EXHIBIT 10.1

 

OPTION AGREEMENT

 

This Option Agreement (“ Agreement ”), is made effective as of the 12th day of March, 2015 (“ Effective Date ”), by and between Talapoosa Development Corp. , a Delaware corporation (“ Buyer ”) and Timberline Resources Corporation , a Delaware corporation (“ Timberline Parent ”), whose addresses are 101 East Lakeside Avenue, Coeur d’Alene, Idaho 83814 and American Gold Capital US Inc. , a Nevada corporation (“ American Gold ”), Gunpoint Exploration US Ltd. , a Nevada corporation (“ Gunpoint US ”) and Gunpoint Exploration Ltd. , a British Columbia corporation (“ Gunpoint Parent ” and collectively with American Gold and Gunpoint US, the “ Sellers ”), whose addresses are Suite 1620 – 1140 West Pender Street, Vancouver, British Columbia, Canada V6E 4G1.  Buyer, Timberline Parent and Sellers are referred to herein individually as a “ Party ” and collectively as the “ Parties .”

 

Recitals

 

A.           American Gold is the registered, legal and beneficial owner of certain fee property as described on Part 1 of Exhibit A (“ Fee Property ”), certain unpatented mining claims as described on Part 2 of Exhibit A (“ Mining Claims ”), and certain water rights as described on Part 5 of Exhibit A (“ Water Rights ”), and is the lessee under certain leases of fee property as described on Part 3 of Exhibit A (“ Leases ”), and is the grantee under certain easements as described on Part 4 of Exhibit A (“ Easements ”), all located in Lyon County, Nevada, and collectively referred to herein as the “ Talapoosa Property ”.  Gunpoint US and American Gold hold certain permits, licenses and governmental authorizations relating to the Talapoosa Property, as described on Exhibit B (“ Permits ”). Gunpoint US and American Gold lease or hold rights to use office/warehouse rental space in Reno, Nevada, as described on Exhibit I attached hereto (“ Rental Space ”).  Gunpoint Parent is the parent company of American Gold and Gunpoint US.  The Talapoosa Property, the Permits, the Rental Space, and any and all personal property directly related to thereto, including Sellers’ Data are collectively referred to herein as the “ Talapoosa Project ”.

 

B.           Sellers desire to grant to Buyer, and Buyer desires to purchase from Sellers, an option to purchase all of Sellers’ interest in and to the Talapoosa Project.

 

Agreement

 

NOW, THEREFORE, for and in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the Parties agree as follows:

 

ARTICLE I

Option

 

1.1.            Option .  Sellers hereby grant to Buyer during the Option Period (as defined in Section 1.2) of this Agreement the exclusive and irrevocable option to purchase all of Sellers’ interest in the Talapoosa Project (“ Option ”), together with all appurtenances incident thereto, all after acquired rights, titles and interests, including any interests in any relocated or amended mining claims or subsequently issued leases pertaining to the Talapoosa Project, and all improvements and personal property thereon, free and clear of all liens and encumbrances.

 

1.2.            Option Period .  Buyer shall have the right to exercise the Option at any time beginning on the Initial Closing Date (as defined in Section 1.4) and ending within thirty (30) months of the Effective Date, unless sooner terminated, or until the earlier exercise of the Option granted under Section 1.1 (“ Option Period ”).

 

     1.3.            Consideration .  The consideration for the Option shall consist of Two Million (2,000,000) shares of the common stock in Timberline Parent (“ Initial Securities ”) and Three Hundred Thousand United States Dollars (U.S.$300,000) in cash (the “ Initial Cash Option Payment ”).  The Initial Securities shall be delivered on the Initial Closing Date and held in escrow (“ Escrow ”) pursuant to the escrow agreement between the Buyer, Timberline Parent, Gunpoint Parent and Corporate Stock Transfer, Inc., in the form as agreed to by the parties, and twenty-five percent (25%) of the Initial Securities will vest and be delivered to Gunpoint Parent (or as Gunpoint Parent may direct pursuant to this Agreement) at the conclusion of each six-month period following the Effective Date, as set forth on the following schedule.

 

 

1.4.            Initial Closing . The grant of the Option and the beginning of the Option Period under Sections 1.1 and 1.2 and the issuance of the Initial Securities under Section 1.3 shall occur on March 27, 2015, or such other date and time as the parties hereto may mutually agree to in writing, not to exceed April 30, 2015, following receipt by both parties of all necessary regulatory approvals for the grant of the Option and the issuance of the Initial Securities (“ Initial Closing Date” ).  Buyer shall pay or cause to be paid to the Sellers (or as the Sellers may direct) the Initial Cash Option Payment, as follows, in order to keep the Option so granted in good standing:

 

(a)           One Hundred Thousand United States Dollars (U.S.$100,000) on or before the Initial Closing Date; and

 

(b)           Two Hundred Thousand United States Dollars (U.S.$200,000) within the earlier of (i) two Business Days following Timberline Parent closing a financing raising aggregate gross proceeds of at least Two Million United States Dollars (U.S.$2,000,000) or (ii) 180 days of the Initial Closing Date.

 

1.5.            Lease .  During the Option Period, Sellers hereby (i) lease to Buyer the Fee Property, the Mining Claims and the Water Rights, sublease to Buyer the Leases, and grant to Buyer a license to use the Easements, together with all appurtenances incident thereto, all after acquired rights, titles and interests, including any interests in any relocated or amended mining claims or subsequently issued leases pertaining to the Talapoosa Project, and all improvements and personal property thereon for the purposes set forth herein, and (ii) license and sublease the Permits and the rights to use the Rental Space for the purposes set forth herein.  Buyer shall have the right at any time to request and receive the full assignment and conveyance of the Permits to Buyer for the purposes set forth herein, provided that upon the termination of this Agreement (without Closing), Buyer shall reassign the Permits to Sellers. Buyer shall have all such rights and privileges of access to and use of the Talapoosa Project as are held by and granted to Sellers under applicable law in and to the Talapoosa Project and the right to conduct exploration, development, and mining activities on the Talapoosa Project.

 

1.6.            Feasibility Study .  Buyer will use its reasonable efforts to complete a feasibility study on the Talapoosa Project within the Option Period; provided that the completion of a feasibility study is not a condition to the exercise of the Option by Buyer during the Option Period.  As used herein, “feasibility

 

study” shall include any technical study completed by a reputable, independent technical service provider that conducts an evaluation and analysis of the potential economic viability of the Talapoosa Project to a level of certainty deemed appropriate by the independent technical service provider to designate the report a feasibility level study. The feasibility study shall be deemed complete when the independent service provider delivers the final report to the Buyer regardless of whether the final report is publicly released or published at that time or complies in the form delivered with any specific public reporting standards, including, but not limited to, Canadian National Instrument 43-101.

 

1.7.            Reversion .  If, during the Option Period, Buyer elects not to exercise the Option or determines not to complete a feasibility study on the Talapoosa Project, as set forth in Section 1.6, then Buyer shall return to Sellers all technical information, documents and data related to the feasibility work and shall not receive nor have earned any interest in the Talapoosa Project.

 

1.8.            Employment of E. Max Baker .  Upon the Initial Closing Date, Buyer or Timberline Parent will use its reasonable best efforts to hire E. Max Baker, Gunpoint’s current President, as a full-time employee of either Buyer or Timberline Parent pursuant to terms of employment to be negotiated between the Buyer or Timberline Parent and E. Max Baker. Failure to come to terms of employment with Mr. Baker will have no effect on any other term of this Agreement, including, but not limited to, the Buyer’s right to exercise the Option.

 

ARTICLE II

Exercise of Option and Closing

 

2.1.            Exercise of Option .  At any time during the Option Period, Buyer may exercise the Option by written notice to Gunpoint Parent as provided herein (“ Option Exercise Notic e”).  The Option Exercise Notice shall designate a closing date, which date shall be no more than ninety (90) days from the date the Option Exercise Notice is delivered to Gunpoint Parent (the “ Option Exercise Closing Date ”).  Buyer shall have acquired all of Sellers’ interest in and to the Talapoosa Project as of the Option Exercise Closing Date upon the delivery of the documents and payment of the Option Payment as provided in Sections 2.2 and 2.3 below (the “ Closing ”).

