8-K

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 27, 2011

GRYPHON GOLD CORPORATION

(Exact name of registrant as specified in its charter)

Nevada	333-127635	92-0185596
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

601 N. Nevada Street

Carson City, Nevada 89703

(Address of principal executive offices)  (Zip Code)

 (604) 261-2229

(Registrant’s telephone number, including area code)

N/A

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

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a -12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d -2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e -4(c))

Item 1.01 Entry into a Material Definitive Agreement.

On July 27, 2011, Gryphon Gold Corporation (the “Registrant”) entered into an agency agreement (the “Agency Agreement”) with Acumen Capital Finance Partners Limited (“Acumen”) and Roth Capital Partners, LLC (“Roth”, and together with Acumen, the “Agents”) pursuant to which the Agents agreed to act as the exclusive agents of the Registrant to offer 3,000 units (“Units”) of the Registrant on a private placement basis at the price of CAD$1,000.00 per Unit for aggregate gross proceeds to the Registrant of approximately CAD$3,000,000 (the “Private Placement”).  Each Unit was comprised of 10% subordinated secured notes maturing on July 28, 2012 (“Debentures”), each with a principal face value of CAD$1,000, and 1,500 warrants (“Warrants”) to acquire one share of common stock of the Registrant at a price of US$0.20.   Pursuant to the Agency Agreement, in consideration for services rendered by the Agents, the Registrant agreed to pay the Agents a fee equal to the amount of 6% of the aggregate gross proceeds of the Private Placement, totaling CAD$180,000.  Also in consideration for services rendered by the Agents, the Registrant agreed to issue to the Agents upon closing an aggregate number of broker warrants equal to 5% of the number of warrants issued under the Private Placement.  In connection with the closing of the Private Placement, pursuant to the broker warrants, Acumen and Roth were each given the right to purchase 112,500 shares of common stock of the Registrant at a price per share of US$0.20, with an expiry date of January 27, 2013.

On July 27, 2011, the Registrant entered into certain debenture and purchase agreements (“Purchase Agreements”) with purchasers of the Units of the Registrant offered by private placement pursuant to the Agency Agreement (each, a “Purchaser”).  Pursuant to the Purchase Agreements, the Registrant agreed to issue and sell to each Purchaser, and each Purchaser agreed to purchase from the Registrant, a number of Units for the purchase price of CAD$1,000 per Unit for aggregate gross proceeds to the Registrant of CAD$3,000,000.  Under the terms of the Purchase Agreement, the Registrant agreed to grant, for the benefit of the Purchaser, as secured party, a security interest in certain of its property and assets, including a pledge of 100% of the issued and outstanding shares of common stock of Borealis Mining Company.

On July 27, 2011, in connection with the Private Placement, the Registrant entered into a note indenture  (“Note Indenture”) with Computershare Trust Company of Canada (“Trustee”) providing for the terms and conditions upon which the Debentures were to be created, issued and held, as well as the rights of the Purchasers of the Debentures, the Registrant and the Trustee. Under the Note Indenture, the Debentures are not redeemable at the option of the Registrant at any time.  In the event of a Change of Control (as defined in the Note Indenture), the Registrant will be required to make an offer to purchase, within 30 days following the completion of the Change of Control, of all of the Debentures for cashat a price equal to 110% of the principal amount plus accrued and unpaid interest.  If Holders holding 90% or more of the outstanding Debentures choose to accept the Registrant’s offer, the Registrant will have the right to redeem all of the Debentures remaining outstanding.  Pursuant to the Note Indenture, the Debentures will be secured and will be subordinated to the Registrant’s current and future senior secured debt.  The Registrant has the right at any time to purchase any or all of the Debentures by tender or by private contract.

On July 27, 2011, in connection with the Private Placement, the Registrant entered into a pledge and security agreement (“Pledge and Security Agreement”) with Trustee as trustee to the holders (“Holders”) of the Debentures.    Pursuant to the Pledge and Security Agreement, the Registrant agreed to grant Trustee, for the benefit of the Holders, a lien on and security interest in all of the Registrant’s right, title and interest in various collateral, including inventory, equipment, receivables, contract rights, investment properties, other properties and proceeds, in addition to 100% of the issued and outstanding shares of common stock of Borealis Mining Company.

The foregoing descriptions of the Agency Agreement, the Purchase Agreements, the Note Indenture and the Pledge and Security Agreement are qualified in their entirety by the copies of each, which are filed as Exhibit 10.1, 10.2, 4.1, and 4.2, respectively, to this Current Report on Form 8-K and which are hereby incorporated by reference into this Item 1.01.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of Registrant.

As set forth under Item 1.01 of this Current Report on Form 8-K, which information is incorporated by reference in response to this Item 2.03, on July 27, 2011, the Registrant issued the Debentures pursuant to the Note Indenture.    The Debentures will bear a 10% interest per annum from the date of issue, and are payable quarterly in arrears in equal installments on March 31, June 30, September 30 and December 31 of each year, with the first payment being made on September 30, 2011.  Upon the occurrence of an Event of Default (as defined in the Note Indenture), the principal amount of and accrued and unpaid interest on, all outstanding Debentures will be immediately due and payable upon declaration by Trustee or the Holders.  Pursuant to the Note Indenture, if the Event of Default relates to a judgment of bankruptcy or insolvency of the Registrant or its subsidiary Borealis Mining Company, the principal amount of, and accrued and unpaid interest on, all outstanding Debentures will be due and payable immediately without any declaration or other action by the Trustee or the Holders.  In this event, the Registrant will be required to pay Trustee the amount of principal and accrued and unpaid interest on the Debentures and all other fees and expenses applicable under the Note Indenture, together with interest.

Item 3.02 Unregistered Sale of Equity Securities.

As set forth under item 1.01 of this Current Report on Form 8-K, which information is incorporated by reference in the response to this Item 3.02, on July 27, 2011, the Registrant issued 3,000 Units of Debentures and 1,500 warrants (the “Offered Securities”).  The Offered Securities were issued pursuant to an exemption from registration in reliance on Rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933, as amended.

Item 7.01  Regulation FD Disclosure.

On July 27, 2011, the Registrant issued the press release attached hereto as Exhibit 99.1 announcing the closing of the Private Placement.  In accordance with General Instruction B.2 of Form 8-K, the information set forth herein and in the press release is deemed to be “furnished” and shall not be deemed to be “filed” for purposes of the Securities Exchange Act of 1934, as amended.  The information set forth in Item 7.01 of this Current Report on Form 8-K shall not be deemed an admission as to the materiality of any information in this Current Report on Form 8-K that is required to be disclosed solely to satisfy the requirements of Regulation FD.

Item 9.01  Exhibits.

Exhibit	Description
4.1	Note Indenture, dated July 27, 2011
4.2	Pledge and Security Agreement, dated July 27, 2011
4.3	Form of Warrant
10.1	Agency Agreement, dated July 27, 2011
10.2	Form of Debenture and Purchase Agreement, dated July 27, 2011
99.1	Press Release, dated July 27, 2011*

* The Exhibit relating to Item 7.01 is intended to be furnished to, not filed with, the SEC pursuant to Regulation FD.

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 hereunto duly authorized.

GRYPHON GOLD CORPORATION.

(Registrant)

Dated:  August 1, 2011 By:  /s/ John L. Key                                            John L. Key Chief Executive Officer

EX-4.1

NOTE INDENTURE

made as of July 27, 2011

Between

GRYPHON GOLD CORPORATION

as issuer

and

COMPUTERSHARE TRUST COMPANY OF CANADA

as trustee

Relating to the issuance of

10% Subordinate Secured Notes

Due July 28, 2012

TABLE OF CONTENTS

SECTION 1	INTERPRETATION		1
	1.1	Definitions	1
	1.2	Meaning of “outstanding” for Certain Purposes	13
	1.3	Interpretation Not Affected by Headings	14
	1.4	Extended Meanings	14
	1.5	Day Not a Business Day	15
	1.6	Currency	15
	1.7	Statutes	15
	1.8	Invalidity of Provisions	15
	1.9	Applicable Law	15
SECTION 2	THE SUBORDINATE SECURED NOTES		15
	2.1	Designation and Issuance of Subordinate Secured Notes	15
	2.2	Description of the Subordinate Secured Notes	16
	2.3	Form of Subordinate Secured Notes	16
	2.4	Subordinate Secured Notes to Rank Pari Passu	16
	2.5	No Book Entry	16
	2.6	Signatures on Subordinate Secured Notes	17
	2.7	Certification	17
	2.8	Concerning Interest	17
	2.9	Issue of Substitutional Subordinate Secured Notes	19
	2.10	Option of Holder as to Place of Payment	19
	2.11	Record of Payments	19
	2.12	Surrender for Cancellation	19
	2.13	Right to Receive Indenture	19
SECTION 3	REGISTRATION, TRANSFER, EXCHANGE AND OWNERSHIP OF SUBORDINATE SECURED NOTES		20
	3.1	Registers	20
	3.2	Transfer of Subordinate Secured Notes	20
	3.3	Restrictions on Transfer of Subordinate Secured Notes	21
	3.4	Transferee Entitled to Registration	21
	3.5	Closing of Register; Recording of Certain Transfers	21
	3.6	Exchange of Subordinate Secured Notes	21
	3.7	Ownership and Entitlement to Payment	22
	3.8	Evidence of Ownership	22
	3.9	No Notice of Trusts	22
	3.10	Charges for Transfer and Exchange	23
	3.11	Restrictions on Transfer of Subordinate Secured Notes Under U.S. Securities Law	23
SECTION 4	ISSUE AND DELIVERY OF SUBORDINATE SECURED NOTES		24
	4.1	Issuance of Subordinate Secured Notes	24
	4.2	No Subordinate Secured Notes to be Issued During Default	25

TABLE OF CONTENTS

(continued)

			Page
SECTION 5	REDEMPTION AND PURCHASE OF SUBORDINATE SECURED NOTES		25
	5.1	General	25
	5.2	Redemption on Change of Control	25
	5.3	Purchase of Subordinate Secured Notes	26
	5.4	Cancellation of Subordinate Secured Notes	26
SECTION 6	QUALIFYING CHANGE OF CONTROL PURCHASES		26
	6.1	Qualifying Change of Control Purchase	26
	6.2	QualifyingChange of Control Notice	26
	6.3	Purchase Notice	27
	6.4	Procedures for Exercising QualifyingChange of Control Purchase	28
	6.5	Consummation of Purchase	28
	6.6	Withdrawal of Purchase Notice	28
	6.7	Notification by Trustee	29
	6.8	Deposit of QualifyingChange of Control Purchase Price	29
	6.9	Subordinate Secured Notes Purchased	29
	6.10	Covenant to Comply with Securities Laws	29
SECTION 7	WITHHOLDING TAXES		30
SECTION 8	COVENANTS OF THE CORPORATION		30
	8.1	Positive Covenants in respect of the Corporation and Borealis Mining Company	30
	8.2	Restrictive Covenants in respect of the Corporation and Borealis Mining Company	31
	8.3	Maintenance of Offices or Agencies	33
	8.4	Money for Payments to Be Held in Trust	33
	8.5	Trustee’s Remuneration and Expenses	35
	8.6	Not to Extend Time for Payment of Interest	35
	8.7	Examination and Audit	35
	8.8	No Change of Domicile	35
	8.9	Trustee May Perform Covenants	36
	8.10	Certificates Relating to Compliance and Default	36
	8.11	Financial Statements	37
SECTION 9	DEFAULTS AND REMEDIES		37
	9.1	Events of Default	37
	9.2	Notice of Event of Default	38
	9.3	Acceleration	39
	9.4	Waiver of Event of Default	39
	9.5	Enforcement by the Trustee	40
	9.6	Suits by Noteholders	41

TABLE OF CONTENTS

(continued)

			Page
	9.7	Application of Money	42
	9.8	Distribution of Proceeds	42
	9.9	Remedies Cumulative	43
	9.10	Judgment Against the Corporation	43
SECTION 10	CANCELLATION, DISCHARGE AND DEFEASANCE		43
	10.1	Cancellation and Destruction	43
	10.2	Discharge	44
SECTION 11	MEETINGS OF NOTEHOLDERS		44
	11.1	Right to Convene Meetings	44
	11.2	Notices of Meetings	44
	11.3	Chairman	44
	11.4	Quorum	45
	11.5	Power to Adjourn	45
	11.6	Show of Hands	45
	11.7	Poll	45
	11.8	Voting	45
	11.9	Regulations	46
	11.10	Corporation and Trustee May Be Represented	46
	11.11	Powers Exercisable by Noteholders by Extraordinary Resolution	46
	11.12	Meaning of Ordinary Resolution	49
	11.13	Meaning of Extraordinary Resolution	49
	11.14	Powers Cumulative	49
	11.15	Minutes	50
	11.16	Instruments in Writing	50
	11.17	Binding Effect of Resolutions	50
	11.18	Record Dates	50
SECTION 12	NOTICES		51
	12.1	Notice to the Corporation	51
	12.2	Notice to Noteholders	51
	12.3	Notice to the Trustee	51
	12.4	When Publication Not Required	52
	12.5	Waiver of Notice	52
SECTION 13	CONCERNING THE TRUSTEE		52
	13.1	Corporate Trustee Required Eligibility	52
	13.2	Certain Duties and Responsibilities of Trustee	52
	13.3	No Conflict of Interest	53
	13.4	Conditions Precedent to Trustee’s Obligation to Act	53
	13.5	Resignation and Removal; Appointment of Successor	54
	13.6	Acceptance of Appointment by Successor	55

TABLE OF CONTENTS

(continued)

			Page
	13.7	Trustee May Deal in Subordinate Secured Notes	55
	13.8	No Person Dealing with Trustee Need Inquire	55
	13.9	Investment of Money Held by Trustee	56
	13.10	Trustee Not Required to Give Security	57
	13.11	Trustee Not Required to Possess Subordinate Secured Notes	57
	13.12	Evidence of Compliance	57
	13.13	Form of Evidence	58
	13.14	Certain Rights of Trustee	58
	13.15	Merger, Conversion, Consolidation or Succession to Business	59
	13.16	Action by Trustee to Protect Interests	59
	13.17	Protection of Trustee	59
	13.18	No Global Note	62
	13.19	Trustee Appointed Attorney-In-Fact	62
	13.20	Acceptance of Trusts	62
	13.21	No Liability for Certain Deposited Monies	62
	13.22	Third Party Interests	62
	13.23	Trustee Not Bound to Act	63
	13.24	Privacy Laws	63
	13.25	Insurance	63
	13.26	SEC Reporting Statutes	63
	13.27	Force Majeure	64
SECTION 14	SECURITY		64
	14.1	Corporation’s Security	64
	14.2	Registration of the Security	64
	14.3	After Acquired Property and Further Assurances	64
	14.4	Partial Discharges	65
SECTION 15	SUPPLEMENTAL INDENTURES		65
	15.1	Supplemental Indentures	65
	15.2	Effect of Supplemental Indentures	66
	15.3	Execution of Supplemental Indentures	66
SECTION 16	EVIDENCE OF RIGHTS OF NOTEHOLDERS		66
	16.1	Evidence of Rights of Noteholders	66
SECTION 17	EXECUTION AND FORMAL DATE		67
	17.1	Counterpart Execution	67
	17.2	Formal Date	67

NOTE INDENTURE

THIS INDENTURE is made as of July 27, 2011,

BETWEEN:

GRYPHON GOLD CORPORATION

a Nevada corporation

(the “Corporation”),

611 N. Nevada Street, Carson City, NV, 89703

and

COMPUTERSHARE TRUST COMPANY OF CANADA

a trust company existing under the laws of Canada,

(the “Trustee”)

RECITALS

A. The Corporation is authorized and wishes to create and issue Subordinate Secured Notes in the manner provided in this Indenture (as hereinafter defined).

B. All necessary resolutions of the Directors have been duly passed and other proceedings taken and conditions complied with to make this Indenture valid and binding on the Corporation.

C. The foregoing recitals are made as representations and statements of fact by the Corporation and not by the Trustee.

NOW THEREFORE THIS NOTE INDENTURE WITNESSES and it is hereby covenanted, agreed and declared as follows.

SECTION 1  INTERPRETATION

1.1  Definitions

In this Indenture and in the Subordinate Secured Notes, unless there is something in the subject matter or context inconsistent therewith, the following expressions have the following meanings:

“Affiliate” has the meaning given thereto in the U.S. Securities Act.

“Affiliate Transaction” has the meaning ascribed to such term in Section 8.2(e).

“Agents” means Acumen Capital Finance Partners Limited and Roth Capital Partners, LLC, as agents.

“Applicable Law” means, at any time, with respect to any Person, property, transaction, event or other matter, as applicable, all laws, rules, statutes, regulations, treaties, orders, judgments and decrees, and all official requests, directives, rules, guidelines, orders, policies, practices and other requirements of any Governmental Authority relating or applicable at such time to such Person, property, transaction, event or other matter, and also includes any interpretation thereof by any Person having jurisdiction over it or charged with its administration or interpretation.

“Authorized Investment” means a short term, interest-bearing or discount debt obligation assigned a rating not lower than R-1 (mid) by Dominion Bond Rating Service Limited (or equivalent rating by its successor) or an equivalent rating by Standard and Poor’s Corporation (or its successor).

“Board” means the board of directors of the Corporation.

“Borealis Indebtedness” means Indebtedness incurred by Borealis Mining Company, directly or by way of guarantee, indemnity or other similar arrangement, pursuant to which recourse of the creditor of such Indebtedness extends to the Borealis Mine Assets, whether such recourse is secured or unsecured.

“Borealis Mine” means the Borealis Mining Company gold and silver mine in Mineral County, Nevada.

“Borealis Mine Assets” means the Borealis Mining Company properties and assets comprising the Borealis Mine that relate directly to the operation of the Borealis Mine for the production of gold, copper and molybdenum, including but not limited to all NI 43-101 mineral reserves, plant, equipment and inventory of the Borealis Mine.

“Borealis Mining Company” means Borealis Mining Company, a wholly owned subsidiary of the Corporation, incorporated under the laws of Nevada, which holds a 100% interest in the Borealis Property.

“Borealis Mining Lease” means the Borealis Mining Lease, dated January 24, 1997, as amended, a Memorandum of which is recorded as Entry 115828 in Book 169 at page 489 in the official records of Mineral County, Nevada.

“Business Day” means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day when banking institutions in Vancouver, British Columbia or New York, New York are authorized or obligated by law or regulation to close.

“Capital Lease” means, with respect to a Person, a lease or other arrangement in respect of real or personal property that is required to be classified and accounted for as a capital lease on a balance sheet of the Person in accordance with GAAP.

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“Capital Lease Obligation” means, with respect to a Person, the obligation of the Person to pay rent or other amounts under a Capital Lease.

“Certified Resolution” means a copy of a resolution certified by a senior officer of the Corporation to have been duly passed by the Directors and to be in full force and effect on the date of such certification.

“Change of Control” means the occurrence of any of the following events:

(a) there is a report filed with any securities commission or securities regulatory authority in the United States or Canada, disclosing that any acquiror, other than the Corporation, any Subsidiary of the Corporation or any employee benefit plan of either the Corporation or any Subsidiary of the Corporation, has acquired beneficial ownership (within the meaning of Rule 13d-3 of the U.S. Exchange Act) of, or the power to exercise control or direction over, any voting or equity shares of the Corporation, that together with the voting or equity shares of the Corporation held by acquiror (which for greater certainty, excludes any securities exercisable or convertible into Voting Shares which have not been exercised or converted) would constitute Voting Shares of the Corporation representing more than 50% of the total voting power attached to all Voting Shares of the Corporation then outstanding; or

(b) there is consummated any amalgamation, consolidation, statutory arrangement (involving a business combination) or merger of the Corporation (1) in which the Corporation is not the continuing or surviving corporation or (2) pursuant to which any Voting Shares of the Corporation would be reclassified, changed or converted into or exchanged for cash, Securities or other property, other than (in each case) an amalgamation, consolidation, statutory arrangement or merger of the Corporation in which the holders of the Voting Shares of the Corporation immediately prior to the amalgamation, consolidation, statutory arrangement or merger have, directly or indirectly, more than 50% of the Voting Shares of the continuing or surviving corporation immediately after such transaction.

(c) there is consummated any sale of all or substantially all of the assets of the Corporation, other than a sale in which the holders of the Voting Shares of the Corporation immediately prior to the sale have, directly or indirectly, more than 50% of the Voting Shares of the entity or entities that acquire the assets from the Corporation.

“Closing Date” means July 27, 2011 or such other date as agreed to between the Corporation and the Agents.

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“Contingent Liabilities” means with respect to a Person, any agreement, undertaking or arrangement by which the Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or other, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the obligation, debt or other liability of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any Person.  The amount of any contingent liability will, subject to any limitation contained therein, be deemed to be the outstanding principal amount (or maximum principal amount, if larger) of the obligation, debt or other liability to which the contingent liability is related.

“Corporate Trust Office” means either of the principal trust offices of the Trustee at which, at any particular time, its corporate trust business relative to this Indenture is administered.  At the date hereof, the Corporate Trust Offices of the Trustee are located at 510 Burrard Street, 3rd Floor, Vancouver, B.C., V6C 3B9.

“Corporation” means Gryphon Gold Corporation, a Nevada corporation, and its successors and assigns.

“Corporation Counsel” means, at any time, legal counsel retained by the Corporation, and acceptable to the Trustee, acting reasonably.

“Corporation’s Auditors” means, at any time, a firm of chartered accountants duly appointed as auditors of the Corporation.

“Debenture and Warrant Purchase Agreement” means the debenture and warrant purchase agreement between the Corporation and any Purchaser under which such Purchaser purchased Subordinate Secured Notes.

“Deferred Purchase Price Obligation” means, with respect to a Person, an obligation issued, incurred or assumed by the Person in connection with the acquisition by the Person of an asset in respect of the deferred purchase price of the asset.

“deemed year” has the meaning ascribed to such term in Section 2.8.

“Directors” means the directors of the Corporation or, whenever duly empowered by a resolution of the directors of the Corporation in accordance with Applicable Law, a committee of the directors of the Corporation, and reference to action by the Directors means action by the directors of the Corporation or action by any such committee.

“Environmental Laws” means all federal, provincial, state, municipal, county, local and other laws, statutes, codes, ordinances, by-laws, rules, regulations, policies, guidelines, certificates, approvals, permits, consents, directions, standards, judgments, orders and other authorizations, as well as common law, civil and other jurisprudence or authority, in each case domestic or foreign, having the force of law at any time relating in whole or in part to any Environmental Matters and any permit, order, directions, certificate, approval, consent, registration, licence or other authorization of any kind held or required to be held in connection with any Environmental Matters.

4

“Environmental Matters” means:

(a) condition or substance, heat, energy, sound, vibration, radiation or odour that may affect any component of the earth and its surrounding atmosphere or affect human health or any plant, animal or other living organism; and

(b) any waste, toxic substance, contaminant or dangerous good or the deposit, release or discharge of any thereof into any component of the earth and its surrounding atmosphere.

“Event of Default” has the meaning ascribed to such term in Section 9.1.

“Extraordinary Resolution” has the meaning ascribed to such term in Section 11.13.

“Financial Instrument Obligations” means, with respect to any Person, obligations arising under:

(a) interest rate swap agreements, forward rate agreements, floor, cap or collar agreements, futures or options, insurance or other similar agreements or arrangements, or any combination thereof, entered into or guaranteed by the Person where the subject matter thereof is interest rates or the price, value or amount payable thereunder is dependent or based upon interest rates or fluctuations in interest rates in effect from time to time (but excluding conventional floating rate indebtedness);

(b) currency swap agreements, cross-currency agreements, forward agreements, floor, cap or collar agreements, futures or options, insurance or other similar agreements or arrangements, or any combination thereof, entered into or guaranteed by the Person where the subject matter thereof is currency exchange rates or the price, value or amount payable thereunder is dependent or based upon currency exchange rates or fluctuations in currency exchange rates in effect from time to time; and

(c) any agreement for the making or taking of any commodity (including coal, natural gas, oil and electricity), swap agreement, floor, cap or collar agreement or commodity future or option or other similar agreement or arrangement, or any combination thereof, entered into or guaranteed by the Person where the subject matter thereof is any commodity or the price, value or amount payable thereunder is dependent or based upon the price or fluctuations in the price of any commodity;

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or any other similar transaction, including any option to enter into any of the foregoing, or any combination of the foregoing, in each case to the extent of the net amount due or accruing due by the Person under the obligations determined by marking the obligations to market in accordance with their terms.

 “GAAP” means, as at any date of determination, accounting principles generally accepted as at such date in the jurisdiction in which the applicable Persons are reported (which as at the date of this Indenture is the United States for the Corporation).

“Governmental Authority” means, when used with respect to any Person, any government, parliament, legislature, regulatory authority, agency, tribunal, department, commission, board, instrumentality, court, arbitration board or arbitrator or other law, regulation or rule-making entity having or purporting to have jurisdiction on behalf of, or pursuant to the laws of, Canada, the United States or any country in which such Person is incorporated, continued, amalgamated, merged or otherwise created or established or in which such Person has an undertaking, contractual obligation, carries on business or holds property, or any province, territory, state, municipality, district or political subdivision of any such country or of any such province, territory or state of such country.

 “Indebtedness” means, with respect to a Person, without duplication:

(a) all obligations of the Person for borrowed money, including obligations with respect to bankers’ acceptances and contingent reimbursement obligations relating to letters of credit and other financial instruments;

(b) all Financial Instrument Obligations of the Person;

(c) all Deferred Purchase Price Obligations of the Person;

(d) all Capital Lease Obligations and Purchase Money Obligations of the Person; and

(e) all Contingent Liabilities of the Person with respect to obligations of another Person if such obligations are of the type referred to in Subsections (a) to (d) above.

“Indenture Documents” means this Indenture, the Security Documents, the Note Certificate and any ancillary documents executed by the Corporation in connection therewith.

“Interest Payment Date” means a date on which interest is due and payable in accordance with the terms of the Subordinate Secured Notes.

“Lien” means any mortgage, charge, security interest, pledge, lien (statutory or otherwise) hypothec, tax lien, statutory lien, trust or deemed trust, adverse claim, construction lien materialman’s lien or charge or encumbrance of any kind whatsoever.

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“Maturity Date” means, with respect to a Subordinate Secured Note, the date on which the principal of such Subordinate Secured Note becomes due and payable as therein or herein provided, whether at the Stated Maturity thereof or by declaration of acceleration, call for redemption or otherwise.

“MI 62-104” means Multilateral Instrument 62-104 - Take-Over Bids and Issuer Bids, dated February 1, 2008, and all successors or replacements thereof.

 “NI 43-101” means National Instrument 43-101 - Standards of Disclosure for Mineral Projects, dated December 30, 2005, and all successors or replacements thereof.

“Note Certificate” means a Subordinate Secured Note Certificate representing all or a portion of the aggregate principal amount of the Subordinate Secured Notes issued in the name of the Holder.

“Noteholder” or “Holder” means, at a particular time, a Person entered in the Register as a holder of one or more Subordinate Secured Notes outstanding at such time.

“Noteholders’ Request” means an instrument signed in one or more counterparts by Noteholders holding not less than 33-1/3% of the aggregate principal amount of the outstanding Subordinate Secured Notes requesting or directing the Trustee to take or refrain from taking the action or proceeding specified therein.

