Lands and the Trustor’s use and proposed use thereof are not and will not be in violation of any environmental, occupational safety and health or other applicable law now in effect, the effect of which violation, in any case or in the aggregate, would materially adversely affect the Lands or the Trustor’s use thereof, or which, in any case or in the aggregate, would impose a material liability on the Trustee or the Beneficiary or jeopardize the interest of the Trustee or the Beneficiary in the Collateral.  The Trustor has no knowledge of any past or existing violations of any such laws, ordinances or regulations issued by any governmental authority.

 

Section 3.12   Permits Affecting Properties.  The Trustor has obtained all licenses, operating bonds, permits, authorizations and approvals from all governments, governmental commissions, boards and other agencies required in respect of its present use of and operations on the Lands.

 

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ARTICLE 4 – COVENANTS

 

Section 4.1   Affirmative Covenants.  The Trustor covenants and agrees that so long as any of the Obligations secured hereby remain unpaid or outstanding (except as specifically set forth in the Loan Agreement):

 

(a)           Due Payment.  The Trustor will promptly pay when due, or within any applicable grace periods with respect thereto, any and all amounts for which it is obligated under the terms of the Loan Agreement, this Deed of Trust and each other Loan Document and will comply with all of the terms and provisions thereof and hereof;

 

(b)           Perfection; Maintenance of Liens.  The Trustor shall promptly, at the Trustor’s own expense and insofar as not contrary to applicable law, execute such documents and provide such authorizations as Beneficiary may request so that Beneficiary may file and refile in such offices, at such times and as often as may be necessary, any instrument as may be necessary to create, perfect, maintain and preserve the lien and security interest intended to be created hereby and the rights and remedies hereunder; shall promptly furnish to the Trustee evidence satisfactory to the Trustee of all such filings and refilings; and otherwise shall do all things necessary or expedient to be done to effectively create, perfect, maintain and preserve the liens and security interests intended to be created hereby as a valid lien of first priority on real property and fixtures and a perfected security interest in personal property and fixtures, subject to Permitted Liens.  The Trustor hereby authorizes the Trustee and the Beneficiary to file this Deed of Trust and one or more financing or continuation statements, and amendments thereto, relative to any or all of the Collateral;

 

(c)           Maintenance of Lands.  The Trustor will (i) cause each of the Water Rights and Access Rights owned, held or hereafter acquired by or for the Trustor and necessary or appropriate to the operation of a mine or mines upon the Lands to be kept in full force and effect by the payment of whatever sums may become payable and by the fulfillment of whatever other obligations, and the performance of whatever other acts may be required to the end that forfeiture or termination of each such interest shall be prevented unless the termination, forfeiture or other relinquishment of the interest is authorized by any operating plan or plan of operations then in effect thereunder, (ii) conduct all drilling, mining, exploratory work and related operations and activities in accordance with applicable federal, state and local laws and good and minerlike practice, (iii) maintain the Trustor as the sole owner of, and retain their exclusive possession of, all mining and millsite claims, free and clear of all Liens, subject only to the paramount title of the United States and Permitted Liens, (iv) timely pay all required federal claim maintenance fees, and timely record and file in the appropriate county and federal offices adequate affidavits and notices of timely payment of such fees, and amend, relocate, and locate new mining claims with respect to those unpatented mining claims as reasonably necessary to protect the Trustor’s and the Trustee’s interest in the Collateral, (v) timely make all payments and perform all obligations to prevent the forfeiture or termination of any portion of the Lands, (vi) permit the Trustee and the Beneficiary, through their employees, representatives and agents, to enter upon the Lands at any time, subject to appropriate safety procedures, for the purpose of 

 

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investigating and inspecting the condition and operation of the Collateral, and do all other things necessary or proper to enable the Trustee and the Beneficiary to exercise this right upon reasonable notice at such times as the Trustee or the Beneficiary may reasonably request, and (vii) do all other things necessary to preserve and maintain the right, title and interest of the Trustee and the Beneficiary in the Collateral.  The Trustor shall not abandon all or any portion of the Lands that is producing or capable of commercial production or forfeit, surrender or release any lease, sublease, operating agreement or other agreement or instrument comprising or affecting the Collateral;

 

(d)           Maintenance of Unpatented Claims.  To the extent not otherwise addressed herein, the Trustor covenants and agrees to timely pay all claim maintenance fees, to timely make all filings and recordings, including affidavits of payment, and to otherwise timely take all other necessary actions and pay such amounts relating to the preservation, maintenance, continuance and validity of unpatented mining claims and unpatented millsite claims as may be required by any federal, state or local governmental authority, including payment of claim maintenance fees to the U.S. Bureau of Land Management on or before July 15th of each year.  The Trustor further covenants and agrees to provide the Beneficiary, on or before August 1 of each year, written notice and evidence of the payment of such claim maintenance fees for such unpatented claims.  In the event that the Beneficiary has not received the notice and evidence described in the preceding sentence by August 1, the Trustee or the Beneficiary may, on behalf of the Trustor, make and pay any claim maintenance fees, in which event the Trustor shall promptly reimburse the Trustee and the Beneficiary for any such fees, with interest at the rate set forth in the Loan Agreement, in addition to any costs and expenses incurred in making such payments, and all such amounts shall be Obligations hereunder;

 

(e)           Maintenance of Collateral.  The Trustor will keep all Improvements, Personal Property, inventory and fixtures of every kind now or hereafter included in the Collateral in good working order and condition (ordinary wear and tear excepted), and all repairs, renewals, replacements, additions, substitutions and improvements needful to such end shall be promptly made. The Trustor will comply fully with all of the terms and conditions of all leases, agreements and other instruments of title and all Access Rights and privileges necessary for the proper operation of such leases and instruments, and otherwise do all things necessary to keep Trustor’s rights and Beneficiary’s interest in the Collateral unimpaired;

 