 

2.2.            Sellers Deliverable Documents .  At the Closing, Sellers shall execute, acknowledge and deliver to Buyer the following:

 

(a)           A general warranty deed substantially in the form attached hereto as Exhibit C conveying to Buyer the Fee Property (“ Warranty Deed ”), which Warranty Deed shall be made subject to the Gunpoint Royalty;

 

(b)           A mining claim deed substantially in the form attached hereto as Exhibit D conveying  to Buyer the Mining Claims (“ Mining Claim Deed ”), which Mining Claim Deed shall be made subject to the Gunpoint Royalty;

 

(c)           An assignment and assumption agreement substantially in the form attached hereto as Exhibit E assigning to Buyer the Leases, Easements and Permits (“ Assignment ”), which Assignment shall be made subject to the Gunpoint Royalty;

 

(d)           A bill of sale substantially in the form attached hereto as Exhibit F selling and conveying to Buyer all of Sellers’ Data and any personal property of Sellers directly related to the Talapoosa Property and Permits (“ Bill of Sale ”);

 

 

(f)           A certificate pursuant to Section 1445(b)(2) of the Internal Revenue Code, providing that American Gold is not a foreign person, in form and substance reasonably satisfactory to Buyer.

 

2.3.            Buyer Deliverable Documents .  At the Closing, Buyer shall undertake or cause to be undertaken the following:

 

(a)           Pay to Gunpoint Parent (or as Gunpoint Parent may direct) Ten Million United States Dollars (U.S.$10,000,000) in cash as consideration for the purchase of the Talapoosa Project (“ Option Payment ”); and

 

(b)           Execute, acknowledge and deliver to the Sellers the Assignment.

 

2.4.            Royalty .  American Gold hereby retains and reserves, effective as of the Option Exercise Closing Date, a net smelter returns royalty in all minerals mined and removed from the Talapoosa Property, in the amount of one percent (1%) calculated as more fully described in Exhibit H (“ Gunpoint Royalty ”).  The Gunpoint Royalty shall be owned by and payable to Gunpoint Parent (or to such other of the Sellers as American Gold may direct).  Buyer may purchase the Gunpoint Royalty from American Gold or its successors or assigns at any time by paying Three Million United States Dollars (U.S.$3,000,000) to Gunpoint Parent (or as Gunpoint Parent may direct).

 

2.5.            Contingent Consideration .  For a period of five (5) years following the Option Exercise Closing Date (“ Contingent Payment Period ”), should the daily price of gold (as determined by the London PM Fix) be fixed at or above One Thousand Six Hundred United States Dollars (U.S.$1,600) on any single day during the Contingent Payment Period (the “ Initial Threshold Event ”) and at any time after the Initial Threshold Event during the Contingent Payment Period the daily price of gold (as determined by the London PM Fix) averages One Thousand Six Hundred United States Dollars (U.S.$1,600) per ounce or greater for a period of ninety (90) consecutive Trading Days (the “ Trigger Event ”), Buyer shall be required to pay or cause to be paid to Gunpoint Parent (or as Gunpoint Parent may direct) an additional payment of Ten Million United States Dollars (U.S.$10,000,000) (the “ Contingent Payment ”) within ninety (90) days of the date that the Trigger Event is deemed to have occurred.  The Contingent Payment shall consist of Five Million United States Dollars (U.S.$5,000,000) in cash, and the remainder shall be paid either in cash in United States dollars or in shares of common stock of Timberline Parent or a combination thereof, such allocation to be determined at Timberline Parent’s sole discretion at the time of the Contingent Payment; provided that the issuance of shares of common stock of Timberline Parent will be subject to any applicable requirements of the TSX Venture Exchange and the NYSE MKT, including, if required, approval of the shareholders of Timberline Parent.  For any shares issued as part of the Contingent Payment, the deemed value of such shares shall be greater of (a) the Closing Price for such shares of common stock on the Option Exercise Closing Date, and (b) the “Discounted Market Price” (as defined by the TSX Venture Exchange) per such share of common stock on the date prior to the dissemination of Timberline Parent’s news release announcing this Agreement. As used herein, “Trading Day” shall include any day during which the London Bullion Market Association is open for business and provides a London PM Fix for gold.  As used herein, “Closing Price” shall mean the closing price of the Timberline Parent’s shares of common stock as quoted on the NYSE MKT, or if the shares of common stock are no longer traded on the NYSE MKT, the closing price of the shares of common stock on the market in which the shares of common stock have the highest aggregate volume of trading in the ninety (90) days prior to the Option Exercise Closing Date, or if the shares of common stock are not traded on any market, the closing price of the shares of common stock on any inter-dealer quotation system or other

 

over-the-counter market for Timberline Parent’s shares of common stock, or if no such quotations exist, the price of the shares of the common stock as determined by the Timberline Parent’s board of directors in good faith.

 

2.6.            Post Closing .  After Closing, this Agreement shall terminate, except for such provisions that specifically survive.  Buyer shall pay all registration charges and transfer fees properly payable on and in connection with the sale and transfer of the Talapoosa Project to Buyer.

 

2.7.            No Obligation to Purchase the Mining Claims .  This Agreement constitutes an option to purchase the Talapoosa Project and Buyer shall have no obligation to make the Option Payment except at its sole and independent discretion in order to exercise the Option to purchase the Talapoosa Project.  Buyer shall have the unrestricted right at any time to terminate this Agreement by delivery to Buyer of written notice of such termination without liability or obligation of any kind except the obligations of Buyer under Section 5.1.  All Initial Securities placed in Escrow, as provided in Section 1.3, shall be nonrefundable and shall be delivered to Gunpoint Parent (or as Gunpoint Parent may direct) in accordance with the delivery schedule set forth in Section 1.3.

 

ARTICLE III

Pre-Closing Conditions

 

After exercise of the Option, Buyer’s obligation to complete the Closing and purchase the Talapoosa Project is expressly conditioned upon the matters set forth in this ARTICLE III.

 

3.1.           All required regulatory, stock exchange, creditor, court and third-party approvals, consents, permits, waivers, exemptions and orders shall have been received at or prior to Closing.

 

3.2.           The representations and warranties of Sellers as set forth in this Agreement shall be true and correct as of the Effective Date, the Initial Closing Date and the Option Exercise Closing Date.

 

3.3.           No material adverse change with respect to the Talapoosa Project shall have occurred.

 

3.4.           No injunction or order by any governmental authority prohibiting the transactions contemplated by this Agreement shall be in effect.

 

ARTICLE IV

Shares

 

4.1.            Distribution of Shares.

 

(a)           Subject to regulatory approval, Timberline Parent shall issue the Initial Securities and any shares issued as part of the Contingent Payment, collectively referred to herein as “ Shares ,” to Gunpoint Parent (or as Gunpoint Parent may direct, provided that the issuance to such designated party as Gunpoint Parent may direct will be contingent on such issuance being made in accordance with all applicable securities laws and such designated party making all necessary representations and warranties and executing such documents as Timberline Parent or its transfer agent may reasonably request, including where applicable, an opinion of legal counsel of recognized standing in form and substance reasonably satisfactory to Timberline Parent), and Sellers shall, at the option of Timberline Parent, execute such receipts and disclosure documents as Timberline Parent or its counsel reasonably deem necessary or required as a condition to receiving the Shares.  The release of the Initial Securities from the Escrow to Gunpoint Parent (or as Gunpoint may direct), shall constitute prima facie evidence of delivery of the Initial Securities as required by Section 1.3 and Sellers shall have no right to challenge such release

 

and delivery as   representing consideration for the Option granted herein.  Timberline Parent’s issuance of shares as part of the Contingent Payment to Gunpoint Parent (or as Gunpoint Parent may direct) shall constitute prima facie evidence of issuance of such shares as required by Section 2.5 and Sellers shall have no right to challenge such issuance as representing delivery of the Contingent Payment.

