GOLDEN PHOENIX MINERALS, INC. as Borrower THE GUARANTORS FROM TIME TO TIME PARTY HERETO as Guarantors and WATERTON GLOBAL VALUE, L.P., BY THE GENERAL PARTNER OF ITS GENERAL PARTNER, CORTLEIGH LIMITED as Lender SENIOR SECURED GOLD STREAM CREDIT AGREEMENT

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as Borrower

 

 

 

 

as Guarantors

 

 

and

 

 

 

as Lender

 

 

 

 

 

 

 

 

 

 

ARTICLE 1 INTERPRETATION		2
Section 1.1	Defined Terms	2
Section 1.2	Other Usages	17
Section 1.3	Gender and Number	17
Section 1.4	Headings, etc	18
Section 1.5	Currency	18
Section 1.6	Meaning of certain terms	18
Section 1.7	Certain Phrases, etc	18
Section 1.8	Accounting Terms	18
Section 1.9	Incorporation of Schedules	18
Section 1.10	Conflict	19
Section 1.11	Certificates	19
ARTICLE 2 LOAN		19
Section 2.1	Fees	19
Section 2.2	Advances of the Loan	19
Section 2.3	Borrowing Procedure	20
Section 2.4	Repayment	20
Section 2.5	Use of Proceeds	20
Section 2.6	Lender’s Loan Records	21
ARTICLE 3 PROCEDURE AND PAYMENTS		21
Section 3.1	Payments	21
ARTICLE 4 PREPAYMENTS		22
Section 4.1	Mandatory Prepayments	22
Section 4.2	Change of Control or Exercise of Option Agreement	22
Section 4.3	Voluntary Prepayments	23
ARTICLE 5 PAYMENTS UNDER THIS AGREEMENT		24
Section 5.1	Payments	24
ARTICLE 6 CONDITIONS OF LENDING		25
Section 6.1	Conditions Precedent for Advance of Loans	25
Section 6.2	No Waiver	31
ARTICLE 7 REPRESENTATIONS AND WARRANTIES		31
Section 7.1	Representations and Warranties	31
Section 7.2	Survival of Representations and Warranties	40

 

Article 8 COVENANTS OF THE BORROWER		40
Section 8.1	Affirmative Covenants	40
Section 8.2	Negative Covenants	45
ARTICLE 9 EVENTS OF DEFAULT		47
Section 9.1	Events of Default	47
Section 9.2	Acceleration	50
Section 9.3	Remedies	50
ARTICLE 10 MISCELLANEOUS		51
Section 10.1	Amendments, etc	51
Section 10.2	Waiver	51
Section 10.3	Evidence of Debt and Borrowing Notices	51
Section 10.4	Notices, etc	51
Section 10.5	Costs, Expenses General Indemnity and Environmental Indemnity	52
Section 10.6	Release	54
Section 10.7	Taxes and Other Taxes	55
Section 10.8	Successors and Assigns	56
Section 10.9	Right of Set-off	56
Section 10.10	Judgment Currency	57
Section 10.11	Interest on Amounts	57
Section 10.12	Governing Law and Waiver of Jury Trial	57
Section 10.13	Counterparts	58
Section 10.14	Severability	58
Section 10.15	Governing Language	58
Section 10.16	Survival of Representations and Warranties	58
Section 10.17	Entire Agreement; Schedules and Exhibits	58
Section 10.18	Credit Party Joint and Several Liability	59
Section 10.19	Further Assurances	59
Section 10.20	Acknowledgements	59
Section 10.21	Amendment and Restatement	59

TABLE OF SCHEDULES AND EXHIBITS

 

SCHEDULES
Schedule 1.1(a)	Leases, Mineral Ridge Project, Mining Properties, Mining Claims, Santa Rosa Project
Schedule 1.1(b)	Repayment Schedule
Schedule 1.1(c)	Santa Rosa Acquisition Agreement
Schedule 1.1(e)	Material Contracts
Schedule 1.1(f)	Liens
Schedule 6.1(g)	Financial Statements
Schedule 7.1(a)	Jurisdictions of Incorporation
Schedule 7.1(w)	Tax Liability
Schedule 7.1(x)	Corporate Structure
Schedule 7.1(aa)	Debt
Schedule 7.1(cc)	Litigation
Schedule 7.1(dd)(i)	Other Jurisdictions
Schedule 7.1(dd)(ii)	Authorizations
Schedule 7.1(dd)(iii)	Trademarks, Trade names, Copyrights and Patents
Schedule 7.1(dd)(iv)	Actions, Suits, Arbitrations or Proceedings
Schedule 7.1(dd)(v)	Contracts with Potential Material Adverse Effect
Schedule 7.1(dd)(vi)	Labour Agreements
Schedule 7.1(dd)(vii)	Bank Account Details
Schedule 7.1(gg)	Broker’s Fees
Schedule 7.1(jj)	Permitted Affiliate Transactions
Schedule 7.1(ll)	Project Permits
Schedule 8.1(m)	Insurance

 

 

 

 

Exhibit A	Form of Borrowing Notice
Exhibit B	Form of Compliance Certificate
Exhibit C	Form of Gold Supply Agreement
Exhibit D	Form of Omnibus Certificate
Exhibit E	Form of Solvency Certificate

 

 

 

 

 

This SENIOR SECURED GOLD STREAM CREDIT AGREEMENT is dated September 26, 2011 (the “Effective Date”) and entered into by and between GOLDEN PHOENIX MINERALS, INC., a corporation incorporated pursuant to the laws of the State of Nevada, as the borrower (the “Borrower”), each person that accedes to the terms of this Agreement from time to time by executing a Guarantee, as a guarantor (each a “Guarantor” and, collectively, the “Guarantors”) and WATERTON GLOBAL VALUE, L.P. by the general partner of its general partner, Cortleigh Limited, as the lender (the “Lender”).

 

 

 

A.           The Lender and the Borrower entered into that certain Bridge Loan Agreement dated as of August 3, 2011 (the “Existing Agreement”), whereby the Lender agreed to loan up to U.S. One Million Dollars ($1,000,000) to the Borrower on the terms and conditions set forth therein (with any and all loans outstanding as of the date of this Agreement being referred to as the “Existing Loan”).

 

B.           The Borrower desires to amend, restate, modify, extend and continue the Existing Agreement, and the Borrower desires that the Lender make available a senior secured non-revolving loan up to an aggregate amount of U.S. Fifteen Million Five Hundred Thousand Dollars ($15,500,000), in five separate tranches, upon the terms hereof and subject to the satisfaction of the conditions precedent contained herein (the “Loan”).  The Existing Loan shall remain and continue as a Loan under this Agreement.  The Borrower shall use the proceeds of the Loan as set forth herein.

 

C.           The Borrower shall use the proceeds of the Loan to acquire, maintain, develop and advance its interest in the Santa Rosa Project (defined below) located in Panama, including the payment of amounts due in order to obtain and maintain the Borrower’s interest therein.

 

D.           This Agreement and the Loan are secured by the Security Documents and Liens on the Collateral in favour of the Lender, which Liens, and the associated Security Documents, shall be ratified, continued and affirmed, and the Borrower shall provide additional security on and over the Santa Rosa Project in Panama, which the Borrower shall acquire using proceeds of the Loan.  The Borrower and the Guarantor shall remain liable for the payment and performance of all obligations hereunder and under the other Credit Documents.

 

E.           Until the Effective Date, the Existing Agreement shall remain in full force and effect in accordance with its terms and this Agreement shall have no effect.

 

F.           Effective as of the Effective Date, the Existing Agreement is amended, modified, continued and restated in its entirety as set forth in this Agreement, and this Agreement shall be in full force and effect.

 

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties hereby agree as follows:

 

 

 

 

As used in this Agreement, the following terms have the following meanings:

 

“Additional Guarantor” means any Person which becomes a Guarantor in accordance with Section 8.1(w).

 

“Advances” means advances of a Loan made by the Lender pursuant to Section 2.2 and “Advance” means any one of such advances.

 

“Affairs” means the business, affairs, operations, undertaking, property, assets, liabilities, condition (financial or otherwise), prospects, performance and results of operations of a specified Person.

 

“Affiliate” means an affiliated body corporate and, for the purposes of this Agreement, (i) one body corporate is affiliated with another body corporate if one such body corporate is the subsidiary of the other or both are subsidiaries of the same body corporate or each of them is Controlled by the same Person and (ii) if two bodies corporate are affiliated with the same body corporate at the same time, they are deemed to be affiliated with each other.

 

“Agreed Priority” means, with respect to a Security Document and a Lien made in favour of the Lender, a senior first priority Lien in favour of the Lender, meaning that such Security Document and Lien are prior in right to any other Lien in, on or to the Collateral which is purported to be covered thereby, subject only, in each case, to Permitted Liens.  For the avoidance of doubt, the Loan and the Obligations shall be secured by a first ranking perfected encumbrance over (i) all real property and personal property of the Borrower; (ii) 100% of the shares or Equity Interests of Mineral Ridge LLC owned by the Borrower; and (iii) all of Borrower’s right, title and interest in and to the Santa Rosa Subsidiary and the Santa Rosa Project, as hereafter acquired.

 

“Agreement” means this senior secured gold stream credit agreement, which amends, restates and replaces the Existing Agreement, and all schedules and instruments in amendment or confirmation of it; and the expressions “Article”, “Section”, “Subsection” and “paragraph” followed by a number mean and refer to the specified Article, Section, Subsection or paragraph of this Agreement.

 

“Applicable Law” means any international treaty, any domestic or foreign constitution or any supranational, national, regional, federal, provincial, territorial, state, municipal, tribal or local statute, law, ordinance, code, rule, regulation, order (including any consent decree or administrative order), applicable to, or any directive, guideline, policy or Authorization of any Governmental Entity having jurisdiction with respect to any specified Person, property, transaction or event or any of such Person’s Affairs, and any order, judgment, award or decree of any Governmental Entity, or arbitrator in any proceeding or action to which the Person in question is a party or by which such Person or any of its Affairs is bound.

 

“Applicable Securities Legislation” means, at any time, all securities laws and the respective rules and regulations under such laws together with applicable published fee schedules, prescribed forms, policy statements, national or multilateral instruments, orders, blanket rulings and other applicable regulatory instruments of the securities regulatory authorities applicable to the Borrower or to which it is subject.

 

“Authorization” means any authorization, approval, consent, exemption, licence, permit, franchise, certification, registration or no-action letter from any Governmental Entity having jurisdiction with respect to any specified Person, property, transaction or event, or any of such Person’s Affairs or from any Person in connection with any easements or contractual rights.

 

“Availability Period” means the period starting on the Effective Date and ending on the day immediately preceding the first day of the Repayment Period.

 

“Bankruptcy Code” shall mean the Bankruptcy Code in Title 11 of the United States Code, as amended, modified, succeeded or replaced from time to time.

 

“Bankruptcy Laws” shall mean the Bankruptcy Code and all other Applicable Laws pertaining or applicable to bankruptcy, insolvency, debtor relief, debtor protection, liquidation, reorganization, winding up, arrangement, receivership, administration, moratorium, assignment for the benefit of creditors or other similar laws applicable in the United States, Canada or other applicable jurisdictions as in effect from time to time.

 

“Borrower” means Golden Phoenix Minerals, Inc., a corporation incorporated and existing under the laws of the State of Nevada, and its successors and permitted assigns.

 

“Borrower Control Agreement” means an account control agreement relating to the Borrower’s bank accounts to be entered into among the Lender, the Borrower and the Borrower’s bank or financial institution.

 

“Borrower’s Account” means, collectively, each bank account or other deposit account owned or held by the Borrower or for the benefit of the Borrower.

 

“Borrowing Notice” means a written request by the Borrower for a Loan pursuant to Section 2.3, which shall include all of the information referenced in Section 2.3 and a certification from the Borrower, substantially in the form of Exhibit A hereto.

 

“Buildings and Fixtures” means all plant, buildings, structures, erections, improvements, appurtenances and fixtures (including fixed machinery and fixed equipment) situate on any of the Subject Properties.

 

“Business” means the business of the Borrower as conducted as at the date hereof.

 

“Business Day” means any day of the year, other than a Saturday, Sunday or any day on which major banks are closed for business in Toronto, Ontario.

 

“Capital Lease” means, with respect to a Person, a lease or other arrangement in respect of real or personal property that is required to be classified and accounted for as a capital lease or debt obligation on a balance sheet of the Person in accordance with GAAP.

 

“Capital Lease Obligation” means, with respect to a Person, the obligation of the Person to pay rent or other amounts under a Capital Lease and for the purposes of this definition, the amount of such obligation at any date shall be the capitalized amount of such obligation at such date as determined in accordance with GAAP.

 

“Cash Payment Amount” means [***].

 

“Change of Control” means the occurrence of any of the following events:

 

(a)

Any “person” or “persons acting jointly or in concert” as defined under applicable securities laws or regulations becomes the record or beneficial owner of more than fifty percent (50%) of the total voting power attached to all Voting Shares of the Borrower then outstanding;

 

(b)

there is consummated any amalgamation, consolidation, statutory arrangement (involving a business combination) or merger of a Credit Party (1) in which the Credit Party is not the continuing or surviving corporation or (2) pursuant to which any Voting Shares of a Credit Party would be reclassified, changed or converted into or exchanged for cash, securities or other property, other than (in each case) an amalgamation, consolidation, statutory arrangement or merger of a Credit Party in which the holders of the Voting Shares of such Credit Party immediately prior to the amalgamation, consolidation, statutory arrangement or merger have, directly or indirectly, more than 50% of the Voting Shares of the continuing or surviving corporation immediately after such transaction; or

 

(c)

any Person or group of Persons shall succeed in having a sufficient number of its nominees elected as Directors such that such nominees, when added to any existing Directors after such election who was a nominee of or is an Affiliate or related Person of such Person or group of Persons, will constitute a majority of the Directors.

 

“Collateral” means any and all real and personal property, assets, rights, titles and interests in respect of which the Lender has or will have a Lien pursuant to a Security Document, whether tangible or intangible, presently held or hereafter acquired, and all products and proceeds of the foregoing, including insurance proceeds related to the foregoing.

 

“Commitment Amount” means US Fifteen Million Five Hundred Thousand Dollars ($15,500,000).

 

“Common Shares” means the common shares in the capital of a Person.

 

“Compliance Certificate” means a certificate of the Borrower substantially in (i) the form of Exhibit B, signed on its behalf by its chief financial officer or any other officer acceptable to the Lender or (ii) such other form as the Lender may determine.

 

“Consent” means that certain Consent, Waiver and Subordination dated August 3, 2011 among the Borrower, the Lender, Mineral Ridge LLC and Scorpio Gold (US) Corporation, together with all amendments, modifications, supplements and revisions thereof in accordance with its terms.

 

“Contaminant” means any solid, liquid, gas, odour, heat, sound, vibration, radiation or combination of any of them that may (i) injure or damage property or plant or animal life, (ii) harm or cause a nuisance to any Person, (iii) adversely affect the health of any individual, (iv) impair the safety, of any individual, (v) render any property or plant or animal life unfit for use by humans, (vi) cause loss of enjoyment of normal use of property, or (vii) interfere with the normal course of business, and includes any “Contaminant” within the meaning assigned to such term (or any similar term) in any Environmental Law applicable to the Mining Properties or the Borrower.

 

“Contingent Liability” means, with respect to a Person, any agreement, undertaking or arrangement by which the Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in a debtor, or otherwise to assure a creditor against loss) the obligation, debt or other liability of any other Person or guarantees the payment of dividends or other distributions upon the shares of any Person.  The amount of any contingent liability will, subject to any limitation contained therein, be deemed to be the outstanding principal amount (or maximum principal amount, if larger) of the obligation, debt or other liability to which the contingent liability is related.

 

 

“Control” of any Person means:

 

(a)

the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to:

 

(i)

cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of such Person; or

 

(ii)

appoint or remove all, or the majority, of the directors or other equivalent officers of such Person; or

 

(iii)

give directions with respect to the operating and financial policies of such Person with which the directors or other equivalent officers of such Person are obliged to comply; and/or

 

(b)

the holding beneficially of more than 50% of the issued share capital of such Person.

 

“Credit Documents” means this Agreement, the Security Documents, the Guarantees, each Borrowing Notice, each Compliance Certificate, the Supply Agreement, and each other Instrument executed by the Borrower or other Credit Party in connection with this Agreement, the Existing Agreement or any of the foregoing Instruments, whether or not specifically identified in this clause, as any of the foregoing may be amended, modified, supplemented, extended or restated from time to time in accordance with their respective terms.

 

“Credit Parties” means, collectively, the Borrower and each Guarantor, and “Credit Party” means any of them, together with their permitted successors and assigns.

 

“Debt” of any Person means:

 

(a)

all obligations of the Person for borrowed money, including debentures, notes or similar instruments and other financial instruments and obligations with respect to bankers’ acceptances and contingent reimbursement obligations relating to letters of credit;

 

(b)

all Financial Instrument Obligations of the Person;

 

(c)

all Capital Lease Obligations and Purchase Money Obligations of the Person;

 

(d)

all obligations to pay the deferred and unpaid purchase price of property or services, which purchase price is due and payable more than six months after the date of placing such property or service or taking delivery at the completion of such services;

 

(e)

all indebtedness of any Person secured by a Lien on any assets of such Person;

 

(f)

all obligations to repurchase, redeem or repay any shares of such Person; and

 

(g)

all Contingent Liabilities of the Person with respect to obligations of another Person if such obligations are of the type referred to in paragraphs (a) to (g).

 

“Default” means an event which, with the giving of notice or passage of time, or the making of any determination or any combination of the foregoing, would constitute an Event of Default.

 

“Direct Agreement” means a direct agreement entered into by a Credit Party, the counterparty to a Material Contract and the Lender in respect of the assignment of the rights of the Borrower, and the exercise of step-in rights by the Lender under, such Material Contract, in form and substance satisfactory to the Lender, acting reasonably.

 

“Director” means a director of a Credit Party and “Directors” means the board of directors of a Credit Party or, whenever duly empowered, a committee of the board of directors of a Credit Party, and reference to action by the Directors means action by the directors as a board or action by such a committee of the board as a committee.

 

“Disposal” means a sale, lease, release, abandonment, licence, exchange, transfer, loan, grant, option or other disposal by a Person of any asset, undertaking or business (whether by a voluntary or involuntary single transaction or series of transactions) and “Dispose” shall have a corresponding meaning.

 

“Disposal Proceeds” means, the consideration receivable by a Credit Party for any Disposal made by such Credit Party, after deducting any reasonable expenses which are incurred by the Credit Party with respect to such Disposal.

 

“Distribution” has the meaning specified in Section 8.2(g).