(f)           Compliance with Laws and Permits.  The Trustor will (i) comply with all lawful rulings and regulations of each regulatory authority having jurisdiction over the Trustor or the Lands; (ii) conduct any and all operations and activities on the Lands in compliance with applicable federal, state and local laws, rules and regulations and with all Permits; (iii) reclaim the Lands in accordance with applicable federal, state and local laws, rules and regulations and all Permits; and (iv) obtain and maintain in full force and effect all Permits necessary or appropriate for the use or operation of the Collateral or activities on the Lands, in each case as currently conducted;

 

(g)           Payment of Obligations.  The Trustor will pay when due all liabilities and obligations of any nature, including all liabilities and obligations for labor, material, equipment and contracted services, incurred in or arising from the administration, operation or use of the Lands and the other Collateral;

 

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(h)           Protection of Collateral.  The Trustor will protect every part of the Collateral from removal, destruction and damage, and will protect same from the doing or suffering to be done of any act, other than the use of the Collateral as hereby contemplated, whereby the value of the Collateral may be lessened;

 

(i)           Insurance.  The Trustor will carry (i) workmen’s compensation insurance covering persons who are employed by or for the benefit of the Properties in compliance with applicable laws, and (ii) other insurance as required by the Loan Documents;

 

(j)           Further Assurances.  The Trustor shall execute, acknowledge and deliver to the Trustee and the Beneficiary all and any such other and further instruments, documents and certificates and do and perform such other acts as in the opinion of the Trustee or the Beneficiary may be necessary or desirable to implement, effect and maintain the intent of this Deed of Trust, upon the reasonable request of the Trustee or the Beneficiary, and at the Trustor’s expense;

 

(k)           Defend Title.  The Trustor warrants and shall forever defend the Collateral against every person whomsoever lawfully claiming the same or any part thereof, and the Trustor shall maintain and preserve the lien and security interest herein created until this instrument has been terminated and released as provided herein.  If the title or the right of the Trustor or the Trustee or the Beneficiary to the Lands or any other Collateral or any part thereof shall be challenged or attacked, either directly or indirectly, or if any legal proceedings are commenced against the Trustor or all or any portion of the Lands, the Trustor shall promptly give written notice thereof to the Trustee and, at the Trustor’s own expense, shall proceed diligently to defend against any such attack or proceedings, and the Trustee and the Beneficiary may take such independent action in connection therewith as either of them may, in its reasonable discretion, deem advisable to protect its interest in the Collateral, and all costs, expenses and reasonable attorneys’ fees incurred by the Trustee or the Beneficiary in connection therewith shall be a demand obligation owing by the Trustor, and shall bear interest at the rate specified in the Loan Agreement from the date such expenses are incurred until paid, and shall be part of the Obligations;

 

(l)           Change in General Mining Law.  In the event of the repeal or modification of the current General Mining Law of 1872 during the term of this Deed of Trust, such that the interest of the Trustor in those lands which are material to the exploration, development or operation of the Lands is affected, modified or transformed, the Trustor will use its best efforts to retain its interest in those lands and will consult with the Trustee and the Beneficiary to determine how best to preserve the interest of the Trustor and the interest of the Trustee and the Beneficiary in the affected Collateral, and the Trustor shall take no action, which in the reasonable opinion of the Trustee or the Beneficiary or their counsel could adversely affect or impair their interest in the Collateral or under this Deed of Trust;

 

(m)           Information.  The Trustor shall promptly furnish to the Trustee and the Beneficiary such information concerning the Trustor, the Trustor’s business affairs and financial condition, the Collateral and the operations and financial condition of the Trustor, as the Trustee or the Beneficiary may reasonably request; and

 

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(n)           Access.  The Trustor shall keep proper books, records and accounts in which complete and correct entries shall be made of the Trustor’s transactions in accordance with generally accepted accounting principles, and shall keep the records concerning the accounts and contract rights included in the Collateral at the Trustor’s place of business, and the Trustee and the Beneficiary shall have the right to inspect such records, and the Trustor shall furnish copies upon reasonable request and upon reasonable notice in accordance with the Loan Agreement.

 

Section 4.2   Negative Covenants.  The Trustor covenants and agrees that, so long as any of the Obligations secured hereby remains unpaid or outstanding, the Trustor shall not, either directly or indirectly:

 

(a)           No Disposition of Assets.  Except as permitted under the Loan Agreement, sell, transfer, assign, convey or otherwise dispose of all or any part of the Collateral;

 

(b)           No Debt.  Except as permitted under the Loan Agreement, incur, create, issue, assume or permit any borrowing or indebtedness to exist or incur, create or enter into any guaranty of any obligation of any other person or entity;

 

(c)           No Liens.  Except as permitted under the Loan Agreement, incur, create, grant, assume, allow or suffer to exist any Lien on all or any part of the Lands or any other Collateral, except Permitted Liens; or

 

(d)           Changes in Business.  Except as permitted under the Loan Agreement, liquidate or dissolve, or enter into any consolidation, merger, amalgamation, or sale or enter into any partnership, joint venture or other combination, where such transaction involves a contribution by the Trustor of all or a significant portion of the Collateral, or sell, lease or dispose of its business or the assets of the Trustor.

 

ARTICLE 5 – DEFAULT

 

The occurrence of any one or more of the following events in Section 5.1(a) through Section 5.1(f) shall constitute an “Event of Default”:

 

Section 5.1   Events of Default.  The term “Event of Default” shall have the meaning given thereto in the Loan Agreement and each other Loan Document, but shall also include the occurrence or the existence of any of the following conditions:

 

(a)           The failure by the Trustor to keep, punctually perform, or observe any of the covenants, agreements, obligations or prohibitions contained herein, in the Loan Agreement, in any Loan Document, in any other written instrument evidencing any of the Obligations or in any other agreement with the Trustee or the Beneficiary (whether now existing or entered into hereafter), and such failure remains unremedied for a period of five Business Days; or

 

(b)           This Deed of Trust or any other collateral security granted by the Trustor with respect to the Obligations shall fail to constitute a valid and enforceable, perfected first priority security interest in or lien on any Collateral for any reason, subject to any Permitted 