 

(b)           Timberline Parent shall have no obligation to issue Shares to any party other than Gunpoint Parent (or as Gunpoint Parent may direct), except for transfers as provided by ARTICLE IX.  Timberline Parent shall have no obligation to recognize the purported transferee of Gunpoint Parent’s rights until (i) Timberline Parent has received certified copies of all legal documents, acceptable to Timberline Parent, effectuating such transfer, (ii) the purported transferee ratifies in writing the terms of this Agreement and executes such receipts and disclosure documents as Timberline Parent and its respective counsel reasonably deem necessary or required as a condition to receiving Shares, and (iii) regulatory approval is obtained for the issuance of Shares to such purported transferee where such regulatory approval is required.

 

(c)           Gunpoint Parent understands that the Shares have not been registered under the U.S. Securities Act of 1933, as amended (the “ U.S. Securities Act ”) or any applicable securities laws of any state of the United States and may not be offered or sold absent such registration or an available exemption from such registration requirements and the Shares have not been approved or disapproved by the United States Securities and Exchange Commission or any state securities agency.  Gunpoint Parent understands and agree that the Shares are being offered and sold to Gunpoint Parent in reliance upon the exemption provided under section 4(a)(2) under the U.S. Securities Act and pursuant to similar exemptions from any applicable securities laws of any state of the United States.

 

(d)           Gunpoint Parent is not an underwriter and Gunpoint Parent is acquiring the Shares solely for investment purposes for its own account and not with a view to, or for, resale in connection with any distribution of securities within the meaning of the U.S. Securities Act; and the Shares are not being purchased with a view to or for the resale, distribution, subdivision or fractionalization thereof; and the undersigned has no contract, undertaking, understanding, agreement, or arrangement, formal or informal, with any person to sell, transfer, or pledge to any person the securities for which it hereby subscribes, or any part thereof; and it understands that the legal consequences of the foregoing representations and warranties to mean that it must bear the economic risk of the investment for an indefinite period of time because the Shares have not been registered under the U.S. Securities Act, and, therefore, may be resold only if registered under the U.S. Securities Act or if an exemption from such registration is available.

 

(e)           Gunpoint Parent is an “accredited investor” that satisfies one or more of the criteria set forth in Rule 501(a) of Regulation D of the U.S. Securities Act.

 

(f)           Gunpoint Parent understands that Timberline Parent is under no obligation to register the Shares or seek an exemption under the U.S. Securities Act or any applicable state laws for the   resale of the Shares, or to cause or permit the Shares to be transferred in the absence of any such registration or exemption, and understands that Gunpoint Parent must hold the Shares indefinitely unless the Shares are subsequently registered under U.S. Securities Act and applicable state securities laws or an exemption from registration is available.

 

(g)           Gunpoint Parent has not purchased the Shares as a result of any form of general solicitation or general advertising (as such terms are used in Rule 502 (c) under Regulation D of the U.S. Securities Act) or in any manner involving a public offering within the meaning of Section 4(a)(2) of the U.S. Securities Act.

 

 

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.  THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) PURSUANT TO REGISTRATION OF SUCH SECURITIES IN COMPLIANCE WITH THE REGISTRATION REQUIREMENTS UNDER THE U.S. SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, (C) IN COMPLIANCE WITH THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE U.S. SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, OR (D) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE LAWS AND REGULATIONS GOVERNING THE OFFER AND SALE OF SECURITIES, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO THE COMPANY AN OPINION OF COUNSEL, OF RECOGNIZED STANDING, OR OTHER EVIDENCE OF EXEMPTION, REASONABLY SATISFACTORY TO TIMBERLINE.”

Provided however that if the certificates representing the Shares have been held for a period of at least six months and if Rule 144 under the U.S. Securities Act is applicable (there being no representations by Timberline Parent that Rule 144 is applicable), then the undersigned may make sales of the Shares only under the terms and conditions prescribed by Rule 144 of the U.S. Securities Act and the above legend may be removed upon delivery to the Timberline Parent and its transfer agent of an opinion of counsel of recognized standing in form and substance reasonably satisfactory to the Company and its transfer agent to the effect that such legend is no longer required under the U.S. Securities Act.

(i)            Gunpoint Parent consents to Timberline Parent making a notation on its records or giving instruction to the registrar and transfer agent of Timberline Parent in order to implement the restrictions on transfer set forth and described herein

 

(j)      Gunpoint Parent acknowledges that the Buyer has advised Gunpoint Parent that it is relying on an exemption from the requirements to provide Gunpoint Parent with a prospectus under applicable Canadian securities laws and, as a consequence of acquiring securities pursuant to an exemption from the prospectus requirement, certain protections, rights and remedies provided by the applicable Canadian securities laws, including, in most circumstances, statutory rights of rescission or damages, will not be available to Gunpoint Parent.

 

 

 

“Unless permitted under securities legislation, the holder of this security must not trade the security before [insert the date that is four months and a day after the distribution date.]”.

 

4.2.            Shareholder Approval .  Gunpoint Parent acknowledges that, if any proposed issuance of Shares under this Agreement could result in Gunpoint Parent (or recipient of the Shares) becoming a “control person” (as defined by the TSX Venture Exchange) of Timberline Parent, the issuance of such Shares will be subject to shareholder approval as may be required by the TSX Venture Exchange.

 

ARTICLE V

Property Maintenance

 

5.1.            Property Maintenance.

 

(a)           Upon the Initial Closing Date, Buyer shall assume the duty to (i) pay all taxes levied or assessed against the Talapoosa Property, (ii) make all Bureau of Land Management (“ BLM ”) and county filings and pay all BLM and county fees necessary to maintain the Mining Claims, and (iii) pay any and all rentals and advance royalties required under the Leases, Easements or with respect to the Rental Space (collectively the “ Property Maintenance Costs ”) not less than twenty (20) days prior to the date such obligations become due.  Upon written request from Gunpoint Parent, Buyer shall provide Gunpoint Parent evidence of payment of the Property Maintenance Costs as incurred and paid. Sellers shall immediately provide to Buyer copies of any and all tax notices and invoices, all communications and notices from lessors or grantors under the Leases or Easements, and any other notices received by Sellers with respect to the Talapoosa Project and any Property Maintenance Costs.

 

(b)           Upon termination by Buyer of this Agreement with respect to all or a portion of the Talapoosa Project, Buyer shall remain liable for any Property Maintenance Costs that are due and payable within twenty (20) days or less of the date of termination.

 

5.2.            Amendments, Relocations and Patents .  During the Option Period, Buyer shall have the right (but not the obligation) to amend or relocate any or all of the Mining Claims, to locate placer claims on ground theretofore covered by lode claims and vice versa, to locate mill sites on ground theretofore covered by mining claims and vice versa, and to locate any fractions existing on the Initial Closing Date or resulting from the location, amendment, or relocation of mining claims or mill sites on lands covered by the Talapoosa Project as of the Initial Closing Date.  All such locations, amendments, or relocations shall be made in the name of American Gold (or as American Gold may direct).  All expenses authorized by Buyer in connection with the locating, amending, or relocating mining claims or mill sites shall be borne by Buyer.  The rights of Buyer under this Agreement shall extend to all such locations, amended locations, and relocations of the mining claims and mill sites, and the Gunpoint Royalty reserved to Gunpoint Parent (or as Gunpoint Parent may direct) herein shall extend to all such amendments, relocations and locations.

 

5.3.            Change in Federal Mining Law .  If the United States establishes a leasing system or other system of tenure for lands or minerals now subject to location under the mining laws, and if the new system gives Sellers an election to acquire rights under the new system in exchange for or in modification of Sellers’ existing rights, upon prior written consent of Gunpoint Parent, which consent shall not be unreasonably withheld, Buyer may make the election in the name of applicable Sellers with respect to any

 

or all of the Mining Claims.  Thereafter, during the term of this Agreement, Buyer shall pay all royalties, rentals, bonuses, fees, and other amounts required by the new system. The rights of Buyer under this Agreement shall extend to the lease or other rights granted by the new system.

 

5.4.            Covenants by Sellers .  During the Option Period, Sellers shall use their commercially reasonable efforts to conduct their affairs in respect of the Talapoosa Project in the ordinary course of business consistent with their past practices.  Unless Buyer has previously otherwise consented in writing, Sellers shall not sell, lease or otherwise dispose of any interest in the Talapoosa Project.