 

“Dollars” and “$” means lawful money of the United States of America.

 

“Effective Date” means September 26, 2011 or such other date as the parties may agree.

 

“Environmental Claims” means, all liabilities, (including costs of remedial actions, natural resource damages and costs and expenses of investigation and feasibility studies, including the cost of environmental consultants and cost of legal fees) that may be imposed on, incurred by, or asserted against a Credit Party as a result of, or related to, any claim, suit, action, investigation, proceeding or demand by any Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law or otherwise, arising under any Environmental Law, any Release or threatened Release of Hazardous Materials, or in connection with any environmental, health or safety condition and resulting from the ownership, lease, sublease or the operation or occupation of property by any Credit Party whether on, prior or after the date hereof.

 

“Environmental Laws” means any Applicable Law relating to pollution or protection of the environment, ecology or public health or safety and the Mining Properties, including, Applicable Laws relating to emissions, discharges, Releases or threatened Releases of Hazardous Materials or other pollutants, Contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment (including, ambient air, surface water, ground water, land surface or subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, pollutants, Contaminants, chemicals or industrial, toxic or hazardous substances or wastes.

 

“Equity Financing Transaction” means an equity issuance of common shares of the Borrower for net cash proceeds of at least $8,000,000.00.

 

“Equity Interest Pledge Agreement” means (i) that certain Pledge Agreement dated August 3, 2011, from the Borrower to and in favor of the Lender with respect to the Borrower’s 30% interest in Mineral Ridge LLC, as amended and restated by that certain Amended and Restated Pledge Agreement of even date herewith (ii) the pledge, public deed, notarial deed or other Instrument with respect to Borrower’s ownership of Santa Rosa Subsidiary, (iii) a pledge agreement from the Borrower to and in favor of the Lender with respect to the Borrower’s ownership of Ra Resources Ltd., and (iv) any other Instruments given or to be given by a Credit Party for the benefit of the Lender that creates a Lien on and with respect to the Equity Interests of a Credit Party or other Person in order to secure the Obligations, together, in each case, with all amendments, modifications, supplements and revisions thereof in accordance with its terms, together with all other Instruments now or hereafter filed, recorded or delivered to formalize, authorize and perfect the security interests granted therein.

 

“Equity Interests” means, with respect to any Person, shares of capital stock of (or other ownership or profit interests in) such Person, warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, and the rules and regulations thereunder, each as amended or modified from time to time.

 

“Event of Default” has the meaning specified in Section 9.1.

 

“Exchange” means the OTC:BB or any other stock exchange on which the Borrower’s securities may be listed from time to time.

 

“Existing Agreement” shall have the meaning given thereto in the Recitals.

 

“Existing Loan” shall have the meaning given thereto in the Recitals.

 

“Expropriation Event” means the appropriation, confiscation, expropriation, cancellation, seizure or nationalization (by Applicable Law, intervention, court order, condemnation, exercise of eminent domain or other action or form of taking) of ownership or control of a Credit Party or any of its Subsidiaries or of a Mining Property, or any substantial portion thereof, or any substantial portion of the rights related thereto, or any substantial portion of the economic value thereof, or which prevents or materially interferes with the ability of a Person to own or operate the property subject to such action, including by the imposition of any Tax, fee, charge or royalty.

 

“Fees” means the Structuring Fee and all other fees (if any) payable by the Borrower under this Agreement.

 

“Financial Instrument Obligations” means, with respect to any Person, obligations arising under:

 

(a)

any interest rate swap agreement, forward rate agreement, floor, cap or collar agreement, future or option, insurance or other similar agreement or arrangement, or any combination thereof, entered into or guaranteed by the Person where the subject matter thereof is interest rates or the price, value or amount payable thereunder is dependent or based upon interest rates or fluctuations in interest rates in effect from time to time (but excluding non-speculative conventional floating rate indebtedness);

 

(b)

any currency swap agreement, cross-currency agreement, forward agreement, floor, cap or collar agreement, future or option, insurance or other similar agreement or arrangement, or any combination thereof, entered into or guaranteed by the Person where the subject matter thereof is currency exchange rates or the price, value or amount payable thereunder is dependent or based upon currency exchange rates or fluctuations in currency exchange rates in effect from time to time; or

 

(c)

any agreement for the making or taking of any commodity, swap agreement, floor, cap or collar agreement or commodity future or option or other similar agreement or arrangement, or any combination thereof, entered into or guaranteed by the Person where the subject matter thereof is any commodity or the price, value or amount payable thereunder is dependent or based upon the price or fluctuations in the price of any commodity;

 

or any other similar transaction, including any option to enter into any of the foregoing, or any combination of the foregoing, in each case to the extent of the net amount due or accruing due by the Person under the obligations determined by marking the obligations to market in accordance with their terms.

 

“Financial Assistance” has the meaning specified in Section 8.2(h).

 

“Financial Quarter” means, a period of three consecutive months in each Financial Year ending on March 31, June 30, September 30 and December 31, as the case may be, of such year.

 

“Financial Year” means, in relation to the Borrower, its financial year commencing on January 1 of each calendar year and ending on December 31 of such year.

 

“Full Prepayment Amount” means, at any time, [***].

 

“GAAP” means generally accepted accounting principles in the United States of America, consistently applied.

 

“Gold” means gold of a purity of at least .995 fine, and otherwise of grade and quality conforming to the stated requirements for good delivery in the London Bullion Market Association.

 

“Governmental Entity” means any, (i) multinational, national, federal, provincial, state,  territorial, municipal, local, tribal, aboriginal, native or other government, governmental or public department, central bank, court, commission, board, bureau, agency, instrumentality or regulatory authority, domestic or foreign, (ii) any subdivision or authority of any of the foregoing, or (iii) any quasi-governmental or private body exercising any regulatory, judicial, expropriation or taxing authority under or for the account of any of the above.

 

“Guarantees” means the Guarantee from any Guarantor to and in favour of the Lender and each other guarantee by a Guarantor in favour of the Lender to be delivered in connection with this Agreement and any other Credit Document or any of the transactions contemplated herein or therein, together with all amendments, modifications, supplements, extensions and restatements thereof in accordance with its terms.

 

“Guarantors” means each Person that accedes to the terms of this Agreement from time to time by executing a Guarantee, and each Additional Guarantor, and “Guarantor” means any one of them.

 

“Hazardous Material” means any substance or mixture of substances, or any pollutant or Contaminant, toxic or dangerous waste or hazardous material, as defined or listed in, or otherwise classified pursuant to, or give rise to liability under, any Environmental Law or applicable regulations, including any “hazardous substance”, “hazardous material”, “hazardous waste”, “toxic substance”, “Contaminant”, “pollutant” or any other similar formulation intended to define, list or classify substances by reason of deleterious properties such as ignitability, corrosiveness, reactivity, carcinogenicity, toxicity or dangerousness.

 

“Hedging Agreement” means (i) any currency exchange or interest rate swap agreement, currency exchange or interest rate cap agreement or currency exchange or interest rate collar agreements between any Credit Party and any other Person and (ii) all net forward sale, put/call options, spot deferred sale or other similar arrangement or agreement relating to the sale or purchase of any commodity.

 

“Indemnified Person” has the meaning specified in Section 10.5(1).

 

“Instrument” means any contract, agreement, undertaking, indenture, mortgage, certificate, document or writing (whether formal agreement, letter or otherwise) under which any obligation, duty, covenant, agreement, affirmation, undertaking or liability is evidenced, assumed or undertaken, or any right or Lien (or right or interest therein) is granted, authenticated, notarized, authorized or perfected, and any notice, registration, recordation or filing associated with or required by any of the foregoing.

 

“Insurance Proceeds” means the proceeds of any insurance claim under any insurance maintained by any Credit Party.

 

“Leased Properties” means, collectively, the real properties forming the subject matter of the Leases.

 

“Leases” means the mineral concessions, surface concessions, leases, subleases, rights to occupy, rights to use and exploit, and licences of real property or Buildings and Fixtures, to which any Credit Party is a party (i) at the date of this Agreement, as listed and described in Schedule 1.1(a), or (ii) after the date of this Agreement as notified to the Lender pursuant to a Compliance Certificate.

 

“Lender” means Waterton Global Value, L.P., its successors and assigns.

 

“Lender’s Gold Account” shall mean the account of the Lender at Johnson Matthey Inc., [***], or with such other institution or such other account as designated by the Lender in writing from time to time.

 

“Lien” means any mortgage, deed of trust, lien, pledge, charge, security interest, hypothecation, indenture, preferential right, assignment, option, production payment or other lien, encumbrance or collateral security Instrument in, on or to, or any right or interest, or the title of any vendor, lessor, the Lender or other secured party to, or interest or title of any Person under any conditional sale or other title retention agreement or capital lease with respect to, any property or asset owned or held by such Person, the signing of any mortgage, deed of trust, pledge, charge, security agreement, hypothecation, indenture, assignment or similar instrument, or the signing or filing of a financing statement, personal property security act filing or other similar Instrument, which names such Person as debtor, or the signing of any security agreement or other similar Instrument authorizing any other party as the secured party thereunder to file any financing statement, personal property security act filing or other similar Instrument or any other arrangement, encumbrance or condition that in substance secures payment or performance of an obligation.

 

 

“Loan” shall mean the aggregate of the Tranche One Loan, the Tranche Two Loan, the Tranche Three Loan, the Tranche Four Loan and the Tranche Five Loan.

 

“Mandatory Prepayment Amount” shall have the meaning given thereto in Section 4.1(1).

 

“Material Adverse Effect” means a material adverse effect (or a series of adverse effects, none of which is material in and of itself but which cumulatively result in a material adverse effect) on (i) the Mining Properties, (ii) the business, operations, results of operations, prospects, assets, performance, prospects, liabilities or the condition (financial or otherwise) of any Credit Party, (iii) any of the rights or remedies of the Lender or (iv) the ability of any Credit Party to perform its obligations to the Lender under any of the Credit Documents.

 

“Material Contracts” means, collectively, the agreements set out in Schedule 1.1(e), and any other agreement to which any Credit Party is a party and which is deemed material by the Lender (acting reasonably) to the Business or the operation of the Mining Properties.

 

“Mineral Ridge LLC” means Mineral Ridge Gold LLC, a Nevada limited liability company, its successors and assigns.

 

“Mineral Ridge Project” means the Mineral Ridge Project, located in Esmeralda County, Nevada, which is owned and operated by Mineral Ridge LLC, as further described on Schedule 1.1(a) hereto.

 

“Mining Properties” means all surface, subsurface and mineral rights, and all surface, subsurface and mineral leases, concessions, licenses, claims, rights, titles or interests owned, leased, held or controlled by a Credit Party, or, in the case of the Santa Rosa Project, to be owned, leased, held or controlled by a Credit Party, and all related, associated or appurtenant rights, in each case howsoever characterized or designated, that are owned, leased, held, or controlled, directly or indirectly, by a Credit Party, with such rights, titles and interests (including the Santa Rosa Project) described in Schedule 1.1(a).

 

“Monthly Repayment Amount” means, in relation to any Repayment Date, the monthly amortization instalment amount for such Repayment Date set forth on Schedule 1.1(b) hereto, as such Schedule 1.1(b) may be revised and replaced by the Lender from time to time based on the actual amount Advanced to the Borrower in respect of any Tranche; the Lender shall promptly provide the Borrower with any subsequent, replacement Schedule 1.1(b).

 

“Monthly Repayment Ounces” means [***].

 

“Obligations”  means all duties, covenants, agreements, liabilities, indebtedness and obligations of the Borrower and each Guarantor with respect to the repayment, payment or performance of all Indebtedness, liabilities and obligations (monetary or otherwise) of the Borrower and each Guarantor (if applicable), whenever arising, whether primary, secondary, direct, contingent, fixed or otherwise and whether joint, several, or joint and several, established by or arising under or in connection with this Agreement, the Existing Agreement and each other Credit Document, including, in each case, the payment of principal, interest, fees, expenses, reimbursements and indemnification obligations.

 

“Option Agreement” means that certain Option Agreement dated August 3, 2011 from the Borrower to and in favour of the Lender.

 

“Original Currency” has the meaning specified in Section 10.10(1).

 

 “Other Currency” has the meaning specified in Section 10.10(1).

 

“Other Taxes” has the meaning specified in Section 10.7(2).

 

“Owned Properties” means, collectively, (i) the Mining Properties, and (ii) after the date of this Agreement, the additional lands and premises notified to the Lender pursuant to each Compliance Certificate.

 

“Partial Prepayment Amount” has the meaning specified in Section 4.3(3).

 

“Pension Laws” means ERISA and all Applicable Laws governing the registration, administration, funding and investment of Pension Plans, including the applicable provisions of the Income Tax Act (Canada) and any other similar legislation.

 

“Pension Plan” means any plan or arrangement, whether funded or unfunded, registered or not registered, that provides defined benefit pensions or term-certain annuities in respect of any employees, former employees or retirees of any Credit Party.

 

“Permitted Affiliate Transactions” has the meaning specified in Section 7.1(jj).

 

“Permitted Debt” means, in respect of any Person, the following:

 

(a)

Debt under any of the Credit Documents;

 

(b)

Debt to the extent secured by Liens pursuant to paragraphs (a), (b) or (c) of the definition of Permitted Liens;

 

(c)

amounts payable arising in the ordinary course of business for the purchase of goods and services, provided (i) such amounts are not overdue in excess of 90 days; and (ii) such amounts, in the aggregate, do not exceed $100,000 at any time, except for such previously incurred obligations set forth in Schedule 1.1(e); and

 

(d)

unsecured obligations to pay the deferred and unpaid purchase price with respect to the Company’s interests being acquired under those certain option and acquisition agreements set forth in Schedule 1.1(e), provided (i) such amounts are not overdue in excess of 90 days; and (ii) such amounts, in the aggregate, do not exceed $100,000 at any time, except for such previously incurred obligations set forth in Schedule 1.1(e).

 

“Permitted Liens” means, in respect of any Person, any one or more of the following:

 

(a)

Liens for taxes, assessments or governmental charges or levies if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings, so long as such contested Liens could not have a Material Adverse Effect;

 

 

(b)

Liens imposed by law, such as carriers, warehousemen and mechanics’ liens and other similar liens arising in the ordinary course of business associated with amounts not yet due and payable, provided that such Liens are not registered against title to any assets of the Person and in respect of which adequate holdbacks are being maintained as required by Applicable Law or such Liens are being contested in good faith by appropriate proceedings and in respect of which there has been set aside a reserve (segregated to the extent required by GAAP) in an adequate amount and provided further that such Liens could not have a Material Adverse Effect;

 

(c)

Liens of purchase money mortgages and other security interests on equipment acquired, leased or held by the Borrower (including equipment held by any such Person as lessee under leveraged leases) in the ordinary course of business to secure the purchase price of or rental payments with respect to such equipment or to secure indebtedness incurred solely for the purpose of financing the acquisition (including acquisition as lessee under leveraged leases), construction or improvement of any such equipment to be subject to such mortgages or security interests, or mortgages or other security interests existing on any such equipment at the time of such acquisition, or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount, provided that no such mortgage or other security interest shall extend to or cover any equipment other than the equipment being acquired, constructed or improved, and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the mortgage or security interest being extended, renewed or replaced, provided, further, that such Liens shall not exceed $100,000 in the aggregate;

 

(d)

Liens outstanding on the date hereof and described in Schedule 1.1(f) hereto;

 

(e)

Liens arising under the Security Documents;

 

(f)

Cash or governmental obligations deposited in the ordinary course of business in connection with contracts, bids, tenders or to secure workmen’s compensation, unemployment insurance, surety or appeal bonds, costs of litigation, when required by law, public and statutory obligations, Liens or claims incidental to current construction, mechanics’, warehousemen’s, carriers’ and other similar Liens; and

 

(g)

Liens given in the ordinary course of business to a public utility or any municipality or governmental or other public authority when required by such utility or municipality or governmental or other authority in connection with the operations of the Borrower.

 

“Person” means a natural person, partnership, limited liability company, corporation, joint stock company, trust, unincorporated association, joint venture or other entity or Governmental Entity, and pronouns have a similarly extended meaning.

 

“Prepayment Notice” has the meaning specified in Section 4.3(1).

 

“Prior Day Price” means:

 

(a)

In relation to any Repayment Date, the settlement per ounce price of Gold on the London Bullion Market Association, PM Fix (Bloomberg: GoldLNPM) on the Business Day immediately preceding such Repayment Date; and

 

(b)

In relation to any prepayment date, the settlement per ounce price of Gold on the London Bullion Market Association, PM Fix (Bloomberg: GoldLNPM) on the Business Day immediately preceding such prepayment date.

 

“Profit Participation Amount” means: [***].

 

“Project Mortgages” means a mortgage, deed of trust, public deed, notarial deed or other Instrument by which the Lender obtains a Lien on and to the Mining Properties and any other Instrument by which the Lender obtains a Lien in or on any real property or Mining Properties of a Credit Party to secure the Obligations, together with all amendments, modifications, supplements, extensions and restatements thereof in accordance with its terms.

 

“Project Permits” means those Authorizations for the development and operation of the Santa Rosa Project, as defined in Section 7.1(ll).

 

“Prudent Mining Industry Practices” means those practices, standards, methods, techniques and specifications, as they may evolve, change and modify from time to time that (a) are commonly used and generally accepted in the mining industry as good, safe and prudent operational, administrative and engineering practices in connection with the design, construction, operation, maintenance, repair or use of mining projects, mining facilities, mining infrastructure, mining equipment or other components of a mining operation, (b) conform in all material respects to Applicable Laws, (c) conform in all material respects to operational and maintenance guidelines and requirements suggested by applicable manufacturers, suppliers and insurance providers (taking into account the size, age, service and type of asset), and (d) are commercially reasonable based on the nature of the Mining Properties.

 

“Purchase Money Obligation” means, in relation to any Person, indebtedness of such Person issued, incurred or assumed to finance all or part of the cost of acquiring any asset for such Person.

 

“Related Party” means in respect of any Credit Party (i) a Person which alone or in combination with others holds a sufficient number of securities or has contractual rights sufficient to affect materially the Control of such Credit Party, (ii) a Person which alone or in combination with others holds a sufficient number of securities or has contractual rights sufficient to affect materially the Control of such Credit Party, (iii) a Person who beneficially owns, directly or indirectly, voting securities of a Credit Party or who exercises Control or direction over voting securities of such Credit Party or a combination of both carrying more than 10% of the voting rights attached to all voting securities of such Credit Party for the time being outstanding, (iv) a director or senior officer of a Credit Party or Related Party of any Credit Party, or (v) an Affiliate of any of the foregoing.

