AMENDMENT NO. 1 TO THE LOAN AGREEMENT
AMENDMENT
NO. 1 TO THE LOAN AGREEMENT
THIS AMENDMENT NO. 1 TO THE LOAN
AGREEMENT (the “Amendment”), entered into
effective this 14th day of
July 2010, is by, between, and among Desert Hawk Gold Corp. (the “Company”) and West C Street,
LLC and Ibearhouse, LLC (the “Lenders”).
RECITALS:
WHEREAS, on or about November 30, 2009,
the Company entered into a Loan Agreement dated November 18, 2009, with the
Lenders (the “Original Loan
Agreement”) and issued promissory notes to each of the Lenders in the
principal amount of $300,000 each (the “Notes”);
WHEREAS, the Company has negotiated an
investment agreement (the “Investment Agreement”) with a
third-party investor (the “Investor”), a copy of which
has been furnished to the Lenders, pursuant to which the Investor will make
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 with the
Investment Agreement and to provide capital to the Company for the conduct of
mining activities by the Company at the Cactus Mill and on the Yellowhammer
Properties and the Kiewit Properties;
WHEREAS,
the Investor has indicated its willingness to make the credit facility available
to the Company upon and subject to the terms and conditions set forth herein
provided, in part, that the Lenders are willing to subordinate their Notes as
provided in the Subordination Agreement (as defined below);
WHEREAS, in partial consideration of
the willingness of the Lenders to subordinate the Notes to the rights of the
Investor, the Company is willing to reduce the conversion rate as provided in
the Notes;
NOW, THEREFORE, in consideration of the
mutual terms and conditions set forth in this Amendment, and in accordance with
Section 6(e) of the Original Loan Agreement, the parties hereto agree as
follows:
1. Amended
Conversion Price. The conversion rate of each of the Notes
shall be reduced from $1.50 per share to $0.70 per share as of the Closing of
the Investment Agreement (as defined therein).
2. Subordination. The
Lenders shall execute and deliver to the Company for Closing of the Investment
Agreement (as defined therein), the Subordination Agreement, a copy of which is
attached hereto as Exhibit A and incorporated herein (the “Subordination
Agreement”). Pursuant to the terms of the Subordination
Agreement, the indebtedness evidenced by the Notes shall be subordinate in right
or payment, priority and exercise of remedies to the indebtedness created under
the Investment Agreement.
3. Amended and
Restated
Notes. At the Closing of the Investment Agreement (as defined
therein), the Lenders shall deliver the original Notes for cancellation and the
Company shall deliver to the Lenders amended and restated promissory notes in
the forms attached hereto in Exhibits B-1 and B-2 and incorporated
herein.
4. Representations
and Warranties. Each of the parties hereto, severally and not
jointly, hereby confirms that each representation and warranty made by it in the
Original Loan Agreement remains true and correct as of the effective date of
this Amendment, except to the extent that any such representation or warranty
expressly related solely to an earlier date, and that no Event of Default (as
defined in the Notes) and no default or any event that with the passage of time
or giving of notice would constitute a default, has occurred or is continuing
under the Original Loan Agreement or the Notes.
5. Validation of
Original Loan Agreement. Except as supplemented or amended
hereby, each of the Original Loan Agreement and the Notes 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 Original Loan Agreement or the Notes or
(ii) to prejudice any right or rights which any of the parties thereto may now
have or may have in the future under or in connection with the Original Loan
Agreement or the Notes 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.
Signature
Page Follows
2
Signature
Page
IN
WITNESS WHEREOF, each of the parties hereto has caused this Amendment No. 1 to
the Loan Agreement to be duly executed by their respective authorized
signatories, duly authorized, as of the day and year set forth
below.
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COMPANY:
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Date: July
14, 2010
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By:
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/s/ Xxxxxx X. Xxxxxxxxx
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Xxxxxx
X. Xxxxxxxxx, Chief Executive Officer
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LENDERS:
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West
C. Street LLC
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Date: July
14, 2010
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By:
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/s/ Xxxxxxx Xxxxxxx
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Xxxxxxx
Xxxxxxx, Manager
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IBEARHOUSE
LLC
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Date: July
14, 2010
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By:
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/s/ Xxxxxx Xxxxx
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Xxxxxx
Xxxxx, Manager
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