 

 

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Liens, or Trustor shall so state in writing or Trustor or any other Person shall take or agree to take any action threatening the validity, perfection or priority of any such security interest; or

 

(c)           (i) The Trustor shall initiate or commence any case, proceeding or other action (A) under any existing or future bankruptcy or insolvency law, or otherwise seek to have it judged bankrupt or insolvent, or seek reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) any such case, proceeding or other action shall seek appointment of a receiver, trustee, custodian, administrator, conservator or other similar official for it or for all or any substantial part of its assets, or the Trustor shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Trustor any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of sixty (60) days; or (iii) there shall be commenced against the Trustor any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of their assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within sixty (60) days from the entry thereof; or (iv) the Trustor shall take any action in furtherance of, or indicating its consent to, approval of, authorization of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Trustor generally shall not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or

 

(d)           Any governmental authority shall condemn, seize or appropriate all or any portion of the Collateral that is material to the financial condition, business or operations of the Trustor or the Properties; or

 

(e)           The voluntary or involuntary dissolution, merger, consolidation, winding up or reorganization of Trustor or the occurrence of any action preparatory thereto.

 

(f)           The assertion (except by the owner of an encumbrance expressly excepted from the Trustor’s warranty of title herein) of any claim of priority over this instrument, by title, lien or otherwise, unless the Trustor within 30 days after such assertion either causes the assertion to be withdrawn or provides the Beneficiary with such further or additional security as the Beneficiary may require to protect the Beneficiary against all loss, damage, or expense, including attorneys’ fees, which the Beneficiary may incur in the event such assertion is upheld.

 

Section 5.2   Acceleration Upon Default.  Upon the occurrence of any Event of Default, or at any time thereafter during the continuance of an Event of Default, the Beneficiary may, at its option, by notice to the Trustor, declare all Obligations to be due and payable forthwith without any further notice, presentment or demand of any kind, all of which are hereby expressly waived.

 

Section 5.3   Possession and Operation of Property.  Upon the occurrence of any Event of Default, or at any time thereafter during the continuance of an Event of Default, and in addition to all other rights therein conferred on the Trustee or the Beneficiary, the Trustee, the Beneficiary or any person, firm or corporation designated by Beneficiary, will have the right and power, but will not be obligated, to have an audit performed, at Trustor’s expense, of the books 

 

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and records of Trustor, and to enter upon and take possession of all or any part of the Collateral, to exclude Trustor therefrom, and to hold, use, administer and manage the same to the extent that Trustor could do so.  The Trustee, the Beneficiary or any person, firm or corporation designated by the Beneficiary, may manage the Collateral, or any portion thereof, without any liability to the Trustor in connection with such management except with respect to gross negligence or willful misconduct; and the Trustee, the Beneficiary or any person, firm or corporation designated by the Beneficiary will have the right to collect, receive and receipt for all Products  produced and sold from the Royalty Interests, and to exercise every power, right and privilege of the Trustor with respect to the Collateral.  Providing there has been no foreclosure sale, when and if the expenses of the management of the Collateral have been paid and the Obligations paid in full, the remaining Collateral shall be returned to the Trustor.

 

Section 5.4   Ancillary Rights.  Upon the occurrence of an Event of Default, or at any time thereafter during the continuance of an Event of Default, and in addition to all other rights of the Beneficiary hereunder, the Beneficiary may, without notice, demand or declaration of default, all of which are hereby expressly waived by the Trustor, proceed by a suit or suits in equity or at law (i) for the seizure and sale of the Collateral or any part thereof, (ii) for the specific performance of any covenant or agreement herein contained or in aid of the execution of any power herein granted, (iii) for the foreclosure or sale of the Collateral or any part thereof under the judgment or decree of any court of competent jurisdiction, (iv) without regard to the solvency or insolvency of any person, and without regard to the value of the Collateral, and without notice to Trustor (notice being hereby expressly waived), for the ex parte appointment of a receiver to serve without bond pending any foreclosure or sale hereunder, or (v) for the enforcement of any other appropriate legal or equitable remedy.

 

Section 5.5   Availability of Rights and Remedies; Cumulative Rights and Remedies.  Upon the occurrence of an Event of Default, or at any time thereafter during the continuance of an Event of Default, all of the rights and remedies provided to the Trustee or the Beneficiary in this Deed of Trust and each other collateral security documents shall immediately become available to the Trustee and the Beneficiary, and the Trustee and the Beneficiary shall have all other rights and remedies available at law or in equity.  All rights and remedies of the Trustee and the Beneficiary set out in this Deed of Trust, each other collateral security document and as otherwise available are cumulative, and no right or remedy contained herein or therein is intended to be exclusive; each such right and remedy is in addition to every other right and remedy contained in this Deed of Trust, each other collateral security document or in any existing or future agreement or now or in the future existing at law, in equity, by statute or otherwise.  Every right, power and remedy given by this Deed of Trust to the Trustee or the Beneficiary or to which either of them may be otherwise entitled, may be exercised concurrently or independently, from time to time and as often as may be deemed expedient by the Trustee or the Beneficiary, and either of them may pursue inconsistent remedies.

 

ARTICLE 6 – BENEFICIARY’S RIGHTS AS TO REALTY COLLATERAL UPON DEFAULT

 

Section 6.1   Deed of Trust or Mortgage.  The Beneficiary may elect to treat this instrument as either a deed of trust or as a mortgage, but not both.  Upon the occurrence of an Event of Default, or at any time thereafter, the Beneficiary or the Trustee may declare all sums 

 

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secured hereby immediately due and payable either by commencing an action to foreclose this Deed of Trust as a mortgage, or by the delivery to the Trustee of a written declaration of default and demand for sale and of written notice of default and of election to cause the Collateral to be sold, which notice the Trustee shall cause to be duly filed for record in case of foreclosure by exercise of the power of sale herein.  The decision by the Beneficiary to pursue its remedies and foreclose either by acting under the Deed of Trust as a deed of trust by exercise of the power of sale (and as otherwise set forth herein) or by acting under the Deed of Trust as a mortgage by exercise of a judicial foreclosure (and as otherwise set forth herein) may be made by the Beneficiary at the Beneficiary’s sole option and discretion.