 

“Release” means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, leeching or migration of any element or compound in or into the indoor or outdoor environment (including the abandonment or disposal of any barrels, tanks, containers or receptacles containing any Contaminant), or in, into or out of any vessel or facility, including the movement of any substance through the air, soil, subsoil, surface, water, groundwater, rock formation or otherwise.

 

“Repayment Date” means the last Business Day of each calendar month during the Repayment Period and any date on which the Lender accelerates the due date of the Loan by reason of an Event of Default pursuant to Section 9.2.

 

“Repayment Period” means the eighteen-month period commencing on the last Business Day of March 2012 and ending on the last Business Day of August 2013.

 

“Santa Rosa Acquisition Agreement” means that certain definitive Acquisition Agreement dated September 16, 2011, by and between the Borrower and Silver Global, S.A., a corporation formed under the laws of the Republic of Panama, whereby the Borrower will acquire its interest in the Santa Rosa Project, a final, executed copy of which is attached hereto as Schedule 1.1(c).

 

“Santa Rosa Project” means the Santa Rosa mine (Minas Santa Rosa), consisting of the Santa Rosa gold deposit, the Alto de la Mina gold deposit and all associated Mining Properties,  Buildings and Fixtures, assets, properties  and equipment, located near the village of Canazas in Veraguas Province, Panama, situated approximately 300 kilometres southwest of Panama City, Panama, all as further described on Schedule 1.1(a) hereto.

 

“Santa Rosa Subsidiary” means Golden Phoenix Panama, S.A., a corporation formed under the laws of the Republic of Panama, formed for the purpose of owning, managing, operating and administering the Santa Rosa Project, and through which Borrower will acquire an interest in the Santa Rosa Project.

 

“Security” means, at any time, the charges, mortgages, pledges, assignments, security interests and other encumbrances in favour of the Lender in the assets and properties of the Credit Parties securing their obligations under this Agreement and the other Credit Documents.

 

“Security Agreements” means (i) the Security Agreement dated as of August 3, 2011 between the Borrower and the Lender, as amended and restated by that certain Amended and Restated Security Agreement of even date herewith, and (ii) any other security agreement or other Instrument by which the Lender obtains a Lien in or on any personal property or assets of a Credit Party to secure the Obligations, together with all amendments, modifications, supplements, extensions and restatements thereof in accordance with its terms.

 

“Security Documents” means each of the Guarantees, the Security Agreements, the Project Mortgages, the Equity Interest Pledge Agreements, the Borrower Control Agreement, each of the agreements described in Schedule 1.1(d) and all public deeds, notarial deeds, Instruments and any other security granted to the Lender by any Credit Party, as security for the payment and performance of the Obligations, in each case, with all modifications, supplements, amendments, extensions or restatements thereto or thereof in accordance with their respective terms, all schedules and exhibits attached thereto and all financing statements, personal property security act filings and other Instruments required to be filed or recorded or notices required to be given in order to authenticate, establish and perfect the Liens created by the foregoing.

 

“Spot Price” means, in relation to any date, either of the following prices (as selected by the Borrower in its sole discretion) [***].

 

“Structuring Fees” means the structuring fees described in Section 2.1.

 

“Subject Properties” means, collectively, the Mining Properties and all other Owned Properties and Leased Properties.

 

“Subsidiaries” means the subsidiaries of a Credit Party.

 

“subsidiary” means with respect to any Person (the “parent”) at any date, (i) any corporation, limited liability company, association or other business entity of which securities or other ownership interests representing more than 50% of the voting power of all equity interests entitled to vote in the election of the board of directors thereof are, as of such date, held by the parent and/or one or more subsidiaries of the parent, (ii) any partnership, (x) the sole general partner or the managing general partner of which is the parent and/or one or more subsidiaries of the parent or (y) the only general partners of which are the parent and/or one or more subsidiaries of the parent and (iii) any other Person that is otherwise Controlled by the parent and/or one or more subsidiaries of the parent.

 

“Supply Agreement” means the Gold Supply Agreement given by the Borrower and the Santa Rosa Subsidiary for the benefit of the Lender, substantially in the form of Exhibit C hereto, whereby the Lender shall have the right to acquire all gold produced at and from the Santa Rosa Project for the life of the Santa Rosa Project on the terms and conditions set forth therein, together with all amendments, modifications, supplements, extensions and restatements thereof in accordance with its terms, to be acknowledged, notarized and recorded as a public deed in the applicable official public records in Panama, to the extent that recording is legally available.

 

“Taxes” has the meaning specified in Section 10.7(1).

 

“Total Principal Balance” means the aggregate total amount of all Tranches of Loans made to the Borrower.

 

“Tranche” shall mean any one of the Tranche One Loan, the Tranche Two Loan, the Tranche Three Loan, the Tranche Four Loan or the Tranche Five Loan, and “Tranches” shall refer to more than one of the foregoing.

 

“Tranche One Loan” means an amount up to $1,750,000 (which shall include the continuation of the Existing Loan), available upon the Effective Date, subject to satisfaction of applicable conditions precedent.

 

“Tranche Two Loan” means an amount equal to the Borrower’s next payment due under the Santa Rosa Acquisition Agreement, up to $4,250,000, available on the date such payment is due pursuant to the Santa Rosa Acquisition Agreement, subject to satisfaction of the conditions precedent thereto.

 

“Tranche Three Loan” means an amount equal to the Borrower’s next payment due under the Santa Rosa Acquisition Agreement, up to $3,000,000, available on the date such payment is due pursuant to the Santa Rosa Acquisition Agreement, subject to satisfaction of the conditions precedent thereto.

 

“Tranche Four Loan” means an amount up to $1,500,000, available upon satisfaction of the conditions precedent thereto.

 

“Tranche Five Loan” means an amount up to $5,000,000, available upon satisfaction of the conditions precedent thereto.

 

“Voting Shares” means shares of capital stock of any class of any corporation carrying voting rights under all circumstances, provided that, for the purposes of such definition, shares which only carry the right to vote conditionally on the happening of any event shall not be considered Voting Shares, whether or not such event shall have occurred, nor shall any shares be deemed to cease to be Voting Shares solely by reason of a right to vote accruing to shares of another class or classes by reason of the happening of such event.

 

 

“Waste” means ashes, garbage and refuse and includes domestic waste, industrial waste, municipal refuse or such other wastes as are designated as such under any Environmental Law.

 

 

References to “this Agreement”, “the agreement”, “hereof”, “herein”, “hereto” and like references refer to this Agreement and not to any particular Article, Section, Subsection, paragraph or other subdivision of this Agreement.  Any references herein to any agreements or documents shall mean such agreements or documents as amended, supplemented, restated or otherwise modified from time to time in accordance with the terms hereof and thereof.

 

 

Any reference in the Credit Documents to gender includes all genders and words importing the singular number only include the plural and vice versa.

 

 

The provision of a Table of Contents, the division of this Agreement into Articles and Sections and the insertion of headings are for convenient reference only and are not to affect the interpretation of this Agreement.

 

 

All references in the Credit Documents to dollars, unless otherwise specifically indicated, are expressed in United States currency.

 

 

Any reference in this Agreement to:

 

(a)

a Default being “continuing” means that such Default has not been waived or remedied and an Event of Default being “continuing” means that such Event of Default has not been waived;

 

(b)

unless otherwise indicated, a “Credit Document” or any other agreement or instrument is a reference to that Credit Document or other agreement or instrument as amended, modified, novated, supplemented, extended or restated;

 

(c)

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

 

(d)

“knowledge” of any Person shall be deemed to mean such knowledge after due and diligent inquiry; and

 

(e)

“repay” (or any derivative form thereof) shall, subject to any contrary indication, be construed to include “prepay” (as, as the case may be, the corresponding derivative form thereof).

 

 

In any Credit Document (i) (x) the words “including” and “includes” mean “including (or includes) without limitation”, and does not create or denote a limitation, (y) the phrase “the aggregate of”, “the total of”, “the sum of”, or a phrase of similar meaning means “the aggregate (or total or sum), without duplication, of”, and (z) the word “asset” includes present and future properties, revenues and rights of every description, and (ii) in the computation of periods of time from a specified date to a later specified date, unless otherwise expressly stated, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding”.

 

 

All accounting terms not specifically defined in this Agreement shall be interpreted in accordance with GAAP.

 

 

The schedules and exhibits attached to this Agreement shall, for all purposes of this Agreement, form an integral part of it.

 

 

The provisions of this Agreement prevail in the event of any conflict or inconsistency between its provisions and the provisions of any of the other Credit Documents.

 

 

Whenever the delivery of a certificate is a condition precedent to the taking of any action by the Lender or the occurrence of any event hereunder, the truth and accuracy of the facts and the diligent and good faith determination of the opinions stated in such certificate shall in each case be conditions precedent to have such action taken, and any certificate executed by any Credit Party shall be deemed to represent and warrant that the facts stated in such certificate are true and accurate in all respects.

 

 

 

The Borrower shall pay to the Lender a one-time structuring fee in an amount equal to two percent (2%) of the Commitment Amount (the “Structuring Fee”), with one percent (1%) of the Structuring Fee to be paid to the Lender on the Effective Date and the remaining one percent (1%) of the Structuring Fee due to the Lender on or prior to the advance of the Tranche Two Loan, provided, that in the event the Tranche Two Loan is not advanced on or before the date that is sixty (60) days from the Effective Date, the remaining amount due as the Structuring Fee shall be immediately due and payable.  No portion of the Structuring Fee is refundable to the Borrower, in whole or in part, under any circumstances.

 

 

Subject to all of the terms and conditions of this Agreement, the Lender shall Advance each of the Tranches upon satisfaction of the applicable conditions precedent, as follows:

 

(1)

Tranche One Loan.  Upon satisfaction of the Tranche One Loan conditions precedent set forth in Article 6, the Lender shall Advance the Tranche One Loan to the Borrower.  The Tranche One Loan shall be Advanced in one Advance, with such Advance to be made to the Borrower’s Account.  Upon Advance, the commitment of the Lender to make the Tranche One Loan shall expire.  The Existing Loan outstanding as of the Effective Date shall convert into and continue as part of the Tranche One Loan hereunder for all purposes (including for purposes of determining the amount of the Commitment available to the Borrower).

 

(2)

Tranche Two Loan.  Upon satisfaction of the Tranche Two Loan conditions precedent set forth in Article 6, the Lender shall Advance the Tranche Two Loan to the Borrower.  The Tranche Two Loan shall be Advanced in one Advance, with such Advance to be made to the Borrower’s Account.  Upon Advance, the commitment of the Lender to make the Tranche Two Loan shall expire.

 

(3)

Tranche Three Loan.  Upon satisfaction of the Tranche Three Loan conditions precedent set forth in Article 6, the Lender shall Advance the Tranche Three Loan to the Borrower.  The Tranche Three Loan shall be Advanced in one Advance, with such Advance to be made to the Borrower’s Account.  Upon Advance, the commitment of the Lender to make the Tranche Three Loan shall expire.

 

(4)

Tranche Four Loan.  Upon satisfaction of the Tranche Four Loan conditions precedent set forth in Article 6, the Lender shall Advance the Tranche Four Loan to the Borrower.  The Tranche Four Loan shall be Advanced in one Advance, with such Advance to be made to the Borrower’s Account.  Upon Advance, the commitment of the Lender to make the Tranche Four Loan shall expire.

 

(5)

Tranche Five Loan.  Upon satisfaction of the Tranche Five Loan conditions precedent set forth in Article 6, the Lender shall Advance the Tranche Five Loan to the Borrower.  The Tranche Five Loan shall be Advanced in one Advance, with such Advance to be made to the Borrower’s Account.  Upon Advance, the commitment of the Lender to make the Tranche Five Loan shall expire.

 

(6)	General.  Any part of a Tranche that has been repaid by the Borrower may not be re-borrowed and shall not be re-advanced to the Borrower.  At no time shall the aggregate principal amount of all Tranches exceed the Commitment Amount.

 

 

The Borrower shall request the borrowing of a Loan by delivering to the Lender a written Borrowing Notice signed by the Borrower, which shall be delivered to the Lender by no later than fifteen (15) days (or such shorter period as may be agreed by the Lender) prior to the date of the requested borrowing.  Each Borrowing Notice shall be irrevocable and shall specify (i) the Tranche that is requested by the Borrower, (ii) the date of the requested borrowing (which shall be a Business Day not less than fifteen (15) days after delivery, or such shorter period as may be agreed by the Lender), (iii) the aggregate principal amount of the Tranche to be borrowed, (iv) the specific purposes to which the proceeds of such Loan shall be applied (as permitted by Section 2.5 below), and (v) such other information and certifications as set forth in the form of Borrowing Notice and as the Lender shall otherwise have reasonably requested.  Each submittal of a Borrowing Notice by the Borrower to the Lender shall constitute a separate representation, warranty and covenant by the Borrower that the conditions precedent thereto have been satisfied and that the Borrower shall use and apply the proceeds of the Loan solely as set forth in such Borrowing Notice.  No Tranche shall be advanced if a Default or Event of Default has occurred and is continuing (unless the Lender has waived the relevant Default or Event of Default for the purpose of advancing the Loan).

 

 

 

The principal amount of the Loan shall be due and payable on each Repayment Date as set forth herein and in full on acceleration of the due date of the Loan by reason of an Event of Default pursuant to Section 9.2.  The Borrower covenants and agrees to repay the Loan in accordance with the terms of this Agreement.

 

 

The Borrower will utilize the Loan to fund the acquisition, development and advancement of the Santa Rosa Project, together with other costs and expenses incidental thereto, with the proceeds of the Tranche Two Loan and the Tranche Three Loan to be used to make the then-due payments under the Santa Rosa Acquisition Agreement in order to maintain such agreement in full force and effect.  The Borrower will use proceeds of the Loan only as specifically provided herein and as approved in writing by the Lender.

 

 

The Lender shall maintain accounts and records evidencing all Loan made hereunder and all payments received hereunder, which accounts and records shall constitute, in the absence of manifest error, prima facie evidence thereof.

 

 

 

(1)

Generally.  The Borrower shall make all payments of principal on or before the date when due, whether on a Repayment Date or by prepayment, by either (a) the delivery of physical ounces of Gold to the Lender at the Lender’s Gold Account, or (b) cash in immediately available funds deposited to an account designated by the Lender.  The Lender may request, in its sole discretion, that any payment made on a Repayment Date shall be made in cash in which case the Borrower shall pay to the Lender the Cash Payment Amount in immediately available funds.

 

(2)

Payment in Gold.  The Borrower represents and warrants, and covenants and agrees, that all Gold delivered to the Lender as payment of any amount due hereunder shall be owned by the Borrower, with good and marketable title thereto, free and clear of all Liens and adverse claims of any nature or description, and upon delivery to the Lender’s Gold Account, the Borrower shall convey and transfer to the Lender good and marketable title thereto, free and clear of all Liens and adverse claims of any nature or description.  The Borrower agrees to convey and properly transfer all legal and beneficial right, interest and title in all Gold delivered to the Lender, and upon each delivery of Gold pursuant to this Agreement, all legal and beneficial right, title and interest in and to such Gold will pass irrevocably from the Borrower to the Lender free and clear of any Liens and adverse claims of any nature or description.  All costs, charges or expenses associated with the production, transport, refining, conveyance, transfer and delivery of any Gold by the Borrower to the Lender shall be borne and paid by the Borrower.  Until delivery of Gold has occurred, all costs of transport, warehousing (including insurance), storage, customs, export and import licences and Taxes and any other related costs and expenses shall be borne by the Borrower.  The Borrower will have and bear all risk of loss of, or damage to, any Gold to be delivered by the Borrower to the Lender pursuant hereto until such Gold has been delivered to the Lender at the Lender’s Gold Account, at which time the risk of loss or damage thereto shall transfer to the Lender.  The Lender shall have the right to reject any gold that does not conform to the definition of Gold, as defined herein.  Any such rejected gold shall not be considered delivered by the Borrower and the payment amount associated therewith shall not be considered paid by the Borrower.

 

 

(3)	Payments Due.   The Borrower shall pay to the Lender each of the following amounts:

 

(a)

on each Repayment Date, the Cash Payment Amount or the Monthly Repayment Ounces, as applicable, relating to such Repayment Date; and

 

(b)

on each Repayment Date, the Profit Participation Amount relating to such Repayment Date.

 

 

 

(1)	The Borrower shall, and shall ensure that each Credit Party shall, prepay Advances in the following amounts (each, a “Mandatory Prepayment Amount”) and at the following times:

 

(a)

the amount of all Disposal Proceeds (other than Disposal Proceeds generated through the Disposal permitted under Section 8.2(d)), within five Business Days of receipt (for greater certainty, for the purposes of this Section 4.1(a) and Section 8.2(d), a Disposal shall not include any equity issuances by the Borrower from its treasury); and

 

(b)

the amount of all Insurance Proceeds received by or on behalf of any Credit Party, within five Business Days, other than Insurance Proceeds for which the Borrower indicates to the Lender in writing, within such five Business Day period, shall be re-invested in replacement assets, and which are actually reinvested in such replacement assets within thirty days of receipt of such proceeds (or such other period as may be agreed upon by the Borrower and the Lender), failing which, the Loan shall immediately be prepaid in an amount equal to such Insurance Proceeds;

 

and, on the day any such prepayment is made, the Loan shall be deemed repaid in an amount equal to [***].

 

(2)	The Borrower shall, in addition to and at the same time as the Borrower makes any prepayment required under Section 4.1(1), pay to the Lender an amount equal to the Profit Participation Amount relating to such prepayment.

 

 

(1)

In the event that a Change of Control occurs, the Lender may, in its sole discretion, by written notice to the Borrower, require the Borrower to repay the Loan in full.  If the Lender requires the Borrower to repay the Loan in full, the Borrower shall do so by paying to the Lender an amount in cash equal to the aggregate of the following payments:

 

(a)

an amount equal to [***]; and

 

(b)

the Profit Participation Amount relating to such prepayment,

 

together with all other fees, charges and costs and other amounts payable hereunder.

 

(2)

In the event that the Lender exercises its option under the Option Agreement, the Borrower shall repay the Loan in full, whereupon the Lender’s obligation to Advance Loans under this Agreement shall terminate.  The Borrower shall repay the Loan by paying to the Lender an amount in cash equal to the aggregate of the following payments:

 

(a)

 

(i)

if the Lender exercises its option under the Option Agreement prior to December 31, 2012, an amount equal to [***]; or

 

(ii)

if the Lender exercises its option under the Option Agreement after December 31, 2012, an amount equal to [***];

and

 

(b)

the Profit Participation Amount relating to such prepayment,

 

together with all other fees, charges and costs and other amounts payable hereunder.  In the event of an exercise of the Option Agreement, the Lender shall set off the amount due to the Lender under this Agreement against payment of the purchase price set forth in the Option Agreement.

