COLLATERAL AGENCY AGREEMENT
Dated as of April 19, 2022
among
TORCHLIGHT MINING CORP. a corporation incorporated under the Canada Business Corporations Act, as Issuer
WOLVERINE LAKE MINING LTD. an Ontario corporation, as Guarantor
TORCHLIGHT MILLING & PROCESSING INC. an Ontario corporation, as Guarantor
TORCHLIGHT U.S. HOLDINGS, INC. a Delaware corporation, as Guarantor
and
NORTHERN DOMINION TRUST COMPANY a national banking association, as Collateral Agent and as Trustee under the Indenture
________________________________________
In connection with the Indenture dated as of April 19, 2022, governing the 8.750% Senior Secured Notes due 2029 $300,000,000 Aggregate Principal Amount
and the Security Documents, including: U.S. Security Agreement dated April 19, 2022 Canadian General Security Agreement dated April 19, 2022
________________________________________
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COLLATERAL AGENCY AGREEMENT
This COLLATERAL AGENCY AGREEMENT (this "Agreement"), dated as of April 19, 2022, is entered into among TORCHLIGHT MINING CORP., a corporation incorporated under the Canada Business Corporations Act (the "Issuer" or "TMC"), WOLVERINE LAKE MINING LTD., a corporation incorporated under the Business Corporations Act (Ontario) ("WLML"), TORCHLIGHT MILLING & PROCESSING INC., a corporation incorporated under the Business Corporations Act (Ontario) ("TMPI"), TORCHLIGHT U.S. HOLDINGS, INC., a corporation incorporated under the General Corporation Law of the State of Delaware ("TUSHI" and, together with WLML and TMPI, the "Guarantors"), and NORTHERN DOMINION TRUST COMPANY, a national banking association, in its capacity as Collateral Agent (in such capacity, the "Collateral Agent") and as Trustee (in such capacity, the "Trustee") under the Indenture (as defined below).
RECITALS
WHEREAS, Torchlight Mining Corp. (the "Issuer") has issued $300,000,000 aggregate principal amount of its 8.750% Senior Secured Notes due 2029 (the "Notes") pursuant to an Indenture dated as of April 19, 2022 (as supplemented, amended, restated, or otherwise modified from time to time, the "Indenture") among the Issuer, the Guarantors party thereto, and Northern Dominion Trust Company, as Trustee;
WHEREAS, the Notes are guaranteed on a joint and several, senior secured basis by Wolverine Lake Mining Ltd., Torchlight Milling & Processing Inc., and Torchlight U.S. Holdings, Inc. (collectively, the "Guarantors" and, together with the Issuer, the "Grantors"), which Guarantors have executed and delivered guarantees of the Obligations (as defined herein) pursuant to the Indenture;
WHEREAS, the obligations of the Issuer under the Notes and the Indenture and the obligations of the Guarantors under the Guarantees are secured by first-priority security interests in the Collateral (as defined herein) granted pursuant to:
(a) the Security Agreement dated as of April 19, 2022 (the "U.S. Security Agreement") between Torchlight U.S. Holdings, Inc. and Northern Dominion Trust Company, as Collateral Agent; and
(b) the General Security Agreement dated as of April 19, 2022 (the "Canadian General Security Agreement") among Torchlight Mining Corp., Wolverine Lake Mining Ltd., Torchlight Milling & Processing Inc., and Northern Dominion Trust Company, as Collateral Agent;
(collectively, the "Security Documents");
WHEREAS, the Collateral secured by such Security Documents includes substantially all tangible and intangible assets of the Issuer and the Guarantors, including, without limitation, mining rights, mineral claims (Ontario Mining Claim Nos. WL-4492-01 through WL-4492-47), surface rights at the Wolverine Lake property consisting of approximately 12,400 hectares located approximately 85 km northeast of Thunder Bay, Ontario, Canada, all equipment (including mining equipment and the concentrator and processing facilities), inventory, accounts receivable, intellectual property, intercompany notes, and equity interests in each Guarantor subsidiary;
WHEREAS, the parties hereto desire to set forth the rights, duties, and obligations of the Collateral Agent in holding, administering, and enforcing the security interests granted under the Security Documents, and to define the relationship among the Collateral Agent, the Trustee, the Grantors, and the holders of the Notes with respect to the Collateral;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I — DEFINITIONS AND INTERPRETATION
Section 1.01 — Definitions
As used in this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Indenture.
"Act of Required Holders" means any direction, instruction, consent, request, or other action given or taken by holders of a majority in aggregate principal amount of the Notes then outstanding under the Indenture, as determined in accordance with Section 2.09 of the Indenture, or by the Trustee acting at the written direction of such holders. For the avoidance of doubt, Notes held by the Issuer or any of its Affiliates shall be disregarded and deemed not to be outstanding for purposes of determining whether the Act of Required Holders has been obtained, in each case as provided in the Indenture.
"Authorized Representative" means the Trustee acting under and in accordance with the Indenture, in its capacity as representative of the holders of the Notes with respect to the Collateral and the security interests granted under the Security Documents, and any successor Trustee appointed in accordance with the terms of the Indenture.
"Business Day" means any day other than a Saturday, Sunday, or any other day on which banking institutions in New York, New York or Toronto, Ontario, Canada are authorized or obligated by law, regulation, or executive order to close.
"Canadian General Security Agreement" means the General Security Agreement dated as of April 19, 2022, among Torchlight Mining Corp., Wolverine Lake Mining Ltd., Torchlight Milling & Processing Inc., and Northern Dominion Trust Company, as Collateral Agent, as the same may be amended, supplemented, restated, or otherwise modified from time to time.
