Form 8-K MAGELLAN GOLD Corp For: Jul 01

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): July 1, 2020

 

MAGELLAN GOLD CORPORATION
(Exact Name of Registrant as Specified in its Charter)

 

Nevada	333-174287	27-3566922
(State or other jurisdiction  of incorporation)	Commission File Number	(I.R.S. Employer Identification number)

 

2010A Harbison Dr., #312, Vacaville, CA 95687
(Address of principal executive offices)                    (Zip Code)

 

Registrant's telephone number, including area code:   707-291-6198

 

______________________________________________________

(Former name or former address, if changed since last report)

 

___	Written communications pursuant to Rule 425 under the Securities Act
___	Soliciting material pursuant to Rule 14a-12 under the Exchange Act
___	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
___	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each Class	Trading Symbol	Name of each exchange on which registered
N/A	N/A	N/A

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company [X]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [_]

 

 

 

 

 

ITEM 1.01

ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

 

Effective July 1, 2020, Magellan Gold Corporation, a Nevada corporation (the “Company”), executed a Share Purchase Agreement with Clearwater Gold Mining Corporation, an Idaho corporation (“Clearwater”) and Clearwater’s sole shareholder Gregory Schifrin (“Shareholder”) pursuant to which the Company acquired 100% of the issued and outstanding stock of Clearwater in exchange for the issuance and transfer of up to One Million (1,000,000) shares of the common stock of the Company and the issuance of promissory note made by the Company in favor of Shareholder in the amount of $125,000 (the “Note”). The Company’s obligations under the Note are secured by a Stock Pledge Agreement covering the Clearwater shares and a Security Agreement covering Clearwater’s assets. A copy of the Agreement, Note, Stock Pledge Agreement and Security Agreement are filed herewith as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively.

 

Clearwater’s sole assets consist of unpatented mining claims comprising the Center Star Gold Mine near Elk City, Idaho.

 

ITEM 3.02

UNREGISTERED SALE OF EQUITY SECURITIES

ITEM 7.01

REGULATION FD DISCLOSURE

 

The following sets forth the information required by Item 701 of Regulation S-K with respect to the unregistered sales of equity securities by Magellan Gold Corporation, a Nevada corporation (the "Company"):

 

1a.        (i) On July 1, 2020 the Company agreed to issue an aggregate of 1,000,000 shares of Common Stock of the Company pursuant the terms of a Share Purchase Agreement described in Item 1.01 above. The issuance is subject to satisfying certain future performance milestones.

 

b.          The shares issued under 1(a) issued to one (1) individual under Section 4(a)(2) of the Securities Act of 1933 as amended (the "Securities Act"). The shares issued will be “restricted securities” under the Securities Act of 1933, as amended and the certificate evidencing same bears the Company’s customary restrictive legend.

 

c.          The Company paid no fees or commissions in connection with the issuance of the shares.

 

d.          The securities issued under 1(a) above were issued without registration under the Securities Act in reliance upon an exemption from the registration requirements of the Securities Act set forth in Section 4(2) thereunder.

 

e.          Not Applicable

 

f.           Not applicable.

 

 

 

 

 

 

ITEM 5.02

ELECTION OF DIRECTORS

 

On July 1, 2020, the Board of Directors (the “Board”) of the Company appointed Gregory Schifrin to serve as a member of the Board.

 

The following is biographical information for Mr. Schifrin:

 

Greg Schifrin has been a Geologist for more than 35 years, specializing in precious, base metals, rare earth and uranium exploration and development. He currently serves as a Director of Idaho Gold Mines (ITKO.CN) and previously he served as the CEO and a member of the Board of Director at Blackrock Gold Corp.

 

ITEM 9.01:       EXHIBITS AND FINANCIAL STATEMENTS

 

(a)

Financial Statements

 

None. The Company has determined that the acquisition of the interests in the properties did not constitute the purchase of a “business” within the meaning of Rule 11-01(d) of Regulation S-X.

 

If the Company determines that financial statements of the company acquired are required under Rule 11-01(d) of Regulation S-X, such financial statements will be filed within 75 days of July 1, 2020 pursuant to Item 9.01(a)(4) of Form 8-K.

 

(b)

Pro Forma Financial Information

 

None. If the Company determines that pro forma financial information is required, such pro forma financial information will be filed within 75 days of July 1, 2020.

 

(c)

Exhibits

 

Item	Title
10.1	Share Purchase Agreement
10.2	Promissory Note
10.3	Stock Pledge Agreement
10.4	Security Agreement

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	Magellan Gold Corporation
Date:  July 20, 2020	By: /s/ John Power                         John Power, President

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 10.1

 

SHARE PURCHASE AGREEMENT

 

THIS SHARE PURCHASE AGREEMENT (this "Agreement") is made and entered into as of, June 19, 2020, by and among CLEARWATER GOLD MINING CORPORATION, an Idaho Corporation (the "Company"), whose principal place of business is located at 1256 Elmira Rd, Sandpoint, Idaho 83864, its sole Shareholder Gregory Schifrin (the "Shareholder"), and MAGELLAN GOLD CORPORATION, a Nevada corporation (the "Buyer"), whose principal place of business is located at 2101-A Harrison Drive PMB#312 Vacaville, California 95687.

 

WHEREAS, the Shareholder, owns 100% of the issued and outstanding shares of common stock of the Company; and

 

WHEREAS, the Buyer desires to acquire from the Shareholder and the Shareholder desire to sell to the Buyer One Million (1,000,000) shares of common stock of the Company (the "Company Shares"), representing 100% of the issue and outstanding shares of capital stock in the Company, in exchange for the issuance and transfer of up to One Million (1,000,000) shares of the voting common stock of Buyer (the "MAGE Shares"), upon the terms and subject to the conditions set forth in this Agreement.

 

NOW THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties contained herein, the Parties hereby agree as follows:

 

1.

Purchase and Sale of Company Shares.

 

a.             Basic Transaction. Subject to the terms and conditions of this Agreement, on the Closing Date, the Shareholder shall transfer, assign, convey and set over to the Buyer, and the Buyer shall acquire and receive from the Shareholder, any and all of the Shareholder’s respective rights, title and interests in and to the Company Shares set forth next to its name on Schedule A attached hereto. In addition to the MAGE Share issuance described in Section 9(b) below, the Buyer shall pay to Schifrin the sum of $12,500 concurrently with the execution of this Agreement and an additional $12,500 within thirty (30) days of the signing of this Agreement. In addition the Buyer will execute and deliver at Closing a promissory note (“Note”), payable to the order of Gregory Schifrin, in the principal sum of One Hundred Twenty Five Thousand Dollars ($125,000), in the form of Note attached as Exhibit E. The obligation of Buyer to pay the Note will be secured by (i) a Stock Pledge Agreement covering the Company Shares purchased by Buyer in the form of Exhibit F and (ii) a UCC Security Agreement covering the assets of the Company in the form of Exhibit G.

 

b.             Purchase Price; Payment. The purchase price for all of the Company Shares shall be the issuance by the Buyer to the Shareholder of a total of One Million (1,000,000) restricted shares of common stock of the Buyer at a rate of one (1) share for every one (1) Company Share transferred hereunder, to be issued to the Shareholder in the amounts and under the terms as follows; 250,000 shares at the time of closing, 250,000 shares at the time the Center Mine receives its permit to reopen the main portal of the mine, 250,000 shares at the point the main portal has been reopened and 250,000 two-years from closing concurrent with the pay-off of the $125,000 promissory note being delivered to the Shareholder as part of the purchase price.

 

c.             Net Smelter Return Royalty. The Company will grant to Schifrin a Net Smelter Return Royalty equal to 1.0% of the Company’s Net Smelter Return. In the event the resource is confirmed to contain a resource of 1.0 million or more ounces, the Net Smelter Return Royalty shall be 1.5% of the Company’s Net Smelter Return. The form of Net Smelter Return Royalty Agreement is attached hereto as Schedule B.

 

d.             Finders Fee. Schifrin has been engaged in the mineral exploration for over 30 years and has ongoing relationships and opportunities in the mineral exploration field, for a period of two years from the Closing Schifrin and the Buyer will negotiate an appropriate finder’s fee arrangement for any additional properties that Schifrin brings to the Buyer.

 

e.             The Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the office of Michael Lavigne in Wallace, Idaho commencing at 10:00 a.m. local time on June 30, 2020 or such other date, time or place as the Buyer and the Shareholders may mutually determine and agree to (the “Closing Date”). The Company and the Buyer agree to make the effective date of this agreement July 1, 2020.

 

 

 

 

f.              Deliveries at Closing. At the Closing, (i) the Shareholder will deliver to the Buyer the stock certificate(s) representing all of the Company Shares, endorsed in blank or accompanied by duly executed assignment documents, and (ii) the Buyer will deliver to the Shareholder, duly authorized and issued certificates for the MAGE Shares in the aggregate amounts set forth on Schedule C hereto, and as provided in Section 3(b)(viii) and (iii) the parties will deliver to one another the additional agreements and documents described in Section 3, executed as provided therein.

 

g.             At the time of Closing Gregory Schifrin will be appointed as a director of Magellan Gold Corporation. At the time of Closing, the Board of Directors of the Company shall be reconstituted to consist of: John Power, Mark Rodenback and Greg Schifrin and the executive officers of the Company shall be reconstituted to consist of Michael Lavigne and John Power.

 

h.             Certain Definitions. In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings ascribed below:

 

(i)

"Knowledge" including the phrase "to the Company's knowledge" shall mean the actual knowledge of the following officers of the Company: Gregory Schifrin.

 

(ii)

"Material Adverse Effect" means a material adverse effect on the business, assets, liabilities, financial condition, property, or results of operations of the Company.

 

2.

Representations and Warranties Concerning the Transaction.

 

a.              Representations and Warranties of the Shareholder. Shareholder represents and warrants to the Buyer that the statements contained in this Section 2.a are correct and complete as of the date hereof and will be correct and complete as of the Closing Date, unless an exception to a representation or warranty made herein is set forth in attached Schedule D, Shareholder’s Disclosure Schedule, which is incorporated herein by reference. The Shareholder’s Disclosure Schedule is arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this Section 2.a.

 

(i)             Ownership of Shares. As of the date hereof, the Shareholder: (1) owns the number of Company Shares set forth opposite his/her/its name on Schedule A hereto, and has not assigned, pledged, or otherwise encumbered said Company Shares with a lien or security interest; (2) has good and marketable title thereto; (3) the Company Shares represents his/her/its entire interest in the Company, and he/she/it has no other interests or rights which are convertible into shares of the Company or any right or option to acquire any further interest in shares of the Company; (4) the Company shares are free and clear of all other restrictions, other than those imposed by applicable state and federal securities laws; (5) the Company Shares are not subject to any agreements, including any buy-sell or shareholder agreements, that would contravene, conflict with, restrict or otherwise impair or limit any Shareholder’s ability to consummate the transactions contemplated under this agreement; and (6) the Company Shares represent 100% of the issued and outstanding shares of common stock of the Company and there exist no options, warrants or securities convertible into or exercisable to purchase shares of the Company’s common stock.

 

(ii)           No Misleading Statements or Omissions. To the knowledge of the Shareholder, neither this Agreement nor any Schedule or document attached hereto, contains any materially misleading statement, or omits any fact or statement necessary to make the other statements or facts therein set forth not materially misleading.

 

(iii)           Authorization of Transaction; Enforceability of the Agreement. The Shareholder has full power and authority to execute and deliver this Agreement and to perform such Shareholder’s obligations hereunder. When duly executed and delivered, this Agreement constitutes the valid and legally binding obligation of the Shareholder, enforceable in accordance with its terms and conditions, except to the extent limited by applicable bankruptcy, reorganization, insolvency, moratorium or other laws relating to or affecting generally the enforcement of creditor’s rights. The Shareholder need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement.

 

 

 

 

(iv)          Shareholder’s Sophistication. The Shareholder has a high degree of business and financial sophistication and has such knowledge and experience in financial and business matters that each has determined and evaluated the merits and risks of an investment in the MAGE Shares for such Shareholders’ own account. The Shareholder acknowledges that it is able to fend for itself and bear the economic risk of its investment, including the complete loss thereof.

 

(v)           Restricted Securities. The Shareholder understands that the MAGE Shares are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from MAGE in a transaction not involving a public offering and that, under such laws and applicable regulations, such securities may be resold without registration under the Securities Act of 1933, as amended (the “Securities Act”), only in certain limited circumstances. In this connection, the Shareholder is familiar with Rule 144, as presently in effect, and understand the resale limitations imposed thereby and by the Securities Act. The Shareholder Investor understands Rule 144 is not currently available for the sale of the MAGE Shares and my never be so available.

 

b.             Representations and Warranties with Respect to the Company/Shareholder. The Shareholder represents and warrants to the Buyer that the statement contained in this Section 2.b are correct and complete as of the date hereof, and will be correct and complete as of the Closing Date, unless an exception to a representation or warranty made herein is set forth in the attached Schedule D, the Company’s Disclosure Schedule, which is incorporated herein by reference.