 

 

(1)	The Borrower may prepay the Loan (in whole or in part) at any time on five (5) Business Days prior written notice to the Lender (each, a “Prepayment Notice”).

 

(2)	The Borrower shall make such prepayment no later than five Business Days following delivery of the Prepayment Notice, together with all other costs, or charges then due.

 

(3)

Each Prepayment Notice shall be irrevocable and shall state whether the prepayment contemplated therein is for the full amount outstanding hereunder or for a part of the amount outstanding hereunder.  In the event such prepayment is a partial prepayment, the Prepayment Notice shall stipulate the amount of such proposed prepayment (the “Partial Prepayment Amount”).  In any case, such prepayment shall be made as follows:

 

(a)

if such prepayment is of the entire outstanding amount of the Loan the Borrower shall pay to the Lender an amount in cash equal to the aggregate of the following payments:

 

(i)

an amount equal to [***]; and

 

(ii)

the Profit Participation Amount relating to such prepayment.

 

(b)

if such prepayment is a partial prepayment of the Loan, the Borrower shall pay to the Lender an amount in cash equal to the aggregate of the following payments:

 

(i)

the Partial Prepayment Amount; and

 

(ii)

the Profit Participation Amount relating to such prepayment,

 

and, on the day any such partial prepayment is made, the Loan shall be deemed repaid in an amount equal to [***].

 

 

 

(1)

The Borrower shall make any payment required to be made by it to the Lender without set-off, deduction, withholding, or counterclaim or cross-claim, by: (a) delivering the Monthly Repayment Ounces or other amount of Gold that is then due to the Lender’s Gold Account or (b) depositing the Cash Payment Amount or other amount of cash then due (including with respect to each Profit Participation Amount) with the Lender, in each case by not later than 12:00 a.m. (Toronto time) on the date the payment is due, to an account designated by the Lender.  The Borrower shall make each such payment in either Gold or immediately available funds as required by this Agreement.

 

(2)

Unless otherwise expressly provided in this Agreement, the Lender shall make Advances and other payments to the Borrower under this Agreement by crediting the Borrower’s Account (or causing the Borrower’s Account to be credited) with the amount of the payment not later than 3:00 p.m. (Toronto time) on the date the payment is to be made.

 

(3)	Any prepayment under this Agreement shall be made together with payment of all interest and fees then due and payable and any and all other amounts which may then be due and payable under any other provision hereof.

 

(4)

The Lender and the Borrower acknowledge and agree that the payment of all amounts and other costs payable hereunder and any further consideration to the Lender is a fair payment based on the business terms of this transaction.  The Lender and the Borrower acknowledge and agree that it is their express intention and desire that in no event shall the total payment to the Lender exceed applicable usury laws.  In the event that any provision of this Agreement would oblige the Borrower to make any other payment which is construed by a court of competent jurisdiction to be interest in an amount or calculated at a rate which would be prohibited by law or would result in a receipt by the Lender of interest at a criminal rate, then, notwithstanding such provision, such amount or rate shall be deemed to have been adjusted nunc pro tunc to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by law or so result in a receipt by the Lender of interest at a criminal rate, such adjustment to be effected, to the extent necessary.

 

(5)	Whenever any payment or delivery to be made hereunder shall be stated to be due on a day that is not a Business Day, the payment may be made on the next succeeding Business Day.

 

 

 

(1)	Conditions Precedent to the Tranche One Loan.  The obligation of the Lender to Advance the Tranche One Loan (and each subsequent Tranche) is subject to satisfaction (or waiver by the Lender in its sole discretion) of each of the following conditions precedent.

 

(a)

The Lender or its counsel shall have received the following, with each Instrument dated the date of this Agreement (or as otherwise agreed by the Lender), and in form and substance as shall be satisfactory to the Lender:

 

(i)

this Agreement, duly executed by the Borrower;

 

(ii)

each of the Security Documents (or each amendment, amendment and restatement or confirmation thereof), each duly executed by the Borrower or other applicable Credit Party, together with any UCC filings, PPSA filings or other Instruments for filing or registration, notarizations thereof, notices with respect thereto or other Instruments determined by the Lender to be necessary or desirable to establish and perfect the Liens established pursuant to the Security Documents;

 

(iii)

to the extent not specifically referenced, each other Credit Document, duly executed by the Borrower or the Credit Party that is party thereto;

 

(iv)

an Omnibus Certificate for each Credit Party, duly executed by officers thereof substantially in the form of Exhibit D hereto, together with each Credit Party’s articles of incorporation, bylaws, resolutions, certificates of good standing and certification of incumbency;

 

(v)

certificates of issuing insurance companies or brokers, confirming compliance by the Borrower with the insurance requirements set forth in Section 8.1(m);

 

(vi)

accurate and complete copies of the most recent financial statements of the Credit Parties;

 

(vii)

delivery of a solvency certificate from the chief financial officer of the Borrower in the form of Exhibit E, certifying that the Borrower (i) is not legally prohibited or restricted from entering into and performing its obligations under the Credit Documents to which it is a party, (ii) is able to pay its debts as they become due in the ordinary course of business, (iii) will not be rendered insolvent by virtue of any Advance to be made hereunder, (iv) will not be left with an unreasonably small amount of capital, and (v) has not incurred debt which cannot be satisfied on a timely basis;

 

(viii)

delivery of a certificate of an officer of the Borrower certifying that all necessary Authorizations relating to the development and operation of the Mining Properties have been obtained and none have been rescinded, cancelled or otherwise terminated in any respect;

 

(ix)

evidence satisfactory to the Lender confirming the validity of the Security Documents and their application to the Loan and the Obligations as well as the validity and perfection of the Liens granted by such Security Documents with the Agreed Priority;

 

(x)

opinions of legal counsel for the Credit Parties, dated the Closing Date and addressed to the Lender in form and substance reasonably acceptable to the Lender; and

 

(xi)

all such other approvals, opinions, documents or Instruments as the Lender may reasonably request.

 

(b)

all representations and warranties made by the Credit Parties herein, in any other Credit Documents shall be true and correct on the Closing Date;

 

(c)

the Borrower shall have paid one-half of the Structuring Fee in accordance with Section 2.1 and all other fees, costs and expenses then due on and as of the date of this Agreement;

 

(d)

no Default or Event of Default has occurred and is continuing or would occur as a result of the making of the Loan or the use of the proceeds thereof;

 

(e)

all Authorizations of Governmental Entities, the shareholders of Borrower or other Persons required in connection with this Agreement and the other Credit Documents shall have been obtained and remain in effect;

 

(f)

there is no pending or threatened action or proceeding before any Governmental Entity against or affecting any Credit Party or any Mineral Property, which could reasonably be expected to have a Material Adverse Effect on any Credit Party;

 

(g)

since December 31, 2010, the date of the Borrower’s most recent audited financial statements, a copy of which is attached in Schedule 6.1(g) attached hereto, there shall have been no change, event or occurrence that has had, or could reasonably be expected to have, a Material Adverse Effect on any Credit Party;

 

(h)

all data, reports, maps, surveys, financial statements, Instruments and other information requested by the Lender for its due diligence, including searches of all Lien filings, registrations and records deemed necessary by the Lender, and copies of any documents, filings and Instruments on file in such jurisdictions, shall have been provided, and the Lender shall have completed its technical, legal, financial, permitting, environmental and other due diligence investigation of the Credit Parties and the Mining Properties in scope, and with results, satisfactory to the Lender;

 

(i)

the Lender shall be satisfied with the form of the Credit Documents;

 

(j)

the Lender shall have received evidence that all Liens granted to the Lender pursuant to the Security Documents have been duly notarized, perfected, registered or recorded in all relevant jurisdictions deemed necessary by the Lender and constitute valid Liens having the Agreed Priority, with priority over all other Liens, subject only to Permitted Liens;

 

(k)

the Consent and the Option Agreement shall remain in full force and effect; and

 

(l)

each Credit Party has performed and complied with all agreements and conditions herein and in the other Credit Documents required to be performed and complied with on or prior to the date of the proposed Loan, except those agreements and conditions waived by the Lender.

 

(2)	Conditions Precedent to the Tranche Two Loan.  The obligation of the Lender to Advance the Tranche Two Loan is subject to satisfaction (or waiver by the Lender in its sole discretion) of each of the following conditions precedent:

 

(a)

the Lender or its counsel shall have received each of the Credit Documents to be executed and delivered by a Credit Party together with all such other approvals, opinions, documents or Instruments as the Lender may reasonably request;

 

(b)

all conditions set forth in Section 2.2 and Section 2.3, including delivery of an executed Borrowing Notice, shall have been satisfied, and all of the conditions set forth in Section 6.1(1) shall have been, and shall remain, satisfied;

 

(c)

the Tranche One Loan shall have been advanced to the Borrower;

 

(d)

the Santa Rosa Acquisition Agreement shall remain in full force and effect, without any default in performance thereunder, and the proceeds of the Tranche Two Loan will be used to make the payment necessary to maintain the Santa Rosa Acquisition Agreement in full force and effect;

 

(e)

the Borrower shall have entered into a definitive joint venture operating agreement per the terms of the Santa Rosa Acquisition Agreement and shall have delivered a copy of the same to the Lender; and

 

(f)

the Borrower shall have paid the second half of the Structuring Fee in accordance with Section 2.1 and all other fees, costs and expenses then due on and as of the date of this Agreement.

 

(3)	Conditions Precedent to the Tranche Three Loan.  The obligation of the Lender to Advance the Tranche Three Loan is subject to satisfaction (or waiver by the Lender in its sole discretion) of each of the following conditions precedent:

 

(a)

The Lender or its counsel shall have received each of the Credit Documents to be executed and delivered by a Credit Party together with all such other approvals, opinions, documents or Instruments as the Lender may reasonably request;

 

(b)

all conditions set forth in Section 2.2 and Section 2.3, including delivery of an executed Borrowing Notice, shall have been satisfied, and all of the conditions set forth in Section 6.1(1) shall have been, and shall remain, satisfied;

 

(c)

the Tranche One Loan and the Tranche Two Loan shall have been Advanced to the Borrower;

 

(d)

the Santa Rosa Acquisition Agreement shall remain in full force and effect, without any default in performance thereunder, and the proceeds of the Tranche Three Loan will be used to make the payment necessary to maintain the Santa Rosa Acquisition Agreement in full force and effect; and

 

(e)

the following Tranche Three Operational Milestone shall have been performed and completed to the satisfaction of the Lender:

 

(i)

immediately prior to the Borrower’s request for the Tranche Three Loan and with respect to the Mineral Ridge Project, the Mineral Ridge LLC shall have achieved “Commercial Production”, as that term is defined in that certain Operating Agreement of the Mineral Ridge LLC dated March 10, 2010, as amended;

 

(ii)

with respect to the Mineral Ridge Project, the Mineral Ridge LLC shall be producing gold from the Mineral Ridge Project resulting in average net revenue of not less than $600 per ounce of gold during each of the 6 months prior to the date of Advance of the Tranche Three Loan, with such net revenue to be calculated based on average on-site cash operating costs per ounce of gold and the average sales price per ounce of gold, in each of such months during such period, all as calculated in accordance with Prudent Mining Industry Practices; and

 

(iii)

with respect to the Santa Rosa Project, the Santa Rosa Subsidiary shall have completed and delivered a National Instrument 43-101 compliant report and mineral resource estimate that reflects at least 600,000 inferred ounces of gold being present at the Santa Rosa Project.

 

(4)	Conditions Precedent to the Tranche Four Loan.  The obligation of the Lender to Advance the Tranche Four Loan is subject to satisfaction (or waiver by the Lender in its sole discretion) of each of the following conditions precedent:

 

(a)

the Lender or its counsel shall have received each of the Credit Documents to be executed and delivered by a Credit Party together with all such other approvals, opinions, documents or Instruments as the Lender may reasonably request;

 

(b)

all conditions set forth in Section 2.2 and Section 2.3, including delivery of an executed Borrowing Notice, shall have been satisfied, and all of the conditions set forth in Section 6.1(1) shall have been, and shall remain, satisfied;

 

(c)

the Tranche One Loan, the Tranche Two Loan and the Tranche Three Loan shall have been Advanced to the Borrower;

 

(d)

the Santa Rosa Acquisition Agreement shall remain in full force and effect, without any default in performance thereunder;

 

(e)

the Borrower shall have closed an Equity Financing Transaction and received the proceeds therefrom;

 

(f)

the Borrower shall have delivered the Supply Agreement; and

 

(g)

the following Tranche Four Operational Milestone shall have been performed and completed to the satisfaction of the Lender:

 

(i)

immediately prior to the Borrower’s request for the Tranche Four Loan and with respect to the Mineral Ridge Project, the Mineral Ridge LLC shall be in “Commercial Production”, as that term is defined in that certain Operating Agreement of the Mineral Ridge LLC dated March 10, 2010, as amended;

 

 

(ii)

with respect to the Mineral Ridge Project, the Mineral Ridge LLC shall be producing gold from the Mineral Ridge Project resulting in average net revenue of not less than $600 per ounce of gold during each of the 6 months prior to the date of Advance of the Tranche Four Loan, with such net revenue to be calculated based on average on-site cash operating costs per ounce of gold and the average sales price per ounce of gold, in each of such months during such period, all as calculated in accordance with Prudent Mining Industry Practices; and

 

(iii)

with respect to the Santa Rosa Project, the Santa Rosa Subsidiary shall have completed and delivered a bankable feasibility study in form and of a scope generally acceptable (based on past precedent and transactions) to reputable Canadian “Schedule 1” financial institutions that provide financing to the mining industry.

 

(5)	Conditions Precedent to the Tranche Five Loan.  The obligation of the Lender to Advance the Tranche Five Loan is subject to satisfaction (or waiver by the Lender in its sole discretion) of each of the following conditions precedent:

 

(a)

the Lender or its counsel shall have received each of the Credit Documents to be executed and delivered by a Credit Party together with all such other approvals, opinions, documents or Instruments as the Lender may reasonably request;

 

(b)

all conditions set forth in Section 2.2 and Section 2.3, including delivery of an executed Borrowing Notice, shall have been satisfied, and all of the conditions set forth in Section 6.1(1) shall have been, and shall remain, satisfied;

 

(c)

the Tranche One Loan, the Tranche Two Loan, the Tranche Three Loan and the Tranche Four Loan shall have been Advanced to the Borrower;

 

(d)

the Santa Rosa Acquisition Agreement shall remain in full force and effect, without any default in performance thereunder;

 

(e)

at least twelve months shall have elapsed since the Effective Date;

 

(f)

the Mineral Ridge Project shall have produced not less than 4,000 ounces of gold per month for the four consecutive calendar months prior to the Borrower’s request for the Tranche Five Loan; and

 

(g)

the following Tranche Five Operational Milestone shall have been performed and completed to the satisfaction of the Lender:

 

(i)

with respect to the Mineral Ridge Project, the Mineral Ridge LLC shall be producing gold from the Mineral Ridge Project resulting in average net revenue of not less than $600 per ounce of gold during each of the 6 months prior to the date of Advance of the Tranche Five Loan, with such net revenue to be calculated based on average on-site cash operating costs per ounce of gold and the average sales price per ounce of gold, in each of such months during such period, all as calculated in accordance with Prudent Mining Industry Practices; and

 

 

(ii)

with respect to the Santa Rosa Project, the Santa Rosa Subsidiary shall have completed and obtained, or shall have provided evidence satisfactory to the Lender in its sole discretion of binding commitments for, the funding necessary to bring the Santa Rosa Project into commercial production as determined in accordance with Prudent Mining Industry Practices.

 

(6)

Conditions Precedent Relating to the Mineral Ridge Project.  To the extent that the Lender exercises its option under the Option Agreement with respect to the Mineral Ridge Project, and this Agreement remains in effect, the conditions precedent pertaining to operational milestones associated with the Mineral Ridge Project shall not be applicable.

 

(7)	Conditions Precedent to All Loans.  The obligation of the Lender to make any Loan hereunder is subject to the satisfaction of the following conditions precedent on the date of making such Loan:

 

(a)

the representations and warranties made by the Credit Parties herein, in the Security Documents or which are contained in any certificate furnished at any time under or in connection herewith shall be true and correct on and as of the date of such Loan as if made on and as of such date, except for representations and warranties expressly stated to relate to a specific earlier date;

 

(b)

no Default or Event of Default shall have occurred and be continuing on such date or after giving effect to such Loan;

 

(c)

immediately after giving effect to the making of any such Loan (and the application of the proceeds thereof), the aggregate sum of all outstanding Tranches shall not exceed the Commitment;

 

(d)

there shall not exist any litigation, investigation, bankruptcy or insolvency, injunction, order or claim affecting or relating to any Credit Party or any of its Subsidiaries, or any Project, which has had, or could reasonably be expected to have, a Material Adverse Effect, or which could reasonably be expected to affect the legality, validity or enforceability of this Agreement or any other Credit Document, that has not been settled, dismissed, vacated, discharged or terminated;

 

(e)

no Borrower, Credit Party or Mineral Property shall have suffered a Material Adverse Effect and the Lender has not become aware of any facts which, in the Lender’s opinion, could have a Material Adverse Effect; and

 

(f)

all conditions set forth in Section 2.2,  Section 2.3 (including delivery of an executed Borrowing Notice) and Section 6.1, shall have been, and shall remain, satisfied to the satisfaction of the Lender in its sole discretion; the Borrower’s delivery of a Borrowing Notice shall constitute the Borrower’s representation and warranty that all such conditions precedent have been, and remain, satisfied.

 

Each Borrower request for a Loan shall be deemed to constitute a representation and warranty by the Borrower as of the date of such Loan that the applicable conditions in paragraphs (a) through (f) of this Section have been, and remain, satisfied.

 

 

The making of an Advance of any Loan or otherwise giving effect to any Borrowing Notice, without the fulfilment of one or more conditions set forth herein, shall not constitute a waiver of any condition and the Lender reserves the right to require fulfilment of such condition in connection with any subsequent Borrowing Notice or Advance of a Loan.

 

 

 

Each of the Credit Parties, for itself and on behalf of each of its Subsidiaries, hereby represents and warrants to the Lender, acknowledging and confirming that the Lender is relying on such representations and warranties without independent inquiry in entering into this Agreement and Advancing any Loan that:

 

(a)

Incorporation and Qualification.  The Borrower is a corporation duly incorporated, organized and validly existing under the laws of the State of Nevada.  Each other Credit Party is a corporation duly incorporated, organized and validly existing under the laws of its jurisdiction of incorporation as set forth in Schedule 7.1(a).  Each of the Credit Parties is qualified, licensed or registered to carry on business under the Applicable Laws in all jurisdictions in which such qualification, licensing or registration is necessary.