 

Section 6.2   Judicial Foreclosure.  Upon the occurrence of an Event of Default, or at any time thereafter, in lieu of the exercise of the non-judicial power of sale hereafter given, the Beneficiary may, subject to any mandatory requirement of applicable law, proceed by suit to foreclose its lien hereunder and to sell or have sold the Collateral or any part thereof at one or more sales, as an entirety or in parcels, at such place or places and otherwise, in such manner and upon such notice as may be required by law, or, in the absence of any such requirement, as the Beneficiary may deem appropriate, and the Beneficiary shall thereafter make or cause to be made a conveyance to the purchaser or purchasers thereof.  The Beneficiary may postpone the sale of the real property included in the Collateral or any part thereof by public announcement at the time and place of such sale, and from time to time thereafter may further postpone such sale by public announcement made at the time of sale fixed by the preceding postponement.  Sale of a part of the real property included in the Collateral will not exhaust the power of sale, and sales may be made from time to time until all such property is sold or the Obligations are paid in full.

 

Section 6.3   Non-Judicial Foreclosure; Power of Sale.  Upon the occurrence of an Event of Default, or at any time thereafter, the Trustee is hereby authorized and empowered, and it shall be its duty, upon request of the Beneficiary, and to the extent permitted by applicable law, to exercise the power of sale contained herein and sell any part of the Collateral at one or more sales, as an entirety or in parcels, at such place or places and otherwise in such manner and upon such notice as may be required by applicable law, or in the absence of any such requirement, as Trustee and/or Beneficiary may deem appropriate, and to make conveyance to the purchaser or purchasers thereof.  Any sale shall be made to the highest bidder for cash at the door of the county courthouse of, or in such other place as may be required or permitted by applicable law in, the county in the state where the Collateral or any part thereof is situated; provided that and if the  Collateral lies in more than one county, such part of the Collateral may be sold at the courthouse door of any one of such counties, and the notice so posted shall designate in which county such property shall be sold. Any such sale shall be made at public outcry, on the day of any month, during the hours of such day and after such written notices thereof have been publicly posted in such places and for such time periods and after all persons entitled to notice thereof have been sent such notice, all as required by applicable law in effect at the time of such sale.  The affidavit of any person having knowledge of the facts to the effect that such a service was completed shall be prima facie evidence of the fact of service.  The Trustor agrees that no notice of any sale, other than as required by applicable law, need be given by the Trustor, the Beneficiary or any other person.  The Trustor hereby designates as its address for the purposes of such notice the address set out on page one hereof; and agrees that such address shall be changed only by depositing notice of such change enclosed in a postpaid wrapper in a post office or official depository under the care and custody of the United States Postal Service, certified mail, 

 

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postage prepaid, return receipt requested, addressed to the Beneficiary or other holder of the Obligations at the address for the Beneficiary set out herein (or to such other address as the Beneficiary or other holder of the Obligations may have designated by notice given as above provided to the Trustor and such other debtors).  Any such notice or change of address of the Trustor or other debtors or of the Beneficiary or of other holder of the Obligations shall be effective upon receipt.  The Trustor authorizes and empowers the Trustee to sell the Collateral in lots or parcels or in its entirety as the Trustee shall deem expedient; and to execute and deliver to the purchaser or purchasers thereof good and sufficient deeds of conveyance thereto by fee simple title, with evidence of general warranty by the Trustee, and the title of such purchaser or purchasers when so made by the Trustee, the Trustor binds itself to warrant and forever defend, subject to Permitted Liens and the paramount ownership of the United States as to any unpatented mining or millsite claims.  Where portions of the Collateral lie in different counties, sales in such counties may be conducted in any order that the Trustee may deem expedient; and one or more such sales may be conducted in the same month, or in successive or different months as the Trustee may deem expedient.

 

ARTICLE 7 – BENEFICIARY’S RIGHTS AS TO PERSONALTY AND FIXTURE COLLATERAL UPON DEFAULT

 

Section 7.1   Personalty Collateral.  Upon the occurrence of an Event of Default, or at any time thereafter during the continuance of an Event of Default, the Beneficiary may, without notice to the Trustor, exercise its rights to declare all of the Obligations to be immediately due and payable, in which case the Beneficiary will have all rights and remedies granted by law, and particularly by the UCC, including, but not limited to, the right to take possession of any and all Collateral constituting personal property (the “Personalty Collateral”), and for this purpose the Beneficiary may enter upon any premises on which any or all of the Personalty Collateral is situated and take possession of and operate the Personalty Collateral or remove it therefrom.  The Beneficiary may require the Trustor to assemble the Personalty Collateral and make it available to the Beneficiary or the Trustee at a place to be designated by Beneficiary which is reasonably convenient to all parties.  Unless the Personalty Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, the Beneficiary will give the Trustor reasonable notice of the time and place of any public sale or of the time after which any private sale or other disposition of the Personalty Collateral is to be made.  This requirement of sending reasonable notice will be met if the notice is mailed, postage prepaid, to the Trustor at the address designated above at least ten (10) days before the time of the sale or disposition.

 

Section 7.2   Sale with Realty Collateral.  In the event of foreclosure, whether judicial or non-judicial, at the Beneficiary’s option it may proceed under the Uniform Commercial Code as to the Personalty Collateral or it may proceed as to both Personalty Collateral and Collateral constituting real property in accordance with its rights and remedies in respect of the Collateral constituting real property.

 

Section 7.3   Private Sale.  If the Beneficiary in good faith believes that any state or federal law prohibits or restricts the customary manner of sale or distribution of any of the Personalty Collateral, or if the Beneficiary determines that there is any other restraint or restriction limiting the timely sale or distribution of any such property in accordance with the 

 

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customary manner of sale or distribution, the Beneficiary may sell or may cause the Trustee to sell such property privately or in any other manner it deems advisable at such price or prices as it determines in its sole discretion and without any liability whatsoever to the Trustor in connection therewith.  The Trustor recognizes and agrees that such prohibition or restriction may cause such property to have less value than it otherwise would have and that, consequently, such sale or disposition by the Beneficiary may result in a lower sales price than if the sale were otherwise held.