"Collateral" means all property and assets, whether now owned or hereafter acquired, that are subject to the Liens created under the Security Documents, including, without limitation: (a) mining rights and mineral claims, including Ontario Mining Claim Nos. WL-4492-01 through WL-4492-47; (b) surface rights at the Wolverine Lake property, consisting of approximately 12,400 hectares located approximately 85 km northeast of Thunder Bay, Ontario, Canada; (c) all equipment, including mining equipment, vehicles, concentrator and processing facilities, and related fixtures; (d) all inventory; (e) all accounts receivable; (f) all intellectual property, including patents, trademarks, copyrights, trade secrets, and proprietary technical data; (g) all intercompany notes and loan receivables; (h) all equity interests in each Guarantor subsidiary, whether represented by certificated or uncertificated securities; (i) all deposit accounts and securities accounts; (j) all general intangibles; (k) all permits, licenses, and governmental authorizations related to the foregoing; and (l) all Proceeds of any of the foregoing.
"Collateral Agent" means Northern Dominion Trust Company, a national banking association, with its corporate trust office at 101 Barclay Street, 7th Floor, New York, NY 10286, acting in its capacity as Collateral Agent under this Agreement and the Security Documents, and its successors and assigns in such capacity.
"Event of Default" has the meaning ascribed to such term in the Indenture.
"Grantors" means, collectively, the Issuer and the Guarantors, and each individually a "Grantor."
"Guarantees" means the guarantees of the Notes executed and delivered by the Guarantors pursuant to Article X of the Indenture.
"Guarantors" means, collectively, Wolverine Lake Mining Ltd., Torchlight Milling & Processing Inc., and Torchlight U.S. Holdings, Inc., and any other Person that becomes a guarantor of the Notes in accordance with the terms of the Indenture, and each individually a "Guarantor."
"Indenture" means the Indenture dated as of April 19, 2022, among Torchlight Mining Corp., as Issuer, the Guarantors party thereto from time to time, and Northern Dominion Trust Company, as Trustee, as the same may be amended, supplemented, restated, or otherwise modified from time to time, governing the 8.750% Senior Secured Notes due 2029 in the aggregate principal amount of $300,000,000.
"Liens" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, security interest, or preference, priority, or other security agreement or preferential arrangement of any kind or nature whatsoever, including any conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing.
"Notes" means the 8.750% Senior Secured Notes due 2029, in the aggregate principal amount of $300,000,000, issued by the Issuer pursuant to the Indenture. The Notes have the following identifying numbers: CUSIP (144A): 891207 AA 3; CUSIP (Reg S): C89120 AA 5; ISIN (144A): US891207AA38; ISIN (Reg S): USC89120AA58.
"Obligations" means all indebtedness, obligations, and liabilities of the Issuer under or in respect of the Notes and the Indenture (including principal, premium, if any, interest, and any other amounts payable thereunder), and all indebtedness, obligations, and liabilities of the Guarantors under or in respect of the Guarantees, in each case whether now existing or hereafter arising, whether direct or indirect, absolute or contingent, due or to become due, and howsoever evidenced, held, or acquired.
"Officer's Certificate" means a certificate signed by the Chief Executive Officer, the Chief Financial Officer, the Treasurer, the General Counsel, or any Vice President of the Issuer (or any Guarantor, as applicable), in his or her capacity as an officer of such entity, and delivered to the Collateral Agent or the Trustee, as applicable.
"Permitted Liens" has the meaning ascribed to such term in the Indenture.
"Person" means any individual, corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, government, or any agency or political subdivision thereof, or any other entity.
"PPSA" means the Personal Property Security Act (Ontario), R.S.O. 1990, c. P.10, as amended from time to time, or any successor statute, and, as the context may require, the personal property security legislation of any other province or territory of Canada or the federal Bank Act (Canada), to the extent applicable.
"Proceeds" means all proceeds of Collateral, as such term is defined in Section 9-102(a)(64) of the UCC and Section 1(1) of the PPSA, as applicable, including all cash proceeds, non-cash proceeds, insurance proceeds, and other amounts received upon the sale, exchange, collection, or other disposition of Collateral.
"Required Holders" means the holders of a majority in aggregate principal amount of the Notes then outstanding, determined in accordance with the Indenture.
"Secured Parties" means, collectively, the Trustee, the Collateral Agent, the holders of the Notes from time to time, and any other Person entitled to the benefit of the security interests created under the Security Documents.
"Security Documents" means, collectively, the U.S. Security Agreement and the Canadian General Security Agreement, together with all UCC financing statements, PPSA registrations, amendments, continuations, renewals, and related filings, and all other documents and instruments executed and delivered in connection therewith, in each case as the same may be amended, supplemented, restated, or otherwise modified from time to time.
"Trustee" means Northern Dominion Trust Company, in its capacity as Indenture Trustee under the Indenture, and its successors and assigns in such capacity.
"UCC" means the Uniform Commercial Code as in effect from time to time in the State of New York or, when the laws of any other state govern the perfection or priority of a security interest in any item of Collateral, the Uniform Commercial Code as in effect from time to time in such state.
"U.S. Security Agreement" means the Security Agreement dated as of April 19, 2022, between Torchlight U.S. Holdings, Inc. and Northern Dominion Trust Company, as Collateral Agent, as the same may be amended, supplemented, restated, or otherwise modified from time to time.
Section 1.02 — Interpretation
(a) Terms defined in the Indenture and not otherwise defined herein shall have the meanings given to such terms in the Indenture. In the event that a term is defined both in this Agreement and in the Indenture, the definition set forth in this Agreement shall control for purposes of this Agreement.