 

(b)

Corporate Power.  Each of the Credit Parties has all requisite corporate power and authority to (i) own, lease and operate its properties and assets (including the Mining Properties) and to carry on its business as now being conducted by it, and (ii) enter into and perform its obligations under the Credit Documents to which it is a party.

 

(c)

Conflict with Other Instruments.  The execution and delivery by the Credit Parties and the performance of its obligations under, and compliance with the terms, conditions and provisions of, the Credit Documents to which they are a party, will not (i) conflict with or result in a breach of any of the terms or conditions of (w) its constating documents or by-laws, (x) any Applicable Law, (y) any Instrument or contractual restriction binding on or affecting it or its properties, or (z) any judgment, injunction, determination or award which is binding on it, or (ii) result in, require or permit (x) the imposition of any Lien in, on or with respect to any of its assets or properties (except in favour of the Lender), (y) the acceleration of the maturity of any Debt binding on or affecting any Credit Party, or (z) any third party to terminate or acquire material rights under any Material Contract.

 

(d)

Corporate Action, Governmental Approvals, etc.  The execution and delivery of each of the Credit Documents by each Credit Party and the performance by each Credit Party of its obligations under the Credit Documents, have been duly authorized by all necessary corporate action including, without limitation, the obtaining of all necessary shareholder consents.  No authorization, consent, approval, registration, qualification, designation, declaration or filing with any Governmental Entity or other Person is or was necessary in connection with the execution, delivery and performance of the obligations under the Credit Documents except as are in full force and effect, unamended, at the date of this Agreement.

 

(e)

Execution and Binding Obligation.  This Agreement and the other Credit Documents have been duly executed and delivered by each of the Credit Parties which is a party thereto and constitute legal, valid and binding obligations of such Credit Party enforceable against it in accordance with their respective terms, subject only to any limitation under Applicable Laws relating to (i) bankruptcy, insolvency, arrangement or creditors’ rights generally, and (ii) the discretion that a court may exercise in the granting of equitable remedies.

 

(f)

No Default or Event of Default.  No Default or Event of Default has occurred which is continuing.  As of the Effective Date, no Default or Event of Default has occurred and is continuing under the Existing Agreement.

 

(g)

All Authorizations Obtained and Registrations Made.  The Security Documents are effective to create in favour of the Lender, a legal, valid and  perfected Lien in the Collateral with the Agreed Priority and the proceeds thereof enforceable against third parties and any trustee in bankruptcy and/or any other similar official. All Authorizations and registrations necessary or of advantage to permit each Credit Party to (i) execute, deliver and perform each Credit Document to which it is a party, (ii) create senior first priority perfected Liens (enforceable against third parties and any trustee in bankruptcy and/or any other similar official) in the Collateral and the proceeds thereof, (iii) consummate the transactions contemplated by the Credit Documents, (iv) own its undertaking, property and assets, and (v) carry on its business (including Authorizations and registrations necessary or of advantage to permit the Borrower to carry on the Business), have been obtained or effected and are in full force and effect.  Each Credit Party is in compliance with the requirements of all such Authorizations and registrations and there are no investigations or proceedings existing, pending or, to the Borrower’s knowledge, threatened which could result in the revocation, cancellation, suspension or any adverse modification of any of such Authorizations and registrations.  The Security Documents constitute a fully perfected security interest or fixed charge on all right, title and interest of each Credit Party in the assets and/or property described therein as security for the obligations specified therein in each case prior and superior in right to any other Person, with the Agreed Priority, other than Permitted Liens.

 

(h)

Compliance with Contracts.  The Borrower is in material compliance with, and has at all times complied in all material respects, with each of the contractual obligations (including those under each Material Contract) owing by it to its customers, suppliers and other Persons.  No contract or other Instrument to which the Borrower is a party is in material default nor has any counterparty thereto claimed or asserted a material default or breach thereof.

 

(i)

Material Contracts.  Each Material Contract has been duly executed and delivered by each Credit Party and each other Person party thereto and constitutes a legal, valid and binding obligation of such Credit Party and the counterparty thereto enforceable against it in accordance with its respective terms, subject only to any limitation under Applicable Law relating to (i) bankruptcy, insolvency, arrangement or creditors’ rights generally, and (ii) the discretion that a court may exercise in the granting of equitable remedies.  Each Material Contract is in full force and effect and no default on the part of any party thereto has occurred thereunder.  All Authorizations necessary to permit each party to perform its obligations under each Material Contract and consummate the transactions contemplated thereby are and will continue to be in full force and effect and there are no investigations or proceedings existing, pending or threatened which could result in the revocation, cancellation, suspension or adverse modification of such Authorization.

 

 

(j)

Ownership and Use of Property.

 

(i)

Schedule 1.1(a) accurately and completely sets forth and describes all real property owned, held or controlled by the Borrower, including all concessions, fee interests, patented mining claims, unpatented mining claims, unpatented millsite claims, leases and other real property interests;

 

(ii)

Except as set forth in Schedule 1.1(a), the Borrower has good and marketable title to all fee lands, patented mining claims, and unpatented mining claims and millsite claims set forth on Schedule 1.1(a), which title is, subject to Permitted Liens, 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 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;

 

(iii)

With respect to the unpatented mining claims and unpatented millsite claims listed on the attached Schedule 1.1(a) and except as specifically set forth therein: (A) the Borrower is in exclusive possession thereof, free and clear of all Liens, claims, 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, 2010, 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 Borrower’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.  In addition, with respect to each of the unpatented mining claims listed on Schedule 1.1(a), the Borrower represents that, to its knowledge, such unpatented mining claims have been relocated or remonumented as necessary, and that evidence of such relocation or remonumentation has been timely and properly recorded, all in compliance with the provisions of N.R.S. Chapter 517;

 

(iv)

As to the patented mining claims listed on Schedule 1.1(a), except as set forth therein: (A) the Borrower owns such claims free and clear of all Liens, claims, encumbrances, royalties or other burdens on production, except for Permitted Liens; (B) the Borrower is in exclusive possession of those claims; and (C) there are no actions or administrative or other proceedings pending or to the Borrower’s knowledge threatened against those claims;

 

(v)

Each Credit Party, and each Subsidiary thereof, has good and marketable title to its owned real property and has valid and effective rights to its leased property, free and clear of Liens, except for Permitted Liens;

 

(vi)

All taxes, charges, rates, levies and assessments that, if unpaid, would create a Lien or charge on any Mining Property or any portion thereof, have been paid in full and will be paid in full;

 

(vii)

To the Borrower’s Knowledge, all contractors, subcontractors, agents and other Persons providing services, materials or labor on or for the benefit of any Mining Property have been paid in a timely manner for all work performed or services, goods or labor provided, on or with respect thereto, except where such payments are subject to a bona fide dispute, which is being diligently pursued by a Credit Party pursuant to appropriate procedures; and

 

(viii)

The Security Documents create, or upon their execution and delivery they will create, valid and effective Liens in and on the Collateral purported to be covered thereby, which Liens are currently (or will be upon the filing of appropriate Instruments with appropriate Governmental Authorities) perfected Liens with the Agreed Priority.

 

(k)

Ownership of Subject Properties.  None of the Borrower or any of the other Credit Parties (i) owns any real property other than the Owned Properties, (ii) is bound by any agreement to own or lease any real property other than the Leases, or (iii) has leased any of its Owned Properties.

 

(l)

Leased Properties.  Each Lease is in good standing and all amounts owing under each Lease have been paid by the Borrower, or a Credit Party as applicable.

 

(m)

Work Orders.  There are no outstanding work orders, enforcement orders, compliance orders or other similar notices or requirements by or from a Governmental Entity relating to any of the Subject Properties, nor does any of the Credit Parties have notice of any possible impending or future work order, enforcement orders, compliance orders or other similar notices or requirements.

 

(n)

Expropriation.  No part of any of the Subject Properties or the Buildings and Fixtures located on the Subject Properties has been subject to an Expropriation Event, no written notice or proceeding in respect of an Expropriation Event has been given or commenced, nor is any Credit Party aware of any intent or proposal to give any such notice or commence any proceedings.

 

(o)

Encroachments.  The Buildings and Fixtures located at each of the Subject Properties are located entirely within such Subject Property and are in conformity with all Applicable Laws, including zoning, building, and set-back codes and coverage requirements.  There are no encroachments upon any of the Subject Properties.

 

 

(p)

Compliance with Laws.  Each Credit Party is in compliance in all material respects with all Applicable Laws.  Each of the Mining Properties has been used, explored and operated by the Borrower and each of the other Credit Parties in compliance in all material respects with all Applicable Laws.

 

(q)

No Default.  None of the Credit Parties is in violation of any of its constating documents, by-laws or any shareholders’ agreement applicable to it.

 

(r)

No Material Adverse Agreements.  None of the Credit Parties is a party to any agreement or instrument or subject to any restriction (including any restriction set forth in its constating documents, by-laws or any shareholders’ agreement applicable to it) which has had, or to the best of its knowledge in the future may have, a Material Adverse Effect.

 

(s)

Environmental Compliance.

 

(i)

the Mining Properties have been owned, developed, operated, leased, reclaimed and utilized in material compliance with all Applicable Laws, including Environmental Laws;

 

(ii)

there are no outstanding or pending consent decrees, clean-up orders, mitigation orders, compliance orders, remediation orders or other material orders, decrees, judgments or other administrative or judicial requirements outstanding under any Environmental Law with respect to any Mining Property;

 

(iii)

no Credit Party or any Subsidiary thereof has received any written or actual notice of: material violation, alleged material violation, material non-compliance, investigation, liability or potential liability, or request for information, with respect to Environmental Laws, Hazardous Materials or other environmental matters with regard to any Mining Property, nor does any Credit Party have knowledge or reason to believe that any such notice will be received or is being threatened; and

 

(iv)

with respect to the Mining Properties, there have been no past, and there are no pending or threatened, lawsuits, claims, complaints, injunctions, or any other governmental or judicial actions or proceedings with respect to any alleged material violation of any Applicable Laws, including Environmental Laws, or any Release or alleged Release of Hazardous Materials.

 

(t)

Pension Plans.  None of the Credit Parties maintains any Pension Plan or has any liability or threatened liability under or pursuant to a Pension Plan.

 

(u)

Labour Matters.  There are no existing or threatened strikes, lock-outs or other disputes relating to any collective bargaining agreement to which any Credit Party is a party.  No Credit Party is subject to or party to a collective bargaining agreement with respect to any employees.

 

(v)

Books and Records.  All books and records of the Credit Parties have been fully, properly and accurately kept and completed and there are no inaccuracies or discrepancies of any kind contained or reflected therein.  Each of the Credit Parties’ books and records and other data and information are available to it in the ordinary course of its business.

 

 

(w)

Tax Liability.  Each of the Credit Parties has filed all tax and information returns which are required to be filed.  Except as set forth in Schedule 7.1(w), each of the Credit Parties has paid all taxes, interest and penalties, if any, which have become due pursuant to such returns or pursuant to any assessment received by it other than those in respect of which liability based on such returns is being contested in good faith and by appropriate proceedings where adequate reserves have been established in accordance with GAAP.  Adequate provision for payment has been made for taxes not yet due.  There are no tax disputes existing or pending involving any of the Credit Parties or the Business.

 

(x)

Corporate Structure.  Except as set forth in Schedule 7.1(x), at the date of this Agreement:

 

(i)

the Borrower has no subsidiaries;

 

(ii)

there are no outstanding warrants, options or other agreements which require or may require the issuance of any equity interests of the Borrower or the issuance of any debt or securities convertible into equity interests of the Borrower and there are no outstanding debt or securities convertible into equity interests of the Borrower; and

 

(iii)

the Borrower is not, directly or indirectly, a member of, or a partner or participant in, any partnership, joint venture or syndicate.

 

(y)

Subsidiaries, etc.  Each of the Credit Parties is a corporation.  None of the shareholders of the Credit Parties are party to any shareholder’s, voting or other agreement relating to shares of any of the Credit Parties owned by such shareholder.

 

(z)

Financial Statements.  The December 31, 2010 audited financial statements of the Borrower, copies of which have been furnished to the Lender prior to the date hereof, fairly present the consolidated financial position of the Borrower at such date and the consolidated results of the operations and changes in financial position of the Borrower for such period, all in accordance with GAAP.

 

(aa)

Debt.  Except as set forth in Schedule 7.1(aa), no Credit Party has any Debt except as permitted pursuant to Section 8.2(a) of this Agreement.  There exists no default under the provisions of any instrument evidencing such Debt or of any agreement relating thereto.

 

(bb)

Insurance.  The Credit Parties maintain insurance of types and in amounts which are customarily maintained by other companies applying Prudent Mining Industry Practices, and the Credit Parties otherwise have and maintains insurance for their Business and the Mining Properties in compliance with Section 8.1(m).

 

(cc)

No Litigation.  Except as set forth in Schedule 7.1(cc), there are no actions, suits or proceedings pending, taken or, to the knowledge of any Credit Party, threatened, before or by any Governmental Entity or by or against any elected or appointed public official or private person in any jurisdiction, which (i) challenges, or to the knowledge of any Credit Party has been threatened, the validity or propriety of the transactions contemplated under the Credit Documents or the documents, instruments and agreements executed or delivered in connection therewith or related thereto, (ii) alleges the violation of any Applicable Law, (iii) involves any Material Contract, (iv) challenges or threatens the validity of all or any portion of any Mining Claim or any Credit Party’s ownership thereof or claim thereto, or (v)  could reasonably be expected to result, either in any case or in the aggregate, in a Material Adverse Effect.

 

 

(dd)

Schedule Disclosure.  At the date of this Agreement:

 

(i)

Schedule 7.1(dd)(i) is a list of all jurisdictions (or registration districts within such jurisdictions) in which each Credit Party (i) has its chief executive office, head office, registered office and chief place of business, (ii) carries on business, (iii) has any account debtors, or (iv) stores any tangible personal property (except for goods in transit in the ordinary course of business);

 

(ii)

Schedule 7.1(dd)(ii) is a list of all Authorizations which are material or necessary to any of the Credit Parties or the ownership, management and operation of the Mining Properties;

 

(iii)

Schedule 7.1(dd)(iii) is a list of all trademarks, tradenames, copyrights and patents (and the registration particulars thereof) which are material or necessary to any the Credit Parties;

 

(iv)

Schedule 7.1(dd)(iv) is a list of all actions, suits, arbitrations or proceedings pending, taken or to the Borrower’s knowledge, threatened, before or by any Governmental Entity or other Person affecting any of the Credit Parties;

 

(v)

Schedule 7.1(dd)(v) contains a list of all agreements, contracts or similar instruments to which a Credit Party is a party or to which any of their property or assets could be subject, for which breach, non-performance, cancellation or failure to renew could have a Material Adverse Effect;

 

(vi)

Schedule 7.1(dd)(vi) contains a list of all labour agreements to which a Credit Party is a party;

 

(vii)

Schedule 7.1(dd)(vii) shows the complete bank account details for the Borrower.

 

(ee)

Insolvency.  No Credit Party has:

 

(i)

not generally paid its debts as they become due;

 

(ii)

admitted its inability to pay its debts generally;

 

(iii)

made a general assignment for the benefit of creditors;

 

(iv)

committed an act of bankruptcy (within the meaning of the Bankruptcy Code (United States), the Bankruptcy and Insolvency Act (Canada) or any similar legislation or Applicable Law);

 

(v)

instituted any proceedings, or had instituted any proceedings against it (x) seeking to adjudicate it a bankrupt or insolvent or (y) seeking liquidation, winding-up, reorganization, compromise, arrangement, adjustment, protection, relief or composition of it or of its debts under any Applicable Law relating to bankruptcy, insolvency or reorganization or relief of debtors or other similar matters or (z) seeking the appointment of a receiver, manager, receiver and manager, trustee, custodian or other similar official for it or for any part of its undertaking, property or assets; or

 

 

(vi)

taken any corporate action to authorize any of the actions set forth above in this Section 7.1(ee).

 

(ff)

No Liabilities.  Except as reflected or reserved against in the balance sheet of the December 31, 2010 audited financial statements and the June 30, 2011 quarterly unaudited financial statements, none of the Credit Parties has liabilities or obligations of any nature (whether absolute, accrued, contingent or otherwise) except for current liabilities incurred in the ordinary course since December 31, 2010.

 

(gg)

Broker’s Fees. Except as set forth in Schedule 7.1(gg), no broker’s or finder’s fee or commissions will be payable by reason of any action of the Borrower with respect to any of the transactions contemplated hereby.

 

(hh)

Counter-Terrorism Regulations and Anti-Money Laundering.  The Borrower is and will remain in compliance with all applicable economic sanctions laws and all applicable anti-money laundering and counter-terrorism financing laws, including the provisions of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada), the Criminal Code (Canada), the United Nations Act (Canada), the Trading with the Enemy Act, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B Chapter V, as amended) and any other enabling legislation or executive order relating thereto, the Patriot Act (United States), and other Applicable Laws relating to “know your customer” and anti-money laundering rules and regulation which apply to it.  None of the Credit Parties are (i) a Person designated by the Canadian government or the United States government on any list set out in the United Nations, Al-Qaida and Taliban Regulations, the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism or the Criminal Code (collectively, the “Terrorist Lists”) with which a Person cannot deal with or otherwise engage in business transactions, (ii) is a Person who is otherwise the target of United States or Canadian economic sanctions laws or (iii) is controlled by (including without limitation by virtue of such person being a director or owning voting shares or interests), or acts, directly or indirectly, for or on behalf of, any person or entity on any Terrorist List or a foreign government that is the target of United States or Canadian economic sanctions prohibitions such that the entry into, or performance under, this Agreement or any other Credit Document would be prohibited under Applicable Law.  No part of the proceeds of any Advance will be used directly or indirectly for any payments to any government official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of any Applicable Law.

 

(ii)

No Cease Trade Orders.  No order or ruling suspending the sale or ceasing the trading in any securities of the Borrower has been issued by any securities regulatory authority and is continuing in effect and no proceedings for that purpose have been instituted or, to the best knowledge of the Borrower, are pending, contemplated or threatened by any regulatory authority.

 

(jj)

Affiliate Transactions.  The Borrower is not conducting, permitting or suffering to be conducted, any transaction with any Affiliate except as set forth on Schedule 7.1(jj) (collectively, the “Permitted Affiliate Transactions”).

 

(kk)

Operation of Projects.  The Credit Parties have heretofore made available to the Lender all feasibility studies and geological, reserve, resource, metallurgical, engineering and financial data and evaluations of each Mineral Property prepared by or for the benefit of any Credit Party or otherwise in the possession of any Credit Party.  The Credit Parties are not aware of any material inaccuracy or omission in such information which has not been disclosed to the Lender in writing.