 

ARTICLE VI

Operations

 

6.1.            Operations .  During the Option Period, Buyer shall conduct all operations on the Talapoosa Property in a good and workmanlike manner and in accordance with accepted mining practice and all applicable federal, state and local laws, rules and regulations.  All decisions with respect to exploration and development of the Talapoosa Property, including all decisions regarding the commencement, suspension, resumption, or termination of any exploration, development activities or operations, shall be made by Buyer in its sole discretion.  There are no covenants or agreements regarding these matters other than those expressly set forth in this Agreement.

 

6.2.            No Implied Covenants .  No covenants or conditions relating to the exploration, development, mining, or related operations on or in connection with the Talapoosa Project, or the timing thereof, other than those expressly provided in this Agreement, shall be implied.

 

6.3.            Protection From Liens and Damages .  During the Option Period, Buyer shall keep the Talapoosa Property free of liens for labor performed or materials or merchandise furnished for use in the Talapoosa Project under this Agreement, and shall hold Sellers harmless from all costs, loss, or damage which may result from any work or operations of Buyer or its possession or occupancy of the Talapoosa Property.

 

6.4.            Inspection .  During the Option Period, Sellers’ or Gunpoint Parent’s authorized representative, during regular business hours and on no less than three business days’ prior written notice, at its sole risk and expense, may (i) enter on the Talapoosa Property for the purpose of inspection, and (ii) inspect any records of Buyer pertinent and necessary for the purpose of substantiating the compliance of Buyer with the provisions of this Agreement, provided that such inspections shall be at Sellers’ own cost and risk and so as not to hinder unreasonably the operations of Buyer.

 

6.5.            Reporting .  During the Option Period, Buyer shall deliver to Gunpoint Parent semi-annual reports on June 30 and December 31 on activities, operations and property payments on the Talapoosa Property during the six-month period preceding the report.

 

6.6.            Data .

 

(a)           Within seven (7) days of the Initial Closing Date, Sellers shall deliver to Buyer all drill core, geological, geophysical, and engineering data and maps, logs of drill holes, results of assaying and sampling, and similar data concerning the Talapoosa Project (or copies thereof) which are in Sellers’ possession or control (“ Sellers’ Data ”).  Prior to the Option Exercise Closing Date, Gunpoint Parent and Buyer shall prepare an inventory of all Sellers’ Data delivered to Buyer.

 

(b)           Upon the termination of this Agreement (except by exercise of the Option), Buyer shall, within sixty (60) days after termination, (i) return to Gunpoint Parent all Sellers’ Data

 

delivered by Sellers to Buyer which are then in Buyer’s possession or control, and (ii) make available for inspection and copying by Gunpoint Parent all factual geological and geophysical data and maps (not including interpretive data), logs of drill holes, and results of assaying and sampling pertaining to the Talapoosa Project which Buyer has obtained as a result of its exploration and development work under this Agreement and which are then in Buyer’s possession or control.  Upon Gunpoint Parent’s request made within sixty (60) days after termination of this Agreement (except by exercise of the Option), Buyer shall, at Gunpoint Parent’s expense, provide Gunpoint Parent with the drill cores requested by Gunpoint Parent and with copies of any portion of the geological and geophysical data and maps (not including interpretive data), logs of drill holes, and results of assaying and sampling by Buyer.  Buyer makes no representation or warranty as to the accuracy of any such data or information provided to Sellers by Buyer under this Section 6.6, and shall not be liable on account of any use by Sellers or any other person of any such data or information.  Buyer shall not be liable for the loss or destruction of any drill core.

 

6.7.            Confidentiality .  Provided this Agreement remains in force and Buyer has not exercised the Option, all information obtained by Sellers or Sellers’ authorized representatives from Buyer or Timberline Parent arising out of Buyer’s activities on the Talapoosa Project pursuant to this Agreement shall be kept strictly confidential by Sellers and shall not be released to any third person except upon the prior written consent of Buyer.

 

ARTICLE VII

Default and Termination

 

7.1.            Default .  A Party shall be in default under this Agreement upon the failure of a Party to comply with its material obligations under this Agreement and such failure continues uncured for thirty (30) days after written notice thereof, provided that if it shall be impracticable or impossible to remedy such failure within such thirty (30) day period, the cure period shall be extended for an additional period reasonably necessary to remedy such failure, but subject to the condition that during the additional period, the defaulting Party shall be diligently pursuing a remedy for the failure.  Any default claimed with respect to the payment of money may be cured by the deposit in escrow of the amount in controversy (not including interest or claimed consequential, special, exemplary, or punitive damages) and giving of notice of the deposit to the other Parties, the amount to remain in escrow until the controversy is resolved by decision of a court or arbitrator, or otherwise.  The non-defaulting Party shall have the right to terminate this Agreement, upon written notice of termination to such other Parties, only after the expiration of the cure period as provided in this Section 7.1.

 

7.2.            Termination .

 

(a)           Upon termination of this Agreement, by default or otherwise, all rights, liabilities, and obligations of Buyer and Timberline Parent under this Agreement shall terminate, except that (i) Buyer shall have the rights provided in Section 7.3 and (ii) Buyer shall have those obligations provided in Section 5.1(b).

 

(b)           In the event of any controversy, the Parties may continue operations under this Agreement and Buyer shall make the payments provided for in this Agreement notwithstanding the existence of the controversy.  Upon the resolution of the controversy, such payments or restitutions shall be made as required by the terms of the decision of the court or arbitrators, or otherwise.

 

 

the Talapoosa Project during the above-mentioned period.  The foregoing shall not relieve Buyer from the obligation to remove structures, equipment, personal property or fixtures mandated under any reclamation requirements.

Representations and Warranties

 

8.1.            Sellers’ Representations and Warranties .  Sellers represent and warrant to Buyer and Timberline Parent as of the Effective Date, the Initial Closing Date and the Option Exercise Closing Date, the following, with the intent that Buyer and Timberline Parent will rely thereon in entering into this Agreement and in concluding the purchase and sale contemplated herein:

 

(a)           Each of Sellers is a corporation duly incorporated, validly existing and in good standing under the laws of the state or province of its formation.

 

(b)           Sellers each have full power and absolute authority and capacity to enter into this Agreement and to carry out the transactions contemplated hereby except where regulatory approval is required.  Sellers each have duly obtained all authorizations for the execution, delivery and performance of this Agreement and such execution, delivery and performance and the consummation of the transactions herein contemplated will not conflict with, or accelerate the performance required by or result in any breach of any covenants or agreements contained in or constitute a default under, or result in the creation of any encumbrance, lien or charge under the provisions of its organizational documents or any members’ or managers’ resolution, indenture, agreement or other instrument whatsoever to which it is a party or by which it is bound or to which it may be subject and will not contravene any applicable law.  Sellers each represent and warrant that this Agreement constitutes a legal, valid and binding obligation of each of Sellers enforceable against each of Sellers in accordance with its terms except as limited by laws of general application affecting the rights of creditors.

 

(c)           The execution and delivery of this Agreement will not violate any order, decree, statute, by-law, regulation, covenant or restriction applicable to Sellers or the Talapoosa Project.

 

(d)           American Gold is the record title and beneficial owner and holds good and marketable title to an undivided one hundred percent (100%) interest in and to the Fee Property, free and clear of all liens and encumbrances.

 

(e)           American Gold owns good and defensible record title to an undivided one hundred percent (100%) interest in and to the Mining Claims. For purposes of this Agreement, “record title” shall mean record title as reflected in the public records maintained by the recorder’s office of Lyon County, and the Nevada State office of the Bureau of Land Management.  Subject to the paramount title of the United States, rights granted by the United States to third parties, and the rights of third parties to use the surface of the Mining Claims pursuant to applicable law, American Gold owns the Mining Claims free and clear of any liens and encumbrances, and (i) the Mining Claims were properly laid out and monumented; (ii) location notices and certificates were properly recorded and filed with appropriate governmental agencies; (iii) all governmental fees have been paid in a manner required by law in order to maintain the Mining Claims through the current assessment year; and (iv) evidence of payment of governmental fees, and other filings required to maintain the Mining Claims in good standing through the current assessment year have been properly and timely recorded or filed with appropriate governmental agencies.