 

(i)             Organization and Authorization. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Idaho with full corporate power and authority to carry on its business as now conducted and to own and operate its assets, properties and business.

 

(ii)            Capitalization. The authorized capital stock of the Company consists of 100,000,000 shares of common stock, with a par value of One Cent ($.01) per share and 100,000,000 shares of preferred stock with a par of One Tenth of One Cent ($.001). As of the date hereof, 1.000,000 of such common shares of the Company are issued and outstanding and no shares of preferred stock are issued and outstanding. All of the issued and outstanding shares of common stock of the Company have been duly authorized, are fully paid and nonassessable, and were issued in compliance with all applicable federal and state securities laws. There are no outstanding options, warrants, rights, conversion rights, contracts, calls, puts, agreements or commitments of any kind relating to the issuance, sale, disposition, acquisition or transfer of any equity securities or other securities of the Company, and there are no voting trusts, proxies, or any other agreements or understandings with respect to the voting of the capital stock of the Company. There are no outstanding or authorized stock appreciation, phantom stock, or similar rights with respect to the Company.

 

(iii)           No Conflict. Neither the execution and delivery of this Agreement, nor the consummation of the transfer and sale of the Company Shares to the Buyer will: (a) violate any provision of the Articles of Incorporation, the Bylaws, or any other governing instrument of the Company; (b) violate, or be in conflict with, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or excuse performance by any person of its obligations under, or cause the acceleration of the maturity of any de t or obligation pursuant to, or result in the creation or imposition of any encumbrance upon an property or assets of the Company under, any material agreement or commitment to which the Company is a party or by which any of its properties or assets are bound or subject; or (c) violate any statute or law or any judgment, decree, order, regulation or rule of any court or other governmental agency applicable to the Company.

 

(iv)           Consent. No consent, approval or authorization of, or declaration, filing or registration with, any governmental body or agency is required to be made or obtained by the Company in connection with the execution, delivery and performance of this Agreement by the Company. In addition, no consent of any other person or entity is required to be obtained by the Company prior to the execution, delivery and performance of this Agreement by the Company, or, to the best of the Shareholder’s knowledge, the consummation of the acquisition by the Buyer of the Company Shares or the transfer of the MAGE Shares to the Shareholder.

 

(v)           Financial Information. The Company has delivered to the Buyer all of the financial information of the Company (collectively, the "Company Financial Information"). Except as set forth in the Company Financial Information, the Company has no material liabilities or obligations, contingent or otherwise, which, in all such cases, individually and in the aggregate would not have a Material Adverse Effect.

 

 

 

 

(vi)           Title to Property; Sufficiency of Assets. The Company owns all the material properties and assets (real, personal and mixed, tangible and intangible) that are reflected in the Company Financial Information. All properties and assets reflected in the Company Financial Information are free and clear of all encumbrances. The assets and property owned or leased by the Company constitute all of the property and assets necessary to conduct the Company's business as currently conducted. The attached Schedule D the Company's Disclosure Schedule, which is incorporated herein by reference, contains a complete list of all material assets owned by the Company.

 

(vii)          Litigation. There is no action, lawsuit inquiry, proceeding or investigation, administrative or judicial, by or before any court or governmental body pending or, to the Shareholder’s knowledge, threatened against or involving the Company, any of its predecessor entities, or the shares of capital stock of the Company. The Company is not subject to any judgment, order or decree that has or is likely to have a material adverse effect on the business, assets, properties or financial condition of the Company. The Company is not in violation of any law, ordinance or regulation of any kind whatsoever including, but not limited to the Securities Act of 1933, the Securities Exchange Act of 1934, as amended, and the Rules and Regulations of the U.S. Securities and Exchange Commission, or the securities laws and regulations of any state.

 

(viii)         No Material Adverse Change. Since the submission of the Company Financial Information, there has not been any material adverse change in the business, assets, properties or financial condition of the Company.

 

(ix)           Contracts and Commitments. All material contracts, commitments and agreements to which the company is a party to, or by which any of its properties or assets are subject or bound, are set forth on the attached Schedule D. Copies of all such contracts and agreements shall be delivered to the Buyer prior to the Closing Date, and all such contracts and agreements are in full force and effect in accordance with the terms thereof.

 

(x)            Taxes. All federal, state and local income or other taxes that it is required to be paid for the period(s) up to and through the Closing Date with all governmental agencies, wherever situate, has paid or accrued for payment all taxes, such that a failure to file, pay or accrue will not have a material adverse effect on the Company. There is no (nor has there been any request for an) agreement, waiver or consent providing for an extension of time with respect to the assessment of any taxes attributable to the Company or its assets or operations, and no power of attorney granted by the Company with respect to any tax matter is currently in force. There is no action, suit, proceeding, investigation, audit, claim, demand, deficiency or additional assessment pending or threatened against the Company, or with respect to any tax attributable to the Company or its assets or operations.

 

(xi)           Licenses and Permits. The Company has all material governmental licenses, authorizations, consents and approvals necessary to carry on its business as now conducted. The attached Schedule D correctly sets forth a list and status of each material license, franchise, permit, order, registration, certificate, approval or other similar authorization affecting, or relating in any way to, the assets or business of the Company (collectively, the "Permits"), and each pending application for any Permit including the name of the Government Agency or entity issuing such Permit or with which such application is pending. except as set forth on the attached Schedule D, (a) the Permits are valid and in full force and effect; (b) the Company is not or has not been in violation of or default under, and, to the Shareholder’s knowledge, no condition exists that with notice or lapse of time or both would consti1ute a violation of or default under, the Permits; (c) no proceeding is pending or, to the Shareholder’s knowledge, threatened, to revoke or limit any Permit; and (d) none of the Permits will be terminated or impaired or become terminable, in whole or in part, as a result of the transactions contemplated by this Agreement. The Company is in compliance in all material respects with the terms of such Permits.

 

(xii)          Environmental Matters.

 

(a)

Except as identified in Schedule D:

 

I.              No written complaint, notification, demand, request for information, citation, summons or order has been received by the Company, no penalty has been assessed, and no written investigation notice, action, claim or review (or any basis therefor) is pending or, to the Shareholder’s knowledge, is threatened by any governmental authority or other person with respect to any matters relating to the Company or any person for which the Company has retained or assumed liability either contractually or by operation of law, and relating to or arising out of any Environmental Law;

 

 

 

 

II.            To the Shareholder’s knowledge after due inquiry, there are no liabilities of or relating to the Company of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, arising under or relating to any Environmental Law, and to the Shareholder’s knowledge there are no facts, conditions, situations or set of circumstances that would reasonably be expected to result in or be the basis for any such liability;

 

III.           The Company is and has been in compliance with all Environmental Laws in material respects, and has obtained and is in compliance with all Environmental Permits in all material respects; and

 

IV.           The Company has not performed or subcontracted for the performance of, with respect to any contract, its own facilities or otherwise, any activity involving the disturbance, abatement, repair or removal of any Material of Environmental Concern.

 

(b)

To the Shareholder’s knowledge after due inquiry, and except as set forth on the attached Schedule D, the company is not currently under any obligation to take any action pursuant to any Environmental Laws requiring (i) the performance of site assessment for Materials of Environmental Concern, (ii) the removal or remediation of Materials of Environmental Concern, (iii) the giving of notice to, or receiving the approval of, any Governmental Entity, or (iv) the recording or delivery to any other Person of any disclosure document or statement pertaining to environmental matters by virtue of the Transactions or as a condition to the effectiveness of any of the Transactions.

 

(c)

There has been no environmental investigation, study, audit, test, review or other analysis conducted in relation to the current or prior business of the Company, or any property or facility owned, leased or operated by the Company which the Company has in its possession and which has not been delivered to the Buyer.

 

(xiii)         Employees. The Company has no employees.

 

(xiv)         No Misleading Statements or Omissions. No representation or warranty of the Company herein or in the Company Financial Information, or any Schedule hereto, and no written statement or certificate furnished or to be furnished by or on behalf of the Company to the Buyer pursuant hereto or in connection with the transactions contemplated hereby, will contain as of the date hereof and on the Closing Date, any untrue statement of a material fact or will omit to state a material fact necessary in light of the circumstances to make the statements contained herein or therein not misleading.

 

(xv)          Survival of Representations and Warranties. All representations, warranties, covenants and agreements made herein and, in the Schedules attached hereto shall survive for one year following the execution, delivery and perform nee of this Agreement, the acquisition of the Company Shares, and the issuance and transfer of the MAGE Shares pursuant hereto.

 

(xiv) Brokers’ Fees. The Company has no liability of' obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Company could become liable or obligated.

 

c.             Representation and Warranties of Buyer. The Buyer represents and warrants to the Shareholder that the statements contained in this Section 2.c are correct and complete as of the date hereof and will be correct and complete as to the Closing Date.

 

(i)             Organization and Authorization. The Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada with full corporate power and authority to carry on its business as now conducted and to own and operate its assets, properties and business. The Buyer has full corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action of the Buyer, its Board of Directors and its shareholders (to the extent shareholder approval is required), and this Agreement constitutes valid and legally binding obligation of Buyer, enforceable against it in accordance with its terms.

 

 

 

 

(ii)            Capitalization. The authorized capital stock of the Buyer consists of 1,000,000,000 shares of common stock, $.001 par value per share, and 2,500,000 shares of preferred stock, $10.00 par value per share. As of the date hereof, 5,608,447 of common shares of the Buyer are issued and outstanding, and 242,269 shares of preferred stock are issued and outstanding. All of the issued and outstanding shares of common stock of the Buyer, have been duly authorized, are fully paid and nonassessable, and, together with the convertible promissory notes referenced below, were issued in compliance with all applicable federal and state securities laws. Except as set forth in Schedule E, there are no outstanding options, warrants, rights, conversion rights, contracts, calls, puts, agreements or commitments of any kind relating to the issuance, sale, disposition, acquisition or transfer of any equity securities or other securities of the Buyer, an there are no voting trusts, proxies, or any other agreements or understandings with respect to the voting of the capital stock of Buyer. There are no outstanding or authorized stock appreciation, phantom stock, or similar rights with respect to the Buyer. The Buyer is not under any obligation to register under the Securities Act any of its currently outstanding securities or any securities issuable upon the conversion of the convertible promissory notes referenced below, or any other of its currently outstanding securities.

 

(iii)           No Conflict. The Articles of Incorporation of Buyer, and all amendments thereto made through the date of this Agreement, have been duly a proved and adopted by all parties whose approval was required under applicable law. The Buyer is not in violation or default (a) of any provision of its Articles of Incorporation or Bylaws, (b) of any instrument, judgment, order, writ or decree, (c) under any note, indenture or mortgage, or (d) under any material lease, agreement, contract or purchase order to which it is a party or by which it is bound, or (e) of any provision of federal or state statute, rule or regulation applicable to the Buyer, the violation of which would have a Material Adverse Effect. he execution, delivery and performance of this Agreement or of any Transaction Agreement not result in any such violation, or be in conflict with, or constitute, with or without that passage of time or giving of notice, either (x) a default under, or result in the termination of, or accelerate or excuse the performance required by any such provision, instrument, judgment, order, writ, decree, contract or agreement, or (y) result in the creation or imposition of any lien, charge, or encumbrance upon any property or assets of the Buyer or nonrenewal of any material permit or license applicable to the Buyer.

 

(iv)           MAGE Shares. Upon their issuance to the Shareholder upon the satisfaction of the conditions to such issuance, the MAGE Shares will be duly and validly authorized, fully paid and non-assessable, and issued in accordance with all registration or qualification requirements under applicable federal and state securities laws, or pursuant to valid exemptions therefrom. The issuance and delivery to the Shareholder of the share certificates for the MAGE Shares as provided in Section 1 upon satisfaction of the conditions precedent to for each issuance will result in the Shareholder’s acquisition, in the aggregate, of record and beneficial ownership of up to One Million (1,000,000) shares of the common stock of the Buyer, free and clear of all encumbrances, subject to any restrictions under applicable state and federal securities laws.

 

(v)           Consent. No consent, approval or authorization of, or declaration, filing or registration with, any governmental body or agency is required to be made or obtained by the Buyer in connection with the execution, delivery and performance of this Agreement by the Buyer. In addition, no consent of any other person or entity is required to be obtained by the Buyer prior to the execution, delivery and performance of this Agreement by the Buyer, or the consummation of the acquisition by the Buyer of the Company Shares, or the transfer of the MAGE Shares to the Shareholder.