 

(ll)

Project Permits.  Except for Authorizations which are to be obtained by a Credit Party from time to time in the ordinary course of business and the absence or delay of which will not materially interfere with or delay development and operation of a Mineral Property, all Authorizations of Governmental Authorities which are necessary to develop and operate the Mining Properties and to undertake and conduct the business of the Credit Parties or any Subsidiary thereof as it is currently being conducted are identified in Schedule 7.1(ll) hereto (collectively, the “Project Permits”).  The Borrower has obtained all Project Permits necessary to conduct mining operations at the Mining Properties and all such Project Permits are in full force and effect in accordance with their terms, free of material defaults.  Except as set forth in Schedule 7.1(ll), all Project Permits necessary to develop, build and operate the Santa Rosa Project have been obtained and are in full force and effect in accordance with their terms, free of material defaults, and no written notice alleging a breach or default under any of the Project Permits or challenging or questioning the validity of any such Project Permit has been delivered, except to the extent disclosed to the Lender in Schedule 7.1(ll).  The Credit Parties have sufficient, legally-enforceable rights of access, entry and egress to and from the Mining Properties, including rights sufficient to develop and operate the Mining Properties, as currently contemplated.

 

(mm)

Disclosure.  All forecasts, projections and other written information supplied to the Lender were prepared in good faith and adequately disclosed all relevant assumptions, are true and accurate in all respects, and were based on fair assumptions.  There is no fact known to any Credit Party which could have a Material Adverse Effect and which has not been fully disclosed to the Lender.  None of the representations or warranties made by the Credit Parties in the Credit Documents as of the date such representations and warranties are made or deemed made, and none of the statements contained in each written exhibit, report, statement or certificate furnished by or on behalf of the Credit Parties in connection with the Credit Documents, contains to the knowledge of the Borrower, acting reasonably and diligently, any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading as of the time when made or delivered which would reasonably be expected to have a Material Adverse Effect.

 

 

The representations and warranties in this Agreement and in any certificates or documents delivered to the Lender in connection therewith shall not merge in or be prejudiced by and shall survive any Advance and shall continue in full force and effect so long as any amounts are owing by the Borrower to the Lender under this Agreement.

 

 

 

Until the full and final payment and performance of the Obligations and the termination of this Agreement, each of the Credit Parties shall perform all covenants in this Section 8.1:

 

(a)

Financial Statements, Reports and Other Information.  The Borrower shall deliver, or arrange for the delivery, to the Lender:

 

(i)

as soon as practicable and in any event within 45 days after the end of each quarter of each year, (A) the Borrower’s unaudited quarterly financial statements for the Financial Year to such quarter end, prepared in accordance with GAAP and (B) together with each such delivery of financial statements pursuant to this paragraph, a duly completed and executed Compliance Certificate relating thereto;

 

(ii)

as soon as practicable and in any event within 90 days after the end of each Financial Year, (A) the annual consolidated financial statements of the Borrower prepared in accordance with GAAP, and (B) together with each such delivery of financial statements pursuant to this paragraph, a duly completed and executed Compliance Certificate relating thereto;

 

(iii)

as soon as practicable, such other information in the possession of the Credit Parties with respect to their financial condition, business and/or operations including copies of all financial statements, proxy statements, material reports and other material disclosure information which the Credit Parties shall send or make available to any of its shareholders or which it is required or elects to file with any Governmental Entity;

 

(iv)

as soon as practicable but no later than ten (10) days after the end of each calendar month, the Credit Parties shall submit to the Lender a written report concerning the business and activities of the Borrower, the status of the Santa Rosa Project, the Borrower’s other Mining Properties and all activities and occurrences with respect thereto during the preceding calendar month, to include a summary description of actions taken with respect to the Credit Parties, the Santa Rosa Project, and the Borrower’s other Mining Properties, a description of actual expenditures (as compared to the mine plan) and such other data and information reasonably requested by the Lender, with such monthly report to be delivered in form and substance reasonably acceptable to the Lender;

 

(v)

promptly after receiving a request from the Lender, such other certificates, reports, status updates, data and information respecting the condition or operations, financial or otherwise, of any Credit Party, the Santa Rosa Project and any other Project as the Lender may from time to time request, with the same to be delivered in form and substance reasonably acceptable to the Lender; and

 

(vi)

all reports, certificates, status updates and other information delivered to the Lender shall be true, accurate and complete in all material respects and shall not contain any material misstatement of fact or omit to state a material fact, and all projections contained in any such reports, certificates, status updates and otherwise shall be based on information which, when delivered, was true, correct and complete in all material respects and shall fairly present such Credit Party’s then-current estimate of its future business, operations and affairs;  the Credit Parties shall provide the foregoing certification in writing upon delivery of any report, certificate, status update or other information and shall be deemed to have done so to the extent that any Credit Party fails to provide written certification thereof.

 

 

(b)

Notice of Litigation.  Give notice to the Lender as soon as it becomes aware of the commencement of any action, litigation, proceeding, arbitration, investigation, grievance or dispute affecting any Credit Party, any Mining Property, any Material Contract or any Affairs of a Credit Party, together with copies of the court filings or other documents associated therewith.

 

(c)

Notice of Default.  Give notice to the Lender as soon as it becomes aware of any Default or Event of Default or any event or circumstance which could have a Material Adverse Effect.

 

(d)

Notice of Environmental Matters.  Promptly after the filing or receipt thereof, copies of (i) all new Project Permits, together with a description thereof and (ii) all notices with or from any Governmental Entity alleging noncompliance with or violation of any Environmental Law or Project Permit and any correspondence in response thereto.

 

(e)

Corporate Existence.  Preserve and maintain, and cause each of the Credit Parties to preserve and maintain its corporate existence.

 

(f)

Compliance with Laws, etc.  The Credit Parties shall comply, and shall cause each of their Subsidiaries, agents and third party contractors to comply with, all Applicable Laws.

 

(g)

Comply with Environmental Laws.  Each Credit Party shall own, operate and manage its business and the Mining Properties in compliance with all Applicable Laws, including Environmental Laws, and each Credit Party shall, and shall cause its agents and third party contractors to, (i) manage and operate the Mining Properties and the Business in compliance with all Environmental Laws, (ii) maintain all Authorizations and make all registrations required under all Environmental Laws in relation to the Mining Properties and the Business and remain in compliance therewith, (iii) store, treat, transport, generate, otherwise handle and dispose of all Hazardous Materials and Waste owned, managed or controlled by any of the Credit Parties in compliance with all Environmental Laws, and (iv) comply with all recommendations contained in any environmental impact assessment.

 

(h)

Conduct of Operations and Maintenance of Properties.  The Credit Parties shall engage solely, and will cause each Credit Party to engage solely, in the business of developing and operating the Mining Properties, and other prospective mining projects, and in activities incident thereto, in accordance with Prudent Mining Industry Practices.  The Credit Parties shall use commercially reasonable efforts to explore, investigate, develop, mine, operate and use each Mining Property in accordance with Prudent Mining Industry Practices.  The Credit Parties shall diligently and continuously work to develop and operate the Mining Properties.  The Credit Parties shall from time to time, make and cause to be made, all repairs, renewals, replacements, additions and improvements to the Mining Properties and their properties and assets, such that the Borrower and the other Credit Parties may properly and advantageously conduct their business at all times in accordance with Prudent Mining Industry Practices.

 

 

(i)

Payment of Taxes and Claims.  Pay, or cause to be paid and cause each of the Credit Parties to pay or cause to be paid, when due, (i) all taxes, assessments and governmental charges or levies imposed upon it or upon its income, sales, capital or profit or any other property belonging to any of the Credit Parties, and (ii) all claims which, if unpaid, might by Applicable Law become a Lien upon any of the Credit Parties’ property or assets, except any such tax, assessment, charge, levy or claim which is being contested in good faith and by proper proceedings and in respect of which the Borrower or any of the Credit Parties have established adequate reserves, satisfactory to the Lender, in accordance with GAAP or which are Permitted Liens and which could not, individually or collectively, in the Lender’s opinion, have a Material Adverse Effect.

 

(j)

Keeping of Books.  Keep, and cause each of the other Credit Parties to keep, proper books of record and account, in which full and correct entries shall be made in respect of its business and shall promptly notify the Lender of any material change in accounting practices or procedures implemented by a Credit Party relative to such practices and procedures as of the execution of this Agreement.

 

(k)

Updated Banking Information. The Borrower shall promptly notify the Lender of any change in bank location or accounts, and shall at all times, following a request by the Lender for the establishment of a Borrower Control Agreement, ensure that all its bank accounts remain subject to the Borrower Control Agreement.

 

(l)

Rights of Inspection.  At any time and from time to time upon reasonable request, permit any employee, officer, agent or other representative of the Lender, at the expense of the Borrower (for up to one examination per quarter per year during the term of this Agreement, unless there has been an Event of Default, in which case, all examinations during such period shall be at the expense of the Borrower), to examine the Mining Properties and make copies of any abstracts from the records and books of account of any Credit Party and to discuss any of its Affairs with any of its directors, officers, employees, agents, representatives or auditors.  At any time and from time to time, upon request of the Lender, permit an independent technical engineer selected by the Lender and any officer, agent or other representative of the Lender, at the expense of the Borrower (for up to one inspection per quarter per year during the term of this Agreement, unless there has been an Event of Default, in which case, all inspections during such period shall be at the expense of the Borrower), to inspect the Mining Properties and the Business and discuss any of the Affairs of any Credit Party with any of its personnel and third party contractors.

 

(m)

Maintenance of Insurance.  Each Credit Party shall maintain with financially sound and reputable insurance companies (i) insurance on all its property and assets insuring against at least such risks as are usually insured against in the same or a similar business and as required by Applicable Laws and (ii) liability insurance covering at least such risks as are usually insured against in the same or a similar business and as required by Applicable Laws; and furnish to the Lender, upon request, full information as to the insurance carried.  The present insurance coverage of the Credit Parties as of the Closing Date is outlined as to carrier, policy number, expiration date, type and amount on Schedule 8.1(m).   Upon the request of the Lender from time to time, each Credit Party shall deliver to the Lender evidence of the insurance then in effect, including a detailed list of such insurance containing the information set forth on Schedule 8.1(m).  The insurance policies with respect to the Mining Properties shall name the Lender as loss payee or additional insured, as appropriate, and shall contain an endorsement providing that such insurance cannot be terminated or amended without at least thirty (30) days prior notice to the Lender.

 

 

(n)

Authorizations.  Obtain and maintain in full force all Authorizations necessary for the exploration and development of the Mining Properties and the performance of the Credit Parties’ obligations and perform and observe all covenants, conditions and restrictions contained in, or imposed on it by, any Authorization and/or Material Contract.

 

(o)

Material Adverse Effect.  Immediately notify the Lender of any event or circumstance or any potential event or circumstance that could have a Material Adverse Effect.

 

(p)

Deliver Additional Material Contracts.  Notify the Lender within five Business Days upon the entering into of any new Material Contract and deliver (i) a certified copy of each such Material Contract to the Lender within five Business Days of the execution and delivery by the parties of such Material Contract, and (ii) upon the request of the Lender, a Direct Agreement in respect of such Material Contract within ten days of the Lender’s request.

 

(q)

Borrower’s Account.  Forthwith upon receipt, pay all cash receipts from the Mining Properties or the Business (including all proceeds of insurance and reinsurance) into the Borrower’s Account.  Direct all parties to the Material Contracts, insurers and all other Persons from whom any Credit Party may become entitled to receive payments (including proceeds arising from sale of production, business interruption insurance, liquidated damages under any Material Contract, any performance bond, letter of credit or guarantee, any warranty claim, the sale of, or grant of any interest in any part of the Mining Properties, any expropriation or property insurance) to pay all such amounts directly to the Borrower’s Account.  No withdrawals or transfers will be permitted from the Borrower’s Account except for payment of the following amounts in the following order of priority and otherwise as agreed to by the Lender:

 

(i)

first, interest, fees, principal and any other amounts then due and payable to the Lender under the Credit Documents; and

 

(ii)

second, for payments of all other amounts permitted to be paid pursuant to this Agreement.

 

(r)

Perfection and Protection of Security.  Perform, execute and deliver all acts, agreements and other documents as may be requested by the Lender at any time to register, file, signify, publish, perfect, maintain, protect, and enforce the Security or grant a security interest thereon including, without limitation, (i) executing, notarizing, recording and filing of the Security Documents and financing or continuation statements in connection therewith, in form and substance satisfactory to the Lender, (ii) delivering to the Lender the originals of all instruments, documents and chattel paper and all other Collateral of which the Lender determines it should have physical possession in order to perfect and protect the Security, duly endorsed or assigned to the Lender, (iii) delivering to the Lender warehouse receipts covering any portion of the Collateral located in warehouses and for which warehouse receipts are listed, (iv) placing notations on its books of account to disclose the Security, (v) delivering to the Lender all letters of credit on which the Credit Party is named beneficiary, and (vi) taking such other steps as are deemed reasonably necessary by the Lender to maintain the Security.

 

 

(s)

Additional Security.  Promptly upon the request of the Lender, the Borrower shall, and shall ensure that each other Credit Party shall, execute, deliver, create and perfect any and all Security which the Lender may require in relation to any assets of any Credit Party, the Lender may designate together with all related documents, Instruments, registrations and other evidence the Lender may require to ensure that such Security creates a legal, valid and first priority perfected security interest in relation to such assets, enforceable against third parties and any trustee in bankruptcy.

 

(t)

Further Assurances.  Upon request of the Lender, execute and deliver, or cause to be executed and delivered, to the Lender such further Instruments and do and cause to be done such further acts as may be necessary or proper in the opinion of the Lender, acting reasonably, to carry out more effectively the provisions and purposes of the Credit Documents.

 

(u)

Purpose of Credit Facility.  Ensure each Advance of a Loan shall be used solely for the purposes set out in Section 2.5 and otherwise as set forth in the applicable Borrowing Notice.

 

(v)

Common Shares.

 

(i)

The Borrower shall comply with all Applicable Securities Legislation.

 

(ii)

The Borrower shall maintain the listing of its Common Shares on the Exchange.

 

(w)

Additional Guarantors.  The Borrower shall ensure that on or prior to any Person becoming a Subsidiary:

 

(i)

such Person shall execute and deliver in favour of the Lender a guarantee of all the obligations of the Credit Parties under this Agreement and all the other Credit Documents;

 

(ii)

such Person shall grant any and all Security as the Lender may require;

 

(iii)

all shares in the capital of such Person are pledged to the Lender (and all original share certificates are delivered to the Lender, duly endorsed in blank or accompanied by a duly executed stock power transfer form) and all directors of such Person have delivered to the Lender resignations duly executed but undated;

 

(iv)

the Lender has received evidence of registration or other perfection of such Security and/or pledge in such jurisdictions as the Lender may require to ensure that such Security and/or pledge creates legal, valid, binding, enforceable and first-priority security interests in the assets or shares to which such Security or pledge relates, enforceable against third parties, trustees in bankruptcy and similar officials;

 

(v)

the Lender has received all discharges, subordination agreements, waivers and confirmations as the Lender may require to ensure that all obligations under the Credit Documents are secured by first priority Liens on the property and assets of such Person; and

 

 

(vi)

the Lender has received such other evidence, certificates and documentation as the Lender may request;

 

in each case, in form and substance satisfactory to the Lender.

 

(x)

Defense of Title and Rights.  Each Credit Party shall preserve and defend its ownership of and all right, title and interest in its assets, properties and rights, including each Mining Property, as such title is represented and warranted in Section 7.1(j).  Each Credit Party shall defend, and will cause the other Credit Parties to defend, the Liens in favor of the Lender under the Security Documents, and the Credit Parties shall maintain and preserve such Liens as perfected Liens with their Agreed Priority.  Each Credit Party shall ensure that the Security Documents shall at all times cover and extend to all assets, properties, rights and interests of each Credit Party or Subsidiary.

 

(y)

Post Effective Date Collateral and Document Deliveries.

 

(i)

The Borrower shall cause its Subsidiary Ra Resources Ltd. to execute and deliver to the Lender a Guarantee, a Security Agreement and such other Credit Documents as are required by the Lender by no later than forty-five (45) days following the Effective Date.

 

(ii)

The Borrower shall deliver to the Lender all certificates or other evidence of its ownership of the Santa Rosa Subsidiary as the Borrower earns an irrevocable interest in and to the Santa Rosa Subsidiary, and the Borrower shall otherwise take all actions and deliver all Instruments necessary or appropriate to evidence and perfect its pledge of its ownership of the Santa Rosa Subsidiary.

 

(iii)

The Borrower shall deliver to the Lender a Gold Supply Agreement, substantially in the form of Exhibit C hereto, executed by the Borrower and the Santa Rosa Subsidiary, by no later than the date that is twelve (12) months following the Effective Date.

 

 

Except with the written consent of the Lender (acting in its sole discretion), until the full and final payment and performance of the Obligations and the termination of this Agreement, each of the Credit Parties shall not, and shall ensure that no other Credit Party shall:

 

(a)

Debt.  Create, incur, assume or suffer to exist any Debt, other than Permitted Debt, or as otherwise previously approved in writing by the Lender.

 

(b)

Liens.  Create, incur, assume or suffer to exist, any Lien on any of their respective properties or assets, now owned or hereafter acquired, or assign or otherwise convey any right to receive the production, proceeds or income therefrom, other than Permitted Liens.  Notwithstanding the foregoing, if a Credit Party shall grant a Lien on any of its properties or assets in violation of this Section 8.2(b), then it shall be deemed to have simultaneously granted an equal and ratable Lien on any such properties or assets to and in favour of the Lender, to the extent that such a Lien has not already been granted to the Lender.

 

 

(c)

Mergers, Etc.  Except with the prior written consent of the Lender, enter into any reorganization, consolidation, amalgamation, arrangement, winding-up, merger or other similar transaction or convey, lease or Dispose of all or substantially all of its assets or convey, lease or Dispose of all or any material portion of any Mining Property.

 

(d)

Disposal of Assets Generally.  Dispose of any property or asset (including, without limitation, any securities other than securities issued directly from such Credit Party’s treasury) other than (i) bona fide sales of inventory in the ordinary course of business for the purpose of carrying on the Business and at fair market value, (ii) the sale of any asset (other than securities) which has no material economic value in the Business and is obsolete provided the fair market value of such asset does not exceed, when aggregated with the fair market value of all other assets sold in reliance on this Section 8.2(d)(ii), the aggregate sum of $100,000, and (iii) any Disposal to the extent the related Disposal Proceeds are applied in prepayment of the Advances as contemplated under Article 4.