“NSR” means the net smelter royalty in the Borealis Mine payable to Richard J. Cavell TTTEE F/T Richard J. Cavell Trust dated 02/23/1994, Hardrock Mining Company, and John W. Whitney pursuant to the Borealis Mining Lease.

“Obligations” means, without duplication, with respect to a Person, all items which, in accordance with GAAP, would be included as liabilities on the liability side of the balance sheet of the Person and all Contingent Liabilities of the Person.

“Officer’s Certificate” means a certificate of the Corporation signed by one officer of the Corporation in his or her capacity as such officer and not in his or her personal capacity.

“Ordinary Resolution” has the meaning ascribed to such term in Section 11.12.

“Paying Agent” means a Person authorized by the Corporation to pay the principal amount or interest payable in respect of any Subordinate Secured Notes on behalf of the Corporation, and may include the Trustee.

“Permitted Affiliate Transaction” has the meaning ascribed to such term in Section 8.2(e).

“Permitted Borealis Indebtedness” means:

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(a) obligations in respect of the Subordinate Secured Notes, performance and surety bonds and completion guarantees provided by Borealis Mining Company in the ordinary course of business;

(b) Purchase Money Obligations and Capital Lease Obligations of the Corporation or its Subsidiaries;

(c) all Indebtedness under agreements related to the general development, construction and operation of the Borealis Mine;

(d) all present and future Security Interests held as security for the payment or performance of any present or future debts, liabilities or obligations under any agreements, instruments, documents related or delivered or entered into in connection with a Senior Creditor Transaction as they may be entered into or otherwise, from time to time, be amended, supplemented or otherwise modified (including without limitation the registration of any security granted by Borealis Mining Company or the Corporation thereunder)

(e) Indebtedness of the Corporation or any of its Subsidiaries which is at all times subordinate in priority of payment to the Obligations of the Corporation to the Noteholders under the Subordinate Secured Notes and this Indenture pursuant to a subordination agreement in form and substance acceptable to the Trustee;

(f) inter-company Indebtedness as between the Corporation and any of its Subsidiaries;

(g) Indebtedness of the Corporation or any of its Subsidiaries comprising Financial Instrument Obligations.

(h) Indebtedness in respect of the NSR; and

(i) Obligations or amounts owed to trade creditors, suppliers and service providers and accruals in relation thereto in the ordinary course of business, in each case due and payable or outstanding for less than 90 days.

“Permitted Encumbrances” means:

(a) any Security Interest created pursuant to the Security Documents;

(b) any Security Interest constituted by a Purchase Money Mortgage or Capital Lease or similar title retention with respect to, or any Security Interest over, goods acquired in the ordinary course of business of the Corporation or any of its Subsidiaries;

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(c) any Security Interest or deposit under workers’ compensation, social security or similar legislation or in connection with bids, tenders, leases, contracts or expropriation proceedings or to secure public or statutory obligations, surety and appeal bonds or costs of litigation where required by law;

(d) any Security Interest or privilege imposed by law, such as builders’, mechanics’, materialman’s lien, carriers’, warehousemen’s and landlords’ liens and privileges evidencing obligations which are not yet due and payable or are not more than 30 days past due; or any Security Interest or privilege arising out of judgments or awards with respect to which, at the time an appeal or proceedings for review is being prosecuted and with respect to which it has secured a stay of execution pending such appeal or proceedings for review; or any Security Interest for taxes, assessments or governmental charges or levies not at the time due and delinquent or the validity of which is being contested at the time in good faith; or any undetermined or inchoate Security Interest or privilege incidental to current operations that has not been filed pursuant to law against Borealis Mining Company or that relates to obligations not due or delinquent; or the deposit of cash or securities in connection with any Security Interest or privilege referred to in this Subsection (d);

(e) any right reserved to or vested in any municipality or governmental or other public authority by the terms of any lease, licence, franchise, grant or permit held or acquired by Borealis Mining Company, or by any statutory provision, to terminate the lease, licence, franchise, grant or permit or to purchase assets used in connection therewith or to require annual or other periodic payments as a condition of the continuance thereof;

(f) any Security Interest or right of distress reserved in or exercisable under any lease for rent to which the Corporation or any of its Subsidiaries is a party and for compliance with the terms of the lease;

(g) any Security Interest created or assumed by the Corporation or any of its Subsidiaries in favour of a public utility or any municipality or governmental or other public authority when required by the utility, municipality or other authority;

(h) all present and future Security Interests created in relation to the Subordinate Secured Notes;

(i) all present and future Security Interests held as security for the payment or performance of any present or future debts, liabilities or obligations under any agreements, instruments, documents related or delivered or entered into in connection with a Senior Creditor Transaction permitted hereunder as they may be entered into or otherwise, from time to time, be amended, supplemented or otherwise modified (including without limitation the registration of any security granted by Borealis Mining Company or the Corporation thereunder);

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(j) all present and future Security Interests created or granted by the Corporation or any of its Subsidiaries that are at all times subordinate in priority of payment to the Obligations of the Corporation to the Noteholders under the Subordinate Secured Notes and this Indenture pursuant to a subordination agreement in form and substance acceptable to the Trustee based on the advice of Trustee Counsel;

(k) any Security Interest created in relation to the shares of Borealis Mining Company for the benefit of the Corporation or to secure any obligations or Indebtedness as between any of the Corporation and its Subsidiaries, provided always that such Security Interest is subordinated in priority to the Security Interest securing the Subordinate Secured Note Indebtedness;

(l) any reservations, limitations, provisos and conditions expressed in original grants from any Governmental Authority; and

(m) any minor encumbrance, such as easements, rights-of-way, servitudes or other similar rights in land granted to or reserved by other Persons, rights-of-way for sewers, electric lines, telegraph and telephone lines, oil and natural gas pipelines and other similar purposes, or zoning or other restrictions applicable to Borealis Mining Company’s use of real property, that do not in the aggregate materially detract from the value of the property or materially impair its use in the operation of the business of Borealis Mining Company.

“Person” means an individual, corporation, body corporate, limited partnership, general partnership, joint stock company, association, joint venture, association, company, trust, bank, fund, Governmental Authority or other entity or organization, whether or not recognized as a legal entity.

“Privacy Laws” has the meaning ascribed to such term in Section 13.24.

“Purchase Money Mortgage” means, with respect to a Person, any Security Interest created or assumed by the Person to secure a Purchase Money Obligation provided that such Security Interest is limited to the asset financed by such Purchase Money Obligation and is created or assumed not later than three months after such Purchase Money Obligation is issued, incurred or assumed.

“Purchase Money Obligation” means, with respect to a Person, indebtedness of the Person issued, incurred or assumed to finance all or part of the cost of acquiring any asset for the Person, other than shares, bonds and other Securities, or constructing, installing or improving any real property or fixtures of the Person, provided that the indebtedness is issued, incurred or assumed within 12 months after such acquisition, construction, installation or improvement, and includes any extension, renewal or refunding of any such indebtedness so long as the principal amount thereof outstanding on the date of such extension, renewal or refunding is not increased.

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“Purchase Notice” shall have the meaning ascribed to such term in Section 6.3.

“Qualifying Change of Control” means circumstances in which a Change of Control has occurred and either:

(a) the debt rating of the acquiror of the Corporation, either before or after the Change of Control is lower than the Corporation’s debt rating (as such debt rating is determined based on debt ratings from recognized rating agencies, or if no such rating exists, as determined by an independent investment bank retained by the Corporation); or

(b) more than 50% of the members of the Board are or will be control persons of the Corporation after the completion of the Change of Control.

“Qualifying Change of Control Notice” has the meaning ascribed to such term in Section 6.2.

“Qualifying Change of Control Purchase Date” means the date specified in a Purchase Notice as the date on which the purchase of Subordinate Secured Notes pursuant to a Change of Control will be completed and payment made.

“Qualifying Change of Control Purchase Price” has the meaning ascribed to such term in Section 6.1.

“Record Date” means the date for determining the Holders of Subordinate Secured Notes entitled to receive payment of interest on an Interest Payment Date, which date shall be the tenth Business Day prior to such Interest Payment Date or such other date as shall be specified in a Certified Resolution delivered to the Trustee.

“Register”has the meaning ascribed to such term in Section 3.1.

“Registrar”has the meaning ascribed to such term in Section 3.1.

"Rule 144" means Rule 144 promulgated under the U.S. Securities Act.

"Secured Assets" means the “Collateral” as defined in the Security Agreement.

“Securities” means stocks, shares, units, instalment receipts, voting trust certificates, bonds, notes, other evidences of indebtedness, or other documents or instruments commonly known as securities or any certificates of interest, shares or participations in temporary or interim certificates for, receipts for, guarantees of, or warrants, options or rights to subscribe for, purchase or acquire any of the foregoing.

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“Security Agreement” means the security agreement in the form attached as Schedule “A” hereto, pursuant to which the Corporation shall grant to the Trustee for the benefit of the Noteholders a security interest in and to the property and assets of the Corporation, including a pledge of the common stock of Borealis Mining Company.

 “Security Documents” means the security documents consisting of the Security Agreement and any document that may be filed in connection with perfection of the Security Interest.

“Security Interest” means any security interest, assignment by way of security, mortgage, charge (whether fixed or floating), hypothec, pledge, lien or other encumbrance on or interest in property or assets that secures the payment of Obligations.

“SEC” means the United States Securities and Exchange Commission.

 “Senior Creditor” means a holder of Senior Creditor Debt.

“Senior Creditor Debt” means any current or future commitment (contingent or otherwise) payable under any Senior Creditor Obligation.

“Senior Creditor Obligation” means any current or future commitment (contingent or otherwise) by any bank, lender, creditor or other Person that agrees or advances, lends, loans, extends credit to, or provides credit, monies or assets to the Corporation, Borealis Mining Company or any Subsidiary, secured by a Security Interest, in an aggregate amount of up to US$5 million thereunder, that (i) is solely for the purposes of mine construction, bonding, exploration expenditures, environmental, permitting, equipment purchases, or purchase money security interests and (ii) the instrument creating or evidencing the same or the assumption or guarantee thereof (or related agreements or documents to which the Corporation, Borealis Mining Company or any Subsidiary of the Corporation is a party, including any all indebtedness of such person for borrowed money, indebtedness evidenced by notes, bonds, debentures or other securities) that expressly provides that such Senior Creditor Obligation shall be “Senior Creditor Debt” for purposes of this Indenture.  No consent from the Agents or Noteholders shall be required in connection with the any Senior Creditor Obligation.  Trustee shall rely without further investigation on an officer’s certificate confirming that indebtedness is Senior Creditor Debt.

“Senior Creditor Subordination Agreement” means a subordination agreement and/or intercreditor agreement to subordinate the Subordinate Secured Note Indebtedness to Senior Creditor Debt in the form requested by the Corporation.

“Senior Creditor Transaction” means any transaction giving rise to a Senior Creditor Obligation.

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“Stated Maturity” means the date fixed and specified in a Subordinate Secured Note as the date on which the principal of such Subordinate Secured Note is due and payable.

“Subordinate Secured Note Indebtedness” means all present and future debts, liabilities and obligations of the Corporation to the Noteholders under and in connection with this Indenture and the Subordinate Secured Notes, including all principal money owing on the Subordinate Secured Notes,  interest (including interest on overdue principal interest) and all fees paid and other money from time to time owing pursuant to the terms of this Indenture and on the Subordinate Secured Notes.

“Subordinate Secured Notes” means the 10% Subordinate Secured Notes of the Corporation issued or to be issued pursuant to this Indenture.

“Subsidiary”has the meaning given thereto in the U.S. Securities Act.

“Supplemental Indenture” means an indenture supplemental to this Indenture pursuant to which, among other things, the provisions of this Indenture may be amended.

“TSX” means the Toronto Stock Exchange.

“Trustee” means the Person named as the “Trustee” in this Indenture, until a successor of such Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Trustee” shall refer instead to such successor Trustee.

“Trustee Counsel” means, at any time, legal counsel retained by the Trustee, which may not be counsel to the Corporation.

“U.S. Private Placement Legend” means the legend set forth in Section 3.11(b), which is required to be placed on all Subordinate Secured Notes issued under this Indenture.

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

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

“Voting Shares” means shares in the capital of a corporation having voting power under ordinary circumstances to vote in the election of directors of the corporation.

1.2  Meaning of “outstanding” for Certain Purposes

Every Subordinate Secured Note certified and delivered by the Trustee hereunder shall be deemed to be outstanding until it is cancelled or delivered to the Trustee for cancellation or money for the payment thereof has been set aside pursuant to Section 10, provided that:

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(a) if a new Subordinate Secured Note has been issued in substitution for a Subordinate Secured Note that has been mutilated, lost, stolen or destroyed, only the new Subordinate Secured Note shall be counted for the purpose of determining the aggregate principal amount of Subordinate Secured Notes outstanding;

(b) Subordinate Secured Notes that have been partially redeemed or purchased shall be deemed to be outstanding only to the extent of the unredeemed or unpurchased part of the principal amount thereof; and

(c) for the purpose of any provision of this Indenture entitling Holders of outstanding Subordinate Secured Notes to vote, sign consents, requisitions or other instruments or take any other action under this Indenture or to constitute a quorum at any meeting of Noteholders, Subordinate Secured Notes owned directly or indirectly by the Corporation or any Affiliate of the Corporation shall be disregarded, provided that:

(i) for the purpose of determining whether the Trustee shall be protected in acting and relying on any such vote, consent, requisition or other instrument or action or on the Noteholders present or represented at any meeting of Noteholders constituting a quorum, only the Subordinate Secured Notes which the Trustee knows are so owned shall be so disregarded; and

(ii) Subordinate Secured Notes so owned that have been pledged in good faith other than to the Corporation or an Affiliate of the Corporation shall not be disregarded if the pledgee shall establish to the satisfaction of the Trustee the pledgee’s right to vote, sign consents, requisitions or other instruments or take such other actions free from the control of the Corporation or any Affiliate of the Corporation.

1.3  Interpretation Not Affected by Headings

The division of this Indenture into Sections and clauses, the provision of a table of contents and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation hereof.

1.4  Extended Meanings

In this Indenture, unless otherwise expressly provided herein or unless the context otherwise requires, words importing the singular number include the plural and vice versa; words importing gender include the masculine, feminine and neuter genders; references to “Indenture”, “this Indenture”, “hereto”, “herein”, “hereof”, “hereby”,“hereunder” and similar expressions refer to this Indenture, and not to any particular Section, Subsection, clause or other portion hereof, and include all Schedules and amendments hereto, modifications or restatements hereof, and any and every Supplemental Indenture; and the expressions “Section”, “Subsection”, “clause” and “Schedule” followed by a number, letter, or combination of numbers and letters refer to the specified Section, Subsection or clause of or Schedule to this Indenture.

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1.5  Day Not a Business Day

If any day on which an amount is to be determined or an action is to be taken hereunder at a particular location is not a Business Day at such location, then such amount shall be determined or such action shall be taken at or before the requisite time on the next succeeding day that is a Business Day at such location.

1.6  Currency

Except as otherwise provided herein, all references in this Indenture to “CAD dollars” or “CAD$” are to lawful money of Canada.

1.7  Statutes

Each reference in this Indenture to a statute is deemed to be a reference to such statute as amended, re-enacted or replaced from time to time.

1.8  Invalidity of Provisions

Each provision in this Indenture or in a Subordinate Secured Note is distinct and severable and a declaration of invalidity or unenforceability of any such provision by a court of competent jurisdiction shall not affect the validity or enforceability of any other provision hereof or thereof.

1.9  Applicable Law

This Indenture and the Subordinate Secured Notes shall be governed by and construed with the internal laws of the State of New York, without giving effect to any of the conflicts of law principles which would result in the application of the substantive law of another jurisdiction and shall be treated in all respects as New York contracts.  Notwithstanding the foregoing, the performance or discharge by the Trustee of any of its rights, powers, duties or responsibilities under this Agreement and the Security Documents shall be construed in accordance with the laws of the Province of British Columbia and the federal laws of Canada applicable therein.

SECTION 2  THE SUBORDINATE SECURED NOTES

2.1  Designation and Issuance of Subordinate Secured Notes

The Subordinate Secured Notes shall be designated as the “10% Subordinate Secured Notes due July 28, 2012”, shall be issued on the Closing Date in CAD$1,000 principal amount denominations or integral multiples thereof, and shall bear interest at 10% per annum, accruing from the Closing Date, payable quarterly in arrears, in equal instalments, on March 31, June 30, September 30 and December 31 of each year, with the first payment being made on September 30, 2011.

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2.2  Description of the Subordinate Secured Notes

The aggregate principal amount of Subordinate Secured Notes that may be issued under this Indenture is limited to CAD$3,000,000.  The Subordinate Secured Notes shall be direct obligations of the Corporation dated July 27, 2011 (being their date of issue) and will become due and payable, together with all accrued interest and unpaid interest thereon, on July 28, 2012. The Subordinate Secured Notes shall be secured by a first charge on the Secured Assets, subject only to Permitted Encumbrances and Senior Creditor Obligations.  The Subordinate Secured Notes shall be subordinate to Senior Creditor Obligations and Senior Creditor Debt.

2.3  Form of Subordinate Secured Notes

The Subordinate Secured Notes shall be in the form attached hereto as Schedule 1.  The Subordinate Secured Notes may be engraved, lithographed, printed, mimeographed or typewritten, or partly in one form and partly in another, as the Corporation may determine, provided that if a Subordinate Secured Note is issued in mimeographed or typewritten form, the Corporation, on the demand of the Holder thereof, shall make available within a reasonable time after such demand, without expense to such Holder, an engraved, lithographed or printed Subordinate Secured Note in exchange therefor.

The Corporation in issuing the Subordinate Secured Notes may use "CUSIP" and "ISIN" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" and "ISIN" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Subordinate Secured Notes or as contained in any notice and that reliance may be placed only on the other identification numbers printed on the Subordinate Secured Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Corporation shall promptly notify the Trustee of any change in the "CUSIP" or "ISIN" numbers.

2.4  Subordinate Secured Notes to Rank Pari Passu

The Subordinate Secured Notes shall be subordinate obligations of the Corporation and shall rank pari passu (equally and rateably with each other).

2.5  No Book Entry

Each Subordinate Secured Note shall be in fully registered form shall be issued to the beneficial owners of such Subordinate Secured Notes or their nominees.  Every Subordinate Secured Note authenticated and delivered upon registration of transfer of a Subordinate Secured Note, or in exchange for or in lieu of a Subordinate Secured Note or any portion thereof, shall be authenticated and delivered in the form of, and shall be, a Subordinate Secured Note in the name of the beneficial owners of such Subordinate Secured Notes or their nominees.

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2.6  Signatures on Subordinate Secured Notes

All Subordinate Secured Notes shall be signed (either manually or by facsimile signature) by one or more of the following officers of the Corporation: the chairman of the Board, the vice-chairman of the Board, the chief executive officer, the president, a vice-president, the chief financial officer and the corporate secretary.  A facsimile signature on any Subordinate Secured Note shall for all purposes of this Indenture be deemed to be the signature of the individual whose signature it purports to be and to have been signed at the time such facsimile signature was reproduced, and each Subordinate Secured Note so signed shall be valid and binding upon the Corporation notwithstanding that the individual whose signature (either manual or facsimile) appears on a Subordinate Secured Note is not at the date of this Indenture or at the date of the Subordinate Secured Note or at the date of the certification and delivery thereof an officer of the Corporation.

2.7 Certification

No Subordinate Secured Note issued shall be obligatory or entitle the Holder thereof to the benefit thereof until a certificate thereon has been signed by or on behalf of the Trustee substantially in the form set out in the form of Subordinate Secured Note attached as Schedule 1 or in some other form acceptable to the Trustee.  Such certificate on any Subordinate Secured Note shall be conclusive evidence that such Subordinate Secured Note has been duly issued hereunder and is a valid obligation of the Corporation.

The certificate of the Trustee signed on a Subordinate Secured Note shall not be construed as a representation or warranty by the Trustee as to the validity of this Indenture or of such Subordinate Secured Note or its issuance, and the Trustee shall not be liable for the use made of such Subordinate Secured Note or the proceeds of issuance thereof.  The certificate of the Trustee signed on any Subordinate Secured Note shall, however, be a representation and warranty by the Trustee that such Subordinate Secured Note has been duly certified by or on behalf of the Trustee pursuant to the provisions of this Indenture.

2.8  Concerning Interest

Each Subordinate Secured Note, whether issued originally or in exchange or in substitution for previously issued Subordinate Secured Notes, shall bear interest from and including the later of (i) its date of issue; and (ii) the last Interest Payment Date to which interest shall have been paid or made available for payment on the outstanding Subordinate Secured Notes.  Interest on the principal amount of each Subordinate Secured Note shall be payable quarterly in arrears in equal instalments on March 31, June 30, September 30 and December 31 (each an “Interest Payment Date” and, collectively, the “Interest Payment Dates”) of each year and shall be payable, commencing September 30, 2011, on each Interest Payment Date. For greater certainty, the first interest payment on the Subordinate Secured Notes will be payable on September 30, 2011 in the amount of CAD$17.53 per CAD$1,000 principal amount of notes and will represent accrued interest payable from and including July 27, 2011 to but excluding September 30, 2011.  For greater certainty, in calculating interest under this Indenture or under a Subordinate Secured Note for any period, unless otherwise specifically stated, the first day of such period shall be included and the last day of such period shall be excluded.

Interest shall be computed on the basis of a year of 365 days or 366 days in a leap year, as the case may be.  For any period that is not an equal quarterly payment, interest shall be calculated for the actual number of days in such period excluding the date of payment.

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Wherever in this Indenture or a Subordinate Secured Note there is mention, in any context, of the payment of interest, such mention is deemed to include the payment of interest on amounts in default to the extent that, in such context, such interest is, was or would be payable pursuant to this Indenture or such Subordinate Secured Note, and express mention of interest on amounts in default in any of the provisions of this Indenture shall not be construed as excluding such interest in those provisions of this Indenture in which such express mention is not made.

If the date for payment of any amount of principal and interest in respect of a Subordinate Secured Note is not a Business Day at the place of payment, then payment shall be made on the next Business Day at such place and the Holder of such Subordinate Secured Note shall not be entitled to any further interest or other payment in respect of the delay.

The Corporation shall pay the interest due upon the principal amount of a Subordinate Secured Note (except interest payable on maturity or redemption of such Subordinate Secured Note which, at the option of the Corporation, may be paid only upon presentation of such Subordinate Secured Note for payment) by forwarding or causing to be forwarded by same day delivery at least three (3) Business Days prior to the applicable Interest Payment Date, a cheque for such interest (less any tax required by law to be deducted or withheld) payable on the applicable Interest Payment Date to the Paying Agent to be sent to the Holder of such Subordinate Secured Note on the Record Date for such payment at the Holder’s address appearing on the Register unless otherwise directed in writing by such Holder or, in the case of joint Holders, payable to all such joint Holders and addressed to one of them at the last address appearing in the Register and negotiable at par at each of the places at which interest upon such Subordinate Secured Note is payable.  The forwarding of such cheque shall satisfy and discharge the liability for the interest on such Subordinate Secured Note to the extent of the sum represented thereby (plus the amount of any tax deducted or withheld) unless such cheque is not paid on presentation at any of the places at which such interest is payable. In the event of the non-receipt of such cheque by the applicable Noteholder or the loss, theft or destruction thereof, the Corporation or the Paying Agent, upon being furnished with evidence of such non-receipt, loss, theft or destruction and indemnity reasonably satisfactory to it, shall issue or cause to be issued to such Noteholder a replacement cheque for the amount of such cheque.  Notwithstanding the foregoing, the Corporation, at its option, may cause the amount payable in respect of interest to be paid to a Noteholder by wire transfer to an account maintained by such Noteholder or in any other manner reasonably acceptable to the Trustee.

If payment of interest is made by cheque, such cheque shall be forwarded at least two Business Days prior to the applicable Interest Payment Date, and if payment is made in any other manner, such payment shall be made in a manner whereby the recipient receives credit for such payment on the applicable Interest Payment Date, provided the Trustee and the Paying Agent shall only forward such cheques upon receipt of the full amount of interest being paid in immediately available funds pursuant to Section 8.4.

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2.9  Issue of Substitutional Subordinate Secured Notes

If any Subordinate Secured Note issued and certified hereunder becomes mutilated or is lost, destroyed or stolen, the Corporation, in its discretion, may issue, and thereupon the Trustee shall certify and deliver, a replacement Subordinate Secured Note of like date and tenor as the one mutilated, lost, destroyed or stolen in exchange for and in place of and upon cancellation of such mutilated Subordinate Secured Note or in lieu of and in substitution for such lost, destroyed or stolen Subordinate Secured Note.  The substituted Subordinate Secured Note shall be in substantially the form of Subordinate Secured Note attached as Schedule 1 to this Indenture, shall be reasonably approved by the Trustee and shall be entitled to the benefit hereof and rank equally in accordance with its terms with all other Subordinate Secured Notes.  The applicant for a replacement Subordinate Secured Note shall bear the cost of the issue thereof and in case of loss, destruction or theft shall, as a condition precedent to the issue thereof, furnish to the Corporation and to the Trustee such evidence of ownership and of the loss, destruction or theft of the Subordinate Secured Note so lost, destroyed or stolen as shall be satisfactory to each of the Corporation and the Trustee in their discretion, and such applicant shall also furnish an indemnity and surety bond, in amount and form satisfactory to each of the Corporation and the Trustee in their discretion, and shall pay the reasonable charges and expenses of the Corporation and the Trustee in connection therewith.

2.10  Option of Holder as to Place of Payment

Except as herein otherwise provided, all amounts which at any time become payable on account of any Subordinate Secured Note or any interest thereon shall be payable at the option of the Holder at any of the places at which the principal and interest in respect of such Subordinate Secured Note are payable.

2.11  Record of Payments

The Trustee shall maintain accounts and records evidencing each payment of principal and interest on Subordinate Secured Notes, which accounts and records shall constitute, in the absence of manifest error, prima facie evidence thereof.

None of the Corporation, the Trustee, any other Registrar and any Paying Agent shall be liable or responsible to any Person for any aspect of the records related to or payments made on account of beneficial interests in any Subordinate Secured Note or for maintaining, reviewing, or supervising any records relating to such beneficial interests.

2.12  Surrender for Cancellation

If the principal amount due upon any Subordinate Secured Note shall become payable before the Stated Maturity thereof, the Person presenting such Subordinate Secured Note for payment shall surrender the same for cancellation to the Corporate Trust Office and the Corporation shall pay or cause to be paid the interest accrued and unpaid thereon (computed on a per diem basis if the date fixed for payment is not an Interest Payment Date).

2.13  Right to Receive Indenture

Each Noteholder is entitled to receive from the Corporation a copy of this Indenture on written request and upon payment of a reasonable copying charge.

