EXECUTION VERSION

COMSTOCK MINING INC.

 

11% Senior Secured Debenture due 2021

 

THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, OR (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OR (II) UNLESS PURSUANT TO RULE 144 (OR ANY SUCCESSOR THERETO) UNDER THE SECURITIES ACT.

THIS DEBENTURE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT (“OID”) FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. THE ISSUE PRICE, AMOUNT OF OID, ISSUE DATE AND YIELD TO MATURITY OF THIS NOTE MAY BE OBTAINED BY CONTACTING THE CHIEF EXECUTIVE OFFICER OF COMSTOCK MINING INC. AT P.O. BOX 1118, VIRGINIA CITY, NV 89440, TELEPHONE: 775-848-5310.

 

COMSTOCK MINING INC.

 

11% Senior Secured Debenture due 2021

 

Certificate No. A-1

 

COMSTOCK MINING INC., a Nevada corporation, for value received, promises to pay to GF COMSTOCK 2 LP, a Delaware limited partnership, or its registered assigns, the principal sum of Ten Million Seven Hundred Thousand Twenty-Three and no/100 Dollars ($10,723,000), and to pay interest thereon, as provided in this Debenture, until the principal and all accrued and unpaid interest are paid or duly provided for.

 

Additional provisions of this Debenture are set forth on the other side of this Debenture.

 

[ Remainder of This Page Intentionally Left Blank; Signature Page Follows ]

  

IN WITNESS WHEREOF , Comstock Mining Inc. has caused this instrument to be duly executed as of the date set forth below.

 

 

 ACKNOWLEDGED AND AGREED:

 

 

[ Signature Page to Comstock Senior Secured Debenture (2017) ]

 

COMSTOCK MINING INC.

 

11% Senior Secured Debenture due 2021

 

This Debenture (this “ Debenture ”) is issued by Comstock Mining Inc., a Nevada corporation (the “ Company ”), to GF Comstock 2 LP, a Delaware limited partnership, and designated as the Company's 11% Senior Secured Debenture due 2021.

 

1. Definitions .

 

“ Account ” is any “account” as defined in the Uniform Commercial Code with such additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing to the Company.

 

“ Affiliate ” means, with respect to any Person, any other Person who directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person. The term “ control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. For purposes of this definition, the terms “ controlling, ” “ controlled by ” and “ under common control with ” have correlative meanings.

 

“ Board of Directors ” means the board of directors of the Company or a committee of such board duly authorized to act on behalf of such board.

 

“ Business Day ” means any day other than a Saturday, a Sunday or any day on which commercial banks in New York are authorized or required by law or executive order to close or be closed. 

 

“ Capital Stock ” of any Person means any and all shares of, interests in, rights to purchase, warrants or options for, participations in, or other equivalents of, in each case however designated, the equity of such Person.

 

“ Change of Control ” means the occurrence after the date hereof of any of (a) an acquisition by any Person (other than a Person who holds such voting power today or his affiliates or related parties) of a majority of the aggregate voting power of the voting securities of the Company whose holders are generally entitled to vote for the election of directors of the Company, (b) the merger or consolidation of the Company with any other Person where, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction do not own a majority of the aggregate voting power of the voting securities of the successor Person of such transaction whose holders are generally entitled to vote for the election of directors of the successor Person of such transaction, or (c) the sale or transfer of all or substantially all of the Company’s consolidated assets to another Person where, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction do not own a majority of the aggregate voting power of the voting securities of the Person whose holders are generally entitled to vote for the election of directors of the acquiring Person immediately after the transaction.

“ Close of Business ” means 5:00 p.m., New York City time.

 

“ Collateral ” has the meaning set forth in the Security Agreement.

 

“ Commission ” means the U.S. Securities and Exchange Commission.

 

“ Default ” means any event that is (or, after notice, passage of time or both, would be) an Event of Default.

 

“ Default Interest Rate ” has the meaning set forth in Section 3(B) .

“ Environmental Claim ” shall mean any written accusation, allegation, notice of violation, claim, demand, order, directive, cost recovery action or other cause of action by, or on behalf of, any Governmental Authority or any other person for damages, injunctive or equitable relief, personal injury (including sickness, disease or death), Remedial Action costs, tangible or intangible property damage, natural resource damages, nuisance, pollution, any adverse effect on the environment caused by any Hazardous Material, or for fines, penalties or restrictions, resulting from or based upon: (a) the threat, the existence, or the continuation of the existence of a Release (including sudden or non-sudden, accidental or non-accidental Releases); (b) exposure to any Hazardous Material; (c) the presence, use, handling, transportation, storage, treatment or disposal of any Hazardous Material; or (d) the violation or alleged violation of any Environmental Law or Environmental Permit.

“ Environmental Law ” shall mean any and all applicable federal, state, local and foreign laws, rules, regulations, requirements, decisions, judgments, decrees and orders relating to the protection of the environment or health and safety including without limitation, environmental, health and safety laws, regulations, governmental authorizations, ordinances, and rules, and the common law, and contractual obligations relating to the use, refinement, handling, treatment, removal, storage, production, manufacture, transportation, disposal, emissions, discharges, Releases or threatened Releases (defined below) of Hazardous Material (defined below) or otherwise relating to pollution or protection of human health or the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or wastes into the environment (including, without limitation, ambient air, soil, surface water, ground water, wetlands, natural resources, land surface or subsurface strata), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, chemicals or industrial, toxic or Hazardous Material or wastes, as the same may be amended or modified, and as now existing or hereafter adopted. Environmental Laws include, without limitation, the Laws listed below: The Hazardous Materials Transportation Act (49 U.S.C. § § 1801 et seq.); the Federal Solid Waste Act as amended by the Resource Conservation and Recovery Act of 1976 (42 U.S.C. § § 6901 et seq.); the Clean Air Act (42 U.S.C. §§ 7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C. § 1251); the Federal Clean Water Act of 1977 (33 U.S.C. §§ 1251, et seq.); the Safe Drinking Water Act (42 U.S.C. §§ 300f et seq.); the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. §§ 9601 et seq.); the Toxic Substances Control Act (15 U.S.C. §§ 2601 et seq.); the Emergency Planning and Community Right to Know Act (42 U.S.C. §§ 11001, et seq.); the Occupational Safety and Health Act (26 U.S.C. §§ 651 et seq.); the Pollution Prevention Act of 1990 (42 U.S.C. §§ 13101 et seq.); the Atomic Energy Act of 1954, 68 Stat. 919; the Energy Reorganization Act of 1974; the Federal Mine Safety and Health Act of 1977, Public Law 91-173, as amended by The Mine Improvement and New Emergency Response (MINER) Act of 2006 (Public Law 109-236, as amended by Public Law 109-280); the Occupational Health and Safety Act of 1970, Pub. Law 91-596, 84 Stat. 1590, 29 USC §§ 652 et seq.); the Federal Land Policy and Management Act, 43 USC §§ 1744 et seq.; Federal Insecticide, Fungicide, and Rodenticide Act; the Federal Pesticide Act of 1978 (7 U.S.C. §§ 136, et seq., and any similar or implementing state or foreign law, and all amendments thereto or regulations promulgated thereunder.

“ Event of Default ” has the meaning set forth in Section 8(A)(i) .

  

“ Exchange Act ” means the U.S. Securities Exchange Act of 1934, as amended.

  

“ GAAP ” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession in the United States, which are applicable to the circumstances as of the date of determination.

 

“ Governmental Authority ” means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government.

“ Hazardous Material ” shall mean any material meeting the definition of a “hazardous substance” in CERCLA 42 U.S.C. §9601(14) and all explosive or radioactive substances or wastes, toxic substances or wastes, pollutants, solid, liquid or gaseous wastes, including petroleum, petroleum distillates or fractions or residues, asbestos or asbestos containing materials, polychlorinated biphenyls (“ PCBs ”) or materials or equipment containing PCBs in excess of 50 ppm, radon gas, infectious or medical wastes, heavy metals, mining wastes, tailings and leachates and all other substances or wastes of any nature regulated pursuant to any Environmental Law, or that reasonably could form the basis of an Environmental Claim.

 

The term “ including ” means “including without limitation.”

  

“ Indebtedness ” means (A) indebtedness for borrowed money or with respect to deposits or advances of any kind or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit (other than trade accounts payable incurred in the ordinary course of business and payable on customary trade terms); (B) obligations evidenced by notes, bonds, debentures or similar instruments; (C) all obligations under conditional sale or other title retention agreements relating to property acquired; (D) capital lease obligations; (E) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed; and (F) all guarantees of Indebtedness of others.

 

“ Interest Payment Date ” means, with respect to this Debenture, on each January 1 ^st and July 1 ^st beginning on July 1, 2017.

“ Inventory ” means all “inventory” as defined in the Uniform Commercial Code in effect on the Issue Date with such additions to such term as may hereafter be made under the Uniform Commercial Code, and includes all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including such inventory as is temporarily out of any Person’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.

 

“ Lien ” shall have the meaning given to it in the Security Agreement.

“ Mandatory Redemption Event ” shall mean the consummation of the sale or other disposition of, or earn-ins related to, any assets of the Company or any of its Subsidiaries.

“ Make-Whole Amount ” means the amount of interest that would accrue on the outstanding principal amount of this Debenture (as of the Redemption Date) from the Redemption Date to the date that is seven

months after such Redemption Date (whether or not such seven month period extends past the Maturity Date).

 

“ Material Adverse Change ” means (A) a material adverse change in the business, assets, operations, earnings, properties, condition (financial or otherwise), prospects or results of operations of the Company and its Subsidiaries, taken as a whole; (B) a material impairment of the prospect of repayment of any portion of the amounts due under this Debenture; or (C) a material adverse effect on the Collateral (as defined in the Security Agreement) that is not the result of action or inaction by the Purchaser or the Company in connection with filings made or not made with respect to the Collateral. For the avoidance of doubt, a “going concern” or like qualification or “emphasis of matter” paragraph in an auditor’s opinion will not automatically constitute a Material Adverse Change unless the underlying facts or situation that resulted in such “going concern” or like qualification or “emphasis of matter” paragraph would otherwise constitute a Material Adverse Change.

“ Material Agreement ” means any contractual arrangement between the Company or any of its Subsidiaries and a Person or Governmental Authority where the value thereof is more than seven hundred fifty thousand dollars ($750,000) in the aggregate.

 

“ Maturity Date ” means January 13, 2021.

“ Net Cash Proceeds ” means the proceeds in the form of cash (including (i) payments in respect of deferred payment obligations and (ii) proceeds from the conversion of other consideration received when converted to cash but only when received), net of reasonable related brokerage commissions and other related fees and expenses incurred as a result thereof; provided that with respect to any permitted earn-in arrangement, the Net Cash Proceeds shall exclude (i) any funds required by the terms of such permitted earn-in to be applied within 12 months of the date of receipt of such cash as a direct investment or capital expenditure in the related project and (ii) any funds expended into such project directly by the third party involved.

The term “ or ” is not exclusive.

 

“ Permitted Indebtedness ” means:

 

(A) the Company’s Indebtedness to the Purchaser under this Debenture and under the Security Agreement;

 

(B) Indebtedness existing on the date hereof and disclosed on Schedule C attached hereto;

(C) Indebtedness of the Company to Northern Comstock LLC represented by a promissory note executed by the Company pursuant to Section 6.11(b) of that certain limited liability company operating agreement of Northern Comstock LLC dated as of October 19, 2010, as amended by the First Amendment to the Limited Liability Company Operating Agreement dated as of August 26, 2015 and as further amended by the Second Amendment to the Limited Liability Company Agreement, dated as of September 28, 2015 (the “ Northern Comstock Agreement ”) (Indebtedness incurred under this clause (C) is hereinafter referred to as “ Northern Comstock Debt ”);

 

(D) unsecured Indebtedness to trade creditors and in connection with credit cards incurred in the ordinary course of business;

 

(E) Indebtedness consisting of capitalized lease obligations and purchase money Indebtedness, in each case incurred by the Company or any of its Subsidiaries to finance the acquisition, repair, improvement or construction of fixed or capital assets of such Person, provided , that (i) the aggregate outstanding principal amount of all such Indebtedness incurred pursuant to this clause (E) during the term of this Debenture does not exceed one million dollars ($1,000,000), (ii) the principal amount of such Indebtedness does not exceed the lower of the cost or fair market value of the property so acquired or built or of such repairs or improvements financed with such Indebtedness (each measured at the time of such acquisition, repair, improvement or construction is made) and (iii) such Indebtedness is incurred prior to or within sixty (60) days after such acquisition or the completion of such repair, improvement or construction;

 

(F) Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of the Company’s business;

(G) deposits or advances received from customers in the ordinary course of business;

 

(H) Indebtedness consisting of guarantees resulting from endorsement of negotiable instruments for collection by the Company or any of its Subsidiaries in the ordinary course of business; and

(I) extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness set forth in clauses (B) and (E) above, provided , that the principal amount thereof is not increased or the terms thereof are not more burdensome in any respect upon the Company, or its Subsidiary, as the case may be, than the Indebtedness being refinanced.

“ permitted earn-in arrangement ” means a joint venture, lease or other arrangement that is on terms that are fair and reasonable to the Company (in the determination of the Company’s board of directors) whereby a third party undertakes the development of a property (other than the Real Property Collateral, excluding the American Flat Properties, the Lucerne Properties and the Occidental Properties, for which an earn-in otherwise satisfying the definition of permitted earn-in arrangement shall be permitted) and receives a share in the revenues or profits therefrom or pays the Company a royalty or participating rent therefrom that does not materially impair the value of such property or the Company’s financial position.

“ Permitted Liens ” means (A) Liens existing on the date hereof and disclosed on Schedule D attached hereto; (B) Liens on assets with an aggregate value (determined as the higher of book value and fair market value) not exceeding $150,000 at any one time; (C) Liens in favor of the Purchaser securing this Debenture; (D) Liens securing Indebtedness incurred under clause (C) of the definition of Permitted Indebtedness secured only by the DWC Property (as defined in the Northern Comstock Agreement) and the Leased Property (as defined in the Northern Comstock Agreement) and no other assets of the Company or any of its Subsidiaries; (E) Liens incurred for the benefit of any third party entering into a permitted earn-in arrangement with the Company that secure the assets that are subject to such permitted earn-in arrangement (but no other assets of the Company or any of its Subsidiaries); (F) all purchase money security interests hereinafter incurred by the Company in the ordinary course of business to the extent incurred under clause (C) of the definition of Permitted Indebtedness; (G) liens imposed by law for taxes that are not yet due or are being contested in good faith, or as to which the grace period, if any, related thereto has not expired; (H) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like liens imposed by law, arising in the ordinary course of business; (I) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations; (J) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety, reclamation and appeal bonds, performance bonds or letters of credit, leases or deferred purchase price of equipment, trade credit, endorsement of checks, and completion guarantees and other obligations of a like nature, in

each case in the ordinary course of business; (K) judgment liens in respect of judgments that do not constitute an Event of Default under Section 8(A)(i)(5) ; (L) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Company or any of the Subsidiaries; (M) Liens to be released upon the application of the use of proceeds in accordance with Section 4(C) of the Securities Purchase Agreement, so long as such Liens are actually released by no later than twelve (12) Business Days after the Closing Date; and (N) Liens with respect to the Genco/Rule Properties (as defined in the Securities Purchase Agreement), so long as either (1) such Liens are released by no later than eight (8) days after the Closing Date, including without limitation pursuant to real property reconveyance documents entitled "Substitution of Trustee and Deed of Reconveyance", or (2) if the Company does not procure the release of such Liens within eight (8) days after the Closing Date as described in clause (1) above, then the Company uses its reasonable best efforts to (A) commence a quiet title action as to the relevant parcel(s) of the Genco/Rule Properties by no later than eight (8) days after the Closing Date and (B) pursue such quiet title action thereafter.

“ Person ” or “ person ” means any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or Governmental Authority.

“ PIK Debt ” has the meaning set forth in Section 3(A) .

“ Purchaser ” means GF Comstock 2 LP, a Delaware limited partnership.

 

“ Real Property Collateral ” shall have the meaning given to it in the Security Agreement.

 

“ Redemption ” means the repurchase of this Debenture (or any portion thereof) by the Company pursuant to Section 5 .

 

“ Redemption Date ” means the date fixed for the repurchase of this Debenture (or any portion thereof) by the Company pursuant to a Redemption.

 

“ Redemption Notice ” has the meaning set forth in Section 5(E) .

 

“ Redemption Notice Date ” means, with respect to a Redemption, the date on which the Company sends the Redemption Notice for such Redemption pursuant to Section 5(E) .

 

“ Redemption Price ” means the cash price payable by the Company to redeem this Debenture (or any portion thereof) upon its Redemption, calculated pursuant to Section 5 .

 

“ Release ” shall have the meaning given such term in CERCLA, 42 U.S.C. §9601(22), including migration.

“ Remedial Action ” shall mean (a) “remedial action” as such term is defined in CERCLA, 42 U.S.C. § 9601(24), and (b) all other actions, including studies and investigations, required by any Governmental Authority or voluntarily undertaken to: (i) clean up, remove, treat, abate or in any other way respond to any Hazardous Material in the environment; (ii) prevent the Release or threat of Release, or minimize the further Release, of any Hazardous Material; (iii) restore and reclaim mine lands both at surface and subsurface, or (iv) monitor the presence of Hazardous Material in the environment or the progress of any treatment or abatement program.

“ Responsible Officer ” of the Company shall mean any executive officer of the Company and any other officer or similar official thereof responsible for the administration of the obligations of such person in respect of this Agreement.

“ Securities Act ” means the U.S. Securities Act of 1933, as amended.

 

“ Securities Purchase Agreement ” means the Securities Purchase Agreement, dated as of the date hereof, between the Company and the Purchaser providing for the initial issuance of this Debenture.

 

“ Security Agreement ” means that certain Pledge and Security Agreement, dated as of the date hereof, between the Company, as pledgor, and the Purchaser as pledgee, and as the same may be amended from time to time.

 

“ Subsidiary ” means, with respect to any Person, (A) any corporation, association or other business entity (other than a partnership or limited liability company) of which more than fifty percent (50%) of the total voting power of the Capital Stock entitled (without regard to the occurrence of any contingency, but after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees, as applicable, of such corporation, association or other business entity is owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person; and (B) any partnership or limited liability company where (i) more than fifty percent (50%) of the capital accounts, distribution rights, equity and voting interests, or of the general and limited partnership interests, as applicable, of such partnership or limited liability company are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person, whether in the form of membership, general, special or limited partnership or limited liability company interests or otherwise; and (ii) such Person or any one or more of the other Subsidiaries of such Person is a controlling general partner of, or otherwise controls, such partnership or limited liability company.

 

“ Transfer ” has the meaning set forth in Section 6(I)(3) .

  

“ Uniform Commercial Code ” means the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of Nevada; provided , however , that, to the extent that the Uniform Commercial Code is used to define any term herein and such term is defined differently in different Articles or Divisions of the Uniform Commercial Code, the definition of such term contained in Article or Division 9 shall govern; provided , further , that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, the lien of the Purchaser on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of Nevada, then the term “ Uniform Commercial Code ” means the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions relating to such provisions.

  

2. Denominations; Transfers and Exchanges .

 

(A) All Debentures will be in registered form, without coupons. The Purchaser may transfer or exchange this Debenture by presenting it to the Company; provided , however , that (x) the Company may refuse to effect any transfer of this Debenture (other than any transfer to an Affiliate (as defined under Rule 144 under the Securities Act) of the Purchaser) until the Purchaser provides the Company with such certificates or other documentation or evidence as the Company may reasonably require to determine that such transfer complies with the Securities Act and other applicable securities laws and (y) notwithstanding

anything to the contrary contained herein, the Purchaser may not transfer the right to designate the persons specified herein to serve as a member of the Board of Directors of the Company as provided for in further detail below and such right shall remain with the Purchaser upon any such transfer or exchange.

 

(B) The Company will not impose any service charge on any Purchaser for any transfer of Debentures, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge that may be imposed in connection with any transfer of this Debenture (or any portion thereof) if the Purchaser requests that this Debenture be issued in a name other than the Purchaser’s name.

(C) The Company will cooperate with the Purchaser upon any requests relating to a transfer of Debentures and will execute and/or deliver any certificates or other documents reasonably requested in connection therewith by the Purchaser or such transferee.

 

3. Interest .

 

(A) Accrual of Interest . This Debenture (including any PIK Debt) will accrue interest at a rate per annum equal to 11% (the “ Stated Interest ”). Stated Interest on this Debenture (including any PIK Debt) will (i) accrue from, and including, the most recent date to which Stated Interest has been paid (including payment in kind of PIK Debt) or duly provided for (or, if no Stated Interest has theretofore been paid or duly provided for, from the date hereof) to, but excluding, the date of payment of such Stated Interest; (ii) be payable semiannually on each Interest Payment Date; and (iii) be computed on the basis of a three hundred sixty (360) day year and the actual number of days elapsed. For the first two (2) years following the date hereof (which, for the avoidance of doubt, shall relate to the Interest Payment Dates in calendar years 2017 and 2018 and on January 1, 2019) and so long as no Default or Event of Default has occurred and is continuing, interest on this Debenture (and on any PIK Debt) will be payable, at the option of the Company, either in cash or in the form of additional Debentures (or a combination thereof), to be issued by the Company, (such additional Debentures, “ PIK Debt ”). For the third and fourth years after the date hereof (beginning with the Interest Payment Date of July 1, 2019), interest on this Debenture (and on any PIK Debt) will be payable only in cash. During the first two (2) years following the date hereof, the Company shall notify the Purchaser no less than five (5) Business Days prior to any Interest Payment Date whether it intends to make a cash interest payment or whether it intends to pay all or a portion of such interest payment by delivering PIK Debt (and, if less than all, the amount of such payment to be made in cash and the amount to be made with PIK Debt). If the Company fails to provide such notice on or prior to such fifth (5 ^th ) Business Day, the Company shall be deemed to have elected to pay all of such interest payment in cash.

(B) Default Interest Rate . If a Default has occurred and is continuing and there are amounts still unpaid remaining on this Debenture (and on any PIK Debt), then, to the extent lawful, interest will accrue on such amounts at a rate per annum equal to 13.5% per annum (the “ Default Interest Rate ”), from, and including, the date of such Default to, but excluding, the date that such Default is cured or waived.

 

4. Repayment; Method of Payment; When Payment Date is Not a Business Day .

 

(A) Repayment . All outstanding principal, along with interest accrued but unpaid on the outstanding principal balance of this Debenture from time to time outstanding, including PIK Debt, plus the Make-Whole Amount with respect to the principal amount of the Debenture as of the date hereof, shall be due and payable on the Maturity Date. For the avoidance of doubt, the Make-Whole Amount shall not be payable with respect to any PIK Debt.

(B) Method of Payment . The Company will pay all cash amounts due under this Debenture by check mailed to the address of the Purchaser (or, if the Purchaser provides the Company, at least five (5) days before the date such amount is due, with written notice of an account of the Purchaser within the United States, by wire transfer of immediately available funds to such account).

 

(C) Delay of Payment when Payment Date is Not a Business Day . If the due date for a payment on this Debenture as provided in this Debenture is not a Business Day, then, notwithstanding anything to the contrary in this Debenture, such payment may be made on the immediately following Business Day and no interest will accrue on such payment as a result of the related delay.

(D) Payments in Kind . With respect to each Interest Payment Date occurring on or prior to January 1, 2019, so long as no Default has occurred and is continuing, the Company in its sole discretion, may pay all or any portion of a payment due on an Interest Payment Date, by: (i) cash; (ii) PIK Debt; or (iii) a combination of the foregoing payment methods.

(E) Allocation of Partial Payments . All payments made by the Company with respect to this Debenture shall be applied in the following manner: (a) first, against the amount of interest accrued and unpaid as of the date of such payment, (b) second, to the payment of any PIK Debt outstanding as of the date of such payment, and (c) third, against all principal being paid on the date of such payment together with the Make-Whole Amount on such principal.

  

5. Redemption .

 

(A) Mandatory Redemption . Within fifteen (15) days of the occurrence of a Mandatory Redemption Event (which in the case of an earn-in shall include any receipt of cash by the Company or any Subsidiary at any time during the earn-in arrangement), the Company shall offer to redeem, in accordance with and subject to this Section 5(A) , the principal amount of this Debenture in amount equal to (x) 70% of the Net Cash Proceeds to the Company of any Mandatory Redemption Event constituting an earn-in arrangement and (y) with respect to all other Mandatory Redemption Events, 100% of the Net Cash Proceeds to the Company of such Mandatory Redemption Event; provided , that the Company shall be permitted to reinvest such Net Cash Proceeds in lieu of redeeming this Debenture if the Purchaser shall provide written authorization therefor in its sole and absolute discretion; provided , further , that no such offer shall be required to be made with respect to any Mandatory Redemption Event the Net Cash Proceeds of which are less than $50,000 until such time as the aggregate Net Cash Proceeds for which no offer has been made exceeds $250,000 during the term of this Debenture, after which the Company (or such Subsidiary) shall be required to offer to redeem, in accordance with and subject to this Section 5(A) , the principal amount of this Debenture in an amount equal to the Net Cash Proceeds in excess of $250,000. Until the Company makes an offer of Redemption or invests the Net Cash Proceeds of a Mandatory Redemption Event in accordance with this Debenture, the Company shall hold such Net Cash Proceeds in a segregated escrow account (on terms reasonably acceptable to Purchaser) until such Net Cash Proceeds have been utilized as permitted hereunder. The Redemption Price for a Redemption pursuant to this Section 5(A) of the Debenture (or any portion thereof) is an amount in cash equal to the sum of (i) the principal amount of this Debenture (or such portion thereof) to be redeemed, plus (ii) accrued and unpaid interest on this Debenture (or such portion thereof) to, but excluding, the Redemption Date for such Redemption, plus (iii) the Make-Whole Amount. Upon receipt of a Notice of Redemption relating to a Mandatory Redemption Event, the Purchaser shall have the right, at any time prior to the Redemption Date, to inform the Company that it does not wish to have the Debenture redeemed.