 

Leases, free and clear of all liens and encumbrances.  Neither American Gold nor the lessors under the Leases are in default under any of the Leases, and to the knowledge of Sellers no event has occurred and no circumstance exists which, if not remedied, and whether with or without notice or the passage of time or both, would result in such a default. There are no consents or approvals required under the Leases for the Parties entering into this Agreement or in concluding the purchase and sale contemplated herein.

 

(g)           American Gold is the owner and holds good and marketable title to the Easements, free and clear of all liens and encumbrances.  Neither American Gold nor the grantors under the Easements are in default under any of the Easements, and to the knowledge of Sellers no event has occurred and no circumstance exists which, if not remedied, and whether with or without notice or the passage of time or both, would result in such a default.  There are no consents or approvals required under the Easements for the Parties entering into this Agreement or in concluding the purchase and sale contemplated herein.

 

(h)           American Gold is the record title and beneficial owner and holds good and marketable title to an undivided one hundred percent (100%) interest in and to the Water Rights, free and clear of any valid claims, rights, liens or encumbrances.

 

(i)           The Talapoosa Property described on Exhibit A (Parts 1-5) attached hereto, constitutes all of the real property interests held by Sellers or their affiliates in Lyon County, Nevada related to or held in connection with the Talapoosa Project.

 

(j)           There are no adverse claims or challenges against or to the ownership of or title to the Talapoosa Project or any portion thereof, nor is there any basis therefore.

 

(k)           There is no litigation or administrative or governmental judgments, proceedings or inquiries outstanding or pending or threatened against or relating to Sellers or the Talapoosa Project, nor is there any basis for any such action, proceeding or inquiry.

 

(l)           Except as provided herein, there are no outstanding agreements or options to acquire or purchase the Talapoosa Project or any portion thereof or interest therein.

 

(m)           No person has any royalty or other interest whatsoever in production or profits from the Talapoosa Project or any portion thereof, except for lessors’ royalties provided under the Leases with respect to the lands covered under such Leases.

 

(n)           All of Sellers’ previous exploration and development activities on the Talapoosa Project have been conducted in a legal and lawful manner and in no way breach any statute, by-law, regulation, covenant, restriction, plan or permit.  All governmental licenses and permits required for Sellers’ previous exploration and development activities on the Talapoosa Project, including the Permits, have been obtained and are in good standing.

 

(o)           No surface activities have been conducted by Sellers on the Talapoosa Project that have resulted in unreclaimed surface disturbances subject to reclamation and rehabilitation obligations and that such surface activities, if any, have been properly completed in compliance with all applicable laws.  Sellers have not received any notice of outstanding orders or directions related to environmental matters requiring any work, repair, construction or expenditures with respect to the Talapoosa Project and the conduct of operations thereto, and there is no basis on which such orders or directions could be made.

 

 

(p)           there is no material scientific or technical information on the Talapoosa Project that would make the disclosure in the technical report prepared by Tetra Tech dated April 12, 2013 and entitled “Technical Report and Resource Estimate on the Talapoosa Project, Nevada” inaccurate or misleading.

 

8.2.            Buyer’s and Timberline Parent’s Representations and Warranties .  Buyer and Timberline Parent represents and warrants to Sellers, as of the Effective Date, the Initial Closing Date and the Option Exercise Closing Date, that:

 

(a)           Buyer and Timberline Parent are each a company duly incorporated and validly subsisting and is in good standing under the laws of the jurisdiction of its incorporation.

 

(b)           Buyer and Timberline Parent have full power and absolute authority and capacity to enter into this Agreement and to carry out the transactions contemplated hereby except where regulatory approval is required.

 

(c)           Buyer and Timberline Parent  have duly obtained all corporate authorizations for the execution, delivery and performance of this Agreement and such execution, delivery and performance and the consummation of the transactions herein contemplated, including the issuance of the Shares, will not conflict with, or accelerate the performance required by or result in any breach of any covenants or agreements contained in or constitute a default under, or result in the creation of any encumbrance, lien or charge under the provisions of its constituting documents or any shareholders' or directors' resolution, indenture, agreement or other instrument whatsoever to which it is a party or by which it is bound or to which it may be subject and will not contravene any applicable law.

 

(d)           The execution and delivery of this Agreement will not violate any order, decree, statute, by-law, regulation, covenant or restriction applicable to Buyer or Timberline Parent.

 

(e)           There are no judgments against Buyer, Timberline Parent or any of their subsidiaries, if any, which are unsatisfied, nor is Buyer, Timberline Parent or any of their subsidiaries, if any, subject to any injunction, judgment, decree or order of any court, regulatory body, administrative agency or other governmental body.

 

(f)           Upon issuance pursuant to the terms of this Agreement, the Shares will be duly-issued, fully-paid and non-assessable securities of Timberline Parent.

 

(g)           No order ceasing, halting or suspending trading in securities of Timberline Parent nor prohibiting the sale of such securities has been issued to and is outstanding against Timberline Parent or its directors, officers or promoters, and, to the best of Timberline Parent’s knowledge, no investigations or proceedings for such purposes are pending or threatened.

 

(h)           Neither Buyer, Timberline Parent nor any of their affiliates, nor any person acting on their behalf has engaged in or will engage in any form of “general solicitation” or “general advertising” (as such terms are used in Rule 502 (c) under Regulation D of the U.S. Securities Act) in the United States with respect to offers or sales of the Shares.

 

(i)           Timberline Parent hereby agrees to use its reasonable best efforts to obtain from the NYSE MKT and TSX Venture Exchange additional listing approval of the Initial Securities on or before the Initial Closing Date and of any other Shares issuable under this Agreement in a timely manner.

 

(j)           The issuance of the Shares by Timberline Parent under this Agreement is exempt from the registration and prospectus requirements of applicable securities laws in Canada and the United States.

 

(k)           Except as set forth in the Disclosure Documents (as defined in Section 8.2(n)), Timberline Parent does not own any shares in or other securities of, or have any interest in the assets or business of, any other person.

 

(l)           As of the date hereof, the authorized share capital of Timberline Parent consists of 200,000,000 shares of common stock, par value U.S.$0.001, of which 10,000,084 shares are issued and outstanding as fully paid and non-assessable.

 

(m)           Except as set forth in the Disclosure Documents and in the reports filed under Section 16 of the United States Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), in relation to Timberline Parent and its securities, no person has any right, warrant, agreement or option, present or future, contingent or absolute, or any right capable of becoming such a right, warrant, agreement or option, for the issue or allotment of any unissued shares in the capital of Timberline Parent or any other security convertible into or exchangeable for any such shares, or to require Timberline Parent to purchase, redeem or otherwise acquire any of the issued and outstanding shares in its capital.

 

(n)           The disclosure documents of Timberline Parent filed with the United States Securities and Exchange Commission and available at www.sec.gov and as filed on www.sedar.com and all financial, marketing, sales and operational information relating to Timberline Parent provided by Timberline Parent to Sellers (collectively, the “ Disclosure Documents” ) are true, correct and complete in all material respects and do not contain any misrepresentations as such term is defined in securities laws in Canada.

 

(o)           The financial statements of Timberline Parent filed with the United States Securities and Exchange Commission and available at www.sec.gov and as filed on www.sedar.com (the “ Financial Statements ”) have been prepared in accordance with United States Generally Accepted Accounting Principles, applied on a basis consistent with that of previous fiscal periods, and present fairly and accurately, in all material respects, the financial position and all material liabilities (accrued, absolute, contingent or otherwise) of Timberline Parent, as of the dates thereof, and the results of Timberline Parent’s operations for such periods.

 

(p)           Timberline Parent does not have any material liabilities which are not disclosed or reflected in the Financial Statements except those incurred after September 30, 2014 in the ordinary and usual course of business.

 

(q)           Since September 30, 2014, there has not been any material change in the condition or operations of the business, assets or financial affairs of Timberline Parent, or any damage, destruction or loss, or other event, development or condition (individually or in the aggregate), of any character (whether or not covered by insurance) which is not generally known or which has not been disclosed to the Sellers, which may have a material and adverse effect on the business of Timberline Parent.