 

ARTICLE 8 – OTHER PROVISIONS CONCERNING FORECLOSURE

 

Section 8.1   Possession and Delivery of Collateral.  It shall not be necessary for the Beneficiary or the Trustee to have physically present or constructively in its possession any of the Collateral at any foreclosure sale, and the Trustor shall deliver to the purchasers at such sale on the date of sale the Collateral purchased by such purchasers at such sale, and if it should be impossible or impracticable for any of such purchasers to take actual delivery of the Collateral, then the title and right of possession to the Collateral shall pass to the purchaser at such sale as completely as if the same had been actually present and delivered.

 

Section 8.2   Beneficiary as Purchaser.  The Beneficiary will have the right to become the purchaser at any foreclosure sale, and it will have the right to credit upon the amount of the bid the amount payable to it out of the net proceeds of sale.  Upon compliance with the terms of any sale, Beneficiary may hold, retain, possess and dispose of such property in its own absolute right without further accountability.

 

Section 8.3   Recitals Conclusive; Warranty Deed; Ratification.  Recitals contained in any conveyance to any purchaser at any sale made hereunder will conclusively establish the truth and accuracy of the matters therein stated, including, without limiting the generality of the foregoing, nonpayment of the unpaid principal sum of, and the interest accrued on, the written instruments constituting part or all of the Obligations after the same have become due and payable, nonpayment of any other of the Obligations or advertisement and conduct of the sale in the manner provided herein, and appointment of any successor Trustee hereunder.  The Trustor ratifies and confirms all legal acts that Beneficiary and/or Trustee may do in carrying out the provisions of this instrument.

 

Section 8.4   Effect of Sale.  Any sale or sales of the Collateral or any part thereof will operate to divest all right, title, interest, claim and demand whatsoever, either at law or in equity, of the Trustor in and to the premises and the property sold, and will be a perpetual bar, both at law and in equity, against the Trustor, Trustor’s successors or assigns and against any and all persons claiming or who shall thereafter claim all or any of the property sold from, through or under the Trustor, or Trustor’s successors or assigns.  Subject to applicable rights of redemption under applicable law, the purchaser or purchasers at the foreclosure sale will receive immediate possession of the property purchased; and if the Trustor retains possession of the Collateral, or any part thereof, subsequent to sale, the Trustor will be considered a tenant at sufferance of the purchaser or purchasers, and if the Trustor remains in such possession after demand of the purchaser or purchasers to remove, the Trustor will be guilty of forcible detainer and will be subject to eviction and removal, forcible or otherwise, with or without process of law, and without any right to damages arising out of such removal.

 

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Section 8.5   Application of Proceeds.  The proceeds of any sale of the Collateral or any part thereof will be applied as follows:

 

(a)           first, to the payment of all out of pocket expenses incurred by the Trustee and Beneficiary in connection therewith, including, without limiting the generality of the foregoing, reasonable court costs, legal fees and expenses, fees of accountants, engineers, consultants, agents or managers and expenses of any entry or taking of possession, holding, valuing, preparing for sale, advertising, selling and conveying;

 

(b)           second, to the payment of the Obligations; and

 

(c)           third, any surplus thereafter remaining to Trustor or Trustor’s successors or assigns, as their interests may be established to Beneficiary’s reasonable satisfaction.

 

Section 8.6   Deficiency.  Subject to applicable law, the Trustor will remain liable for any deficiency owing to the Beneficiary after application of the net proceeds of any foreclosure sale.

 

Section 8.7   Waiver of One-Action Rule.  The Trustor, for the Trustor and all who may claim through or under the Trustor, to the extent that the Trustor may lawfully do so under applicable law, hereby waives and agrees to forego the benefit and application of Nevada’s “one-action rule”, whether arising at common law or by statute, expressly including Nevada Revised Statute Section 40.430 et seq.

 

Section 8.8   Trustor’s Waiver of Appraisement, Marshaling, Etc.  The Trustor agrees that the Trustor will not at any time insist upon or plead or in any manner whatsoever claim the benefit of any appraisement, valuation, stay, extension or redemption law now or hereafter in force, in order to prevent or hinder the enforcement or foreclosure of this instrument, the absolute sale of the Collateral or the possession thereof by any purchaser at any sale made pursuant to this instrument or pursuant to the decree of any court of competent jurisdiction.  The Trustor, for the Trustor and all who may claim through or under the Trustor, hereby waives the benefit of all such laws and to the extent that the Trustor may lawfully do so under applicable state law, waives any and all right to have the Collateral marshaled upon any foreclosure of the lien hereof or sold in inverse order of alienation and, the Trustor agrees that the Trustor may sell the Collateral as an entirety.

 

ARTICLE 9 – MISCELLANEOUS

 

Section 9.1   Recording and Filing.  The Trustor shall pay all costs of filing, registering and recording this and every other instrument in addition or supplemental hereto and all financing statements the Beneficiary may require, in such offices and places and at such times and as often as may be, in the judgment of the Beneficiary, necessary to preserve, protect and renew the lien and security interest herein created as a first lien and prior security interest on and in the Collateral and otherwise do and perform all matters or things necessary or expedient to be done or observed by reason of any law or regulation of any State or of the United States or of any other competent authority for the purpose of effectively creating, maintaining and preserving the lien and security interest created herein and on the Collateral and the priority thereof.  The Trustor shall also pay the costs of obtaining reports from appropriate filing officers concerning financing statement filings in respect of any of the Collateral in which a security interest is granted herein.