    (B) Right to Redeem this Debenture . At any time or from time to time, the Company may redeem this Debenture, in whole at any time and in part from time to time, at its option, upon irrevocable prior written notice in accordance with Section 5(C) below at a redemption price equal to 100% of the principal amount of this Debenture to be redeemed, plus accrued and unpaid interest thereon to the date of Redemption, plus the Make-Whole Amount.

  

(C) Redemption Date . The Redemption Date for any Redemption (other than in respect of a Change of Control) will be a Business Day of the Company’s choosing that is no more than fifteen (15) calendar days after the Redemption Notice Date for such Redemption. Upon the delivery of a Redemption Notice to the Purchaser the Redemption Price shall be irrevocably due and payable on the Redemption Date set forth therein.

 

(D) Redemption Notice . To call any portion of this Debenture for Redemption, the Company must send a written notice to the Purchaser of such Redemption (a “ Redemption Notice ”). Such Redemption Notice must state:

 

(i) that this Debenture (or any replacement(s) thereof) have been called for Redemption, briefly describing the Company’s redemption right;

 

(ii) the Redemption Date for such Redemption;

 

(iii) the Redemption Price per $1,000 principal amount of Debentures for such Redemption;

 

(iv) if the Company refinances this Debenture and the Company’s obligations under the this Debenture and the Security Agreement have not been fully discharged before such Redemption Notice Date, an undertaking that such obligations will be fully discharged before, or concurrently with, the Redemption of this Debenture (or any replacement(s) thereof) and that if all Debentures cease to be outstanding before such Redemption, the Company will nonetheless effect such full discharge on the Redemption Date.

 

(E) Payment of the Redemption Price . The Company will cause the Redemption Price for a Debenture subject to Redemption to be paid to the Purchaser on or before the later of (i) the applicable Redemption Date; and (ii) the date this Debenture (or such portion thereof) is delivered to the Company.

(F) Change in Control . Upon the occurrence of a Change of Control, the Company shall be required to redeem this Debenture on or prior to the Business Day on which such Change of Control occurs for an amount in cash equal to the sum of (i) the principal amount of this Debenture (or such portion thereof) to be redeemed, plus (ii) accrued and unpaid interest on this Debenture (or such portion thereof) to, but excluding, the Redemption Date for such Redemption, plus (iii) the Make-Whole Amount. If not so redeemed immediately following such Change of Control, all amounts set forth in this clause (F) shall be immediately due and payable.

 

6. Covenants.

(A) Delivery of Lien Documentation . The Company grants as security for the payment of the Debentures and will execute and file or record documents perfecting a first priority lien in (i) the Real Property Collateral, (ii) the Article 9 Collateral, as defined in and provided under the Security Agreement, (iii) the

Pledged Equity, as defined in and provided under the Security Agreement, and (iv) subject to the conditions set forth therein, Liens provided for under Section 6(O) hereunder, in each case, in favor of Purchaser, including the Security Agreement and Deeds of Trust.

(B) Delivery of Financial Statements and Other Reports . The Company will furnish to the Purchaser:

(1) Annual Financial Statements. Within 90 days after the end of each fiscal year, all annual financial and other information with respect to the Company and its Subsidiaries that would be required to be contained in a filing with the Commission on Form 10-K if the Company were required to file such Form, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and a report on the annual financial statements by Deloitte & Touche LLP or other certified independent public accountants meeting the requirements of the Public Company Accounting Oversight Board and other legally required professional standards.

(2) Quarterly Financial Statements. Within 45 days after the end of each of the first three (3) fiscal quarters of each fiscal year, all quarterly financial and other information with respect to the Company and its Subsidiaries that would be required to be contained in a filing with the Commission on Form 10-Q if the Company were required to file such Form, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

(3) Publicly Filed Materials. Within the time period that the same is required to be filed with the Commission, copies of any proxy statement and periodic and other report that the Company is required to file with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act (after giving effect to any grace periods provided under the Exchange Act).

(4) Deemed Delivery . Any document or report that the Company files with the Commission through the Commission’s EDGAR system (or any successor thereto) will be deemed to be delivered to the Purchaser for purposes of this Section 6(B) at the time such document or report is filed through the EDGAR system (or such successor), it being understood that notwithstanding anything to the contrary in this Section 6(B) , in no event will this Section 6(B) require the Company to deliver or otherwise provide any information for which it is seeking (or has received) confidential treatment from the Commission.

(4) Monthly Financial Statements and Operating Reports . Within thirty (30) days following the end of each month, the Company and its Subsidiaries shall deliver to the Purchaser: internally prepared, unaudited monthly financial statements of the Company and its Subsidiaries, and an operating report describing the status of the operations for each mine of the Company and its Subsidiaries.

(C) Compliance Certificate . The Company will, concurrently with any delivery of financial statements under Section 6(B)(1) or Section 6(B)(2) above, a certificate of an officer of the Company certifying that no Event of Default or Default has occurred (or, if an Event of Default or Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto).

(D) Notices of Default, Litigation and Other Proceedings . Promptly after any Responsible Officer of the Company obtains actual knowledge thereof, the Company will furnish to the Purchaser written notice of: (1) any Default or Event of Default, specifying the nature and extent thereof and the corrective action (if any) proposed to be taken with respect thereto; (2) the filing or commencement of, or any written threat or notice of intention of any person to file or commence, any action, suit or proceeding, whether at law or in

equity or by or before any Governmental Authority, against the Company or one of the Subsidiaries in respect of which there is a reasonable possibility of an adverse determination and which, if adversely determined, could reasonably be expected to result in a Material Adverse Change; and (3) any other development that has resulted in, or could reasonably be expected to result in, a Material Adverse Change.

(E) Compliance with Laws (including Environmental Laws) and Maintenance of Permits and Licenses . The Company will (1) comply in all material respects with all applicable laws, rules, regulations and orders of any Governmental Authority, whether now in effect or hereafter enacted and (2) (a) comply with all Environmental Laws and Environmental Permits applicable to its operations and Properties; obtain and renew all Environmental Permits necessary for its operations and the Real Property Collateral (except for the Company’s current mercury permit which shall not be renewed until necessary) and (b) conduct any Remedial Action in accordance with Environmental Laws, except, in each case with respect to this clause (2), to the extent the failure to do so, individually or in the aggregate, could not reasonably be expected to have a result in Material Adverse Change.

(F) Taxes . The Company will pay and discharge promptly when due all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise that (if unpaid) might give rise to a Lien upon its properties or any part thereof; provided , however , that such payment and discharge shall not be required with respect to any such tax, assessment, charge, levy or claim so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings and the Company (or affected Subsidiary, as applicable) shall have set aside on its books adequate reserves with respect thereto in accordance with GAAP.

(G) Insurance . The Company will (1) keep its insurable properties insured by financially sound and reputable insurers in such amounts as shall be customary for similar businesses, (2) maintain such other insurance (including, to the extent consistent with past practices, self-insurance), of such types, to such extent and against such risks, as is customary with companies in the same or similar businesses, (3) with respect to each Real Property Collateral, carry and maintain comprehensive general liability insurance and coverage on an occurrence basis against claims made for personal injury (including bodily injury, death and property damage) and umbrella liability insurance against any and all claims, in no event for a combined single limit of less than seven hundred fifty thousand dollars ($750,000), (4) deliver original or certified copies of all such policies (or certificates in respect thereof satisfactory to the Purchaser) to the Purchaser and (5) take all other actions with respect to insurance that are required by any Deed of Trust.

(H) Inspections of Assets and Operations . The Company will (1) maintain all financial records in accordance with GAAP and (2) permit any persons designated by the Purchaser to (a) visit and inspect the financial records and the properties of the Company at reasonable times, upon reasonable prior notice to the Company, and as often as reasonably requested, (b) make extracts from and copies of such financial records and (c) discuss the Company's affairs, finances and condition with the officers thereof and independent accountants therefor (in each case, subject to reasonable requirements of confidentiality, including requirements imposed by law or by contract); provided , however, that if a Default or Event of Default has occurred and is continuing, the foregoing limitation with respect to reasonable times and notice shall not apply.

(I) Maintenance . The Company and its Subsidiaries shall at all times keep their properties and assets in good repair, working order and condition, except for reasonable wear and use. With regard to the Owned Unpatented Claims and Leased Unpatented Claims as those terms are defined in the Securities Purchase

Agreement, the Company will cause all claim maintenance fees payable to the Bureau of Land Management to have been paid in the manner required by Law in order to maintain such claims in good standing, properly and timely record and file evidence of such payment as required by Law, and furnish evidence of such payment to Purchaser not later than August 1 of each year.

(J) Business Activities . Without the prior written consent of the Purchaser, which consent may be given or denied in the Purchaser’s sole discretion, neither the Company nor any of its Subsidiaries will engage directly or indirectly (whether through subsidiaries or otherwise) in any type of business other than the business presently or currently planned to be conducted by them and in related lines of business.

(K) Mineral Reports; Land Title Confirmation . On or prior to April 30, 2017, the Company shall cause to be delivered to the Purchaser, in form and substance either agreed to by the Purchaser prior to the date hereof or is otherwise reasonably satisfactory to the Purchaser, a chain of mineral title and such other reports and opinions, prepared and certified by a licensed Nevada lawyer or a landman that is a member in good standing of the Nevada Landmen’s Association and is reasonably acceptable to the Purchaser (such lawyer or landman, the “ Landman ”) and addressed to the Purchaser and its counsel, relating to the status of ownership of the mineral title to the Dayton/Spring Valley Properties (as defined in the Securities Purchase Agreement), the American Flat Properties (as defined in the Securities Purchase Agreement), the Lucerne Properties (as defined in the Securities Purchase Agreement), the Occidental Properties (as defined in the Securities Purchase Agreement), the Genco/Rule Properties (as defined in the Securities Purchase Agreement), and the Amazon/Wonder Properties (as defined in the Securities Purchase Agreement) and shall reimburse the Purchaser for up to $5,000 of legal expenses relating to the review of such reports and opinions. On or prior to January 31, 2017, the Purchaser shall have received, in form and substance reasonably satisfactory to the Purchaser, updated preliminary title reports and such other reports and opinions, related to the American Flat Properties, the Lucerne Properties, the Occidental Properties, the Genco/Rule Properties and the Amazon/Wonder Properties prepared and certified by a Nevada title insurer or the Landman, as the case may be, relating to the status of ownership of the surface title to all of such real properties. Notwithstanding anything in this paragraph to the contrary, the Company shall, promptly after the same are delivered or otherwise communicated to the Company, deliver copies of each report or opinion (whether preliminary or final and any updates thereto) prepared and delivered by the Landman and inform the Purchaser of any other interim updates or information received from the Landman. The Company shall use commercially reasonable efforts to cure material title defects or other material issues identified within the reports delivered by the Landman or that otherwise become known to the Company.

(L) Payment of Contractual Obligations . The Company will cause to be paid when due all payments due or that may become due under contractual obligations to third parties, including, without limitation, that certain Amended Agreement for the Sale of Untreated Water dated October 7, 2014 and all lease agreements affecting Real Property Collateral, as that term is defined in the Securities Purchase Agreement.

(M) Release or Partial Release of Property . The Company may not surrender, release, abandon or allow to lapse any Owned Unpatented Claims, or permit to be surrendered, released, abandoned or allowed to lapse any Leased Unpatented Claims, without the prior written consent of Purchaser. If the Company surrenders, releases, abandons or allows to lapse any Owned Unpatented Claims, or permits to be surrendered, released, abandoned or allowed to lapse any Leased Unpatented Claims, and subsequently acquires an interest in the lands formerly constituting all or a portion of such Owned Unpatented Claims or Leased Unpatented Claims, whether through re-staking or otherwise, such subsequently acquired interest shall be included within the Real Property Collateral, as that term is defined in the Securities Purchase Agreement, and the Company will execute all instruments reasonably required to secure the Purchaser’s security interest therein.

(N) Negative Covenants. The Company will not, and will not permit any of the Subsidiaries to, do any of the following without the Purchaser's prior written consent:

 

(1) Liens and Encumbrances . Create, incur, allow, or suffer any Lien on any assets of the Company or any of its Subsidiaries (except for Permitted Liens), or permit any Collateral not to be subject to the first priority security interest granted pursuant to the Security Agreement (except for Permitted Liens), or enter into any agreement, document, instrument or other arrangement (except with or in favor of the Purchaser) with any Person that directly or indirectly prohibits or has the effect of prohibiting the Company or any of its Subsidiaries from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of the Company’s or such Subsidiary’s property.

(2) Restricted Payments . Pay any dividends or make any distribution or payment in respect of or redeem, retire or purchase any Capital Stock (other than repurchases pursuant to the terms of employee stock purchase plans, employee restricted stock agreements, stockholder rights plans, director or consultant stock option plans or similar plans); and (ii) payments related to share withholdings for individual taxes related to the Company's stock options and required under the Company’s equity grants and employment agreements.

(3) Asset Sales . Convey, sell, lease, transfer, assign, dispose, assign or Lien, whether by operation of law or otherwise, of on or affecting any assets of the Company or any Subsidiary, enter into any earn-in arrangement or issue equity interests in any Subsidiary (collectively, “ Transfer ”), except for Transfers (A) of Inventory in the ordinary course of business, (B) of worn-out or obsolete equipment (as defined in the Uniform Commercial Code, and including all machinery, fixtures, goods, vehicles (including motor vehicles and trailers) and any interest in any of the foregoing) (C) Transfers (i) for fair value (to be determined and evidenced by an officer’s certificate or a resolution of the Board, or a third-party if the Company Transfers such Collateral for more than $1,000,000), (ii) for at least 90% cash consideration and (iii) the Net Cash Proceeds of which are applied in accordance with the Redemption provisions set forth in Section 5 and (D) permitted earn-ins the Net Cash Proceeds of which are applied in accordance with the Redemption provisions set forth in Section 5 . For the sake of clarity, the issuance and sale of its equity interests by the Company is not, and shall not be deemed to be, a sale of an asset of the Company for purposes of this Section (N)(3) .

(4) Indebtedness . Create, incur, assume, or be liable for any Indebtedness, other than Permitted Indebtedness.

 

(5) Transactions with Affiliates . Directly or indirectly enter into or permit to exist any transaction with an aggregate value in excess of $50,000 with any Affiliate of the Company or any of its Subsidiaries, except for transactions that are in the ordinary course of the Company’s or such Subsidiary’s business, upon fair and reasonable terms that are no less favorable to the Company or such Subsidiary than would be obtained in an arm’s length transaction with a Person that is not an Affiliate.

(6) Merger, Consolidation, Sale of Substantially All Assets . The Company and its Subsidiaries will not affect any merger or consolidation or Transfer of all or substantially all of its assets except that a Subsidiary may merge or consolidate into or Transfer such assets to another Subsidiary and either Subsidiary may merge or consolidate into or Transfer such assets to the Company so long as the Company is the surviving (or acquiring) entity and the Company and such Subsidiary has taken all necessary action to ensure that the security interest of the Purchaser remains in full force and effect and remains perfected, in each case, after giving effect to such merger, consolidation or Transfer.

(O) After-Acquired Property . (i) With respect to any property acquired after the date hereof by the Company or any of its Subsidiaries as to which the Purchaser does not have a perfected Lien, the Purchaser or such Subsidiary shall promptly (x) execute and deliver to the Purchaser such amendments to the Security Agreement or such other documents as the Purchaser deems necessary or advisable to grant to the Purchaser a perfected security interest in such property (subject to Permitted Liens) and (y) take all actions necessary or advisable to grant to the Purchaser a perfected first priority security interest in such property (subject to Permitted Liens), including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by law or as may be reasonably requested by the Purchaser.

(ii) With respect to (a) any fee interest in any real property acquired after the date hereof by the Company or any of its Subsidiaries with a fair market value or purchase price in excess of $200,000 or (b) any unpatented mining claims staked by the Company or any of its Subsidiaries, the Company or such Subsidiary shall promptly (x) execute and deliver a first priority (subject to Permitted Liens) Deed of Trust in favor of the Purchaser covering such real property, (y)  provide the Purchaser with (A) title and extended coverage insurance covering such real property in an amount at least equal to the purchase price of such real property (or such other amount as shall be reasonably specified by the Purchaser) as well as a current survey thereof, together with a surveyor’s certificate and (B) any consents or estoppels reasonably deemed necessary or advisable by the Purchaser in connection with such Deed of Trust, each of the foregoing in form and substance reasonably satisfactory to the Purchaser and (z) if requested by the Purchaser, deliver to the Purchaser legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Purchaser.

(iii) With respect to any new Subsidiary created or acquired after the date hereof by the Company or any of its Subsidiaries, the Purchaser or such Subsidiary shall promptly (i) execute and deliver to the Purchaser such amendments to the Security Agreement as the Purchaser deems necessary or advisable to grant to the Purchaser a perfected first priority security interest in the equity interests of such new Subsidiary, (ii) deliver to the Purchaser the certificates representing such equity interests, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the Company or such Subsidiary, as the case may be, (iii) cause such new Subsidiary to take such actions necessary or advisable to grant to the Purchaser a perfected first priority security interest in the Collateral described in the Security Agreement with respect to such new Subsidiary, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by law or as may be reasonably requested by the Purchaser and (iv) if requested by the Purchaser, deliver to the Purchaser legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Purchaser.

7. Security Agreement .

 

The Debenture is secured pursuant to the terms of the Security Agreement and Deeds of Trust.

 

8. Defaults and Remedies.

 

(A) Events of Default .

 

(i) Definition of Events of Default . “ Event of Default ” means the occurrence of any of the following:

 

(1) a default in the payment when due (whether at maturity or otherwise) of the principal or Redemption Price of this Debenture (or any portion thereof);

(2) a default for three (3) days in the payment when due of interest on this Debenture (or any portion thereof);

 

(3) other than as set forth in clauses (1) and (2) above, a default in any of the Company’s material representations, obligations or agreements under this Debenture (or any replacement(s) thereof), the Security Agreement, any Deed of Trust or the Purchase Agreement; provided , however , that, other than a default under (i) the second sentence Section 6(I) with respect to the payment of claim maintenance fees to the Bureau of Land Management (which shall be an Event of Default on August 2 ^nd of the applicable year) or (ii) failure to deliver mineral title reports pursuant to Section 6(K) (which shall be an Event of Default on (A) May 1, 2017, with respect to reports to be delivered by the Landman pertaining to the Dayton/Spring Valley Properties, the American Flat Properties, the Genco/Rule Properties and the Amazon/Wonder Properties and (B) September 1, 2017, with respect to reports to be delivered by the Landman pertaining to the Lucerne Properties and the Occidental Properties), if such default can be cured, then such default will not be an Event of Default unless the Company has failed to cure such default within thirty (30) days after its occurrence; 

 

(4) either (I) a default under any agreement to which the Company or any of its Subsidiaries is a party governing the Indebtedness of the Company or any Subsidiary in an aggregate principal amount in excess of seven hundred fifty thousand dollars ($750,000) resulting in a right by the holders of such Indebtedness, whether or not exercised, to accelerate the maturity of such Indebtedness; (II) a default under any Northern Comstock Debt or (III) default under a Material Agreement that permits the counterparty thereto to accelerate the payments owed thereunder; provided , that if prior to the exercise of remedies with respect to such acceleration the default under such other Indebtedness has been cured (or acceleration has been reversed) then the default with respect to this Debenture shall be cured as well;

(5) either (I) one or more judgments, orders, or decrees for the payment of money in an amount, individually or in the aggregate, of at least seven hundred fifty thousand dollars ($750,000) (not covered by independent third-party insurance) is rendered against the Company or any of its Subsidiaries and remains unsatisfied, unvacated or unstayed for a period of thirty (30) days after the entry thereof; (II) any judgments, orders or decrees rendered against the Company that could reasonably be expected to result in a Material Adverse Change; or (III) any judgment, order, or decree determined by a court of competent jurisdiction that prevents, enjoins or otherwise materially delays the Company’s exploration, development or mining with respect to the Real Property Collateral;

 

(6) the announcement of a restatement of any of the Company’s financial statements if the result of such restatement would be to require the independent auditor to modify its opinion or the Company to issue a Form 8-K;

(7) a perfected first priority security interest in favor of the Purchaser with respect to the Collateral ceases to exist for any reason, for a period of fifteen (15) days after the earlier of (x) notice thereof from Purchaser or (y) the Company or any Subsidiary of the Company becoming aware of the existence of such circumstance;

 

(8) either (I) the Company or any of its Subsidiaries shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Company or any Subsidiary or for any substantial part of the property of the Company or any Subsidiary, or make any general assignment for the benefit of creditors; or (II) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company or any Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Company or any Subsidiary or for any substantial part of the property of the Company or any Subsidiary or ordering the winding up or liquidation of the affairs of the Company or any Subsidiary, and such decree or order shall remain unstayed and in effect for a period of sixty (60) consecutive days (for purposes of this clause (10) only, “ Subsidiaries ” excludes any single Subsidiary or group of Subsidiaries where such Subsidiary’s revenue or such group of Subsidiaries’ revenues (in each case in accordance with GAAP) or assets is less than five percent (5%) of the aggregate (x) revenue or (y) assets of the Company and all its Subsidiaries, in each case measured on a consolidated basis for the Company and all its Subsidiaries); or

(9) the existence of a material title defect or other material issue identified pursuant to the reports and opinions required by Section 6(K) or that otherwise becomes known to the Company or any of its Subsidiaries that prevents, enjoins or otherwise materially delays the Company’s exploration, development or mining with respect to the Real Property Collateral, as reasonably determined by the Purchaser; provided that no Event of Default shall occur under this clause (9) unless the Company has failed to cure such title defect or other material issue by quiet title action or otherwise to the satisfaction of the Purchaser on or prior to the date that is the earlier of (x) four (4) months after the date on which the Company has become aware of such title defect or other material issue and (y) August 31, 2017.

(B) Acceleration .

 

(i) Automatic Acceleration in Certain Circumstances . If an Event of Default set forth in Section 8(A)(i)(8) occurs with respect to the Company (and not solely with respect to a Subsidiary of the Company (as defined in such Section)), then the principal amount of, and all accrued and unpaid interest on, all of this Debenture (or any replacement(s) thereof) then outstanding and the Make-Whole Amount that would be payable if a Redemption of the Debenture were to occur on such date will immediately become due and payable without any further action or notice by any Person.

 

(ii) Optional Acceleration . If an Event of Default (other than an Event of Default set forth in Section 8(A)(i)(8) with respect to the Company and not solely with respect to a Subsidiary of the Company (as defined in such Section)) occurs and is continuing, then the Purchaser may, by notice to the Company, declare the principal amount of, and all accrued and unpaid interest on, all of this Debenture (or any replacement(s) thereof) then outstanding and the Make-Whole Amount that would be payable if a Redemption of the Debenture were to occur on such date to become due and payable immediately. For the avoidance of doubt, whether or not the Purchasers declares such amounts to

be due and payable under this clause (B)(ii), the Default Interest Rate shall apply as set forth in Section 3(B) .

 

(C) Rescission of Acceleration . Notwithstanding anything to the contrary in this Debenture (or any replacement(s) thereof), the Purchaser may, by written notice to the Company, rescind any acceleration of this Debenture (or any replacement(s) thereof) and its consequences if (i) such rescission would not conflict with any judgment or decree of a court of competent jurisdiction; (ii) all existing Events of Default (except the non-payment of principal of, or interest on, this Debenture that have become due solely because of such acceleration) have been cured or waived and (iii) the Purchaser has received a sum sufficient to pay its fees and expenses in connection with such Event of Default, including the reasonable expenses, advances, and disbursements of its agents and counsel. No such rescission will affect any subsequent Default or impair any right consequent thereto.

 

(D) Waiver of Past Defaults . If an Event of Default is waived by the Purchaser in accordance with this Debenture, then it will cease to exist. If a Default is so waived, then it will be deemed to be cured and any Event of Default arising therefrom will be deemed not to occur. However, no such waiver will extend to any subsequent or other Default or Event of Default or impair any right arising therefrom.

  

9. Amendments, Supplements and Waivers .

 

(A) No Amendments without Consent . Neither this Debenture nor the Security Agreement nor any Deed of Trust or ancillary document or provision thereof may be waived, amended or modified except, in the case of this Agreement, by an agreement or agreements in writing executed by the Company, the Subsidiaries and the Purchaser or, in the case of any other document, by an agreement or agreements in writing entered into by the parties thereto.

 

(B) Notations and Exchanges . If any amendment, supplement or waiver changes the terms of a Debenture, then the Company may, in its discretion, require the Purchaser to deliver this Debenture (or such portion thereof) to the Company so that the Company may place an appropriate notation on this Debenture (or such portion thereof) and return this Debenture (or such portion thereof) to the Purchaser. Alternatively, at its discretion, the Company may, in exchange for this Debenture (or such portion thereof), issue, execute and deliver a new Debenture that reflects the changed terms. The failure to make any appropriate notation or issue a new Debenture will not impair or affect the validity of such amendment, supplement or waiver.