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SECTION 3 REGISTRATION, TRANSFER, EXCHANGE AND OWNERSHIP OF SUBORDINATE SECURED NOTES

3.1  Registers

The Corporation shall cause to be kept at the Corporate Trust Office, or at such other place and by such other Person as shall be agreed by the Corporation and the Trustee, a central register (the “Register”) (the Trustee being hereinafter also referred to as the “Registrar”) in which shall be entered the names and last known addresses of Holders of Subordinate Secured Notes and the other particulars, as prescribed by law, of the Subordinate Secured Notes held by each of them and of all transfers of such Subordinate Secured Notes.  Such registration shall be noted on such Subordinate Secured Notes by the Registrar.  The Registrar from time to time shall, when requested in writing so to do by the Corporation, furnish the Corporation with a list of the names and last known addresses of the Holders of Subordinate Secured Notes entered on the Register, showing the principal amount and serial numbers of the Subordinate Secured Notes held by each of them.

The Register shall at all reasonable times and upon prior written request be open for inspection by the Corporation, the Trustee and any Noteholder.

3.2  Transfer of Subordinate Secured Notes

A Holder of a Subordinate Secured Note may at any time and from time to time, subject to Section 3.5, have such Subordinate Secured Note transferred at the place at which the Register is kept pursuant to the provisions of Section 3.1.

No transfer of a Subordinate Secured Note shall be effective as against the Corporation unless:

(a) such transfer is made by the Holder of the Subordinate Secured Note or the executor, administrator or other legal representative of, or any attorney for, the Holder, duly appointed by an instrument in form and execution satisfactory to the Registrar, upon surrender to the Registrar of the Subordinate Secured Note and a duly executed form of transfer;

(b) such transfer is made in compliance with Applicable Law;

(c) such transfer is made in compliance with requirements as the Registrar may prescribe;

(d) such transfer has been noted on the Register by the Registrar; and

(e) such transfer is made in compliance with Section 3.3 and 3.11.

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3.3  Restrictions on Transfer of Subordinate Secured Notes

Notwithstanding any other provision of this Indenture, a Subordinate Secured Note registered in the name of a Noteholder or a nominee of the Noteholder may not be transferred except in the following circumstances:

(a) such Subordinate Secured Note may be transferred at any time after the Noteholder has notified the Corporation and the Corporation determines that the Subordinate Secured Note may be transferred pursuant to exemptions from the registration requirements of the U.S. Securities Act and applicable state securities laws; and

(b) such Subordinate Secured Note may be transferred at any time after the Trustee has determined that an Event of Default has occurred and is continuing with respect to the Subordinate Secured Notes, provided that at the time of such transfer such Event of Default has not been waived in accordance with the provisions of this Indenture.

3.4 Transferee Entitled to Registration

The registered transferee of a Subordinate Secured Note shall be entitled, after the appropriate form of transfer is lodged with the Registrar and upon compliance with all other conditions in that regard required by this Indenture or by law, to be entered on the Register as the Holder of such Subordinate Secured Note free from all equities or rights of setoff or counterclaim between the Corporation and the transferor or any previous Holder of such Subordinate Secured Note, except in respect of equities of which the Corporation is required to take notice by statute or by order of a court of competent jurisdiction.

3.5  Closing of Register; Recording of Certain Transfers

The Corporation shall not have the power to close the Register.

Neither the Corporation nor the Registrar shall be required to effect transfers or exchanges of Subordinate Secured Notes on any Interest Payment Date or during the 10 preceding Business Days, provided that such transfer restriction shall not affect the ability of the Noteholders to sell, transfer or assign the Subordinate Secured Notes pursuant to exemptions from the registration requirement of the U.S. Securities Act and applicable state securities laws.

3.6  Exchange of Subordinate Secured Notes

Subject to Section 3.5, Subordinate Secured Notes in any authorized form or denomination may be exchanged upon reasonable notice for Subordinate Secured Notes in any other authorized form or denomination, any such exchange to be for an equivalent aggregate principal amount of Subordinate Secured Notes, carrying the same rate of interest and having the same Maturity Date pursuant to exemptions from the registration requirement of the U.S. Securities Act and applicable securities laws.

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Subordinate Secured Notes may be exchanged at the Corporate Trust Office or at such other place or places as may be specified in the Subordinate Secured Notes and at such other place or places as may from time to time be designated by the Corporation pursuant to Section 8.3.  Any Subordinate Secured Notes tendered for exchange shall be surrendered to the Trustee.  The Corporation shall execute and the Trustee shall certify all Subordinate Secured Notes necessary to carry out such exchanges.  All Subordinate Secured Notes surrendered for exchange shall be cancelled.

3.7  Ownership and Entitlement to Payment

The Person in whose name a Subordinate Secured Note is registered shall be deemed to be the beneficial owner thereof for all purposes of this Indenture and payment of or on account of the principal  and interest on such Subordinate Secured Note shall be made only to or upon the order in writing of such Person, and each such payment shall be a good and sufficient discharge to the Corporation, the Trustee, any other Registrar and any Paying Agent for the amount so paid.

If a Subordinate Secured Note is registered in the name of more than one Person, the principal interest from time to time payable in respect thereof may be paid to the order of all such Persons and each such payment shall be a good and sufficient discharge to the Corporation, the Trustee, any other Registrar and any Paying Agent for the amount so paid.

The Holder for the time being of a Subordinate Secured Note shall be entitled to the principal interest evidenced by such Subordinate Secured Note, free from all equities or rights of setoff or counterclaim between the Corporation and the original or any intermediate Holder thereof except in respect of equities of which the Corporation is required to take notice by statute or by order of a court of competent jurisdiction.  The receipt by any such Holder of any such principal or interest shall be a good and sufficient discharge to the Corporation, the Trustee, any other Registrar and any Paying Agent for the amount so paid, and none of the Corporation, the Trustee, any other Registrar and any Paying Agent shall be bound to inquire into the title of any such Holder.

3.8  Evidence of Ownership

The Corporation and the Trustee may treat the Holder of a Subordinate Secured Note as the beneficial owner thereof without actual production of such Subordinate Secured Note for the purpose of any Noteholders’ Request, requisition, direction, consent, instrument or other document to be made, signed or given by the Holder of such Subordinate Secured Note.

3.9 No Notice of Trusts

Neither the Corporation nor the Trustee nor any other Registrar nor any Paying Agent shall be bound to take notice of or see to the performance or observance of any duty owed to a third Person (whether under a trust, express, implied, resulting or constructive, in respect of any Subordinate Secured Note or otherwise) by the beneficial owner or the Holder of a Subordinate Secured Note or any Person whom the Corporation or the Trustee treats, as permitted or required by law, as the beneficial owner or the Holder of such Subordinate Secured Note, and the Corporation, the Trustee or any other Registrar may transfer any Subordinate Secured Note on the direction of the Person so treated or registered as the Holder thereof, whether named as trustee or otherwise, as though that Person was the beneficial owner of such Subordinate Secured Note.

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3.10  Charges for Transfer and Exchange

For each Subordinate Secured Note exchanged or transferred, the Trustee or other Registrar, except as otherwise herein provided, may charge a reasonable amount for its services and in addition may charge a reasonable amount for each new Subordinate Secured Note issued (such amounts to be agreed upon by the Trustee or other Registrar and the Corporation from time to time), and payment of such charges and reimbursement of the Trustee or other Registrar for any stamp taxes or governmental or other charges required to be paid shall be made by the Person requesting such exchange or transfer as a condition precedent thereto.

(a) Notwithstanding the foregoing, no charge (except a charge to reimburse the Trustee or other Registrar for any stamp taxes or governmental or other charges) shall be made to a Noteholder for any exchange or transfer of Subordinate Secured Notes applied for within a period of 45 days from the date of the first delivery of Subordinate Secured Notes.

3.11 Restrictions on Transfer of Subordinate Secured Notes Under U.S. Securities Law

(a) The Subordinate Secured Notes have not been and will not be registered under the U.S. Securities Act or under any applicable securities laws of any state of the United States.  The Subordinate Secured Notes are “restricted securities” (as defined in Rule 144(a)(3) under the U.S. Securities Act) and may be offered, sold, pledged or otherwise transferred, directly or indirectly, only pursuant to an effective registration statement under the U.S. Securities Act or pursuant to an available exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act, and, in each case, in accordance with applicable state securities laws and, if requested by the Corporation or the Trustee, the Holder furnishes to the Corporation and Trustee an opinion of counsel of recognized standing in form and substance reasonably satisfactory to the Corporation and Trustee to such effect.

(b) Each Subordinate Secured Note shall bear the following legend (the “U.S. Private Placement Legend”) until such time as the same is no longer required under applicable requirements of the U.S. Securities Act or applicable state securities laws:

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THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AND, IF REQUESTED BY THE COMPANY OR TRUSTEE, THE SELLER FURNISHES TO THE COMPANY AND TRUSTEE AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY AND TRUSTEE TO SUCH EFFECT.  

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE [THE DATE THAT IS FOUR (4) MONTHS AND A DAY AFTER THE CLOSING DATE]

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO STOCK EXCHANGE (“TSX”); HOWEVER, THE SAID SECURITIES CANNOT BE TRADED THROUGH THE FACILITIES OF THE TSX SINCE THEY ARE NOT FREELY TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON TSX.

provided, that if any such Subordinate Secured Notes are being sold in compliance with the exemption from registration under the U.S. Securities Act provided by Rule 144 thereunder and in compliance with applicable state securities laws and regulations, if requested by the Corporation or the Trustee, the legend may be removed by delivery to the Trustee and the Corporation of an opinion of counsel of recognized standing or other evidence of exemption, in form and substance reasonably satisfactory to the Corporation and Trustee, to the effect that such legend is no longer required under applicable requirements of the U.S. Securities Act or state securities laws. If a Subordinate Secured Note is tendered for transfer and bears the legend set forth above, the Registrar shall not register such transfer without the prior written consent of the Corporation, and if requested by the Corporation or the Trustee, an opinion of counsel of recognized standing or other evidence of exemption, in form and substance reasonably satisfactory to the Corporation and the Trustee.

SECTION 4  ISSUE AND DELIVERY OF SUBORDINATE SECURED NOTES

4.1  Issuance of Subordinate Secured Notes

The Corporation may issue, and the Trustee shall certify and deliver to or to the order of the Corporation, Subordinate Secured Notes issuable under this Indenture, but only upon receipt by the Trustee of the following on the Closing Date:

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(a) a Certified Resolution authorizing the issuance and requesting the certification and delivery of a specified principal amount of the Subordinate Secured Notes;

(b) an Officer's Certificate stating that no default exists in respect of any of the covenants, agreements or provisions of this Indenture or, if any such default exists, specifying the nature thereof and the action, if any, being taken by the Corporation to remedy such default;

(c) an order of the Corporation for the certification and delivery of such Subordinate Secured Notes specifying the principal amount requested to be certified and delivered; and

(d) an opinion of Corporation Counsel to the effect that all legal requirements in respect of the proposed issue of such Subordinate Secured Notes have been satisfied.

4.2  No Subordinate Secured Notes to be Issued During Default

No Subordinate Secured Notes shall be certified and delivered hereunder if, at the time of such certification and delivery, the Corporation, to the knowledge of the Trustee, is in default hereunder, or would immediately after such issuance be in default hereunder, provided that in each case the Trustee may certify and deliver Subordinate Secured Notes notwithstanding such knowledge if the Trustee shall be satisfied, relying on the advice or opinion of Trustee Counsel or other appropriately qualified experts that such default is not material and that the Corporation is taking appropriate action to remedy such default.

SECTION 5 REDEMPTION AND PURCHASE OF SUBORDINATE SECURED NOTES

5.1  General

The Corporation shall not have the option to redeem the Subordinate Secured Notes.

5.2  Redemption on Change of Control

If Holders holding 90% or more of principal amount of outstanding Subordinate Secured Notes exercise a Qualifying Change of Control Purchase, the Corporation will be required to redeem all remaining Subordinate Secured Notes for cash in CDN$ at the Qualifying Change of Control Purchase Price.  In the event that the Corporation is required to redeem the Subordinate Secured Notes further to a Change of Control, it shall redeem, and the Noteholders shall offer to sell, all of the issued and outstanding Subordinate Secured Notes in accordance with the procedure set out in this section 6 mutatis mutandis.

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5.3  Purchase of Subordinate Secured Notes

The Corporation may, at any time when it is not in default hereunder, purchase all or any of the Subordinate Secured Notes in the open market (which shall include purchase from or through an investment dealer or a firm holding membership on a recognized stock exchange), by tender or by private contract, at any price, in compliance with any applicable securities regulations and stock exchange rules.  All Subordinate Secured Notes so purchased shall forthwith be delivered to the Trustee and shall be cancelled by it and, subject to the following paragraph of this Section 5.3, no Subordinate Secured Notes shall be issued in substitution therefor.

If upon an invitation for tenders, more Subordinate Secured Notes are tendered at the same lowest price than the Corporation is prepared to accept, the Subordinate Secured Notes to be purchased by the Corporation shall be selected by the Trustee, in such manner (which may include selection on a pro rata basis, random selection by computer or any other method) as the Trustee deems equitable and expedient, from the Subordinate Secured Notes tendered by each tendering Noteholder who tendered at such lowest price. For this purpose the Trustee may make, and from time to time amend, regulations with respect to the manner in which Subordinate Secured Notes may be so selected, and regulations so made shall be valid and binding upon all Noteholders, notwithstanding the fact that, as a result thereof, one or more of such Subordinate Secured Notes become subject to purchase in part only.  The Holder of a Subordinate Secured Note of which a part only is purchased, upon surrender of such Subordinate Secured Note for payment, shall be entitled to receive, without expense to such Holder, one or more new Subordinate Secured Notes for the unpurchased part so surrendered, and the Trustee shall certify and deliver such new Subordinate Secured Note or Subordinate Secured Notes upon receipt of the Subordinate Secured Note so surrendered.

5.4  Cancellation of Subordinate Secured Notes

Subject to the provisions of Sections 5.2 and 5.3 as to Subordinate Secured Notes purchased in part, all Subordinate Secured Notes redeemed or purchased in whole or in part by the Corporation shall not be reissued or resold and shall be forthwith delivered to and cancelled by the Trustee, and no Subordinate Secured Notes shall be issued in substitution therefor.

SECTION 6  QUALIFYING CHANGE OF CONTROL PURCHASES

6.1  Qualifying Change of Control Purchase

If a Qualifying Change of Control occurs, the Corporation shall make an offer to redeem the Subordinate Secured Notes for cash in CDN$ at a price equal to 110% of the principal amount of the Subordinate Secured Notes plus accrued and unpaid interest to but excluding the Qualifying Change of Control Purchase Date (“Qualifying Change of Control Purchase Price”) in accordance with the procedures set out in this Section 6.

6.2 Qualifying Change of Control Notice

Within 20 Business Days after the occurrence of a Qualifying Change of Control:

(a) the Corporation shall deliver a written notice of Qualifying Change of Control (the “Qualifying Change of Control Notice”) to the Trustee; and

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(b) following receipt by the Trustee of the Qualifying Change of Control Notice, the Trustee shall mail a copy of the Qualifying Change of Control Notice to each Holder in accordance with the provisions of Section 12.2.

The Trustee shall be under no obligation to ascertain the occurrence of a Qualifying Change of Control or to give notice with respect thereto other than as provided above upon receipt of the Qualifying Change of Control Notice.  The Trustee may conclusively assume, in the absence of written notice to the contrary from the Corporation, that no Qualifying Change of Control has occurred.

The Qualifying Change of Control Notice shall state, among other things the date of the Qualifying Change of Control and, describe briefly the events causing the Qualifying Change of Control.  The Trustee shall rely on the Qualifying Change on Control Notice and Purchase Notice without further investigation.

6.3  Purchase Notice

The Qualifying Change of Control Notice shall be accompanied by a written notice (the “Purchase Notice”) offering to purchase all of the Holder’s Subordinate Secured Notes at any time prior to the close of business on the Qualifying Change of Control Purchase Date, which Purchase Notice shall state, among other things:

(a) the date and time by which the Purchase Notice must be completed and returned by the Holder (to be 5 Business Days before the Qualifying Change of Control Purchase Date) if such offer is acceptable to the Holder;

(b) the Qualifying Change of Control Purchase Date (which date shall be within 30 days following the completion of the Change of Control);

(c) the Qualifying Change of Control Purchase Price;

(d) the name and address of the Trustee;

(e) that the Subordinate Secured Notes must be surrendered to the Trustee at Corporate Trust Office to collect payment;

(f) that the Qualifying Change of Control Purchase Price for the Subordinate Secured Notes as to which a Purchase Notice has been duly given and not withdrawn, together with accrued and unpaid interest thereon, will be paid promptly on the Qualifying Change of Control Purchase Date subject to surrender of the Subordinate Secured Notes as described in Subsection (e);

(g) the procedures that the Holder must follow to exercise rights under Section 6 and a brief description of those rights;

(h) that any Holder delivering to the Trustee a signed Purchase Notice shall have the right to withdraw that Purchase Notice at any time prior to the close of business on the date that is at least 5 Business Days prior to the Qualifying Change of Control Purchase Date by delivery of a written notice of withdrawal to the Trustee in accordance with Section 6.6;

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(i) that interest on those Subordinate Secured Notes in respect of which a Purchase Notice has been given and not withdrawn shall cease to accrue from and after the Qualifying Change of Control Purchase Date; and

(j) that the Subordinate Secured Notes shall be purchased on the Qualifying Change of Control Purchase Date pursuant to the applicable provisions of this Indenture.

6.4 Procedures for Exercising Qualifying Change of Control Purchase

A Holder may exercise its rights specified in Section 6.3 upon delivery to the Trustee of a signed Purchase Notice at any time prior to the date specified in Section 6.3(a) that includes the following information:

(a) the certificate numbers of the Subordinate Secured Notes that the Holder will deliver together with the Note Certificates to be purchased; and

(b) the principal amount of the Subordinate Secured Notes that the Holder will deliver to be purchased, which amount must be CAD$1,000 or an integral multiple thereof.

The delivery of such Subordinate Secured Notes (together with all necessary endorsements as set out in Section 6.9) to the Trustee prior to, on or after the Qualifying Change of Control Purchase Date shall be a condition to the receipt by the Holder of the Qualifying Change of Control Purchase Price therefor; provided that such Qualifying Change of Control Purchase Price shall be paid only if the Subordinate Secured Notes so delivered to the Trustee conform in all respects to the description thereof set forth in the related Purchase Notice.

6.5  Consummation of Purchase

Upon receipt by the Trustee of a Purchase Notice, the Holder of the Subordinate Secured Notes in respect of which such Purchase Notice was given shall (unless such Purchase Notice is withdrawn in accordance with Section 6.6) thereafter be entitled to receive solely the Qualifying Change of Control Purchase Price. The Qualifying Change of Control Purchase Price shall be paid to such Holder on the Qualifying Change of Control Purchase Date (provided the conditions in Section 6.4 have been satisfied).

6.6  Withdrawal of Purchase Notice

A Purchase Notice may be withdrawn at any time prior to the close of business on the date that is at least 5 Business Days before the Qualifying Change of Control Purchase Date, by means of a written notice of withdrawal delivered by the Holder to the Trustee specifying:

(a) the certificate number of the Subordinate Secured Notes in respect of which such notice of withdrawal is being submitted;

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(b) the principal amount of the Subordinate Secured Notes (which shall be CAD$1,000 or an integral multiple thereof) with respect to which such notice of withdrawal is being submitted; and

(c) the principal amount of the Subordinate Secured Notes, if any, to remain subject to the original Purchase Notice, which amount must be CAD$1,000 or an integral multiple thereof.

The Trustee shall promptly return to the respective Holders thereof any Subordinate Secured Notes with respect to which a Purchase Notice has been withdrawn in compliance with this Indenture.

6.7  Notification by Trustee

The Trustee shall promptly notify the Corporation of the receipt of any Purchase Notice and of any written notice of withdrawal thereof.

6.8 Deposit of Qualifying Change of Control Purchase Price

No later than 12 p.m., Vancouver, British Columbia time, on the Business Day prior to the Qualifying Change of Control Purchase Date, the Corporation shall deposit with the Trustee by wire transfer an amount of cash sufficient to pay the aggregate Qualifying Change of Control Purchase Price of all the Subordinate Secured Notes or portions thereof that are to be purchased as of the Qualifying Change of Control Purchase Date, together with accrued and unpaid interest thereon.

6.9  Subordinate Secured Notes Purchased

Any Subordinate Secured Notes that are to be purchased shall be surrendered to the Trustee at the Corporate Trust Office (with due endorsement by, or a written instrument of transfer in form satisfactory to the Corporation and the Trustee duly executed by, the Holder thereof or such Holder’s attorney duly authorized in writing).

6.10  Covenant to Comply with Securities Laws

In connection with any offer to purchase or purchase of Subordinate Secured Notes under this Section 6 the Corporation shall comply with all applicable Canadian federal and provincial securities laws, all applicable U.S. securities laws, and any requirements of any stock exchange on which the Subordinate Secured Notes are then listed, so as to permit the rights and obligations under this Section 6 to be exercised to the greatest extent practicable in the time and in the manner specified in this Section 6.

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SECTION 7  WITHHOLDING TAXES

All payments made by the Corporation with respect to the Subordinate Secured Notes shall be made free and clear of and without deduction for or on account of any present or future tax, duty, levy, impost, assessment, or other governmental charge imposed or levied by or on behalf of the Government of Canada or the United States, as well as any other government or authority, province, state or territory thereof or by any authority or agency therein or thereof as well as any other government or authority having power to tax a Noteholder, unless the Corporation is required to withhold or deduct taxes by law or by the interpretation or administration thereof. If the Corporation is required by such laws or by the interpretation or administration thereof to withhold or deduct any amount from any payment with respect to the Subordinate Secured Notes (including without limitation, any payments for principal, interest, capitalized interest) for or on account of any taxes, the Corporation shall make such withholding or deduction and remit the full amount deducted or withheld to the relevant authority in accordance with Applicable Law.

The Corporation will furnish to the Holders of the Subordinate Secured Notes, within 30 days after the date that the payment of any taxes is due pursuant to Applicable Law, copies of receipts evidencing such payment by the Corporation.

SECTION 8  COVENANTS OF THE CORPORATION

8.1 Positive Covenants in respect of the Corporation and Borealis Mining Company

The Corporation hereby covenants and agrees with the Trustee for the benefit of the Trustee and the Noteholders that the Corporation will:

(a) duly and punctually pay or cause to be paid to each Holder of Subordinate Secured Notes the principal thereof, interest accrued thereon, in each case payable thereon on the dates, at the places, in the currency, and in the manner specified herein or as otherwise provided in such Subordinate Secured Notes;

(b) use the net proceeds received by the Corporation from the issuance of the Subordinate Secured Notes solely:

(i) to finance the development and construction of the Borealis Mine; and

(ii) for other general corporate purposes and general working capital of the Corporation and its Subsidiaries;

(c) subject to the express provisions hereof, so long as any of the Subordinate Secured Notes are outstanding, carry on and conduct or shall cause to be carried on and conducted its business and the business of  Borealis Mining Company in a reasonably proper and efficient manner and shall keep or cause to be kept proper books of account and make or cause to be made therein true and faithful entries of all its dealings and transactions in relation to its business and the business of Borealis Mining Company all in accordance with GAAP for itself and Borealis Mining Company and Borealis Mining Company shall continue to be a direct or indirect wholly-owned subsidiary of the Corporation;

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(d) so long as any Subordinate Secured Notes are outstanding, furnish to the Trustee a copy of the consolidated financial statements, whether annual or interim, of the Corporation and any report of the Corporation’s Auditors thereon at substantially the same time as such financial statements are filed with securities regulatory authorities. Upon receipt of financial statements required to be delivered to the Trustee, the Trustee shall,  while such statements are current, maintain custody of same and make same available for inspection by holders on their reasonable request.  No obligation shall rest with the Trustee to analyze such statements, or evaluate the performance of the Company as indicated therein, in any manner whatsoever;

(e) subject to the express provisions hereof, so long as any of the Subordinate Secured Notes are outstanding, and will cause Borealis Mining Company to, at all times maintain its respective corporate existence, carry on and conduct its respective business in a reasonably proper, efficient and businesslike manner and in accordance with good business practice and diligently maintain, use and operate its respective properties so as to preserve and protect the earnings, incomes, rents, issues and profits thereof; and

(f) and will cause Borealis Mining Company to, from time to time pay or cause to be paid all taxes, rates, levies, assessments (ordinary or extraordinary), government fees or dues lawfully levied, assessed or imposed upon or in respect of its respective property or any part thereof or upon its income and profits as and when the same become due and payable and to withhold and remit any amounts required to be withheld by it from payments due to others and remit the same to any government or agency thereof, and it shall exhibit or cause to be exhibited to the Holder or Trustee, when requested, the receipts and vouchers establishing such payment and shall duly observe and conform to all applicable requirements of any Governmental Authority relative to any of the property or rights of the Corporation and of Borealis Mining Company and all covenants, terms and conditions upon or under which any such property or rights are held; provided, however, that the Borealis Mining Company shall have the right to contest in good faith and diligently by legal proceedings any such taxes, rates, levies, assessments, government fees or dues, and during such contest, may deliver or defer payment or discharge thereof.

8.2  Restrictive Covenants in respect of the Corporation and Borealis Mining Company

The Corporation hereby covenants and agrees with the Trustee for the benefit of the Trustee and the Noteholders that it will not:

(a) and will not permit  Borealis Mining Company to, create, incur, assume or suffer to exist any Lien, other than Permitted Encumbrances;

(b) and will not permit  Borealis Mining Company to, directly or indirectly issue, incur, assume or otherwise become liable for or in respect of any Indebtedness, other than Permitted Borealis Indebtedness;

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(c) convey, sell, lease, assign, transfer or otherwise dispose of any Secured Assets other than granting of liens consisting of the Permitted Encumbrances;

(d) permit  Borealis Mining Company to, convey, sell, lease, assign, transfer or otherwise dispose of any of the Borealis Mine Assets, except as provided in Subsection (e), and except that Borealis Mining Company may:

(i) sell, transfer or otherwise dispose of equipment that is no longer used or useful or surplus equipment, vehicles, inventory and other assets in the ordinary course of business;

(ii) factor, sell or discount without recourse accounts receivable arising in the ordinary course of business in connection with the compromise or collection thereof;

(iii) enter into sale/lease back arrangements in respect of mining equipment comprising Borealis Mine Assets; and

(iv) enter into hedging facilities using unsecured options or other Financial Instrument Obligations;

(e) make or permit Borealis Mining Company to make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of any Affiliate of the Corporation or Borealis Mining Company (each, an “Affiliate Transaction”) other than:

(i) an Affiliate Transaction (a “Permitted Affiliate Transaction”) which is not material to the Corporation on a consolidated basis and the Corporation pledges to the Trustee for the benefit of the Noteholders all of the outstanding voting securities of any new Subsidiary which holds all or part of the Borealis Mine Assets, with such new Subsidiary securities becoming part of the Secured Assets hereunder;

(ii) a Senior Creditor Transaction; and

(iii) nothing in this Indenture shall restrict or prevent any of the Corporation or Borealis Mining Company from incorporating, financing or otherwise dealing with any new Subsidiary, provided always that any such incorporation, financing or other dealings do not result in the creation of any Lien over, or Indebtedness with recourse to, the Borealis Mine Assets and provided that any transfer of the Borealis Mine Assets to a new Subsidiary meets the requirements of a Permitted Affiliate Transaction;

(f) permit  Borealis Mining Company to declare or pay any dividend or make any distribution or payment of any kind;

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(g) permit  Borealis Mining Company to issue, purchase, redeem or otherwise acquire for cash or retire for value any shares of capital stock or any warrants, rights or options to purchase or acquire shares of capital stock;

(h) permit  Borealis Mining Company to enter into any agreement restricting the right of Borealis Mining Company to declare or pay any dividend or make any distribution or payment of any kind; or

(i) permit  Borealis Mining Company to, make any principal payment on, purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for value, prior to any scheduled final maturity, scheduled repayment or scheduled sinking fund payment, any Borealis Indebtedness other than Permitted Borealis Indebtedness, that is not subordinated to the Notes;

except to the extent in the case of Subsections (e), (f), (g) and (i) above, that such declaration, dividend, distribution, payment, purchase, redemption, acquisition, retirement, defeasance, prepayment or decrease is used by the Corporation to repay or purchase the Subordinate Secured Note Indebtedness.