 

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Section 9.2   Trustee’s and Beneficiary’s Right to Perform Trustor’s Obligations.  The Trustor agrees that, if Trustor fails to perform any act which Trustor is required to perform under this instrument, the Beneficiary or the Trustee or any receiver appointed hereunder may, but shall not be obligated to, perform or cause to be performed such act, and any expense incurred by the Beneficiary or the Trustee in so doing shall be a demand obligation owing by the Trustor to the Beneficiary, shall bear interest at an annual rate equal to the maximum interest rate provided in the Loan Agreement until paid and shall be a part of the Obligations, and the Beneficiary, the Trustee or any receiver shall be subrogated to all of the rights of the party receiving the benefit of such performance.  The undertaking of such performance by the Beneficiary, the Trustee or any receiver as aforesaid shall not obligate such person to continue such performance or to engage in such performance or performance of any other act in the future, shall not relieve the Trustor from the observance or performance of any covenant, warranty or agreement contained in this instrument or constitute a waiver of default hereunder and shall not affect the right of the Beneficiary to accelerate the payment of all indebtedness and other sums secured hereby or to resort to any other of its rights or remedies hereunder or under applicable law.  In the event the Beneficiary, the Trustee or any receiver appointed hereunder undertakes any such action, no such party shall have any liability to the Trustor in the absence of a showing of gross negligence or willful misconduct of such party, and in all events no party other than the acting party shall be liable to Trustor.

 

Section 9.3   Discharge of Purchaser.  Upon any sale made under the powers of sale herein granted and conferred, the receipt of Beneficiary will be sufficient discharge to the purchaser or purchasers at any sale for the purchase money, and such purchaser or purchasers and the heirs, devisees, personal representatives, successors and assigns thereof will not, after paying such purchase money and receiving such receipt of Beneficiary, be obliged to see to the application thereof or be in anywise answerable for any loss, misapplication or nonapplication thereof.

 

Section 9.4   Indebtedness of Obligations Absolute.  Nothing herein contained shall be construed as limiting the Beneficiary to the collection of any indebtedness of the Trustor to the Beneficiary only out of the income, revenue, rents, issues and profits from the Collateral or as obligating the Beneficiary to delay or withhold action upon any default which may be occasioned by failure of such income or revenue to be sufficient to retire the principal or interest when due on the indebtedness secured hereby.  It is expressly understood between the Beneficiary and the Trustor that any indebtedness of the Trustor to the Beneficiary secured hereby shall constitute an absolute, unconditional obligation of the Trustor to pay as provided herein or therein in accordance with the terms of the instrument evidencing such indebtedness in the amount therein specified at the maturity date or at the respective maturity dates of the installments thereof, whether by acceleration or otherwise.

 

Section 9.5   Defense of Claims.  The Trustee will promptly notify the Trustor and the Beneficiary in writing of the commencement of any legal proceedings affecting Beneficiary’s or Trustee’s interest in the Collateral, or any part thereof, and shall take such action, employing attorneys acceptable to the Beneficiary (acting reasonably), as may be necessary to preserve the 

 

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Trustor’s, the Trustee’s and the Beneficiary’s rights affected thereby; and should the Trustor fail or refuse to take any such action, the Trustee or the Beneficiary may take the action on behalf of and in the name of the Trustor and at the Trustor’s expense.  Moreover, the Beneficiary or the Trustee on behalf of Beneficiary may take independent action in connection therewith as they may in their discretion deem proper, and the Trustor hereby agrees to make reimbursement for all sums advanced and all expenses incurred in such actions plus interest at a rate equal to the maximum interest rate provided in the Loan Agreement.

 

Section 9.6   Termination.  If all the Obligations are irrevocably and finally paid in full, the covenants herein contained are well and truly performed, and the Loan Documents are all terminated and no longer in effect, and if the Trustor and the Beneficiary intend at such time that this instrument not secure any obligation of the Trustor thereafter arising, then the Beneficiary shall, upon the request of the Trustor and at the Trustor’s cost and expense, deliver to Trustor proper instruments executed by the Beneficiary evidencing the release of this instrument.  Until such delivery, this instrument shall remain and continue in full force and effect.  All indemnifications provided by the Trustor for the benefit of the Trustee and/or the Beneficiary shall survive any release or termination of this Deed of Trust and shall remain in full force and effect.

 

Section 9.7   Renewals, Amendments and Other Security.  Renewals, restatements, replacements and extensions of the Obligations may be given at any time, amendments may be made to the agreements with third parties relating to any part of the Obligations or the Collateral, and the Beneficiary or the Trustee may take or hold other security for the Obligations without notice to or consent of the Trustor.  The Trustee or the Beneficiary may resort first to other security or any part thereof, or first to the security herein given or any part thereof, or from time to time to either or both, even to the partial or complete abandonment of either security, and such action will not be a waiver of any rights conferred by this instrument.

 

Section 9.8   Successor Trustees.  The Trustee may resign in writing addressed to Beneficiary or be removed at any time with or without cause by an instrument in writing duly executed by Beneficiary.  In case of the resignation or removal of the Trustee, a successor Trustee may be appointed by Beneficiary by instrument of substitution complying with any applicable requirements of law, and in the absence of any such requirement, without other formality than an appointment and designation in writing.  Any appointment and designation will be full evidence of the right and authority to make the same and of all facts therein recited.  Upon the making of any appointment and designation, all the estate and title of the Trustee in all of the Collateral will vest in the named successor Trustee, and the successor will thereupon succeed to all the rights, powers, privileges, immunities and duties hereby conferred upon the Trustee.  All references herein to the Trustee will be deemed to refer to the Trustee from time to time acting hereunder.

 

Section 9.9   Limitations on Interest.  No provision of the Loan Agreement, the other Loan Documents, or other instrument constituting or evidencing any of the Obligations or any other agreement between the parties shall require the payment or permit the collection of interest in excess of the maximum non-usurious rate which Trustor may agree to pay under applicable laws.  The intention of the parties being to conform strictly to applicable usury laws now in force, the interest on the principal amount of the Loan Agreement and the interest on other 

 

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amounts due under and/or secured by this instrument shall be held to be subject to reduction to the amount allowed under said applicable usury laws as now or hereafter construed by the courts having jurisdiction, and any excess interest paid shall be credited to Trustor.