 

10. Ranking .

 

The Indebtedness of the Company arising under or in connection with this Debenture constitutes a senior obligation of the Company, ranking equally in right of payment with other existing and future senior Indebtedness of the Company and ranking senior in right of payment to any existing or future subordinated debt of the Company.

 

11. Replacement Debentures .

 

If the Purchaser claims that this Debenture (or such portion thereof) has been mutilated, lost, destroyed or wrongfully taken, then the Company will issue, execute and deliver a replacement Debenture upon surrender to the Company of such mutilated Debenture, or upon delivery to the Company of evidence of such loss, destruction or wrongful taking reasonably satisfactory to the Company. In the case of a lost, destroyed or wrongfully taken Debenture, the Company may require the Purchaser to provide such security

or indemnity that is reasonably satisfactory to the Company to protect the Company from any loss that it may suffer if this Debenture (or such portion thereof) is replaced.

 

12. Miscellaneous .

(A) Notices . Unless otherwise provided herein, all notices, demands, consents, service of process, requests and other communications hereunder shall be in writing and shall be delivered in person or by nationally recognized overnight courier service, or mailed by certified mail, return receipt requested, or sent by facsimile (if provided), addressed as follows (or to such other address as may be given in writing in the future by the Company to the Purchaser or the Purchaser to the Company): 

If to the Company, to:

Comstock Mining Inc.

P.O. Box 1118

Virginia City, NV 89440

Attention: Corrado DeGasperis

Facsimile: 800-750-5740

Telephone: 775-848-5310

With a copy (which shall not constitute notice) to:

 

Withers Bergman LLP

1700 East Putnam Avenue, Suite 400

Greenwich, CT 06870-1366

Attention: Clyde Tinnen, Esq.

Facsimile: 203-302-6619

Telephone: 203-302-4079

Notices given to the Purchaser hereunder shall be delivered to it c/o GF Comstock 2 LP, 140 East 45th Street, Suite 17c, New York, NY 10017, Attention: Daniel Freuman, Telephone: 212-201-5813.

Each such notice or other communication shall be deemed given (i) when delivered personally or by verifiable facsimile transmission (with an original to follow) on or before 4:30 p.m., New York City time, on a Business Day or, if such day is not a Business Day, on the next succeeding Business Day; (ii) on the next Business Day after timely delivery for overnight service to a nationally recognized overnight courier service; and (iii) on the Business Day actually received if deposited in the U.S. mail (certified or registered mail, return receipt requested, postage prepaid).

 

(B) Governing Law and Jurisdiction; Waiver of Jury Trial . All questions concerning the construction, validity, enforcement and interpretation of this Debenture shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof; provided , however , that if the laws of any jurisdiction other than New York shall govern in regard to the validity, perfection or effect of perfection of any Lien or in regard to procedural matters affecting enforcement of any Liens in Collateral, such laws of such other jurisdictions shall continue to apply to that extent. The Company agrees that any action, suit or proceeding arising out of or relating to this Debenture (whether brought against the Company, the Purchaser or its respective Affiliates, employees or agents) may be commenced in the state courts sitting in New York City, New York, Borough of Manhattan and the United

States District Court of the Southern District of New York, and any appellate court from any thereof. NOTWITHSTANDING THE FOREGOING, THE PURCHASER SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE COMPANY OR ANY SUBSIDIARY (OR ANY PROPERTY OF SUCH PERSON) IN THE COURT OF ANY OTHER JURISDICTION THE PURCHASER DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS UNDER THIS INDENTURE. The Company hereby (1) irrevocably waives personal service of process, (2) waives, to the fullest extent permitted by applicable law, (x) any objection that it may now or hereafter have to the laying of venue of any such action, suit or proceeding; and (y) any claim that it may now or hereafter have that any such action, suit or proceeding in such a court has been brought in an inconvenient forum, (3) submits to the nonexclusive jurisdiction of such courts in any such action, suit or proceeding and (4) consents to process being served in any such action, suit or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to the Company at the address in effect for notices to it under this Debenture (and agrees that such service shall constitute good and sufficient service of process and notice thereof). The Company hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any action, suit or proceeding arising out of or relating to this Debenture or the transactions contemplated hereby.

(C) Cumulative Remedies . The rights, remedies, powers and privileges of a party hereunder are cumulative and not exclusive of any rights or remedies that such party may otherwise have.

(D) Execution . In the event that any signature is delivered by facsimile or electronic transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile or electronic signature were the original thereof.

(E) Severability . If any term, provision, covenant or restriction of this Debenture is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the reasonable efforts shall be used to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the Company's intention that it would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

(F) Successors and Assigns . This Debenture shall inure to the benefit of and be binding upon the Company's successors and permitted assigns, and references to the Company will be deemed to include its successors and permitted assigns. Nothing in this Debenture, express or implied, is intended to confer upon any party, other than the Company, the Purchaser or their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Debenture, except as expressly provided in this Debenture. The Company may not assign its rights or obligations under this Debenture without the prior written consent of the other party and any attempt to do so without such consent will be null and void.

(G) Section Headings . The section headings contained in this Debenture are for reference purposes only and shall not control or affect its construction or interpretation in any respect.

(H) No Delay, Waivers, etc. No delay on the part of the Purchaser in exercising any power or right hereunder shall operate as a waiver thereof nor shall any single or partial exercise of any power or right hereunder preclude other or further exercise thereof or the exercise of any other power or right. The Purchaser

shall not be deemed to have waived any rights hereunder unless such waiver shall be in writing and signed by the Purchaser.

Schedule C

Permitted Indebtedness

See separate schedule

Schedule D

Permitted Liens

See separate schedule

EXECUTION VERSION

    

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (the “ Agreement ”), dated as of January 13, 2017, is being entered into between COMSTOCK MINING INC., a Nevada corporation (the “ Company ”), and GF COMSTOCK 2 LP, a Delaware limited partnership (the “ Purchaser ”), with respect to the proposed issuance and sale by the Company of 11% Senior Secured Debenture due 2021 in an aggregate principal amount of $10,723,000 (the “ Debenture ”), in the form set forth in Exhibit A hereto.

 

W I T N E S S E T H:

WHEREAS , the Debenture will be secured by (1) the pledge of equity interests in the Company’s subsidiaries Comstock Mining LLC, a Nevada limited liability company (“ Comstock LLC ”), Comstock Real Estate Inc., a Nevada corporation (“ Comstock Real Estate ”), and Comstock Industrial LLC, a Nevada limited liability Company (“ Comstock Industrial ” and, together with Comstock LLC and Comstock Real Estate, the “ Subsidiaries ” and each, a “ Subsidiary ”), and (2) the Collateral (as such term is defined in the Pledge and Security Agreement dated as of the date hereof, in the form set forth in Exhibit B hereto (the “ Security Agreement ” and, together with this Agreement, the Debenture and the deeds of trust contemplated by the Security Agreement, the “ Transaction Documents ”), between the Company and the Purchaser relating to the pledge of such equity and the Collateral); and

WHEREAS , the Debenture will be offered and sold without registration under the U.S. Securities Act of 1933, as amended (the “ Securities Act ”), in accordance with Section 4(a)(2) of the Securities Act; and

WHEREAS, the Purchaser has agreed to consummate the transactions contemplated hereunder substantially concurrent with the purchase of shares of common stock (the “ Common Stock ”) of the Company, $0.000666 par value, per share, from the sellers thereof listed in Exhibit C hereto (the “ Selling Stockholders ”).

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this

Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Purchaser agree as follows:

 

1. Sale and Purchase; Payment and Delivery .

 

(A) Sale and Purchase . On the basis of the representations and warranties and subject to the other terms and conditions set forth in this Agreement, the Company agrees to issue and sell to the Purchaser, and the Purchaser agrees to purchase from the Company, the Debenture for an aggregate purchase price (the “ Purchase Price ”) of Ten Million One Hundred Fifty-Four Thousand Six Hundred Fifty-Three and 36/100 Dollars ($10,154,653.36).

 

(B) Payment and Delivery . Payment of the Purchase Price will be made to the Company by a combination of (x) Federal Funds wire transfer of same-day funds and (y) the cancellation of certain existing indebtedness of the Company owed to the Purchaser, against delivery to the Purchaser of the Debenture. Such payment and delivery shall be made no later than 4:00 p.m., New York City time, on the date of this Agreement (or at such time as otherwise set forth in the funds flow memorandum previously agreed between the Company and the Purchaser). As used herein, “ Closing ” means the closing on such payment and delivery,

“ Closing Date ” means the date on which such payment and delivery are made and “ Closing Time ” means the time when such payment and delivery are made.

2. Representations and Warranties of the Company .

The Company represents and warrants to, and agrees with the Purchaser that, as of the date of this Agreement and as of the Closing Time, unless such representation, warranty or agreement speaks as of a different time:

 

(A) Registration of Common Stock; Stock Exchange Matters . The Common Stock is registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and is currently listed on the NYSE MKT (the “ Exchange ”) under the trading symbol “LODE.” The Company has taken no action designed to, or reasonably likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or delisting the Common Stock from the Exchange, nor has the Company received any notification that the U.S. Securities and Exchange Commission (the “ Commission ”) or the Exchange is contemplating terminating such registration or listing. To the Company’s knowledge, it is in compliance with all applicable listing requirements of the Exchange.

 

(B) No Misstatement or Omission . The reports and other documents that the Company has filed or will file with the Commission under Section 13(a), 14 or 15(d) of the Exchange Act from and including January 1, 2014 and prior to the Closing Time, together with the Company’s registration statement on Form 8-A filed with the Commission under Section 12 of the Exchange Act on June 8, 2011 (File No. 001-35200), in each case including the information, if any, incorporated by reference therein, (collectively, the “ Exchange Act Reports ”, and each, individually, an “ Exchange Act Report ”), did or will not, when they were or will be so filed, do not (if so filed before the execution and delivery of this Agreement), and, as of the Closing Time, will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.

 

(C) Conformity with Securities Act and Exchange Act . (i) Each Exchange Act Report, when it was filed with the Commission under the Exchange Act, conformed in all material respects with the requirements of the Exchange Act and (ii) the Company is, and has been for a period of at least 90 days immediately before the sale of Common Stock, subject to the reporting requirements of section 13 or 15(d) of the Exchange Act and has: (x) filed all required reports under Section 13 or 15(d) of the Exchange Act, as applicable, during the 12 months preceding such sale; and (y) submitted electronically and posted on its corporate website, if any, every Interactive Data File (as defined in the Securities Act) required to be submitted and posted pursuant to Rule 405 of Regulation S-T under the Securities Act, during the 12 months preceding the sale of Common Stock.

 

(D) Financial Information . The consolidated financial statements of the Company included in the Exchange Act Reports, together with the related notes and schedules, present fairly, in all material respects, the consolidated financial position of the Company and the Subsidiaries as of the dates indicated and the consolidated results of operations, cash flows and changes in stockholders’ equity of the Company for the periods specified (subject to normal year-end audit adjustments for interim financial statements) and have been prepared in compliance with the requirements of the Exchange Act and in conformity with generally accepted accounting principles in the United States applied on a consistent basis during the periods involved; the other financial and statistical data with respect to the Company and the Subsidiaries contained in the Exchange Act Reports, if any, have been derived from the accounting records of the Company and the Subsidiaries, are prepared in compliance with the requirements of the Exchange Act and in conformity with generally accepted accounting principles in the United States applied on a consistent basis during the periods

involved and accurately and fairly presented and prepared in all material respects on a basis consistent with the financial statements and books and records of the Company; there are no financial statements (historical or pro forma) that are required to be included or incorporated by reference in the Exchange Act Reports that are not included or incorporated by reference as required; the Company and the Subsidiaries do not have any material liabilities or obligations, direct or contingent (including any off-balance sheet obligations), not described in the Exchange Act Reports; and all disclosures contained or incorporated by reference in the Exchange Act Reports, if any, regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission) comply in all material respects with Regulation G of the Exchange Act and Item 10 of Regulation S-K under the Exchange Act, to the extent applicable.

 

(E) Organization . The Company and each of its Subsidiaries are duly organized, validly existing as a corporation or limited liability company, as the case may be, and in good standing under the laws of Nevada. The Company and each of its Subsidiaries are duly licensed or qualified as a foreign corporation for transaction of business and in good standing under the laws of each other jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such license or qualification, and have all corporate (or limited liability company, as the case may be) power and authority necessary to own or hold their respective properties and to conduct their respective businesses as described in the Exchange Act Reports, except where the failure to be so qualified or have such power or authority would not, individually or in the aggregate, have or reasonably be expected to have a material adverse effect on or affecting the assets, business, operations, earnings, properties, condition (financial or otherwise), prospects or results of operations of the Company and the Subsidiaries taken as a whole, or prevent or interfere in any material respect with consummation of the transactions contemplated by the Transaction Documents (a “ Material Adverse Effect ”).

 

(F) Subsidiaries . The Subsidiaries are the Company’s only subsidiaries. Except as set forth in the Exchange Act Reports, the Company owns, directly or indirectly, all of the equity interests of the Subsidiaries free and clear of any material lien, charge, security interest, encumbrance, right of first refusal or other restriction, and all the equity interests of the Subsidiaries are validly issued and are fully paid, non-assessable and free of preemptive and similar rights. No Subsidiary is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such Subsidiary’s capital stock, from repaying to the Company any loans or advances to such Subsidiary from the Company or from transferring any of such Subsidiary’s property or assets to the Company or any other Subsidiary of the Company.

 

(G) No Violation or Default . Neither the Company nor any of its Subsidiaries is (i) in violation of its charter or by-laws or similar organizational documents; (ii) in default, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or to which any of the property or assets of the Company or any of its Subsidiaries are subject; or (iii) in violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority, except, in the case of each of clauses (ii) and (iii) above, for any such violation or default that would not, individually or in the aggregate, have a Material Adverse Effect. To the Company’s knowledge, no other party under any material contract or other agreement to which it or any of its Subsidiaries is a party is in default in any respect thereunder where such default would, individually or in the aggregate, have a Material Adverse Effect.

 

(H) No Material Adverse Change . Subsequent to the date of the most recent financial statements included in the Exchange Act Reports, there has not been (i) any Material Adverse Effect or the occurrence

of any development that the Company reasonably expects will result in a Material Adverse Effect; (ii) any transaction that is material to the Company and the Subsidiaries taken as a whole; (iii) any obligation or liability, direct or contingent (including any off-balance sheet obligations), incurred by the Company or any Subsidiary, that is material to the Company and the Subsidiaries taken as a whole; (iv) any material change in the capital stock or outstanding long-term indebtedness of the Company or any of its Subsidiaries; (v) any dividend or distribution of any kind declared, paid or made on the capital stock of the Company or any Subsidiary, other than in each case above in the ordinary course of business or as otherwise disclosed in the Exchange Act Reports or (vi) any loss or interference in the business of the Company or the Subsidiaries from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor disturbance or dispute or any action, order or decree of any court or arbitrator or governmental or regulatory authority.

 

(I) Capitalization . The issued and outstanding shares of capital stock of the Company have been validly issued, are fully paid and non-assessable and, other than as disclosed in the Exchange Act Reports, are not subject to any preemptive rights, rights of first refusal or similar rights. The Company has an authorized, issued and outstanding capitalization as set forth in the Exchange Act Reports as of the dates referred to therein (other than the grant of additional options or restricted stock under the Company’s existing equity incentive plans, or changes in the number of outstanding shares of Common Stock of the Company due to the issuance of shares upon the exercise or conversion of securities exercisable for, or convertible into, Common Stock outstanding on the date hereof), and such authorized capital stock conforms to the description thereof set forth in the Registration Statement and the Prospectus. The description of the securities of the Company in the Exchange Act Reports is complete and accurate in all material respects. Except as disclosed in or contemplated by the Exchange Act Reports, as of the date referred to therein, the Company does not have outstanding any options to purchase, or any rights or warrants to subscribe for, or any securities or obligations convertible into, or exchangeable for, or any contracts or commitments to issue or sell, any shares of capital stock or other securities.

 

(J) Authorization; Enforceability . The Company has full legal right, power and authority to execute, deliver and perform its obligations under each Transaction Document and to perform the transactions contemplated thereby. This Agreement has been duly authorized, executed and delivered by the Company and is the legal, valid and binding agreement of the Company enforceable in accordance with its terms, except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general equitable principles. The Debenture has been duly authorized by the Company and, when executed and delivered by the Company, will constitute the legal, valid and binding agreement of the Company enforceable in accordance with its terms, except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general equitable principles. The Security Agreement has been duly authorized by the Company and, when the Security Agreement has been executed and delivered by the Company, will constitute the legal, valid and binding agreement of the Company enforceable in accordance with its terms, except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general equitable principles. Each Deed of Trust has been duly authorized by the Company and, when each Deed of Trust has been executed and delivered by the Company, will constitute the legal, valid and binding agreement of the Company enforceable in accordance with its terms, except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general equitable principles.

 

(K) Compliance with Laws . Except as set forth in the Exchange Act Reports, each of the Company and its Subsidiaries: (i) is in compliance with all statutes, rules, or regulations applicable to the ownership

of the assets and businesses conducted by the Company or its Subsidiaries (“ Applicable Laws ”), except as would not, individually or in the aggregate, result in a Material Adverse Effect; (ii) has not received any correspondence or notice from the any governmental authority alleging or asserting noncompliance with any Applicable Laws or any licenses, certificates, approvals, clearances, authorizations, permits and supplements or amendments thereto required by any such Applicable Laws (“ Authorizations ”), which, would, individually or in the aggregate, have a Material Adverse Effect; (iii) possess all material Authorizations, and such Authorizations are valid and in full force and effect, and none of the Company or any of its Subsidiaries is in material violation of any term of any such Authorizations; (iv) has not received notice that any governmental authority has taken, is taking or intends to take action to limit, suspend, modify or revoke any Authorization and has no knowledge that any such governmental authority is considering such action; and (v) has filed, obtained, maintained or submitted all material reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments as required by any Applicable Laws or Authorizations, and all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments were complete and correct on the date filed (or were corrected or supplemented by a subsequent submission).

(L) No Consents Required . No consent, approval, authorization, order, license, registration or qualification of or with any court or arbitrator or governmental or regulatory authority is required for the execution, delivery and performance by the Company of the Transaction Documents and the transactions contemplated thereby, including the issuance and sale by the Company of the Debenture, except for (i) the consent of certain stockholders of the Company in the form set forth in Exhibit D hereto (the “ Winfield Consent ”) and (ii) such consents, approvals, authorizations, orders and registrations or qualifications as may be required under applicable state securities laws.

 

(M) Independent Public Accounting Firm . Deloitte & Touche LLP (the “ Accountant ”), whose report on the consolidated financial statements of the Company is filed with the Commission as part of the Company’s most recent Annual Report on Form 10-K included in the Exchange Act Reports, is and, during the periods covered by its report, was an independent registered public accounting firm within the meaning of the Securities Act and the Public Company Accounting Oversight Board (United States). To the Company’s knowledge, the Accountant is not in violation of the auditor independence requirements Rule 2-01 of Regulation S-X under the Exchange Act with respect to the Company.

(N) No Litigation . Except as set forth in the Exchange Act Reports, there are no pending legal, governmental or regulatory actions, suits, proceedings, audits or investigations to which the Company or a Subsidiary is a party or to which any property of the Company or any of its Subsidiaries is the subject that, individually or in the aggregate, would have or reasonably be expected to have a Material Adverse Effect, and, to the Company’s knowledge, no such actions, suits, proceedings, audits or investigations are threatened or contemplated by any legal, governmental or regulatory authority or threatened by others. The Company and its Subsidiaries do not have reason to believe that the final determination in the Lyon County Litigation will have an adverse impact on the assets, business, operations, earnings, properties, condition (financial or otherwise), prospects or results of operations of the Company and the Subsidiaries taken as a whole. “ Lyon County Litigation ” means Comstock Res. Assn., et al. v. Lyon Co. Bd. of Commnrs., et al ., Case No. 68433 (Supreme Court of Nevada), Case No. 14-CV-00128 in the Third Jud. Dist. Ct. in and for the State of Nevada.

 

(O) Permits . Except as disclosed in the Exchange Act Reports, the Company and its Subsidiaries have made all filings, applications and submissions required by, possesses and are operating in compliance with, all approvals, licenses, certificates, certifications, clearances, consents, grants, exemptions, marks, notifications, orders, permits and other authorizations issued by, the appropriate federal, state or foreign governmental or regulatory authorities necessary for the ownership or lease of their respective properties or

to conduct their respective businesses as described in the Exchange Act Documents (collectively, “ Permits ”), except for such Permits the failure of which to possess, obtain or make the same would not, individually or in the aggregate, have a Material Adverse Effect; the Company and its Subsidiaries are in compliance with the terms and conditions of all such Permits, except where the failure to be in compliance would not, individually or in the aggregate, have a Material Adverse Effect; all of the Permits are valid and in full force and effect, except where any invalidity would not, individually or in the aggregate, have a Material Adverse Effect; and neither the Company nor any of its Subsidiaries has received any written notice relating to the limitation, revocation, cancellation, suspension, modification or non-renewal of any such Permit which, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect, and neither has any reason to believe that any such Permit will not be renewed in the ordinary course.

 

(P) Regulatory Filings . Except as disclosed in the Exchange Act Reports, neither the Company nor any of its Subsidiaries has failed to file with the applicable regulatory authorities any required filing, declaration, listing, registration, report or submission, except for such failures that would not, individually or in the aggregate, have a Material Adverse Effect; except as disclosed in the Exchange Act Reports, all such filings, declarations, listings, registrations, reports or submissions were in compliance with applicable laws when filed and no deficiencies have been asserted by any applicable regulatory authority with respect to any such filings, declarations, listings, registrations, reports or submissions, except for any deficiencies that would not, individually or in the aggregate, have a Material Adverse Effect.

 

(Q) Taxes . The Company and each of its Subsidiaries have filed all federal, state, local and foreign tax returns which have been required to be filed and paid all taxes shown thereon through the date hereof, to the extent that such taxes have become due and are not being contested in good faith. Except as otherwise disclosed in in or contemplated by the Exchange Act Reports, no tax deficiency has been determined adversely to the Company or any of its Subsidiaries or any of their respective properties or assets. The Company has no knowledge of any federal, state or other governmental tax deficiency, penalty or assessment which has been or might be asserted or threatened against it or any of its Subsidiaries or any of their respective properties or assets.

 

(R) Title to Real and Personal Property . Except as set forth in the Exchange Act Reports, the Company and its Subsidiaries have good and valid title to all personal property and good and insurable title to all real property described in the Exchange Act Reports as being owned by them that are material to the businesses of the Company or such Subsidiary, in each case free and clear of all liens, encumbrances and claims, except (i) Permitted Liens (as defined in the Debenture), (ii) matters that do not materially interfere with the use made and proposed to be made of such property by the Company and any of its Subsidiaries; or (iii) matters that could not, individually or in the aggregate, have or reasonably could be expected to have a Material Adverse Effect.

 

(S) Environmental Laws . Except as set forth in the Exchange Act Reports, the Company and its Subsidiaries (i) are and at all times since January 1, 1996 were, in compliance in all material respects with any and all applicable federal, state, local and foreign laws, rules, regulations, requirements, decisions, judgments, decrees and orders relating to the protection of the environment or health and safety including without limitation, environmental, health and safety laws, regulations, governmental authorizations, ordinances, and rules, and the common law, and contractual obligations relating to the use, refinement, handling, treatment, removal, storage, production, manufacture, transportation, disposal, emissions, discharges, Releases or threatened Releases (defined below) of Hazardous Material (defined below) or otherwise relating to pollution or protection of human health or the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals or industrial, toxic or hazardous

substances or wastes into the environment (including, without limitation, ambient air, soil, surface water, ground water, wetlands, natural resources, land surface or subsurface strata), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, chemicals or industrial, toxic or Hazardous Material or wastes, as the same may be amended or modified, and as now existing or hereafter adopted. Environmental Laws include, without limitation, the Environmental Laws listed below: The Hazardous Materials Transportation Act (49 U.S.C. § § 1801 et seq.); the Federal Solid Waste Act as amended by the Resource Conservation and Recovery Act of 1976 (42 U.S.C. § § 6901 et seq.); the Clean Air Act (42 U.S.C. §§ 7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C. § 1251); the Federal Clean Water Act of 1977 (33 U.S.C. §§ 1251, et seq.); the Safe Drinking Water Act (42 U.S.C. §§ 300f et seq.); the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. §§ 9601 et seq.); the Toxic Substances Control Act (15 U.S.C. §§ 2601 et seq.); the Emergency Planning and Community Right to Know Act (42 U.S.C. §§ 11001, et seq.); the Occupational Safety and Health Act (26 U.S.C. §§ 651 et seq.); the Pollution Prevention Act of 1990 (42 U.S.C. §§ 13101 et seq.); the Atomic Energy Act of 1954, 68 Stat. 919; the Energy Reorganization Act of 1974; the Federal Mine Safety and Health Act of 1977, Public Law 91-173, as amended by The Mine Improvement and New Emergency Response (MINER) Act of 2006 (Public Law 109-236, as amended by Public Law 109-280); the Occupational Health and Safety Act of 1970, Pub. Law 91-596, 84 Stat. 1590, 29 USC §§ 652 et seq.); the Federal Land Policy and Management Act, 43 USC §§ 1744 et seq.; Federal Insecticide, Fungicide, and Rodenticide Act; the Federal Pesticide Act of 1978 (7 U.S.C. §§ 136, et seq. (collectively, “ Environmental Laws ”); (ii) have received and are in material compliance with all permits, licenses, certificates or other authorizations or approvals required of them under applicable Environmental Laws to conduct their business; (iii) have not received written notice of any actual or potential liability under or relating to, or actual or potential violation of, any Environmental Laws, including for the investigation or remediation of any Release or threat of Release of Hazardous Materials, and have no knowledge of any event or condition that would reasonably be expected to result in any such notice; (iv) except for reclamation obligations described therein and bonds posted therefor, are not conducting or paying for, in whole or in part, any investigation, remediation or other corrective action pursuant to any Environmental Law at any location; (v) are not party to any order, decree or agreement that imposes any obligation or liability under any Environmental Law; (vi) other than as reserved on the Company’s financial statements, there are no costs or liabilities associated with Environmental Laws of or relating to the Company or its Subsidiaries; and (vii) (A) have no proceedings that are pending, or that are known to be contemplated, against the Company or any Subsidiary under any Environmental Laws in which a governmental entity is also a party, and (B) are not aware of any facts or issues regarding its compliance with Environmental Laws, or liabilities or other obligations that could be reasonably be expected to incur under Environmental Laws. “ Hazardous Materials ” means any material, chemical, substance, waste, pollutant, contaminant, compound, mixture, or constituent thereof, in any form or amount, including petroleum (including crude oil or any fraction thereof) and petroleum products, natural gas liquids, asbestos and asbestos containing materials, naturally occurring radioactive materials, mining wastes and byproducts, brine, and drilling mud, regulated as toxic, hazardous or as a pollutant or which can give rise to liability under any Environmental Law. “ Release ” means any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, or migrating in, into or through the environment.