(b) All references herein to Articles, Sections, Exhibits, and Schedules shall be deemed to refer to Articles, Sections, Exhibits, and Schedules of this Agreement unless the context otherwise requires.
(c) With respect to Collateral located in the United States or security interests therein governed by the laws of a U.S. jurisdiction, the provisions of this Agreement relating to the creation, perfection, priority, and enforcement of security interests shall be construed in accordance with the applicable provisions of the UCC as in effect under the laws of the State of New York or such other U.S. jurisdiction as may be relevant. With respect to Collateral located in Canada or security interests therein governed by the laws of a Canadian jurisdiction, the provisions of this Agreement relating to the creation, perfection, priority, and enforcement of security interests shall be construed in accordance with the applicable provisions of the PPSA and the laws of the Province of Ontario and the federal laws of Canada applicable therein.
(d) The headings and captions in this Agreement are for convenience of reference only and shall not define, limit, or otherwise affect any of the provisions hereof.
(e) The word "including" (and correlative words such as "include" and "includes") shall mean "including without limitation."
(f) References to any Person shall include such Person's successors and permitted assigns.
(g) Unless the context otherwise requires, words importing the singular include the plural and vice versa, and words importing any gender include all genders.
Section 1.03 — Rules of Construction
(a) References to any agreement, instrument, or document herein shall be deemed to include all amendments, supplements, modifications, restatements, renewals, extensions, and replacements thereof, except where the context expressly provides otherwise.
(b) All dollar amounts referenced in this Agreement are denominated in United States dollars unless otherwise expressly specified. References to "CAD" or "Canadian dollars" shall refer to the lawful currency of Canada.
(c) The exchange rate of USD 1.00 = CAD 1.2698 (equivalently, CAD 1.00 = USD 0.7875) is referenced solely for purposes of initial proceeds calculations as of the date hereof and shall have no application to subsequent conversions, which shall be effected at the spot exchange rate prevailing at the time of conversion as quoted by a nationally recognized financial information service.
(d) Any reference to a statute, regulation, or other legislative provision shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing, or interpreting such statute, regulation, or provision.
(e) The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.
ARTICLE II — APPOINTMENT AND AUTHORIZATION OF COLLATERAL AGENT
Section 2.01 — Appointment
(a) Each Grantor hereby irrevocably appoints and designates Northern Dominion Trust Company as Collateral Agent under this Agreement and each of the Security Documents, to act as agent for the Secured Parties in connection with the holding, administration, maintenance, perfection, and enforcement of the Liens on the Collateral created pursuant to the Security Documents. The Collateral Agent hereby accepts such appointment and agrees to act as Collateral Agent upon the terms and conditions set forth in this Agreement.
(b) Each holder of the Notes, by its acceptance thereof, shall be deemed to have irrevocably appointed and authorized Northern Dominion Trust Company as Collateral Agent under this Agreement and the Security Documents, with such powers and authority as are expressly set forth herein.
(c) The Trustee, acting on behalf of the holders of the Notes in accordance with the Indenture, hereby confirms and ratifies the appointment of Northern Dominion Trust Company as Collateral Agent under this Agreement and the Security Documents.
(d) The appointment of the Collateral Agent is irrevocable, except as otherwise provided in Article VII hereof with respect to the resignation, removal, and replacement of the Collateral Agent.
Section 2.02 — Authorization
The Collateral Agent is hereby authorized, empowered, and directed to take the following actions on behalf of the Secured Parties, in each case in accordance with the terms and conditions of this Agreement and the Security Documents:
(a) Execute, deliver, and perform the Security Documents on behalf of the Secured Parties, and take such further actions as may be necessary or desirable to carry out the purposes thereof;
(b) Hold, perfect, maintain, administer, and enforce the Liens on the Collateral created under the Security Documents, including taking possession of any Collateral that is required or permitted to be held by the Collateral Agent;
(c) File initial UCC-1 financing statements, and any amendments or continuations thereof, with the Secretary of State of the State of Delaware with respect to Torchlight U.S. Holdings, Inc. (EIN: 84-3921057), and in any other applicable U.S. jurisdictions as may be necessary to perfect the security interests in the U.S. Collateral;
(d) Register initial PPSA financing statements, and any amendments, renewals, or changes thereto, under the Ontario Personal Property Security Act and in such other applicable Canadian PPSA jurisdictions as may be necessary to perfect the security interests in the Canadian Collateral, including registrations for Torchlight Mining Corp. (incorporated under the Canada Business Corporations Act), Wolverine Lake Mining Ltd. (incorporated under the Business Corporations Act (Ontario)), and Torchlight Milling & Processing Inc. (incorporated under the Business Corporations Act (Ontario));
(e) Take such actions as are necessary or advisable to preserve, protect, and enforce the first-priority security interests of the Secured Parties in the Collateral, including commencing or defending any action or proceeding relating to the Collateral or the Liens thereon;
(f) Execute and deliver releases, discharges, terminations, and subordinations of Liens on the Collateral as provided in Article VI hereof and in the Security Documents; and
(g) Take such other actions as may be expressly provided for or contemplated by this Agreement, the Security Documents, or the Indenture.
Section 2.03 — Scope of Duties
(a) The Collateral Agent shall act only in accordance with the express terms and provisions of this Agreement and the Security Documents. The Collateral Agent shall have no duties or obligations except those expressly set forth herein and in the Security Documents and shall not be deemed to be a fiduciary with respect to any Secured Party or any Grantor, except to the extent expressly provided herein. No implied covenants, duties, or obligations shall be read into this Agreement against the Collateral Agent.