8.3  Maintenance of Offices or Agencies

The Corporation shall maintain, in Vancouver, an office or agency where Subordinate Secured Notes may be presented or surrendered for payment, where Subordinate Secured Notes may be surrendered for registration of transfer or exchange.  The Corporate Trust Office shall be such office or agency of the Corporation, unless the Corporation shall designate and maintain some other office or agency for one or more of such purposes.  The Corporation shall give prompt notice to the Trustee of any change in the location of any such office or agency. If at any time the Corporation shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, and surrenders may be made or served at the Corporate Trust Office, and the Corporation hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands.

The Corporation may from time to time designate one or more other offices or agencies (in or outside of Vancouver), with approval of the Trustee, where the Subordinate Secured Notes may be presented or surrendered for any or all such purposes, and may from time to time rescind such designation provided, however, that no such designation or rescission shall in any manner relieve the Corporation of its obligation to maintain an office or agency in Vancouver for such purposes.  The Corporation will give prompt written notice to the Trustee of any such designation or rescission and any change in the location of any such office or agency.

8.4  Money for Payments to Be Held in Trust

If the Corporation shall at any time act as its own Paying Agent, it shall, on or before each due date of the principal and interest on any of the Subordinate Secured Notes, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal  and interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and shall promptly notify the Trustee of its action or failure to so act.

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Whenever the Corporation shall have one or more Paying Agents for the Subordinate Secured Notes, it shall, no later than 3 Business Days on or before each due date of the principal of,  and interest on, any Subordinate Secured Notes, deposit with a Paying Agent a sum in same day funds sufficient to pay the principal interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal or interest and (unless such Paying Agent is the Trustee) the Corporation shall promptly notify the Trustee of such action or any failure so to act.

The Corporation shall cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section that such Paying Agent will:

(a) hold all sums held by it for the payment of the principal  and interest on Subordinate Secured Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided;

(b) give the Trustee notice of any default by the Corporation (or any other obligor upon the Subordinate Secured Notes) in the making of any payment of principal interest; and

(c) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent.

The Corporation may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by an order of the Corporation direct any Paying Agent to pay, to the Trustee all sums held in trust by the Corporation or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Corporation or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money.

Any money deposited with the Trustee or any Paying Agent, or then held by the Corporation, in trust for the payment of the principal interest on any Subordinate Secured Note and remaining unclaimed for six years after such principal interest has become due and payable shall be paid, on written request of the Corporation, to the Corporation, or (if then held by the Corporation) shall be discharged from such trust; and the Holder of such Subordinate Secured Note shall thereafter, as an unsecured general creditor, look only to the Corporation for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Corporation as trustee thereof, shall thereupon cease.

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8.5  Trustee’s Remuneration and Expenses

The Corporation shall pay the Trustee reasonable remuneration for its services as trustee hereunder and shall pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in the administration or execution of the trusts hereby created (including the reasonable compensation and the disbursements of Trustee Counsel and all other advisers and assistants not regularly in its employ who have been retained by the Trustee) both before any default hereunder and thereafter until all the duties of the Trustee shall be firmly and fully performed, except any such expense, disbursement or advance as may arise from gross negligence of wilfull misconduct.  Any amount due under this Section 8.5 and unpaid 30 days after request for such payment shall bear interest from the expiration of such 30 days at a rate per annum equal to the then current rate charged by the Trustee from time to time, payable on demand.  After default, all amounts so payable and the interest thereon shall be payable out of any funds coming into the possession of the Trustee or its successors in the trusts hereunder in priority to any payment of the principal of, or interest on, the Subordinate Secured Notes.  Such remuneration shall continue to be payable until the trusts hereof shall be finally wound up, whether or not the trusts of this Indenture shall be in course of administration by or under the direction of a court.

8.6  Not to Extend Time for Payment of Interest

Subject to the provisions of Section 11.11 or 11.12, in order to prevent any accumulation after maturity of unpaid interest, the Corporation shall not directly or indirectly extend or assent to the extension of time for payment of interest upon any Subordinate Secured Notes or directly or indirectly be or become a party to or approve any such arrangement by purchasing or funding interest on the Subordinate Secured Notes or in any other manner.

If the time for the payment of any interest shall be so extended, whether or not such extension is by or with the consent of the Corporation, notwithstanding anything herein or in the Subordinate Secured Notes contained, such interest shall not be entitled in case of default hereunder to the benefit of this Indenture until such time as payment in full has been made of the principal of all the Subordinate Secured Notes and of all interest on such Subordinate Secured Notes the payment of which has not been so extended.

8.7  Examination and Audit

The Corporation shall annually, within 90 days (or such other period prescribed by Applicable Laws) after the end of its fiscal year, have an audit of the Corporation's consolidated financial statements made by the Corporation’s Auditors.

8.8  No Change of Domicile

The Corporation shall not, directly or indirectly through a Subsidiary, enter into a transaction or series of transactions, other than a transaction or series of transactions involving a Change of Control, in which all or substantially all of the undertaking, property and assets of the Corporation and its Subsidiaries would become the property of any other Person, whether by way of reorganization, consolidation, amalgamation, arrangement, merger, transfer, sale, lease or otherwise, unless the Corporation will be the continuing corporation or:

(a) the Person is a corporation organized and existing under the laws of Canada or a province or territory thereof or of the United States of America or a state thereof or of the District of Columbia  and expressly assumes, by a Supplemental Indenture satisfactory in form to the Trustee and Trustee Counsel and executed and delivered to the Trustee, all the covenants and obligations of the Corporation under this Indenture and all Subordinate Secured Notes; the Corporation’s counsel shall provide a legal opinion that effect;

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(b) at the time of and after giving effect to the reorganization, consolidation, amalgamation, arrangement, merger, transfer, sale, lease or other transaction, no Event of Default or event that, with the passing of time or the giving of notice or both, would constitute an Event of Default has occurred and is continuing;

(c) the Corporation shall have delivered to the Trustee an Officer’s Certificate stating that the conditions precedent in this Section 8.8 have been satisfied; and

(d) neither the Corporation nor the Person, either at the time of or immediately after the consummation of any such transaction and after giving full effect thereto, or immediately after compliance by the Person with the provisions of Section 8.8(a), will be insolvent or generally fail to meet, or admit in writing its inability or unwillingness to meet, its obligations as they generally become due.

Whenever the conditions of this Section 8.8 have been duly observed and performed, the Person shall possess and from time to time may exercise each and every right and power of the Corporation under this Indenture, in the name of the Corporation or otherwise, and any act or proceeding required by any provision of this Indenture to be done or performed by any Directors or officers of the Corporation may be done and performed with like force and effect by the directors or officers of the Person.

8.9  Trustee May Perform Covenants

If the Corporation fails to perform any covenant on its part herein contained, the Trustee may perform any such covenant capable of being performed by it and, if any such covenant requires the payment or expenditure of money, the Trustee may make such payment or expenditure with its own funds or with money borrowed by or advanced to it for such purpose, but shall be under no obligation to do so.  All sums so expended or advanced shall be repayable by the Corporation in the manner provided in Section 8.5, but no such performance or payment shall be deemed to relieve the Corporation from any default or continuing obligation hereunder.

Trustee may execute and deliver any Senior Creditor Subordination Agreement in connection with any Senior Creditor Obligation to subordinate the Subordinate Secured Note Indebtedness to Senior Creditor Debt upon written demand of the Corporation, with an officer’s certificate confirming that debt is Senior Creditor Debt.

8.10  Certificates Relating to Compliance and Default

So long as any Subordinate Secured Notes are outstanding, the Corporation shall deliver to the Trustee within 60 days after the end of each of the first three fiscal quarters in each of its fiscal years  and 120 days after the end of its fiscal year ended March 31, and at any other time if so requested by the Trustee, an Officer’s Certificate stating that the Corporation has complied with all covenants, conditions or other requirements contained herein, non-compliance with which would, with the giving of notice or the lapse of time or otherwise, constitute an Event of Default or, if such is not the case, specifying all relevant particulars thereof, the period of existence thereof and the action the Corporation is taking or proposes to take with respect thereto. For purposes of this Section 8.10, compliance by the Corporation with the covenants, conditions or other requirements of this Indenture shall be determined without regard to any period of grace or notice requirement under this Indenture.

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8.11  Financial Statements

Following receipt of consolidated financial statements of the Corporation by the Trustee pursuant to this Indenture, the Trustee shall, while such statements are current, maintain custody of them and make them available for inspection by Noteholders upon reasonable written request. No obligation shall rest with the Trustee to analyze such statements, or evaluate the performance of the Corporation as indicated by such financial statements, in any manner whatsoever.

SECTION 9  DEFAULTS AND REMEDIES

9.1  Events of Default

Each of the following events shall be an “Event of Default” in respect of the Subordinate Secured Notes:

(a) failure to pay principal on any Subordinate Secured Notes when due;

(b) failure to pay interest on any Subordinate Secured Notes when due if such failure continues for a period of 5 Business Days;

(c) failure to observe or perform any other covenant or condition contained in this Indenture or a Supplemental Indenture, provided that, with the exception of the failure to observe or perform the covenants contained in Section 8.2 which result in immediate default, if such covenant or condition is capable of rectification, then  such failure will be an Event of Default only if such failure continues for a period of 30 days after written notice thereof has been given to the Corporation by the Trustee or the Holders of at least 33-1/3% aggregate principal amount of the Subordinate Secured Notes then outstanding;

(d) any default on a Senior Creditor Obligation;

(e) proceedings are commenced for the winding-up, liquidation or dissolution of the Corporation or  Borealis Mining Company (except as otherwise permitted under this Indenture), unless the Corporation or Borealis Mining Company, as applicable, in good faith actively and diligently contests such proceedings, decree, order or approval, resulting in a dismissal or stay thereof within 60 days of commencement;

(f) a decree or order of a court of competent jurisdiction is entered adjudging the Corporation or Borealis Mining Company to be bankrupt or insolvent, or a petition seeking reorganization, arrangement or adjustment of or in respect of the Corporation  or Borealis Mining Company is approved under Applicable Law relating to bankruptcy, insolvency or relief of debtors;

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(g) the Corporation or Borealis Mining Company makes an assignment for the benefit of its creditors, or petitions or applies to any court or tribunal for the appointment of a receiver or trustee for itself or any substantial part of its property, or commences for itself or acquiesces in any proceeding under any bankruptcy, insolvency, reorganization, arrangement or readjustment of debt law or statute or any proceeding for the appointment of a receiver or trustee for itself or any substantial part of its property, or suffers any such receivership or trusteeship;

(h) a resolution is passed for the winding-up or liquidation of the Corporation or Borealis Mining Company except in the course of carrying out or pursuant to a transaction in respect of which the conditions of Section 8.8 are duly observed and performed;

(i) any Indenture Document shall for any reason cease in whole or in any material part to be a legal, valid, binding and enforceable obligation of the Corporation;

(j) breach of any term, or failure to observe or perform any covenant or condition, of the Security Agreement; and

(k) failure on the part of the Corporation or Borealis Mining Company, as applicable, to cause each document required by law or reasonably requested by the Holders to be filed, registered or recorded in order to create in favor of the Holders a valid, legal and perfected security interest in and lien on the Collateral.

9.2                        Notice of Event of Default

If an Event of Default shall occur and be continuing, the Trustee shall, within 10 Business Days after it becomes aware of the occurrence of such Event of Default, give notice of such Event of Default to the Noteholders in the manner specified in Section 12.2; provided, however, that, except in the case of a default in the payment of the principal of, or interest on, any Subordinate Secured Note, the Trustee shall be protected in withholding such notice if and so long as the Trustee in good faith determines that the withholding of such notice is in the best interests of the Noteholders and the Trustee so advises the Corporation in writing.

If notice of an Event of Default has been given to Noteholders and such Event of Default is thereafter remedied or cured prior to the acceleration of the Indebtedness of the Corporation hereunder pursuant to Section 9.3, notice that such Event of Default is no longer continuing shall be given by the Trustee to the Persons to whom notice of such Event of Default was given pursuant to this Section 9.2, such notice to be given within a reasonable time, not to exceed 10 days, after the Trustee becomes aware that such Event of Default has been remedied or cured during such period of time.

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9.3                        Acceleration

If an Event of Default under Section 9.1(f) occurs, the principal amount of and accrued and unpaid interest on, all Subordinate Secured Notes then outstanding shall be due and payable immediately without any declaration or other action by the Trustee or the Holders.  If any other Event of Default occurs, the principal amount of and accrued and unpaid interest on, all Subordinate Secured Notes then outstanding shall be due and payable immediately upon declaration by the Trustee or the Holders to such effect.

Notwithstanding anything contained in this Indenture or the Subordinate Secured Notes to the contrary, if the principal amount  and any accrued and unpaid interest on Subordinate Secured Notes are due and payable automatically or by a declaration pursuant to this Section 9.3, the Corporation shall pay to the Trustee forthwith, for the benefit of the Noteholders of the affected Subordinate Secured Notes, the amount of principal  and accrued and unpaid interest (including interest on amounts in default) on those Subordinate Secured Notes and all other fees and expenses payable in regard thereto under this Indenture, together with interest thereon at the rate borne by such Subordinate Secured Notes from the date that such amounts are due and payable automatically or by declaration pursuant to this Section 9.3 until payment is received by the Trustee.  Such payments, when made, shall be deemed to have been made in discharge of the Corporation’s obligations under this Indenture.

9.4                        Waiver of Event of Default

Upon the happening of an Event of Default:

(a) the Holders of Subordinate Secured Notes then outstanding with respect to which an Event of Default shall have occurred and be continuing, pursuant to an Extraordinary Resolution shall have the power, exercisable by requisition in writing, to instruct the Trustee to waive such Event of Default and to cancel any declaration made by the Trustee pursuant to Section 9.3, and the Trustee shall thereupon waive such Event of Default or cancel such declaration upon such terms and conditions as shall be prescribed in such requisition; and

(b) the Trustee, so long as it has not become bound to declare the principal  and interest on the Subordinate Secured Notes then outstanding to be due and payable, or to obtain or enforce payment thereof, shall have the power to waive any Event of Default which has been remedied or cured or in respect of which, in the opinion of the Trustee, relying, if necessary on the opinion of Trustee's Counsel or other expert, adequate satisfaction has been made.

No delay or omission of the Trustee or of the Noteholders in exercising any right or power accruing upon the occurrence of an Event of Default shall impair any such right or power or shall be construed to be a waiver of such Event of Default or acquiescence therein, and no act or omission, either of the Trustee or of the Noteholders, shall extend to or be taken in any manner whatsoever to affect any subsequent Event of Default or the rights resulting therefrom.

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9.5                        Enforcement by the Trustee

Upon the occurrence of an Event of Default, the Trustee shall exercise the rights and powers vested in it under this Indenture.

Subject to the provisions of Section 9.4 and to the provisions of any Extraordinary Resolution, if the Corporation fails to pay to the Trustee, forthwith after the same shall have been declared to be or has automatically become due and payable under Section 9.3, the principal  and interest on the affected Subordinate Secured Notes together with any other amounts due hereunder, the Trustee shall, upon receipt of a Noteholders’ Request on behalf of the Holders of the affected Subordinate Secured Notes and upon being sufficiently indemnified and funded to its reasonable satisfaction against all costs, expenses and liabilities to be incurred, proceed in its name as Trustee hereunder to obtain or enforce payment of such principal of,  and interest on, those Subordinate Secured Notes together with any other amounts due hereunder by such proceedings authorized by this Indenture or by suit at law or in equity as the Trustee in the Noteholders’ Request shall have been directed to take, or if the Noteholders’ Request contains no such direction, then by such proceedings authorized by this Indenture or by suit at law or in equity as the Trustee shall deem expedient.

The Trustee shall be entitled and is hereby empowered, either in its own name or as trustee of an express trust, or as attorney-in-fact for each of the Holders of the Subordinate Secured Notes, or in any one or more of such capacities, to file such proof of debt, amendment of proof of debt, claim, petition or other document as may be necessary or advisable in order to have the claims of the Trustee and some or all of the Holders of the Subordinate Secured Notes allowed in any insolvency, bankruptcy, liquidation or other judicial proceedings relative to the Corporation or its creditors or relative to or affecting its property.  The Trustee is hereby irrevocably appointed (and the successive respective Holders of the Subordinate Secured Notes by taking and holding Subordinate Secured Notes shall be conclusively deemed to have so appointed the Trustee) the true and lawful attorney-in-fact of the respective Holders of the Subordinate Secured Notes with authority to make and file in the respective names of the Holders of the Subordinate Secured Notes or on behalf of the Holders of the Subordinate Secured Notes as a class, subject to deduction from any such claims of the amounts of any claims filed by any of the Holders of the Subordinate Secured Notes themselves, any proof of debt, amendment of proof of debt, claim, petition or other document in any such proceedings and to receive payment of any sums becoming distributable on account thereof, and to execute any such other documents and to do and perform any and all such acts and things, for and on behalf of such Holders of the Subordinate Secured Notes, as may be necessary or advisable, in the opinion of the Trustee acting on the advice of Trustee Counsel, in order to have the respective claims of the Trustee and of the Holders of the Subordinate Secured Notes against the Corporation or its property allowed in any such proceeding, and to receive payment of or on account of such claims, provided that nothing contained in this Indenture shall be deemed to give to the Trustee, unless so authorized by Extraordinary Resolution, any right to accept or consent to any plan of reorganization or otherwise by action of any character in such proceeding to waive or change in any way any right of any Noteholder.

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The Trustee shall also have power at any time and from time to time to institute and to maintain such suits and proceedings as it may be advised shall be necessary or advisable to preserve and protect its interests and the interests of some or all of the Noteholders.

All rights of action hereunder may be enforced by the Trustee without the possession of any of the Subordinate Secured Notes or the production thereof at the trial or other proceedings relative thereto.  Any such suit or proceeding instituted by the Trustee shall be brought in the name of the Trustee as trustee of an express trust, and any recovery of judgment shall be for the rateable benefit of the applicable Holders of the Subordinate Secured Notes whose rights are enforced subject to the provisions of this Indenture. In any proceeding brought by the Trustee (and also in any proceeding in which a declaratory judgment of a court may be sought as to the interpretation or construction of any provision of this Indenture to which the Trustee shall be a party), the Trustee shall be held to represent all the Holders of the Subordinate Secured Notes whose rights are enforced, and it shall not be necessary to make any Holders of the Subordinate Secured Notes parties to any such proceeding.

9.6                        Suits by Noteholders

No Holder of any Subordinate Secured Note shall have any right to institute any action, suit or proceeding at law or in equity for the purpose of enforcing payment of the principal of,  or interest on, the Subordinate Secured Notes or for the execution of any trust or power hereunder or for the appointment of a liquidator or receiver or for a receiving order under Nevada law or to have the Corporation wound up or to file or prove a claim in any liquidation or bankruptcy proceeding or for any other remedy unless:

(a) the Noteholders, by Extraordinary Resolution or by Noteholders’ Request, shall have made a written request to the Trustee and the Trustee shall have been afforded reasonable opportunity either itself to proceed to exercise the powers conferred upon it or to institute an action, suit or proceeding in its name for such purpose;

(b) the Noteholders or any of them shall have furnished to the Trustee, when so requested by the Trustee, funding and indemnity satisfactory to the Trustee with respect to the costs, expenses and liabilities to be incurred therein or thereby;

(c) the Trustee shall have failed to act within a reasonable time after such notification, request and provision of indemnity; and

(d) no direction inconsistent with such written request has been received by the Trustee from Holders of a majority in principal amount of the outstanding Subordinate Secured Notes.

If a Noteholder has the right to institute proceedings under this Section 9.6, such Noteholder, acting on behalf of itself and all other Noteholders, shall be entitled to commence proceedings in any court of competent jurisdiction in which the Trustee might have commenced proceedings under Section 9.5, but in no event shall any Noteholder or combination of Noteholders have any right to seek any other remedy or institute proceedings out of court. No one or more Noteholders shall have any right in any manner whatsoever to enforce any right under this Indenture or under any Subordinate Secured Note, except in accordance with the conditions and in the manner provided in this Indenture.

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9.7                        Application of Money

Except as herein otherwise expressly provided, any money received by the Trustee or a Noteholder pursuant to the provisions of this Section 11 or as a result of legal or other proceedings against the Corporation pursuant hereto, or from any trustee in bankruptcy or liquidator of the Corporation, shall be applied, together with other money available to the Trustee for such purpose, as follows:

(a) first, in payment or in reimbursement to the Trustee of its fees, costs, charges, expenses, borrowings, advances or other amounts furnished or provided by or at the request of the Trustee in or about the administration and execution of its trusts under, or otherwise in relation to, this Indenture, with interest thereon as herein provided;

(b) second, subject to the provisions of Section 8.6 and this Section 9.7, in payment of the principal of,  and accrued and unpaid interest and interest on amounts in default on, the Subordinate Secured Notes which shall then be outstanding in the priority of principal first and then accrued and unpaid interest and interest on amounts in default unless otherwise directed by an Extraordinary Resolution in respect of the Subordinate Secured Notes, and in that case in such order or priority as between principal interest as may be directed by such Extraordinary Resolution; and

(c) third, in payment of the surplus, if any, of such money to the Corporation or its assigns;

provided, however, that no payment shall be made pursuant to Section 9.7(b) in respect of the principal of, or interest on, any Subordinate Secured Note which the Trustee knows is held, directly or indirectly, by or for the benefit of the Corporation or any Affiliate of the Corporation (other than any Subordinate Secured Note pledged for value and in good faith to a Person other than the Corporation or any Affiliate of the Corporation, but only to the extent of such Person’s interest therein) until the prior payment in full of the principal  and interest on all Subordinate Secured Notes which are not so held.  Trustee shall assume no Notes are held for the benefit of the Corporation or any affiliate unless notified in writing.

9.8                        Distribution of Proceeds

Payments to Noteholders pursuant to Section 9.7(b) shall be made as follows:

(a) at least 15 days’ notice of every such payment shall be given in the manner specified in Section 12.2, specifying the time and the place or places at which the applicable Subordinate Secured Notes are to be presented and the amount of the payment and the application thereof as between principal interest;

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(b) payment in respect of any Subordinate Secured Note shall be made upon presentation thereof at any one of the places specified in such notice and any such Subordinate Secured Note thereby paid in full shall be surrendered, but the Trustee may in its discretion dispense with presentation and surrender or endorsement in any case upon such indemnity being given as the Trustee shall consider sufficient;

(c) from and after the date of payment specified in such notice, interest shall accrue only on the amount owing on each Subordinate Secured Note after giving credit for the amount of the payment specified in such notice unless the Subordinate Secured Note in respect of which such amount is owing is duly presented on or after the date so specified and payment of such amount is not made; and

(d) the Trustee shall not be required to make any payment to Noteholders unless the amount available to it for such purpose, after reserving therefrom such amount as the Trustee may think necessary to provide for the payments referred to in Section 9.7(a), exceeds two per cent of the aggregate principal amount of the Subordinate Secured Notes in default then outstanding.

9.9                        Remedies Cumulative

No remedy herein conferred upon or reserved to the Trustee or upon or to the Noteholders is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now existing or hereafter to exist under applicable law or the Security Documents.

9.10                      Judgment Against the Corporation

In case of any judicial or other proceedings to enforce the rights of the Noteholders, judgment may be rendered against the Corporation in favour of the Noteholders or in favour of the Trustee, as trustee for the Noteholders, for any amount which may remain due in respect of the Subordinate Secured Note Indebtedness.

SECTION 10      CANCELLATION, DISCHARGE AND DEFEASANCE

10.1                      Cancellation and Destruction

All Subordinate Secured Notes surrendered to the Corporation, a Registrar or a Paying Agent for any purpose shall be delivered to the Trustee as soon as reasonably practicable.  Each such Subordinate Secured Note and each Subordinate Secured Note surrendered to the Trustee shall be cancelled by the Trustee forthwith after all payments required in respect thereof to the date of surrender have been made. Subject to Applicable Law, all Subordinate Secured Notes cancelled or required to be cancelled under this or any other provision of this Indenture shall be destroyed by the Trustee in accordance with the Trustee’s ordinary practice, and the Trustee shall, at the request of the Corporation, furnish to it a cancellation or destruction certificate in respect of the Subordinate Secured Notes so cancelled or destroyed.

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10.2                      Discharge

Upon proof being given to the reasonable satisfaction of the Trustee that the principal of all the Subordinate Secured Notes  thereon and interest (including interest on amounts in default) thereon and other amounts payable hereunder have been paid or satisfied, and upon payment of all costs, charges and expenses properly incurred by the Trustee in relation to this Indenture and all interest thereon and the remuneration of the Trustee, or upon provision satisfactory to the Trustee being made therefor, the Trustee shall, at the written request and at the expense of the Corporation, execute and deliver to the Corporation such deeds or other instruments as shall be required to evidence the satisfaction and discharge of this Indenture and the Security Documents and to release the Corporation from its covenants herein contained other than those relating to the indemnification of the Trustee.

SECTION 11      MEETINGS OF NOTEHOLDERS

11.1                      Right to Convene Meetings

The Trustee may at any time and from time to time convene a meeting of Noteholders, and the Trustee shall convene a meeting of Noteholders upon receipt of a request of the Corporation or a Noteholders’ Request and upon being funded and indemnified to its reasonable satisfaction by the Corporation or by the Noteholders signing such request against the costs which may be incurred in connection with the calling and holding of such meeting. If the Trustee fails within 30 days after receipt of any such request and such indemnity and funding to give notice convening a meeting, the Corporation or such Noteholders, as the case may be, may convene such meeting.  Every such meeting shall be held in Vancouver, British Columbia, or at such other place as may be approved or determined by such of the Trustee, the Corporation or the Noteholders as convened the meeting in accordance with this Section 11.1.

11.2                      Notices of Meetings

Notice of a meeting of Noteholders shall be given to the Noteholders in the manner specified in Section 12.2 at least 21 days prior to the date of the meeting, and a copy of any notice sent by mail to Noteholders shall be sent by mail to the Trustee (unless the meeting has been called by it) and to the Corporation (unless the meeting has been called by it).  A notice of a meeting of Noteholders shall state the time and place at which the meeting is to be held and shall state briefly the general nature of the business to be transacted thereat, and it shall not be necessary for any such notice to set out the terms of any resolution to be proposed or any of the provisions of this Section 11.