 

Section 9.10   Effect of Instrument.  This instrument shall be deemed and construed to be, and may be enforced as, an assignment, chattel mortgage or security agreement, common law pledge, contract, deed of trust, financing statement, real estate mortgage, and as any one or more of them if appropriate under applicable state law.  This instrument shall be effective as a financing statement covering minerals, As-Extracted Collateral or the like and accounts subject to Article 9 of the Uniform Commercial Code as enacted in the appropriate jurisdiction and is to be filed for record in the Office of the County Clerk or other appropriate office of each county where any part of the Collateral is situated.  A carbon, photographic, or other reproduction of this Deed of Trust or of any financing statement relating to this Deed of Trust shall be sufficient as a financing statement.

 

Section 9.11   Unenforceable or Inapplicable Provisions.  If any provision hereof or of any of the written instruments constituting part or all of the Obligations is invalid or unenforceable in any jurisdiction, whether with respect to all parties hereto or with respect to less than all of such parties, the other provisions hereof and of the written instruments will remain in full force and effect in that jurisdiction with respect to the parties as to which such provision is valid and enforceable, and the remaining provisions hereof will be liberally construed in favor of Beneficiary in order to carry out the provisions hereof.  The invalidity of any provision of this instrument in any jurisdiction will not affect the validity or enforceability of any provision in any other jurisdiction.

 

Section 9.12   Rights Cumulative; Delay or Omission No Waiver.

 

(a)           Each and every right, power and remedy given to Beneficiary herein or in any other written instrument relating to the Obligations will be cumulative and not exclusive; and each and every right, power and remedy whether specifically given herein or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by Beneficiary, and the exercise, or the beginning of the exercise, of any such right, power or remedy will not be deemed a waiver of the right to exercise, at the same time or thereafter, any other right, power or remedy.  No waiver, delay, omission, or forbearance by Beneficiary of any right, power or remedy hereunder or under applicable law on any occasion will act as, or shall be deemed to be, a bar to the exercise of any right, power or remedy on any subsequent occasion or shall otherwise exhaust or impair any such right, power or remedy or shall be deemed to waive any Event of Default or to constitute acquiescence.  Every right, power and remedy given to Trustee or Beneficiary may be exercised from time to time and as often as may be deemed expedient by Trustee or Beneficiary.

 

(b)           No failure on the part of Beneficiary to exercise, no course of dealing with respect to, and no delay on the part of Beneficiary in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power, privilege or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power, privilege or remedy.

 

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(c)           In the event that Beneficiary shall have instituted any proceeding to enforce any right, power, privilege or remedy under this Deed of Trust or any other Loan Document by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason, then and in every such case, the Trustor and Beneficiary shall be restored to its respective former positions and rights hereunder with respect to the Collateral, and all rights, remedies, privileges and powers of Beneficiary shall continue as if no such proceeding had been instituted.

 

Section 9.13   Non-Waiver.  No act, delay, forbearance, omission or course of dealing between Beneficiary and Trustor will be a waiver of any of Beneficiary’s rights or remedies hereunder or under applicable law.  No waiver, change or modification in whole or in part of this instrument or any other written instrument will be effective unless in a writing signed by Beneficiary.

 

Section 9.14   Beneficiary’s Expenses.  The Trustor agrees to pay in full all expenses and reasonable attorneys’ fees of the Beneficiary or the Trustee which may have been or may be incurred by the Beneficiary or the Trustee in connection with the collection of the Obligations and the enforcement of any of Trustor’s obligations hereunder and under any documents executed in connection with the Obligations.

 

Section 9.15   Indemnification.  In addition to any other indemnifications or similar obligations contained in this instrument or elsewhere, the Trustor hereby indemnifies, saves and holds harmless, and agrees to defend, the Beneficiary, the Trustee, their respective successors and assigns, their respective Affiliates and their respective directors, partners, managers, principals, officers, employees, agents, consultants and representatives (each, an “Indemnified Party) from, and no such Indemnified Party shall be liable for, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, fines, suits, costs, charges, claims, taxes, fees, expenses, payments or disbursements of any kind whatsoever, including attorneys’ fees and expenses (collectively “Losses”) which may at any time (including, without limitation, at any time following the payment of the Obligations) be imposed on, incurred or suffered by or asserted against any Indemnified Party in any way relating to or arising out of this Deed of Trust or any other Loan Document or any instrument contemplated by or referred to herein or therein (including exercise by the Beneficiary or the Trustee of any right, power or remedy conferred upon it by this instrument or any other instrument pertaining hereto, or from the attempt or failure of the Beneficiary or the Trustee to exercise any such right, power or remedy), or the transactions contemplated hereby or thereby, or any act or omission of the Trustor, or the ownership, management, administration, operation, use or condition of the Lands, the other Collateral or the Properties or any other property, except with respect to Losses arising entirely out of the gross negligence or willful misconduct of such Indemnified Party.  Notwithstanding any provision hereof to the contrary, the foregoing indemnity shall in all respects survive, continue and remain in full force and effect even though all Obligations, indebtedness and other sums secured hereby may be fully paid and the lien of this instrument released.

 

Section 9.16   Partial Releases.  In the event the Trustor sells for monetary consideration or otherwise any portion of the Collateral, in compliance with and as permitted by the Loan Agreement, the Beneficiary and the Trustee shall release the lien of this instrument with respect to the portion sold, at the reasonable request of the Trustor, at the Trustor’s cost and expense.  

 

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No release from the lien of this instrument of any part of the Collateral by Beneficiary shall in anywise alter, vary or diminish the force, effect or lien of this instrument on the balance or remainder of the Collateral.

 

Section 9.17   Subrogation.  This instrument is made with full substitution and subrogation of Beneficiary and Trustee in and to all covenants and warranties by others heretofore given or made in respect of the Collateral or any part thereof.