 

(T) Disclosure Controls . The Company and each of its Subsidiaries maintains systems of “internal control over financial reporting” (as defined under Rules 13a-15 and 15d-15 under the Exchange Act Regulations) that comply with the requirements of the Exchange Act and have been designed by, or under the supervision of, its principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, including, but not limited to, internal accounting controls sufficient to provide reasonable assurance that (i)

transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company’s internal control over financial reporting is effective, and the Company is not aware of any material weaknesses in its internal control over financial reporting (other than as set forth in the Exchange Act Reports). The Company’s auditors and the Audit Committee of the Board of Directors of the Company have been advised of: (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are known to the Company’s management and that have adversely affected or are reasonably likely to adversely affect the Company’ ability to record, process, summarize and report financial information; and (ii) any fraud known to the Company’s management, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting. Since the date of the latest audited financial statements of the Company included in the Exchange Act Reports, there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting (other than as set forth in the Exchange Act Reports). The Company has established disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 under the Exchange Act) for the Company and designed such disclosure controls and procedures to provide reasonable assurance that material information relating to the Company and each of its Subsidiaries is made known to the certifying officers by others within those entities, particularly during the period in which the Company’s Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as the case may be, is being prepared.

 

(U) Sarbanes-Oxley . The Company and each of its Subsidiaries has developed and currently maintains disclosure controls and procedures that comply with Rule 13a-15 or 15d-15 under the Exchange Act Regulations, and such controls and procedures are effective to ensure that all material information concerning the Company and the Subsidiaries will be made known on a timely basis to the individuals responsible for the preparation of the Company’s Exchange Act filings and other public disclosure documents. There is and has been no failure on the part of the Company or any of the Company’s directors or officers, in their capacities as such, to comply with any applicable provisions of the Sarbanes-Oxley Act of 2002, as amended (the “ Sarbanes-Oxley Act ”), and the rules and regulations promulgated thereunder. Each of the principal executive officer and the principal financial officer of the Company (or each former principal executive officer of the Company and each former principal financial officer of the Company, as applicable) has made all certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act with respect to all reports, schedules, forms, statements and other documents required to be filed by the Company or furnished by Company to the Commission. For purposes of the preceding sentence, “ principal executive officer ” and “ principal financial officer ” shall have the meanings given to such terms in the Sarbanes-Oxley Act.

 

(V) Employees . Neither the Company nor any of the Subsidiaries is engaged in any unfair labor practice; except for matters which would not, individually or in the aggregate, have a Material Adverse Effect, (i) there is (A) no discrimination complaint or unfair labor practice complaint pending or, to the Company’s knowledge, threatened against the Company or any of the Subsidiaries, (B) no strike, labor dispute, slowdown or stoppage pending or, to the Company’s knowledge, threatened against the Company or any of the Subsidiaries and (C) no union representation dispute currently existing concerning the employees of the Company or any of the Subsidiaries, (ii) to the Company’s knowledge, no union organizing activities are currently taking place concerning the employees of the Company or any of the Subsidiaries and (iii) there has been no violation of any federal, state, local or foreign law or collective bargaining agreement relating to discrimination in the hiring, promotion or pay of employees, any applicable wage or hour laws

or retirement benefits, or any provision of the Employee Retirement Income Security Act of 1974, as amended, or the rules and regulations promulgated thereunder concerning the employees of the Company or any of the Subsidiaries that would, individually or in the aggregate, have a Material Adverse Effect.

The Company and any “employee benefit plan” (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, “ ERISA ”)) established or maintained by the Company or its ERISA Affiliates (as defined below) are in compliance in all material respects with ERISA. “ ERISA Affiliate ” means, with respect to the Company, any member of any group of organizations described in Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the “ Code ”), of which the Company is a member. No “reportable event” (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates. No “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates, if such “employee benefit plan” were terminated, would have any “amount of unfunded benefit liabilities” (as defined under ERISA). Neither the Company nor any of its ERISA Affiliates has incurred or reasonably expects to incur any material liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any “employee benefit plan” or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates that is intended to be qualified under Section 401(a) of the Code is so qualified and, to the knowledge of the Company, nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification

(W) Insurance . The Company and its Subsidiaries have insurance covering their respective properties, operations, personnel and businesses, which insurance, to the knowledge of the Company or any Subsidiary, is in amounts and insures against such losses and risks as are adequate to protect the Company and its Subsidiaries and their respective businesses; and neither the Company nor any of its Subsidiaries has (i) received notice from any insurer or agent of such insurer that material capital improvements or other expenditures are required or necessary to be made in order to continue such insurance or (ii) any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage at reasonable cost from similar insurers as may be necessary to continue its business.

 

(X) No Conflicts . Neither the execution and delivery of the Transaction Documents and all ancillary documents, nor the issuance, offering or sale of the Debenture, nor the consummation of any of the transactions contemplated by the Transaction Documents, nor the compliance by the Company or any of its Subsidiaries with the terms and provisions thereof, do not and will not, with or without the giving of notice or the lapse of time or both: (i) result in a material breach or conflict with any of the terms and provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to the terms of any contract, instrument, indenture, mortgage, deed of trust, note, loan agreement or other agreement to which the Company or any of its Subsidiaries may be bound or to which any of their respective properties or assets are subject, except (i) liens, charges or encumbrances pursuant to the Transaction Documents, (ii) such conflicts, breaches or defaults as have been waived; and (iii) such conflicts, breaches and defaults that would not, individually or in the aggregate, have a Material Adverse Effect; nor will any such action result in (x) any violation of the provisions of the organizational or governing documents of the Company or any of its Subsidiaries; or (y) any violation of the provisions of any statute or any order, rule or regulation applicable to the Company or any of its Subsidiaries, or of any court or of any federal, state or other regulatory authority or other government body having jurisdiction over the Company or any of its Subsidiaries or any of their respective assets or businesses, other than, with respect

to this clause (y), any violation that would not, individually or in the aggregate, have a Material Adverse Effect.

(Y) Investment Company Act; Public Utility Holding Company . Neither the Company nor any Subsidiary is and, after giving effect to the transactions contemplated by this Agreement and the application of the proceeds thereof, will be, (i) required to register as an “investment company,” as defined in the Investment Company Act of 1940, as amended, (ii) a “holding company” or a “subsidiary company” of a “holding company” or an “affiliate” of either a “holding company” or a “subsidiary company” within the meaning of the Public Utility Holding Company Act of 1935, as amended, or (iii) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money.

(Z) Intellectual Property Rights . The Company and each of its Subsidiaries owns or possesses or has valid rights to use all patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, inventions, trade secrets, geological and geophysical data, any studies, reports, mining models, assays, drill core, drill-hole data, geochemical reports, recovery reports and any other information relating to the Real Property Collateral and similar rights (“ Intellectual Property Rights ”) necessary for the conduct of the business of the Company and its Subsidiaries as currently carried on and as described in the Exchange Act Reports. To the knowledge of the Company and its Subsidiaries, no action or use by the Company or its Subsidiaries necessary for the conduct of its business as currently carried on and as described in the Exchange Act Reports will involve or give rise to any infringement of, or license or similar fees for, any Intellectual Property Rights of others. Neither the Company nor any Subsidiary has received any notice alleging any such infringement, fee or conflict with asserted Intellectual Property Rights of others. Except as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect (A) to the knowledge of the Company and its Subsidiaries, there is no infringement, misappropriation or violation by third parties of any of the Intellectual Property Rights owned by the Company or any Subsidiary; (B) there is no pending or, to the knowledge of the Company and its Subsidiaries, threatened action, suit, proceeding or claim by others challenging the rights of the Company or any of its Subsidiaries in or to any such Intellectual Property Rights, and the Company and its Subsidiaries are unaware of any facts which would form a reasonable basis for any such claim, that would, individually or in the aggregate, together with any other claims in this clause (Y), reasonably be expected to result in a Material Adverse Effect; (C) the Intellectual Property Rights owned by the Company and its Subsidiaries and, to the knowledge of the Company and its Subsidiaries, the Intellectual Property Rights licensed to the Company or any of its Subsidiaries have not been adjudged by a court of competent jurisdiction invalid or unenforceable, in whole or in part, and there is no pending or, to the Company’s and its Subsidiaries’ knowledge, threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property Rights, and the Company and its Subsidiaries are unaware of any facts which would form a reasonable basis for any such claim that would, individually or in the aggregate, together with any other claims in this clause (Y), reasonably be expected to result in a Material Adverse Effect; (D) there is no pending or, to the Company’s or any Subsidiary’s knowledge, threatened action, suit, proceeding or claim by others that the Company or any Subsidiary infringes, misappropriates or otherwise violates any Intellectual Property Rights or other proprietary rights of others, neither the Company nor any Subsidiary has received any written notice of such claim and the Company and the Subsidiaries are unaware of any other facts which would form a reasonable basis for any such claim that would, individually or in the aggregate, together with any other claims in this clause (Y), reasonably be expected to result in a Material Adverse Effect; and (E) to the Company’s and its Subsidiaries’ knowledge, no employee of the Company

or any Subsidiary is in or has ever been in violation in any material respect of any term of any employment contract, patent disclosure agreement, invention assignment agreement, non-competition agreement, non-solicitation agreement, nondisclosure agreement or any restrictive covenant to or with a former employer where the basis of such violation relates to such employee’s employment with the Company or any Subsidiary, or actions undertaken by the employee while employed with the Company or any Subsidiary and could reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect. To the Company’s and its Subsidiaries’ knowledge, all material technical information developed by and belonging to the Company or any Subsidiary which has not been patented has been kept confidential. Neither the Company nor any Subsidiary is a party to or bound by any options, licenses or agreements with respect to the Intellectual Property Rights of any other person or entity that are required to be set forth in the Exchange Act Reports and are not described therein. The Exchange Act Reports contain in all material respects the same description of the matters set forth in the preceding sentence. None of the technology employed by the Company or any Subsidiary has been obtained or is being used by the Company or such Subsidiary in violation of any contractual obligation binding on the Company or any Subsidiary or, to the Company’s or any Subsidiary’s knowledge, any of its officers, directors or employees, or otherwise in violation of the rights of any persons.

(AA) Foreign Corrupt Practices Act . Neither the Company nor any of its Subsidiaries nor, to the Company’s or any Subsidiary’s knowledge, any director, officer, agent, employee or affiliate of the Company or any Subsidiary or any other person acting on behalf of the Company or any Subsidiary, has, directly or indirectly, given or agreed to give any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business) to any customer, supplier, employee or agent of a customer or supplier, or official or employee of any governmental agency or instrumentality of any government (domestic or foreign) or any political party or candidate for office (domestic or foreign) or other person who was, is, or may be in a position to help or hinder the business of the Company or any of its Subsidiaries (or assist it in connection with any actual or proposed transaction) that (i) might subject the Company or any of its Subsidiaries to any material damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) if not given in the past, might have had a Material Adverse Effect or (iii) if not continued in the future, might materially adversely affect the assets, business, operations or prospects of the Company or any of its Subsidiaries. The Company and its Subsidiaries have taken reasonable steps to ensure that its accounting controls and procedures are sufficient to cause the Company and its Subsidiaries to comply in all material respects with the Foreign Corrupt Practices Act of 1977, as amended.

(BB) Compliance with OFAC . Neither the Company nor any of its Subsidiaries nor, to the Company’s or any of its Subsidiaries’ knowledge, any director, officer, agent, employee or affiliate of the Company, any Subsidiary or any other person acting on behalf of the Company or any of its Subsidiaries, is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“ OFAC ”), and the Company will not, directly or indirectly, use the proceeds of the Offering hereunder, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

(CC) Money Laundering Laws . The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Entity (collectively, the “ Money Laundering Laws ”); and no action, suit or proceeding by or before any Governmental Entity involving the

Company with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company or any of its Subsidiaries, threatened.

(DD) Related Party Transactions . There are no business relationships or related party transactions involving the Company, its affiliates or any other person required to be described or incorporated by reference in the Exchange Act Reports that have not been described as required. The Purchaser acknowledges that Hard Rock Nevada Inc., an entity owned and controlled by an employee of the Company, participated indirectly in a loan to Comstock Industrial in an amount equal to approximately $200,000.

(EE) Board of Directors . The Board of Directors of the Company is comprised of the persons set forth in the Exchange Act Reports. The qualifications of the persons serving as board members and the overall composition of the board comply with the Exchange Act, the Exchange Act Regulations, the Sarbanes-Oxley Act applicable to the Company and the listing rules of the Exchange. At least one member of the Audit Committee of the Board of Directors of the Company qualifies as an “audit committee financial expert,” as such term is defined under Regulation S-K and the listing rules of the Exchange. In addition, at least a majority of the persons serving on the Board of Directors qualify as “independent,” as defined under the listing rules of the Exchange.

(FF) Solvency; Fraudulent Conveyance . The Company and its Subsidiaries (i) have not entered into this Agreement or any Transaction Document with the actual intent to hinder, delay, or defraud any creditor, and (ii) have received reasonably equivalent value in exchange for their obligations under this Agreement, the Debenture and the other Transaction Documents. The fair saleable value of Company’s and the Subsidiaries’ assets are and will, immediately following the execution and delivery of the Transaction Documents, be greater than Company’s and its Subsidiaries’ total liabilities (including the maximum amounts of its subordinated, unliquidated, disputed, or contingent liabilities or its debts as such debts become absolute and matured). The Company’s and its Subsidiaries’ assets do not and will not, immediately following the execution and delivery of the Transaction Documents, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. The Company and its Subsidiaries do not intend to, and do not believe that they will, incur debts and liabilities (including contingent liabilities and other commitments) beyond their ability to pay such debts as they mature (taking into account the timing and amount to be payable on or in respect of any such obligations).

(GG) Margin Regulations . No part of the proceeds of the Debenture will be used for the purpose of purchasing or acquiring any “margin stock” within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with such Regulation U or any other Regulations of such Board of Governors, or for any purposes prohibited by Applicable Laws.

(HH) Collateral Representations .

(i)      The provisions of the Security Agreement and the Deeds of Trust are effective to create in favor of the Purchaser a legal, valid and enforceable first priority lien and security interest (subject to Permitted Liens) on all right, title and interest of the Company or the relevant Subsidiary in the Collateral described therein. Except for filings completed prior to the Closing Date and as contemplated hereby and by the Security Agreement or the Deeds of Trust, no filing or other action will be necessary to perfect or protect such liens.

(ii)     Set forth on Schedule 2(HH)(ii), as of the Closing Date, is a description of all Deposit Accounts and Securities Accounts of the Company and its Subsidiaries (other than payroll accounts), including the name of (A) the Company or applicable Subsidiary in whose name such Account exists, (B) in

the case of a Deposit Account, the depository institution and average amount held in such Deposit Account, and (C) in the case of a Securities Account, the Securities Intermediary or issuer and the average aggregate market value held in such Securities Account, as applicable.

(iii)     Set forth on Schedule 2(HH)(iii), as of the Closing Date, is a description of all Commercial Tort Claims of the Company and its Subsidiaries (detailing such Commercial Tort Claim in such detail as reasonably requested by the Purchaser).

(iv)     Set forth on Schedule 2(HH)(iv), as of the Closing Date, is a true and complete list of (x) all real property owned in fee by the Company or a Subsidiary (“ Fee Property ”) and (y) all unpatented mining claims owned by the Company or a Subsidiary (“ Unpatented Claims ”).

(v)    Set forth on Schedule 2(HH)(v), as of the Closing Date, is a true and complete list of (x) all real property owned in fee by a third party and leased to the Company or a Subsidiary (“ Leased Fee Property ”) and (y) all unpatented mining claims owned by a third party and leased to the Company or a subsidiary (“ Leased Unpatented Claims ”).

(vi)    Except for Permitted Liens and the royalties set forth on Schedule 2(HH)(ix) with respect to each such real property, the Company owns a 100% interest in and to (i) the Fee Property; (ii) the Unpatented Claims, subject to the paramount title of the United States; (iii) the leasehold estate in the Leased Fee Property; and (iv) the Leased Unpatented Claims, subject to the paramount title of the United States.

(vii)    With respect to Unpatented Claims located and staked by the Company or a Subsidiary, all required claim maintenance fees have been paid in the manner required by Applicable Law in order to maintain such Unpatented Claims in good standing through the end of the current assessment year, and proof thereof has been properly and timely recorded and filed in accordance with Applicable Law, and all such Unpatented Claims were located and staked in the manner required by Applicable Law, and proof thereof has been properly and timely recorded and filed in accordance with Applicable Law. With respect to Unpatented Claims located and staked by a Person other than the Company or a Subsidiary, since the date of acquisition of such Unpatented Claims, all required claim maintenance fees have been paid in the manner required by Applicable Law in order to maintain such Unpatented Claims in good standing through the end of the current assessment year and proof thereof has been properly and timely recorded and filed in accordance with Applicable Law and, prior to the date of acquisition to the knowledge of the Company (x) all such Unpatented Claims were located and staked in the manner required by Applicable Law, and proof thereof has been properly and timely recorded and filed in accordance with Applicable Law, and (y) all required claim maintenance fees have been paid in the manner required by Applicable Law in order to maintain such Unpatented Claims in good standing, and proof thereof has been properly and timely recorded and filed in accordance with Applicable Law.

(viii)    With respect to the Leased Unpatented Claims, since the date of acquisition of such leasehold interest, all required claim maintenance fees have been paid in the manner required by Applicable Law in order to maintain the Leased Unpatented Claims in good standing through the end of the current assessment year (inclusive of the Closing Date), and proof thereof has been properly and timely recorded and filed in accordance with Applicable Law, and, prior to the date of acquisition of such leasehold interest to the knowledge of the Company, (x) all Leased Unpatented Claims were located and staked in the manner required by Applicable Law, and proof thereof has been properly and timely recorded and filed in accordance with Applicable Law, and (y) all required claim maintenance fees have been paid in the manner required by Applicable Law in order to maintain the Leased Unpatented Claims in good standing, and proof thereof has been properly and timely recorded and filed in accordance with Applicable Law.

(ix)    Schedule HH(ix), as of the Closing Date, sets forth a true and complete list of all royalties on or burdening all or any portion of the Real Property Collateral.

(II) Auramet Note and Auramet Purchase Agreement . There are currently no amounts outstanding under either the Auramet Note or the Auramet Purchase Agreement (as such terms are defined below).

3. Representations of the Purchaser .

 

The Purchaser represents and warrants to, and agrees with the Company that, as of the date of this Agreement and as of the Closing Time, unless such representation, warranty or agreement speaks as of a different time:

 

(A) Investor Status . The Purchaser is an “accredited investor” within the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act.

 

(B) Experience of the Purchaser . The Purchaser is knowledgeable, sophisticated and experienced in financial and business matters, and in making decisions with respect to investments in securities representing an investment decision, like that involved in the purchase of the Debenture, including investments in securities issued by the Company and comparable entities, has the ability to bear the economic risks of an investment in the Debenture, and has undertaken an independent analysis of the merits and the risks of an investment in the Debenture, based on the Purchaser’s own financial circumstances. The Purchaser has had the opportunity to request, receive, review and consider all information it deems relevant in making an informed decision to purchase the Debenture and to ask questions of, and receive answers from, the Company concerning such information.

 

(C) No Public Sale or Distribution . The Purchaser is acquiring the Debenture in the ordinary course of its business and for its own account for investment only and with no present intention of “distributing” the Debenture, or participating in any arrangement or understanding with any other persons regarding the “distribution” of the Debenture, in each case within the meaning of the Securities Act. The Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) the Debenture, nor will the Purchaser engage in any short sale that results in a disposition of the Debenture by the Purchaser, except if (i) the transferee of the Debenture has agreed in writing for the benefit of the Company to be bound by this Section 3 ; (ii) such offer, sale, pledge, transfer or other disposition is in compliance with the Securities Act and the rules and regulations of the Commission thereunder and any applicable state securities or “blue sky” laws; and (iii) if such sale, pledge, transfer or other disposition is not registered by an effective registration statement under the Securities Act and if reasonably requested by the Company, the Purchaser shall have furnished the Company with such documents reasonably requested by the Company, including without limitation an opinion of counsel reasonably satisfactory to the Company that such sale, pledge, transfer or other disposition will not require registration under the Securities Act; provided, however , that (x) clause (i) above will not apply to, and, except in unusual circumstances, the Company will not be entitled pursuant to clause (iii) above to request or require any documentation other than a representation letter in customary form for, any sale, pledge, transfer or other disposition made pursuant to Rule 144 promulgated under the Securities Act (or any successor thereto); and (y) clause (i) above will not apply to, and the Company will not be entitled to request or require such an opinion of counsel or any other documentation or information if such Debenture does not bear a restricted legend.

 

(D) Information . The Purchaser has, in connection with its decision to purchase the Debenture, relied solely upon the Exchange Act Reports, the representations and warranties of the Company contained herein and the information referred to in Section 3(B) .

 

(E) Reliance on Exemptions . The Purchaser understands that the Debenture is being offered and sold to it in reliance upon specific exemptions from the registration requirements of the Securities Act, the rules and regulations of the Commission thereunder and state securities or “blue sky” laws and that the Company is relying upon the truth and accuracy of, and the Purchaser’s compliance with, the representations, warranties and agreements of the Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of the Purchaser to acquire the Debenture.

 

(F) No Legal, Tax or Investment Advice . The Purchaser understands that nothing in the Agreement or any other materials presented to the Purchaser in connection with the purchase and sale of the Debenture constitutes legal, tax or investment advice. The Purchaser has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the Debenture.

 

(G) Risk of Loss . The Purchaser understands that its investment in the Debenture involves a significant degree of risk, including a risk of total loss of the Purchaser’s investment. The Purchaser understands that no representation is being made as to the future value of the Debenture.

 

(H) Legend . The Purchaser understands that, until such time as the Debenture may be sold pursuant to Rule 144 under the Securities Act without any restriction as to the volume or manner of sale of such securities that can then be sold, the Debenture will bear a restrictive legend in substantially the following form:

 

“THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, OR (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OR (II) UNLESS PURSUANT TO RULE 144 (OR ANY SUCCESSOR THERETO) UNDER THE SECURITIES ACT.”

 

(I) Residency . The Purchaser’s residence and principal executive offices are in the jurisdiction set forth in Section 7(A) of this Agreement.

 

(J) Organization; Validity; Enforcement . The Purchaser has full legal right, power and authority to execute, deliver and perform its obligations under this Agreement and to perform the transactions contemplated by this Agreement. The execution, delivery and performance of this Agreement by the Purchaser and the consummation of the transactions herein contemplated will not violate any provision of the organizational documents of the Purchaser or conflict with, result in the breach or violation of, or constitute, either by itself or upon notice or the passage of time or both, a default under any material agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which the Purchaser is a party, or any statute or any judgment, decree, order, rule or regulation of any court or any regulatory

body or other governmental agency or body applicable to the Purchaser, except, with respect to any such agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit, other instrument, statute, judgment, decree, order, rule or regulation, as would not, individually or in the aggregate, materially interfere with consummation of the transactions contemplated hereby. No consent, approval, authorization or other order of any court, regulatory body or other governmental body is required on the part of the Purchaser for the execution, delivery and performance of this Agreement by the Purchaser, except in each case as would not, individually or in the aggregate, materially interfere with consummation of the transactions contemplated hereby. Upon the execution and delivery of this Agreement by the parties hereto, this Agreement shall constitute the legal, valid and binding agreement of the Purchaser enforceable against the Purchaser in accordance with its terms, except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general equitable principles.

 

(K) Disclosure . The Purchaser acknowledges and agrees that the Company does not make nor has made any representations or warranties with respect to the transactions contemplated hereby or to its business, properties, operations and prospects, other than those specifically set forth in Section 2 of this Agreement.

 

(L) Compliance with Laws . The Purchaser acknowledges and agrees that it is responsible for its own compliance with foreign, state and federal securities laws. The Purchaser has all business and professional licenses, registrations and permits necessary to receive any fees or take any other actions contemplated under this Agreement or the other Transaction Documents.