 

(vi)           Financial Statements. The Buyer has delivered to the Shareholder balance sheets and statements of income of the Buyer as of and for the fiscal years ended December 31, 2018 and December 31, 2019 (collectively, the "MAGE” Financial Statements"). Such MAGE Financial Statements and notes are true, correct, an complete in all material respects, prepared in accordance with U.S. GAAP applied on a consistent basis throughout the periods covered thereby, are consistent with the books and records of the Buyer, and fairly present the consolidated financial condition and results of operations of the Buyer as at the respective dates thereof and for the periods therein. Except as set forth in the MAGE Financial Statements, the Buyer has no material liabilities or obligations, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to December 31, 2019; (ii) obligations under contracts and commitments incurred in the ordinary course of business; and (iii)liabilities and obligations of a type or nature not required under AAP to be reflected in the MAGE Financial Statements, which, in all such cases, individually and in the aggregate would not have a Material Adverse Effect.

 

 

 

 

(vii)         Title to Property. The Buyer owns all the material properties and assets (real, personal and mixed, tangible and intangible) that are reflected in the MAGE Financial Statements. All properties and assets reflected in the MAGE Financial Statements are free and clear of all encumbrances.

 

(viii)         Litigation. There is no action, lawsuit,' inquiry, proceeding or investigation, administrative or judicial, by or before any court or governmental body pending or threatened against or involving the Buyer, any of its predecessor entities, or the shares of capital stock of the Buyer. The Buyer is not subject to any judgment, order or decree that has or is likely to have a material adverse effect on the business, assets, properties or financial condition of the Buyer. The Buyer is not in violation of any law, ordinance or regulation of any kind whatsoever, including, but not limited to the Securities Act of 1933, the Securities Exchange Act of 1934, as amended, and the Rules and Regulations of the U.S. Securities and Exchange Commission, or the securities laws and regulations of any state.

 

(ix)           No Material Adverse Change. Since December 31, 2019, there has not been any material adverse change in the business, assets, properties or financial condition of the Buyer.

 

(x)            Contracts and Commitments. All contracts, commitments and agreements to which the Buyer is a party, or by which any of its properties or assets are subject or bound, are set forth on the attached Schedule E, Buyer's Disclosure Schedule, which is incorporated herein by reference. Copies of all such contracts and agreements shall be delivered to the Shareholder prior to the Closing Date, and all such contracts and agreements are in full force and effect in accordance with the terms thereof.

 

(xi)           Taxes. The Buyer has timely paid or accrue all federal, state and local income or other taxes that it is required to file for the period(s) up to and through the Closing Date with all governmental agencies, wherever situate, and has paid or accrued for payment all taxes, such that a failure to file, pay or accrue will not have a material adverse effect on the Buyer or the MAGE Shares. There is no (nor has there been any request for an) agreement, waiver or consent providing for an extension of time with respect to the assessment of any taxes attributable to the Buyer or its assets or operations, and no power of attorney granted by the Buyer with respect to any tax matter is currently in force. There is no action, suit, proceeding, investigation, audit, claim, demand, deficiency or additional assessment pending or threatened against the Buyer, or with respect to any tax attributable to Buyer or is assets or operations.

 

(xii)          No Misleading Statements or Omissions. No representation or warranty of the Buyer herein or in the MAGE Financial Statements, or any Schedule hereto, and no written statement or certificate furnished or to be furnished by or on behalf of the Buyer to the Shareholder pursuant hereto or in connection with the transactions contemplated hereby, will contain as of the date hereof and on the Closing Date, any untrue statement of a material fact or will omit to state a material fact necessary in light of the circumstances to make the statements contained herein or therein not misleading.

 

(xiii)        Survival of Representations and Warranties. All representations, warranties, covenants and agreements made herein and, in the Schedules attached hereto shall survive for one year following the execution, delivery and performance of this Agreement, and the issuance and transfer of the MAGE Shares pursuant hereto.

 

(xiv)        Brokers’ Fees. The Buyer has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Company or Shareholder come become liable or obligated.

 

(xv)          Investment. The Buyer is not acquiring the Company Shares with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act. Buyer represents and warrants it understands that the Company Shares have not been registered under the Securities Act and, therefore, cannot be resold unless subsequently registered under the Securities Act or an exemption from registration is available.

 

 

 

 

3.

Conditions Precedent to Closing.

 

a.             Conditions to Obligation of Buyer. The obligation of the Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions:

 

(i)             The representations and warranties of the Shareholder set forth in Section 2.a above shall be true and correct in all material respects at and as of the Closing Date;

 

(ii)            The Shareholder shall have performed and complied with all of their covenants hereunder in all material respects through the Closing;

 

(iii)          This Agreement and the transactions contemplated herein shall have been duly approved and authorized by the Board of Directors and if required, the shareholders, of the Buyer;

 

(iv)           The Buyer shall have completed, to its satisfaction, their due diligence investigation and review of the business, capitalization, assets, liabilities, properties, material contracts and financial condition of the Company, and the results of such investigation shall be satisfactory to the Buyer in its sole discretion; and

 

(v)            The Shareholder shall have delivered to the Buyer at the Closing the certificates evidencing their respective Company Shares, duly endorsed for transfer;

 

The Buyer may waive any condition specified in this Section 3.a if it executes a writing so stating at or prior to the Closing.

 

b.             Conditions and Obligations of the Shareholder. The obligation of the Shareholder to consummate the transactions to be performed by him in connection with the Closing is subject to satisfaction of the following conditions:

 

(i)             The representations and warranties of the Buyer set forth in Section 2.b above shall be true and correct in all material respects at and as of the Closing Date;

 

(ii)            The Buyer shall have performed and complied with all of its covenants hereunder in all material respects through the Closing;

 

(iii)           No action, suit, or proceeding shall be pending before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction wherein an unfavorable judgment, order, decree, stipulation, injunction, or charge would: (A) prevent consummation of any of the transactions contemplated by this Agreement, or (B) cause any of the transactions contemplated by this Agreement to be rescinded before consummation, or C) require divestiture of any of the MAGE Shares by the Shareholder (and no such judgment, order, decree, stipulation, injunction, or charge shall be in effect);

 

(iv)           This Agreement and the transactions contemplated herein shall have been duly approved and authorized by the Board of Directors and the shareholder, if required, of the Company;

 

(v)           The Shareholder shall have completed, to his satisfaction, his due diligence investigation and review of the business, capitalization, assets, liabilities, properties, material contracts and financial condition of the Buyer, and the results of such investigation shall be satisfactory to the Shareholder in their sole discretion; and

 

 

 

 

(vi)          The Buyer shall have delivered to the Shareholder at the Closing a certificate representing 250,000 of MAGE Shares to be issued to such Shareholder pursuant to the terms of this Agreement, the balance of the 750,000 MAGE Shares to be delivered directly to such Shareholder if and when Shareholder has earned such shares pursuant to Section 1b. The Shares may be notated with one or all of the following or similar legends:

 

THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE AFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

 

(vii)         As of the Closing, the authorized size of the Buyer's Board of Directors shall be, and the Board shall be comprised of John Power, Mark Rodenback, and Gregory Schifrin. In the future the Buyer may expand its board as provided in its By-laws.

 

(viii)         The Buyer will tender to the Shareholder the original, executed version of the Promissory Note described in Section 1.c.

 

(ix)           The Buyer and Shareholder shall have executed and delivered the Stock Pledge Agreement and UCC Security Agreement described in Section 1(a) of this Agreement.

 

The Shareholder may waive any condition specified in Section 3.b. if the Shareholder execute a writing so stating at or prior to the Closing.

 

4.

Post-Closing Covenants.

 

(i)             The Parties agree that if, at any time after the Closing, any further action is necessary or desirable to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request, all at the sole cost and expense of the requesting Party.

 

(ii)            For so long as the Note is outstanding and unpaid, Buyer will notify Shareholder no later than August 1 of each calendar year if Buyer intends to not renew any of the Company mining claims; whereupon the Shareholder shall have the right to undertake such renewal for his own account.

 

5.

Termination.

 

a.              Grounds for Termination. This Agreement may be terminated before the Closing occurs only as follows:

 

(i)             At any time by mutual written agreement of the Buyer and the Shareholder.

 

(ii)            By the Shareholder, by notice to the Buyer at any time, if one or more of the conditions specified in Section 3.b is not satisfied at the time at which the Closing is scheduled to occur or if satisfaction of such a condition is or becomes impossible, or if the Buyer shall have breached any material covenant herein or hall have made a material misrepresentation herein.

 

 

 

 

(iii)           By the Buyer, by notice to the Shareholder at any time, if one or more of the conditions specified in Section 3.a is not satisfied at the time at which the Closing is scheduled to occur or if satisfaction of such a condition is or becomes impossible, or if one or more of the Shareholders shall have breached any material covenant herein or shall have made a material misrepresentation herein.

 

(iv)           By either the Buyer or the Shareholder, if any legal proceeding shall have been instituted or shall be imminently threatened, to delay, restrain or prevent the consummation of this Agreement.

 

b.             Effect of Termination. If this Agreement is terminated pursuant to Section 5.a, this Agreement shall terminate without any liability or further obligation of any party to the other, and each party shall bear its own costs and expenses.

 

6.

Remedies for Breach.

 

a.             Survival. All of the representations, warranties, and covenants of the Parties contained in or made pursuant to this Agreement that are not waived by the party for whose benefit the covenant or agreement exists, shall survive the Closing and continue in full force and effect for a period of one year following the Closing.

 

b.             Breach by Buyer. In the event of: (a) any breach of any of the representations or warranties of Buyer set forth in herein; (b) any breach of any covenant or agreement made by Buyer under this Agreement; or (c) the arising of any material obligation from an event that occurred, or circumstances that arose, prior to the Closing Date involving Buyer and not disclosed herein, the Shareholders shall be entitled to an offset for all Losses (as hereafter defined) arising from such event (a "Cause Event").

 

c.             Breach by Shareholder. In the event of: (a) any breach of any of the representations or warranties of the Shareholder set forth in herein; (b) any breach of any covenant or agreement made by the Shareholder under this Agreement; or (c) the arising of any material obligation from an event that occurred, or circumstances that arose, prior to the Closing Date involving the Shareholders and not disclosed herein, the Buyer shall be entitled to an offset for all Losses (as hereafter defined) arising from such event (also a "Cause Event").

 

d.             “Losses” Defined. In this Agreement, the term "Losses" means and includes all losses, claims, liabilities, damages, judgments, liabilities, payments, obligations, costs and expenses (including, without limitation, any reasonable legal fees and costs and expenses incurred after the Closing Date in defense or in connection with any alleged or asserted liability, payment or obligation as to which indemnification may apply hereunder), regardless of whether or not any liability, payment, obligation or judgment is ultimately imposed and whether or not Buyer or Shareholder is made or becomes a party to any such action, suit or proceeding in respect thereof, voluntarily or involuntarily.

 

e.             Remedy Not Exclusive. The foregoing offset provisions are in addition to, and not in derogation of, any statutory or common law remedy any Party may have for breach of representation, warranty, or covenant.

 

f.              Additional Indemnifications. Each party agrees to indemnify, defend and hold harmless the other party as a result of any claims that may be brought by any third party alleging any impropriety on the part of either party as a result of such party's entering into this Agreement and consummating the transactions contemplated hereby.

 

7.

Miscellaneous.

 

a.             Press Release and Announcements. No Party shall issue any press release or announcement relating to the subject matter of this Agreement prior to the Closing without the prior written approval of the other Party unless such Party is under a legal obligation to make such announcement.

 

 

 

 

b.             No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any person other than the Parties and their respective successors and permitted assigns.

 

c.             Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement between the Parties and supersede any prior understandings, agreements, or representations by or among the Parties, written or oral, that may have related in any way to the subject matter hereof.

 

d.             Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successor and permitted assigns. No Party may assign this Agreement or any of his or its rights, interests, or obligations hereunder without the prior written consent of the other Party.

 

e.              Counterparts. This Agreement may be executed in two or more counterparts and by facsimile, each of which shall be deemed an original but all of which together will constitute one and the same instrument.

 

f.              Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

 

g.             Notices. All notices, consents, demands, assignments, claims, and other communications hereunder shall be in writing, and shall be deemed to have been duly given: (a) when received, if delivered by hand; (b) when sent by telex, facsimile or (with receipt confirmed), provided that a copy is concurrently mailed to the intended recipient by registered mail, return receipt requested; (c) one day after delivery to a nationally recognized overnight courier service; or (d) three (3) days after mailing by certified or registered mail, postage prepaid and return receipt requested, in each case to the appropriate addresses, telex numbers, email address and facsimile numbers set forth below (or to such other addresses, telex numbers, email address and facsimile numbers as a party may designate by notice to the other parties):

 

If to the Shareholder:		With a copy to:
________________________		________________________
________________________		________________________
________________________		________________________
________________________		________________________
If to the Buyer:		With a copy to:
Magellan Gold Corporation		Clifford L. Neuman, P.C.
P.O. Box 114		6800 N. 79th Street, Suite 200
The Sea Ranch, CA 95497		Niwot, CO 80503
Attention: John Power
Email: [email protected]		[email protected]

 

 

 

 

h.             Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Idaho, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Idaho or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Idaho.