11.3                      Chairman

The Noteholders present in person or represented by proxy shall choose an individual present to be the chairman of the meeting.

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11.4                      Quorum

Subject to the provisions of Section 12.12, the quorum for a meeting of Noteholders shall be the Holder or Holders, present in person or represented by proxy, of at least 25% of the aggregate principal amount of the Subordinate Secured Notes then outstanding. If a quorum is not present within 30 minutes from the time fixed for the holding of a meeting, the meeting, if convened by the Noteholders, shall be dissolved, but in any other case the meeting shall be adjourned to the same day in the next week (unless such day is not a Business Day, in which case it shall be adjourned to the next following Business Day thereafter) at the same time and place, and no notice shall be required to be given in respect of such adjourned meeting.  At the adjourned meeting, the Noteholders present in person or represented by proxy shall constitute a quorum and may transact the business for which the meeting was originally convened notwithstanding that they may not represent at least 25% of the aggregate principal amount of the Subordinate Secured Notes then outstanding.

11.5                      Power to Adjourn

The chairman of a meeting at which a quorum of Noteholders is present may, with the consent of the Holder or Holders of a majority of the aggregate principal amount of the Subordinate Secured Notes present or represented thereat, adjourn such meeting, and no notice of such adjournment need be given except such notice, if any, as the meeting may prescribe.

11.6                      Show of Hands

Except as otherwise provided in this Indenture, every resolution submitted to a meeting shall be decided by a majority of the votes cast on a show of hands, and unless a poll is duly demanded as herein provided, a declaration by the chairman that a resolution has been carried or carried unanimously or by a particular majority or lost or not carried by a particular majority shall be conclusive evidence of the fact.

11.7                      Poll

On every resolution proposed to be passed as an Extraordinary Resolution and on any other resolution submitted to a meeting in respect of which the chairman of the meeting or one or more Noteholders or proxyholders for Noteholders holding at least CAD$10,000 principal amount of Subordinate Secured Notes demands a poll, a poll shall be taken in such manner and either at once or after an adjournment as the chairman of the meeting shall direct.

11.8                      Voting

On a show of hands, every Person who is present and entitled to vote, whether as a Noteholder or as proxyholder for one or more Noteholders or both, shall have one vote.  On a poll each Noteholder present in person or represented by a proxy duly appointed by an instrument in writing shall be entitled to one vote in respect of each CAD$1,000 principal amount of Subordinate Secured Notes held by such Noteholder on the record date fixed for the meeting.  A proxyholder need not be a Noteholder. In the case of joint Holders of a Subordinate Secured Note, any one of them present in person or represented by proxy at the meeting may vote in the absence of the other or others, but if more than one of them are present in person or represented by proxy, they shall vote together in respect of the Subordinate Secured Notes of which they are joint Holders. Subject to the provisions of Section 11.9, in the case of Subordinate Secured Notes held by a Person other than an individual, an officer or representative of such Person may vote the Subordinate Secured Notes held by it unless there shall be more than one officer or representative of such Person present at the meeting, and those officers or individuals present do not agree on how the Subordinate Secured Notes may be voted, in which case a written proxy shall be required to determine who may vote the Subordinate Secured Notes and how such Subordinate Secured Notes are to be voted.

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11.9                      Regulations

The Trustee, or the Corporation with the approval of the Trustee, may from time to time make and from time to time vary such regulations as it shall from time to time think fit providing for or governing the following:

(a) voting by proxy by Noteholders, the form of the instrument appointing a proxyholder (which shall be in writing) and the manner in which it may be executed, and the authority to be provided by any Person signing a proxy on behalf of a Noteholder;

(b) the deposit of instruments appointing proxyholders at such place as the Trustee, the Corporation or the Noteholders convening the meeting, as the case may be, may, in the notice convening the meeting, direct and the time, if any, before the holding of the meeting or any adjournment thereof by which the same shall be deposited; and

(c) the deposit of instruments appointing proxyholders at an approved place or places other than the place at which the meeting is to be held and enabling particulars of such instruments appointing proxyholders to be provided before the meeting to the Corporation or to the Trustee at the place at which the meeting is to be held and for the voting of proxies so deposited as though the instruments themselves were produced at the meeting.

Any regulations so made shall be binding and effective and the votes given in accordance therewith shall be valid and shall be counted. Except as such regulations may provide, the only Persons who shall be recognized at a meeting as the Holders of any Subordinate Secured Notes, or as entitled to vote or be present at the meeting in respect thereof, shall be registered Noteholders and Persons whom registered Noteholders have by instrument in writing duly appointed as their proxyholders.

11.10                    Corporation and Trustee May Be Represented

The Corporation and the Trustee, by their respective officers, directors and employees, and the legal advisers of the Corporation and the Trustee may attend any meeting of the Noteholders, but shall have no voting rights.

11.11                    Powers Exercisable by Noteholders by Extraordinary Resolution

Subject to the provisions of Sections 9.4 of this Indenture, the following powers of the Noteholders shall be exercisable from time to time only by Extraordinary Resolution:

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(a) power to sanction any modification, abrogation, alteration, compromise or arrangement of the rights of the Noteholders or any of them or, subject to the Trustee’s prior consent, the Trustee against the Corporation or against its property, whether such rights arise under this Indenture or the Subordinate Secured Notes or otherwise, provided that such sanctioned actions are not prejudicial to the Trustee;

(b) power to assent to any modification of or change in or addition to or omission from the provisions contained in this Indenture which shall be agreed to by the Corporation and to authorize the Trustee to concur in and execute any Supplemental Indenture embodying any modification, change, addition or omission;

(c) power to sanction any scheme for the reconstruction or reorganization of the Corporation or for the consolidation, amalgamation or merger of the Corporation with or into any other Person or for the sale, leasing, transfer or other disposition of the undertaking, property and assets of the Corporation or any part thereof, provided that no such sanction shall be necessary in respect of any transaction which is not subject to any restriction in Section 8;

(d) power to direct or authorize the Trustee to exercise any power, right, remedy or authority given to it by this Indenture in any manner specified in any such Extraordinary Resolution (subject to the Trustee being sufficiently funded and indemnified to its reasonable satisfaction) or to refrain from exercising any such power, right, remedy or authority;

(e) power to waive and direct the Trustee to waive any Event of Default and to cancel any declaration made by the Trustee pursuant to Section 9.3 either unconditionally or upon any condition specified in such Extraordinary Resolution;

(f) power to restrain any Noteholder from taking or instituting any suit, action or proceeding for the purpose of enforcing payment of the principal of, or interest on, any Subordinate Secured Notes or for the purpose of executing any trust or power hereunder;

(g) power to direct any Noteholder who, as such, has brought any action, suit or proceeding to stay or discontinue or otherwise deal with the same upon payment, if the taking of such suit, action or proceeding shall have been permitted by Section 9.6, of the costs, charges and expenses reasonably and properly incurred by such Noteholder in connection therewith;

(h) power to remove the Trustee at any time;

(i) power to assent to any compromise or arrangement with any creditor or creditors or any class or classes of creditors, whether secured or otherwise, and with holders of any shares or other Securities of the Corporation; and

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(j) power to appoint a committee with power and authority (subject to such limitations, if any, as may be prescribed in the resolution) to exercise, and to direct the Trustee to exercise, on behalf of the Noteholders, such of the powers of the Noteholders as are exercisable by Extraordinary Resolution or otherwise as shall be included in the resolution appointing the committee.  The resolution making such appointment may provide for payment of the expenses and disbursements of and compensation to such committee and the Trustee.  Such committee shall consist of such number of individuals as shall be prescribed in the resolution appointing it and the members need not be Noteholders. Every such committee may elect its chairman and may make regulations respecting its quorum, the calling of its meetings, the filling of vacancies occurring in its number and its procedure generally.  Such regulations may provide that the committee may act at a meeting at which a quorum is present or may act by minutes signed by the number of members thereof necessary to constitute a quorum.  All acts of any such committee within the authority delegated to it shall be binding upon all Noteholders.  Neither the committee nor any member thereof nor the Trustee shall be liable for any loss arising from or in connection with any action taken or omitted to be taken by them in good faith;

(k) reduce the principal amount at maturity of, extend the fixed maturity of, or alter the redemption provisions of, the Subordinate Secured Notes;

(l) change the currency in which the Subordinate Secured Notes  or interest thereon is payable;

(m) reduce the percentage in principal amount at maturity outstanding of the Subordinate Secured Notes that must consent to an amendment, supplement or waiver or consent to take any action under this Indenture or the Subordinate Secured Notes;

(n) impair the right to institute suit for the enforcement of any payment on or with respect to the Subordinate Secured Notes;

(o) waive a default in payment with respect to the Subordinate Secured Notes;

(p) reduce the rate or extend the time for payment of interest on the Subordinate Secured Notes;

(q) affect the ranking of the Subordinate Secured Notes in a manner adverse to the Holder of the Subordinate Secured Notes; or

(r) make any changes to this Indenture or the Subordinate Secured Notes that could result in the Corporation being required to make any withholding or deduction from payments made under or with respect to the Subordinate Secured Notes.

Except as otherwise provided in this Indenture, all other powers of and matters to be determined by the Noteholders may be exercised or determined from time to time by Ordinary Resolution.

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11.12                    Meaning of Ordinary Resolution

The expression “Ordinary Resolution” when used in this Indenture means, except as otherwise provided in this Indenture, a resolution proposed to be passed as an ordinary resolution at a meeting of Noteholders, as the case may be, duly convened for the purpose and held in accordance with the provisions of this Section 11 at which a quorum of Noteholders is present and passed by the affirmative votes of Noteholders present in person or represented by proxy at the meeting who hold more than 50% of the aggregate principal amount of the Subordinate Secured Notes voted in respect of such resolution.

11.13                    Meaning of Extraordinary Resolution

The expression “Extraordinary Resolution” when used in this Indenture means, except as otherwise provided in this Indenture, a resolution proposed to be passed as an extraordinary resolution at a meeting of Noteholders, duly convened for the purpose and held in accordance with the provisions of this Section at which the Holders of at least 51% of the aggregate principal amount of the Subordinate Secured Notes then outstanding are present in person or represented by proxy and passed by the affirmative votes of Noteholders present in person or represented by proxy at the meeting who hold not less than 66 2/3% of the aggregate principal amount of the Subordinate Secured Notes voted in respect of such resolution.

If, at any such meeting, the Holders of at least 51% of the aggregate principal amount of the Subordinate Secured Notes then outstanding are not present in person or represented by proxy within 30 minutes after the time appointed for the meeting, then the meeting, if convened by or on the requisition of Noteholders, shall be dissolved, but in any other case the meeting shall stand adjourned to such date, being not less than 21 nor more than 60 days later, and to such place and time as may be appointed by the chairman of the meeting. Notice of the time and place that such adjourned meeting is to be reconvened shall be given to the Noteholders in the manner specified in Section 11.2 at least 10 days prior to the date the adjourned meeting is to be reconvened.  Such notice shall state that at the adjourned meeting the Noteholders present in person or represented by proxy shall constitute a quorum, but it shall not be necessary to set forth the purposes for which the meeting was originally called or any other particulars.  At the adjourned meeting, the Noteholders present in person or represented by proxy shall constitute a quorum and may transact the business for which the meeting was originally convened, and a resolution proposed to be passed as an extraordinary resolution at such adjourned meeting and passed by the requisite vote as provided in this Section 11.13 shall be an Extraordinary Resolution within the meaning of this Indenture, notwithstanding that the Holders of at least 51% of the aggregate principal amount of the Subordinate Secured Notes then outstanding are not present in person or represented by proxy at such adjourned meeting.

11.14                    Powers Cumulative

Any one or more of the powers or any combination of the powers in this Indenture stated to be exercisable by the Noteholders may be exercised from time to time, and the exercise of any one or more of such powers or any combination of powers from time to time shall not be deemed to exhaust the rights of the Noteholders to exercise the same or any other such power or powers or combination of powers thereafter from time to time.

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11.15                    Minutes

Minutes of all resolutions and proceedings at every meeting of Noteholders shall be made and duly entered in books to be from time to time provided for that purpose by the Trustee at the expense of the Corporation, and any such minutes, if signed by the chairman of the meeting at which such resolutions were passed or proceedings had, or by the chairman of the next succeeding meeting of the Noteholders, shall be prima facie evidence of the matters therein stated and, unless the contrary is proved, every such meeting, in respect of the proceedings of which minutes shall have been made, shall be deemed to have been duly held and convened, and all resolutions passed thereat or proceedings had shall be deemed to have been duly passed and had.

11.16                    Instruments in Writing

All actions which may be taken and all powers which may be exercised by the Noteholders at a meeting held as provided in this Section 11 may also be taken and exercised by an instrument in writing signed in one or more counterparts by the Holders of more than 50%, in the case of an Ordinary Resolution, or not less than 66 2/3%, in the case of an Extraordinary Resolution, of the aggregate outstanding principal amount of the Subordinate Secured Notes, and the expressions “Ordinary Resolution” and “Extraordinary Resolution” when used in this Indenture shall include any instrument so signed.

11.17                    Binding Effect of Resolutions

Every resolution passed in accordance with the provisions of this Section 11 at a meeting of Noteholders shall be binding upon all the Noteholders, whether present at or absent from such meeting, and every instrument in writing signed by Noteholders in accordance with Section 11.16 shall be binding upon all the Noteholders, whether signatories thereto or not, and each and every Noteholder and the Trustee (subject to the provisions for its remuneration, indemnification and protection herein contained) shall be bound to give effect accordingly to every such resolution and instrument in writing.

11.18                    Record Dates

If the Corporation shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other action, the Corporation may, at its option, by or pursuant to a Certified Resolution, fix in advance a record date for the determination of such Holders entitled to provide such request, demand, authorization, direction, notice, consent, waiver or other action, but the Corporation shall have no obligation to do so.  Any such record date shall be the record date specified in or pursuant to such Certified Resolution.

If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other action may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Subordinate Secured Notes then outstanding have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for this purpose the Subordinate Secured Notes then outstanding shall be computed as of such record date.

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SECTION 12      NOTICES

12.1                      Notice to the Corporation

Any notice to the Corporation under the provisions hereof shall be valid and effective if delivered to the Chief Financial Officer of the Corporation or if sent by facsimile transmission (with receipt confirmed) to the attention of the Chief Financial Officer of the Corporation at Gryphon Gold Corporation,611 N. Nevada Street

Carson City, NV, 89703, fax: (604) 608-3262 with a copy for informational purposes only to Dorsey & Whitney, LLP, attention Kenneth Sam, 1400 Wewatta St., Suite 400, Denver, CO, 80202, fax: (303) 629-3450, and shall be deemed to have been validly given at the time of delivery or transmission if it is received prior to 4:00 p.m. (Vancouver time) on a Business Day, failing which it shall be deemed to have been given on the next Business Day.  The Corporation may from time to time notify the Trustee of a change in address or facsimile number which thereafter, until changed by like notice, shall be the address or facsimile number of the Corporation for all purposes of this Indenture.

12.2                      Notice to Noteholders

Unless otherwise expressly provided in this Indenture, any notice to Noteholders under the provisions hereof shall be valid and effective if it is delivered or mailed postage prepaid, addressed to such Noteholders, at their addresses or electronic communication numbers, if any, appearing in the Register and, subject as provided in this Section 12.2, shall be deemed to have been received at the time of delivery or on the second Business Day after the day on which it was mailed.  Any notice made by delivery on a day other than a Business Day, or after 4:00 p.m. (Vancouver time) on a Business Day, shall be deemed to be received on the next following Business Day.  All notices to joint Holders of any Subordinate Secured Notes may be given to whichever one of the Holders thereof is named first in the Register, and any notice so given shall be sufficient notice to all holders of such Subordinate Secured Note. In the event of a postal disruption, notice to Noteholders shall be given or sent by other appropriate means.

12.3                      Notice to the Trustee

Any notice to the Trustee under the provisions hereof shall be valid and effective if delivered to the Trustee at 510 Burrard Street, 3rd Floor, Vancouver, B.C., V6C 3B9, Attention: Corporate Trust Department, fax no: (604) 661-9403, or if sent by facsimile transmission (with receipt confirmed) to and shall be deemed to have been validly given at the time of delivery or transmission if it is received prior to 4:00 p.m. (Vancouver time) on a Business Day, failing which it shall be deemed to have been given on the next Business Day.  The Trustee may from time to time notify the Corporation of a change in address or facsimile number which thereafter, until changed by like notice, shall be the address or facsimile number of the Trustee for all purposes of this Indenture.

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12.4                      When Publication Not Required

If at any time a notice is required by this Indenture to be published in a particular city and no newspaper of general circulation is then being published and circulated on a daily basis in that city, the Corporation shall not be required to publish such notice in that city.

12.5                      Waiver of Notice

Any notice provided for in this Indenture may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Noteholders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waivers.

SECTION 13      CONCERNING THE TRUSTEE

13.1                      Corporate Trustee Required Eligibility

The Trustee shall at all times be a corporation organized under the laws of Canada or any province thereof and represents to the Corporation that at the date of execution and delivery by it of this Indenture, it is duly authorized and qualified to carry on the business of a trust company in each of the provinces and territories of Canada. If at any time the Trustee shall cease to be eligible in accordance with this Section 13, it shall resign immediately in the manner and with the effect hereinafter specified in this Section 13.

13.2                      Certain Duties and Responsibilities of Trustee

In the exercise of the rights, powers and duties prescribed or conferred by the terms of this Indenture, the Trustee shall act honestly and in good faith and exercise that degree of care, diligence and skill that a reasonably prudent trustee would exercise in comparable circumstances, and shall duly observe and comply with the provisions of any legislation and regulations which relate to the functions or role of the Trustee as a fiduciary hereunder.  The duties and obligations of the Trustee shall be determined solely by the provisions hereof and, accordingly, the Trustee shall not be responsible except for the performance of such duties and obligations as they have undertaken herein.  None of the provisions of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties or in the exercise of any of its rights or powers nor shall the Trustee be so compelled pursuant to any provisions contained in this Indenture.

The Trustee, upon the occurrence or at any time during the continuance of any act, action or proceeding, may require the Noteholders at whose instance it is acting to deposit with it any Subordinate Secured Notes held by them, for which Subordinate Secured Notes the Trustee shall issue receipts.

Notwithstanding any other provisions of this Indenture to the contrary, every provision of this Indenture that by its terms relieves the Trustee of liability or entitles the Trustee to rely or act upon any evidence submitted to it is subject to the provisions of applicable legislation, this Section 13.2 and Section 13.3.

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No provision of this Indenture shall operate to confer any obligation, duty or power on the Trustee in any jurisdiction in which it does not have the legal capacity required to assume, hold or carry out such obligation, duty or power. For the purposes of this Section 13.2, legal capacity includes, without limitation, the capacity to act as a fiduciary in such jurisdiction.

13.3                      No Conflict of Interest

(a) The Trustee represents to the Corporation that at the date of the execution and delivery of this Indenture there exists no material conflict of interest in the Trustee’s role as a fiduciary hereunder. If at any time a material conflict of interest exists in respect of the Trustee’s role as a fiduciary under this Indenture that is not eliminated within 90 days after the Trustee becomes aware that such a material conflict of interest exists, the Trustee shall resign from the trusts under this Indenture by giving notice in writing of such resignation and the nature of such conflict to the Corporation at least 21 days prior to the date upon which such resignation is to take effect, and shall on such date be discharged from all further duties and liabilities hereunder.  The validity and enforceability of this Indenture and any Subordinate Secured Notes shall not be affected in any manner whatsoever by reason only of the existence of a material conflict of interest of the Trustee.

(b) If at any time the Trustee fails to comply with the provisions of Section 13.3(a), the Trustee shall within 10 days after the expiration of the 90-day period referred to therein, transmit notice of such failure to the Holders in the manner provided for notices to the Holders in Section 12.2.

13.4                      Conditions Precedent to Trustee’s Obligation to Act

The Trustee shall not be bound to give any notice or take any action or proceeding unless it is required to do so under the terms of this Indenture.  The Trustee shall not be required to take notice of an Event of Default under this Indenture, unless and until the Trustee is notified in writing of such Event of Default by any Noteholder or the Corporation, of such Event of Default.  In the absence of such written notice the Trustee may for all purposes of this Indenture assume that no Event of Default has occurred.

The obligation of the Trustee to commence or continue any act, action or proceeding under this Indenture shall be conditional upon its receipt of the following:

(a) an Extraordinary Resolution, Ordinary Resolution, Noteholders’ Request, requisition in writing, or such other notice or direction as is required pursuant to this Indenture, specifying the action or proceeding which the Trustee is requested, directed or authorized to take;

(b) sufficient funds to commence or continue such act, action or proceeding; and

(c) an indemnity satisfactory to the Trustee to protect and hold harmless the Trustee against the costs, charges, expenses and liabilities to be incurred thereby and any loss and damages it may suffer by reason thereof.

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13.5                      Resignation and Removal; Appointment of Successor

(a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Section 13.5 shall become effective until the acceptance of appointment by the successor Trustee under Section 13.6.

(b) The Trustee may resign at any time by giving 60 days’ written notice thereof to the Corporation.  If an instrument of acceptance by a successor Trustee shall not have been delivered to the resigning Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee.

(c) The Trustee may be removed at any time by an Extraordinary Resolution of the Noteholders.

(d) If at any time:

(i) the Trustee shall fail to comply with the provisions of Section 13.3, or

(ii) the Trustee shall cease to be eligible under Section 13.1 and shall fail to resign after written request therefor by the Corporation or by any Holder who has been a bona fide Noteholder for at least six months, or

(iii) the Trustee shall become incapable of acting or shall be adjudged as bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

then, in any case,

(A) the Corporation by a Certified Resolution may remove the Trustee, or

(B) in the case of clause (i) above, a Noteholder and any other interested party, and in the case of clauses (ii) and (iii) above, any Noteholder may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

(e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of the Trustee for any cause, the Corporation, by a Certified Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Ordinary Resolution of the Noteholders, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with Section 13.6, become the successor Trustee and supersede the successor Trustee appointed by the Corporation. If no successor Trustee shall have been so appointed by the Corporation or the Holders of the Subordinate Secured Notes and so accepted such appointment, a Noteholder may on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee.  Any successor Trustee appointed under any provision of this Section 13.5 shall be a corporation authorized to carry on the business of a trust company in all of the provinces of Canada.

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(f) The Corporation shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by registered mail, postage prepaid, to the Noteholders as their names and addresses appear in the Register.

13.6                      Acceptance of Appointment by Successor

Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Corporation and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, upon written request of the Corporation or the successor Trustee, such retiring Trustee shall, upon payment of all amounts due it under Section 8.5, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder subject to the claim provided for in Section 8.5.  Upon request of any such successor Trustee, acting reasonably, the Corporation shall execute any and all deeds, conveyances or instruments for more fully and certainly vesting in and confirming to it such rights, powers and trusts.

No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Section 13.

13.7                      Trustee May Deal in Subordinate Secured Notes

The Trustee may buy, sell, lend upon and deal in the Subordinate Secured Notes and generally contract and enter into financial transactions with the Corporation or otherwise, without being liable to account for any profits made thereby.

13.8                      No Person Dealing with Trustee Need Inquire

No Person dealing with the Trustee shall be required to inquire as to whether the powers that the Trustee is purporting to exercise have become exercisable, or whether any amount remains due upon the Subordinate Secured Notes or to see to the application of any amount paid to the Trustee.

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13.9                      Investment of Money Held by Trustee

Unless otherwise provided in this Note Indenture, any money held by the Trustee, which under the trusts of this Note Indenture may or ought to be invested or which may be on deposit with the Trustee or which may be in the hands of the Trustee, will be invested and reinvested in the name or under the control of the Trustee in any Authorized Investments  and, prior to the date the Trustee has declared the principal of and interest on the Notes to be due and payable, as directed by the Corporation.  Any such direction to the Trustee as to the investment of funds must be in writing and must be provided to the Trustee no later than  8:00 a.m. (Vancouver time) on the day on which the investment is to be made.  Any such direction received by the Trustee after 8:00 a.m. (Vancouver time) or received on a non-Business Day, will be deemed to have been given prior to 8:00 a.m. (Vancouver time) the next Business Day.  Pending such investment, such moneys may be deposited by the Trustee in an interest-bearing trust account in the name of the Trustee at an Approved Bank or maintained in a trust account with the Trustee.  The Trustee will allow interest at its current rate for trust accounts on money maintained in such trust account and will credit the Corporation with such interest.

If the Corporation determines not to invest in Authorized Investments, the Corporation may instruct the Trustee to deposit any money held by the Trustee in one or more interest-bearing trust accounts to be maintained by the Trustee in the name of the Trustee at one or more Approved Banks.   The Trustee will pay to the Corporation interest at an annual rate which is equal to 2 percent less than the prime rate of interest announced from time to time by The Bank of Nova Scotia on Canadian dollar loans made to its most credit-worthy customers in Canada,  Such payment obligation will be calculated daily and paid to the accounts within 3 Business Days of each month-end.  The Trustee shall be entitled to retain for its own benefit, as partial compensation for its services hereunder, any amount of the interest earned on such funds that is not payable to the Corporation pursuant to this section.

The Trustee will have no responsibility or liability for any diminution of funds held by the Trustee pursuant to this Note Indenture which may result from any deposit made with an Approved Bank pursuant to this Section, including any losses resulting from a default by the Approved Bank or other credit losses (whether or not resulting from such a default) and any credit or other losses on any deposit liquidated or sold prior to maturity.  The Corporation acknowledges and agrees that the Trustee has acted prudently in depositing the funds at any Approved Bank, and that the Trustee is not required to make any further inquiries in respect of any such bank.

At any time and from time to time, the Corporation will be entitled, at its sole discretion, to direct the Trustee by written notice: (a) not to deposit any new amounts in any Approved Bank specified in the notice, and/or (b) to withdraw all or any of such funds that may then be deposited with any Approved Bank specified by the Corporation in the notice and to deposit any new amounts as the Corporation directs.  With respect to any withdrawal notice, the Trustee will endeavour to withdraw such amount specified in the notice as soon as reasonably practicable and the Corporation acknowledges and agrees that such specified amount remains at the sole risk of the Corporation prior to and after such withdrawal.

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Approved Banks
Bank	Relevant S&P Issuer Credit Rating (as at June 1, 2011)
Bank of Montreal	A+
Citibank NA	A+
Bank of America NA	A+
Harris Bancorp Inc.	A+
PNC Bank NA	A+
Canadian Imperial Bank of Commerce	A+
Bank of Scotland	A+
The Bank of Nova Scotia	AA-
Royal Bank of Canada	AA-
The Toronto-Dominion Bank	AA-

13.10                    Trustee Not Required to Give Security

The Trustee shall not be required to give any bond or security in respect of the execution of the trusts and powers of this Indenture or otherwise in respect of this Indenture.

13.11                    Trustee Not Required to Possess Subordinate Secured Notes

All rights of action under this Indenture may be enforced by the Trustee without the possession of any of the Subordinate Secured Notes or the production thereof on any trial or other proceedings relative thereto.