 

Section 4. COVENANTS OF THE COMPANY.

 

(A) Blue Sky and Other Qualifications . The Company will qualify the Debenture for offering and sale, or to obtain an exemption for the Debenture to be offered and sold, under the applicable securities laws of such states and other jurisdictions (domestic or foreign) may be necessary in order to issue and sell the Debenture to the Purchaser pursuant to this Agreement; provided , however , that the Company will not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it has theretofore so filed or in which it is not so qualified, as applicable, or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.

 

(B) Payment of Expenses . On the Closing Date, the Company shall reimburse the Purchaser for due diligence expenses in an amount equal to Three Hundred Fifty Thousand Dollars ($350,000) (collectively, the “ Purchaser Reimbursed Expenses ”). The Company shall also be responsible for the payment of its own expenses related to the transactions contemplated by this Agreement, including (i) the preparation, issuance and delivery of the certificates, if any, for the Debenture; (ii) reasonable fees and disbursements of the counsel, accountants and other advisors to the Company; and (iii) the qualification or exemption of the Debenture under securities laws in accordance with Section 4(A) , including filing fees (collectively, the “ Company Expenses ”). For purposes of this Agreement, “ Business Day ” means any day on which commercial banks in the City of New York are open for business.

(C) Use of Proceeds . The Company will use the proceeds from the issuance of the Debenture in accordance with Schedule A attached hereto.

(D) Right to Board Designee . For so long as the Debenture remains outstanding, the Purchaser will be entitled to designate Clark Gillam to serve as a member of the Board of Directors of the Company (which right is not transferable to any third party). The Company agrees that if Mr. Gillam is unable to serve as a

director, resigns as a director or is removed as a director without cause and the Debenture remains outstanding, then the Purchaser shall have the ability to designate Daniel Freuman for appointment or election to the Board (Mr. Gillam or Mr. Freuman, as the case may be, the “ Purchaser Designee ”). The Company will take all action necessary to appoint the Purchaser Designee to the Board and to nominate such designee for election to the Board at each stockholder meeting. The Company shall recommend that the Company’s stockholders vote in favor of the Purchaser Designee at each stockholder meeting at which the Purchaser Designee is nominated. The Purchaser Designee shall not be entitled to compensation for serving as a member of the Board of Directors of the Company for so long as this Debenture is outstanding. Any such designee shall be subject to the same duties with respect to confidentiality, conflicts of interest and corporate opportunities, among other duties, as other non-employee members of the Board of Directors. The Company understands and agrees that the Purchaser Designee may, if and to the extent he desires to do so, disclose to the Purchaser (including any partners or members thereof) information he obtains while serving as a member of the Board of Directors of the Company or any committee thereof on a confidential basis, subject to an express agreement naming the Company as a third-party beneficiary of such confidentiality obligations (which the parties hereto acknowledge is satisfied by the terms of the Purchaser’s limited partnership agreement as in effect on the date hereof).

(E) Mineral Reports; Surface Title Confirmation . The Company shall comply with its obligations set forth in Section 6(K) of the Debenture, relating to the delivery of certain title reports relating to the Dayton/Spring Valley Properties as described on Schedule 4(E)(1) (“ Dayton/Spring Valley Properties ”), the American Flat Properties as described on Schedule 4(E)(2) (“ American Flat Properties ”), the Lucerne Properties as described on Schedule 4(E)(3) (“ Lucerne Properties ”), the Occidental Properties as described on Schedule 4(E)(4) (“ Occidental Properties ”) the Genco/Rule Properties as described on Schedule 4(E)(5) (“ Genco/Rule Properties ”) and the Amazon/Wonder Properties as described on Schedule 4(E)(6) (“ Amazon/Wonder Properties ”).

Section 5. CONDITIONS TO THE PURCHASER’S OBLIGATIONS.

 

The obligations of the Purchaser under this Agreement will be subject to the satisfaction (or waiver by the Purchaser in its sole discretion) of the following conditions precedent:

 

(A) Accuracy of Representations . The representations and warranties of the Company in this Agreement are accurate and correct as of, and as if made at, the Closing Time.

 

(B) Performance of Company’s Obligations . The Company shall have duly performed all of its obligations under this Agreement as are required to be completed at or before the Closing Time, including without limitation, payment of the Purchaser Reimbursed Expenses.

 

(C) Execution and Delivery of Security Agreement and Deeds of Trust . The Security Agreement and each Deed of Trust shall have been executed and delivered by each party thereto, and the Purchaser shall have received a copy thereof.

 

(D) Winfield Consent . Execution and delivery of the Winfield Consent, and the Purchaser shall have received a copy thereof.

 

(E) Surface Title Work . The Purchaser shall have received, in form and substance satisfactory to the Purchaser, updated preliminary title reports and such other reports and opinions, related to Dayton/Spring Valley Properties, the Industrial Park Properties as described on Schedule 5(E)(1) (“ Industrial Park Properties ”) and the Daney Ranch Properties as described on Schedule 5(E)(2) (“ Daney Ranch Properties ”)

prepared and certified by a Nevada title insurer, relating to the status of ownership of the surface title to all of such real properties.

(F) Selling Stockholders Sale . The purchase of the Common Stock free and clear of any lien, defect or encumbrance from the Selling Stockholders pursuant to documentation satisfactory to the Purchaser; provided , that this condition shall be deemed to have been satisfied so long as the transfer agent relating to the Common Stock has delivered by email confirmation that (1) as to the Selling Stockholders transferring shares of Common Stock to the Purchaser via electronic delivery, all actions in respect of such electronic transfer have been taken and (2) as to the Selling Stockholder transferring to the Purchaser physical certificates representing shares of Common Stock, such Selling Stockholder has irrevocably given instructions to The Depositary Trust Company (DTC) to deliver such physical certificates to the transfer agent (it being understood that such certificates for shares of Common Stock shall be delivered to the Purchaser as soon as practicable after the Closing in accordance with the Purchaser’s instructions).

(G) Legal Opinions of Counsel . The Purchaser shall have received an opinion or opinions (including local counsel opinions) of counsel for the Company and its Subsidiaries, addressed to the Purchaser, in form and substance reasonably acceptable to the Purchaser.

(H) Officer’s Certificate . The Purchaser shall have received an Officer’s Certificate, certifying as to the organizational documents of the Company and each Subsidiary (which, to the extent filed with a Governmental Authority, shall be certified as of a recent date by such Governmental Authority), the resolutions of the governing body of the Company and each Subsidiary and the good standing, existence or its equivalent of the Company and each Subsidiary.

(I) Existing Indebtedness; No Liens . All of the existing Indebtedness of the Company and its Subsidiaries other than the Indebtedness described on Schedule 5(I) shall be repaid in full and all guarantees and security interests related thereto shall be terminated prior to or concurrent (or substantially concurrent, to the extent arrangements for such repayment and termination have been already been agreed) with the Closing (other than as set forth in clause (L) below). There shall exist no lien, charge or encumbrance on any assets of the Company and its Subsidiaries other than Permitted Liens.

(J) Personal Property Collateral . The Purchaser shall have received, in form and substance satisfactory to the Purchaser: (i) (A) searches of UCC filings in the jurisdiction of incorporation or formation, as applicable, of the Company and each Subsidiary and each jurisdiction where any Collateral is located or where a filing would need to be made in order to perfect the Purchaser’s security interest in the Collateral, copies of the financing statements on file in such jurisdictions and evidence that no liens, charges or encumbrances exist other than Permitted Liens and (B) tax lien, judgment and bankruptcy searches, (ii) completed UCC financing statements for each appropriate jurisdiction as is necessary, in the Purchaser’s sole discretion, to perfect the Purchaser’s security interest in the Collateral and (iii) stock or membership certificates, if any, evidencing the pledged equity and undated stock or transfer powers duly executed in blank; in each case to the extent such pledged equity is certificated.

(K) Real Property Collateral . The Purchaser shall have received, in form and substance reasonably satisfactory to the Purchaser, a Deed of Trust, Assignment of Rents and Leases and Security Agreement, executed by the Company and each Subsidiary owning a record title interest in the Real Property Collateral, securing a lien against all of the real property set forth on Schedule 5(K) (“ Real Property Collateral ”).

(L) Auramet Debt . The Company shall have terminated (1) that certain Secured Promissory Note and Guaranty dated March 6, 2015 (the “ Auramet Note ”) entered into with Auramet International, LLC (and secured by a Deed of Trust, General Security Agreement and Financing Statement and Pledge of its interest

in Comstock Mining LLC) and (2) that certain Amended and Restated Master Purchase Contract and Bill of Sale dated March 11, 2015 (the “ Auramet Purchase Agreement ”) with Auramet International, LLC and all security interests, guarantees and pledges associated therewith.

(M) Other Materials . The Company shall have furnished to the Purchaser such appropriate further information, certificates, letters and other documents as the Purchaser may reasonably request. All such certificates, letters and other documents will be in compliance with the provisions of this Agreement.

Section 6. CONDITIONS TO THE COMPANY’S OBLIGATIONS.

 

The obligations of the Company under this Agreement will be subject to the satisfaction (or waiver by the Company in its sole discretion) of the following conditions precedent:

 

(A) Accuracy of Representations . The representations and warranties of the Purchaser in this Agreement are accurate and correct as of, and as if made at, the Closing Time.

 

(B) Receipt of Purchase Price . The Company shall have received the Purchase Price in accordance with Section 1(B) .

Section 7. MISCELLANEOUS.

 

(A) Notices . Unless otherwise provided herein, all notices, demands, consents, service of process, requests and other communications hereunder shall be in writing and shall be delivered in person or by nationally recognized overnight courier service, or mailed by certified mail, return receipt requested, or sent by facsimile (if provided), addressed as follows (or to such other address as may be given in writing in the future by either party to the other party hereto): 

If to the Company, to:

Comstock Mining Inc.

P.O. Box 1118

Virginia City, NV 89440

Attention: Corrado DeGasperis

Facsimile: 800-750-5740

Telephone: 775-848-5310

 

With a copy (which shall not constitute notice) to:

 

Withers Bergman LLP

1700 East Putnam Avenue, Suite 400

Greenwich, CT 06870-1366

Attention: Clyde Tinnen, Esq.

Facsimile: 203-302-6619

Telephone: 203-302-4079

and if to the Purchaser, shall be delivered to:

 

GF Comstock 2 LP

140 East 45th Street, Suite 17c

New York, NY 10017

Attention: Daniel Freuman

Telephone: 212-201-5813

 

Each such notice or other communication shall be deemed given (i) when delivered personally or by verifiable facsimile transmission (with an original to follow) on or before 4:30 p.m., New York City time, on a Business Day or, if such day is not a Business Day, on the next succeeding Business Day; (ii) on the next Business Day after timely delivery for overnight service to a nationally recognized overnight courier service; and (iii) on the Business Day actually received if deposited in the U.S. mail (certified or registered mail, return receipt requested, postage prepaid).

 

(B)      Governing Law and Jurisdiction; Waiver of Jury Trial . All questions concerning the construction, validity, enforcement and interpretation of this Agreement and any claim, controversy or dispute arising under or related to this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party hereto agrees that any action, suit or proceeding arising out of or relating to this Agreement (whether brought against a party hereto or its respective affiliates, employees or agents) may be commenced in the state courts sitting in New York City, New York, Borough of Manhattan and the United States District Court of the Southern District of New York, and any appellate court from any thereof. Each party hereto hereby (1) irrevocably waives personal service of process, (2) waives, to the fullest extent permitted by applicable law, (x) any objection that it may now or hereafter have to the laying of venue of any such action, suit or proceeding; and (y) any claim that it may now or hereafter have that any such action, suit or proceeding in such a court has been brought in an inconvenient forum, (3) submits to the nonexclusive jurisdiction of such courts in any such action, suit or proceeding and (4) consents to process being served in any such action, suit or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement (and agrees that such service shall constitute good and sufficient service of process and notice thereof). Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any action, suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. Nothing in this Agreement or in any other Transaction Document shall affect any right that the Purchaser may otherwise have to bring any action or proceeding relating to this Agreement or any other Transaction Document against the Company or any of its Subsidiaries or any of their respective properties or assets in the courts of any jurisdiction.

(C)      Amendments and Waivers; Cumulative Remedies . No provision of this Agreement may be modified, changed, waived, amended, discharged or terminated except in a written instrument signed by the Company and the Purchaser. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right. The rights, remedies, powers and privileges of a party hereunder are cumulative and not exclusive of any rights or remedies that such party may otherwise have.

(D)      Execution and Counterparts . This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile or electronic transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf

such signature is executed) the same with the same force and effect as if such facsimile or electronic signature were the original thereof.

(E) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

(F)      Successors and Assigns . This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties. References to either of the parties contained in this Agreement will be deemed to include the successors and permitted assigns of such party. Nothing in this Agreement, express or implied, is intended to confer upon any party, other than the parties hereto or their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. Neither party hereto may assign its rights or obligations under this Agreement without the prior written consent of the other party and any attempt to do so without such consent will be null and void; provided , however , that the Purchaser may assign its rights and obligations hereunder to an affiliate thereof without obtaining the Company’s consent (but shall give notice thereof to the Company).

(G) Section Headings. The section headings contained in this Agreement are for reference purposes only and shall not control or affect its construction or interpretation in any respect.

 

[remainder of page intentionally left blank]

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement as of the date first written above.

 

 

 

[Signature Page to Securities Purchase Agreement (2017)]

 

Schedules and Exhibits

Schedules

Schedule A - Sources and Uses of Cash Proceeds

Schedules to be provided by the Company:

Schedule 2(HH)(ii)—Deposit Accounts

Schedule 2(HH)(iii)—Commercial Tort Claims

Schedule 2(HH)(iv)—Fee Property/Unpatented Claims

Schedule 2(HH)(v)—Leased Fee Property/Unpatented Claims

Schedule 2(HH)(ix)—Royalties on Real Property Collateral

Schedule 4(E)(1)—Dayton/Spring Valley Properties

Schedule 4(E)(2)—American Flat Properties

Schedule 4(E)(3)—Lucerne Properties

Schedule 4(E)(4)—Occidental Properties

Schedule 4(E)(5)—Genco/Rule Properties

Schedule 4(E)(6)—Amazon/Wonder Properties

Schedule 5(E)(1)—Industrial Park Properties

Schedule 5(E)(2)—Daney Ranch Properties

Schedule 5(K)—Real Property Collateral

Exhibits

Exhibit A - Form of Debenture

Exhibit B - Form of Pledge and Security Agreement

Exhibit C – Selling Stockholders

Exhibit D – Form of Winfield Consent

EXECUTION VERSION

PLEDGE AND SECURITY AGREEMENT

THIS PLEDGE AND SECURITY AGREEMENT (this “ Agreement ”) is made as of this 13 ^th day of January, 2017, by and between COMSTOCK MINING INC., a Nevada corporation and Comstock Mining LLC, a Nevada limited liability company (the “ Company ”), the subsidiaries of the Company from time to time party hereto, and GF COMSTOCK 2 LP, a Delaware limited partnership (the “ Purchaser ”) who has entered into a Securities Purchase Agreement with the Company.

W I T N E S S E T H:

WHEREAS , the Company has issued and delivered, or will issue and deliver, to the Purchaser a $10,723,000 aggregate principal amount 11% Senior Secured Debenture due 2021 (the “ Debenture ”); and

WHEREAS , pursuant to the Securities Purchase Agreement (as defined herein) and the Debenture, the Company has agreed to grant a security interest in and to the Article 9 Collateral (as defined herein) on the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Purchaser agree as follows:

1.     Definitions . In addition to the words and terms defined elsewhere in this Agreement, the following words and terms shall have the following meanings, unless the context otherwise clearly requires:

“ Accounts ” shall have the meaning given to that term in the Code and shall include without limitation all rights of the Company, whenever acquired, to payment for goods sold or leased or for services rendered, whether or not earned by performance.

“ Article 9 Collateral ” shall mean the Pledged Equity and all tangible and intangible personal property of Company, including, without limitation, collectively the Accounts, Chattel Paper, Deposit Accounts, Documents, Equipment, Fixtures, General Intangibles, Instruments, Intellectual Property, Inventory and Proceeds of each of them.

“ Chattel Paper ” shall have the meaning given to that term in the Code and shall include without limitation all writings owned by the Company, whenever acquired, which evidence both a monetary obligation and a security interest in or a lease of specific goods.

“ Code ” shall mean the Uniform Commercial Code, as adopted in the State of Nevada, NRS Chapter 104, as in effect on the date of this Agreement and as amended from time to time, of the state or states having jurisdiction with respect to all or any portion of the Article 9 Collateral from time to time.

“ Collateral ” shall mean the Article 9 Collateral and the Real Property Collateral.

“ Comstock Industrial ” shall mean the Company’s wholly-owned subsidiary Comstock Industrial LLC, a Nevada limited liability company.

“ Comstock LLC ” shall mean the Company’s wholly-owned subsidiary Comstock Mining LLC, a Nevada limited liability company.

“ Comstock Real Estate ” shall mean the Company’s wholly-owned subsidiary Comstock Real Estate Inc. f/k/a Gold Hill Hotel Inc., a Nevada corporation.

“ Deposit Accounts ” shall have the meaning given to that term in the Code and shall include a demand, time, savings, passbook or similar account maintained with a bank, savings bank, savings and loan association, credit union, trust company or other organization that is engaged in the business of banking.

“ Documents ” shall have the meaning given to that term in the Code and shall include without limitation all warehouse receipts (as defined by the Code) and other documents of title (as defined by the Code) owned by the Company, whenever acquired.

“ Equipment ” shall have the meaning given to that term in the Code and shall include without limitation all goods owned by the Company, whenever acquired and wherever located, used or brought for use primarily in the business or for the benefit of the Company and not included in Inventory of the Company, including, without limitation, haul trucks, service vehicles, conveyors, crushers, GPS equipment and software, drilling equipment, leach pads, liners, and pond skimmers together with all attachments, accessories and parts used or intended to be used with any of those goods or Fixtures, whether now or in the future installed therein or thereon or affixed thereto, as well as all substitutes and replacements thereof in whole or in part.

“ Event of Default ” shall mean any of the Events of Default described in the Debenture.

“ Excluded Account ” means accounts of the Company or any of its Subsidiaries used exclusively for payroll, payroll taxes and other employee wage and benefit payments, as identified to the Purchaser by the Company as such by written notice from time to time.

“ Fixtures ” shall have the meaning given to that term in the Code, and shall include any Fixtures which are leasehold improvements.

“ General Intangibles ” shall have the meaning given to that term in the Code and shall include, without limitation, all contract rights under leases under which the Company now or in the future leases and or obtains a right to occupy or use real or personal property, or both, all of the other contract rights of the Company, whenever acquired, and customer lists, choses in action, claims (including claims for indemnification), books, records, patents, copyrights, trademarks, blueprints, drawings, designs and plans, trade secrets, data, reports, and studies, methods, processes, contracts, licenses, license agreements, formulae, tax and any other types of refunds, returned and unearned insurance premiums, rights and claims under insurance policies, and computer information, software, records and data now owned or acquired after the date of this Agreement by the Company.

“ Instruments ” shall have the meaning given to that term in the Code and shall include, without limitation, all negotiable instruments (as defined in the Code), all certificated securities (as defined in the Code), bonds, and all other writings which evidence a right to the payment of money now or after the date of this Agreement owned by the Company.

“ Inventory ” shall have the meaning given to that term in the Code and shall include without limitation all goods owned by the Company, whenever acquired and wherever located, held for sale or lease or furnished or to be furnished under contracts of service, and all raw materials, work in process and materials owned by

the Company and used or consumed in the Company’s business, including, without limitation severed minerals, extracted minerals, pregnant solution, chemicals, stockpiles, ore, core samples and chips, dore; and concentrate whenever acquired and wherever located.

“ Investment Property ” shall have the meaning set forth in the Code.

“ Lien ” shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest in or on such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities; provided, however, that contractual, statutory and common law rights of set-off shall not constitute Liens.

“ Permitted Liens ” shall have the meaning given to that term in the Debenture.

“ Pledged Equity ” shall mean 100% of the equity interests in each of the Subsidiaries.

“ Proceeds ” shall have the meaning given to that term in the Code and shall include without limitation whatever is received when Article 9 Collateral or Proceeds are sold, exchanged, collected or otherwise disposed of, whether cash or non-cash, and includes without limitation proceeds of insurance payable by reason of loss of or damage to Article 9 Collateral and all interest, payments, prepayments, collections, dividends or other distributions or other income on the Pledged Equity.

“ Real Property Collateral ” means the real property encumbered by the Deeds of Trust.

“ Secured Obligations ” shall mean (i) all indebtedness, both principal and interest, of the Company to the Purchaser evidenced by the Debenture, including, without limitation, the Make Whole Amount and (ii) all other debts, liabilities, duties and obligations of the Company to the Purchaser arising after the date of this Agreement contracted or incurred under or in connection with the Transaction Documents.

“ Securities Purchase Agreement ” shall mean the Securities Purchase Agreement dated the date hereof between the Company and the Purchaser.

“ Subsidiaries ” shall mean each of Comstock Industrial, Comstock LLC and Comstock Real Estate.

“ Transaction Documents ” shall mean collectively, this Agreement, the Securities Purchase Agreement and the Deeds of Trust and the Debenture, and all other agreements, documents and instruments required to be executed and delivered pursuant thereto, as each may be amended, supplemented or modified from time to time.

2.     Pledge and Security Interest; Negative Pledge .

(a) Grant. As security for the full and timely payment of the Secured Obligations in accordance with the terms of the Secured Obligations and the performance of the obligations of the Company under the Debenture and this Agreement, the Company hereby (a) pledges the Pledged Equity and (b) grants and conveys to and creates in favor of the Purchaser a security interest under the Code in and to such of the Article 9 Collateral as is now owned or acquired after the date of this Agreement by the Company. The security interests granted to the Purchaser herein shall be a first priority security interest, prior and superior to the rights of all third parties existing on or arising after the date of this Agreement, subject to the Permitted

Liens, to extent value has been given prior to or without notice of the Secured Obligations and such third parties have not agreed to subordinate such Permitted Liens.

(b) Code Governs. The Code shall govern the settlement, perfection and the effect of attachment and perfection of the security interest in the Article 9 Collateral, and the rights, duties and obligations of the Purchaser and the Company with respect to the Article 9 Collateral. Unless the context otherwise requires, all terms used in this Agreement which are defined by the Code shall have the meanings stated in the Code.

(c) Negative Pledge . The Company hereby agrees not to create or grant to any person any Lien, with respect to the Collateral or any other asset of the Company, without the prior written consent of Purchaser, except Permitted Liens.

3.      Provisions Applicable to the Article 9 Collateral . The parties agree that the following provisions shall be applicable to the Article 9 Collateral:

(a) Books and Records . The Company covenants and agrees that at all times during the term of this Agreement it shall keep accurate and complete books and records concerning the Article 9 Collateral that is now owned or acquired after the date of this Agreement by the Company.

(b) Examination of Article 9 Collateral . The Purchaser shall have the right, upon reasonable prior written notice to the Company and during the regular business hours of the Company, to examine and inspect the Article 9 Collateral and to review the books and records of the Company concerning the Article 9 Collateral that is now owned or acquired after the date of this Agreement by the Company and to copy the same and make excerpts therefrom; provided , however , that from and after the occurrence of an Event of Default, the rights of inspection and entry shall be subject to the requirements of the Code.

(c) Information on Request . Promptly upon request of the Purchaser from time to time, the Company shall furnish the Purchaser with such information and documents regarding the Article 9 Collateral and the Company’s financial condition, business, assets or liabilities, at such times and in such form and detail as the Purchaser may request.

(d) Cooperation . The Company shall cooperate with the Purchaser, at Company’s expense, in perfecting the Purchaser’s security interest in any of the Article 9 Collateral.

(e) Financing Statements . The Purchaser may file any necessary financing statements and other documents the Purchaser deems necessary in order to perfect its security interest without Company’s signature. Company grants to the Purchaser a power of attorney for the sole purpose of executing any documents on behalf of Company that the Purchaser deems necessary to perfect the security interest of the Purchaser. Such power, coupled with an interest, is irrevocable.

(f) Pledged Equity .

(1) Equity Powers in Pledged Equity . The Company will cause the Pledged Equity to be evidenced by duly executed certificates that are pledged and delivered to the Purchaser pursuant to the terms hereof. Simultaneously with the execution and delivery of this Agreement, the Company shall execute and deliver to the Purchaser undated equity powers, duly executed in blank, in the form attached hereto as Exhibit A-1 (Comstock LLC), Exhibit A-2 (Comstock Real Estate) and Exhibit A-3 (Comstock Industrial).

(2) Distributions and Voting Rights . Unless an Event of Default shall have occurred and be continuing, the Company may, to the extent the Company has such right as a holder of the Pledged Equity,

vote and give consents, ratifications, and waivers with respect thereto, except to the extent that, in the Purchaser’s reasonable judgment, any such vote, consent, ratification or waiver could materially and adversely detract from the value thereof as Article 9 Collateral or that could be inconsistent with or result in any material violation of any provision of the Debenture, this Agreement or any other Transaction Document. Unless an Event of Default shall have occurred and be continuing, the Company may receive and retain all dividends and Proceeds paid by either of the Subsidiaries in respect of the Pledged Equity.

(g) Restrictions and Covenants .

(1) Deposit Accounts . Company shall not close any of its Deposit Accounts or open any new or additional Deposit Accounts without first giving the Purchaser at least fifteen (15) days’ prior written notice thereof.