 

i.              Resolution of Disputes. The parties agree that, in the event of a dispute between them arising from, concerning or in any way related to this Agreement, the Parties shall undertake good faith efforts to negotiate the resolution of the matter amicably between them for a period of no longer than thirty (30) days following written notice of the dispute provided by either Party. If these negotiations prove to be unsuccessful for any reason, either party shall be entitled to initiate an action to resolve such dispute. The Parties hereby agree that the venue for any such action shall be Shoshone County, Idaho.

 

j.              Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Buyer and all of the Shareholders. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent occurrence.

 

k.             Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof, or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the mal judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the Parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope or duration of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed.

 

l.              Expenses. Each of the Parties will bear their own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby.

 

m.            Construction and Shareholder’s Waiver Regarding Construction. The language used in this Agreement will be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party. In addition, by executing this Agreement below, the Shareholder hereby acknowledge that he has had the opportunity to seek independent counsel to review this Agreement, and that they have either (a) retained independent counsel, or (b) chosen not to do so at own risk. Further, in consideration for the Buyer's drafting of this document, the Shareholder hereby waive any argument, in any litigation, that this document should be construe against the drafting party. Any reference to any federal, state, local, or foreign statute or laws all be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The Parties intend that each representation, warranty, and covenant contained herein shall have independent significance. If any Party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract from or mitigate the fact that the Party is in breach of the first representation, warranty, or covenant.

 

n.             Incorporation of Schedules. The Schedules identified in this Agreement are incorporated herein by reference and made part hereof.

 

o.             Specific Performance. The Shareholder and Buyer acknowledges and agrees that the other Party would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific term or otherwise are breached. Accordingly, the Shareholder and Buyer agrees that the other Party shall be entitled to an injunction or injunctions to prevent breaches of the provision of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in addition to any other remedy to which they may be entitled at law or in equity, subject to the agreements regarding venue in Section 7.i above.

 

 

 

 

p.             No Transfer of Attorney-Client Privilege. The Buyer acknowledges and agrees that upon closing of the transactions contemplated by this Agreement the right to assert the attorney-client privilege as to communications regarding any matter in which the Company engaged legal counsel at or prior to the closing, including without limitation the negotiation and preparation of this Agreement, will not be transferred as an asset of or by virtue of Buyer's ownership of the shares of the Company, but will be retained by the Shareholder.

 

q.             Acknowledgement of the Buyer. The Buyer is a sophisticated party, through its officers and directors, and acknowledges that it has had a full, fair and ample opportunity to review the affairs, business, history, records and accounts as the case may be, of the Company and has satisfied itself as to the same. The Buyer relies upon the results of its own investigation and experience except to the extent that a specific warranty or representation has been made herein by the Shareholder.

 

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SIGNATURES

 

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written.

 

 

Buyer:
MAGELLAN GOLD CORPORATION
		Address:
		P.O. Box 114
/s/ John. C. Power		The Sea Ranch, CA 95497
Print Name: John C. Power		Attn: John Power
Title: President & CFO.
Company:
		Address:
By: /s/ Gregory Schifrin		_______________________
Print Name: Gregory Schifrin		_______________________
Title: __________________________		_______________________
Shareholder:
		Address:
		_______________________
/s/ Gregory Schifrin		_______________________
(Signature)		_______________________

 

 

 

 

Exhibit 10.2

 

THIS NOTE HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

 

 

No. 2020C-001	U.S. $125,000
	Original Issue Date: July 1, 2020

 

3% SECURED CONVERTIBLE PROMISSORY NOTE

DUE JULY 1, 2022

 

THIS NOTE is a duly authorized Note of MAGELLAN GOLD CORPORATION, a Nevada corporation, (the “Company” or “Maker”), designated as a 3% Secured Convertible Note (the “Note”) due on July 1, 2022 (the “Maturity Date”), in an aggregate principal amount of $125,000 plus accrued and unpaid interest.

 

FOR VALUE RECEIVED, the Company promises to pay to GREGORY SCHIFRIN, the registered holder hereof (the "Holder"), the principal sum of One Hundred Twenty-five Thousand Dollars (US $125,000) and to pay interest on the principal sum outstanding from time to time in arrears at the rate of 3% per annum calculated from the date of initial issuance of this Note (the “Issue Date”) and payable yearly, in cash, in arrears beginning on July 1, 2021 and continuing each anniversary of the Issue Date thereafter until the Maturity Date (the “Interest Payment Date”). Accrual of interest shall commence on the first such business day to occur after the Issue Date and shall continue to accrue until payment in full of the principal sum has been made or duly provided for.

 

The Company shall pay all accrued and unpaid interest, in arrears, on each Interest Payment Date, as provided herein, and shall pay the outstanding principal balance hereof on the earlier of (i) the Conversion Date, or (ii) the Maturity Date.

 

This Note is subject to the following additional provisions.

 

Section 1.              Collateral. The Company’s obligation to repay all sums due under this Note and perform all covenants to be performed hereunder are secured by a UCC Security Agreement covering all of the tangible and intangible assets of Borrower’s wholly owned subsidiary, Clearwater Gold Mining Corporation (the “Security Agreement”) and a Stock Pledge Agreement covering 1,000,000 shares of common stock of Clearwater Gold Mining Corporation purchased by the Company from Holder.

 

Section 2.               No Sale or Transfer. This Note may not be sold, transferred, assigned, hypothecated or divided into two or more Notes of smaller denominations except to the extent such sale, transfer, assignment, hypothecation or division is in compliance with federal and applicable state securities laws, the compliance with which must be established to the reasonable satisfaction of the Company.

 

Section 3.               No Limitations on Debt. The existence of this Note does not preclude the Company from incurring other indebtedness (including secured debt and including other notes which may, by their terms, be senior to the Notes).

 

Section 4.               Provisions Regarding Payment of Interest. Interest hereunder will be paid to the Holder on each Interest Payment Date, as hereinabove defined. If not paid previously, all interest will be payable at the Maturity Date.

 

 

 

 

Section 5.               (a)           “Event of Default” wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

 

(i)       Any default in the payment of the principal of or interest on this Note as and when the same shall become due and payable, (whether on the Maturity Date or by acceleration or otherwise);

 

(ii)               The Company shall fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach of, this Note or and such failure or breach shall not have been remedied within 30 days after the date on which notice of such failure or breach shall have been given;

 

(iii)       The Company shall commence a voluntary case under the United States Bankruptcy Code or insolvency laws as now or hereafter in effect or any successor thereto (the “Bankruptcy Code”); or an involuntary case is commenced against the Company under the Bankruptcy Code and the petition is not controverted within 30 days, or is not dismissed within 60 days, after commencement of such involuntary case; or a “custodian” (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or any substantial part of the property of the Company or the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or there is commenced against the Company any such proceeding which remains undismissed for a period of 60 days; or the Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company suffers any appointment of any custodian or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of 60 days; or the Company makes a general assignment for the benefit of creditors; or the Company shall fail to pay, or shall state that it is unable to pay its debts generally as they become due; or the Company shall call a meeting of all of its creditors with a view to arranging a composition or adjustment of its debts; or the Company shall by any act or failure to act indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Company for the purpose of effecting any of the foregoing.

 

(b)            Remedies. The Holder may declare a default under Section 5(a)(i) upon not less than 15 days’ written notice to the Company. If the Company fails to cure an Event of Default within such period (or if the cure cannot be reasonably completed within such period, commence the cure of the Event of Default and diligently pursue such cure), then the principal amount hereof together with all accrued and unpaid interest up to the date of default shall thereafter accrue interest at the default interest rate of 6% per annum and the Holder may:

 

(i)             Declare all amounts due under the Notes immediately due and owing and exercise all rights with respect thereto permitted by law;

 

(ii)            Convert all of the Notes into common stock of the Company; or

 

(iii)           Assert any other remedy available at law or in equity.

 

Section 6.               Prepayment. The Company may prepay this Note in whole or in part at any time prior to the Maturity Date upon not less than 30 days’ written notice to the Holder.

 

Section 7.               Definitions. For the purposes hereof, the following terms shall have the following meanings:

 

“Business Day” means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of Colorado are authorized or required by law or other government action to close.

 

“Company” means Magellan Gold Corporation, a Nevada corporation.

 

 

 

 

“Conversion Amount” shall mean the total of unpaid principal and accrued but unpaid interest at the date such amount is determined.

 

“Conversion Price” shall mean $0.50 per share of Common Stock, as adjusted as set forth in Section 8(d), below.

 

“Conversion Shares” shall mean the shares of the Company’s common stock issued or issuable upon conversion of the Notes.

 

“Holder” means any Person who is a registered holder of this Note as listed in the books of the Company.

 

“Interest Payment Date” is as defined in the paragraph entitled “FOR VALUE RECEIVED,” above.

 

“Market Price” at any date shall be deemed to be (i) if the principal trading market for such securities is any exchange, the last reported sale price, on each Trading Day for which determination is made as officially reported on any consolidated tape, (ii) if the principal market for such securities is the over-the-counter market, the closing prices (or, if no closing price, the closing bid price) on such Trading Days as set forth by Nasdaq or the OTC.QB (whichever is the principal market for the Company’s common stock) as reported at http://finance.yahoo.com or, (iii) if the security is not quoted on Nasdaq or the OTC.QB), the average bid and asked price as set forth on the OTC.QB of the OTC Markets Group, Inc. for such day. Notwithstanding the foregoing, if there is no reported closing price or bid price, as the case may be, on any of the ten trading days preceding the event requiring a determination of Market Price hereunder, then the Market Price shall be determined in good faith by resolution of the Board of Directors of the Company, based on the best information available to it.

 

“Material Adverse Effect” means a material adverse effect upon the business, operations, properties, assets or condition (financial or otherwise) of the Company taken as a whole.

 

“Maturity Date” means the date defined in the first paragraph or (if earlier) the date of any conversion, prepayment or acceleration.

 

“Original Issue Date” shall mean the date this Note is purchased by the initial holder.

 

“Person” means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency.

 

“Trading Day” means a day in which the market on which shares of the Company’s common stock are principally traded is open for trading, whether or not any shares of the Company’s common stock are actually traded on that day.

 

Section 8.               Conversion.

 

a.             Voluntary Conversion. At any time before this Note has been paid, the Holder may convert the Conversion Amount into shares of the Company’s common stock by dividing the Conversion Amount by the Conversion Price.

 

 

 

 

b.             Limitation on Conversion. Notwithstanding any other provision hereof, in no event (except (i) as specifically provided herein as an exception to this provision, or (ii) while there is outstanding a tender offer for any or all of the shares of the Company’s Common Stock) shall the Holder be entitled to convert any portion of this Note, or shall the Company have the obligation to convert such Note (and the Company shall not have the right to pay interest hereon in shares of Common Stock) to the extent that, after such conversion or issuance of stock in payment of interest, the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or other convertible securities or of the unexercised portion of warrants or other rights to purchase Common Stock), and (2) the number of shares of Common Stock issuable upon the conversion of the Notes with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock (after taking into account the shares to be issued to the Holder upon such conversion). For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, except as otherwise provided in clause (1) of such sentence. The Holder, by its acceptance of this Note, further agrees that if the Holder transfers or assigns any of the Notes to a party who or which would not be considered such an affiliate, such assignment shall be made subject to the transferee’s or assignee’s specific agreement to be bound by the provisions of this Section 8(b) as if such transferee or assignee were the original Holder hereof. Nothing herein shall preclude the Holder from disposing of a sufficient number of other shares of Common Stock beneficially owned by the Holder so as to thereafter permit the continued conversion of this Note. The provisions of this Section 8(b) may be waived in writing by agreement of the Holder and the Company.

 

c.              Manner of Converison. Conversion shall be effectuated by faxing a Notice of Conversion (as defined below) to the Company as provided in this paragraph. The Notice of Conversion shall be executed by the Holder of this Note and shall evidence such Holder's intention to convert this Note or a specified portion hereof in the form annexed hereto as Exhibit A. No fractional shares of Common Stock or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. The date on which notice of conversion is given (the "Conversion Date") shall be deemed to be the date on which the Holder faxes or otherwise delivers the conversion notice ("Notice of Conversion") to the Company so that it is received by the Company on or before such specified date, provided that, if such conversion would convert the entire remaining principal of this Note, the Holder shall deliver to the Company the original Note being converted no later than five (5) business days thereafter. Email delivery of the Notice of Conversion shall be accepted by the Company at [email protected]: Attention John C. Power. Certificates representing Common Stock upon conversion (“Conversion Certificates”) will be delivered to the Holder at the address specified in the Notice of Conversion (which may be the Holder’s address for notices as contemplated by the Subscription Agreement or a different address), via express courier, by electronic transfer or otherwise, as provided in Section 8(d)(iii) below, and, if interest is paid by Common Stock, the Interest Payment Date. The Holder shall be deemed to be the holder of the shares issuable to it in accordance with the provisions of this Section 8(c) on the Conversion Date.