(b) The Collateral Agent shall act upon, and shall be entitled to rely upon, the written direction of the Trustee (acting at the written direction of holders of a majority in aggregate principal amount of the outstanding Notes) with respect to the exercise of any rights, remedies, powers, or privileges under this Agreement or the Security Documents, including the enforcement of security interests and the disposition of Collateral. In the absence of such written direction, the Collateral Agent shall have no obligation to take any action with respect to the Collateral or the Liens thereon, except as otherwise expressly provided herein.
(c) Nothing in this Agreement shall be construed to require the Collateral Agent to take any action that is contrary to this Agreement, the Security Documents, or applicable law, or to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder if the Collateral Agent has reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured.
ARTICLE III — THE COLLATERAL
Section 3.01 — Description of Collateral
The Collateral that secures the Obligations consists of all assets described in, and subject to the Liens created under, the Security Documents, as follows:
(a) U.S. Collateral. The U.S. Security Agreement creates a security interest in substantially all of the assets of Torchlight U.S. Holdings, Inc., whether now owned or hereafter acquired, including, without limitation: all accounts receivable, inventory, equipment, intellectual property (including patents, trademarks, copyrights, and trade secrets), intercompany notes and loan receivables, general intangibles, chattel paper, instruments, documents, deposit accounts, securities accounts, investment property, letter-of-credit rights, commercial tort claims, and all Proceeds of the foregoing.
(b) Canadian Collateral. The Canadian General Security Agreement creates a security interest in substantially all of the tangible and intangible assets of Torchlight Mining Corp., Wolverine Lake Mining Ltd., and Torchlight Milling & Processing Inc., whether now owned or hereafter acquired, including, without limitation:
(i) all mining rights and mineral claims at the Wolverine Lake property, including Ontario Mining Claim Nos. WL-4492-01 through WL-4492-47, as more particularly described in Exhibit C hereto;
(ii) all surface rights at the Wolverine Lake property, consisting of approximately 12,400 hectares located approximately 85 km northeast of Thunder Bay, Ontario, Canada;
(iii) all equipment, including mining equipment, earth-moving vehicles, drill rigs, ventilation systems, the concentrator and processing facilities, and all related fixtures, components, parts, and accessories;
(iv) all inventory, including mined ore, concentrates, refined product, consumables, and supplies;
(v) all accounts receivable and book debts;
(vi) all intellectual property, including patents, trademarks, copyrights, trade secrets, proprietary technical data, process technologies, and know-how;
(vii) all intercompany notes and loan receivables;
(viii) all equity interests in each Guarantor subsidiary, whether represented by certificated or uncertificated securities;
(ix) all permits, licenses, and governmental authorizations relating to the mining, milling, processing, and sale of mineral products at the Wolverine Lake property;
(x) all deposit accounts, securities accounts, investment property, and general intangibles; and
(xi) all Proceeds of any of the foregoing.
Section 3.02 — Priority of Liens
(a) The security interests created under the Security Documents are intended to constitute valid, enforceable, and perfected first-priority Liens on the Collateral, subject only to Permitted Liens as defined in the Indenture. The Collateral Agent shall use commercially reasonable efforts, consistent with the terms of this Agreement and the Security Documents, to maintain the first-priority status of such Liens.
(b) As of the date hereof, no intercreditor agreement is required or in effect with respect to the Collateral. The existing revolving credit facility of the Issuer with Ridgeline Bank of Canada (committed amount of CAD $225,000,000; drawn amount of CAD $140,000,000 as of immediately prior to the closing of the offering of the Notes) was repaid in full and terminated at closing on April 19, 2022, and all Liens of Ridgeline Bank of Canada on the assets of the Issuer and the Guarantors have been released and discharged. In the event that the Issuer or any Guarantor enters into a future credit facility or other financing arrangement that gives rise to a Permitted Lien on any Collateral, the parties shall negotiate in good faith and execute such intercreditor arrangements as may be necessary or appropriate to define the relative priorities and rights of the Secured Parties and any such other secured creditors.
Section 3.03 — After-Acquired Collateral
(a) The Liens created under the Security Documents extend to, and automatically attach to, all after-acquired property of the Grantors that constitutes Collateral under the Security Documents, without any further action, filing, or agreement, to the fullest extent permitted by applicable law and the terms of the Security Documents. Notwithstanding the foregoing, the Grantors shall take such actions and execute and deliver such documents as may be reasonably requested by the Collateral Agent to evidence and perfect such security interests in after-acquired Collateral.
(b) Any future Subsidiary of the Issuer or any Guarantor that meets the $5,000,000 total asset threshold required under Section 4.15 of the Indenture to become a Guarantor shall, within twenty (20) Business Days of the date on which such threshold is met: (i) execute and deliver a joinder to this Agreement substantially in the form attached hereto as Exhibit A; (ii) grant security interests in its assets in favor of the Collateral Agent for the benefit of the Secured Parties by executing and delivering supplemental security agreements as required; and (iii) deliver all corporate authorizations, legal opinions, and other documentation reasonably requested by the Collateral Agent or the Trustee to evidence the validity and perfection of such security interests.
Section 3.04 — Perfection
(a) The Collateral Agent is responsible for maintaining the perfection of the security interests in the Collateral through the following means, as applicable:
(i) UCC Financing Statements. The Collateral Agent shall cause to be filed, and shall timely maintain, UCC-1 financing statements (and any amendments or continuations thereof) with the Secretary of State of the State of Delaware, naming Torchlight U.S. Holdings, Inc. as debtor and Northern Dominion Trust Company, as Collateral Agent, as secured party, covering all personal property Collateral of TUSHI in which a security interest may be perfected by the filing of a UCC financing statement.