13.12                    Evidence of Compliance

The Corporation shall furnish to the Trustee forthwith evidence of compliance with the conditions specified in this Indenture relating to the issue, certification, authentication and delivery of Subordinate Secured Notes hereunder, the satisfaction and discharge of this Indenture or the taking of any other action to be taken by the Trustee at the request of or on the application of the Corporation.  Such evidence shall consist of:

(a) an Officer’s Certificate addressed to the Trustee stating that such conditions have been complied with in accordance with the terms of this Indenture; and

(b) in the case of conditions, compliance with which are by this Indenture subject to review or examination by Corporation Counsel, an opinion of Corporation Counsel addressed to the Trustee that such conditions have been complied with in accordance with the terms of this Indenture, including any statements required by Applicable Law.

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13.13                    Form of Evidence

Evidence furnished to the Trustee, which relates to a matter other than the issue, certification and delivery of Subordinate Secured Notes or the satisfaction and discharge of this Indenture or the compliance with a particular term of the Indenture which specifies more particularly the nature of evidence required for compliance, may consist of or otherwise be in accordance with a report or opinion of any solicitor, auditor, accountant, engineer or appraiser or any other Person whose qualifications give authority to a statement made by such Person, but if such report or opinion is furnished by a Director, officer or employee of the Corporation it shall be in the form of a statutory declaration or a certificate.

Evidence furnished to the Trustee pursuant to Section 13.12 or this Section 13.13 shall include:

(a) a statement by the Person giving the evidence declaring that such Person has read and understands the provisions hereof relating to the conditions precedent with respect to compliance with which such evidence is being given;

(b) a statement describing the nature and scope of the examination or investigation upon which the statements or opinions contained in the evidence are based;

(c) a statement declaring that, in the belief of the Person giving the evidence, such Person has made such examination or investigation as is necessary to enable such Person to make the statements or give the opinions contained or expressed therein; and

(d) a statement permitting and acknowledging reliance thereon by Holders.

13.14                   Certain Rights of Trustee

Subject to the provisions of Section 13.2,

(a) the Trustee may conclusively act and rely as to the truth of the statements and correctness of the opinions expressed in, shall not be bound to make any investigation into the facts or matters of, and shall be fully protected in acting or relying or refraining from acting upon, any resolution, certificate, statement, statutory declaration, instrument, opinion, report, notice, request, direction, consent, order, bond, Subordinate Secured Note, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b) any request or order of the Corporation shall be sufficiently evidenced by a request or order in writing and signed by any officer of the Corporation, any resolution of the Directors shall be sufficiently evidenced by a Certified Resolution, and the Trustee may conclusively act and rely on any such request, order or Certified Resolution;

(c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, rely and act upon an Officer’s Certificate;

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(d) the Trustee at the expense of the Corporation may consult with Trustee Counsel and such other experts and advisers as the Trustee believes are necessary to enable it to determine and discharge its duties hereunder, and the advice or opinion of the Trustee Counsel, experts or advisers shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; and

(e) the Trustee shall not be under any obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Noteholders pursuant to this Indenture unless such Noteholders shall have offered to the Trustee sufficient funding and indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction, and provisions of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 13.14(e).

13.15                    Merger, Conversion, Consolidation or Succession to Business

Any corporation into which the Trustee may be merged or with which it may be amalgamated or consolidated, or any corporation resulting from any merger, amalgamation or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Section 13, without the need for execution or filing of any specific instrument or any further act on the part of any of the parties hereto to evidence same.

13.16                    Action by Trustee to Protect Interests

The Trustee shall have power to institute and maintain such actions and proceedings as it may consider necessary or expedient to preserve, protect or enforce its interests and the interests of the Noteholders.

13.17                   Protection of Trustee

The Corporation hereby indemnifies and saves harmless the Trustee and its directors, officers and employees (each in this Section 13.17, an “Indemnified Persons”) from and against all claims, demands, losses, actions, causes of action, costs, charges, expenses, damages, taxes (other than income or capital taxes), penalties and liabilities whatsoever brought against or incurred by the Trustee (collectively in this Section 13.17, “Claims”), including Claims arising under or pursuant to Environmental Laws, which it may suffer or incur as a result of or arising in connection with the performance of its duties and obligations under this Indenture, including any and all legal fees and disbursements of whatever kind or nature, except that no Indemnified Person shall be entitled to indemnification in respect of a Claim resulting from the gross negligence, fraud, or wilful misconduct.  This indemnity shall survive the removal or resignation of the Trustee under this Indenture and the termination of this Indenture.

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The Trustee shall not be liable for or by reason of any statements of fact in this Indenture or in the Subordinate Secured Notes (except for the representations contained in Sections 13.3 and in the certificate of the Trustee on the Subordinate Secured Notes) or required to verify such statements, and all such statements are and shall be deemed to be made by the Corporation.

The Trustee shall not be bound to give notice to any Person of the execution of this Indenture.

The Trustee shall not incur any liability or responsibility whatever or in any way be responsible for the consequence of any breach on the part of the Corporation of any of the covenants contained in this Indenture or in any Subordinate Secured Notes or of any acts of the agents or employees of the Corporation.

Neither the Trustee nor any Affiliate of the Trustee shall be appointed a receiver or receiver and manager or liquidator of all or any part of the assets or undertaking of the Corporation.

Nothing in this Indenture shall impose on the Trustee any obligation to see to, or to require evidence of, the registration or filing (or renewal thereof) of this Indenture or any instrument ancillary or supplemental to this Indenture, including the Security Documents, in any jurisdiction.

The Trustee shall not:

(a) be responsible or liable for any debts contracted by it, for damages to persons or property, for salaries, or for non-fulfilment of contracts in any period during which the Trustee is managing or in possession of assets of the Corporation;

(b) be liable to account as mortgagee in possession or for anything other than actual receipts or be liable for any loss on realization or for any default or omission for which a mortgagee in possession may be liable;

(c) be bound to do, observe or perform or to see to the observance of performance by the Corporation of any obligations or covenants imposed upon the Corporation; or

(d) in the case of any chattel paper, security or instrument, be obligated to preserve rights against any other Persons,

and the Corporation waives any provision of Applicable Law permitted to be waived by it which imposes higher or greater obligations upon the Trustee.

The Trustee shall not be responsible or liable in any manner whatever for the sufficiency, correctness, genuineness or validity of any security deposited with it.

The Trustee shall not incur any liability with respect to the delivery or non-delivery of any certificate or certificates whether delivered by hand, mail or any other means.

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The Trustee shall not be responsible for ensuring that the proceeds from the sale of Subordinate Secured Notes are used in a manner contemplated by any prospectus pursuant to which such Subordinate Secured Notes were offered or sold.

The Corporation hereby indemnifies and holds harmless the Trustee, its directors, officers, employees, and agents, and all of their respective representatives, heirs, successors and assigns (collectively in this and the next paragraph the "Indemnified Parties") against any loss, expenses, claim, proceedings, judgment, liability or asserted liability (including strict liability and including costs and expenses of abatement and remediation of spills or releases of contaminants and including liabilities of the Indemnified Parties to third parties (including governmental agencies) in respect of bodily injuries, property damage, damage to or impairment of the environment or any other injury or damage and including liabilities of the Indemnified Parties to third parties for the third parties' foreseeable and unforeseeable consequential damages) incurred as a result of:

(e) the administration of the trust created hereby;

(f) the exercise by the Trustee of any rights hereunder or under the Security Documents which create an interest in property (in this paragraph, “Mortgaged Property”);

which result from or relate, directly or indirectly, to:

(i) the presence or release of any contaminants, by any means or for any reason, on the Mortgaged Property, whether or not release or presence of the contaminants was under the control, care or management of the Corporation or of a previous owner, or of a tenant;

(ii) any contaminant present on or released from any contiguous property to the Mortgaged Property; or

(iii) the breach or alleged breach of any environmental laws by the Corporation.

For purposes of the previous paragraph, "liability" shall include (i) liability of an Indemnified Party for costs and expenses of abatement and remediation of spills and releases of contaminants, (ii) liability of an Indemnified Party to a third party to reimburse the third party for bodily injuries, property damages and other injuries or damages which the third party suffers, including (to the extent, if any, that the Indemnified Party is liable therefor) foreseeable and unforeseeable consequential damages suffered by the third party and (iii) liability of the Indemnified Party for damage  suffered by the third party, (iv) liability of an Indemnified Party for damage to or impairment of the environment and (v) liability of an Indemnified Party for court costs, expenses of alternative dispute resolution proceedings, and fees and disbursements of expert consultants and legal counsel on a solicitor and client basis.

By way of supplement to the provisions of any law for the time being relating to the Trustee, it is expressly declared and agreed that the Trustee shall not be liable for or by reason of:

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(a) any failure or defect of title to, or encumbrance upon, the property and assets granted under the Security Documents;

(b) any failure of or defect in the registration, filing or recording of the Security Documents or any other deed or writing delivered hereunder by way of mortgage or charge upon the property and assets granted thereunder or any part thereof, or any notice, caveat or financing statement with respect to the foregoing; or

(c) any failure to do any act necessary to constitute, perfect and maintain the priority of the security hereby created.

13.18                    No Global Note

No global Subordinate Secured Notes shall be issued.

13.19                    Trustee Appointed Attorney-In-Fact

The Corporation hereby irrevocably appoints the Trustee to be the attorney-in-fact of the Corporation in the name and on behalf of the Corporation to execute any documents and to do any acts and things which the Corporation ought to execute and do, and has not executed or done, under the covenants and provisions contained in this Indenture and generally to use the name of the Corporation in the exercise of all or any of the powers hereby conferred on the Trustee, with full powers of substitution and revocation.

13.20                    Acceptance of Trusts

The Trustee hereby accepts the trusts in this Indenture declared and provided for and agrees to perform the same upon the terms and conditions set forth in this Indenture and in trust for the Noteholders from time to time, subject to the terms and conditions of this Indenture.

13.21                    No Liability for Certain Deposited Monies

The Trustee will bear no liability for monies deposited other than with the Trustee.  The Trustee will disburse monies according to this Indenture only to the extent that monies have been deposited with it.

13.22                    Third Party Interests

Each party to this Indenture hereby represents to the Trustee that any account to be opened by, or interest to held by, the Trustee in connection with this Indenture, for or to the credit of such party, either (i) is not intended to be used by or on behalf of any third party; or (ii) is intended to be used by or on behalf of a third party, in which case such party hereto agrees to complete and execute forthwith a declaration in the Trustee’s prescribed form as to the particulars of such third party.

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13.23                    Trustee Not Bound to Act

The Trustee shall retain the right not to act and shall not be liable for refusing to act if, due to a lack of information or for any other reason whatsoever, the Trustee, in its sole judgment, determines that such act might cause it to be in non-compliance with any applicable anti-money laundering or anti-terrorist legislation, regulation or guideline. Further, should the Trustee, in its sole judgment, determine at any time that its acting under this Indenture has resulted in its being in non-compliance with any applicable anti-money laundering or anti-terrorist legislation, regulation or guideline, then it shall have the right to resign on 10 days written notice to the other parties to this Indenture, provided (i) that the Trustee’s written notice shall describe the circumstances of such non-compliance; and (ii) that if such circumstances are rectified to the Trustee’s satisfaction within such 10 day period, then such resignation shall not be effective.

13.24                   Privacy Laws

The parties acknowledge that federal and/or provincial legislation that addresses the protection of individuals’ personal information (collectively, “Privacy Laws”) applies to obligations and activities under this Indenture. Despite any other provision of this Indenture, neither party shall take or direct any action that would contravene, or cause the other to contravene, applicable Privacy Laws. The Corporation shall, prior to transferring or causing to be transferred personal information to the Trustee, obtain and retain required consents of the relevant individuals to the collection, use and disclosure of their personal information, or shall have determined that such consents either have previously been given upon which the parties can rely or are not required under the Privacy Laws. The Trustee shall use commercially reasonable efforts to ensure that its services hereunder comply with Privacy Laws.

13.25                      Insurance

Nothing herein shall be deemed to hold the Trustee responsible for failure by the Corporation to maintain insurance coverage or for any loss arising out of any want, defect or insufficiency in any insurance policy, or because of failure of any insurer to pay the full amount of any loss or damage insured against.  The Trustee shall be entitled to request and rely absolutely upon an Officers' Certificate stating that the Company is in compliance with their covenant to maintain adequate insurance coverage.  No duty with respect to effecting or maintaining insurance coverage shall rest with the Trustee.

13.26                    SEC Reporting Status

The Corporation confirms that it has either: (i) a class of securities registered pursuant to Section  12 of the U.S. Exchange Act or (ii) a reporting obligation pursuant to Section 15(d) of the U.S. Exchange Act.  The Corporation covenants that in the event that (i) any class of its securities shall cease to be registered pursuant to Section 12 of the U.S. Exchange Act or the Corporation shall cease to have a reporting obligation pursuant to Section 15(d) of the U.S. Exchange Act, or (ii) any such registration or reporting obligation shall be terminated by the Corporation in accordance with the U.S. Exchange Act, the Corporation shall promptly deliver to the Trustee an Officers’ Certificate (in a form provided by the Trustee) notifying the Trustee of such termination and such other information as the Trustee may require at the time. The Corporation acknowledges that Computershare is relying upon the foregoing representation and covenants in order to meet certain SEC obligations with respect to those clients who are filing with the SEC.

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13.27                    Force Majeure

Except for the payment obligations of the Corporation contained herein, neither party shall be liable to the other, or held in breach of this Agreement, if prevented, hindered, or delayed in the performance or observance of any provision contained herein by reason of act of God, riots, terrorism, acts of war, epidemics, governmental action or judicial order, earthquakes, or any other similar causes (including, but not limited to, mechanical, electronic or communication interruptions, disruptions or failures).  Performance times under this Agreement shall be extended for a period of time equivalent to the time lost because of any delay that is excusable under this Section.

SECTION 14      SECURITY

14.1                      Corporation’s Security

To secure the due payment of all Subordinate Secured Note Indebtedness, and the performance by the Corporation of its obligations contained in the Indenture Documents to which it is a party, the Corporation shall execute and deliver to the Trustee, for the benefit of the Noteholders, the Security Documents and shall grant a Security Interest in the Secured Assets.

14.2                      Registration of the Security

The Corporation shall, at its expense, register, file or record or give notice of (or cause to be registered, filed, recorded or given notice of) the Security Documents in all offices where such registration, filing or recording is reasonably necessary or of reasonable advantage to the creation, perfection and preserving of the security constituted thereby including, without limitation, any applicable land or personal property registry offices.  The Corporation shall (at the expense of the Corporation) renew or cause to be renewed such registrations, filings and recordings from time to time as and when required to keep them in full force and effect until the Maturity Date.  The Trustee shall have the right, but is not obligated, to amend any such registrations, filings or recordings to reflect any changes in Applicable Law, whether arising as a result of statutory amendments, court decisions or otherwise, in order to confer upon the Trustee (for the benefit of the Noteholders) the Liens intended to be created thereby, except that in no event shall the Trustee effect any such amendment if the result thereof would be to grant the Trustee or the Noteholders greater rights than is otherwise contemplated herein.

14.3                      After Acquired Property and Further Assurances

The Corporation shall, from time to time, upon the request of the Trustee (as directed by an Ordinary Resolution), execute and deliver all such further deeds or other instruments of conveyance, assignment, transfer, mortgage, pledge or charge as may be required to ensure that any additional interests in any assets acquired after the date hereof are subject to the security interests created pursuant to the Security Documents in the manner contemplated hereby.

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14.4                      Partial Discharges

Upon the sale or transfer of any assets permitted under this Indenture and upon receipt by the Trustee of an Officer’s Certificate confirming that the partial discharge requested is permitted pursuant to such particular Section of the Indenture, the Trustee shall, at the request and expense of the Corporation, execute and deliver to the Corporation such deeds or other instruments as may be necessary to release such asset from the Liens created by the Security Documents provided that such deeds or other instruments are in form and substance satisfactory to the Trustee and the Trustee Counsel, both acting reasonably.

SECTION 15      SUPPLEMENTAL INDENTURES

15.1                      Supplemental Indentures

From time to time the Trustee and, when authorized by a resolution of its Directors, the Corporation may, without the consent of any Noteholder, and they shall when required by this Indenture, execute, acknowledge and deliver by their proper officers Supplemental Indentures, which thereafter shall form part of this Indenture, for any one or more of the following purposes:

(a) adding to the covenants of the Corporation herein contained for the protection of the Noteholders or providing for Events of Default in addition to those herein specified;

(b) making such provisions not inconsistent with this Indenture as may be necessary or desirable with respect to matters or questions arising hereunder, including the making of any modifications in the form of the Subordinate Secured Notes which do not affect the substance thereof and which it may be expedient to make, provided that such provisions and modifications will not adversely affect the interests of the Noteholders based on the advice of Trustee Counsel;

(c) evidencing the succession, or successive successions, of successors to the Corporation and the covenants of and obligations assumed by any such successor in accordance with the provisions of this Indenture; and

(d) giving effect to any Extraordinary Resolution or Ordinary Resolution.

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The Trustee may also, without the consent or concurrence of the Noteholders, by Supplemental Indenture or otherwise, concur with the Corporation in making any changes or corrections in this Indenture or in any Supplemental Subordinate Secured Note which it shall have been advised by Trustee Counsel are required for the purpose of curing or correcting any ambiguity or defective or inconsistent provision or omission or mistake or manifest error contained herein or in any Supplemental Indenture, provided that the rights of the Noteholders are in no way adversely affected thereby based on the advise of Trustee Counsel.

15.2                      Effect of Supplemental Indentures

Upon the execution of any Supplemental Indenture relating to some or all Subordinate Secured Notes, this Indenture shall be modified in accordance therewith, such Supplemental Indenture shall form a part of this Indenture for all purposes in relation to such Subordinate Secured Notes, and every Holder of such Subordinate Secured Notes shall be bound thereby.  Any Supplemental Indenture providing for the issue of Subordinate Secured Notes may contain terms which add to, modify or negate any of the terms contained in this Indenture in relation to the Subordinate Secured Notes to be so issued, and to the extent that there is any difference between the terms of this Indenture and the terms contained in a Supplemental Indenture, the terms contained in the Supplemental Indenture shall be applicable to the Subordinate Secured Notes unless otherwise indicated in such Supplemental Indenture; provided that no provision in a Supplemental Indenture shall adversely affect the rights of holders of Subordinate Secured Notes.

15.3                      Execution of Supplemental Indentures

In executing, or accepting the additional trusts created by, any Supplemental Indenture permitted by this Indenture or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in acting and relying upon, an opinion of Corporation Counsel stating that the execution of such Supplemental Indenture is authorized or permitted by this Indenture.  The Trustee may, but shall not be obligated to, enter into any such Supplemental Indenture which affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

SECTION 16      EVIDENCE OF RIGHTS OF NOTEHOLDERS

16.1                      Evidence of Rights of Noteholders

Any instrument which this Indenture may require or permit to be signed or executed by the Noteholders may be in any number of concurrent instruments of similar tenor and may be signed or executed by such Noteholders in person or by attorney duly appointed in writing.

The Trustee may, nevertheless, in its discretion, require further proof when it deems further proof desirable or may accept such other proof as it shall consider proper.

The ownership of Subordinate Secured Notes shall be proved by the Register as herein provided.

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SECTION 17      EXECUTION AND FORMAL DATE

17.1                      Counterpart Execution

This Indenture may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute one and the same instrument.

17.2                      Formal Date

For the purpose of convenience, this Indenture may be referred to as bearing the formal date of July 27, 2011, irrespective of the actual date of execution hereof.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF the parties hereto have executed this Indenture under the hands of their proper signatories in that behalf.

GRYPHON GOLD CORPORATION
By:
	Authorized Signing Officer

COMPUTERSHARE TRUST COMPANY OF CANADA

By:

By:

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SCHEDULE 1

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FORM OF DEFINITIVE SUBORDINATE SECURED NOTE

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AND, IF REQUESTED BY THE COMPANY, THE SELLER FURNISHES TO THE COMPANY AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY TO SUCH EFFECT.

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE [THE DATE THAT IS FOUR (4) MONTHS AND A DAY AFTER THE CLOSING DATE].

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO STOCK EXCHANGE (“TSX”); HOWEVER, THE SAID SECURITIES CANNOT BE TRADED THROUGH THE FACILITIES OF THE TSX SINCE THEY ARE NOT FREELY TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON TSX.

No. l

GRYPHON GOLD CORPORATION

(Incorporated under the laws of Nevada)

10% Subordinate Secured Note due July 28, 2012

Principal Amount	CAD$1,000 (or an integral multiple thereof)
Interest Rate Per Annum	10% payable quarterly in arrears in equal instalments on
Interest Payment Dates	March 31, June 30, September 30 and December 31 in each year
Initial Interest Payment Date	September 30, 2011

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GRYPHON GOLD CORPORATION (the “Corporation”) for value received hereby promises to pay to ______________, the registered holder hereof (the “Holder”), on July 28, 2012 (the “Stated Maturity”), or on such earlier date as the Principal Amount (or a portion thereof) may become due and payable in accordance with the provisions of the Note Indenture (as defined below), on presentation and surrender of this 10% Subordinate Secured Note due July 28, 2012 (the “Subordinate Secured Note”), the Principal Amount in lawful money of Canada at the office of the Trustee (as defined below) at 510 Burrard Street, 3rd Floor, Vancouver, B.C., V6C 3B9, and to accrue interest from the date hereof (the “Issue Date”) and pay interest on the Principal Amount at the Interest Rate Per Annum, at the address of the Holder appearing on the register of the Subordinate Secured Notes maintained by or at the direction of the Trustee (the “Register”), in like money semi-annually in arrears in equal instalments on the Interest Payment Dates in each year, the first such payment to be payable on the Initial Interest Payment Date, and if the Corporation at any time defaults in the payment of any principal or interest, to pay interest on the amount in default at the rate set out in the Note Indenture from and after the date of the Event of Default, in like money on demand at the address of the Holder hereof appearing on the Register.  The Corporation will forward or cause to be forwarded by same day delivery at least two Business Days prior to each Interest Payment Date to the address of the Holder appearing on the Register a cheque for interest due and payable to such Holder on such Interest Payment Date, less any taxes required by law to be deducted or withheld, made payable to the order of such Holder; provided, however that in case of payment of interest at maturity or redemption or as otherwise provided in the Note Indenture, the time for payment of interest, less any such taxes, may at the option of the Corporation be determined based on the time that the certificate representing this Subordinate Secured Note is presented and surrendered to the Trustee.  The forwarding of such cheque will satisfy and discharge the liability for interest upon such Subordinate Secured Note to the extent of the sum represented thereby (plus the amount of any taxes deducted or withheld as aforesaid) unless such cheque is not paid on presentation.

This Subordinate Secured Note is one of an authorized issue of Subordinate Secured Notes designated as 10% Subordinate Secured Notes due July 28, 2012 and issued pursuant to a note indenture (the “Note Indenture”) made as of July 27, 2011, between COMPUTERSHARE TRUST COMPANY OF CANADA (the “Trustee”), as Trustee, and the Corporation.  The Note Indenture specifies the terms and conditions upon which the Subordinate Secured Notes are created and issued or may be created, issued and held and the rights of the registered holders of the Subordinate Secured Notes, the Corporation and the Trustee, all of which terms and conditions including those provisions related to the first ranking lien in the Secured Assets are incorporated by reference in this Subordinate Secured Note and to each of which the Holder, by acceptance hereof, agrees.  Capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Note Indenture. To the extent there is any discrepancy between this Subordinate Secured Note and the Note Indenture, the terms of the Note Indenture shall prevail.

The aggregate principal amount of Subordinate Secured Notes that may be created and issued under the Note Indenture is CAD$3,000,000.  Subordinate Secured Notes are issuable in denominations of CAD$1,000 and integral multiples thereof.

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If a Change of Control occurs, the Corporation may redeem the Subordinate Secured Notes in whole for cash on giving notice to the holders of the Subordinate Secured Notes, at a redemption price which is equal to the principal amount of each Subordinate Secured Note plus accrued and unpaid interest to but excluding the date fixed for redemption.  In the event that the Corporation is required to redeem the Subordinate Secured Notes further to a Change of Control, it shall redeem, and the Noteholders shall offer to sell, all of the issued and outstanding Subordinate Secured Notes in accordance with the procedure set out in section 6 of the Note Indenture mutatis mutandis.

If a Qualifying Change of Control occurs and the Holders of Subordinate Secured Notes have passed an Extraordinary Resolution to require the Corporation to redeem the Subordinate Secured Notes, the Corporation shall make an offer to redeem the Subordinate Secured Notes for cash at a price equal to the principal amount of the Subordinate Secured Notes plus accrued and unpaid interest to but excluding the Change of Control Purchase Date in accordance with the procedures set out in Section 6 of the Note Indenture.

At any time when the Corporation is not in default under the Note Indenture, the Corporation may, subject to the terms and conditions set forth in the Note Indenture, purchase Subordinate Secured Notes in the open market, by tender or by private contract, at any price. Subordinate Secured Notes purchased by the Corporation shall be cancelled and not reissued.

The Principal Amount may become or be declared due before the Stated Maturity on the conditions, in the manner, with the effect and at the times set forth in the Note Indenture.

The Note Indenture contains provisions for the holding of meetings of registered holders of Subordinate Secured Notes issued by the Corporation pursuant to the Note Indenture and the making of resolutions at such meetings and the creation of instruments in writing signed by the registered holders of a specified majority of Subordinate Secured Notes issued and outstanding pursuant to the Note Indenture.  Such resolutions and instruments will be binding on and may affect the rights and entitlements of all holders of Subordinate Secured Notes issued by the Corporation pursuant to the Note Indenture, subject to the provisions of the Note Indenture.

This Subordinate Secured Note (as defined in the Note Indenture) may be transferred only upon compliance with the conditions prescribed in the Note Indenture relating to the transfer of a Subordinate Secured Note.  Further this Subordinate Secured Note may be transferred only upon compliance with such reasonable requirements as the Trustee or other Registrar may prescribe, and such transfer shall be duly noted hereon by the Trustee or other Registrar.

This Subordinate Secured Note shall not become obligatory for any purpose until it shall have been certified by the manual signature of the Trustee in accordance with the Note Indenture.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF GRYPHON GOLD CORPORATION has caused this Subordinate Secured Note to be signed by its duly authorized officer as of the 27 day of July, 2011.

GRYPHON GOLD CORPORATION
By:
	Authorized Signing Officer
By:
	Authorized Signing Officer

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(FORM OF TRUSTEE’S CERTIFICATE)

TRUSTEE’S CERTIFICATE

This Subordinate Secured Note is one of the Subordinate Secured Notes referred to in the Note Indenture referred to above.

Dated as of the 27 day of July, 2011.

COMPUTERSHARE TRUST COMPANY

OF CANADA

By:

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ASSIGNMENT/TRANSFER FORM

TO:	GRYPHON GOLD CORPORATION
	c/o [COMPUTERSHARE TRUST COMPANY]
	510 Burrard Street, 3rd Floor,
	Vancouver, British Columbia V6C 3B9

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto:

Name

Address

Social Insurance Number, Social Security Number or Tax Identification Number

CAD$____________ of the principal amount of Subordinate Secured Note registered in the name of the undersigned represented by the within certificate (which amount must be CAD$1,000 or an integral multiple thereof) and do hereby irrevocably constitute and appoint ___________ attorney to transfer the said Subordinate Secured Note on the books of the Corporation with full power of substitution in the premises.