 

d.             Nature of Common Stock Issued.

 

(i)            When issued upon conversion of the Note pursuant to Section 8(a) hereof, the Conversion Shares will be legally and validly issued, fully-paid and non-assessable.

 

(ii)            Upon any conversion, this Note will be deemed cancelled and of no further force and effect, representing only the right to receive the Conversion Shares, regardless whether the Holder delivers this Note to the Company for cancellation.

 

(iii)           As soon as possible after a conversion has been effected (and subject to the Holder having returned the Note to the Company for cancellation), the Company will deliver to the converting holder a certificate or certificates representing the Conversion Shares issuable by reason of such conversion in such name or names and such denomination or denominations as the converting holder has specified If any fractional share of common stock would be issuable upon any conversion, the Company will pay the holder of the Conversion Shares an amount equal to the Market Price of such fractional share.

 

(iv)           The issuance of certificates for shares of Conversion Shares will be made without charge.

 

(v)            The Company will not close its books against the transfer of the Conversion Shares issued or issuable in any manner which interferes with the conversion of this Note.

 

 

 

 

e.              Adjustments for Capital Reorganization, Reclassification or Transfer or Assets. In the event the Common Stock issuable upon conversion of the Note shall be changed into the same or different number of shares of any class or classes of stock, whether by capital reorganization, reclassification or otherwise, or in the event Maker shall at any time issue Common Stock by way of dividend or other distribution on any stock of Maker, or subdivide or combine the outstanding shares of Common Stock, then in each such event the Holder shall have the right thereafter, but not the obligation, to exercise such Note and receive the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification or other change by holders of the number of shares of Common Stock into which such Note might have been exercised immediately prior to such organization, reclassification or change. In the case of any such reorganization, reclassification or change, the Conversion Price shall also be appropriately adjusted so as to maintain the aggregate Conversion Price. Further, in case of any such consolidation or merger of Maker with or into another corporation in which consolidation or merger Maker is not the continuing corporation, or in case of any sale or conveyance to another corporation of the property of Maker as an entirety, or substantially as an entirety, Maker shall cause effective provision to be made so that the Holder shall have the right thereafter, by converting the Note, to purchase the kind and amount of shares of stock and other securities and property receivable upon such consolidation, merger, sale or conveyance by holders of the number of share of Common Stock into which such Note might have been exercised immediately prior to such consolidation, merger, sale or conveyance, which provision shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Note. The foregoing provisions shall similarly apply to successive reclassifications, capital reorganizations and changes of shares of Common Stock and to successive consolidations, mergers, sales or conveyances. Notwithstanding the foregoing, no adjustment of the Conversion Price shall be made as a result of or in connection with (1) the issuance of Common Stock of Maker pursuant to options, warrants and share purchase agreements now in effect or hereafter outstanding or created, (2) the establishment of option plans of Maker, the modification, renewal or extension of any plan now in effect or hereafter created, or the issuance of Common Stock upon exercise of any options pursuant to such plans, (3) the issuance of Common Stock in connection with an acquisition, consolidation or merger of any type in which Maker is the continuing corporation, or (4) the issuance of Common Stock in consideration of such cash, property or service as may be approved by the Board of Directors of Maker and permitted by applicable law.

 

f.              Anti-Dilution Provisions.

 

(i)             Adjustment for Dividends. In the event the Company shall make or issue, or shall have issued, or shall fix a record date for the determination of holders of common stock entitled to receive a dividend or the distribution (other than a distribution otherwise provided for herein) payable in (a) securities of the Company other than shares of common stock or (b) assets (including cash paid or payable out of capital or capital surplus or surplus created as a result of a revaluation of property, but excluding the cumulative dividends payable with respect to an authorized series of Preferred Stock), then and in each such event provision shall be made so that the holders of Notes shall receive upon conversion thereof in addition to the number of shares of common stock receivable thereupon, the number of securities or such other assets of the Company which they would have received had their Notes been converted into common stock on the date of such event and had they thereafter, during the period from the date of such event to and including the conversion date, retained such securities or such other assets receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this paragraph with respect to Note holders.

 

(ii)            Adjustment for Capital Reorganization or Reclassification. If the common stock issuable upon the conversion of the Notes shall be changed into the same or different number of shares of any class or classes of stock, whether by capital reorganization, reclassification or otherwise then and in each such event the holder of the Notes shall have the right thereafter to exercise such Notes and receive the kind an amount of shares of stock and other securities and property receivable upon such reorganization, reclassification or other change by holders of the number of shares of common stock into which such Note might have been exercised immediately prior to such reorganization, reclassification or change, all subject to further adjustment as provided herein.

 

(iii)           Convertible Securities. For the purpose of the adjustment provided for in section (iv) of this Section 8 (f), if at any time or from time to time after the date of this Note the Company shall issue any rights or options for the purchase of, or stock or other securities, including convertible debt, convertible into, additional shares of common stock (such convertible stock or securities being hereafter referred to as "convertible securities,") then and in such event, whether or not the convertible security is actually converted or exercised to acquire additional shares of Common Stock, such convertible securities shall be deemed to have been so converted or exercised, in which event the conversion Price or exercise price of the convertible securities shall be treated as the consideration per share received by the Company for such securities for the purpose of determining the adjustment, if any, provided for in Subsection (i) of this paragraph.

 

 

 

 

(iv)           Adjustment of Number of Shares. Anything in this Certificate to the contrary notwithstanding, in case the Company shall at any time issue Common Stock or Convertible Securities by way of dividend or other distribution on any stock of the Company or subdivide or combine the outstanding shares of Common Stock, the Conversion Price shall be proportionately decreased in the case of such issuance (on the day following the date fixed for determining shareholders entitled to receive such dividend or other distribution) or decreased in the case of such subdivision or increased in the case of such combination (on the date that such subdivision or combination shall become effective).

 

(v)            No Adjustment for Small Amounts. Anything in this paragraph to the contrary notwithstanding, the Company shall not be required to give effect to any adjustment in the Conversion Price unless and until the net effect of one or more adjustments, determined as above provided, shall have required a change of the Converion Price by at least one cent, but when the cumulative net effect of more than one adjustment so determined shall be to change the actual Conversion Price by at least one cent, such change in the Conversion Price shall thereupon be given effect.

 

(vi)           Common Stock Defined. Whenever reference is made in this paragraph 6(e) to the issue or sale of shares of Common Stock, the term "Common Stock" shall mean the Common Stock of the Company of the class authorized as of the date hereof and any other class of stock ranking on a parity with such Common Stock. However, subject to the provisions of paragraph 6 hereof, shares issuable upon exercise hereof shall include only shares of the class designated as Common Stock of the Company as of the date hereof.

 

 

g.             Exercise of Conversion Privilege. To exercise its conversion privilege or in the event of the automatic conversion of the Note, the Holder shall surrender such Note, or recognize partial prepayment therefor, being converted to Maker at its principal office, and shall give written notice to Maker at that office that Holder is delivering the Note for conversion or recognizing partial prepayment. Such notice shall also state the name or names (with address or addresses) in which the certificate or certificates for shares of Common Stock issuable upon such conversion shall be issued. The Note, if surrendered for conversion shall be accompanied by proper assignment thereof to the Company or in blank.

 

h.             Notice of Record Date. In the event of:

 

(1)            any taking by Maker of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, or

 

(2)            any capital reorganization of Maker, any reclassification or recapitalization of the capital stock of Maker, any merger or consolidating of Maker or a transfer of all or substantially all of the assets of the company to any other corporation, or any other entity or person, or

 

(3)            any voluntary or involuntary dissolution, liquidation or winding up of Maker, then and in each such event Maker shall mail or cause to be mailed to the Holder a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right and a description of said dividend, distribution or right, (ii) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding up is expected to become effective and (iii) the time, if any, that is to be fixed, as to when the holders of record of common stock (or other securities) shall be entitled to exchange their shares of common stock (or other securities) for securities or other property deliverable upon such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding up. Such notice shall be mailed at least thirty (30) days prior to the date specified in such notice on which such action is to be taken.

 

i.               Continuation of Terms. Upon any reorganization, consolidation or merger referred to in this Section 8, the Note shall continue in full force and effect until conversion by the Holder and the terms hereof shall be applicable to the shares of stock and other securities and property receivable on the conversion of any Note after the consummation of such reorganization, consolidation, merger of any similar event and shall be binding upon the issuer of any such stock or other securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of Maker whether or not such person shall have expressly assumed the terms of the Note.

 

 

 

 

Section 9.               No Impairment. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct obligation of the Company.

 

Section 10.             No Rights as a Shareholder. This Note shall not entitle the Holder to any of the rights of a stockholder of the Company, including without limitation, the right to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of stockholders or any other proceedings.

 

Section 11.             No recourse shall be had for the payment of the principal of, or the interest on, this Note, or for any claim based hereon, or otherwise in respect hereof, against any incorporator, shareholder, officer or director, as such, past, present or future, of the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released.

 

Section 12.             All payments contemplated hereby to be made “in cash” shall be made in immediately available good funds of United States of America currency by wire transfer to an account designated in writing by the Holder to the Company (which account may be changed by notice similarly given). All payments of cash and each delivery of shares of Common Stock issuable to the Holder as contemplated hereby shall be made to the Holder at the address last appearing on the Note Register of the Company as designated in writing by the Holder from time to time; except that the Holder can designate, by notice to the Company, a different delivery address for any one or more specific payments or deliveries.

 

Section 13.             The Holder of the Note, by acceptance hereof, agrees that this Note is being acquired for investment and that such Holder will not offer, sell or otherwise dispose of this Note or the shares of Common Stock issuable upon conversion thereof except under circumstances which will not result in a violation of the Act or any applicable state Blue Sky or foreign laws or similar laws relating to the sale of securities.

 

Section 14.             The Note will initially be issued in denominations determined by the Company, but are exchangeable for an equal aggregate principal amount of Notes of different denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration or transfer or exchange.

 

Section 15.             The Company shall be entitled to withhold from all payments of principal of, and interest on, this Note any amounts required to be withheld under the applicable provisions of the United States income tax laws or other applicable laws at the time of such payments, and Holder shall execute and deliver all required documentation in connection therewith.

 

Section 16              This Note has been issued subject to investment representations of the original purchaser hereof and may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (the "Act"), and other applicable state and foreign securities laws and the terms of the Subscription Agreement. In the event of any proposed transfer of this Note, the Company may require, prior to issuance of a new Note in the name of such other person, that it receive reasonable transfer documentation that is sufficient to evidence that such proposed transfer complies with the Act and other applicable state and foreign securities laws and the terms of the Subscription Agreement. Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Company's Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note be overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

 

Section 17.             Mutilated, Lost or Stolen Notes. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, and adequate indemnity, if requested, all reasonably satisfactory to the Company.

 

 

 

 

Section 18.             Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Colorado. Each of the parties consents to the exclusive jurisdiction of the federal courts whose districts encompass any part of Boulder, Colorado, or the state courts of the State of Colorado sitting in Boulder County, Colorado in connection with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non coveniens, to the bringing of any such proceeding in such jurisdictions. To the extent determined by such court, the Company shall reimburse the Holder for any reasonable legal fees and disbursements incurred by the Holder in enforcement of or protection of any of its rights under any of this Note.

 

Section 19.             Waiver of Jury Trial; No Other Waivers. The Company and the Holder hereby waive the right to a trial by jury in any action, proceeding or counterclaim in respect of any matter arising out or in connection with this Note. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note. Any waiver must be in writing.

 

Section 20.             Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.

 

Section 21.             Obligations Due on a Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day (or, if such next succeeding Business Day falls in the next calendar month, the preceding Business Day in the appropriate calendar month).

 

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed by an officer duly authorized for such purpose, as of the date first above indicated.

 

 

MAGELLAN GOLD CORPORATION

 

 

 

By:       /s/ John C. Power

John C. Power, President

 

 

 

 

 

 

 

 

 

 

 

 

Accepted this ________________ day of _______________, 2020 by the undersigned, thereunto duly authorized, in accordance with the terms stated herein.

 

Name of Holder: Gregory Schifrin

 

 

By:     /s/ Gregory Schifrin               

 

 

Tax Identification Number: SS#

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOTICE OF CONVERSION

 

(To be Executed by the Registered Holder
in order to Convert the Note)

 

The undersigned hereby irrevocably elects to convert $__________ principal amount of the Note (defined below) and $___________ in accrued and unpaid interest due under the Note into shares of common stock, par value $.001 per share (“Common Stock”), of Magellan Gold Corporation, a Nevada corporation (the “Company”) according to the conditions of the Unsecured Convertible Note of the Company (the “Note”), as of the date written below. If securities are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any. The original certificate evidencing the Note is delivered herewith (or evidence of loss, theft or destruction thereof).