 

(e)

Transactions with Related Parties.  Directly or indirectly enter into any agreement with, make any financial accommodation for, or otherwise enter into any transaction with, a Related Party other than a Permitted Affiliate Transaction.

 

(f)

Change in Business.  Make any change in the nature of the Business or permit any of the other Credit Parties to make any change in the nature of its business.

 

(g)

Distributions.  Declare, make or pay any Distribution.  For purposes of this Section 8.2(g), “Distribution” includes with respect to any Person (i) any dividend or other distribution on issued shares of the Person or any of its subsidiaries, (ii) any purchase, redemption or retirement amount of any issued share, warrant or any other option or right to acquire any share of the Person or any of its subsidiaries redeemed or purchased by the Person or any its subsidiaries, or (iii) any payment whether as consulting fees, management fees or otherwise to any Related Party of the Person or any of its subsidiaries.

 

(h)

Financial Assistance.  Provide any Financial Assistance to any Person, except for Financial Assistance provided to other Credit Parties in an aggregate amount not exceeding $50,000 in any fiscal period.  For the purposes of this Section 8.2(h), “Financial Assistance” includes any advances, loans or other extensions of credit, guarantees, indemnities or other contingent liabilities in the nature of a guarantee or indemnity or capital contributions.

 

(i)

Acquisitions.  Purchase any shares, stocks, bonds, notes, debentures or other securities of any Person or acquire the undertaking of, or all or substantially all the assets of, any other Person, provided that the Borrower shall be permitted to acquire additional Mining Properties and make other acquisitions, in each case via option, asset or stock purchase, so long as such acquisitions do not (in the reasonable opinion of the Lender) impair the Lender’s then existing Security, no Default or Event of Default has occurred and is continuing, the aggregate consideration for such acquisition and all other acquisitions shall not exceed $100,000 in any year, and the acquired property and assets are added to and covered by the Security.

 

(j)

Hedging.  Enter into any Hedging Agreement on a margined or collateralized basis or of a speculative nature.

 

(k)

Subsidiaries.  Carry on the Business otherwise than through the Borrower or any  Credit Party.

 

(l)

Charter Documents.  Amend or modify its articles of incorporation or bylaws (or equivalent charter documents) without the prior written consent of the Lender.

 

(m)

Change to Material Contracts.  Terminate, waive or make any amendment to, or assign any interest, in any Material Contract, except with the prior written consent of the Lender.

 

(n)

Burdens on Production.  No Credit Party shall grant, sell, transfer, assign or convey, directly or indirectly, to any Person any royalty (of any kind or nature whatsoever, howsoever designated), production payment or other non-cost bearing interest in any Mineral Property, other than any granted to the Lender or as required by Applicable Law in favour of a Governmental Entity.

 

(o)

Prepayment of Indebtedness.  The Borrower shall, not, directly or indirectly, voluntarily purchase, redeem, defease or prepay any principal or interest of any Debt, provided that, the Borrower may prepay the Debt described in paragraph (c) of the definition of Permitted Debt if it simultaneously executes, delivers, creates and perfects any and all Security which the Lender may require, with all related documents, instruments, registrations and other evidence the Lender may require to ensure that such Security creates legal, valid, binding, enforceable and first priority perfected security interests over the property charged thereunder, enforceable against third parties and any trustee in bankruptcy.

 

 

 

The occurrence of any of the following events that is continuing shall constitute an “Event of Default” under this Agreement:

 

(a)

Non-Payment.  A Credit Party fails to make payment of any Obligation (whether for principal, interest, costs, fees, expenses or any other amount due hereunder or under any other Credit Document) when due and payable pursuant to the terms of a Credit Document (whether on a payment date, by prepayment, on demand or otherwise);

 

(b)

Misrepresentation.  Any representation or warranty or certification made or deemed to be made by a Credit Party or any of its respective directors or officers in any Credit Document shall prove to have been incorrect, incomplete or misleading in any respect when made or deemed to be made (in the case of any representation or warranty containing any materiality qualifier) or proves to have been incorrect, incomplete or misleading in any material respect (in the case of any representation or warranty without any materiality qualifier);

 

(c)

Breach of Covenants.  A Credit Party fails to perform, observe or comply with:

 

(i)

any of the covenants or any other provision or obligation contained in Section 8.2, Section 8.1(u), Section 8.1(w), Section 8.1(x) or Section 8.1(y); or

 

(ii)

any other covenant or any other provision or obligation contained in any Credit Document to which it is a party and such failure is not capable of being remedied or, if capable of being remedied, continues for a period of five Business Days, provided in such case the Credit Party is proceeding diligently to remedy such failure and the Lender is not prejudiced thereby;

 

(d)

Cross-Default.  A Credit Party fails to pay the principal of, or premium or interest on or any other amount relating to, any of its Debt exceeding $100,000 (or the equivalent amount in any other currency) when such amount becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise); or any other event occurs or condition exists if its effect is to accelerate, or permit the acceleration of such Debt; or any such Debt shall be declared to be due and payable prior to its stated maturity;

 

(e)

Material Contracts.  A Credit Party fails to perform or observe any term, covenant or agreement contained in any Material Contract on its part to be performed or observed where such failure could, have a Material Adverse Effect and such failure remains outstanding for a period of ten (10) Business Days; or any Material Contract is amended, where such amendment could have a Material Adverse Effect; or any Material Contract is terminated or revoked or permitted to lapse (other than in accordance with its terms and not as a result of default); or any party to any Material Contract delivers a notice of termination or revocation in respect of such Material Contract and such Material Contract is subsequently terminated or revoked;

 

(f)

Judgments.  Any judgment or order for the payment of money in excess of $100,000.00 (or the equivalent amount in any other currency) is rendered against a Credit Party and either (i) enforcement proceedings have been commenced by a creditor upon the judgment or order, or (ii) there is any period of ten (10) consecutive days during which a stay of enforcement of the judgment or order, by reason of a pending appeal or otherwise, is not in effect;

 

(g)

Bankruptcy; Insolvency.  (i) Any Credit Party shall initiate or commence any case, proceeding or other action (A) under any existing or future Bankruptcy Law, or otherwise seeking to have it judged bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking 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 any Credit Party shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against any Credit Party 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 thirty (30) days; or (iii) there shall be commenced against any Credit Party 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 thirty (30) days from the entry thereof; or (iv) any Credit Party 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) any Credit Party generally shall not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due.

 

 

(h)

Dissolution.  Any application is made for, or order, judgment or decree is entered against any Credit Party decreeing, the winding-up, dissolution or similar process of such Credit Party and, in the case of an application, such application remains undischarged or unstayed for a period in excess of ten days provided the Lender is not materially prejudiced thereby;

 

(i)

Security Imperilled.  Any Credit Document is declared by a court or tribunal of competent jurisdiction to be void, invalid, illegal or unenforceable or the validity, legality or enforceability thereof is contested by any Credit Party or any other Person party thereto (other than the Lender), or any Credit Party or any other Person party thereto denies that it has any or further obligations thereunder;

 

(j)

Change of Control.  A Change of Control occurs;

 

(k)

Material Adverse Effect.  Any event, circumstance or condition which could reasonably be expected to have a Material Adverse Effect has occurred;

 

(l)           Expropriation/Condemnation.  An Expropriation Event shall have occurred;

 

(m)

Regulatory Action.  Any Governmental Entity shall take or attempt to take any action with respect to a Credit Party, or with respect to any Mining Property or any Collateral subject to the Security Documents, which has had or could reasonably be expected to have a Material Adverse Effect on a Credit Party or the ability of the Borrower to repay the Loan or to meet its other Obligations in a timely manner unless such action is set aside, dismissed or withdrawn within twenty (20) days of its institution or such action is being contested in good faith, its effect is stayed during such contest, the Credit Parties are allowed to continue development of each Mining Property during such period, and the same would not be expected to have a Material Adverse Effect;

 

(n)

Cessation of Project Operations.  Without the prior written consent of the Lender, the Santa Rosa Project, the Mineral Ridge Project or any other Mining Property, or any material portion thereof, shall be abandoned or terminated, or exploration, development or operation of the Santa Rosa Project, the Mineral Ridge Project or any other Mining Property shall be terminated or reduced materially, or the Santa Rosa Acquisition Agreement shall be terminated prior to the Borrower earning its full right and interest in the Santa Rosa Project; or

 

(o)

Financial Statements.  The audited consolidated financial statements of the Borrower are qualified in any respect (other than with respect to a going concern note) by the Borrower’s independent auditors.

 

 

Upon the occurrence of an Event of Default specified in Section 9.1(g), all obligations of the Lender hereunder shall automatically terminate, but such termination shall not limit or affect any rights or remedies hereunder.  Immediately and automatically upon the occurrence of an Event of Default specified in Section 9.1(g), without delivery of any notice by the Lender, the Loan, together with all interest thereon, the Obligations and all other amounts owed by any Credit Party hereunder or under any other Credit Document shall be automatically accelerated and immediately due and payable to the Lender.  Upon the occurrence of any other Event of Default which is continuing, the Lender may by notice to the Borrower, (A) declare its commitment to Advance any part of the Loan to be terminated, whereupon the same shall forthwith terminate, and (B) the Lender, in its sole discretion, may accelerate the Loan.  Upon acceleration of the Loan, whether automatically or by notice, the Borrower shall (i) immediately repay all Obligations, and (ii) the Borrower shall pay to the Lender an amount in cash equal to the aggregate of the following payments:

 

 

(i)

an amount equal to [***]; plus

 

(ii)

the Profit Participation Amount relating to such payment;

 

together with all accrued interest (as applicable) and all other fees, charges, costs and other amounts payable hereunder and under any other Credit Document.

 

 

(1)

Upon the occurrence of an Event of Default, the Lender may commence such legal action or proceedings and exercise all its rights and remedies available to it under the Credit Documents and/or Applicable Law, which in its sole discretion it deems appropriate or expedient, including, the commencement of foreclosure and enforcement proceedings under the Credit Documents, all without any additional notice, presentation, demand, protest, notice of dishonour, entering into of possession of any property or assets, or any other action or notice, all of which are expressly waived by each Credit Party, whereupon all obligations of the Lender to make any further Advances shall forthwith be suspended or terminated.  Upon the occurrence of an Event of Default, the Lender shall have, and may exercise, all of its rights and remedies under this Agreement and the other Credit Documents as well as all other rights and remedies available at law or in equity.

 

(2)

The rights and remedies of the Lender under the Credit Documents are cumulative and are in addition to, and not in substitution for, any other rights or remedies, and no right or remedy contained herein or in any other Credit Document, or otherwise at law or in equity, is intended to be exclusive.  Nothing contained in the Credit Documents with respect to the liability of the Credit Parties to the Lender, nor any act or omission of the Lender with respect to the Credit Documents or its rights or remedies, shall in any way prejudice, impair, limit or otherwise affect the rights, remedies and powers of the Lender under the Credit Documents or otherwise.

 

 

 

No amendment or waiver of any provision of any of the Credit Documents, nor consent to any departure by any Credit Party or any other Person from such provisions, is effective unless in writing and approved by the Lender.  Any amendment, waiver or consent is effective only in the specific instance and for the specific purpose for which it was given.

 

Section 10.2                      Waiver.

 

(1)

No failure on the part of the Lender to exercise, and no delay in exercising, any right under any of the Credit Documents shall operate as a waiver of such right; nor shall any single or partial exercise of any right under any of the Credit Documents preclude any other or further exercise of such right or the exercise of any other right.

 

(2)	Except as otherwise expressly provided in this Agreement, the covenants, representations and warranties shall not merge on and shall survive each Advance and, notwithstanding any such Advance or any investigation made by or on behalf of any party, shall continue in full force and effect.

 

 

The indebtedness of the Borrower resulting from the Advances shall be evidenced by the Borrowing Notices and the records of the Lender, which shall constitute prima facie evidence of such indebtedness.

 

 

Any notice, direction or other communication to be given under this Agreement shall, except as otherwise permitted, be in writing and given by delivering it or sending it by facsimile or other similar form of recorded communication addressed:

 

(a)

to any Credit Party at:

 

Golden Phoenix Minerals, Inc.

1675 E. Prater Way, Suite 102

Sparks, Nevada 89434

Attention:       Tom Klein

Telephone:

Facsimile:         ###-###-####

Email:

 

(b)

to the Lender at:

 

Waterton Global Value, L.P.

Folio House, P.O. Box 800

Road Town, Tortola, VG1110

British Virgin Islands

Attention:       Peter Poole

Facsimile:         ###-###-####/7422

Any such communication shall be deemed to have been validly and effectively given if (i) personally delivered, on the date of such delivery if such date is a Business Day and such delivery was made prior to 4:00 p.m. (Toronto time), otherwise on the next Business Day, (ii) transmitted by facsimile, electronic mail or similar means of recorded communication on the Business Day following the date of transmission.  Any party may change its address for service from time to time by notice given in accordance with the foregoing and any subsequent notice shall be sent to the party at its changed address.

 

 

(1)

The Borrower and the other Credit Parties agree to pay on demand all reasonable costs and expenses of the Lender in connection with the negotiation, preparation, execution, and delivery of this Agreement, the other Credit Documents and the other documents and Instruments to be delivered hereunder, including the reasonable fees and expenses of all legal counsel and independent consultants to the Lender and all other out-of-pocket expenses of the Lender, and including the costs and expenses associated with undertaking due diligence with respect to the Santa Rosa Project and in connection with the negotiation, preparation, execution, and delivery of all Security Documents and other Credit Documents by the Santa Rosa Subsidiary and otherwise with respect to the Santa Rosa Project.  In addition, the Borrower and the other Credit Parties agree to pay on demand all reasonable costs and expenses of the Lender in connection with the administration of this Agreement and the other Credit Documents,  including the reasonable costs and expenses incurred by the Lender in connection with site visits by the Lender to the Mining Properties, and all costs and expenses, if any, in connection with the protection of the Lender’s rights with respect to and the enforcement of this Agreement, the other Credit Documents and the other documents to be delivered hereunder (whether incurred before, during or after commencement of any bankruptcy, reorganization or insolvency actions pertaining to the Borrower or any other Credit Party).  All such expenses will be itemized in reasonable detail.  In addition, the Borrower and the other Credit Parties agree to pay any and all stamp, mortgage recording and other Taxes, filing fees, duties or charges payable or determined to be payable in connection with the execution and delivery of this Agreement, the other Credit Documents and the other documents to be delivered hereunder, and the Borrower and the other Credit Parties agree to indemnify and save the Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such Taxes, filing fees or charges.  The Borrower and the other Credit Parties acknowledge that they shall pay all aforementioned costs, expenses and taxes regardless of whether a Loan is advanced.

 

(2)

The Borrower and each other Credit Party agree, whether or not the transactions contemplated in this Agreement are completed, to indemnify and to defend and hold the Lender, the Lender’s Affiliates and their respective directors, partners, managers, members, owners, principals, shareholders, officers, employees, agents, consultants and representatives (each an “Indemnified Person”) harmless from, and shall pay to such Indemnified Person promptly (and in any event within five Business Days of demand) any amounts required to compensate the Indemnified Person for, any cost, expense, liability, obligation, loss, damage, penalty, action, judgment, fine, suit, charge, claim, taxes, payments or disbursements of any kind or nature whatsoever, including attorneys fees and expenses imposed on, incurred by, suffered by or asserted against, the Indemnified Person as a result of, connected with or arising out of (i) the preparation, execution and delivery of, preservation of rights under, enforcement of, or refinancing, renegotiation or restructuring of, the Credit Documents and any related amendment, waiver or consent, as well as the consummation of the transactions contemplated thereby (ii) any advice of counsel as to the rights and duties of the Lender with respect to the administration of the Credit Documents or any transaction contemplated under the Credit Documents, (iii) a default (whether or not constituting a Default or an Event of Default) by a Credit Party, (iv) any proceedings brought by or against the Indemnified Person, or in which the Indemnified Person otherwise participates, due to its entering into or being a party to any of the Credit Documents, or by reason of its exercising or performing, or causing the exercise or performance of, any right, power or obligation under any of the Credit Documents or otherwise in connection with its interest in any Security, whether or not such proceedings are directly related to the enforcement of any Credit Document, and (v) the ownership, management, administration or operation of any Mining Property, except in each case to the extent caused by the gross negligence or wilful misconduct of the Indemnified Person.

 

(3)

Without limiting the generality of the foregoing provisions, the Borrower and each other Credit Party hereby indemnifies and holds harmless and agrees to defend the Indemnified Persons against any cost, expense, liability, obligation, loss, damage, penalty, action, judgment, fine, suit, charge, claim, taxes, payments or disbursements of any kind or nature whatsoever (including strict liability and including costs and expenses of investigation, abatement and remediation and monitoring of spills or Releases or threatened Releases of Hazardous Materials or other Contaminants, and including liabilities of the Indemnified Persons to third parties (including Governmental Entities) in respect of bodily injuries, property damage, damage to or impairment of the environment or any other injury or damage and including liabilities of the Indemnified Persons to third parties for the third parties' foreseeable and unforeseeable consequential damages) incurred as a result of or in connection with the administration or enforcement of this Agreement or any other Credit Document, including the exercise by the Lender of any rights hereunder or under any of the other Credit Documents, which result from or relate, directly or indirectly, to:

 

(a)

the presence, Release or threatened Release of any Hazardous Material or other Contaminants, by any means or for any reason, whether or not such presence, Release or threatened Release of Hazardous Materials or other Contaminants was under the control, care or management of a Credit Party or of a previous owner, operator, tenant or other Person;

 

(b)

any Release, presence, use, creation, transportation, storage or disposal of any Hazardous Material or Contaminant on or with respect to the Subject Property or the business, operations or activities of any Credit Party;

 

(c)

any claim or order for any clean-up, restoration, detoxification, reclamation, repair or other securing or remedial action which relates to any Subject Property or the business, operations or activities of any Credit Party;

 

(d)

any Environmental Claim with respect to any Subject Property or any Credit Party; or

 

(e)

the breach or violation or alleged breach or violation of any Environmental Laws by a Credit Party.

 

For purposes of this Section, “liability” shall include (a) liability of an Indemnified Person for costs and expenses of abatement and remediation of spills and releases of Contaminants where such abatement and remediation is prudent for the continued operation of the Business or required by Environmental Laws and to the extent required to maintain the value and use of the Collateral, (b) liability of an Indemnified Person to a third party to reimburse the third party for bodily injuries, property damages and other injuries or damages which the third party suffers, including (to the extent, if any, that the Indemnified Person is liable therefor) foreseeable and unforeseeable consequential damages suffered by the third party, (c) liability of the Indemnified Person for damage suffered by the third party, (d) liability of an Indemnified Person for damage to or impairment of the environment and (e) liability of an Indemnified Person for court costs, expenses of alternative dispute resolution proceedings, and fees and disbursements of expert consultants and legal counsel on a solicitor and own client basis.