The undersigned understands that, as a condition to any transfer of a Subordinate Secured Note, the Company or Trustee may request a legal opinion, in form and substance reasonably satisfactory to the Company, Trustee, and their respective legal counsel, stating that such transfer is exempt from the registration requirements of the Securities Act of 1933, as amended.

DATED the ______ day of ________, 20___.

Signature of Transferor:
	____________________________
	(Signature of Transferor)

Guaranteed by:
	____________________________
	Authorized Signature Number

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NOTICE:

The signature to this transfer must correspond in every particular with the name as shown on the face of this certificate and the endorsement must be signature guaranteed, in either case, by a Canadian Schedule I Chartered Bank, or by a medallion signature guarantee from a member recognized under the Signature Medallion Guarantee Program or from a similar entity in the United States. The stamp affixed thereon by the guarantor must bear the actual words “signature guarantee”, OR “signature medallion guarantee” or in accordance with industry standards.

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SCHEDULE “A”

SECURITY AND PLEDGE AGREEMENT

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EX-4.2

PLEDGE AND SECURITY AGREEMENT

THIS PLEDGE AND SECURITY AGREEMENT (this “Agreement”), dated as of July 27, 2011 (the “Effective Date”), is by and among Gryphon Gold Corporation, a Nevada corporation (“Debtor”), and Computershare Trust Company of Canada (“Trustee”), as trustee to the holders (collectively, “Holders”) of 10% Subordinate Secured Notes, due July 28, 2012, issued by the Debtor.

Recitals

A.           Holders advanced Debtor the aggregate amount of CAD$3,000,000 (the “Loan”) pursuant to the terms of that certain Note and Warrant Purchase Agreement dated July 27, 2011 (as amended, restated, supplemented, or otherwise modified from time to time, the “Purchase Agreement”).

B.           The indebtedness is evidenced by 10% Subordinate Secured Notes, due July 28, 2012 (“Notes”), in the aggregate principal amount of CAD$3,000,000, issued by Debtor to Holders pursuant to the terms of a Note Indenture dated July 27, 2011, by and between Debtor and Trustee, for the benefit of Holders (as amended, restated, supplemented, or otherwise modified from time to time, the “Note Indenture”).

C.           Borealis Mining Company, a Nevada corporation (“Borealis Mining”), is a wholly-owned subsidiary of Debtor, and Debtor owns all of the issued and outstanding shares of common stock of Borealis Mining (the “Borealis Securities”).

D.           Under the terms of the Purchase Agreement, Debtor has agreed to grant, for the benefit of Holder, as secured party, a security interest in all of its property and assets as set forth herein, including a pledge of 100% of the Borealis Securities.

E.           As a condition precedent to advancing the Loan and the issuance of the Notes, the Debtor is required to execute and deliver this Agreement.

Agreement

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows:

1.           Grant of Security. Debtor hereby grants to Trustee, for the benefit of Holders, a lien on and security interest in all of Debtor’s right, title and interest in, to and under the following, whether now or hereafter owned, existing, arising or acquired and wherever located (all of the following, collectively, the “Collateral”):

(a)           Inventory.  All (i) inventory in all its forms and of any kind, (ii) goods in which Debtor has an interest in mass or a joint or other interest or right of any kind, (iii) goods which are returned to or repossessed by Debtor, and (iv) accessions thereto and products thereof and documents therefor (any and all of the foregoing herein collectively called the “Inventory”).

(b)           Equipment.  All equipment in any form and of any kind, including all office machinery, production and printing equipment and delivery vehicles (any and all of the foregoing herein collectively called the “Equipment”).

(c)           Receivables.  All (i) accounts of any kind, (ii) chattel paper, documents and instruments of any kind relating to such accounts or arising out of or in connection with the sale or lease of goods or the rendering of services, and (iii) rights in, to or under all security agreements, leases and other contracts securing or otherwise relating to any such accounts, chattel paper, documents, or instruments (any and all of the foregoing herein collectively called the “Receivables”).

(d)           Contract Rights, General Intangibles, etc.  All  (i) contract rights and general intangibles of any kind (including choses in action, tax refunds, and insurance proceeds), (ii) chattel paper, documents, instruments (including promissory notes, drafts, bills of exchange and trade acceptances), security agreements, leases, other contracts and money, all other rights of Debtor (except those constituting Receivables) to receive payments of money or the ownership of property, and (iii) intellectual property of Debtor (any and all of the foregoing herein collectively called the “General Intangibles”).

(e)           Investment Property. All investment property, including the Pledge Securities (as defined below), all other securities, security entitlements, securities accounts, commodity contracts, commodity accounts, stocks, partnership interests, limited liability company interests, bonds, mutual fund shares, money market shares and U.S. government securities (any and all of the foregoing herein collectively called the “Investment Property”).

(f)           Pledged Borealis Securities.  The entire interest of Debtor in Borealis Mining, as described in Schedule 1(f) and as the same is updated from time to time, all additional interests in Borealis Mining or any successor from time to time acquired by Debtor, and all warrants, options or other rights, whether now owned or hereafter acquired, of Debtor entitling the holder thereof to purchase or acquire any such interest or interests, including (i) Debtor’s capital account, its interest as a shareholder, as applicable, in the net cash flow, net profit and net loss, any items of income, gain, loss, deduction and credit of Borealis Mining, Debtor’s interest in all distributions made or to be made by Borealis Mining to Debtor and all of the other economic rights, titles and interests of Debtor as a shareholder whether set forth in the articles of incorporation or bylaws, as applicable, of Borealis Mining, by separate agreement or otherwise, (ii) Debtor’s voting and other control rights as a shareholder of Borealis Mining, and (iii) all certificates, agreements (including operating agreements), books, records, writings, data bases, information and other property relating to, used or useful in connection with, evidencing, embodying, incorporating or referring to, any of the foregoing (collectively, the “Pledged Securities”).

(g)           Other Property. To the extent not included in the foregoing, all of the personal property, rights and interests, present and future, tangible and intangible, which are owned by Debtor or in which Debtor otherwise has any rights, including all goods, fixtures and deposit accounts, cash, funds, checks, notes and instruments from time to time on deposit in any of such deposit accounts, and letter of credit rights and all commercial tort claims.

(h)           Proceeds.  All proceeds, products and supporting obligations of or with respect to any and all of the foregoing and, to the extent not otherwise included, any payments under insurance (whether or not Holder is the loss payee thereof) or under any indemnity, warranty or guaranty by reason of loss to or otherwise with respect to any of the foregoing.

In each case, the foregoing shall be covered by this Agreement, whether any Debtor’s ownership or other rights therein are presently held or hereafter acquired (by operation of law or otherwise) and howsoever any Debtor’s interests therein may arise or appear (whether by ownership, security interest, claim or otherwise).  For purposes hereof, the terms inventory, goods, equipment, accounts, chattel paper, documents, instruments, general intangibles, investment property, securities, security entitlements, securities accounts, commodity contracts, commodity accounts, fixtures, deposit accounts, letter of credit rights, commercial tort claims, supporting obligations and proceeds shall have the meanings set forth in the Uniform Commercial Code as enacted from time to time in the state of New York or in any other applicable jurisdiction(“UCC”).

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Notwithstanding anything herein to the contrary, other than to the extent that any such term would be rendered ineffective pursuant to Section 9-406, 9-407, 9-408 or 9-409 of the UCC or any other applicable law or principle of equity, in no event shall the lien or security interest granted hereunder attach to, and the Collateral shall not include:  (i) any lease, license, intellectual property, contract, right, claim or benefit to which any Debtor is a party or beneficiary of or any of Debtor’s rights or interest thereunder if, and for so long as, the grant of such lien or security interest shall constitute or result in (A) the abandonment, invalidation or unenforceability of any right, title or interest of Debtor therein or (B) a breach or termination pursuant to the terms of, or a default under, any such lease, license, intellectual property, contract, right, claim or benefit; provided, however, that such lien and security interest shall attach immediately at such time as the condition causing such abandonment, invalidation, unenforceability, breach or termination shall be remedied and, to the extent severable, shall attach immediately to any portion of such lease, license, intellectual property, contract, right, claim or benefit that does not result in any of the consequences specified in clauses (A) or (B) of this clause (i) including any proceeds of such lease, license, intellectual property, contract, right, claim or benefit; or (ii) any government approval or permit, if and for so long as the grant of such lien or security interest shall constitute or result in (A) the abandonment, invalidation or unenforceability of any right, title or interest of Debtor therein, (B) a violation of, or termination pursuant to, the terms of such government approval or permit or (C) a violation of any applicable law; provided, however, that such lien and security interest shall attach immediately at such time as the condition causing such abandonment, invalidation, unenforceability, violation or termination shall be remedied and, to the extent severable, shall attach immediately to such portion of any such government approval or permit that does not result in any of the consequences specified in clause (A), (B) or (C) of this clause (ii).

2.           Security for Secured Obligations.  This Agreement secures the payment and performance of (a) all subordinate Secured Note Indebtedness (as defined in the Note Indenture), and all other obligations and liabilities of Debtor (now or hereafter existing) arising under, out of, pursuant to, or in connection with the Notes or the Note Indenture and (b) all indebtedness, obligations and liabilities of the Debtor now or hereafter existing under this Agreement (all such indebtedness, obligations and liabilities being the “Secured Obligations”).  Notwithstanding the foregoing, the security interest granted under this Agreement is subordinate to any security interest granted to a Senior Creditor under any Senior Creditor Obligation (as such terms are defined in the Note Indenture).

3.           Debtor Remains Liable. Anything herein to the contrary notwithstanding, (a) Debtor shall remain liable under the contractsand agreements included in the Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by Holder of any of its rights hereunder shall not release Debtor from any of its duties or obligations under the contracts and agreements included in the Collateral, and (c) Holder shall not have any obligation or liability under the contracts and agreements included in the Collateral by reason of this Agreement nor shall Holder be obligated to perform any of the obligations or duties of Debtor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.

4.           Representations and Warranties.  Debtor hereby continuously represents and warrants as follows:

(a)           (i)           Debtor is a corporation duly organized, validly existing and in good standing under the laws of the state of Nevada.  The principal place of business and chief executive office of the Debtor and the office where Debtor keeps all of its records are located at 611 N. Nevada Street, Carson City, NV, 89703.  Debtor’s tax identification number is 92-0185596 and its organizational identification number is NV20031328264.

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(ii)           Borealis Mining is a corporation duly organized, validly existing and in good standing under the laws of the state of Nevada.

(b)           As of the Effective Date, the Pledged Securities constitute all of the issued and outstanding equity and non-equity securities of Borealis Mining.

(c)           Debtor has no securities account and none of the Collateral is deposited in, credited to or otherwise subject to any securities account.

(d)           Debtor is the sole legal and beneficial owner of the Collateral owned by it, and has good and marketable title to (or valid right in and the power to transfer such rights to) the Collateral, free and clear of any lien, security interest, option or other charge or encumbrance except for the security interest created by this Agreement, Permitted Encumbrances (as defined in the Note Indenture) and the liens arising in the ordinary course of business or otherwise disclosed or contemplated in the Note Indenture.

(e)           This Agreement creates a valid security interest in the Collateral, which, upon the filing of all related UCC-1 financing statements in the state of Nevada pursuant to the applicable provisions of the UCC and the delivery to the Trustee of all certificates representing the Pledged Securities, shall constitute a perfected, first priority security interest in the Collateral, securing the payment of the Secured Obligations, subject to Permitted Encumbrances, and all filings and other actions necessary or desirable to perfect and protect such security interest have been duly taken.

(f)           No consent of any other person or entity and no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required (i) for the grant by Debtor of the security interest created hereby or for the execution, delivery or performance of this Agreement by Debtor, (ii) for the perfection or maintenance of the security interest created hereby (including the first priority nature of such security interest), other than the filing of UCC-1 financing statements or UCC-3 amendments describing the Collateral, in accordance with the applicable provisions of the UCC or (iii) for the exercise by Holder of its rights and remedies hereunder.

(g)           There are no conditions precedent to the effectiveness of this Agreement that have not been satisfied or waived.

(h)           Debtor has, independently and without reliance upon Holder and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and represents and warrants that it benefits from the transactions contemplated under the Purchase Agreement and Note Indenture.

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5.           Covenants; Further Assurances.

(a)           Debtor shall keep its principal place of business and chief executive office and the office where it keeps its records concerning the Receivables, if any, at 611 N. Nevada Street, Carson City, NV, 89703. Debtor shall not change its name in any manner whatsoever or its jurisdiction of organization, formation or incorporation without 10 business days written notice to Trustee.  Until Holder notifies Debtor to the contrary, each Debtor shall make collection of all Receivables and other Collateral in the ordinary course of business.  Holder may, at any time after the occurrence and during the continuance of any “default” or “event of default” under the Notes or the Note Indenture (each an “Event of Default”), notify all account debtors relating to any Receivables that Debtor’s Receivables have been assigned to Trustee for the benefit of Holders and of Holders’ security interest therein, and may collect them directly and charge the collection costs and expenses to Debtor.  So long as an Event of Default has occurred and is continuing, Debtor, at Trustee’s request, shall execute and deliver to Trustee for the benefit of Holders such documents as Trustee shall require to grant Trustee access to any post office box in which collections of Receivables are received.

(b)           Debtor shall maintain good and marketable title to its Collateral free and clear of all liens, security interests, options, and other charges or encumbrances, except for the security interests created by this Agreement, and Permitted Encumbrances (as defined in the Note Indenture).  No Debtor shall sell, assign (by operation of law or otherwise) or otherwise dispose of all or any portion of the Pledged Securities to any person unless (i) no Change of Control will occur as a result of such disposition, (ii) no Event of Default exists as of the date of such disposition or would exist as a result thereof, (iii) the proposed third party transfer is approved in advance by Holder, (iv) the Pledged Securities conveyed remain subject to a first priority, perfected security interest in favor of Holder (subordinate only to Senior Creditor Debt (as defined in the Note Indenture) and Senior Creditor Obligations (as defined in the Note Indenture)), and (v) each party acquiring Pledged Securities shall enter into a pledge agreement with Trustee on behalf of Holder granting such security interest, which pledge agreement shall be in form and substance satisfactory to Trustee. Debtor shall use its best efforts to resolve any dispute, right of setoff, counterclaim, or defense with respect to all or any part of the Collateral.  Debtor shall cause to be terminated any financing statement or other security instrument with respect to its Collateral, except such as may exist or as may have been filed in favor of Holder.  Debtor shall defend Holder’s right, title, and special property and security interest in and to the Collateral against the claims of any person or entity.

(c)           Debtor shall maintain its Collateral in good condition and shall not use the same in violation of any law or any policy of insurance thereon, and shall make such Collateral available for inspection by Holder. Debtor shall not permit any of its Collateral or any part thereof to be affixed to or otherwise become a part of any real or personal property, without first making arrangements satisfactory to Holder to protect Holder’s security interest therein.  Upon Trustee’s request, Debtor shall make appropriate notations in its ledger to indicate Holder’s interest in the Collateral.

(d)           All and any Pledged Securities shall be delivered to the Trustee, along with duly executed powers of attorney.  Collateral shall remain at the location(s) designated by Debtor. Debtor shall not cause or permit the removal of any item of the Collateral from its possession, control or risk of loss, or from the location specified herein, other than removal in connection with possession of Collateral by Trustee for the benefit of Holders or by a bailee selected by Trustee who is holding the Collateral for the benefit of Holder as agent for Holder.

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(e)           Debtor agrees that from time to time, at the expense of Debtor, Debtor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that Trustee for the benefit of Holder may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable Trustee to exercise and enforce its rights and remedies hereunder with respect to any Collateral.  Without limiting the generality of the foregoing, Debtor will upon such request execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as Trustee may request, in order to perfect and preserve the security interest granted or purported to be granted hereby. Debtor shall furnish to Trustee any information that Trustee may from time to time request concerning any covenant, provision or representation contained herein or any other matter in connection with the Collateral or the Note Indenture.

(f)           Debtor hereby authorizes Trustee, but Trustee shall have no obligation, to file one or more financing or continuation statements, and amendments thereto, related to all or any part of the Collateral without the signature of Debtor.  A photocopy or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.

(g)           Debtor will furnish to Holder from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Holder may reasonably request, all in reasonable detail.

(h)           Debtor hereby agrees to and makes the covenants regarding the operations and assets of Borealis Mining set forth in Section 8.2 (d) – (h) of the Note Indenture as if set forth fully herein.

6.           Insurance.  Debtor shall maintain and shall require Borealis Mining to maintain adequate insurance on all of its properties in such amounts with such insurers as are standard practice within the industry of the Debtor.  If Debtor receives benefits arising from any insurance policy covering Collateral, the net cash proceeds shall be deemed Collateral under this Agreement and paid to the Trustee for the benefit of the Holders.

7.           Holder Appointed Attorney-in-Fact. Debtor hereby irrevocably appoints Trustee, for the benefit of Holders, the attorney-in-fact of Debtor, coupled with an interest and with full authority in the place and stead of Debtor and in the name of Debtor, Holder or otherwise, from time to time in Trustee’s discretion, to take any action and to execute any instrument which Trustee may deem necessary or advisable to accomplish the purposes of this Agreement, including:

(a)           To obtain and adjust insurance required to be paid to Holders pursuant to Section 6;

(b)           To ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in connection with the Collateral;

(c)           To receive, endorse, and collect any drafts or other instruments, documents and chattel paper, in connection therewith; and

(d)           To file any claims or take any action or institute any proceedings which Trustee may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of Holder with respect to any of the Collateral.

The provisions of this Section 7 shall terminate upon termination of the Note Indenture and the complete and final satisfaction and repayment of all obligations of any of Debtor under the Notes and Note Indenture, whether for principal, interest, expenses or otherwise.

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8.           Holder May Perform.  If any Debtor fails to perform any agreement contained herein, Trustee, for the benefit of Holders, may perform, or cause performance of, such agreement, and the expenses of Trustee incurred in connection therewith shall be payable by Debtor.

9.           Trustee/Holder’s Duties.  The powers conferred on Trustee hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers.  Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, Trustee shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral.  Trustee shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if such Collateral is accorded treatment substantially equal to that which Trustee accords its own property.

10.        Remedies.

(a)           If any Event of Default shall have occurred and be continuing:

(i)         Trustee, for the benefit of Holders, shall have all of the rights, remedies and privileges with respect to repossession, retention and sale of the Collateral and disposition of the proceeds thereof as are afforded to Trustee or Holders by this Agreement and the applicable sections of the UCC (whether or not the UCC applies to the affected Collateral).

(ii)         Without limiting the scope of the foregoing clause (i):

(1)           Trustee, for the benefit of Holders, shall have the right to sell, resell, assign, and deliver the Collateral for sale, provided that only such portion of the Collateral as is necessary to satisfy the obligations arising under the Notes or Note Indenture may be sold by Trustee, for the benefit of Holders.  Trustee will give Debtor, to the extent notice of sale shall be required by law, at least ten (10) days’ prior written notice of the time and place of any sale of the Collateral or the time after which any private sale or any other intended disposition of the Collateral is to be made.  Any such notice shall be deemed to meet any requirement hereunder or under any applicable law (including the UCC) that reasonable notification be given of the time and place of such sale or other disposition.  Such notice may be given without any demand for performance or other demand, all such demands being hereby expressly waived by Debtor. Trustee shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Trustee 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.

(2)           In the event of any such sale or sales, the Collateral so purchased shall be held by the purchaser absolutely free from any and all claims or rights of Debtor of every kind and nature whatsoever, including any equity of redemption or similar rights, all such equity of redemption and similar rights being hereby expressly waived and released by Debtor.  Trustee may disclaim warranties of title, possession, quiet enjoyment and the like.  The proceeds of the sale of any Collateral, together with any other additional collateral security at the time received and held hereunder, shall be received and applied: first, to the payment of all of the Trustee’s costs and expenses of sale, including reasonable attorneys’ fees; second, to the payment of the obligations of Debtor and the other parties under the Notes or Note Indenture, in such order of priority as Trustee shall determine; and third, any remaining proceeds shall be paid to shall be paid over to the applicable Debtor or to whomsoever may be lawfully entitled to receive such surplus.

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(3)           Debtor recognizes that Trustee may be unable to effect a public sale of all or any part of the Collateral by reason of certain prohibitions contained in the Securities Act of 1933, as amended (the “Securities Act”), or other applicable laws, rules or regulations, but may be compelled to resort to one or more private sales to a restricted group of purchasers who will, among other things, be obliged to agree to acquire the Collateral or any part thereof for their own account, for investment and not with a view to the distribution or resale thereof.  Debtor agrees that private sales so made may be at prices and on terms less favorable than if the Collateral were sold at public sales, and that Holder has no obligation to delay the sale of any Collateral for the period of time necessary to permit the Collateral to be registered for public sale under the Securities Act or any other applicable law, rule or regulation.  Debtor agrees that private sales made under the foregoing circumstances shall be deemed to have been made in a commercially reasonable manner.

(iii)       Debtor shall take any action that Trustee may request in the exercise of its rights and remedies under this Agreement in order to transfer and assign to Trustee, or to such one or more third parties as Trustee may designate, or to a combination of the foregoing, any or all of the Collateral.

(iv)       Trustee shall have the right, for and in the name, place and stead of Debtor, to execute endorsements, assignments and other instruments of conveyance or transfer with respect to all or any of the Collateral, and in connection therewith, Debtor hereby irrevocably appoints Trustee, its officers, employees and agents, or any of them, as attorneys-in-fact for Debtor to execute, deliver, file and record such items for Debtor and in Debtor’s name, place and stead.  This power of attorney, being coupled with an interest, shall be irrevocable.

(b)           If in connection with the exercise by Trustee of any power, right, provision or remedy granted pursuant to this Agreement, or in order to effectuate the purposes and intent of this Agreement, any consent, approval, registration, filing, qualification or authorization of any governmental authority is required, Debtor will execute and deliver all applications, certificates, instruments and other documents and papers that Trustee may be required to obtain for such governmental consent, approval, registration, filing, qualification or authorization.

11.         Waivers and Amendments.   No provision of this Agreement may be amended, waived or modified without the written consent of all the Holders and the Debtor.  Trustee, for the benefit of Holders, may exercise its rights with respect to the Collateral held hereunder without first or simultaneously resorting to any other collateral or sources of repayment or reimbursement; and without being obligated to consider or take notice of any right of contribution, reimbursement, subrogation or marshaling of assets which Debtor may have or claim to have against any person or persons or with respect to any other collateral; and Trustee, for the benefit of Holders, may release any and all other collateral it may now or hereafter have to secure repayment of the Notes, all without affecting  or impairing its rights with respect to the Collateral.  The failure by Trustee to insist upon Debtor’s strict performance of this Agreement or the delay or the failure by Trustee, for the benefit of Holders, to exercise Holder’s remedies hereunder shall not be deemed a waiver of such default, and shall not be a waiver by Holder of any of Holder’s rights or remedies hereunder or at law or in equity.  A waiver on any one occasion shall not be construed as a bar to or waiver of any right and/or remedy on any future occasion.

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12.         Addresses for Notices.

(a)           Except in the case of notices and other communications expressly permitted to be given by telephone (and subject to Section 12(b)) all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile, as follows:

If to any Debtor:

Gryphon Gold Corporation

611 N. Nevada Street

Carson City, NV, 89703

Attention: President

Facsimile No.:  (775) 883-1456

If to Trustee:

Computershare Trust Company of Canada

510 Burrard Street, 3rd Floor

Vancouver, British Columbia

Attention:  Manager, Corporate Trust Department

Facsimile No.:  (604) 661-9403

(b)           Each party hereto may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

(c)           Each party hereto may change its address or facsimile number for notices and other communications hereunder by notice to the other parties hereto.  All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.

13.        Security Interest Absolute; Continuing Security Interest.  All rights of Holders and security interests hereunder, and all obligations of Debtor hereunder, shall be absolute and unconditional irrespective of, and unaffected by any other circumstance which might otherwise constitute a defense available to, or a discharge of Debtor in respect of the Notes, Note Indentures and this Agreement.  This Agreement shall create a continuing assignment of and security interest in the Collateral and shall remain in full force and effect until the payment in full of the Secured Obligations, subject to the rights of Senior Creditors, Senior Creditor Debt and Senior Creditor Obligations (as defined in the Note Indenture).  Upon any termination of the Agreement, Trustee will, at Debtor’s expense, execute and deliver to Debtor such documents as Debtor shall reasonably request to evidence such termination.

14.         Governing Law.   This Agreement, and its validity, enforcement, and interpretation, shall be governed by New York law (without regard to any conflict of law principles that would result in the application of substantive law of another jurisdiction) and applicable United States federal law.

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15.         Jurisdiction; Consent to Service of Process; Waiver of Jury Trial.

(a)           DEBTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN, CITY OF NEW YORK, NEW YORK AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND DEBTOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.

(b)           DEBTOR HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING IN ANY OF THE ABOVE-MENTIONED COURTS BY THE MAILING THEREOF BY HOLDER BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEVADA, AT ITS ADDRESS SPECIFIED IN SECTION 12.  NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

(c)           EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  DEBTOR HEREBY (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF HOLDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT HOLDER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT HOLDERS ARE NOT PARTIES, ONLY TRUSTEE HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS OF DEBTOR IN THIS SECTION 15.

(d)           DEBTOR HEREBY WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF HOLDER IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF HOLDER, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER, OR PRELIMINARY OR PERMANENT INJUNCTION, THIS AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT BETWEEN HOLDER AND ANY DEBTOR.

16.         Advice of Counsel.  Debtor represents and warrants that it has consulted with its legal counsel regarding all provisions of this Agreement, including those under Section 15.

17.         Successors and Assigns.  The provisions of this Agreement shall be binding upon Debtor and its successors and assigns and inure to the benefit of, and be enforceable by, Holders and their successors, transferees and assigns.  No Debtor shall assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of Trustee (and any attempted assignment or transfer by Debtor without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any person or entity, other than the parties hereto, their respective successors and assigns permitted hereby, any legal or equitable right, remedy or claim under or by reason of this Agreement.

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18.         Severability.  Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement.

19.         Interpretation.   Capitalized terms used, but not defined, herein shall have the meanings ascribed to them in the Note Indenture.  As used in this Agreement, except as otherwise indicated in this Agreement or as the context may otherwise require:

(a)           the words “include,” “includes” and “including” are deemed to be followed by “without limitation” whether or not they are in fact followed by such words or words of similar import,

(b)           the word “or” is not exclusive,

(c)           references to an “Article,” “Section,” “preamble,” “recital” or any other subdivision, or to an “Appendix,” “Annex,” “Exhibit” or “Schedule” are to an article, section, preamble, recital or subdivision of this Agreement, or to an appendix, annex, exhibit or schedule to this Agreement,

(d)           the words “this Agreement,” “hereby,” “hereof,” “herein,” “hereunder” and comparable words refer to all of this Agreement, including the Appendices, Annexes, Exhibits and Schedules to this Agreement, and not to any particular Article, Section, preamble, recital or other subdivision of this Agreement or Appendix, Exhibit or Schedule to this Agreement,

(e)           any pronoun in masculine, feminine or neuter form shall include any other gender,

(f)           any word in the singular form include the plural and vice versa,

(g)           references to any agreement or other document, including this Agreement, are to such agreement or document as amended, modified, supplemented and restated now or from time to time after the Effective Date,

(h)           references to any law are to it as amended, modified, supplemented and restated now or from time to time after the Effective Date, and to any corresponding provisions of successor laws, and, unless the context requires otherwise, any reference to any law shall be deemed also to refer to all rules and regulations promulgated thereunder,

(i)           references to any person or entity include such person’s or entity’s respective successors and assigns permitted hereby,

(j)           references to a “day” or number of “days” (without the explicit qualification of “Business”) refer to a calendar day or number of calendar days, and

(k)           any financial or accounting term that is not otherwise defined herein shall have the meaning given such term under generally accepted accounting principles in the United States of America consistently applied.