 

The Company shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

 

Name of DTC Prime Broker:                                                                                                                               

 

Account Number:                                                                                                                                                

 

In lieu of receiving shares of Common Stock issuable pursuant to this Notice of Conversion by way of a DWAC Transfer, the undersigned hereby requests that the Company issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

 

Name:                                                                                                                                                                    

 

Address:                                                                                                                                                                

 

The undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable to the undersigned upon conversion of the Note shall be made pursuant to registration of the securities under the Securities Act of 1933, as amended (the “Act”), or pursuant to an exemption from registration under the Act.

 

Date of Conversion:___________________________

 

Applicable Conversion Price:____________________

 

 

Number of Shares of Common Stock to be Issued Pursuant to

Conversion of the Notes:___________________

 

Signature:___________________________________

 

Name:______________________________________

 

Address:____________________________________

 

___________________________________________

 

SS or Tax I.D. No.____________________________

 

The Company shall issue and deliver shares of Common Stock to an overnight courier not later than three business days following receipt of the original Note(s) to be converted, and shall make payments pursuant to the Notes for the number of business days such issuance and delivery is late.

 

 

 

 

 

 

Exhibit 10.3

 

STOCK PLEDGE AGREEMENT

 

THIS AGREEMENT made and entered into this 1^st day of July, 2020, by and between MAGELLAN GOLD CORPRATION, a Nevada corporation, hereafter referred to as "Pledgor," and GREGORY SCHIFRIN, hereinafter referred to as "Pledgee."

 

W I T N E S S E T H:

 

WHEREAS, Pledgor is indebted to Pledgee in the principal amount of $125,000 pursuant to a promissory note of even date herewith (the "Promissory Note"); and

 

WHEREAS, the Pledgor has agreed to pledge certain stock with the Pledgee as security for the repayment of the Promissory Note;

 

NOW, THEREFORE, in consideration of the mutual covenants hereinbelow set forth, the parties agree as follows:

 

1.       PLEDGE. In consideration of the indebtedness set forth in the Promissory Note, the Pledgor hereby grants a security interest to the Pledgee in 1,000,000 shares of Common Stock of Clearwater Gold Mining Corporation, an Idaho corporation (the "Shares" and the "Company" respectively), duly endorsed in blank and herewith delivered to the Pledgee. The Pledgee shall hold the pledged shares as collateral security for the repayment of the indebtedness of Pledgor to the Pledgee pursuant to the Promissory Note. The Pledgee shall hold the pledged shares as security and shall not encumber or dispose of said shares except in accordance with the provisions of this Agreement.

 

2.       DIVIDENDS. During the term of this pledge, should the Pledgor declare or pay any dividends or distributions to the holders of outstanding shares of Common Stock, no dividend or distribution shall be made with respect to the pledged Shares and Pledgee shall not have any right, title, or interest therein.

 

3.       VOTING RIGHTS. During the term of this pledge, and so long as Pledgor is not in default in the performance of any of the terms of this Agreement or in the payment of any principal or interest under the Promissory Note the Pledgor shall not have the right to vote the pledged shares on all corporate questions.

 

4.       REPRESENTATIONS. The Pledgor warrants and represents that there are no restrictions upon the transfer of any of the pledged shares, other than may appear on the face of the certificates and other than on account of federal and state securities laws. Except for the foregoing, Pledgor is the true and lawful beneficial owner of the Shares, free of any claims, liens, or encumbrances, and Pledgor has the right to transfer such Shares except as may hereinabove be expressly provided.

 

5.       ADJUSTMENTS. In the event that, during the term of this pledge, any share dividend, reclassification, readjustment, or other change is declared or made in the capital structure of the Company which has issued the pledged Shares, all new, substituted additional shares or other securities, issued by reason of any such change shall be held by the Pledgee under the terms of this Agreement in the same manner as the Shares originally pledged hereunder.

 

6.       TERMINATION. This Pledge Agreement shall terminate upon the full and satisfactory discharge by Pledgor of the Promissory Note. So long as there may exist any indebtedness or obligation under the Promissory Note this Agreement shall remain in full force and effect. Upon the termination of this Agreement, the Pledgee shall return to the Pledgor all of the shares then remaining covered by this pledge and all rights received by the Pledgee as a result of this Agreement shall terminate.

 

7.       DEFAULT. Default of this Agreement shall be deemed to have occurred in the event that there is a default under the terms of the Promissory Note. In the event of default under the Promissory Note, Pledgee shall serve written notice as provided in the Promissory Note of said default upon Pledgor demanding that said default be cured within fifteen (15) days (the “Cure Period”). In the absence of a cure within the fifteen (15) day Cure Period, Pledgee may exercise the rights and remedies set forth in Section 8 hereof.

 

 

 

 

8.       REMEDIES UPON DEFAULT. In the event of default as hereinabove defined, the Pledgee shall retain a portion of the Shares then remaining covered by this Pledge Agreement (the “Retained Shares”). The portion to be retained shall be equal to a fraction, the numerator whereof shall be the balance of outstanding and unpaid principal and accrued and unpaid interest due under the Promissory Note, and the denominator whereof shall be the original principal balance of the Promissory Note. All Shares covered by this Pledge Agreement in excess of the Retained Shares shall be delivered to Pledgor, free and discharged of this pledge. Should Pledgee take ownership of the Retained Shares in the event of a default by Pledgor, the Pledgee, and the Retained Shares, shall have all of the rights associated with Common Stock of the Company and shall be subject to the restrictions set forth in the Plan.

 

IN WITNESS WHEREOF, the parties have signed the Agreement the date and year first above written.

 

	PLEDGOR:
	MAGELLAN GOLD CORPORATION
	By:       /s/ John C. Power
	Name:       John C. Power
	Title:       President
	PLEDGEE:
	/s/          Gregory Schifrin
	Gregory Schifrin

 

 

 

 

 

 

 

 

Exhibit 10.4

 

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT is entered into as of this 1^st day of July, 2020, by and among CLEARWATER GOLD MINING CORPORATION ("Clearwater"), Magellan Gold Corporation (“Debtor”) and GREGORY SCHIFRIN ("Secured Party").

 

Recitals

 

A.             Clearwater is a wholly-owned subsidiary of Debtor.

 

B.             Debtor has agreed to borrow from Secured Party the sum of $125,000 (the “Loan”).

 

C.             As of the date hereof, Debtor has executed and delivered to Secured Party, a convertible promissory note in the principal amount of $125,000 (the "Note"); and

 

C.             As a condition to the agreement of Secured Party to loan such amount to Debtor, Debtor is required to enter into this Security Agreement and to grant to the Lenders a security interest in the Collateral (as hereinafter defined).

 

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements hereinafter set forth, the parties hereto agree as follows:

 

Agreement

 

1.

SECURITY

 

1.1           Grant of Security Interest. As security for all of the Obligations (as defined in Section 1.2), Debtor hereby grants to the Secured Party, a continuing security interest (as that term is defined in the Uniform Commercial Code as in effect in Colorado on the date hereof (the "Uniform Commercial Code")), in, and assigns and pledges to the Secured Party all of the Debtor's right, title and interest in and to the following, whether now owned or hereafter acquired (by operation of law or otherwise), and whether now or hereafter existing, owned by Debtor or in which Debtor otherwise has any rights (collectively, the "Collateral"):

 

(a)            All of Clearwater's tangible personal property, including without limitation all present and future inventory, equipment (including items of equipment that are or become fixtures), now owned or hereafter acquired;

 

(b)            All patents and patent applications and the inventions and improvements described and claimed therein, including without limitation, all patents and patent applications described on Schedule 1.1 hereto, together with (i) all reissues, divisionals, continuations, renewals, substitutions, extensions and continuations-in-part thereof, (ii) all income, royalties, damages and payments now or hereafter due or payable under and with respect thereto, including without limitation, damages and payments for past, present and future infringements thereof, (iii) the right to sue for past, present and future infringements thereof, and (iv) all rights corresponding, incident or relating thereto (collectively, the "Patents");

 

 

 

 

(c)            All licenses and similar agreements and covenants not to sue with respect to all Patents or any of them (other than any existing license agreements or covenants not to sue which by their terms prohibit assignment, transfer or the grant of a security interest by Debtor or give the other party thereto the right to terminate the same upon an assignment, transfer or grant of a security interest therein, which licenses or covenants not to sue do not in the aggregate have a material adverse effect on the value or utility of the Patents or other assets of Clearwater individually or as a whole), together with (i) all renewals, extensions, supplements and continuations thereof and supplements thereto, (ii) income, royalties, damages and payments now or hereafter due or payable with respect thereto, including without limitation, damages and payments for past, present and future breaches thereof, (iii) the right to sue for past, present and future breaches thereof, and (iv) all rights corresponding, incident or relating thereto (collectively, the "Licenses");

 

(d)            To the extent that such rights are assignable, all of Clearwater's other intangible personal property other than the property covered by subsection (e) below, including, without limitation, all present and future accounts, contract rights, permits, licenses, general intangibles, chattel paper, documents, and instruments, now owned or hereafter acquired;

 

(e)            All of Clearwater's present and future Government Accounts and rights under Government Contracts, now owned or hereafter acquired; provided, however, that Secured Party shall not have a security interest in any rights under any Government Contract of Clearwater or in the related Government Account where the taking of such Security Interest would be a violation of an express prohibition contained in the Government Contract (for purposes of this limitation, the fact that a Government Contract is subject to, or otherwise refers to, Title 31, § 3727 or Title 41, § 15 of the United States Code shall not be deemed an express prohibition against assignment thereof); and

 

(f)             Any and all additions to any of the foregoing, and any and all replacements, products and proceeds (including insurance proceeds) of any of the foregoing.

 

For purposes of this Agreement, the terms "accounts," "chattel paper," "documents," "general intangibles," "instruments," "inventory," "fixtures", "contract rights" and "equipment" shall have the meanings ascribed to them in Article 9 of the Uniform Commercial Code, "Government Account" shall mean all accounts arising out of any Government Contract and "Government Contract" shall mean all contracts with the United States Government or with any agency thereof, and all amendments thereto.

 

1.2           Obligations. The security interest created hereby in the Collateral constitutes a continuing security interest for all of the following obligations, indebtedness and liabilities, whether now existing or hereafter incurred or arising (collectively, the "Obligations"):

 

(a)            The payment and performance by Debtor, as and when due and payable, of all amounts from time to time owing by it under or with respect to, whether for principal, interest, fees, expenses or otherwise, and the performance of all other obligations of Debtor under, the Notes, this Agreement, an Agreement Among Lenders, or any other document or instrument now or hereafter delivered in connection with or as security for the Notes (collectively, the "Loan Documents");

 

(b)            All loans and future advances made by Secured Party to Debtor evidenced by, and all other debts, obligations and liabilities of every kind and character of Debtor arising from, the Note, or hereafter arising in favor of Secured Party, whether such debts, obligations or liabilities be direct or indirect, primary or secondary, joint or several, fixed or contingent, and whether originally payable to Secured Party or to a third party and subsequently acquired by Secured Party and whether such debts, obligations or liabilities are evidenced by notes, open account, overdraft, endorsement, security agreement, guaranty, or otherwise (it being contemplated that Debtor may hereafter become indebted to one or more Secured Party in further sum or sums, but Secured Party shall have no obligation to extend further indebtedness by reason of this Agreement);

 

(c)            All expenditures made or incurred by Secured Party to protect and maintain the Collateral and to enforce the rights of Secured Party under this Agreement;

 

 

 

 

(d)            The due performance and observance by Debtor of all of its other obligations and undertakings from time to time existing under or with respect to the Loan Documents or any other document or instrument now or hereafter delivered in connection with or as security for any of the Loan Documents; and

 

(e)            All renewals, extensions, amendments, modifications, supplements or restatements of or substitutions for any of the foregoing.

 

Notwithstanding anything to the contrary contained in this Agreement, the Obligations are not intended to include, and the Collateral is not intended to secure, amounts owing from the Debtor to Secured Party under any promissory note (other than the Note, which is intended to be secured hereby) made by the Debtor in favor of Secured Party before the date of this Agreement.

 

1.3           Certain Rights of Secured Party. The Secured Party shall have the right, but not the obligation, to pay any taxes or levies on the Collateral or any costs to repair or to preserve the Collateral, which payment shall be made for the account of Debtor and shall constitute a part of the obligations owed to the Secured Party and secured pursuant to this Agreement.

 

1.4           Financing Statements. At the request of the Secured Party, Debtor will execute such financing statements, continuation statements, and other documents with respect to the Collateral pursuant to the Uniform Commercial Code and otherwise as Secured Party may request, in form satisfactory to the Secured Party, and Debtor will pay the cost of filing the same in all public offices where filing is reasonably necessary (including, without limitation, the cost of filing in the office of the Colorado Secretary of State and the United States Patent and Trademark Office).

 

1.5           No Release. No injury to, or loss or destruction of, any item of the Collateral shall relieve Debtor of any obligation under this Agreement or under any of the other Loan Documents.