 

(4)

If, with respect to the Lender, (i) any change in any law, rule, regulation, judgment or order or any change in the interpretation, application or administration of such law, rule, regulation, judgment or order, occurring or becoming effective after this date, or (ii) compliance by the Lender with any direction, request or requirement (whether or not having the force of law) of any Governmental Entity made or becoming effective after the date hereof, has the effect of causing any loss to the Lender or reducing the Lender’s rate of return by (w) increasing the cost to the Lender of performing its obligations under any of the Credit Documents (including the costs of maintaining any capital, reserve or special deposit requirements), (x) requiring the Lender to maintain or allocate any capital or additional capital or affecting its allocation of capital in respect of its obligations under any of the Credit Documents, (y) reducing any amount payable to the Lender under any of the Credit Documents, (z) causing the Lender to make any payment or to forego any return on, or calculated by reference to, any amount received or receivable by the Lender under the Credit Documents, then the Lender may give notice to the Borrower specifying the nature of the event giving rise to the loss and the Borrower shall, on demand, pay such amounts as the Lender specifies are necessary to compensate it for any such loss.  A certificate as to the amount of any such loss submitted in good faith by the Lender to the Borrower shall be conclusive and binding for all purposes, absent manifest error.

 

 

(5)

The Borrower shall pay to the Lender on demand any amounts required to compensate the Lender for any loss suffered or incurred by it as a result of (i) any payment being made in respect of an Advance, (ii) the failure of the Borrower to give any notice in the manner and at the times required by this Agreement, (iii) the failure of the Borrower to effect an Advance in the manner and at the time specified in any Borrowing Notice, or (iv) the failure of the Borrower to make a payment or a mandatory repayment in the manner and at the time specified in this Agreement.  A certificate as to the amount of any loss submitted in good faith by the Lender to the Borrower shall be conclusive and binding for all purposes, absent manifest error.

 

(6)

The provisions of this Section 10.5 shall survive the termination of this Agreement and the repayment of all Obligations.  The Borrower acknowledges that neither its obligation to indemnify nor any actual indemnification by it of the Lender or any other Indemnified Person in respect of such Person’s losses for the legal fees and expenses shall in any way affect the confidentiality or privilege relating to any information communicated by such Person to its counsel.

 

 

Upon irrevocable and indefeasible repayment and performance in full of the Obligations, including all indebtedness, obligations and liabilities (direct or indirect, absolute or contingent, matured or not, solely or jointly) by the each of the Credit Parties incurred under or in connection with this Agreement and/or any other Security Documents and payment to the Lender of all costs, charges, expenses and legal fees and disbursements (on a solicitor and his own client basis) incurred by the Lender in connection with the Security, each of the Credit Parties shall be entitled to a release and discharge of the Security constituted by the Security Documents, other than obligations and/or liabilities that have accrued prior to the date of such release or any other obligation which is expressly stated to survive the termination of the Security Documents, provided that the Lender no longer has any obligations (contingent or otherwise) under or in connection with this Agreement or any other Credit Document.

 

 

(1)

All payments to the Lender by the Borrower under any of the Credit Documents shall be made free and clear of and without deduction or withholding for any and all taxes, levies, imposts, deductions, charges or withholdings and all related liabilities (all such taxes, levies, imposts, deductions, charges, withholdings and liabilities being referred to as “Taxes”) imposed by Canada or any other relevant jurisdiction (or any political subdivision or taxing authority of it), unless such Taxes are required by Applicable Law to be deducted or withheld.  If a Credit Party shall be required by Applicable Law to deduct or withhold any such Taxes from or in respect of any amount payable under any of the Credit Documents (i) the amount payable shall be increased as may be necessary so that after making all required deductions or withholdings (including deductions or withholdings applicable to any additional amounts paid under this Section 10.7(1)), the Lender receives an amount equal to the amount it would have received if no such deduction or withholding had been made, (ii) the Borrower shall make such deductions or withholdings, and (iii) the Borrower shall immediately pay the full amount deducted or withheld to the relevant Governmental Entity in accordance with Applicable Law.

 

 

(2)

The Borrower shall immediately pay any present or future stamp or documentary taxes or any other excise or property taxes, charges, financial institutions duties, debits taxes or similar levies (all such taxes, charges, duties and levies being referred to as “Other Taxes”) which arise from any payment made by the Borrower under any of the Credit Documents or from the execution, delivery or registration of, or otherwise with respect to, any of the Credit Documents.

 

(3)

The Borrower shall indemnify the Lender for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable by the Borrower under this Section 10.7) arising from the Credit Documents and paid by the Lender and any liability (including penalties, interest and expenses) arising from or with respect to such Taxes or Other Taxes, whether or not they were correctly or legally asserted.  The Borrower shall (within three Business Days of demand by the Lender ) pay the Borrower an amount equal to the loss, liability or cost which the Lender is required to pay to any Governmental Entity as a result of any actions or payments taken or made by the Borrower pursuant to Section 10.7(1).

 

(4)

Payment under this indemnification shall be made within 10 days from the date the Lender makes written demand for it.  A certificate as to the amount of such Taxes or Other Taxes submitted to the Borrower by the Lender shall be conclusive evidence, absent manifest error, of the amount due from the Borrower to the Lender.

 

(5)	The Borrower shall furnish to the Lender the original or a certified copy of a receipt evidencing payment of Taxes or Other Taxes made by the Borrower within 10 days after the date of any payment of Taxes or Other Taxes.

 

(6)

Nothing contained in this Section 10.7 shall interfere with the right of the Lender to arrange its tax affairs in whatever manner it deems fit (in its sole and absolute discretion) and in particular, the Lender shall not be under any obligation to claim relief from its corporate profits or similar tax liability in respect of any deduction or withholding in priority to any other relief, claims, credits or deductions available to it and the Lender shall not be obligated to disclose to the Borrower any information regarding its tax affairs, tax computations or otherwise.

 

(7)	The provisions of this Section 10.7 shall survive the termination of the Agreement and the repayment of all Obligations.

 

 

(1)	The Borrower shall not have the right to assign or transfer any of its rights or obligations under this Agreement or any interest in this Agreement without the prior written consent of the Lender, which consent may be unreasonably withheld.

 

(2)

The Lender may not assign or transfer any of its rights, interests or obligations (in whole or in part) under this Agreement except (i) to an Affiliate of the Lender, (ii) with the prior written consent of the Borrower (which consent may not be unreasonably withheld or delayed) or (iii) after the occurrence of any Default which is continuing, to any Person without notice to or the consent of the Borrower.  In the case of an assignment or transfer authorized under this Section 10.8, the assignee or transferee (as the case may be) shall have, to the extent of such assignment or transfer, the same rights, benefits and obligations as it would if it were the Lender hereunder and the Lender shall be relieved of its obligations hereunder with respect to the commitments assigned or transferred; provided that an assignee or transferee (as the case may be) shall not be entitled to receive any greater payment under any provision of any Credit Document than the Lender would have been entitled to receive.  The Borrower hereby acknowledges and agrees that any assignment or transfer will give rise to a direct obligation of the Borrower to such assignee or transferee (as the case may be) and that such assignee or transferee (as the case may be) shall be considered to be the “Lender” hereunder.  The Lender may furnish any information concerning the Borrower in its possession from time to time to assignees and transferees provided that any such assignee or transferee agrees to maintain the confidentiality of such information.

 

 

(3)	The Borrower shall provide such certificates, acknowledgments and further assurances in respect of this Agreement and the Credit Documents as the Lender may reasonably require in connection with any assignment pursuant to this Section 10.8.

 

(4)

Any assignment pursuant to this Section 10.8 will not constitute a repayment by the Borrower to the Lender of any Advance, nor a new Advance to the Borrower by the Lender or by the assignee, as the case may be, and the parties acknowledge that the Borrower’s obligations with respect to any such Advances will continue and will not constitute new obligations.

 

 

Upon the occurrence and during the continuance of any Event of Default, the Lender is authorized at any time and from time to time, to the fullest extent permitted by law (including general principles of common-law), to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by it to or for the credit or the account of any Credit Party against any and all of the obligations of any Credit Party under any of the Credit Documents, irrespective of whether or not the Lender has made demand under any of the Credit Documents and although such obligations may be unmatured or contingent.  If an obligation is unascertained, the Lender may, in good faith, estimate the obligation and exercise its right of set-off in respect of the estimate, subject to providing the applicable Credit Party with an accounting when the obligation is finally determined.  The Lender shall promptly notify the applicable Credit Party after any set off and application is made by it, provided that the failure to give notice shall not affect the validity of the set off and application.  The rights of the Lender under this Section 10.9 are in addition to any other rights and remedies (including all other rights of set-off) which the Lender may have.

 

 

(1)

If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due to the Lender in any currency (the “Original Currency”) into another currency (the “Other Currency”), the parties agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which, in accordance with normal banking procedures, the Lender could purchase the Original Currency with the Other Currency on the Business Day preceding the day on which final judgment is given or, if permitted by Applicable Law, on the day on which the judgment is paid or satisfied.

 

(2)

The obligations of the Borrower in respect of any sum due in the Original Currency from it to the Lender under any of the Credit Documents shall, notwithstanding any judgment in any Other Currency, be discharged only to the extent that on the Business Day following receipt by the Lender of any sum adjudged to be so due in the Other Currency, the Lender may, in accordance with normal banking procedures, purchase the Original Currency with such Other Currency.  If the amount of the Original Currency so purchased is less than the sum originally due to the Lender in the Original Currency, the Borrower agrees, as a separate obligation and notwithstanding the judgment, to indemnify the Lender, against any loss, and, if the amount of the Original Currency so purchased exceeds the sum originally due to the Lender in the Original Currency, the Lender shall remit such excess to the Borrower.

 

 

Except as may be expressly provided otherwise in this Agreement, all amounts owed by the Borrower to the Lender, which are not paid when due (whether at stated maturity, on demand, by acceleration or otherwise) shall bear interest (both before and after default and judgment), from the date on which such amount is due until such amount is paid in full, payable on demand, at a rate per annum equal at all times to 10%.

 

 

(1)	THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA.

 

(2)

The Borrower irrevocably attorns and submits to the non-exclusive jurisdiction of any court of competent jurisdiction of the State of Nevada in any action or proceeding arising out of or relating to this Agreement and the other Credit Documents to which it is a party.  The Borrower irrevocably waives objection to the venue of any action or proceeding in such court or that such court provides an inconvenient forum.  Nothing in this Section 10.12 limits the right of the Lender to bring proceedings against the Borrower in the courts of any other jurisdiction.

 

(3)

The Borrower hereby irrevocably consents to the service of any and all process in any such action or proceeding by the delivery of copies of such process to the Borrower at its address set out in Section 10.4(a)  Nothing in this Section 10.12 affects the right of the Lender to serve process in any manner permitted by Applicable Law.

 

(4)

Each of the parties to this Agreement hereby irrevocably waives all right to a trial by jury in any action, proceeding or counterclaim arising out of or relating to this Agreement, the other Credit Documents or the transactions contemplated hereby or thereby.  The scope of this waiver is intended to be all-encompassing with respect to any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including contract claims, tort claims, breach of duty claims and all other common law and statutory claims.  Each of the parties hereto (a) acknowledges that this waiver is a material inducement for the parties to the Credit Documents to enter into a business relationship, that the parties to the Credit Documents have already relied on this waiver in entering into same and the transactions that are the subject thereof, and that they will continue to rely on this waiver in their related future dealings, and (b) further warrants and represents that each has reviewed this waiver with its legal counsel and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel.  This waiver is irrevocable, meaning that it may not be modified either orally or in writing, and this waiver shall apply to any subsequent amendments, modifications, supplements, extensions, renewals and/or replacements of this Agreement.  In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.

 

 

 

This Agreement and any amendments, waivers, consents, or supplements may be executed in any number of counterparts in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute one and the same instrument.  This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties.  This Agreement may be validly executed and delivered by facsimile, portable document format (.pdf) or other electronic transmission, and delivery of an executed counterpart of a signature page to this Agreement, any amendment, waiver, consent or supplement, or to any other Credit Document, by facsimile, portable document format (.pdf) or other electronic delivery (including e-mail) shall be as effective and binding as delivery of a manually executed counterpart thereof.

 

 

If any provision hereof is determined to be ineffective or unenforceable for any reason, the remaining provisions hereof shall remain in effect, binding on the parties and enforceable at the election of the Lender in its sole discretion.

 

 

For all purposes, this English language version of this Agreement shall be the original, governing instrument and understanding of the parties.  In the event of any conflict between this English language version of the Agreement and any subsequent translation into any other language, this English language version shall govern and control.

 

 

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 Agreement and the making of any Loan.

 

 

The Schedules to this Agreement and the Exhibits to this Agreement form an integral part of this Agreement and are incorporated herein by reference and expressly made a part hereof.  This Agreement 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.

 

 

The Borrower and the other Credit Parties are engaged in related businesses and are integrated to such an extent that the financial strength and flexibility of each Credit Party has a direct, tangible and immediate impact on the success of the other Credit Parties.  Each Guarantor will derive substantial direct and indirect benefit from the extensions of the Loan to the Borrower hereunder.  Each Guarantor waives any right to revoke, terminate or suspend its Guarantee and acknowledges that it entered into such Guarantee in contemplation of the benefits that it would receive by this Agreement.

 

 

Each Credit Party shall execute, acknowledge and deliver to the Lender such other and further documents and Instruments and do or cause to be done such other acts as the Lender reasonably determines to be necessary or desirable to effect the intent of the parties to this Agreement or otherwise to protect and preserve the interests of the Lender hereunder, promptly upon request of the Lender, including the execution and delivery of any and all documents and Instruments which are necessary or advisable to create, protect or maintain in favor of the Lender, Liens on all Collateral of the Credit Parties as may be required by this Agreement or any Security Document that are duly perfected in accordance with all Applicable Laws.

 

 

Each of the parties hereto hereby acknowledges that:

 

(i)

it has been advised by its own legal counsel in the negotiation, preparation, execution and delivery of this Agreement and each other Credit Document;

 

(ii)

this Agreement and the other Credit Documents shall not be construed  against any party or more favourably 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 and the other Credit Documents;

 

(iii)

the Lender has no fiduciary relationship with or duty to the Borrower or any other Credit Party arising out of or in connection with the Existing Agreement, this Agreement, or any other agreement, arrangement or Instrument, and the relationship between the Lender, on one hand, and the Borrower and the other Credit Parties, on the other hand, in connection herewith is solely that of creditor and debtor; and

 

(iv)

neither this Agreement nor any other Credit Document or other Instrument between any Credit Party and the Lender creates a joint venture or partnership among the parties hereto, and no joint venture or partnership exists, or shall be deemed to exist, among the Lender and the Borrower or among the Lender and the other Credit Parties.

 

 

This Agreement amends, restates and continues the Existing Agreement, and this Agreement and all other Instruments executed in connection herewith, constitute an amendment, renewal, continuance and restatement of all Loans and Obligations of the Borrower and the Guarantors.  The Existing Loan shall continue as part of the Tranche One Loan under this Agreement.  Each Credit Document entered into in connection with the Existing Agreement or the Existing Loan is hereby ratified and confirmed and shall remain in full force and effect in accordance with its terms, except to the extent expressly amended or modified in accordance with its terms.  It is expressly understood and agreed by the parties hereto that this Agreement is in no way intended to constitute, and does not constitute, a release, repayment, satisfaction, discharge or novation of the Existing Loan or the obligations and liabilities existing under the Existing Agreement, or a release, termination, novation or impairment of any Credit Document or Lien granted to the Lender.  All such Credit Documents and Liens created pursuant to the Credit Documents in connection with the Existing Loan shall remain in full force and effect and extend and apply to this Agreement, the Loan and the full payment and performance of all Obligations, in each case for the benefit of the Lender.  All such Liens created pursuant to the Security Documents entered into in connection with the Existing Agreement are hereby expressly continued, ratified and confirmed by the Borrower and the Guarantors.  The amendment and restatement hereby of the Existing Agreement, and the concurrent amendment and restatement of any other Credit Document, shall not constitute a waiver of any conditions or requirements set forth herein or therein, whether or not performed, fulfilled or required to be performed or fulfilled prior to the date hereof, nor does it constitute consent to, or waiver of, any prior or existing default, event of default or breach of any provision hereof or of any other Credit Document.  All references to the Existing Agreement in any Credit Document or any other Instrument shall be deemed to refer to this Agreement.  If any inconsistency exists between this Agreement and the Existing Agreement, the terms of this Agreement shall prevail.  Nothing contained in this Agreement or any other Instrument executed contemporaneously herewith shall be deemed to satisfy or discharge the Loans or Obligations arising under the Existing Agreement or this Agreement (this being an amendment and restatement only).

 

 

 

[Signatures on following page.]

 

IN WITNESS WHEREOF the parties have executed this Senior Secured Gold Stream Credit Agreement.

 

		THE BORROWER:
		GOLDEN PHOENIX MINERALS, INC.
		By:          ______________________________  Name: Title:
		THE LENDER:
		WATERTON GLOBAL VALUE, L.P., BY THE GENERAL PARTNER OF ITS GENERAL PARTNER, CORTLEIGH LIMITED
		By:           ______________________________ Authorized Signatory

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

	Months After Initial Close	T1 Funded	T1/T2 Funded	T1/T2/T3 Funded	T1/T2/T3/T4 Funded	T1/T2/T3/T4/T5 Funded
Mar-12	7	$750,000	$750,000	$750,000	$750,000	$750,000
Apr-12	8	$750,000	$750,000	$750,000	$750,000	$750,000
May-12	9	$250,000	$750,000	$750,000	$750,000	$750,000
Jun-12	10		$750,000	$750,000	$750,000	$750,000
Jul-12	11		$750,000	$750,000	$750,000	$750,000
Aug-12	12		$750,000	$750,000	$750,000	$750,000
Sep-12	13		$750,000	$750,000	$750,000	$750,000
Oct-12	14		$750,000	$750,000	$750,000	$750,000
Nov-12	15			$750,000	$750,000	$950,000
Dec-12	16			$750,000	$750,000	$950,000
Jan-13	17			$750,000	$750,000	$950,000
Feb-13	18			$750,000	$750,000	$950,000
Mar-13	19				$750,000	$950,000
Apr-13	20				$750,000	$950,000
May-13	21					$950,000
Jun-13	22					$950,000
Jul-13	23					$950,000
Aug-13	24					$950,000
		$1,750,000	$6,000,000	$9,000,000	$10,500,000	$15,500,000

 

 

 

 

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