(ii) PPSA Registrations. The Collateral Agent shall cause to be registered, and shall timely renew and maintain, PPSA financing statements (and any amendments, renewals, or changes thereto) in the Province of Ontario with respect to Wolverine Lake Mining Ltd. and Torchlight Milling & Processing Inc., and in such federal or provincial registries as are applicable to Torchlight Mining Corp. as a corporation incorporated under the Canada Business Corporations Act, covering all personal property Collateral of such entities in which a security interest may be perfected by registration under the PPSA.
(iii) Possession. To the extent that perfection of the security interests requires possession of certificated securities, promissory notes, instruments, or other tangible Collateral, the Collateral Agent shall take and retain possession of such Collateral, or cause the same to be held by a bailee on its behalf, in each case in accordance with applicable law and the terms of the Security Documents.
(iv) Control Agreements. To the extent that perfection of the security interests requires control of deposit accounts, securities accounts, or other investment property, the Collateral Agent shall maintain control agreements with applicable financial institutions in form and substance satisfactory to the Collateral Agent, as required by the Security Documents.
(b) Each Grantor shall cooperate fully with the Collateral Agent and shall promptly execute and deliver all documents, instruments, agreements, and other materials reasonably requested by the Collateral Agent to perfect, maintain, and protect the security interests in the Collateral, including execution of additional financing statements, amendments, renewals, and continuation statements, and the delivery of certificates representing equity interests in the Guarantors, duly endorsed in blank or accompanied by stock powers endorsed in blank.
ARTICLE IV — DUTIES AND OBLIGATIONS OF THE COLLATERAL AGENT
Section 4.01 — Standard of Care
(a) The Collateral Agent shall exercise the same degree of care in the performance of its duties and obligations under this Agreement and the Security Documents as a prudent person would exercise under similar circumstances, taking into account the nature and extent of the Collateral, the Obligations secured thereby, and the customary practices of institutional collateral agents.
(b) The Collateral Agent shall not be liable for any action taken or omitted to be taken by it in good faith and in accordance with the express terms of this Agreement or the Security Documents, or in reliance upon written directions received from the Trustee or the Required Holders. Without limiting the generality of the foregoing, the Collateral Agent shall not be responsible for or in respect of the validity, sufficiency, or adequacy of this Agreement, the Security Documents, or the Collateral, or for the title of any Grantor to any Collateral, or for any failure by any Grantor to perform its obligations hereunder or under any Security Document.
(c) The Collateral Agent shall not be charged with knowledge of any Event of Default, or of any event that, with the giving of notice or lapse of time or both, would constitute an Event of Default, unless and until the Collateral Agent receives written notice thereof from the Trustee, the Issuer, or any holder of the Notes, specifically referencing the applicable provision of the Indenture or this Agreement.
Section 4.02 — Administrative Duties
The Collateral Agent shall have the following administrative duties and responsibilities under this Agreement:
(a) Safekeeping. The Collateral Agent shall safekeep all items of Collateral that are delivered to it or held in its possession in accordance with this Agreement and the Security Documents, including certificated securities, promissory notes, and instruments. The Collateral Agent shall maintain such Collateral in a secure manner, separate from the Collateral Agent's own property, and properly identified as being held for the benefit of the Secured Parties.
(b) Maintenance of Records. The Collateral Agent shall maintain accurate and complete records of all Security Documents, UCC financing statements, PPSA registrations, and all other filings, registrations, and documents related to the Collateral and the Liens thereon. Such records shall be made available for inspection by the Trustee or its designated representatives upon reasonable prior written notice during normal business hours.
(c) Timely Renewals and Continuations. The Collateral Agent shall timely renew and continue all UCC financing statements and PPSA registrations before the expiration thereof, in accordance with applicable law. Without limiting the generality of the foregoing, the Collateral Agent shall file UCC continuation statements not earlier than six (6) months and not later than sixty (60) days prior to the expiration date of each financing statement and shall register PPSA renewal registrations within the time periods prescribed by applicable law to maintain the priority and effectiveness of the security interests. The Grantors shall cooperate with the Collateral Agent and provide all information necessary for such renewals and continuations.
(d) Receipt of Notices and Communications. The Collateral Agent shall receive and hold all notices, certificates, reports, and other communications related to the Collateral that are delivered to it by the Grantors, the Trustee, or any other Person in accordance with the terms of this Agreement and the Security Documents.
(e) Periodic Reports. Upon the reasonable written request of the Trustee (but not more frequently than once per calendar quarter), the Collateral Agent shall provide the Trustee with a written report regarding the status of the Collateral and the security interests, including the status of UCC financing statements and PPSA registrations, any Collateral in the Collateral Agent's possession, and any material correspondence received by the Collateral Agent from or on behalf of any Grantor regarding the Collateral.
Section 4.03 — Duties Upon Default
(a) Upon receipt of written notice from the Trustee (or from any holder of the Notes, to the extent permitted under the Indenture) that an Event of Default under the Indenture has occurred and is continuing, the Collateral Agent shall:
(i) Act in accordance with the written instructions of the Trustee (acting at the written direction of the Required Holders) with respect to the exercise of any rights, remedies, powers, or privileges available under this Agreement, the Security Documents, or applicable law;
(ii) Exercise such remedies under the Security Documents as the Trustee (acting at the direction of the Required Holders) may direct, including, without limitation, the foreclosure upon, collection of, and realization upon, the Collateral, the sale or other disposition of the Collateral (whether by public sale, private sale, or otherwise), the enforcement of mining rights, mineral claims, and surface rights, the collection of accounts receivable and other payment obligations, and the taking of any and all actions necessary or appropriate to protect and preserve the value of the Collateral;
(iii) Comply with all applicable provisions of Article 9 of the UCC (with respect to U.S. Collateral) and the Ontario PPSA and other applicable Canadian legislation (with respect to Canadian Collateral), including all notice requirements, commercially reasonable disposition requirements, and redemption rights, in connection with any enforcement, foreclosure, or realization upon the Collateral; and
(iv) Apply all Proceeds received upon enforcement, foreclosure, or realization upon the Collateral in accordance with Article V hereof.