 

2.

REPRESENTATIONS AND WARRANTIES OF DEBTOR

 

In order to induce Secured Party to enter into this Agreement and to make the Loan, Debtor hereby makes the following representations and warranties to Secured Party:

2.1           Organization; Due Authorization; Enforceability. Debtor is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Colorado. The execution, delivery and performance by Debtor of this Agreement and all transactions contemplated herein are within Debtor's corporate powers and have been duly authorized by all necessary action on the part of Debtor, corporate and otherwise. This Agreement has been duly executed and delivered by Debtor and constitutes the valid and binding obligation of Debtor, enforceable against Debtor in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity.

 

2.2           No Conflicts or Consents. Neither the ownership nor the intended use of the Collateral by Debtor, nor the grant of the security interest by Debtor to Secured Party herein, nor the exercise by Secured Party of any rights and remedies hereunder, does or will (i) conflict with or violate any provision of the Articles of Organization, Operating Agreement or other governing documents of Debtor, (ii) conflict with or violate any applicable domestic or foreign law, statute, rule or regulation applicable to or binding upon Debtor, (iii) conflict with or violate any agreement, judgment, license, order or permit applicable to or binding upon Debtor, or (iv) result in or require the creation of any lien, charge or Encumbrance (as defined below) upon any assets or properties of Debtor except as expressly contemplated by this Agreement. Except for filings of financing statements to be made in favor of Secured Party and filing a copy of this Agreement with the United States Patent and Trademark Office, no consent, approval, authorization or order of, and no notice to or filing with, any court, governmental authority or third party is required in connection with the grant by Debtor of the security interest herein or the exercise by Secured Party of any rights and remedies hereunder.

 

 

 

 

2.3           Security Interest. Debtor has and will have at all times full right, power and authority to grant a security interest in the Collateral to Secured Party in the manner provided herein, free and clear of any lien, security interest, adverse claims or other charges or encumbrances. This Agreement creates a valid and binding security interest in favor of Secured Party in the Collateral securing the Obligations. The filing of the financing statements and other instruments of registration delivered concurrently herewith by Debtor to Secured Party will perfect, and establish the first priority of, Secured Party's security interests hereunder in the Collateral securing the Obligations. No further or subsequent filing, recording, registration, other public notice or other action is necessary or desirable to perfect or otherwise continue, preserve or protect such security interest, except for continuation statements or filings.

 

2.4           Title to Assets. As of the date hereof, Debtor has good, valid, and marketable title to all of its properties and assets (whether real or personal), and there exists no mortgage, lien, security interest, reservation, covenant, restriction or other encumbrance (each of the foregoing hereinafter referred to as an "Encumbrance") of any nature upon, or with respect to, Debtor or any of its properties or assets, including, without limitation, the Collateral, except for liens of record and the security interests created by this Agreement.

 

2.5           Taxes. Debtor has filed all tax returns and reports required by any governmental authority to be filed by Debtor, and such returns and reports are true and correct. Debtor has paid all taxes, assessments, and other government charges imposed upon it or its income, profits or properties, or upon any part thereof, other than those presently payable without penalty or interest.

 

2.6           No Default. No Event of Default (as defined in Section 6.1 hereof), and no event which with notice, lapse of time, or both would constitute an Event of Default, has occurred and is continuing as of the date hereof.

 

3.

AFFIRMATIVE COVENANTS OF DEBTOR

 

Until all of the Obligations of Debtor are paid and performed in full, Debtor hereby covenants and agrees that it shall, unless the Secured Party otherwise consents in advance in writing:

 

3.1           Payment of Notes. Punctually pay the principal of and interest on the Notes and all other amounts that may be due thereunder at the times and places and in the manner specified therein, except to the extent of any principal or interest that is converted into common stock of the Debtor according to the terms of the Notes.

 

3.2           Corporate Existence. Preserve, maintain, and keep in full force and effect its corporate existence in the jurisdiction of its incorporation.

 

3.3           Taxes, Charges, and Obligations. Pay and discharge all taxes, assessments, and governmental charges or levies imposed upon it or upon its income, profits, properties or any part thereof, prior to the date on which penalties or interest attach thereto, as well as all claims which, if unpaid, might become an Encumbrance upon any properties of Debtor, and pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all of the indebtedness and other obligations of whatever nature of Debtor; provided, however, that Debtor shall not be required to pay any such tax, assessment, charge, levy, claim, indebtedness or obligation so long as (a) the validity thereof is being diligently contested by Debtor in good faith and by proper proceedings, (b) Debtor sets aside on its books adequate reserves therefor in accordance with generally accepted accounting principles, (c) during the period of such contest the enforcement of any contested item is effectively stayed, and (d) in the case where any such tax, assessment, charge, claim or levy might become an Encumbrance upon any item of the Collateral or any part thereof, Debtor makes arrangements acceptable to the Secured Party to secure the payment thereof.

 

3.4           Maintenance of Property. Keep all property used or useful in its business, including, without limitation, the Collateral, in good repair, working order, and condition, and from time to time make all necessary or desirable repairs, renewals, and replacements thereof.

 

 

 

 

3.5           Preservation of Patents. Prosecute diligently any patent application pertaining to the Patents, now or hereafter pending, file and prosecute opposition, cancellation, reissue, reexamination, protest, public use, concurrent use and similar proceedings relating to the Patents, and preserve and maintain all rights in all Patents. Any expenses incurred in connection with the foregoing shall be borne by Debtor.

 

3.6           Notice and Defense of Actions. Provide Secured Party with immediate notice of any opposition, cancellation, reissue, reexamination, protest, public use, concurrent use or similar proceeding relating to the Patents or any part thereof, and shall diligently defend its rights in any such action or proceeding.

 

3.7           Collateral. Execute, deliver, and file, or cause the execution, delivery, and filing of, any and all documents (including, without limitation, financing statements and continuation statements) that Secured Party deem necessary or desirable to create, perfect, preserve, validate, or otherwise protect a first priority lien and security interest in the Collateral; immediately upon learning thereof, report to the Secured Party any reclamation, return or repossession of any goods forming a part of the Collateral, any claim or dispute asserted by any debtor or other obligor owing an obligation to Debtor, and any other matters affecting the value or enforceability or collectability of any of the Collateral; defend the Collateral against all claims and demands of all persons at any time claiming the same or any interest therein adverse to the Secured Party, and pay all costs and expenses (including attorneys' fees and expenses) incurred in connection with such defense; indemnify and protect the Secured Party against any liability, loss or expense arising from any such claims, demands, or disputes or out of any such reclamation, return or repossession of goods forming a part of the Collateral; provided, however, that if the Secured Party shall so elect, the Secured Party shall have the right at all times to settle, compromise, adjust or litigate all claims and disputes directly with the debtor or other obligor owing an obligation to Debtor upon such terms and conditions as the Secured Party deems advisable, and all costs and expenses thereof (including attorneys' fees and expenses) shall be made for the account of Debtor and shall constitute a part of the Obligations owed to the Secured Party and secured pursuant to this Agreement.

 

3.8           Notice of Default and Loss. Give immediate notice to the Secured Party upon the occurrence of any Event of Default or event which with notice or lapse of time or otherwise would constitute an Event of Default and of any loss or damage to any of the Collateral.

 

3.9           Information. Furnish Secured Party any information that any Secured Party may from time to time reasonably request concerning any covenant, provision or representation contained in this Agreement or any other matter in connection with the Collateral or Loan Documents.

 

4.

NEGATIVE COVENANTS OF DEBTOR

 

Until all of the Obligations of Debtor are paid and performed in full, Debtor hereby covenants and agrees that it shall not, unless the Secured Party otherwise consents in advance in writing:

 

4.1           Fundamental Changes. Amend its Articles of Organization or Operating Agreement by any amendment which would adversely affect Debtor's ability to perform or comply with any of the terms, conditions or agreements to be performed or complied with by Debtor hereunder or under any of the Loan Documents or to perform any of the transactions contemplated hereby or thereby, change its name, consolidate or merge with any other corporation or other entity, or purchase, lease or otherwise acquire all or substantially all of the assets of any other entity, including shares of stock of other corporations, except that Debtor may own notes and other receivables acquired in the ordinary course of business. Debtor shall not take any action described in this Section 4.1 unless and until Debtor has taken all action requested by Secured Party to further perfect or protect Secured Party's security interests in the Collateral.

 

4.2           Transfer of Assets. Sell, lease, assign (by operation of law or otherwise), pledge or otherwise dispose of any of its properties or assets (including, without limitation, the Collateral), whether now owned or hereafter acquired, except for sales of properties and assets other than the Patents and Licenses in the ordinary course of business and for fair market value. Debtor shall not enter into any agreement relating to any Patent or License other than licensing agreements in the ordinary course of business, which are not inconsistent with the terms hereof and which do not have a material adverse effect on Debtor.

 

 

 

 

5.

POWERS AND AUTHORIZATIONS

 

5.1           New or Additional Patents. If, before the Obligations shall have been satisfied in full, Debtor shall obtain rights to any new or additional patents or applications therefor, Debtor shall give to Secured Party prompt notice thereof in writing. Any such new patents and applications therefor shall, without any further action on behalf of Debtor, automatically become subject to the terms of this Agreement and shall be deemed to be Patents for the purposes of this Agreement. Debtor will amend Schedule 1.1 to include any new or additional patents and applications therefor, but such new or additional patents and applications therefor shall constitute Collateral hereunder whether or not Debtor so amends Schedule 1.1; and Debtor agrees to execute such additional security agreements, financing statements, instruments of registration and related documents as may be reasonably requested by Secured Party to perfect Secured Party’s security interest in such patents and applications therefor.

 

5.2.          Power of Attorney. Debtor hereby irrevocably appoints Secured Party as Debtor's attorney-in-fact and proxy, with full authority in the place and stead of Debtor and in the name of Debtor or otherwise, in such Secured Party's discretion, at any time upon the occurrence and during the continuance of an Event of Default, to take any action and to execute any instrument which such Secured Party may deem necessary or advisable to accomplish the purposes of this Agreement, including without limitation (i) to obtain and adjust insurance required to be paid to any Secured Party under the Loan Documents, (ii) to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral, (iii) to receive, endorse and collect any drafts or other instruments, documents and chattel paper in connection with clause (i) or clause (ii) above, (iv) to file any claims or take any action or institute any proceedings that such Secured Party may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of Secured Party with respect to any of the Collateral, and (v) to execute and file one or more financing or continuation statements, and amendments thereto, relating to the Collateral. Secured Party shall be under no duty to exercise or withhold the exercise of any of the rights, powers, privileges, and options expressly or implicitly granted to Secured Party in this Agreement, and shall not be responsible for any failure to do so or any delay in doing so. Secured Party shall not be liable for any act or omission or for any error of judgment or any mistake of fact or law in their individual capacity or in their capacity as attorney-in-fact except acts or omissions resulting from such Secured Party's willful misconduct or gross negligence. This power of attorney is conferred on Secured Party solely to protect, preserve and realize upon the security interests in the Collateral. Secured Party shall not be responsible for any decline in the value of the Collateral and shall not be required to take any steps to preserve rights against prior parties or to protect, preserve or maintain any security interest or lien given to secure the Collateral. The powers granted herein are coupled with an interest and shall be irrevocable from the date hereof and so long as any part of the Obligations is outstanding.

 

5.3           Performance by Secured Party. If Debtor fails to perform any agreement or obligation contained herein, Secured Party may itself, at its option and in its sole discretion, perform, or cause performance of, such agreement or obligation, and the expenses of such Secured Party incurred in connection therewith shall be payable by Debtor on demand; provided, however, that nothing herein shall impose any obligation of any kind whatsoever on Secured Party to perform any obligation or agreement of Debtor.

 

6.

EVENTS OF DEFAULT AND REMEDIES

 

6.1           Events of Default. The occurrence of any one or more of the following events shall constitute an "Event of Default" hereunder:

 

(a)            any action or event that is an "Event of Default" under the Notes; (b) Debtor shall fail to pay or perform the Obligations when due; (c) any representation or warranty made by or on behalf of Debtor herein or in any other Loan Document shall prove to have been incorrect in any material respect on or as of any date as of which made; (d) Debtor shall at any time fail to observe, satisfy or perform any of the covenants or agreements contained in Sections 3.1, 3.2, 4.1, or 4.5 of this Agreement; (e) Debtor shall at any time fail to observe, satisfy or perform any of the covenants or agreements contained in Sections 3 or 4 (other than in Sections 3.1, 3.2, 4.1 or 4.5) of this Agreement, except that no failure to observe any of such covenants or agreements hereof shall constitute an Event of Default hereunder unless such default shall continue unremedied for a period of twenty (20) business days after written notice of the existence of such default shall have been received by Debtor from Secured Party; or (f) Debtor shall default in the payment of principal of or interest on any Indebtedness (other than the Notes) of Debtor or any such Indebtedness shall be accelerated or otherwise become due and payable prior to its stated maturity.