 

(r)           All tax returns and reports of Timberline Parent required by applicable laws to be filed prior to the date hereof have been filed within the times and in the manner prescribed by law and are true, complete and correct and all taxes have been paid or accrued in the Financial Statements.

 

(s)           The accounting and financial books and records of Timberline Parent set out and disclose all material financial transactions of Timberline Parent and such transactions have been accurately recorded in such books and records.

 

(t)           The minute books and corporate records of Timberline Parent contain substantially complete and accurate minutes of all meetings and proceedings of the shareholders, directors and committees of Timberline Parent, all meetings and proceedings were duly called and held, the share certificate books, register of transfers, register of shareholders and register of directors are complete and accurate in all material respects.

 

(u)           Timberline Parent has materially complied and will materially comply with the requirements of all applicable laws, including, without limitation, the applicable securities laws in relation to the issue and trading of its securities and all matters relating to the issue of the Shares to the Sellers pursuant to the terms of this Agreement.

 

(v)           Timberline Parent is a “reporting issuer” (within the meaning of the applicable securities laws) in the provinces of British Columbia and Alberta and its shares of common stock are registered under Section 12(b) of the Exchange Act and Timberline Parent is not a reporting issuer in any other jurisdiction and the Timberline Parent Shares are listed on the TSX Venture Exchange and the NYSE MKT and Timberline Parent is not in default in any material respect of any of the requirements of the applicable securities laws or TSX Venture Exchange or NYSE MKT rules and policies.

 

(w)           Timberline Parent is in material compliance with all applicable laws in the jurisdictions in which it carries on business and which may materially affect Timberline Parent, has not received a notice of material non-compliance, nor knows of, any facts that could give rise to a notice of material non-compliance with any such applicable laws and is not aware of any pending change or contemplated change to any applicable laws or governmental positions that would materially affect the business of Timberline Parent or the business or legal environment under which Timberline Parent operates.

 

(x)           Except as disclosed in the Disclosure Documents, Timberline Parent is not party to or bound by any material contract or commitment, whether oral or written. All contracts disclosed in the Disclosure Documents to which Timberline Parent is a party are all in full force and effect and unamended, no material default exists in respect thereof in relation to Timberline Parent or its subsidiaries and, to the best of Timberline Parent’s knowledge, in relation to any other party thereto, and Timberline Parent is not aware of any intention on the part of any other party thereto to terminate or materially alter any such contract or agreement.

 

(y)           Timberline Parent is not a party to any actions, suits or proceedings which could materially affect its business or financial condition and, to the best of Timberline Parent’s knowledge, no such actions, suits or proceedings are contemplated or have been threatened.

 

(z)           There are no judgments against Timberline Parent which are unsatisfied, nor are there any consent decrees or injunctions to which Timberline Parent or any of its subsidiaries is subject.

 

(aa)           Timberline Parent covenants, represents and warrants with and in favor of the Sellers that all of the representations and warranties set forth in this section 8.2 will be true and correct at the date of each issuance of Shares under this Agreement as if made at that time.

 

ARTICLE IX

Assignments

 

9.1.            Transfers by Buyer .

 

(a)           This Agreement and the benefits, rights, duties and obligations of Buyer may be assigned or transferred by Buyer in whole or in part, without prior written consent of Sellers, to any corporation, partnership or any other legal entity which Buyer directly or indirectly controls, provided that such assignment shall not relieve Timberline Parent of any liabilities under this Agreement to issue the Shares to exercise the Option.  For purposes of this paragraph, “control” means ownership in excess of fifty percent (50%).

 

(b)           Buyer shall have the right to sell, option or joint venture its interests in this Agreement and the Talapoosa Project prior to payment of the Option Payment only upon prior written approval of Sellers, such approval not to be unreasonably withheld, provided that such transaction shall not relieve Timberline Parent of any liabilities under this Agreement to issue the Shares to exercise the Option.

 

(c)           Each purchaser, optionee or joint venturer prior to the effective date of any sale, option or joint venture shall agree in writing to be bound by the terms and conditions of this Agreement, including specifically the terms to pay the Gunpoint Royalty.

 

9.2.            Transfer by Sellers .

 

(a)           Sellers may transfer or assign their entire interest in this Agreement and the Talapoosa Project subject to the written consent of Buyer, which consent shall not be unreasonably withheld, and the express assumption by the transferee of all of Sellers’ obligations and upon execution of appropriate disclosure documents as Buyer or its counsel deems necessary.

 

(b)           Gunpoint Parent shall not assign or transfer any rights to receive the Shares, except (i) with the prior written consent of Timberline Parent, which consent may be unreasonably withheld, or (ii) by operation of law in the event of bankruptcy or a corporate reorganization.  In the event of a permitted transfer, and in each such case, each legal transferee shall (i) provide Timberline Parent, in respect of an assignment or transfer of rights to receive Shares with certified copies of all applicable legal documentation evidencing transfer by operation of law; (ii) ratify this Agreement, and, (iii) with respect to the Shares, execute and deliver to Timberline Parent such other documentation as may be reasonably required by Timberline Parent under applicable securities laws and regulations and the applicable requirements of any stock exchange, prior to receiving any distribution of Shares. No change in ownership shall be binding on Timberline Parent until thirty (30) days after Timberline Parent has received copies of the instruments and documents required herein evidencing the change.  Except as set forth herein, Timberline Parent shall have no obligation to recognize any claims to the Shares.

 

(c)           Except as expressly agreed in writing by Timberline Parent, no change or division in the ownership of the Talapoosa Property or the right to issuance of the Shares shall enlarge the obligations or diminish the rights of Timberline Parent or Buyer.  Sellers covenant that any change in ownership shall be accomplished in such a manner that Buyer or Timberline Parent shall be required to give any notices hereunder only to Gunpoint Parent, its permitted transferees and assignees, as provided under Section 9.2, for and on behalf of the Sellers.  Upon breach of this covenant, Buyer and Timberline Parent may suspend all obligations hereunder, including, without reservation, issuance of Shares otherwise due to Sellers or payment of the Gunpoint Royalty until the breach has been cured.

 

ARTICLE X

Notice

 

10.1.            Notices .  All notices and other communications to a Party shall be in writing and shall be sufficiently given if (i) delivered in person, (ii) sent by electronic communications, with confirmation sent by registered, certified mail, or overnight courier delivery, or (iii) sent by registered, certified mail, or overnight courier delivery.  All notices shall be effective and shall be deemed delivered (i) if by personal delivery, on the date of delivery, (ii) if by electronic communication, on the date of receipt of the electronic communication, and (iii) if by mail or overnight delivery, on the date of receipt.  Until a change of address is communicated as indicated above, all notices shall be addressed as follows:

 

To Sellers:

 

Gunpoint Exploration Ltd.

c/o #201 - 1512 Yew Street

Vancouver, British Columbia, Canada V6K 3E4

Facsimile:  604-731-0209

 

To Buyer and Timberline Parent:

 

Timberline Resources Corporation

101 East Lakeside Avenue

Coeur d’Alene, Idaho 83814

Facsimile:  208-664-4860

 

10.2.           Any Party may give notice in writing of any change of its address. The address provided in said notice will thereafter be deemed to be the address of the Party for the giving of notice hereunder.

 

ARTICLE XI

Arbitration

 

11.1.            Procedure .  Any controversy or claim, whether based on contract, tort, statute or other legal or equitable theory (including, but not limited to, any claim of fraud, misrepresentation or fraudulent inducement or any question of validity or effect of this Agreement, including this clause) arising out of or related to this Agreement (including amendments or extensions), or the breach or termination of this Agreement shall be first submitted to a mutually agreed neutral third party for non-binding mediation.  If mediation is not successful, then such controversy or claim shall be settled by arbitration in accordance with the then current CPR Institute for Dispute Resolution Rules for Non-Administered Arbitration of Business Disputes or, if such entity is unable or unwilling to settle such controversy or claim, the Rules of the American Arbitration Association for Commercial Arbitration (the applicable entity, the “ Institute ”), and this provision.  The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. Sections 1 through 16 to the exclusion of any provision of state law inconsistent therewith or which would produce a different result, and the judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction.