(b) The Collateral Agent shall not be required to take any action with respect to the Collateral following an Event of Default unless and until it has received written instructions from the Trustee (acting at the direction of the Required Holders), and the Collateral Agent has been provided with indemnity and security satisfactory to it against any and all losses, liabilities, costs, and expenses that it may incur in connection with such action.
Section 4.04 — No Duty to Investigate
(a) The Collateral Agent shall have no obligation to independently verify the existence, value, condition, quality, quantity, or marketability of any item of Collateral, or the title of any Grantor thereto. The Collateral Agent shall not be responsible for any loss in value of the Collateral, whether resulting from market conditions, depreciation, deterioration, obsolescence, changes in mining regulations, environmental contamination, or otherwise.
(b) The Collateral Agent may conclusively rely on certificates, reports, appraisals, and other information delivered by the Grantors, including, without limitation, the independent technical report prepared by Cascade Technical Advisors Inc. dated February 28, 2022, describing the mineral reserves, mineral resources, and mine plan for the Wolverine Lake property, without any obligation to conduct an independent investigation or verification thereof. The Collateral Agent shall have no liability arising out of or in connection with any inaccuracy, incompleteness, or error in any such certificate, report, or information, provided that the Collateral Agent has acted in good faith.
Section 4.05 — Reliance
(a) The Collateral Agent may rely, and shall be protected in acting or refraining from acting, upon any notice, certificate, instrument, opinion, direction, request, consent, order, or other document or communication that the Collateral Agent believes in good faith to be genuine and to have been signed, sent, or presented by the proper party or parties. The Collateral Agent shall not be obligated to make any inquiry or investigation into the facts or matters stated in any such document or communication.
(b) The Collateral Agent may consult with legal counsel of its choice (including, without limitation, Calderwood & Harkness LLP or other nationally recognized counsel), and the advice or opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, omitted, or suffered by the Collateral Agent in good faith and in accordance with such advice or opinion. The reasonable fees and expenses of such counsel shall be reimbursed by the Issuer in accordance with Section 11.02 hereof.
(c) The Collateral Agent may perform any of its duties through agents, attorneys-in-fact, or employees, and shall not be responsible for the negligence or misconduct of any such agent, attorney-in-fact, or employee selected by it with reasonable care.
(d) The Collateral Agent shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, or other paper or document, but the Collateral Agent, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit.
ARTICLE V — APPLICATION OF PROCEEDS
Section 5.01 — Order of Application
All amounts received by the Collateral Agent in connection with the enforcement, foreclosure, or realization upon the Collateral (including all cash Proceeds, non-cash Proceeds converted to cash, and insurance proceeds related to the Collateral), net of any costs and expenses of sale or disposition, shall be applied by the Collateral Agent in the following order of priority:
First, to the payment of all fees, costs, expenses, indemnities, and other amounts due and owing to the Collateral Agent under this Agreement and the Security Documents, including reasonable attorneys' fees, filing fees, search costs, appraisal costs, and other expenses incurred in connection with the enforcement, protection, or preservation of the Collateral and the security interests therein;
Second, to the payment of all fees, costs, expenses, indemnities, and other amounts due and owing to the Trustee under the Indenture, including the Trustee's compensation and the reimbursement of the Trustee's expenses;
Third, to the payment of all accrued and unpaid interest on the Notes (including, to the extent permitted by applicable law, interest on overdue installments of interest), ratably to the holders of the Notes in proportion to the respective amounts of accrued and unpaid interest due to each such holder;
Fourth, to the payment of the unpaid principal amount of the Notes, ratably to the holders of the Notes in proportion to the respective unpaid principal amounts held by each such holder;
Fifth, to the payment of any other Obligations remaining outstanding under the Indenture and the Security Documents, including any premium, make-whole amount, fees, or other amounts payable thereunder, ratably among the Secured Parties in proportion to the respective amounts due to each such Secured Party; and
Sixth, the balance, if any, remaining after payment in full of all amounts described in clauses First through Fifth above, shall be paid to the Issuer, or to such other Person or Persons as may be entitled thereto under applicable law or as directed by a court of competent jurisdiction.
Section 5.02 — Insufficient Proceeds
In the event that the Proceeds of the Collateral realized upon enforcement, foreclosure, or other realization are insufficient to pay in full all of the Obligations and all other amounts described in Section 5.01, the Secured Parties shall retain all of their rights to pursue deficiency claims against the Grantors, whether arising under the Notes, the Indenture, the Guarantees, or applicable law, subject in each case to any limitations imposed by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors' rights generally. Nothing in this Agreement shall be construed to limit, impair, or otherwise affect any rights or remedies of the Secured Parties against the Grantors for the recovery of any deficiency.
Section 5.03 — Currency of Payment
(a) All distributions made by the Collateral Agent pursuant to this Article V shall be made in United States dollars.
(b) To the extent that Proceeds of the Collateral are received by the Collateral Agent in Canadian dollars or in any currency other than United States dollars, the Collateral Agent shall convert such amounts to United States dollars at the prevailing spot exchange rate at the time of conversion, as quoted by a nationally recognized financial information service or by a major international bank selected by the Collateral Agent in its reasonable discretion. The Collateral Agent shall have no liability to any Person for any loss arising from fluctuations in exchange rates.