 

 

 

 

6.2           Rights and Remedies of the Secured Party. Upon the occurrence of any Event of Default, or at any time thereafter, in addition to all other rights, powers and remedies herein conferred, conferred in the other Loan Documents or conferred by operation of law, Secured Party may declare the Obligations due, payable and performable or to become due, payable and performable to such Secured Party immediately, including all principal and interest remaining unpaid on the Notes payable to Secured Party and all other amounts with respect to Secured Party secured hereby or thereby, all without demand, presentment or notice, all of which are hereby expressly waived; and from time to time in its discretion, without limitation and without notice except as expressly provided below, Secured Party may:

 

(a)            Exercise with respect to the Collateral all the rights and remedies of a secured party on default under the Uniform Commercial Code (whether or not the Uniform Commercial Code applies to the affected Collateral);

 

(b)            Require Debtor to, and Debtor hereby agrees that it shall at its expense and upon request of Secured Party forthwith, assemble all or part of the Collateral and the documentation relating to the Collateral as directed by such Secured Party and make it available to such Secured Party at a place to be designated by such Secured Party which is reasonably convenient to both parties;

 

(c)            Reduce its claim to judgment or foreclose or otherwise enforce, in whole or in part, the security interest created hereby by any available judicial procedure;

 

(d)            Dispose of, at its office, on the premises of Debtor or elsewhere, all or any part of the Collateral, as a unit or in parcels, by public or private proceedings, and by way of one or more contracts (it being agreed that the sale of any part of the Collateral shall not exhaust Secured Party's power of sale, but sales may be made from time to time, and at any time, until all of the Collateral has been sold or until the Obligations have been paid and performed in full), and at any such sale it shall not be necessary to exhibit any of the Collateral;

 

(e)            Buy the Collateral, or any portion thereof, at any public sale;

 

(f)             Buy the Collateral, or any portion thereof, at any private sale if the Collateral is of a type customarily sold in a recognized market or is of a type that is the subject of widely distributed standard price quotations;

 

(g)            Apply by appropriate judicial proceedings for appointment of a receiver for the Collateral, or any part thereof, and Debtor hereby consents to any such appointment; and

 

(h)            At its discretion, retain the Collateral in satisfaction of the Obligations whenever the circumstances are such that Secured Party is entitled to do so under the Uniform Commercial Code or otherwise.

 

Debtor agrees that, to the extent notice of sale shall be required by law, five (5) calendar days' notice to Debtor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

 

 

 

 

6.3            Application of Proceeds. Upon the occurrence of any Event of Default, or at any time thereafter, Secured Party may in its discretion apply any cash held by Secured Party as Collateral, and any cash proceeds received by any Secured Party with respect to any sale of, collection from, or other realization upon all or any part of the Collateral, to any or all of the following in such order as Secured Party may elect:

 

(a)            To the repayment of the reasonable out-of-pocket costs and expenses, including attorneys' fees and legal expenses, incurred by Secured Party in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any Collateral, (iii) the exercise or enforcement of any of the rights of Secured Party hereunder; or (iv) the failure of Debtor to perform or observe any of the provisions hereof;

 

(b)            To the payment or other satisfaction of any liens and other encumbrances upon any of the Collateral;

 

(c)            To the reimbursement of Secured Party for the amount of any obligations of Debtor paid or discharged by Secured Party pursuant to the provisions of this Agreement or the other Loan Documents, and of any expenses of Secured Party payable by Debtor hereunder or under the other Loan Documents;

 

(d)            To the satisfaction of any other Obligations;

 

(e)            By holding the same as Collateral;

 

(f)             To the payment of any other amounts required by applicable law; and

 

(g)            By delivery to Debtor or to whomsoever shall be lawfully entitled to receive the same or as a court of competent jurisdiction shall direct.

 

Unless the Secured Party otherwise agrees, all proceeds received by Secured Party from the sale of, collection from, or other realization upon any Collateral (net of the actual unreimbursed out-of-pocket costs incurred by Secured Party in connection with such sale, collection or other realization) and all payments to Secured Party to reimburse it for certain expenses as provided herein if Debtor can not pay 100% of the demanded expense amounts shall be distributed to Secured Party.

 

6.4           Deficiency. In the event that the proceeds of any sale, collection or realization of or upon the Collateral by Secured Party are insufficient to pay all amounts to which Secured Party is legally entitled, Debtor shall be liable for the deficiency, together with interest thereon as provided in the governing Loan Documents or (if no interest is so provided) at such other rate as shall be fixed by applicable law, together with the costs of collection and the fees and expenses of any attorneys employed by Secured Party to collect such deficiency.

 

6.5           Non-Judicial Remedies. In granting to Secured Party the power to enforce its rights hereunder without prior judicial process or judicial hearing, Debtor expressly waives, renounces and knowingly relinquishes any legal right which might otherwise require Secured Party to enforce its rights by judicial process. In so providing for non-judicial remedies, Debtor recognizes and concedes that such remedies are consistent with the usage of trade, are responsive to commercial necessity, and are the result of a bargain at arm's length. Nothing herein is intended to prevent Secured Party or Debtor from resorting to judicial process at any party's option.

 

6.6           Remedies Not Exclusive. All rights, powers and remedies herein conferred are cumulative, and not exclusive, of (i) any and all other rights and remedies herein conferred or provided for, (ii) any and all other rights, powers and remedies conferred or provided for in the Loan Documents, and (iii) any and all rights, powers and remedies conferred, provided for or existing at law or in equity, and Secured Party shall, in addition to the rights, powers and remedies herein conferred or provided for, be entitled to avail itself of all such other rights, powers and remedies as may now or hereafter exist at law or in equity for the collection of and enforcement of the Obligations and the enforcement of the warranties, representations, covenants, indemnities and other agreements contained the Loan Documents. Each and every such right, power and remedy may be exercised from time to time and as often and in such order as may be deemed expedient by Secured Party and the exercise of any such right, power or remedy shall not be deemed a waiver of the right to exercise, at the same time or thereafter, any other right, power or remedy. No delay or omission by Secured Party or other person or entity in the exercise of any right, power or remedy will impair any such right, power or remedy or operate as a waiver thereof or of any other right, power or remedy then or thereafter existing.

 

 

 

 

7.

MISCELLANEOUS PROVISIONS

 

7.1           Additional Actions and Documents. Debtor shall take or cause to be taken such further actions, shall execute, deliver, and file or cause to be executed, delivered, and filed such further documents and instruments, and shall obtain such consents as may be necessary or as the Secured Party may reasonably request in order fully to effectuate the purposes, terms, and conditions of this Agreement and the other Loan Documents, whether before, at or after the closing of transactions contemplated hereby and thereby or the occurrence of an Event of Default hereunder.

 

7.2           Notification. All notices, requests, instructions or other communications to be given in writing hereunder shall be addressed as follows:

 

	If to Debtor:
	Name:	Magellan Gold Corporation
	Address:	2010A Harbison Dr., #312
		Vacaville, CA 95687
	Fax:
	Attention:	John Power
with a copy, which shall not constitute notice, to:
	Address:	Clifford L. Neuman, P.C.
		6800 N. 79th St., Ste. 200
		Niwot, CO 80503
	Fax:	303-449-1045
	Attention:	Clifford L. Neuman, Esq.
	If to the Secured Party:
	Name:	Gregory Schifrin
	Address:	1256 Elmira Road
		Sandpoint, ID 83864
	Fax:

 

 

Written communications shall be deemed given, when addressed to the other party as set forth above, three days after sent by registered or certified mail, one day after sent by overnight courier of national repute or on the same day when delivered in person or when sent by facsimile to the facsimile number as set forth above, provided that the sending party can provide written evidence of the communication's successful transmission to such facsimile number. The notification information of any party may be changed by notifying the other parties of such change in accordance with this Section 7.2. Notice by e-mail shall not be effective for any purpose under this Agreement.

 

 

 

 

If Secured Party receives from a third party any notice or other written communication relating to the Collateral or any other right or obligation of the Secured Party under this Agreement, it shall forward promptly a copy of such notice or written communication to the Borrower, unless it is clear from the face of the notice or written communication that the Borrower has received or will receive the same notice or written communication from that third party.

 

7.3           Expenses. Debtor shall (a) reimburse the Secured Party and save the Secured Party harmless against liability for the payment of all out-of-pocket expenses arising in connection with enforcement of, or the preservation or exercise of any rights (including the right to collect and dispose of the Collateral) under, this Agreement or any of the other Loan Documents, including, without limitation, the fees and expenses of counsel to the Secured Party arising in such connection; and (b) pay, and hold the Secured Party and subsequent holders of the Notes harmless from and against, any and all present and future stamp taxes or similar document taxes or recording taxes and any and all charges with respect to or resulting from any delay in paying, or failure to pay, such taxes.

 

7.4           Severability. If fulfillment of any provision of the Loan Documents or performance of any transaction related thereto, at the time such fulfillment or performance shall be due, shall involve transcending the limit of validity prescribed by law, then the obligation to be fulfilled or performed shall be reduced to the limit of such validity; and if any clause or provision contained in any Loan Document operates or would operate prospectively to invalidate any Loan Document, in whole or in part, then such clause or provision only shall be held ineffective, as though not herein or therein contained, and the remainder of the Loan Documents shall remain operative and in full force and effect.

 

7.5           Waivers. No waiver by the Secured Party of, or consent by the Secured Party to, a variation from the requirements of any provision of the Loan Documents shall be effective unless made in a written instrument duly executed on behalf of Secured Party, and any such waiver shall be limited solely to those rights or conditions expressly waived.

 

7.6           Rights Cumulative. The rights and remedies of the Secured Party described in any of the Loan Documents are cumulative and not exclusive of any other rights or remedies which the Secured Party or the then holder of the Notes otherwise would have at law or in equity or otherwise. Except as otherwise provided herein, notice to or demand on Debtor in any case shall not entitle Debtor to any other notice or demand in similar or other circumstances.

 

7.7           Entire Agreement; Modification; Benefit. This Agreement, the exhibits hereto, and the other Loan Documents constitute the entire agreement of the parties hereto with respect to the matters contemplated herein, supersede all prior oral and written agreements with respect to the matters contemplated herein, and may not be modified, deleted or amended except by written instrument executed by the parties. All terms of this Agreement and of the other Loan Documents shall be binding upon, and shall inure to the benefit of and be enforceable by, the parties hereto and their respective successors and permitted assigns; provided, however, that no Secured Party may assign or transfer any of its rights or obligations hereunder except in connection with the transfer or assignment of a Notes, which is permitted by the terms thereof. Debtor shall not have the right to assign or transfer any of its rights or obligations hereunder without the prior written consent of each Secured Party.

 

7.8           Termination. This Agreement shall terminate upon the payment and performance in full of all Obligations under the Notes.

 

7.9           Construction. This Agreement and the other Loan Documents, the rights and obligations of the parties hereto, and any claims or disputes relating thereto shall be governed by and construed in accordance with the laws of the State of Colorado (excluding the choice of law rules thereof). Each party hereto hereby acknowledges that all parties hereto participated equally in the negotiation and drafting of this Agreement and that, accordingly, no court construing this Agreement shall construe it more stringently against one party than against the other.

 

7.10         Pronouns. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the person or entity may require.

 

 

 

 

7.11         Headings. Section and subsection headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof.

 

7.12         Payments. If any payment or performance of the Notes or of any of the other obligations under this Agreement or any of the other Loan Documents becomes due on a day other than a Business Day, the due date shall be extended to the next succeeding Business Day, and interest thereon (if applicable) shall be payable at the then applicable rate during such extension. For the purposes of this Agreement, "Business Day" means a day other than a Saturday, Sunday or other day on which commercial banks in Colorado are authorized by law to close.

 

7.13         Execution. To facilitate execution, this Agreement and any of the other Loan Documents may be executed in as many counterparts as may be required; and it shall not be necessary that the signatures of, or on behalf of, each party, or the signatures of all persons required to bind any party, appear on each counterpart; but it shall be sufficient that the signature of, or on behalf of, each party, or the signatures of the persons required to bind any party, appear on one or more of the counterparts. All counterparts shall collectively constitute a single agreement. It shall not be necessary in making proof of this Agreement or any other Loan Document to produce or account for any particular number of counterparts; but rather any number of counterparts shall be sufficient so long as those counterparts contain the respective signatures of, or on behalf of, all of the parties hereto.

 

IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, or have caused this Agreement to be duly executed on their behalf, as of the day and year first hereinabove set forth.

 

	SECURED PARTY:
	/s/ Gregory Schifrin
	Gregory Schifrin
	DEBTOR:
	Magellan Gold Corporation
	By: /s/ John Power
	John Power, President
	Accepted and Agreed to By:
	CLEARWATER GOLD CORPORATION
	By:     /s/ Gregory Schifrin
	Name:          Gregory Schifrin
	Title:            President

 

 

 

 

 

 

 

 

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