AMENDMENT AND WAIVER TO THE INVESTMENT AGREEMENT
AMENDMENT
AND WAIVER TO THE INVESTMENT AGREEMENT
THIS
AMENDMENT AND WAIVER, dated as of November 8, 2010 (this “Amendment”)
to the Investment Agreement referred to below is entered into by and between
Desert Hawk Gold Corp., a Nevada corporation (the “Company”),
and DMRJ Group I, LLC, a Delaware limited liability company (the “Investor”).
RECITALS:
WHEREAS,
the parties have entered into that certain Investment Agreement dated as of July
14, 2010 (the “Investment
Agreement”) between the Company and the Investor, pursuant to which the
Investor has made available to the Company a senior secured term loan credit
facility of up to $6,500,000 to pay transaction fees and expenses in connection
therewith and to provide capital to the Company for the conduct of the Mining
Activities at the Cactus Mill and on the Yellowhammer Properties and the Kiewit
Properties;
WHEREAS, the Company prepared the
Yellowhammer Pro Forma Statement based on the assumption that the Company would
receive its amendment to the existing Cactus Mill Large Mining Operations Permit
to allow construction and operation of the heap xxxxx facility (the “Permit
Amendment”);
WHEREAS, the Company has made good
faith efforts to obtain the Permit Amendment and has informed the Investor of
the status of the Permit Amendment process on a continuous basis, but the
Company has been unsuccessful in finalizing the regulatory process for issuance
of the Permit Amendment;
WHEREAS, since the Company is not able
to process the tailings from the Cactus Mill pilot plant in the proposed heap
xxxxx facility, it will be unable to meet its obligations to produce at least
400,000 pounds of copper concentrate from the Yellowhammer Properties on or
prior to the date that is 150 days following the date of the Initial Borrowing
under the Investment Agreement or prior to the need for the final two
Yellowhammer Advances;
WHEREAS,
the parties now wish to amend the Investment Agreement and the Investor is
willing to grant a limited waiver of the Company’s compliance with certain terms
of the Investment Agreement and to permit the Company to receive continued Term
Loan Advances for the Yellow Hammer Mining Activities pending receipt
of the Permit Amendment;
NOW
THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt of which is hereby acknowledged, and pursuant to the
provisions of Section 9.01 of the Investment Agreement, the parties hereby agree
as follows:
SECTION
1. Definitions. Reference
is hereby made to the Investment Agreement for a statement of the terms
thereof. All terms used in this Amendment which are used but not
otherwise defined herein shall have the same meanings herein as set forth in the
Investment Agreement.
SECTION
2. Amendments. The
parties hereto hereby consent to and approve the following
amendments:
(a) Amendment to Section 3.02(c)
(Conditions Precedent to Each Borrowing). Section 3.02(c) of
the Investment Agreement is amended to read as follows:
(c) if
a Term Loan Advance requested pursuant to such Borrowing, as specified in the
applicable Borrowing Notice, shall be a Yellowhammer Advance, then, with respect
to the last two Yellowhammer Advances of $500,000 each (on a net advance basis,
as listed on the Yellowhammer Pro Forma Statement), the Company shall have
commenced the mining of copper from the Yellowhammer Properties and shall have produced
at least 400,000 pounds of copper concentrate from its ore processing operations
at the Cactus Properties (and the conditions described in this clause (c)
are referred to herein as, collectively, the “Yellowhammer
Milestones”); and
(b) Amendment to Section 7.01(m) (Events
of Default). Section 7.01(m) of the Investment Agreement is
removed and stricken from the Investment Agreement in its entirety and shall no
longer constitute an Event of Default.
(c) Amendment to Schedule 4.01(i)(A)
(Yellowhammer Pro Forma Statement). Schedule 4.01(i)(A) of the
Investment Agreement is amended and replaced in its entirety by the Revised
Yellowhammer Pro Forma Statement attached hereto and incorporated
herein.
SECTION
3. Limited
Waiver. The Investor hereby grants a limited waiver of the
forecasted mineral production levels, cash flows, and operating expenses as set
forth in Section 4.01(i) of the Investment Agreement pertaining to the previous
Yellowhammer Pro Forma Statement attached thereto as Schedule 4.01(i)(A) from
the period of the Effective Date until the date hereof and grants a limited
waiver of the requirements of Section 3.02(c) of the Investment Agreement for
the Proposed Borrowing dated October 26, 2010 by the Company.
SECTION
4. Effectiveness. This
Amendment shall become effective upon the receipt by the parties of duly
executed counterparts to this Amendment.
SECTION
5. General
Provisions.
(a) The
Company hereby confirms that each representation and warranty made by it under
the Investment Agreement was true and correct when made as of the Effective
Date, except to the extent that any such representation or warranty expressly
related solely to an earlier date (in which case such representation or warranty
was true and correct on and as of such earlier date), and that no Event of
Default, and no event that with the passage of time or giving of notice would
constitute an Event of Default, has occurred or is continuing under the
Investment Agreement.
2
(b) Except
as supplemented or amended hereby, the Investment Agreement and the other
Transaction Documents shall continue to be, and shall remain, in full force and
effect. This Amendment shall not be deemed (i) to be a waiver of, or
consent to, or a modification or amendment of, any other term or condition of
the Investment Agreement or (ii) to prejudice any right or rights which the
Investor may now have or may have in the future under or in connection with the
Investment Agreement or the other Transaction Documents or any of the
instruments or agreements referred to therein, as the same may be amended,
restated, supplemented or otherwise modified from time to time.
(c) The
terms of the Investment Agreement are incorporated herein by reference and shall
form a part of this Amendment as if set forth herein in their
entirety.
[Signature
page follows]
3
IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by
their respective officers thereunto duly authorized, as of the date first above
written.
|
By:
|
/s/ Xxxxxx X. Xxxxxxxxx
|
|
Name:
Xxxxxx X. Xxxxxxxxx
|
|
|
Title:
Chief Executive Officer
|
|
|
DMRJ
GROUP I, LLC
|
|
|
By:
|
/s/ Xxxxxx X. Small
|
|
Name:
Xxxxxx I Small
|
|
|
Title:Managing
Director
|
|
4