(c) Any costs or fees incurred in connection with such currency conversion (including wire transfer fees and conversion charges) shall be deducted from the amounts converted prior to distribution.
ARTICLE VI — RELEASE OF COLLATERAL AND LIENS
Section 6.01 — Release Upon Payment in Full
(a) Upon the irrevocable payment in full (in immediately available funds) of all Obligations, including all outstanding principal of the Notes ($300,000,000 aggregate principal amount, or such lesser amount as may be outstanding at such time), all accrued and unpaid interest, premium (if any), and all other fees, costs, expenses, and other amounts due under the Notes, the Indenture, and the Security Documents, the Collateral Agent shall, at the written request and sole expense of the Issuer, release all Liens on the Collateral and return to the Grantors all items of Collateral then held by or in the possession or control of the Collateral Agent.
(b) In connection with any such release, the Collateral Agent shall execute and deliver, at the expense of the Issuer, all UCC-3 termination statements, PPSA discharge registrations, reconveyances, releases, satisfactions, and such other instruments and documents as may be necessary or appropriate to evidence the release and termination of the Liens on the Collateral. The Issuer shall prepare and present to the Collateral Agent all such instruments and documents in proper form for execution by the Collateral Agent.
(c) The Trustee shall deliver to the Collateral Agent an Officer's Certificate or other written confirmation that all Obligations have been paid in full and that the Collateral Agent is authorized to release the Liens on the Collateral.
Section 6.02 — Release Upon Asset Sale
(a) The Collateral Agent shall release its Liens on any item of Collateral that is the subject of a Permitted Asset Sale (as defined in the Indenture), provided that the following conditions are satisfied:
(i) The Issuer delivers to the Collateral Agent and the Trustee an Officer's Certificate, in form and substance reasonably satisfactory to the Collateral Agent, certifying that the proposed disposition constitutes a Permitted Asset Sale in compliance with the Limitation on Asset Sales covenant set forth in the Indenture, including certification that: (A) the consideration received by the applicable Grantor is at least equal to the fair market value of the Collateral being sold or disposed of (as determined in good faith by the Board of Directors of the Issuer); (B) at least 75% of the aggregate consideration received consists of cash or Cash Equivalents (as defined in the Indenture); and (C) the Net Proceeds (as defined in the Indenture) of such Asset Sale will be applied within 365 days of receipt thereof to one or more of the following: (1) repayment of the Notes, (2) investment in Replacement Assets (as defined in the Indenture), or (3) the making of an Asset Sale Offer (as defined in the Indenture) to the holders of the Notes at a purchase price of 100% of the principal amount thereof, plus accrued and unpaid interest;
(ii) The Trustee has not notified the Collateral Agent in writing that an Event of Default has occurred and is continuing that would prohibit the consummation of such Asset Sale; and
(iii) Such other conditions as may be required by the Indenture or the Security Documents in connection with Permitted Asset Sales have been satisfied.
(b) Upon satisfaction of the conditions set forth in paragraph (a) above, the Collateral Agent shall execute and deliver, at the expense of the Issuer, such UCC-3 partial termination statements, PPSA partial discharge registrations, releases, and other instruments as may be necessary or appropriate to release the Liens on the Collateral that is the subject of such Permitted Asset Sale.
Section 6.03 — Release Upon Defeasance or Redemption
(a) The Collateral Agent shall release all of its Liens on the Collateral upon the legal defeasance or covenant defeasance of the Notes in accordance with Article VIII of the Indenture, or upon the redemption of all outstanding Notes in accordance with the optional redemption provisions set forth in the Indenture, in each case upon receipt of written confirmation from the Trustee that the conditions to such defeasance or redemption have been satisfied.
(b) Upon any such defeasance or redemption, the Collateral Agent shall execute and deliver all UCC-3 termination statements, PPSA discharge registrations, and such other instruments and documents as may be necessary or appropriate to evidence the release of the Liens on the Collateral, at the expense of the Issuer.
Section 6.04 — Partial Release for Permitted Liens
The Collateral Agent shall release, subordinate, or otherwise accommodate its Liens on the Collateral to the extent necessary to permit Permitted Liens as defined in the Indenture, upon receipt of:
(a) An Officer's Certificate from the Issuer certifying that the Lien in question constitutes a Permitted Lien under the Indenture, identifying with specificity the provision of the Indenture under which such Lien is permitted, and describing the property subject to such Permitted Lien; and
(b) An opinion of counsel (which may be in-house counsel of the Issuer or external counsel reasonably acceptable to the Collateral Agent), addressed to the Collateral Agent, to the effect that the actions to be taken by the Collateral Agent in connection with such release or subordination are authorized under this Agreement and the Indenture.
The Collateral Agent shall be entitled to conclusively rely on such Officer's Certificate and opinion of counsel without any independent investigation or verification.
ARTICLE VII — RESIGNATION, REMOVAL, AND SUCCESSION OF COLLATERAL AGENT
Section 7.01 — Resignation
(a) Northern Dominion Trust Company may resign as Collateral Agent at any time by giving not less than sixty (60) days' prior written notice of such resignation to the Issuer and the Trustee. Such resignation shall specify the proposed effective date thereof, which date shall be not earlier than sixty (60) days after the date of such notice.
(b) Notwithstanding the foregoing, no resignation of the Collateral Agent shall become effective until a successor Collateral Agent has been duly appointed and has accepted such appointment in accordance with the provisions of Section 7.03 hereof. If no successor Collateral Agent has been appointed and accepted such appointment within sixty (60) days after the date of the resigning Collateral Agent's notice of resignation, the resigning Collateral Agent may petition any court of competent jurisdiction for the appointment of a successor Collateral Agent.