 

11.2.            Location .  The arbitration shall be held in Reno, Nevada and there shall be one arbitrator.  Gunpoint Parent and Timberline Parent shall jointly select the arbitrator.  The arbitrator shall be chosen subject to the rules and procedures as provided by the Institute and shall have a minimum of ten (10) years’ experience in mining matters generally and in the subject matter of the dispute specifically.  The arbitrator shall have no financial interest in the outcome of the dispute.  The arbitrator shall determine the claims of the Parties and render a final award in accordance with the substantive law of the State of

Nevada, excluding the conflicts provisions of such law.  The arbitrator shall set forth the reasons for the award in writing.  Except as required by law (and then only after prior notice to the other Party), no Party shall disclose the facts of the underlying dispute or the contents or results of the arbitration without the prior consent of all Parties.  The decision of the arbitrator shall be final and binding on all Parties, and shall be enforceable in any court of competent jurisdiction.

 

11.3.            Limitation .  Any claim or right of action by either Party shall be time-barred if the asserting Party provides written notice of such claim or right of action later than the last day of the period of survival of the representation, warranty, covenant or indemnification obligation giving rise to such claim or right of action.  All periods of survival and statutes of limitation and defenses based upon passage of time applicable to any claim or right of action (including any counterclaim or claim of setoff) shall be tolled while the arbitration is pending.

 

11.4.            Inurement .  The obligation to arbitrate any claim shall extend to the successors, assigns and third party beneficiaries of the Parties.

 

11.5.            Discovery .  The arbitrators shall order the Parties to promptly exchange copies of all exhibits and witness lists, and, if requested by a Party, to produce other relevant documents, to answer up to ten interrogatories (including subparts), to respond to up to ten (10) requests for admissions (which shall be deemed admitted if not denied) and to produce for deposition and, if requested, at the hearing all witnesses that such Party has listed and up to four (4) other persons within such Party’s control.  Any additional discovery shall only occur by agreement of the Parties or as ordered by the arbitrators upon a finding of good cause.

 

11.6.            Costs .  Each Party shall bear its own costs, expenses and attorney’s and Party arbitrator fees; and one-half of the neutral arbitrator’s fees, provided that if court proceedings to stay litigation or compel arbitration are necessary, the Party who unsuccessfully opposes such proceedings shall pay all reasonable associated costs, expenses, and attorney’s fees in connection with such court proceedings.

 

11.7.            Authority .  The arbitrators shall not have the power to grant temporary or permanent injunctive or other equitable relief.  A Party may, notwithstanding any other provision of this Agreement, seek injunctive relief from any court of competent jurisdiction.

 

11.8.            Enforceability .  If any part of this arbitration provision is held to be unenforceable, it shall be severed and shall not affect either the duty to arbitrate or any other part of this provision.

 

ARTICLE XII

Miscellaneous

 

12.1.            Governing Law; Jurisdiction .  This Agreement shall be governed by and interpreted in accordance with the laws of the United States of America and the State of Nevada.  The Parties hereby consent to the non-exclusive personal jurisdiction of the state and federal courts located in the state of Nevada in connection with any controversy related to this Agreement and waive any argument that venue in any such forum is not convenient.  THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION AT LAW OR IN EQUITY OR IN ANY OTHER PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT.

 

12.2.            Entire Agreement .  This Agreement embodies the entire agreement and understanding among the Parties hereto and supersedes all prior agreements and undertakings, whether oral or written, relative to the subject matter hereof.

 

 

 

12.3.            Time of Essence .  Time shall be of the essence of this Agreement.

 

12.4.            Binding .  This Agreement shall ensure to the benefit of and be binding upon the Parties hereto and their respective successors and permitted assigns.

 

12.5.            Unenforceability of Provisions .  If any one or more of the provisions contained herein should be held to be invalid, unenforceable or illegal in any respect in any jurisdiction, the validity, legality and enforceability of such provision shall not in any way be affected or impaired thereby in any other jurisdiction and the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

 

12.6.            Counterparts .  This Agreement may be executed in counterparts which may be delivered by facsimile. Each executed counterpart shall be deemed to be an original and all such counterparts when read together constitute one and the same instrument.

 

12.7.            Third Party Beneficiaries .  This Agreement is exclusively for the benefit of Sellers, their successors and permitted assigns, with respect to the obligations of Buyer and Timberline Parent under this Agreement, and for the benefit of Buyer and Timberline Parent, and their respective successors and permitted assigns, with respect to the obligations of Sellers, under this Agreement, and this Agreement shall not be deemed to confer upon or given to any other third party any remedy, claim, liability, reimbursement or other right.

 

12.8.            U.S. Dollars .  Except as where specifically noted, all funds payable hereunder are to be payable in United States Dollars.

 

12.9.            Specific Performance .  The Parties acknowledge that any breach of the terms of this Agreement by Sellers would give rise to irreparable harm to Buyer and Timberline Parent for which money damages would not be an adequate remedy and accordingly the Parties agree that, in addition to any other remedies permitted under this Agreement, Buyer and Timberline Parent shall be entitled to enforce the terms of this Agreement by a decree of specific performance without the necessity of proving the inadequacy of money damages as a remedy.

 

12.10.            Short Form .  Contemporaneously herewith Buyer, Timberline Parent and Sellers have executed and delivered a short form of this Agreement in the form of Exhibit J (“ Short Form ”).  Buyer may record the Short Form if it so elects.

 

12.11.            Perpetuities .  The Parties do not intend that there shall be any violation of the Rule Against Perpetuities, the Rule Against Unreasonable Restraints on the Alienation of Property, or any similar rule.  If any right or option to acquire any interest in any real properties exists in this Agreement, such right or option must be exercised, if at all, so as to vest such interest within time periods permitted by applicable rules.  If, however, any such violation should inadvertently occur, the Parties hereby agree that a court or arbitrator shall reform that provision in such a way as to approximate most closely the intent of the Parties within the limits permissible under such rules.

 

12.12.            Survival .  Sections 1.3 (relating to the release of the Initial Securities from Escrow, as provided therein) 1.5, 2.4, 2.5, 2.6, ARTICLE IV, 5.1(b), 6.6(b), ARTICLE VII, ARTICLE VIII, ARTICLE IX, ARTICLE X, ARTICLE XI and ARTICLE XII shall survive termination of this Agreement and delivery of the closing documents.

 

12.13.            Regulatory Approval .  This Agreement is subject to regulatory approval, which approval Buyer and Timberline Parent shall apply for promptly after the Effective Date.

 

 

 

12.14.            Public Disclosure of Agreement and Sellers .  The Parties hereby consent to the filing by the other Parties of this Agreement with the United States Securities and Exchange Commission pursuant to any of the Party’s obligations under the Exchange Act and the rules and regulations thereunder and on the System for Electronic Document Analysis and Retrieval (SEDAR) Internet website of the Canadian Securities Administrators and the identification of the Parties in news releases and other continuous disclosure documents of any Party where required to comply with the Party’s public disclosure obligations under the Exchange Act and of the policies of the NYSE MKT and the TSX Venture Exchange.

 

12.15.            Further Assurance .  At the request of any Party, the Parties shall take such reasonable actions, and execute and deliver any further instruments, agreements, documents or other papers reasonably requested by any Party to effect the purposes of this Agreement and the transactions contemplated hereby, including without limitation, (i) the Warranty Deed, (ii) the Mining Claim Deed, (iii) the Assignment, (iv) the Water Rights Deed, (v) the Bill of Sale, (vi) Short Form, and (vii) revision of schedules consistent with the legal description of the Talapoosa Project (including any amended or relocated mining claims or subsequently issued leases).

 

[ Remainder of Page Intentional Left Blank ]

 

 

IN WITNESS WHEREOF the Parties hereto have executed this Agreement as of the Effective Date.