(2) Principal Offices . The Company shall not move the location of its principal executive offices without prior written notification to the Purchaser.

(3) Changes of Name, Etc . The Company shall not change its name, entity status, federal taxpayer identification number, or provincial organizational or registration number, or the state under which it is organized without the prior written consent of the Purchaser (such consent not to be unreasonably withheld, conditioned or delayed).

4.      Actions with Respect to Article 9 Collateral . The Company irrevocably makes, constitutes and appoints the Purchaser its true and lawful attorney-in-fact with power to sign its name and to take any of the following actions after the occurrence and prior to the cure of an Event of Default, at any time without notice to the Company and at the Company’s expense:

(a) Verification. Verify the validity and amount of, or any other matter relating to, the Article 9 Collateral by mail, telephone, facsimile or otherwise;

(b) Notifications. Notify all account debtors that the Accounts have been assigned to the Purchaser and that the Purchaser has a security interest in the Accounts;

(c) Direction as to Accounts. Direct all account debtors to make payment of all Accounts directly to the Purchaser;

(d) Control of Accounts. Take possession of (1) in any reasonable manner of any cash or non-cash items of payment or proceeds of Accounts or (2) in any manner of any rejected, returned, stopped in transit or repossessed goods relating to Accounts;

(e) Negotiate and Endorse. Negotiate and endorse any Document in favor of the Purchaser or its designees, covering Inventory that constitutes Article 9 Collateral, and related documents for the purpose of carrying out the provisions of this Agreement and taking any action and executing in the name of Company any instrument which the Purchaser may reasonably deem necessary or advisable to accomplish the purpose hereof (and without limiting the generality of the foregoing, the Purchaser shall have the right and power to receive, endorse and collect checks and other orders for the payment of money made payable to the Company representing any payment or reimbursement made under, pursuant to or with respect to, the Article 9 Collateral or any part thereof and to give full discharge to the same; and the Company does hereby ratify and approve all acts of such attorney and agrees that such attorney shall not be liable for any acts of commission or omission, nor for any error of judgment or mistake of fact or law, except for such attorney’s own gross negligence or willful misconduct. This power, being coupled with an interest, is irrevocable until the Secured

Obligations (other than inchoate indemnity obligations) are paid in full, at which time this power shall terminate in full;

(f) Pledged Equity. Receive any and all Proceeds paid in respect of the Pledged Equity (and all Pledged Equity shall be registered in the name of the Purchaser or its nominee, and the Purchaser or its nominee may thereafter exercise (i) all voting, corporate and other rights pertaining to such shares of the Pledged Equity at any meeting of equity holders of any Subsidiary or otherwise and (ii) any and all rights of conversion, exchange and subscription and any other rights, privileges or options pertaining to the Pledged Equity as if it were the absolute owner thereof (including the right to exchange at its discretion any and all the Pledged Equity upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of any Issuer, or upon the exercise by the Purchaser of any right, privilege or option pertaining to such Pledged Equity); and

(g) Enforce. Enforce payment of and collect any Accounts, by legal proceedings or otherwise (and the Company agrees to use its reasonable efforts to assist the Purchaser in the collection and enforcement of the Accounts and will not hinder, delay or impede the Purchaser in any manner in its collection and enforcement of the Accounts), and for such purpose the Purchaser may:

(1) Demand payment of any Accounts or direct any account debtors to make payment of Accounts directly to the Purchaser;

(2) Receive and collect all monies due or to become due to the Company pursuant to the Accounts;

(3) Exercise all of the Company’s rights and remedies with respect to the collection of Accounts;

(4) Settle, adjust, compromise, extend, renew, discharge or release Accounts in a commercially reasonable manner;

(5) Sell or assign Accounts on such reasonable terms, for such reasonable amounts and at such reasonable times as the Purchaser reasonably deems advisable;

(6) Prepare, file and sign the Company’s name or names on any Proof of Claim or similar documents in any proceeding filed under federal or state bankruptcy, insolvency, reorganization or other similar law as to any account debtor;

(7) Prepare, file and sign the Company’s name or names on any notice of lien, claim of mechanic’s lien, assignment or satisfaction of lien or mechanic ‘s lien or similar document in connection with the Article 9 Collateral;

(8) Endorse the name of the Company upon any chattel papers, documents, instruments, invoices, freight bills, bills of lading or similar documents or agreements relating to Accounts or goods pertaining to Accounts or upon any checks or other media of payment or evidence of a security interest that may come into the Purchaser’s possession;

(9) Sign the name of the Company to verifications of Accounts and notices of Accounts sent by account debtors to the Company; or

(10) Take all other actions that the Purchaser reasonably deems to be necessary or desirable to protect the Company’s interest in the Accounts.

5.      Preservation and Protection of Security Interest .

(a) Representations. The Company represents and warrants that it has, and covenants and agrees that at all times during the term of this Agreement, it will have, good and marketable title to the Article 9 Collateral (and insurable title with respect to the Mortgaged Properties) from time to time owned or acquired by it free and clear of all mortgages, pledges, liens, security interests, charges or other encumbrances, except for the Permitted Liens and those junior in right of payment and enforcement to that of the Purchaser or in favor of the Purchaser, and shall defend the Article 9 Collateral against the claims and demands of all persons, firms and entities whomsoever. The Company represents and warrants that (i) the Pledged Equity has been duly and validly authorized and issued by the issuers thereof and is fully paid and nonassessable; (ii) the Company is the legal, record and beneficial owner thereof, free of any and all liens, security interests, charges or other encumbrances, or options in favor of, or claims of, any other person; and (iii) the Pledged Equity is and will continue to be freely transferable and assignable and none of the Pledged Equity is or will be subject to any option, right of first refusal, shareholders agreement, charter or bylaw provisions or contractual restriction of any nature that might prohibit, impair, delay or otherwise affect the pledge of such Pledged Equity hereunder, the sale or disposition thereof pursuant hereto or the exercise by the Purchaser of rights and remedies hereunder. Assuming the Purchaser has taken all required action to perfect a security interest in the Article 9 Collateral as provided by the Code, the Company represents and warrants that as of the date hereof the Purchaser has, and that all times in the future the Purchaser will have, a first priority perfected security interest in the Article 9 Collateral, prior and superior to the rights of all third parties in the Article 9 Collateral existing on the date of this Agreement or arising after the date of this Agreement, subject to the Permitted Liens.

(b) Covenants. Except as permitted by this Agreement, the Company covenants and agrees that it (1) shall not, without the prior written consent of the Purchaser (i) borrow against the Article 9 Collateral or any portion of the Article 9 Collateral from any other person, firm or entity, (ii) grant or create or permit to attach or exist any Lien on, of or in any of the Article 9 Collateral or any portion of the Article 9 Collateral except those in favor of the Purchaser or the Permitted Liens, (iii) permit any levy or attachment to be made against the Article 9 Collateral or any portion thereof, except those subject to the Permitted Liens, or (iv) permit any financing statements to be on file with respect to any of the Article 9 Collateral, except financing statements in favor of the Purchaser or those with respect to the Permitted Liens, (2) shall faithfully preserve and protect the security interest of the Purchaser in the Article 9 Collateral and shall, at its own cost and expense, cause, or assist the Purchaser to cause that security interest to be perfected and continue perfected so long as the Secured Obligations or any portion of the Secured Obligations is outstanding, unpaid or executory and (3) shall do all such other acts and things and shall execute and deliver all such other instruments and documents, including further security agreements, pledges, endorsements, assignments and notices as the Purchaser in its discretion may reasonably deem necessary or advisable from time to time in order to perfect and preserve the priority of such security interest as a first lien security interest in the Article 9 Collateral prior to the rights of all third persons, firms and entities, subject to the Permitted Liens and except as may be otherwise provided in this Agreement.

(c) Financing Statements. For purposes of the perfection of the security interest of the Purchaser in the Article 9 Collateral in accordance with the requirements of this Agreement, the Company shall from time to time at the request of the Purchaser file or record, or cause to be filed or recorded, such instruments, documents and notices, including assignments, financing statements and continuation statements, as the

Purchaser may reasonably deem necessary or advisable from time to time in order to perfect and continue perfected such security interest.

6.      Insurance of Equipment, Inventory and Fixtures .

(a) Insurance. The Company shall insure the Equipment, Inventory and Fixtures against such risks and casualties and in such amounts and with such insurance companies as is ordinarily carried by corporations or other entities engaged in the same or similar businesses and similarly situated or as otherwise reasonably required by the Purchaser in its sole discretion. At the reasonable request of the Purchaser, each of the Company’s policies of insurance shall contain loss payable clauses in favor of the Company and the Purchaser as their respective interests may appear and shall contain provision for notification of the Purchaser thirty (30) days prior to the termination of such policy. At the request of the Purchaser copies of all such policies, or certificates evidencing the same, shall be deposited with the Purchaser. If the Company fails to effect and keep in full force and effect such insurance or fails to pay the premiums when due, the Purchaser may (but shall not be obligated to) do so for the account of the Company and add the cost thereof to the Secured Obligations.

(b) Loss, Damage or Destruction. In the event of loss of, damage to or destruction of the Equipment, Inventory or Fixtures during the term of this Agreement, the Company shall promptly notify the Purchaser of such loss, damage or destruction.

7.      Maintenance and Repair . The Company shall maintain the Real Property Collateral, Equipment, Inventory and Fixtures (and every portion thereof) in good condition, repair and working order, reasonable wear and tear alone excepted, and shall pay and discharge all taxes, levies and other impositions assessed or levied thereon as well as the cost of repairs to or maintenance of the same. If the Company fails to do so, the Purchaser may (but shall not be obligated to) pay the cost of such repairs or maintenance and such taxes, levies or impositions for the account of the Company and add the amount of such payments to the Secured Obligations.

8.      Preservation of Rights against Third Parties; Preservation of Article 9 Collateral in the Purchaser’s Possession . Until such time as the Purchaser exercises its right to effect direct collection of the Accounts and the Chattel Paper and to effect the enforcement of the Company’s contract rights, the Company assumes full responsibility for taking any and all commercially reasonable steps to preserve rights in respect of the Accounts and the Chattel Paper and their contracts against prior parties. The Purchaser shall be deemed to have exercised reasonable care in the custody and preservation of such of the Article 9 Collateral as may come into its possession from time to time if the Purchaser takes such action for that purpose as the Company shall request in writing, so long as (a) the requested action does not (in the Purchaser's reasonable judgment) impair the Purchaser's security interest in the Article 9 Collateral or its right in (or the value of) the Article 9 Collateral and (b) the Purchaser receives such written request in sufficient time to permit the Purchaser to take the requested action.

9.      Events of Default and Remedies .

(a) Foreclosure. If any one or more of the Events of Default shall occur or shall exist, the Purchaser may then or at any time thereafter, so long as such default shall continue, foreclose the lien or security interest in the Article 9 Collateral in any way permitted by law, or upon fifteen (15) days’ prior written notice to the Company, sell any or all Article 9 Collateral at private sale at any time or place in one or more sales, at such price or prices and upon such terms, either for cash or on credit, as the Purchaser, in its sole discretion, may elect, or sell any or all Article 9 Collateral at public auction, either for cash or on credit, as the Purchaser, in its sole discretion, may elect, and at any such sale, the Purchaser may bid for and become the purchaser of

any or all such Article 9 Collateral. Pending any such action the Purchaser may liquidate the Article 9 Collateral.

(b) Compromise; Waiver of Notices. If any one or more of the Events of Default shall occur or shall exist, the Purchaser may then, or at any time thereafter, so long as such default shall continue, grant extensions to, or adjust claims of, or make compromises or settlements with, debtors, guarantors or any other parties with respect to Article 9 Collateral or any securities, guarantees or insurance applying thereon, without notice to or the consent of the Company, without affecting the Company’s liability under this Agreement or the Debenture. The Company waives notice of acceptance, of nonpayment, protest or notice of protest of any Accounts or Chattel Paper or any of its contract rights and any other notices to which the Company may be entitled.

(c) Rights Under Code. If any one or more of the Events of Default shall occur or shall exist and be continuing, then in any such event, the Purchaser shall have such additional rights and remedies in respect of the Article 9 Collateral or any portion thereof as are provided by the Code and such other rights and remedies in respect thereof which it may have at law or in equity or under this Agreement, including without limitation the right to enter any premises where Equipment, Inventory and/or Fixtures are located and take possession and control thereof without demand or notice and without prior judicial hearing or legal proceedings, which the Company expressly waives.

(d) Application of Proceeds. The Purchaser shall apply the Proceeds of any sale or liquidation of the Article 9 Collateral and any Proceeds received by the Purchaser from insurance, first to the payment of the reasonable costs and expenses incurred by the Purchaser in connection with such sale or collection, including without limitation reasonable attorneys’ fees and legal expenses, second to the payment of the Secured Obligations, whether on account of principal or interest or otherwise as the Purchaser in its sole discretion, may elect, and then to pay the balance, if any, to the Company or as otherwise required by law. If such Proceeds are insufficient to pay the amounts required by law, the Company shall be liable for any deficiency.

(e) Assembly Rights. Upon the occurrence of any Event of Default, the Company shall promptly upon written demand by the Purchaser assemble the Equipment, Inventory and Fixtures and make them available to the Purchaser at a place or places to be designated by the Purchaser. The rights of the Purchaser under this Section 9(e) to have the Equipment, Inventory and Fixtures assembled and made available to it is of the essence of this Agreement and the Purchaser may, at its election, enforce such right by an action in equity for injunctive relief or specific performance, without the requirement of a bond.

10.       Release . Notwithstanding anything to the contrary contained in this Agreement, upon payment and performance in full of the Secured Obligations (other than inchoate indemnity obligations), this Agreement shall terminate and be of no further force and effect and the Purchaser shall thereupon terminate its security interest in the Article 9 Collateral. Notwithstanding the preceding sentence, this Agreement shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Secured Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by the Purchaser pursuant to an order by a court of competent jurisdiction, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Secured Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. Until such time, however, this Agreement shall be binding upon and inure to the benefit of the parties, their successors and assigns, provided , that, without the prior written consent of the Purchaser the Company may not assign this Agreement or any of its rights under

this Agreement or delegate any of its duties or obligations under this Agreement and any such attempted assignment or delegation shall be null and void. This Agreement is not intended and shall not be construed to obligate the Purchaser to take any action whatsoever with respect to the Article 9 Collateral or to incur expenses or perform or discharge any obligation, duty or disability of the Company. Upon any sale or other transfer by the Company of any Collateral in a transaction permitted under the Transaction Documents (including, without limitation, any “permitted earn-in arrangement,” as defined in the Debenture to the extent required by the terms of such earn-in arrangement), the security interests in such Collateral created by the Transaction Documents shall be automatically released. For the sake of clarity, the Company’s rights and privileges with respect to any permitted earn-in arrangement are hereby pledged as Collateral for the benefit of Purchaser. In connection with any termination or release pursuant to this Section 10, the Purchaser shall, at the expense of the Company, execute and deliver all documents that the Company shall reasonably request to evidence such termination or release.

11.     Miscellaneous .

(a) Notices. Unless otherwise provided herein, all notices, demands, consents, service of process, requests and other communications hereunder shall be in writing and shall be delivered in person or by nationally recognized overnight courier service, or mailed by certified mail, return receipt requested, or sent by facsimile (if provided), addressed as follows (or to such other address as may be given in writing in the future by either party to the other party hereto):

If to the Company, to:

Comstock Mining Inc.

P.O. Box 1118

Virginia City, NV 89440

Attention: Corrado DeGasperis

Facsimile: 800-750-5740

Telephone: 775-848-5310

 If to the Purchaser to:

GF Comstock 2 LP

140 East 45th Street, Suite 17c

New York, NY 10017

Attention: Daniel Freuman

Telephone: 212-201-5813

Each such notice or other communication shall be deemed given (i) when delivered personally or by verifiable facsimile transmission (with an original to follow) on or before 4:30 p.m., New York City time, on a Business Day or, if such day is not a Business Day, on the next succeeding Business Day; (ii) on the next Business Day after timely delivery for overnight service to a nationally recognized overnight courier service; and (iii) on the Business Day actually received if deposited in the U.S. mail (certified or registered mail, return receipt requested, postage prepaid).

(b)      Governing Law and Jurisdiction; Waiver of Jury Trial . All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party hereto agrees that any action, suit or proceeding arising out of or

relating to this Agreement (whether brought against a party hereto or its respective affiliates, employees or agents) may be commenced in the state courts sitting in New York City, New York, Borough or Manhattan and the United States District Court of the Southern District of New York and any appellate court from any thereof. Each party hereto hereby (1) irrevocably waives personal service of process, (2) waives, to the fullest extent permitted by applicable law, (x) any objection that it may now or hereafter have to the laying of venue of any such action, suit or proceeding; and (y) any claim that it may now or hereafter have that any such action, suit or proceeding in such a court has been brought in an inconvenient forum, (3) submits to the nonexclusive jurisdiction of such courts in any such action, suit or proceeding and (4) consents to process being served in any such action, suit or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement (and agrees that such service shall constitute good and sufficient service of process and notice thereof). Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any action, suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

(c)      Amendments and Waivers; Cumulative Remedies . No provision of this Agreement may be modified, changed, waived, amended, discharged or terminated except in a written instrument signed by the Company and the Purchaser. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right. The rights, remedies, powers and privileges of a party hereunder are cumulative and not exclusive of any rights or remedies that such party may otherwise have. If an Event of Default is waived by the Purchaser in accordance with this Agreement, then it will cease to exist. If a Default is so waived, then it will be deemed to be cured and any Event of Default arising therefrom will be deemed not to occur. However, no such waiver will extend to any subsequent or other Default or Event of Default or impair any right arising therefrom.

(d)      Execution and Counterparts . This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile or electronic transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile or electronic signature were the original thereof.

(e) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

(f)      Successors and Assigns . This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties. Neither party shall assign its rights or obligations under this Agreement without the prior written consent of the other party and any attempt to do so without such consent will be null and void.

(g) Section Headings. The section headings contained in this Agreement are for reference purposes only and shall not control or affect its construction or interpretation in any respect.

[remainder of page intentionally left blank]

IN WITNESS WHEREOF, and intending to be legally bound, the parties have executed and delivered this Security Agreement as of the date first written above.

[ Signature Page to Comstock Pledge and Security Agreement (2017) ]

EXHIBIT A-1

(COMSTOCK LLC)

EQUITY POWER

FOR VALUE RECEIVED, Comstock Mining Inc., a Nevada corporation, does hereby assign and transfer unto _____________________________, a ______________________, __________________ limited liability company interests (the “ LLC Equity ”) in COMSTOCK MINING LLC, a Nevada limited liability company (the “ LLC ”), standing in its name on the books of the LLC, the LLC Equity represented by Certificate No. _____ herewith, and does hereby irrevocably constitute and appoint any officer or agent of the LLC as its attorney-in-fact to transfer the LLC Equity on the books of the LLC with full power of substitution in the premises.

Dated: __________________.

COMSTOCK MINING INC.

By:    _________________________

Name:    

Title:    

In the presence of    

                                

___________________________                

, Witness

EXHIBIT A-2

(COMSTOCK REAL ESTATE)

STOCK POWER

FOR VALUE RECEIVED, Comstock Mining Inc., a Nevada corporation, does hereby assign and transfer unto _____________________________, a ______________________, __________________ shares (the “ Shares ”) of Common Stock, par value $______ per share, in COMSTOCK REAL ESTATE INC., a Nevada corporation (the “ Corporation ”), standing in its name on the books of the Corporation, the Shares being represented by Certificate No. _____ herewith, and does hereby irrevocably constitute and appoint any officer or agent of the Corporation as its attorney-in-fact to transfer the Shares on the books of the Corporation with full power of substitution in the premises.

Dated: __________________.

COMSTOCK MINING INC.

By:    _________________________

Name:    

Title:    

In the presence of    

                                

___________________________                

, Witness

EXHIBIT A-3

(COMSTOCK INDUSTRIAL)

EQUITY POWER

FOR VALUE RECEIVED, Comstock Mining Inc., a Nevada corporation, does hereby assign and transfer unto _____________________________, a ______________________, __________________ limited liability company interests (the “ LLC Equity ”) in COMSTOCK INDUSTRIAL LLC, a Nevada limited liability company (the “ LLC ”), standing in its name on the books of the LLC, the LLC Equity represented by Certificate No. _____ herewith, and does hereby irrevocably constitute and appoint any officer or agent of the LLC as its attorney-in-fact to transfer the LLC Equity on the books of the LLC with full power of substitution in the premises.

Dated: __________________

COMSTOCK MINING INC.

By:    _________________________

Name:    

Title:    

In the presence of    

                                

___________________________                

, Witness

ACKNOWLEDGEMENT, CONSENT AND WAIVER AGREEMENT

This Acknowledgement, Consent and Waiver Agreement (this “ Agreement ”), dated as of December 29, 2016, is entered into by and among Comstock Mining Inc., a Nevada corporation (“ Comstock ”), Northern Comstock LLC, a Nevada limited liability company (“ Northern Comstock ”), DWC Resources Inc., a Nevada corporation (“ DWC ”), The InterGroup Corporation, a Delaware corporation (“ InterGroup ”), Santa Fe Financial Corporation, a California corporation (“ Santa Fe ”), Portsmouth Square, Inc., a California corporation (“ Portsmouth ”) and John V. Winfield (“ Winfield ”). Reference is made to: (i) the Limited Liability Company Operating Agreement of Northern Comstock, dated as of October 19, 2010, as amended prior to the date hereof (the “ NC Agreement ”), by and among Comstock, DWC and Winfield; and (ii) Stockholders Agreement, dated as of July 29, 2015 (the “ Stockholders Agreement ”), by and among Comstock, Northern Comstock, DWC, InterGroup, Santa Fe, Portsmouth and Winfield.

WHEREAS, Comstock desires to enter into a debenture to borrow $12,000,000 on term substantially consistent with those set forth in the term sheet attached hereto as Exhibit A (the “ Debenture ”); and

WHEREAS, pursuant to the Stockholders Agreement, Comstock is not permitted to incur certain indebtedness without the prior consent of Northern Comstock, DWC, InterGroup, Santa, Portsmouth and Winfield; and

WHEREAS, Comstock is obligated to make certain capital contributions to Northern Comstock pursuant to, and in accordance with, the terms of the NC Agreement and Comstock will use some of the proceeds of the Debenture to make capital contributions to Northern Comstock in an amount equal to $330,000; and

WHEREAS, in connection with the foregoing, Comstock, Northern Comstock, DWC, InterGroup, Santa, Portsmouth and Winfield have determined to enter into this Agreement.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the parties hereto hereby agree as follows:

1. Each of Northern Comstock, DWC, InterGroup, Santa, Portsmouth and Winfield hereby consent to and authorize Comstock to incur the indebtedness and perform the obligations and cause its subsidiaries to perform the obligations, contemplated by the Debenture.

2. Each of Northern Comstock, DWC and Winfield hereby irrevocably waives any defaults arising from, or related to, the failure of Comstock to make capital contributions or incur other expenditures required pursuant to the NC Agreement on or prior to the date hereof.

3. Each of Northern Comstock, DWC and Winfield hereby acknowledges and agrees that the closing of the Debenture and the transactions contemplated thereby shall not be deemed to constitute a “Liquidity Surplus Event,” a “One Payment Liquidity Surplus Event” or a “Two Payment Liquidity Surplus Event,” in each case, as defined in the NC Agreement.

4. Each person signing this Agreement represents and warrants that he is duly authorized and has legal capacity to execute and deliver this Agreement. Each party represents and warrants to the other parties that the execution and delivery of the Agreement and the performance of such party’s obligations hereunder have been duly authorized and that the Agreement is a valid and legal agreement binding on such party and enforceable in accordance with its terms and each party agrees to indemnify and hold harmless each other party from any claim that such authority did not exist.

5. The parties agree that, from time to time, each of them will execute and deliver, or cause to be executed and delivered, such further agreements and instruments and take such other action as may be necessary to effectuate the provisions, purposes, and intents of this Agreement.

6. This Agreement shall be governed by and be construed in accordance with the laws of the State of New York, without giving effect to the principles of conflicts of laws thereof.

7. This Agreement may be executed by facsimile and electronically by pdf and in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered (including by facsimile and electronically by pdf) to the other parties hereto.

[Signature page follows]

IN WITNESS WHEREOF, the parties hereto have caused this Acknowledgement, Consent and Waiver Agreement to be duly executed and delivered, all as of the date first set forth above.

 

 

APN# : [___________]

and N/A, [unpatented mining claims]

Recording Requested by :

When Recorded Mail to :

Rew R. Goodenow

Parsons Behle & Latimer

50 W. Liberty St., Suite 750

Reno, NV 89501

DEED OF TRUST,

ASSIGNMENT OF RENTS AND LEASES, AND

SECURITY AGREEMENT

THIS DEED OF TRUST (“Deed of Trust”), is made as of the ___ day of January, 2017 by [COMSTOCK MINING INC.] [Comstock Mining LLC] [Comstock Industrial LLC] [Comstock Real Estate Inc.], a [corporation] [limited liability company] organized and existing in the State of Nevada (“Grantor”), to JLM TITLE LLC, d/b/a First Centennial Title Company Of Nevada, a Nevada limited liability company, as trustee (“Trustee”) for the use and benefit of GF COMSTOCK 2 LP, a Delaware limited partnership, as beneficiary, secured party and collateral agent (“Beneficiary”).