 

Section 9.18   Notice.  All notices and deliveries of information hereunder shall be deemed to have been duly given if actually delivered or mailed by registered or certified mail, postage prepaid, addressed to the parties hereto at the addresses set forth above on page 1; if by mail, then as of the date of such mailing.  Each party may, by written notice so delivered to the others, change the address to which delivery shall thereafter be made.

 

Section 9.19   Successors.  This instrument shall bind and inure to the benefit of the respective successors and assigns of the parties.

 

Section 9.20   Interpretation.

 

(a)           Article and section headings used in this instrument are intended for convenience only and shall be given no significance whatever in interpreting and construing the provisions of this instrument.

 

(b)           As used in this instrument, “Beneficiary” and “Trustee” include their respective successors and assigns.  Unless context otherwise requires, words in the singular number include the plural and in the plural number include the singular.  Words of the masculine gender include the feminine and neuter gender and words of the neuter gender may refer to any gender.

 

Section 9.21   Counterparts.  This instrument may be executed in any number of counterparts, each of which will for all purposes be deemed to be an original, and all of which are identical except that to facilitate recordation, in particular counterparts hereof, portions of Exhibit A hereto which describe properties situated in counties other than the county in which the counterpart is to be recorded have been omitted.

 

Section 9.22   Survival of Representations and Warranties.  All representations and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Deed of Trust and the advance of any amounts in connection with the Loan Agreement.

 

Section 9.23   Rights Absolute.  All rights of the Trustee and the Beneficiary and the deed of trust, pledge, assignment, charge and security interest hereunder, and all obligations of the Trustor hereunder, shall be absolute and unconditional, irrespective of:

 

(a)           any lack of validity or enforceability of any Loan Document or any other agreement or instrument relating thereto;

 

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(b)           any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from any Loan Document, including, without limitation, any increase in the Obligations;

 

(c)           any taking, exchange, release or non-perfection of any other collateral, or any taking, release, amendment or waiver of or consent to departure from any guaranty, surety or support agreement for all or any of the Obligations;

 

(d)           any manner of application of collateral or proceeds thereof, to all or any of the Obligations, or any manner of sale or other disposition of any collateral for all or any of the Obligations or any other assets of any principal, guarantor or surety;

 

(e)           any change, restructuring or termination of the corporate or company structure or existence of the Borrower, the Trustor or any affiliate thereof; and

 

(f)           any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Trustor or any affiliate of the Trustor, any other Person liable for the Obligations or a third party guarantor or grantor of a security interest.

 

Section 9.24   Joint and Several Liability. Trustor and Borrower are engaged in related businesses and are integrated to such an extent that the financial strength and flexibility of each such party has a direct, tangible and immediate impact on the success of the other parties.  Trustor will derive substantial and immediate direct and indirect benefit from the Loan Agreement, the Loan Documents, the Gold and Silver Supply Agreement and the transactions entered into in connection therewith.  Trustor expressly waives any right to revoke, terminate or suspend this Agreement and acknowledges that it entered into such Agreement in contemplation of the benefits that it would receive by the Loan Agreement, the Gold and Silver Supply Agreement and the other Loan Documents.

 

Section 9.25   Entire Agreement; Exhibits»

 

.  The Exhibits to this Deed of Trust form an integral part of this Deed of Trust and are incorporated herein by reference and expressly made a part hereof.  This Deed of Trust constitutes the entire agreement among the parties with respect to the subject matter hereof, superseding all prior statements, representations, discussions, agreements and understandings, oral or written, relating to such subject matter, including all term sheets and commitment letters.

 

Section 9.26  Acknowledgments.   The Trustor hereby acknowledges that:

 

(a)           it has been advised by its own legal counsel in the negotiation, preparation, execution and delivery of this Deed of Trust and each other Loan Document;

 

(b)           this Deed of Trust shall not be construed against any party or more favorably in favor of any party based upon which party drafted the same, it being agreed and acknowledged that all parties contributed substantially to the negotiation and preparation of this Agreement;

 

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(c)           the Beneficiary has no fiduciary relationship with or duty to the Trustor, and the relationship between the Beneficiary, on the one hand, and the Trustor, on the other hand, in connection herewith is solely that of creditor and debtor; and

 

(d)           this Deed of Trust does not create a joint venture or partnership among the parties hereto or for whom it benefits, and no joint venture, partnership or other fiduciary relationship exists, or shall be deemed to exist, among the Beneficiary and the Trustor or among the Trustee and the Trustor.

 

Section 9.27    Governing Law.  This Deed of Trust shall be governed by the laws of the State of Nevada.

 

 

 

[Signature Page to Follow]

 

 

 

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IN WITNESS WHEREOF, this Deed of Trust has been duly and validly executed and delivered by the Trustor as of the date first written above.

 

 

	 	
TRUSTOR:

BOREALIS MINING COMPANY,

a Nevada corporation

	 	 
	 	By:  ___________________________________
	 	    Name:
	 	    Title: 

 

 

ATTEST:

_____________________________

_____________________________

   (Name and Title)

 

 

 

 

 

 

[Signature Page to Borealis Deed of Trust]

  

  

  

STATE OF                       )

                                           )  ss.

COUNTY OF                    )

On March ___, 2012 personally appeared before me, a notary public, __________________, the _______________________ of Borealis Mining Company, a Nevada corporation, who acknowledged that he executed the above instrument for and on behalf of Borealis Mining Company.

 

Witness my hand and official seal.

 

My commission expires  ______________________________.

 

 

	 	 _________________________________ 

Notary Public

	 	 
	 	 

 

 

 

 

 

 

 

            

[Acknowledgment Page to Borealis Deed of Trust]

  

  

  

Exhibit A

To

Deed of Trust, Security Agreement, Assignment of Production,

Rents and Leasehold Interests, Financing Statement and Fixture Filing

Among

Borealis Mining Company, as the Trustor

Stewart Title of Nevada Holdings, Inc., as the Trustee

Waterton Global Value, L.P., as the Beneficiary

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00201-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00201-of-00352.parquet"}]]