(c) Any successor Collateral Agent must be a bank or trust company organized and existing under the laws of the United States or any state thereof, authorized to exercise corporate trust powers, with a combined capital and surplus of at least $500,000,000, and subject to supervision or examination by federal or state banking authorities.
Section 7.02 — Removal
(a) The Collateral Agent may be removed by the Trustee (acting at the written direction of holders of a majority in aggregate principal amount of the outstanding Notes) at any time, with or without cause, by giving not less than sixty (60) days' prior written notice to the Collateral Agent and the Issuer. Such notice shall specify the effective date of removal, which date shall be not earlier than sixty (60) days after the date of such notice.
(b) In addition, the Collateral Agent may be removed for cause at any time by the Trustee (acting at the direction of the Required Holders), effective upon thirty (30) days' prior written notice, if the Collateral Agent: (i) has engaged in willful misconduct or gross negligence in the performance of its duties under this Agreement; (ii) has become the subject of a proceeding under any bankruptcy, insolvency, reorganization, liquidation, or similar law; (iii) has had a receiver, trustee, or similar official appointed with respect to it or any substantial part of its property; or (iv) has otherwise become unable to discharge its duties hereunder.
(c) Upon any removal of the Collateral Agent, the provisions of Section 7.03 regarding the appointment of a successor Collateral Agent shall apply.
Section 7.03 — Appointment of Successor
(a) Upon the resignation or removal of the Collateral Agent, the Trustee (acting at the written direction of the Required Holders) shall promptly appoint a successor Collateral Agent that meets the qualification requirements set forth in Section 7.01(c). The appointment of a successor Collateral Agent shall be effective upon the acceptance of such appointment by the successor.
(b) If no successor Collateral Agent has been appointed and has accepted such appointment within sixty (60) days after the date of the resignation notice or the removal notice, as applicable, the resigning or removed Collateral Agent may petition any court of competent jurisdiction in the State of New York for the appointment of a successor Collateral Agent, and the costs of such proceeding shall be borne by the Issuer.
(c) Upon the appointment and acceptance of a successor Collateral Agent, the predecessor Collateral Agent shall: (i) deliver to the successor Collateral Agent all items of Collateral then held by or in the possession or control of the predecessor, together with all documents, records, instruments, and other materials related thereto; (ii) execute and deliver such instruments and documents as may be necessary to assign and transfer the Liens on the Collateral and the rights and obligations of the Collateral Agent under this Agreement and the Security Documents to the successor; and (iii) take such other actions as may be reasonably necessary to effect the transition.
(d) Upon the effective date of such appointment, the successor Collateral Agent shall succeed to and become vested with all of the rights, powers, privileges, duties, and obligations of the predecessor Collateral Agent under this Agreement and the Security Documents, and the predecessor Collateral Agent shall be discharged from all further duties and obligations hereunder, except with respect to any liabilities or obligations arising prior to such effective date and any indemnification obligations that survive under Article X hereof.
Section 7.04 — Merger or Consolidation of Collateral Agent
Any corporation or other entity into which Northern Dominion Trust Company may be merged or converted, or with which it may be consolidated, or any corporation or other entity resulting from any merger, conversion, or consolidation to which Northern Dominion Trust Company shall be a party, or any corporation or other entity that succeeds to all or substantially all of the corporate trust business of Northern Dominion Trust Company, shall be and become the successor Collateral Agent hereunder without the execution or filing of any paper or instrument or any further act or thing on the part of any of the parties hereto; provided, however, that such successor entity meets the qualification requirements set forth in Section 7.01(c) hereof.
ARTICLE VIII — REPRESENTATIONS AND WARRANTIES OF THE GRANTORS
Each Grantor hereby represents and warrants to the Collateral Agent and each other Secured Party as follows:
Section 8.01 — Organization and Good Standing
(a) Torchlight Mining Corp. is a corporation duly incorporated, validly existing, and in good standing under the Canada Business Corporations Act. Its headquarters are located at 2200 – 400 Burrard Street, Vancouver, BC V6C 3A6, Canada. Its registered office is located at 1600 – 925 West Georgia Street, Vancouver, BC V6C 3L2, Canada. It is duly qualified or licensed to do business in each jurisdiction where the nature of its business or the ownership of its properties requires such qualification, including the Province of Ontario.
(b) Wolverine Lake Mining Ltd. is a corporation duly incorporated, validly existing, and in good standing under the Business Corporations Act (Ontario). Its registered office is located at 44 Lakeshore Boulevard, Wolverine Lake, ON P0L 1R0, Canada. It is duly qualified or licensed to do business in each jurisdiction where the nature of its business or the ownership of its properties requires such qualification.
(c) Torchlight Milling & Processing Inc. is a corporation duly incorporated, validly existing, and in good standing under the Business Corporations Act (Ontario). Its registered office is located at 44 Lakeshore Boulevard, Wolverine Lake, ON P0L 1R0, Canada. It is duly qualified or licensed to do business in each jurisdiction where the nature of its business or the ownership of its properties requires such qualification.
(d) Torchlight U.S. Holdings, Inc. is a corporation duly incorporated, validly existing, and in good standing under the General Corporation Law of the State of Delaware. Its registered office is located at 1209 Orange Street, Wilmington, DE 19801, United States. Its employer identification number (EIN) is 84-3921057. It is duly qualified or licensed to do business in each jurisdiction where the nature of its business or the ownership of its properties requires such qualification.