Grant and Assignment . For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Grantor hereby irrevocably and unconditionally grants, transfers and assigns to Trustee, in trust, with power of sale and right of reentry and possession, all that certain real property (“Land”) located in [Storey] [Lyon] County, Nevada as more particularly described in Exhibit “A” attached hereto and incorporated herein[, and all of those unpatented mining claims described in Exhibit “B” attached hereto (“Claims”),] [and the water rights described in Exhibit "C" attached hereto ("Water Rights"),] together with all right, title and interest of Grantor in all buildings, fixtures and improvements now located or hereafter to be constructed thereon (collectively “Improvements”);

TOGETHER WITH all right, title and interest of Grantor, now or hereafter acquired, in the appurtenances, hereditaments, privileges, reversions, remainders, profits, easements, franchises and tenements thereof, including all minerals, oil, gas and other hydrocarbon

substances thereon or therein subject to the paramount interest of the United States of America in unpatented mining claims, air rights, water rights, and any land lying in the streets, roads or avenues, open or proposed, in front of or adjoining the Land, Claims and Improvements;

TOGETHER WITH all right, title and interest of Grantor in all equipment, fixtures, chattels, furniture, furnishings, appliances, and all other articles of tangible personal property, and any additions to, substitutions for, changes in or replacements of the whole or any part thereof now or at any time hereafter affixed to, attached to, placed upon or used in any way in connection with the use, enjoyment, occupancy or operation of the Land, Claims and Improvements or any portion thereof, including all building materials and equipment now or hereafter delivered to the Land, Claims and Improvements and intended to be installed in or about the same, and all inventory, accounts, accounts receivable, utility deposits, water rights and any rights to receive water, contract rights, development and use rights, governmental approvals, permits, licenses, applications, architectural and engineering plans, data, samples, cores, specifications, maps and drawings, architectural, engineering and construction contracts, surveys, appraisals, all reports, papers, studies and other documents relating to the use or improvement of the Land, Claims and Improvements, cash, money, chattel paper, instruments, documents, bonds, deposits, loans, drafts and letters of credit arising from, located on or related to the Land, Claims and Improvements and any business conducted thereon by Grantor and any other intangible personal property and rights relating to or located on the Land, Claims and Improvements or any part thereof or to the operation thereof or used in connection therewith, including, without limitation, tradenames and trademarks (collectively “Personal Property”, including the items in the next paragraph).

TOGETHER WITH all of Grantor's right, title and interest to all proceeds (including claims or demands thereto) from the conversion, voluntary or involuntary, of any of the Land, Claims, Improvements or Personal Property into cash or liquidated claims, including, without limitation, proceeds of all present and future fire, hazard or casualty insurance policies and all condemnation awards or payments in lieu thereof made by any public body or decree by any court of competent jurisdiction for taking or for degradation of the value in any condemnation or eminent domain proceeding, and all causes of action and the proceeds thereof of all types for any damage or injury to the Land, Improvements or Personal Property or any part thereof, including, without limitation, causes of action arising in tort or contract and causes of action for fraud or concealment of a material fact, and all proceeds from the sale of all or any portion of the Land, Improvements or Personal Property.

TOGETHER WITH all ore, dore, severed minerals, extracted minerals, solutions and other products, of mining activity conducted on the Claims, subject only to prior superior recorded interests.

TOGETHER WITH all leases (including, without limitation, ground leases, subleases or subsubleases), lettings, licenses, concessions, joint ventures, earn-in or other agreements

(whether written or oral) pursuant to which any Person is granted a possessory interest in, or right to use or occupy all or any portion of the Land, Claims and the Improvements, and every modification, amendment or other agreement relating to such leases, subleases, subsubleases, rentals or other agreements entered into in connection with such leases, subleases, subsubleases, rentals or other agreements and every guarantee of the performance and observance of the covenants, conditions and agreements to be performed and observed by the other party thereto, heretofore or hereafter entered into (collectively, the “Leases”), whether before or after the filing by or against Grantor of any petition for relief under 11 U.S.C. § 101 et seq., as the same may be amended from time to time (the “Bankruptcy Code”) and all right, title and interest of Grantor, its successors and assigns therein and thereunder, including, without limitation, cash or securities deposited thereunder to secure the performance by the lessees of their obligations thereunder and all rents, rent equivalents, moneys payable as damages or in lieu of rent or rent equivalents, additional rents, revenues, issues and profits (including all oil and gas or other mineral royalties and bonuses), income, fees, receivables, deposits (including, without limitation, security, utility and other deposits) accounts and receipts from the Land, Claims and the Improvements whether paid or accruing before or after the filing by or against Grantor of any petition for relief under the Bankruptcy Code (collectively, the “Rents”) and all proceeds from the sale or other disposition of the Leases and the right to receive and apply the Rents to the payment of the Debt and the performance of the Secured Obligations.

IN ADDITION, Grantor absolutely and irrevocably assigns to Beneficiary all right, title and interest of Grantor in and to any bonds or other security instruments held by any federal or state regulatory agency for the purpose of securing Grantor's or any of Grantor’s subsidiary entities’ reclamation obligations regarding the Property. (The Land, Claims, Improvements, Personal Property, Leases, Rents, and all other right, title, and interest of Grantor in and to all assets, property and other items described above are collectively referred to herein as “Property” or “Real Property”.)

1. Obligations Secured . Grantor makes this Deed of Trust for the purpose of securing:

(a)      Payment of all amounts owed at any time under the 11% Senior Secured Debenture due 2021 dated as of January ___, 2017 and any amendments thereto or extensions thereof (“Debenture”), including, without limitation, principal, interest, default interest and the Make Whole Amount (as defined in the Debenture);

(b)      Payment and performance of all obligations of Grantor under this Deed of Trust, including payment of all sums expended or advanced by Beneficiary hereunder, together with interest thereon at the rate specified in the Debenture, in the preservation, enforcement and realization of the rights of Beneficiary hereunder or under any of the other

obligations secured hereby including, but not limited to, attorney's fees, court costs, other litigation expenses, and foreclosure expenses;

(c)      Payment and performance of all obligations of the Grantor pursuant to the Transaction Documents (as defined in the Debenture);

(d)      It is the intention of Grantor and Beneficiary that this Deed of Trust is an “instrument” (as defined in Nevada Revised Statute (“NRS”) 106.330, as amended or recodified from time to time) which secures “future advances” (as defined in NRS 106.320, as amended or recodified from time to time) and which is governed pursuant to NRS 106.300 through 106.400, as amended or recodified from time to time. It is the intention of Grantor and Beneficiary that the Secured Obligations include, without limitation, the obligation of Grantor to repay “future advances” of “principal” (as defined in NRS 106.345), as amended or recodified from time to time), and costs and expenses of collection or incurred in connection with protecting Beneficiaries’ interests hereunder (including, without limitation, expenses incurred in connection with the preservation of the value of the Property), or further provided in paragraph 15 of this Deed of Trust, in an amount up to $____________, and that the lien of this Deed of Trust secures the obligation of Grantor to repay all such “future advances” with the priority set forth in NRS 106.370(1), as amended or recodified from time to time;

(e)      All modifications, extensions and renewals (if any) of the Debenture and the obligations thereunder (including, for the avoidance of doubt, any PIK Notes issued pursuant thereto); and

(f)      Performance of each and every obligation of Grantor as lessor or lessee under any and all leases, which have or will be executed in connection with the Property.

The obligations secured by this Deed of Trust are herein collectively called the “Secured Obligations”. Notwithstanding anything in this Deed of Trust to the contrary, this Deed of Trust and the Secured Obligations shall be subject to the terms and conditions of the Debenture and the Security Agreement (as defined in the Debenture) in all respects. All persons who may have or acquire an interest in the Property shall be deemed to have notice of, and shall be bound by, the terms of the Debenture, this Deed of Trust, the Transaction Documents and any other instruments or documents made or entered into in connection herewith (collectively “Documents”) and each of the Secured Obligations.

2.      Leases and Rents .

(a)      Neither the assignment of the Leases and Rents set forth above nor any other provision of any of the Documents shall impose upon Beneficiary any duty to produce Rents from the Property or cause Beneficiary to be (a) a “mortgagee in possession” for any purpose, (b) responsible for performing any of the obligations of Grantor under any Lease or other agreement relating to the sale of all or any portion of the Property, (c) responsible or

liable for any waste by any lessees or any other parties, for any dangerous or defective condition of the Property, for any negligence in the management, upkeep, repair or control of the Property or for any other act or omission by any other person. The foregoing assignment is an absolute assignment and not an assignment for security only and Beneficiary's right to the Rents is not contingent upon its possession of the Property.

(b)      Upon the occurrence and during the continuance of a Default or Event of Default (in each case, as hereinafter defined), Grantor hereby directs each tenant of the Property, or any portion thereof, to pay such Rents to Beneficiary, or Beneficiary's agent, and irrevocably appoints Beneficiary as its true and lawful attorney-in-fact, at the option of Beneficiary, at any time and from time to time, to demand, receive and enforce payment, to give receipts, releases and satisfactions and to sue, in the name of Grantor or Beneficiary, for all such Leases and Rents and apply the same to the Secured Obligations; provided, however, Beneficiary confers upon Grantor the authority to collect and retain the Rents as they become due and payable, subject, however, to the right of Beneficiary to revoke said authority and without taking possession of all or any part of the Property. Upon the occurrence and during the continuance of a Default or Event of Default, (i) Grantor shall not accept any deposit or prepayment of rental or lease payment in excess of one (1) month in advance, (ii) Beneficiary at any time may require that all deposits and prepayments be delivered to Beneficiary, (iii) Grantor covenants and agrees that Grantor shall not (x) amend, modify or change any term, covenant or condition of any Lease in existence on the date of this Deed of Trust without the prior written consent of Beneficiary or (y) enter into any Lease of the Property, or any interest therein, or any portion thereof, from and after the date of this Deed of Trust without the prior written consent of Beneficiary. Grantor agrees that commencing with a Default or Event of Default, as hereinafter defined, each tenant of the Property, or any portion thereof, shall make such Rents payable to and pay such Rents to Beneficiary, or Beneficiary's agent, upon Beneficiary's written demand therefore, without any liability on the part of such person to inquire further as to the existence of a Default or Event of Default by Grantor, provided, however, in the event of Grantor's cure of any such Default or Event of Default as herein provided, Grantor shall again be entitled to recover and collect such Rents as provided above prior to such Default or Event of Default.

(c)      Grantor shall (i) fulfill and perform each and every condition and covenant of each Lease to be fulfilled or performed by the lessor thereunder, (ii) give prompt (but in any event within three (3) Business Days, as defined in the Debenture) notice to Beneficiary of any notice of default by the lessor or lessee thereunder received by Grantor together with a complete copy of any such notice, and (iii) enforce, short of termination thereof, the performance or observance of each and every covenant and condition thereof by the lessee thereunder to be performed or observed.

(d)      Grantor shall furnish to Beneficiary, within thirty (30) days after a request by Beneficiary, a written statement containing the names of all lessees of the Property,

the terms of their respective Leases, the spaces occupied and the rentals payable and received thereunder and a copy of each Lease.

(e)      Unless otherwise provided in the Documents with respect to a permitted earn-in arrangement (as defined in the Debenture), all Leases shall provide for the subordination, in form and substance satisfactory to Beneficiary, of such Leases to this Deed of Trust and all extensions, renewals and modifications thereof. In addition each Lease shall provide that, in the event of the enforcement by Trustee or Beneficiary of the remedies provided at law or by this Deed of Trust, each lessee under a Lease shall, if requested by Beneficiary as a result of such enforcement, automatically become the lessee of Beneficiary, without any change in the terms or other provisions of the respective Lease; provided, Beneficiary shall not be (i) bound by any payment of rent or other sum more than one (1) month in advance, except payments in the nature of security, (ii) bound by any amendment or modification to the respective Lease made without the consent of Beneficiary, (iii) liable for damages or any act or omission of any prior lessor or (iv) subject to any offsets or defenses which such lessee might have against any prior lessor.

3.      Representation and Warranties . Grantor acknowledges, represents and warrants to Beneficiary that Grantor has not entered into and will not enter into any agreements with respect to the Property effecting the performance of the Documents or conveyance of the Property to Trustee (unless otherwise provided in the Documents with respect to a permitted earn-in arrangement), and Grantor's execution and performance of this agreement will not breach, conflict with, or constitute a default under any agreement, judgment, order or decree, or other instrument; and that Grantor shall comply in all material respects with any and all applicable laws relating its intended uses for the Property. The representations and warranties by Grantor contained in this paragraph shall be deemed to be remade as of the date of recording of this Deed of Trust and shall survive after such recording. Grantor agrees to notify Beneficiary in writing if it is discovered that any of said representations or warranties are, have, or may become materially false.

4.      Taxes and Assessments . Grantor shall pay prior to delinquency all taxes, assessments, levies and charges of any kind or nature whatsoever imposed by any governmental or quasi-public authority or utility company which are (or, if not paid, may become) a lien upon or cause a loss in value of any interest in any of the Property, including assessments on appurtenant water stock. Grantor shall also pay prior to delinquency all taxes, assessments, levies and charges imposed by any governmental authority upon Beneficiary by reason of its interest in any Secured Obligation or in any of the Property or by reason of any payment made to Beneficiary hereunder or pursuant to any Secured Obligation (excluding taxes on or measured by net income). Grantor shall furnish Beneficiary, within ten (10) days after the date of such payments, official receipts of the appropriate authority or other proof satisfactory to Beneficiary evidencing the payment thereof.

5.      Insurance . During the continuance of this trust, Grantor covenants to keep all Improvements insured against loss by fire, or other hazard, with extended coverage endorsement, for the full insurable value of the Improvements, at replacement cost. Such policies shall not contain a co-insurance provision whereby Grantor in the event of loss becomes a co-insurer and shall contain a non-contributory standard mortgagee or beneficiary endorsement making losses payable to Beneficiary and/or its nominee as its interests may appear.

Grantor agrees to provide Beneficiary original or certified copies of such policies upon request therefore. The form of all such policies and the companies issuing them shall be reasonably acceptable to Beneficiary; provided that such policies and companies, as the case may be, shall be deemed acceptable to the Beneficiary unless the Beneficiary objects within five (5) Business Days of receipt of such policy documentation. At least five (5) Business Days prior to the expiration date of such policies, original or certified copies of renewals thereof shall be delivered to Beneficiary together with receipts evidencing the payment of all premiums on such policies and renewals. The policies and renewals shall be deemed reasonable to the Beneficiary unless (x) such policy or renewal contains changes that are material and adverse to the Grantor or (y) the Beneficiary objects within five (5) Business Days of receipt of such policy documentation. In the event of loss or of any actual or potential claim under such policies, Grantor will give prompt (but in any event within three (3) Business Days) written notice to Beneficiary and Beneficiary may make proof of loss if not made promptly by Grantor. All right, title and interest to such policies shall pass to the Beneficiary at any Trustee's sale hereunder or at any other sale or transfer of the Property to satisfy the Secured Obligations. All such policies shall provide that they may not be cancelled or terminated without the written consent of Beneficiary.

6.      Insurance and Condemnation Proceeds . All awards of damages and all other compensation payable directly or indirectly by reason of a condemnation for public or private use affecting any interest in any of the Property and all proceeds of any insurance policies payable by reason of loss of or damage to any part of the Property shall be paid by the Grantor to the Beneficiary within ninety (90) days of receipt of such award, damages or compensation; provided that the Grantor shall be permitted to reinvest such award, damages or compensation in replacement property or other property that is useful in the business of the Grantor so long as the Grantor has provided an officer’s certificate to the Beneficiary prior to such ninetieth (90 ^th ) day and has actually reinvested such award, damages or compensation within one-hundred eighty (180) days of receipt of such amount. Except as otherwise set forth herein, Beneficiary may apply any such sum to the payment of the Secured Obligations. Any such application of proceeds to the Secured Obligations shall not extend or postpone the due date of installments under the Debenture or change the amount of such installments. Upon the occurrence and during the continuance of a Default or Event of Default, Beneficiary shall be entitled to settle and adjust all claims under insurance policies provided hereunder; and Beneficiary may deduct and retain from the proceeds of any insurance the amount of all

expenses incurred by Beneficiary in connection with any settlement or adjustment. Beneficiary may, in the absolute discretion of Beneficiary, release to Grantor all or any part of the entire amount so collected upon any conditions Beneficiary may choose. Application of all or any portion of said funds, or the release thereof, shall not cure or waive any Default or Event of Default or notice thereof or invalidate any acts done pursuant to such notice.

7.      Liens, Encumbrances and Charges . Other than Permitted Liens (as defined in the Debenture), Grantor shall promptly discharge any lien, claim or encumbrance which has not been approved by Beneficiary in writing. Grantor shall pay at or prior to maturity all obligations secured by or reducible to liens or encumbrances which shall now or hereafter encumber or appear to encumber all or any interest in any of the Property, whether senior or subordinate hereto.

8.      Maintenance and Preservation of the Subject Property . Grantor covenants:

(a)      To operate the Property in a manner consistent with customary practices prevailing in the mining industry, for like mining companies;

(b)      Not to remove or demolish any of the structures on the Property to the extent such removal or demolition could reasonably be expected to result in a Material Adverse Change (as defined in the Debenture) without Beneficiary's prior written consent;

(c)      [Reserved];

(d)      To complete or restore promptly and in good and workmanlike manner any of the structures on the Property, which may be damaged or destroyed or which may be affected by any condemnation or eminent domain proceeding;

(e)      Not to suffer violation of any, and to comply with all, (i) laws, ordinances, regulations and standards; (ii) covenants, conditions, restrictions and equitable servitudes, whether public or private, or every kind and character; and (iii) requirements of insurance companies for insurability, which laws, covenants or requirements affect any of the Property or pertain to acts committed or conditions existing thereon, in each case, to the extent that such violation or failure to comply could reasonably be expected to result in a Material Adverse Change;

(f)      Not to initiate or acquiesce in any change in any zoning or other land use or legal classification which affects any of the Property if such change could reasonably be expected to result in a Material Adverse Change (as defined in the Debenture) without Beneficiary's prior written consent;

(g)      Not to permit the Claims or any part thereof to be transferred, surrendered or lost due to forfeiture and to pay all accounts and assessments, when due, unless otherwise permitted under the Documents;

(h)      Not to commit or permit waste of the Property or to conduct or permit any nuisance thereon or abandon the same;

(i)      To maintain in good standing all mining leases and other agreements related to the Property and promptly perform all material obligations thereunder, except where the failure to do so would not reasonably be expected to result in a Material Adverse Change, provided that nothing in the foregoing shall be deemed to preclude termination of a mining lease upon expiration or termination of its term after completion of mining;

(j)      To do all other acts which from the character or use of the Property may be reasonably necessary to maintain and preserve its value.

9.      Defense and Notice of Losses, Claims and Actions . Grantor shall protect, preserve and defend the Property and title to and right of possession of the Property, the security and priority hereof and the rights and powers of Beneficiary hereunder at Grantor's sole expense against all adverse claims. Grantor shall give Beneficiary prompt (but in any event within three (3) Business Days) notice in writing of the assertion of any claim, of the filing of any action or proceeding, of the occurrence of any damage to any of the Property, of any condemnation offer or action and of any Default or Event of Default.

10.      Inspection . Beneficiary, its agents and employees may enter the Property at any reasonable time upon reasonable notice to Grantor for the purpose of inspecting the Property and ascertaining Grantor's compliance with the terms of this Deed of Trust and each of the other Documents; provided that Beneficiary shall not be required to provide such reasonable notice after the occurrence and during the continuance of a Default or Event of Default.

11.      Compensation; Exculpation; Indemnification .

(a)      Grantor shall pay to Beneficiary reasonable compensation for services rendered by Beneficiary or its agents which relate to this Deed of Trust, including, without limitation, preparation of any statement of any Secured Obligation. Beneficiary shall not directly or indirectly be liable to Grantor or any other person as a consequence of (i) the exercise of the rights, remedies or powers granted to Beneficiary under this Deed of Trust, (ii) the failure or refusal of Beneficiary to perform or discharge any obligation or liability of Grantor under any agreement related to the Property or under this Deed of Trust, or (iii) any loss sustained by Grantor or any third party resulting from Beneficiary's failure to lease the Property after a Default or Event of Default or from any other act or omission of Beneficiary

in managing the Property after a Default or Event of Default unless the loss is caused by the intentional misconduct or gross negligence of Beneficiary.

(b)      Grantor shall indemnify Beneficiary against, and shall hold it harmless from, all losses, damages, liabilities, claims, causes of action, judgments, court costs, attorney's fees and other legal expenses, cost of evidence of title, cost of evidence of value, and other expenses which Beneficiary may suffer or incur, (i) by reason of this Deed of Trust or any of the other Documents, (ii) in performance of any act required or permitted hereunder, under any of the other Documents or by law, (iii) as a result of any failure of Grantor to perform any of Grantor's obligations or (iv) by reason of any alleged obligation or undertaking on Beneficiary's part to perform or discharge any of the representations, warranties, conditions, covenants, or other obligations contained in any other document related to any of the Property.

12.      Estoppel Certificate . Grantor shall, at any time and from time to time upon not less than ten (10) days prior written notice from Beneficiary, execute, acknowledge and deliver to Beneficiary a statement, (i) certifying that this Deed of Trust and the other Secured Obligations are unmodified and in full force and effect, or, if modified, stating the nature thereof and certifying that each Secured Obligation, as so modified, is in full force and effect and the date to which principal, interest and other sums secured hereby have been paid, and (ii) acknowledging that there is no uncured Default or Event of Default under this Deed of Trust or any other Secured Obligation or specifying such Default or Event of Default if any are claimed. Any such certificate may be conclusively relied upon by Beneficiary and any prospective Beneficiary or assignee of any Secured Obligation. Grantor's failure to deliver such certificate within such time shall be conclusive upon Grantor that, (i) the Secured Obligations are in full force and effect, without modification, except as may be represented by Beneficiary, and (ii) there is no uncured Default or Event of Default thereunder.

13.      Further Assurances . Grantor shall promptly make, execute, acknowledge and deliver, in form and substance satisfactory to Beneficiary, all additional instruments, agreements and other documents, and Grantor shall do all other acts, as may at any time hereafter be requested by Beneficiary to effectuate and carry out the purposes of this Deed of Trust and each of the Secured Obligations.

14.      Expenses and Fees . All reasonable expenses, costs and other liabilities, including attorney's fees, which Beneficiary or Trustee may incur, (i) in enforcing, defending, construing or administering this Deed of Trust (or its priority) or any of the other Documents, or (ii) in the exercise by Beneficiary of any rights or remedies granted by this Deed of Trust or any of the other Documents, shall be paid by Grantor upon demand by Beneficiary, together with interest thereon, from the date of expenditure until payment in full, at the rate(s) provided for under the Debenture, and until payment in full, such obligations shall be secured hereby with the same priority as Grantor's other obligations hereunder.

15.      Beneficiary's Powers . Beneficiary may commence, appear in, defend or prosecute any assigned claim or action; and Beneficiary may adjust, compromise, settle and collect all claims and awards assigned to Beneficiary, but shall not be responsible for any failure to collect any claim or award regardless of the cause of the failure. Without affecting the liability of any other person liable for the payment of any obligation herein mentioned, and without affecting the lien or charge of this Deed of Trust upon any portion of the Property not then or theretofore released as security for the full amount of the Secured Obligations, at any time during the continuance of an Event of Default, Beneficiary may, from time to time and without notice, (i) release any person so liable, (ii) extend the maturity or alter any of the terms of any such obligation, (iii) grant other indulgences, (iv) release or reconvey, or cause to be released or conveyed, at any time and at Beneficiary's option, any parcel, portion or all of the Property, (v) take or release any other or additional security for any Secured Obligation or (vi) compromise or make other arrangements with debtors in relation thereto.

16.      Trustee's Powers . Without liability therefor and without notice, upon written request of Beneficiary and without affecting the effect of this Deed of Trust upon the remainder of the Property, Trustee may, (i) upon the occurrence and during the continuance of an Event of Default, reconvey any part of the Property, (ii) at any time and from time to time, consent in writing to the making of any map or plat thereof, (iii) upon the occurrence and during the continuance of an Event of Default, join in granting any easement thereon, or (iv) at any time and from time to time, join in any extension agreement or any agreement subordinating the lien or charge hereof.

17.      Security Agreement; Fixture Filing .

(a)      Grantor hereby grants, assigns and transfers to Beneficiary a security interest in and to the Personal Property; and this Deed of Trust shall constitute a security agreement pursuant to the Nevada Uniform Commercial Code (NRS Chapter 104) with respect to Personal Property located in Nevada (the Nevada Uniform Commercial Code is referred to as the “UCC”). For purposes of treating this Deed of Trust as a security agreement, Grantor shall be deemed to be the “Debtor” and Beneficiary the “Secured Party”.

(b)      Grantor maintains a place of business in the State of Nevada in Storey County; and Grantor will promptly (but in any event within three (3) Business Days) notify Beneficiary in writing of any change in its place of business.

(c)      At the request of Beneficiary, Grantor shall join Beneficiary in executing one or more financing statements and continuations and amendments thereof pursuant to the UCC in form satisfactory to Beneficiary; and Grantor will pay the cost of filing the same in all public offices wherever filing is deemed by Beneficiary in its sole discretion to be necessary or desirable. In the event Grantor fails to execute such documents, Grantor hereby authorizes Beneficiary to file such financing statements, and continuations

and amendments thereto, and irrevocably constitutes and appoints Beneficiary, or any officer of Beneficiary, as its true and lawful attorney-in-fact to execute the same on behalf of Grantor.