List of Exhibits

 

Exhibit A-1 – Fee Property

 

Exhibit A-2 – Mining Claims

 

Exhibit A-3 – Leases

 

Exhibit A-4 – Easements

 

Exhibit A-5 – Water Rights

 

Exhibit B – Permits

 

Exhibit C – Warranty Deed

 

Exhibit D – Mining Claim Deed

 

Exhibit E – Assignment

 

Exhibit F – Bill of Sale

 

Exhibit G – Water Rights Deed

 

Exhibit H – Gunpoint Royalty Calculation

 

Exhibit I – Storage Space

 

Exhibit J – Short Form

 

 

 

Page 22

Exhibit A-1

to

Option Agreement

 

Fee Property

 

Township 18 North, Range 24 East, MDB&M

Section 3: N2; N2S2

 

Covering approximately 330 acres

 

(Parcel # 015-091-03)

 

 

 

Exhibit A-2

to

Option Agreement

 

Mining Claims

 

 

Serial No	Case Type	Claim Name/No.	Mer	Twp	Rn g	Sec	Subdiv	Lead File	Loc. Date
NMC1035142	LODE CLAIM	Sorrel 1	MD	18N   18N   19N	24E   25E   24E	1   6   36	NE   NW   SE	NMC1035142	11/3/2010
NMC1035143	LODE CLAIM	Sorrel 2	MD	18N	25E	6	NE, NW	NMC1035142	11/3/2010
NMC1035144	LODE CLAIM	Sorrel 3	MD	18N   18N	24E   25E	1   6	NE   NW	NMC1035142	11/3/2010
NMC1035145	LODE CLAIM	Sorrel 4	MD	18N	25E	6	NE, NW	NMC1035142	11/3/2010
NMC1035146	LODE CLAIM	Sorrel 5	MD	18N   18N	24E   25E	1   6	NE   NW	NMC1035142	11/3/2010
NMC1035147	LODE CLAIM	Sorrel 6	MD	18N	25E	6	NE, NW	NMC1035142	11/3/2010
NMC1035148	LODE CLAIM	Sorrel 7	MD	18N   18N	24E   25E	1   6	NE   NW	NMC1035142	11/3/2010
NMC1035149	LODE CLAIM	Sorrel 8	MD	18N	25E	6	NE, NW	NMC1035142	11/3/2010
NMC1035150	LODE CLAIM	Sorrel 9	MD	18N   18N	24E   25E	1   6	NE, SE   NW, SW	NMC1035142	11/3/2010
NMC1035151	LODE CLAIM	Sorrel 10	MD	18N	25E	6	All	NMC1035142	11/3/2010
NMC1035152	LODE CLAIM	Sorrel 11	MD	18N   18N	24E   25E	1   6	SE   SW	NMC1035142	11/3/2010
NMC1035153	LODE CLAIM	Sorrel 12	MD	18N	25E	6	SW, SE	NMC1035142	11/3/2010
NMC1035154	LODE CLAIM	Sorrel 13	MD	18N   18N	24E   25E	1   6	SE   SW	NMC1035142	11/3/2010
NMC1035155	LODE CLAIM	Sorrel 14	MD	18N	25E	6	SW, SE	NMC1035142	11/3/2010
NMC1035156	LODE CLAIM	Sorrel 15	MD	18N   18N	24E   25E	1   6	SE   SW	NMC1035142	11/3/2010
NMC1035157	LODE CLAIM	Sorrel 16	MD	18N	25E	6	SW, SE	NMC1035142	11/3/2010
NMC1035158	LODE CLAIM	Sorrel 17	MD	18N     18N	24E     25E	1 12   6 7	SE NE   SW NW	NMC1035142	11/3/2010
NMC1035159	LODE CLAIM	Sorrel 18	MD	18N	25E	6 7	SW, SE NE, NW	NMC1035142	11/3/2010
NMC1035160	LODE CLAIM	Palomino 1	MD	19N	24E	17 18 19 20	SW SE NE NW	NMC1035142	10/31/2010

 

Exhibit A-1 - Page 3

 

 

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Serial No.	Case Type	Claim Name/No.	Mer	Twp	Rn g	Sec	Subdiv	Lead File	Loc. Date
NMC1035215	LODE CLAIM	Palomino 56	MD	19N	24E	14 15 22 23	SW SE NE NW	NMC1035142	11/2/2010
NMC1035216	LODE CLAIM	Palomino 57	MD	19N	24E	22	NE, NW	NMC1035142	11/2/2010
NMC1035217	LODE CLAIM	Palomino 58	MD	19N	24E	22 23	NE NW	NMC1035142	11/2/2010
NMC1035218	LODE CLAIM	Palomino 59	MD	19N	24E	22	NE, NW	NMC1035142	11/2/2010
NMC1035219	LODE CLAIM	Palomino 60	MD	19N	24E	22 23	NE NW	NMC1035142	11/2/2010
NMC1035220	LODE CLAIM	Palomino 61	MD	19N	24E	22	NE, NW	NMC1035142	11/2/2010
NMC1035221	LODE CLAIM	Palomino 62	MD	19N	24E	22 23	NE NW	NMC1035142	11/2/2010
NMC1035222	LODE CLAIM	Palomino 63	MD	19N	24E	22	All	NMC1035142	11/2/2010
NMC1035223	LODE CLAIM	Palomino 64	MD	19N	24E	22 23	NE, SE NW, SW	NMC1035142	11/2/2010
NMC1035224	LODE CLAIM	Palomino 65	MD	19N	24E	22	SW, SE	NMC1035142	11/2/2010
NMC1035225	LODE CLAIM	Palomino 66	MD	19N	24E	22 23	SE SW	NMC1035142	11/2/2010
NMC1035226	LODE CLAIM	Palomino 67	MD	19N	24E	22	SW, SE	NMC1035142	11/2/2010
NMC1035227	LODE CLAIM	Palomino 68	MD	19N	24E	22 23	SE SW	NMC1035142	11/2/2010
NMC1035228	LODE CLAIM	Palomino 69	MD	19N	24E	22	SW, SE	NMC1035142	11/2/2010
NMC1035229	LODE CLAIM	Palomino 70	MD	19N	24E	22 23	SE SW	NMC1035142	11/2/2010
NMC1035230	LODE CLAIM	Palomino 71	MD	19N	24E	22 27	SW, SE NE, NW	NMC1035142	11/2/2010
NMC1035231	LODE CLAIM	Palomino 72	MD	19N	24E	22 23 26 27	SE SW NW NE	NMC1035142	11/2/2010
NMC117406	LODE CLAIM	Washington	MD	18N	24E	2	All	NMC117339	8/28/1925
NMC117407	LODE CLAIM	Lincoln #1	MD	18N	24E	2	NW, SW	NMC117339	7/1/1951
NMC117408	LODE CLAIM	Lincoln #2	MD	18N	24E	2	NW, SW	NMC117339	7/1/1951
NMC117409	LODE CLAIM	Jefferson	MD	18N	24E	2	NW, SW, SE	NMC117339	7/1/1951
NMC117410	LODE CLAIM	Roosevelt	MD	18N	24E	2	NW	NMC117339	8/23/1925
NMC912930	LODE CLAIM	Alpha	MD	18N	24E	3	NE, SE	NMC912930	9/4/2005
NMC912931	LODE CLAIM	Alpha Fr	MD	18N	24E	3	SE	NMC912930	9/4/2005
NMC912932	LODE CLAIM	Cuba	MD	18N	24E	2	NW	NMC912930	9/3/2005
NMC912933	LODE CLAIM	Equity 1	MD	18N	24E	2 3	SW SE	NMC912930	9/5/2005
NMC912934	LODE CLAIM	Equity 2	MD	18N	24E	2 3	SW SE	NMC912930	9/5/2005
NMC912935	LODE CLAIM	First Strike	MD	18N	24E	3	NE, SE	NMC912930	9/4/2005
NMC912936	LODE CLAIM	Georgia Amended	MD	18N	24E	2 3	NW, SW NE, SE	NMC912930	9/3/2005
NMC912937	LODE CLAIM	Justice	MD	18N	24E	3	NW, SW	NMC912930	9/4/2005
NMC912938	LODE CLAIM	Justice Fr	MD	18N	24E	3	NW, SW	NMC912930	9/4/2005

 

 

Exhibit A-1 - Page 4

 

 

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Exhibit A-1 - Page 5

 

 

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