(d)      In addition to Beneficiary's rights under the UCC, Beneficiary may, but shall not be obligated to, at any time without notice and at the expense of Grantor, (i) give notice to any person of Beneficiary's rights hereunder and enforce such rights; (ii) insure, protect, defend and preserve the Personal Property and any rights or interest of Beneficiary therein and (iii) inspect the Personal Property upon reasonable notice. In addition, during the continuance of a Default or Event of Default, Beneficiary may, but shall not be obligated to, at any time without notice and at the expense of Grantor endorse, collect and receive any right to payment of money owing to Grantor under or from the Personal Property. Beneficiary shall have no duty or obligation to make or give any presentments, demand for performance, notices of nonperformance, notices of protest or notices of dishonor in connection with any of the Personal Property.

(e)      Upon the occurrence and during the continuance of a Default or Event of Default, Beneficiary shall have with respect to the Personal Property, in addition to all of its rights and remedies as stated in this Deed of Trust, all rights and remedies of a secured party under the UCC as well as all other rights and remedies available at law or in equity.

(f)      PARTS OF THE PERSONAL PROPERTY ARE, OR ARE TO BECOME, FIXTURES ON THE PROPERTY.

(g)      Beneficiary has no responsibility for, and does not assume any of, Grantor's obligations or duties under any agreement or obligation which is part of the Personal Property or any obligation relating to the acquisition, preparation, custody, use, enforcement or operation of any of the Property.

(h)      Grantor and Beneficiary agree that the filing of a financing statement in the records normally having to do with personal property shall never be construed as in any way derogating from or impairing this Deed of Trust and the intention that everything used in connection with the production of income from the Property or adapted for use therein or which is described or reflected in this Deed of Trust is, and at all times and for all purposes and in all proceedings both legal or equitable shall be regarded as, part of the real estate subject to the lien hereof, irrespective of whether (i) any such item is physically attached to improvements located on such real property or (ii) any such item is referred to or reflected in any financing statement so filed at any time. Similarly, the mention in any such financing statement of (A) the Property or (B) any award in eminent domain proceedings for taking or for loss of value or for any cause of action or proceeds thereof in connection with any damage or injury to the Property or any part thereof shall never be construed as in any way altering any of the rights of Beneficiary as determined by this instrument or impugning the priority of Beneficiary's lien granted hereby or by any other recorded document, but such mention in such financing statement is declared to be for the protection of Beneficiary in the event any

court shall at any time hold with respect to matters (A) and (B) above that notice of Beneficiary's priority of interest, to be effective against a particular class of persons, including, without limitation, the Federal government and any subdivision or entity of the Federal government, must be filed in the personal property records or other commercial code records.

(i)      Grantor shall not permit any of the Personal Property to be removed from the Improvements without the prior written consent of Beneficiary unless (i) (A) the replacements for such items of Personal Property are of equivalent value and quality and (B) Grantor has good and clear title to such replacements free and clear of any and all liens, encumbrances, security interests, ownership interests, claims of title (contingent or otherwise) or charges of any kind or the rights of any such conditional sellers, vendors or any other third parties have been expressly subordinated, at no cost to Beneficiary, to the lien and security interest granted hereby in a manner satisfactory to Beneficiary or (ii) such removal is expressly permitted by the terms of the Debenture.

(j)      Grantor hereby acknowledges that the sale of the Collateral by Trustee after the occurrence and during the continuance of an Event of Default of Grantor pursuant to the provisions of this Agreement and Chapter 107 of the Nevada Revised Statutes (as the same may be amended from time to time) or pursuant to a court order rendered in a judicial foreclosure proceeding, shall be deemed to constitute a “commercially reasonable” sale within the meaning of Article 9 of Chapter 104 of the Nevada Revised Statutes, as to the Personal Property Collateral.

Notwithstanding any provision to the contrary set forth herein, during the continuance of an Event of Default, Beneficiary may, at its sole discretion, (i) choose such other means for the sale of the Personal Property Collateral, or a portion or portions thereof, which Beneficiary deems to be reasonable, so long as such sale complies with the provisions of Article 9 of Chapter 104 of the Nevada Revised Statutes. In such event Beneficiary shall, in its sole discretion, determine which of the Collateral is personal property and therefore subject to the provisions of such Article 9 and (ii) exercise any and all rights with respect to the Collateral pursuant to the Security Agreement (as defined in the Debenture)

18.      Default and Event of Default . As used herein, the term “Default” and the term “Event of Default” shall have the meanings ascribed to those respective terms in the Debenture.

19.      Remedies . Unless otherwise prohibited by law, upon the occurrence and during the continuance of an Event of Default, Beneficiary may at any time, at its option and in its sole discretion, exercise all remedies provided for under the Documents.

Beneficiary may also do any or all of the following, although it shall have no obligation to do any of the following:

(a)      Either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court and without regard to the adequacy of Beneficiary's security, enter upon and take possession of the Property, or any part thereof, and do any acts which Beneficiary deems necessary or desirable to preserve the value, marketability or rentability of the Property, or to increase the income therefrom or to protect the security hereof and, with or without taking possession of any of the Property, sue for or otherwise collect all rents and profits, including those past due and unpaid, and apply the same, less costs and expenses, upon the Secured Obligations, all in such order as Beneficiary may determine. The collection of rents and profits in an amount less than the Secured Obligations due and payable under the Debenture and the application thereof shall not cure or waive any Default or Event of Default or notice thereof or invalidate any act done in response thereto or pursuant to such notice. If Beneficiary elects to seek the appointment of a receiver for the Property, or any portion thereof, Grantor hereby expressly consents to the appointment of such receiver without regard to the adequacy of Beneficiary's security and authorizes the appointment of Beneficiary as such receiver. Beneficiary or the receiver shall be entitled to receive a reasonable fee for so managing the Property, which fees shall be secured hereby with the same priority as the other Secured Obligations.

(b)      Bring an action in any court of competent jurisdiction to foreclose this instrument or to enforce any of the covenants thereof in accordance with this Deed of Trust and the Documents.

(c)      Without notice to or demand upon Grantor, make such payments and do such acts as Beneficiary may deem necessary to protect its security interest in the Property, including, without limitation, paying, purchasing, contesting or compromising any encumbrance, charge or lien which is prior or superior to the security interest granted hereunder, and in exercising any such powers or authority, to pay all expenses incurred in connection therewith, which sums shall be secured hereby with the same priority as the other Secured Obligations.

(d)      Exercise any or all of the remedies available to a secured party under the UCC, including, but not limited to:

(i)      either personally or by means of a court appointed receiver, take possession of all or any of the Personal Property and exclude therefrom Grantor and all others claiming under Grantor and thereafter hold, store, use, operate, manage, maintain and control, make repairs, replacements, alterations, additions and improvements to and exercise all rights and powers of Grantor in respect to the Personal Property; and in the event Beneficiary demands or attempts to take possession of the Personal Property in the exercise of any of its rights hereunder, Grantor promises and agrees promptly to turn over and deliver complete possession thereof to Beneficiary;

(ii)      without notice to or demand upon Grantor, make such payments and do such acts as Beneficiary may deem necessary to protect its security interest in the Personal Property, including, without limitation, paying, purchasing, contesting or compromising any encumbrance, charge or lien which is prior or superior to the security interest granted hereunder, and in exercising any such powers or authority, to pay all expenses incurred in connection therewith, which sums shall be secured hereby with the same priority as the other Secured Obligations;

(iii)      require Grantor to assemble the Personal Property or any portion thereof at a place designated by Beneficiary and promptly to deliver such Personal Property to Beneficiary or an agent or representative designated by it. Beneficiary, its agent and representatives, shall have the right to enter upon any or all of the Grantor's premises and property to exercise the Beneficiary's rights hereunder; and

(iv)      sell, lease or otherwise dispose of the Personal Property at public sale, with or without having the Personal Property at the place of sale, and upon such terms and in such manner as Beneficiary may determine; and Beneficiary may be a Beneficiary at any such sale. Beneficiary shall not be deemed to have accepted any property other than cash in satisfaction of any Secured Obligation unless Beneficiary shall make an express written election of said remedy under NRS 104.9505 or other applicable law.

(e)      Elect to sell by power of sale the Property which is Land, Claims and Improvements or which Beneficiary has elected under the UCC to treat as Land, Claims and Improvements and, upon such election, such notice of default and election to sell shall be given as may then be required by law. Thereafter, upon the expiration of such time and the giving of such notice of sale as may then be required by law, at the time and place specified in the notice of sale, Trustee shall sell such Property, or any portion thereof specified by Beneficiary, at public auction to the highest bidder for cash in lawful money of the United States. Trustee may, and upon request of Beneficiary shall, from time to time, postpone the sale by public announcement thereof at the time and place noticed therefor. If the Property consists of several lots, parcels or interests, Beneficiary may designate the order in which the same shall be offered for sale or sold. Should Beneficiary desire that more than one such sale or other disposition be conducted, Beneficiary may, at its option, cause the same to be conducted simultaneously, or successively on the same day, or at such different days or times and in such order as Beneficiary may deem to be in its best interest. Any person, including Grantor, Trustee or Beneficiary, may purchase at the sale. Upon any sale, Trustee shall execute and deliver to the Beneficiary a deed or deeds conveying the Property so sold, but without any covenants or warranty whatsoever, express or implied, whereupon such Beneficiary shall be let into immediate possession.

(f)      Exercise each of its other rights and remedies under this Deed of Trust and each of the other Documents.

(g)      Except as otherwise required by law, apply the proceeds of any foreclosure or disposition hereunder to payment of the following: (i) the expense of such foreclosure or disposition, (ii) the cost of any search or other evidence of title procured in connection therewith and revenue stamps on any deed of conveyance, (iii) all sums expended under the terms hereof, not then repaid, with accrued interest in the amount provided herein, (iv) all other sums secured hereby, and (v) the remainder, if any, to the person or persons legally entitled thereto.

(h)      Upon any sale or sale made under or by virtue of this section, whether made under the power of sale or by virtue of judicial proceedings or of a judgment or decree of foreclosure and sale, or by private sale, Beneficiary may bid for and acquire the Property or any part thereof. In lieu of paying cash for the Property, Beneficiary may make settlement for the purchase price by crediting the Secured Obligations, or any portion thereof, against the sales price of the Property so sold (“Credit Bid”). Beneficiary shall have the right to Credit Bid regardless of whether the sale occurs by exercise of the power of sale, court order, bankruptcy plan, sale pursuant to 11 U.S.C. § 363 or other authority or process.

20.      Incorporation of Statutory Covenants . To the extent not inconsistent herewith, the provisions of Nevada Revised Statutes (“NRS”) 107.030 (1), (2) (in amounts as provided for in the Debenture), (3), (4) (with interest at the Default Interest Rate provided for in the Debenture), (5), (6), (7) (reasonable), (8) and (9) are included herein by reference and made part of this Security Instrument.

21.      Releases, Extensions, Modifications and Additional Security . Without notice to or the consent, approval or agreement of Grantor, any subsequent owner of any part of the Property, any maker, surety, guarantor, or endorser of this Deed of Trust or any Secured Obligation, or any holder of a lien or other claim on all or any part of the Property, whether senior or subordinate hereto, Beneficiary may, from time to time, do one or more of the following: release any person's liability for the payment of any Secured Obligation, take any action or make any agreement extending the maturity or otherwise altering the terms of any Secured Obligation, or accept additional security or release all or any portion of the Property and other security for any Secured Obligation. No such release of liability, taking of additional security, release of security, change in terms or conditions of any Secured Obligation, or other action shall release or reduce the personal liability of Grantor (if any), Beneficiary of all or any part of the Property, or makers, sureties, guarantors or endorsers of the Deed of Trust or any Secured Obligation, under any covenant of this Deed of Trust or any Secured Obligation, under any covenant of this Deed of Trust or any Secured Obligation, or release or impair the priority of the lien of this Deed of Trust upon any of the Property.

22.      No Waiver . Any failure by Beneficiary to insist upon the strict performance by Grantor of any of the terms and provisions of any of the Documents shall not be deemed to be a waiver of any of the terms and provisions of any of the Documents; and Beneficiary,

notwithstanding any such failure, shall have the right thereafter to insist upon the strict performance by Grantor of any and all of the terms and provisions of each of the Documents. The acceptance by Beneficiary of any sum after any Default or Event of Default shall not constitute a waiver of the right to require prompt performance of all of the covenants and conditions contained in any of the Documents. The acceptance by Beneficiary of any sum less than the sum then due shall be deemed an acceptance on account only and shall not constitute a waiver of the obligation of Grantor to pay the entire sum then due. Grantor's failure to pay said entire sum due shall be and continue to be an Event of Default notwithstanding such acceptance of such lesser amount on account and Beneficiary shall be entitled to exercise all rights conferred upon it following a Default or Event of Default notwithstanding such acceptance.

23.      Stamps . If at any time the United States of America, any state thereof or any governmental subdivision of such state, or any other foreign jurisdiction shall require revenue stamps to be affixed to the Debenture or any of the other Documents, or the payment of any other tax paid on or in connection therewith, Grantor shall pay the same with any interest or penalties imposed in connection therewith if Grantor is permitted by law to pay such amount and, if not so permitted, then the Secured Obligations shall immediately be due and payable.

24.      Cumulative . The rights of Beneficiary arising under this Deed of Trust and the other Documents shall be separate, distinct and cumulative, and none of them shall be in exclusion of the others; provided, that all rights provided for hereunder shall be subject to the Documents and to the extent any conflict exists between this Deed of Trust and the Debenture the terms of the Debenture shall control. No act of Beneficiary shall be construed as an election to proceed under any one provision to the exclusion of any other provision, notwithstanding anything herein or otherwise to the contrary.

25.      Statement of Condition . Beneficiary shall furnish any statement required by law regarding the obligations secured hereby or regarding the amounts held in any trust or reserve fund hereunder.

26.      Reconveyance . Upon written request of Grantor, and confirmed in writing by Beneficiary, stating that all sums secured hereby have been paid, and upon surrender of this Deed of Trust to Trustee for cancellation, and upon payment of its fees, Trustee shall reconvey, without warranty, the Property then held hereunder. The recitals in any such reconveyance of any matters or facts shall be conclusive proof of the truth thereof. The grantee in such reconveyance may be described as “the person or persons legally entitled thereto” unless otherwise indicated by Grantor in its request. Such request and reconveyance shall operate as a re-assignment of the rents, issues and profits herein assigned to Beneficiary.

27.      Substitution . Beneficiary may elect to appoint a substitute Trustee hereunder in any manner now or hereafter provided by law or, in lieu thereof, Beneficiary may from time to time, by an instrument in writing, substitute a successor or successors to any Trustee

named herein or acting hereunder, which instrument, executed and acknowledged by Beneficiary and recorded in the office of the recorder of the county or counties in which the Land and Improvements are situated, shall be conclusive proof of proper substitution of such successor Trustee, who shall thereupon and without conveyance from the predecessor Trustee, succeed to all its title, estate, rights, powers and duties.

28.      Law . Grantor acknowledges and agrees that the enforcement of this Deed of Trust including provisions with respect to the creation of any monetary obligations and the rights accruing and compensation payable to Beneficiary in connection herewith, shall be governed by and construed in accordance with the laws of the State of Nevada, notwithstanding provisions contained within the other Documents pursuant to which the law of some other jurisdiction may be selected to govern the parties rights thereunder.

29.      Severable . If any provision of this Deed of Trust or its application to any person or circumstance is held invalid, the other provisions hereof or the application of the provision to other persons or circumstances shall not be affected.

30.      Successors and Assigns . Each of the covenants and obligations of Grantor set forth in this Deed of Trust and each of the other Documents shall run with the land and shall bind Grantor, the heirs, personal representatives, successors and assigns of Grantor and all subsequent encumbrancers and tenants of the Property and shall inure to the benefit of Beneficiary and its respective successors and assigns.

31.      Captions . The captions or headings at the beginning of each section hereof are for the convenience of reference and are not a part of this Deed of Trust.

32.      Notice . Except as otherwise provided by law, any notice, request, demand, consent, approval or other communication (“Notice”) provided or permitted under this Deed of Trust, or any other instrument contemplated hereby, shall be in writing, signed by the party giving such Notice, and shall be given by personal delivery to the other party or by United States certified or registered mail, postage prepaid, return receipt requested, addressed to the party for whom it is intended at its address as set forth below. Unless otherwise specified, Notice shall be deemed given when received, but if delivery is not accepted, on the earlier of the date delivery is refused or the third day after same is deposited in any official United States Postal Depository. Any of Grantor, Beneficiary or Trustee, from time to time, by Notice to the others given as above set forth, may change its address for purposes of receipt of any such communication.

TO BENEFICIARY:

GF Comstock 2 LP

140 East 45 ^th Street, Suite 17C

New York, NY 10017

Attn: Mr. Daniel Freuman

And

c/o Rew Goodenow

Parsons Behle & Latimer

50 W. Liberty Street, Suite 750

Reno, NV 89501

TO GRANTOR:

[Comstock Mining Inc.] [Comstock Mining LLC] [Comstock Industrial LLC] [Comstock Real Estate Inc.]

P.O. Box 1118

Virginia City, NV 89440

Attn: Corrado DeGasperis

TO TRUSTEE:

First Centennial Title Company

1450 Ridgeview Drive, Suite 100

Reno, NV 89519

Attn: MaryAnn Infantino, Commercial Escrow Officer

33.      No Third Party Beneficiaries . This Deed of Trust is made and entered into for the sole protection and benefit of Trustee, Beneficiary and Grantor, and no other person or entity shall be a direct or indirect beneficiary of, or shall have any direct or indirect cause of action or claim in connection with this Deed of Trust or any of the other Documents.

34.      No Offset . Under no circumstances shall Grantor fail or delay to perform (or resist the enforcement of) any of its obligations in connection with any of the Documents because of any alleged offsetting claim or cause of action against Beneficiary (or any indebtedness or obligation of Beneficiary) which has not been confirmed in a final judgment of a court of competent jurisdiction (sustained on appeal, if any) against Beneficiary, and Grantor hereby waives any such rights of setoff (or offset) which it might otherwise have with respect to any such claims or causes of action against Beneficiary (or any such obligations or indebtedness of Beneficiary), unless and until such right of setoff is confirmed and liquidated

by such final judgment. To the extent permitted by applicable law, Grantor further waives any right that it might otherwise have to require a marshaling of any security of Beneficiary or to direct the order in which Beneficiary pursues its rights or remedies with respect to any of its security.

35.      Amendments . This Deed of Trust contains (or incorporates) the entire agreement of Grantor and Beneficiary with respect to the matters discussed herein, and this Deed of Trust may only be modified or amended by a written instrument executed by Grantor and Beneficiary.

36.      Survival of Warranties . All representations, warranties, covenants and agreements of Grantor hereunder shall survive the delivery of this Deed of Trust and shall continue in full force and effect until the full and final payment and performance of all of the Secured Obligations.

37.      Time . Time is of the essence of each provision of this Deed of Trust.

38.      Continuation of Payments . Notwithstanding any taking by eminent domain or other governmental action causing injury to, or decrease in value of, the Property and creating a right to compensation therefor, Grantor shall continue to make the payments required under the Documents. If, prior to the receipt by Beneficiary of such award or compensation, the Property shall have been sold in any action or proceeding to foreclose this Deed of Trust, Beneficiary shall have the right to receive said award or compensation to the extent of any deficiency found to be due upon such sale, with interest thereon, whether or not a deficiency judgment on this Deed of Trust shall have been sought or recovered, together with reasonable counsel fees and the costs, disbursements, and all other expenses incurred by Beneficiary in connection with the collection of such award or compensation.

39.      Sale or Encumbrance . The sale or transfer, or the further encumbrance of all or any part of the Real Property, or any interest in the Real Property shall be governed by the terms of the Documents. To the extent any sale or transfer, or further encumbrance, occurs in violation of the terms and conditions of the Documents such sale, transfer or encumbrance shall give rise to all of the rights and remedies afforded to the Beneficiary hereunder.

40.      Compliance with Environmental Laws and Agreements .

(a)      Except for Environmental Liability, as defined herein, or claims that do not and would not reasonably be expected to result in a Material Adverse Change, neither the Grantor nor the Beneficiary; (i) will fail to comply in all material respects with any Environmental Law or to obtain, maintain or comply with any Environmental Permit, or defined herein, (ii) be subject to any Environmental Liability (other than Environmental Liabilities for reclamation obligations for which adequate reserves have been made on the financial statements of the Grantor in accordance with GAAP or for which no reserves are so

required), or (iii) has received written notice of any claim with respect to any Environmental Liability.

(b)      The Grantor shall comply in all material respects with all applicable laws, regulations and orders (including any zoning, ordinances, code or approval, mining law, or mining permit), excluding any Environmental Law, of any Governmental Authority, in each case applicable to it or its property, and all indentures, agreements and other instruments binding on it or its property, except where failures to do so, in the aggregate, do not and would not reasonably be expected to result in a Material Adverse Change.

(c)      In addition to any other rights hereunder, during the continuance of any Default or Event of Default, at the reasonable request of the Beneficiary, the Grantor will provide to the Beneficiary within ninety (90) days after such request, at the expense of the Grantor, an environmental or mining site assessment or audit report summarizing any material Environmental Liabilities for the Property described in such request, prepared by an environmental or mining consulting firm reasonably acceptable to the Beneficiary, in each case showing compliance with the plan to achieve compliance with Environmental Laws subject to ordinary course normal practices and procedures of the mining industry with respect to such Environmental Liabilities or matters.

(d)      Notwithstanding any Default or Event of Default, Grantor will operate the Property in all material respects in accordance with sound mining practices and applicable mining laws and mining permits, except where the failure to do so would not reasonably be expected to result in a Material Adverse Change.

(e)      In accordance with NRS 40.512, Beneficiary may waive its lien against the Property constituting real property collateral, to the extent such property is found to be “environmentally impaired” (as defined in NRS 40.503), and may exercise any and all rights and remedies permitted by law of an unsecured creditor against Grantor. No such waiver shall be final or binding on Beneficiary unless and until a final money judgment is obtained against Grantor. As between Beneficiary and Grantor, Grantor shall have the burden of proving that Beneficiary obtained actual knowledge of the environmental impairment at the time the lien was created.

(f)      “Environment” means soil, land surface or subsurface strata, water, surface waters (including navigable waters, ocean waters within applicable territorial limits, streams, ponds, drainage basins, and wetlands), ground waters, drinking water supply, water related sediments, air, plant and animal life, and any other environmental medium.

(g)      “Environmental Laws” means all laws (including common law), rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the Environment, the preservation, restoration or reclamation of natural resources, or the

presence, use, storage, discharge, management, release or threatened release of any pollutants, contaminants or hazardous or toxic substances, wastes or material or the effect of the environment on human health and safety.

(h)      “Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of remediation, fines, penalties or indemnities), directly or indirectly resulting from or based on (i) violation of any Environmental Law or Environmental Permit, (ii) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Material, (iii) exposure to any Hazardous Material, (iv) the release or threatened release of any Hazardous Material into the Environment, (v) the preservation, restoration or reclamation of natural resources or (vi) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

(i)      “Environmental Permits” means any and all permits, licenses, registrations, certifications, exemptions and any other authorization required under any applicable Environmental Law.

(j)      “Hazardous Material” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes, and all other substances or wastes of any nature, in each case subject to regulation under or which could give rise to liability under any Environmental Law, including, without limitation, coal ash, coal combustion by-products or waste, boiler slag, scrubber residue or flue desulphurization residue.

41.      Beneficiary in Privity with Trustor . The Grantor agrees that Beneficiary is not acquiring and has not acquired the interest secured hereby from a person who previously held such right, pursuant to NRS 40.459(c) and is, therefore, not subject to the limitations imposed by it.

42.      Specific Performance . At any time, Beneficiary may commence and maintain an action in any court of competent jurisdiction for specific performance of any of the covenants and agreements contained herein, and may obtain the aid and direction of the court in the performance of any of the covenants and agreements contained herein, and may obtain orders or decrees directing the execution of the same and, in case of any sale hereunder, directing, confirming or approving its or Trustee's acts and granting it such relief as may be warranted in the circumstances.

43.      Books and Records . Grantor will keep proper records and books of account with respect to the Property and the operation thereof in accordance with sound accounting principles and will permit Beneficiary or any person duly authorized by it, to conduct an

independent audit of the operation of the Property and to have access to examine the books and records pertaining to the operation of the Property at all reasonable business hours.

[Signature page follows]

IN WITNESS WHEREOF, this Deed of Trust has been duly executed and acknowledged by Grantor as of the day and year first above written.

On the _____ day of January in the year 2017, before me, the undersigned, personally appeared ____________, as ____________ of ____________, a Nevada ____________, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity and that of the above-referenced corporation, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument.

_______________________________________

NOTARY PUBLIC

EXHIBIT A

to

Deed of Trust regarding Real Property located

In [Storey] [Lyon] County, Nevada

---

[EXHIBIT B

to

Deed of Trust regarding Real Property located

In [Storey] [Lyon] County, Nevada

LIST OF CLAIMS

[______________]

SUBJECT to all patents, easements, rights-of-way, reservations, zoning restrictions, covenants and any other matter of public record or otherwise established; all assessments and subsequently assessed taxes.]

[ EXHIBIT C

to

Deed of Trust regarding Real Property located

In [Storey] [Lyon] County, Nevada

The following water rights, which are located in [Storey] [Lyon] County, Nevada and issued by the Nevada State Engineer:

Permit [ ] (Certificate [ ]) and Permit [ ].]