20.         Headings.  Titles and Article, Section and other subdivision headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

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21.         Counterparts; Integration.  This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  This Agreement, the Purchase Agreement, the Notes and the Note Indenture collectively constitute the entire contract among the parties hereto relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, between the parties hereto relating to the subject matter hereof.  Delivery of an executed counterpart of a signature page of this Agreement by facsimile or by PDF shall be effective as delivery of a manually executed counterpart of this Agreement.

Signature pages follow

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This Agreement has been duly executed and delivered to be effective as of the Effective Date.

DEBTOR:

GRYPHON GOLD CORPORATION, a Nevada

corporation

By:

Its:

TRUSTEE:

COMPUTERSHARE TRUST COMPANY OF

CANADA, a trust company existing under the laws of

Canada, as trustee for the Holders

By:

[Signature Page of Pledge and Security Agreement]

13

Schedule 1(f)

Pledged Securities

Registered Holder (Debtor)	Corporation (Issuer)	Jurisdiction of Organization of Issuer	Ownership of Debtor in Issuer (common shares of Issuer)
			1,000,000 shares of common stock (“Shares”) with power of attorney to transfer securities
			Certificate No. 1 – 100 Shares
			Certificate No. 2 – 849,900 Shares
Gryphon Gold Corporation	Borealis Mining Company	Nevada	Certificate No. 3 – 37,500 Shares
			Certificate No. 4 – 37,500 Shares
			Certificate No. 5 – 37,500 Shares
			Certificate No. 6 – 37,500 Shares
			6 Certificates to be deposited

14

EX-4.3

THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AND, IF REQUESTED BY THE COMPANY, THE SELLER FURNISHES TO THE COMPANY AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY TO SUCH EFFECT.

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE [THE DATE THAT IS FOUR (4) MONTHS AND A DAY AFTER THE DISTRIBUTION DATE.]

THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.  THIS WARRANT MAY NOT BE EXERCISED UNLESS THE WARRANT AND THE UNDERLYING SHARES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE, AND THE HOLDER HAS DELIVERED AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE CORPORATION TO SUCH EFFECT.

THESE WARRANTS WILL EXPIRE AND BECOME NULL AND VOID

AT 5:00 P.M. (VANCOUVER TIME) ON JANUARY 27, 2013.

 ● SERIES P SHARE PURCHASE WARRANTS

TO PURCHASE SHARES OF COMMON STOCK

GRYPHON GOLD CORPORATION

incorporated in the State of Nevada

THIS IS TO CERTIFY THAT _________________________________, (the “Holder”), has the right to purchase, upon and subject to the terms and conditions hereinafter referred to, up to ● fully paid and non-assessable shares of common stock (the “Shares”) in the capital of Gryphon Gold Corporation (hereinafter called the “Company”) on or before 5:00 p.m. (Vancouver time) on January 27, 2013 (the “Expiry Date”) at a price per Share (the “Exercise Price”) of US$0.20, on the terms and conditions attached hereto as Appendix “A” (the “Terms and Conditions”).

1. ONE (1) WHOLE SERIES P WARRANT AND THE EXERCISE PRICE ARE REQUIRED TO PURCHASE ONE SHARE.  THIS CERTIFICATE REPRESENTS ● SERIES P WARRANTS.

2. These Warrants are issued subject to the Terms and Conditions, and the Warrant Holder may exercise the right to purchase Shares only in accordance with those Terms and Conditions.

3. Nothing contained herein or in the Terms and Conditions will confer any right upon the Holder hereof or any other person to subscribe for or purchase any Shares at any time subsequent to the Expiry Date, and from and after such time, these Warrants and all rights hereunder will be void and of no value.

IN WITNESS WHEREOF the Company has executed this Warrant Certificate this 27th day of July,  2011.

GRYPHON GOLD CORPORATION

Per:

John L. Key, Chief Executive Officer

PLEASE NOTE THAT ALL SHARE CERTIFICATES MUST BE LEGENDED AS FOLLOWS DURING THE CURRENCY OF APPLICABLE HOLD PERIODS:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AND, IF REQUESTED BY THE COMPANY, THE SELLER FURNISHES TO THE COMPANY AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY TO SUCH EFFECT.

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE [THE DATE THAT IS FOUR (4) MONTHS AND A DAY AFTER THE DISTRIBUTION DATE.]

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO STOCK EXCHANGE (“TSX”); HOWEVER, THE SAID SECURITIES CANNOT BE TRADED THROUGH THE FACILITIES OF TSX SINCE THEY ARE NOT FREELY TRANSFERABLE, AND, CONSEQUENTLY, ANY CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON TSX.

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APPENDIX “A”

TERMS AND CONDITIONS dated July 27, 2011, attached to the Series P Warrants issued by Gryphon Gold Corporation

1.   INTERPRETATION

1.1 Definitions

In these Terms and Conditions, unless there is something in the subject matter or context inconsistent therewith:

(a)   “Business Day” means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York, New York are generally authorized or obligated by law or executive order to close;

(b)   “Company” means Gryphon Gold Corporation until a successor corporation will have become such as a result of consolidation, amalgamation or merger with or into any other corporation or corporations, or as a result of the conveyance or transfer of all or substantially all of the properties and estates of the Company as an entirety to any other corporation and thereafter “Company” will mean such successor corporation;

(c)   “Company’s Auditors” means an independent firm of accountants duly appointed as auditors of the Company;

(d)   “Director” means a director of the Company for the time being, and reference, without more, to action by the directors means action by the directors of the Company as a Board, or whenever duly empowered, action by an executive committee of the Board;

(e)   “Eligible Market” means any of NYSE, the NYSE Amex, The NASDAQ Global Market, The NASDAQ Global Select Market, The NASDAQ Capital Market or the Toronto Stock Exchange;

(f)   “herein”, “hereby” and similar expressions refer to these Terms and Conditions as the same may be amended or modified from time to time; and the expression “Article” and “Section,” followed by a number refer to the specified Article or Section of these Terms and Conditions;

(g)   “person” means an individual, corporation, partnership, trustee or any unincorporated organization and words importing persons have a similar meaning;

(h)   “shares” means the common shares in the capital of the Company as constituted at the date hereof and any shares resulting from any subdivision or consolidation of the shares;

(i)   “Trading Day” shall mean (a) any day on which the Common Stock is listed or quoted and traded on its primary Trading Market, (b) if the Common Stock is not then listed or quoted and traded on any Eligible Market, then a day on which trading occurs on the OTC Bulletin Board (or any successor thereto), or (c) if trading does not occur on the OTC Bulletin Board (or any successor thereto), any Business Day;

(j)   “Trading Market” shall mean the OTC Bulletin Board or any Eligible Market or any other national securities exchange, market or trading or quotation facility on which the shares are then listed or quoted; and

(k)   “Warrants” means the Series P warrants of the Company issued and presently authorized and for the time being outstanding.

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1.2 Gender

Words importing the singular number include the plural and vice versa and words importing the masculine gender include the feminine and neuter genders.

1.3 Interpretation not affected by Headings

The division of these Terms and Conditions into Articles and Sections, and the insertion of headings are for convenience of reference only and will not affect the construction or interpretation thereof.

1.4 Applicable Law

The Warrants will be construed in accordance with the laws of the State of New York without regard to its conflicts of law principles, and the federal law of the United States of America. The Company and Holder each irrevocably consents to the jurisdiction of the courts of the State of New York in connection with any action or proceeding arising out of, or relating to, these Warrants, any document or instrument delivered pursuant to, in connection with, or simultaneously with these Warrants, or a breach of the Terms and Conditions of these Warrants or any such document or instrument.

1.5 Severability

In the event that any one or more of the provisions contained in this Warrant Certificate or in any other document referenced in this Warrant Certificate shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Warrant Certificate or any other such document.

1.6 Time is of the Essence

Time is absolutely of the essence in construing each provision of this Warrant Certificate.

2.   ISSUE OF WARRANTS

2.1 Additional Warrants

The Company may at any time and from time to time issue additional warrants or grant options or similar rights to purchase shares of its capital stock.

2.2 Warrants to Rank Pari Passu

All Warrants and additional warrants, options or similar rights to purchase shares from time to time issued or granted by the Company, will rank pari passu whatever may be the actual dates of issue or grant thereof, or of the dates of the certificates by which they are evidenced.

2.3 Issue in substitution for Lost Warrants

(a)   In case a Warrant Certificate becomes mutilated, lost, destroyed or stolen, the Company, at its discretion, may issue and deliver a new Warrant Certificate of like date and tenor as the one mutilated, lost, destroyed or stolen, in exchange for and in place of and upon cancellation of such mutilated Warrant Certificate, or in lieu of, and in substitution for such lost, destroyed or stolen Warrant Certificate and the substituted Warrant Certificate will be entitled to the benefit hereof and rank equally in accordance with its terms with all other Warrants issued or to be issued by the Company.

(b)   The applicant for the issue of a new Warrant Certificate pursuant hereto will bear the cost of the issue thereof and in case of loss, destruction or theft furnish to the Company such evidence of ownership and of loss, destruction, or theft of the Warrant Certificate so lost, destroyed or stolen as will be satisfactory to the Company in its discretion and such applicant may also be required to furnish indemnity in amount and form satisfactory to the Company in its discretion, and will pay the reasonable charges of the Company in connection therewith.

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2.4 Warrant Holder Not a Shareholder

The holding of a Warrant will not constitute the Holder thereof a shareholder of the Company, nor entitle him to any right or interest in respect thereof except as in the Warrant Certificate expressly provided.

3.   NOTICE

3.1 Notice to Holders

Any notice required or permitted to be given to the Holders will be in writing and may be given by prepaid registered post, electronic facsimile transmission, portable document format (pdf) transmission or other means of electronic communication capable of producing a printed copy to the address of the Holder appearing on the Holder’s Warrant Certificate or to such other address as any Holder may specify by notice in writing to the Company, and any such notice will be deemed to have been given and received by the Holder to whom it was addressed if mailed, on the third day following the mailing thereof, if by facsimile, pdf or other electronic communication, on successful transmission, or, if delivered, on delivery; but if at the time of mailing or between the time of mailing and the third business day thereafter there is a strike, lockout, or other labour disturbance affecting postal service, then the notice will not be effectively given until actually delivered.

3.2 Notice to the Company

Any notice required or permitted to be given to the Company will be in writing and may be given by prepaid registered post, electronic facsimile transmission, portable document format (pdf) transmission or other means of electronic communication capable of producing a printed copy to the address of the Company set forth below or such other address as the Company may specify by notice in writing to the Holder, and any such notice will be deemed to have been given and received by the Company to whom it was addressed if mailed, on the third day following the mailing thereof, if by facsimile, pdf or other electronic communication, on successful transmission, or, if delivered, on delivery; but if at the time or mailing or between the time of mailing and the third business day thereafter there is a strike, lockout, or other labour disturbance affecting postal service, then the notice will not be effectively given until actually delivered:

Gryphon Gold Corporation

Suite711, 675 West Hastings Street

Vancouver, B.C.

Canada  V6B 1N2

Attention:  Lisanna Lewis

Fax No. (604) 608-3262

4.   EXERCISE OF WARRANTS

4.1Method of Exercise of Warrants

(a) The right to purchase shares conferred by the Warrants may be exercised by the Holder surrendering the Warrant Certificate representing same, with a duly completed and executed Form of Subscription in the form attached hereto and a bank draft or certified cheque payable to or to the order of the Company, at par, in Vancouver, BC, Canada, for the purchase price applicable at the time of surrender in respect of the shares subscribed for in lawful money of the United States of America, to the Company at the address set forth in, or from time to time specified by the Company pursuant to, Section 3.2.

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(b) Net Issue Exercise.

(i)   Section 4.1(b)(ii) shall not apply and shall have no force or effect if the shares issuable upon exercise of these Warrants have been registered for resale under the Securities Act of 1933, as amended (the “1933 Act”), on a Registration Statement on Form S-1, S-3, or another appropriate form and such Registration Statement remains effective under the 1933 Act and available for use by Holder at the time of exercise or the shares issuable upon exercise of these Warrants may otherwise be immediately resold upon exercise pursuant to available exemptions from the 1933 Act and any applicable securities laws of any state of the United States.

(ii)   Subject to Section 4.1(b)(i), if, at any time after the issuance of these Warrants but prior to the Expiry Date, the Fair Market Value of one share is greater than the Exercise Price, in lieu of exercising these Warrants for cash, the Holder may elect to receive shares equal to the value (as determined below) of these Warrants (or the portion thereof being exercised) by surrender of this Warrant Certificate at the principal office of the Company with a duly completed and executed Form of Subscription in the form attached hereto in which event the Company shall issue to the Holder a number of shares computed using the following formula:

X = (Y (A - B)) / A

Where X = the number of shares to be issued to Holder

Y = the number of shares purchasable under the Warrants or, if only a portion of the Warrants are being exercised, the portion of the Warrants being exercised (at the date of such calculation)

A = the Fair Market Value of one share (at the date of such calculation)

B = Exercise Price (at the date of such calculation)

For purposes of the above calculation, the “Fair Market Value” of one share shall mean (i) the average of the closing sales prices for the shares on the Eligible Market on which the shares are listed or traded as reported by Bloomberg Financial Markets (or a comparable reporting service of national reputation selected by the Company and reasonably acceptable to the Holder if Bloomberg Financial Markets is not then reporting sales prices of such security) (collectively, “Bloomberg”) for the ten (10) consecutive Trading Days immediately prior to the Exercise Date, or (ii) if an Eligible Market is not the principal Trading Market for the shares, the average of the reported sales prices reported by Bloomberg on the principal Trading Market for the shares during the same period, or, if there is no sales price for such period, the last sales price reported by Bloomberg for such period, or (iii) if neither of the foregoing applies, the last sales price of such security in the over-the-counter market on the pink sheets or bulletin board for such security as reported by Bloomberg, or if no sales price is so reported for such security, the last bid price of such security as reported by Bloomberg, or (iv) if fair market value cannot be calculated as of such date on any of the foregoing bases, the fair market value shall be as determined by the Board of Directors of the Company in the exercise of its good faith judgment.

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4.2 Effect of Exercise of Warrants

(a)   Upon surrender and payment (unless exercise is pursuant to Section 4.1(b)(ii)) as aforesaid the shares so subscribed for will be deemed to have been issued and such person or persons will be deemed to have become the Holder or Holders of record of such shares on the date of such surrender and payment, and such shares will be issued based on the Exercise Price in effect on the date of such surrender and payment.

(b)   Within ten (10) business days after surrender and payment (unless exercise is pursuant to Section 4.1(b)(ii)) as aforesaid, the Company will forthwith cause to be delivered to the person or persons in whose name or names the Shares so subscribed for are to be issued as specified in such Form of Subscription or mailed to him or them at his or their respective addresses specified in such Form of Subscription, a certificate or certificates for the appropriate number of Shares not exceeding those which the Holder is entitled to purchase pursuant to the Warrant Certificate surrendered.

4.3 Restrictions on Exercise of Warrants

The Warrants represented by this Warrant Certificate may only be exercised by or for the account or benefit of a holder who, at the time of exercise, either:

(a)   represents to the Company, pursuant to subparagraph 1 of the attached Form of Subscription, that (i) the holder was the original subscriber for the Warrants from the Company, and (ii) the representations, warranties and covenants set forth in the debenture and warrant purchase agreement pursuant to which the holder purchased the Warrants from the Company (the “Purchase Agreement”) are true and correct on the date of exercise in relation to the exercise of the Warrants, including, without limitation, the representations and warranties in the U.S. Accredited Investor Questionnaire attached to the Purchase Agreement as Exhibit H; or

(b)   provides, pursuant to subparagraph 2 of the attached Form of Subscription, a written opinion of counsel or other evidence of exemption in form and substance reasonably satisfactory to the Company that the Shares to be delivered upon exercise of the Warrants have been registered under the 1933 Act and the securities laws of all applicable states of the United States or are exempt from such registration requirements.

4.4 Subscription for Less Than Entitlement

The Holder of any Warrant may subscribe for and purchase a number of shares less than the number which he is entitled to purchase pursuant to the surrendered Warrant Certificate. In the event of any purchase of a number of shares less than the number which can be purchased pursuant to a Warrant Certificate, the Holder thereof upon exercise thereof will in addition be entitled to receive a new Warrant Certificate in respect of the balance of the shares which he was entitled to purchase pursuant to the surrendered Warrant Certificate and which were not then purchased.

4.5 Warrants for Fractions of Shares

To the extent that the Holder of any Warrant is entitled to receive on the exercise or partial exercise thereof a fraction of a share, such right may be exercised in respect of such fraction only in combination with another Warrant or other Warrants which in the aggregate entitle the Holder to receive a whole number of such shares.

4.6 Expiration of Warrants

After the expiration of the period within which a Warrant is exercisable, all rights thereunder will wholly cease and terminate and such Warrant will be void and of no effect.

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4.7 Exercise Price; Beneficial Ownership Limitation

Each whole Warrant is exercisable at a price per share (the “Exercise Price”) of US$0.20if exercised on or before 5:00 p.m. (Vancouver time) on January 26, 2013.  One (1) Warrant and the Exercise Price are required to subscribe for each Share during the term of the Warrants.

Notwithstanding any other provision hereof, no Holder shall exercise Warrants if as a result of such exercise the Holder would then become a “ten percent beneficial owner” (as defined in Rule 16a-2 under the Securities Exchange Act of 1934, as amended) of Shares.  For greater certainty, the Warrants shall not be exercised by the Holder, and the Company shall not give effect to any exercise of Warrants, if, after giving effect to such exercise, the Holder of such securities, together with its affiliates, would in aggregate beneficially own, or exercise control or direction over that number of voting securities of the Company which is 10% or greater of the total issued and outstanding voting securities of the Company, immediately after giving effect to such exercise.

For purposes of the foregoing paragraph, the number of Shares beneficially owned by the Holder and its affiliates shall include the number of Shares issuable upon exercise of these Warrants with respect to which such determination is being made, but shall exclude the number of Shares which would be issuable upon (i) exercise of the remaining, nonexercised portion of these Warrants beneficially owned by the Holder or any of its affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 4.7, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 4.7 applies, the determination of whether these Warrants are exercisable (in relation to other securities owned by the Holder together with any affiliates) and of which portion of these Warrants is exercisable shall be in the sole discretion of the Holder, and the submission of a Form of Subscription shall be deemed to be the Holder’s determination of whether these Warrants are exercisable (in relation to other securities owned by the Holder together with any affiliates) and of which portion of these Warrants is exercisable, in each case subject to the “ten percent beneficial owner” limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. For purposes of this Section 4.7, in determining the number of outstanding Shares, a Holder may rely on the number of outstanding Shares as reflected in (A) the Company’s most recent periodic or annual report filed with the Securities and Exchange Commission, as the case may be, (B) a more recent public announcement by the Company, or (C) a more recent written notice by the Company or its transfer agent setting forth the number of Shares outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of Shares then outstanding. In any case, the number of outstanding Shares shall be determined after giving effect to the conversion or exercise of securities of the Company, including these Warrants, by the Holder or its affiliates since the date as of which such number of outstanding Shares was reported.

4.8 Adjustment of Exercise Price

The Exercise Price and the number of Shares purchasable hereunder (or any shares of stock or other securities or property receivable or issuable upon exercise of this Warrant) are subject to adjustment from time to time as follows:

(a)   Reclassification of Shares. If the Company at any time shall, by reclassification or exchange of securities or otherwise, change all of the outstanding Shares into the same or a different number of securities of any other class or classes, this Warrant Certificate shall thereafter represent the right to acquire such number and kind of securities as would have been issuable hereunder had the Holder exercised its rights with respect to all of the Shares then represented by this Warrant Certificate immediately prior to such combination, reclassification, exchange, subdivision or other change.

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(b)   Subdivision, Split, Reverse Split or Combination of Shares. If the Company at any time shall subdivide or split its Shares into a larger number of outstanding Shares, the Exercise Price shall be proportionately decreased and the number of Shares issuable upon exercise of these Warrants (or any shares of stock or other securities at the time issuable upon exercise of these Warrants) shall be proportionally increased to reflect any such subdivision or stock split. If the Company at any time shall reverse split or combine its Shares into a smaller number of outstanding Shares, the Exercise Price of these Warrants shall be proportionally increased and the number of Shares issuable upon exercise of these Warrants (or any shares of stock or other securities at the time issuable upon exercise of these Warrants) shall be proportionally decreased to reflect any such reverse stock split or combination.

(c)   Stock Dividends or Other Non-Cash Distributions. If the Company at any time shall make, issue, fix a record date for or pay a dividend or other distribution with respect to the Shares (or any shares of stock or other securities at the time issuable upon exercise of the Warrants) payable in (i) securities of the Company or (ii) assets (excluding cash dividends), then, in each such case, the Holder on exercise of these Warrants at any time after the consummation, effective date or record date of such dividend or other distribution, shall receive, in addition to the Shares (or such other stock or securities) issuable on such exercise prior to such date, and without the payment of additional consideration therefor, the securities or such other assets of the Company to which such Holder would have been entitled upon such date if such Holder had exercised these Warrants on the date hereof and had thereafter, during the period from the date hereof to and including the date of such exercise, retained such shares and all such additional securities or other assets distributed with respect to such shares as aforesaid during such period giving effect to all adjustments called for by this Section 4.8.

(d)  Capital Reorganization, Merger or Consolidation. In case of any capital reorganization of the capital stock of the Company (other than a combination, stock split, reverse stock split, reclassification or subdivision of shares otherwise provided for herein), or any merger or consolidation of the Company with or into another corporation, or the sale of all or substantially all the assets of the Company then, and in each such case, as a part of such reorganization, merger, consolidation, sale or transfer, lawful provision shall be made so that the Holder shall thereafter be entitled to receive upon exercise of these Warrants until the Expiry Date and upon payment of the Exercise Price (or use of net exercise if then permitted hereunder), the number of shares or other securities or property of the successor corporation resulting from such reorganization, merger, consolidation, sale or transfer that a holder of the Shares deliverable upon exercise of these Warrants would have been entitled to receive in such reorganization, consolidation, merger, sale or transfer if these Warrants had been exercised immediately before such reorganization, merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 4.8. The foregoing provisions of this Section 4.8(d) shall similarly apply to successive reorganizations, consolidations, mergers, sales and transfers and to the stock or securities of any other corporation that are at the time receivable upon the exercise of these Warrants. If the per-Share consideration payable to the Holder hereof for Shares in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by the Company’s Board of Directors. In addition to the adjustments set forth above, appropriate adjustments (as determined in good faith by the Company’s Board of Directors) shall be made in the application of the provisions of this Warrant Certificate with respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Warrant Certificate shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of these Warrants.

(e)  Certificate as to Adjustments. In each case of any adjustment in the Exercise Price, or number or type of Shares or other securities or property issuable upon exercise of these Warrants, the Chief Financial Officer or Controller of the Company shall compute such adjustment in accordance with the terms of this Warrant Certificate and prepare a certificate setting forth such adjustment and showing in detail the facts upon which such adjustment is based, including a statement of the adjusted Exercise Price and/or Shares, other securities or property issuable upon exercise, as applicable. The Company shall promptly send a copy of each such certificate to the Holder.

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4.9 Determination of Adjustments

If any questions will at any time arise with respect to the Exercise Price or any adjustment provided for in Section 4.8, such questions will be conclusively determined by the Company’s Auditors, or, if they decline to so act any other firm of certified public accountants in the United States of America that the Company may designate and who will have access to all appropriate records and such determination will be binding upon the Company and the Holders of the Warrants.

4.10 Charges, Taxes and Expenses

Issuance of certificates for Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder (or in such name or names as may be directed by the Holder).

5.   REPRESENTATIONS AND WARRANTIES, OTHER AGREEMENTS OF THE COMPANY

5.1 Due Authorization; Consents

The Company hereby represents and warrants to the Holder that all corporate authorizations necessary for the execution and delivery of, and the performance of all obligations of the Company under, this Warrant have been obtained. This Warrant constitutes a valid and binding obligation of the Company enforceable in accordance with its terms, subject, as to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and similar laws affecting creditors’ rights generally and to general equitable principles.

5.2 Organization

The Company hereby represents and warrants to Holder that the Company is a corporation duly organized and validly existing under the laws of the State of Nevada and has all requisite corporate power to own, lease and operate its property and to carry on its business as now being conducted and as currently proposed to be conducted.

5.3 Reservation of Shares

The Company has duly authorized and reserved, and shall at all times have authorized and reserved, a sufficient number of shares of its Common Stock to provide for the exercise of the rights to purchase the Shares as provided in this Warrant Certificate.

5.4 Valid Issuance

All Shares issued upon the exercise of these Warrants shall be validly issued, fully paid and nonassessable when issued consistent with the terms hereof, and free from all taxes, liens and charges created by the Company in respect of the issue thereof. The Company will take all such reasonable action as may be necessary to assure that such Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any Trading Market upon which the Shares may be listed.

Before taking any action which would result in an adjustment in the number of Shares for which these Warrants are exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

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6.   HOLDER REPRESENTATIONS AND WARRANTIES

Holder hereby represents and warrants as follows:

6.1 Securities Not Registered

The Holder understands that neither the Warrants nor the Shares have been registered under the 1933 Act or the securities laws of any state of the United States and are being issued in reliance on exemptions or exclusions from such registration requirements.

6.2 Restricted Shares/Legend

The Holder understands that the Company will treat the Shares issuable upon the exercise of the Warrants under this Warrant Certificate as “restricted securities” as that term is defined in Rule 144 promulgated under the 1933 Act, and the Share certificates representing the Shares shall bear a legend in the form substantially set forth on the second page of this Warrant Certificate.

7.   WAIVER OF CERTAIN RIGHTS

7.1 Immunity of Shareholders, etc.

The Holder, as part of the consideration for the issue of the Warrants, waives and will not have any right, cause of action or remedy now or hereafter existing in any jurisdiction against any past, present or future incorporator, shareholder, Director or Officer (as such) of the Company for the issue of shares pursuant to any Warrant or on any covenant, agreement, representation or warranty by the Company herein contained or in the Warrant.

8.   MODIFICATION OF TERMS, MERGER, SUCCESSORS

8.1 Modification of Terms and Conditions for Certain Purposes

From time to time the Company may, subject to the provisions hereof, modify the Terms and Conditions hereof, for the purpose of correction or rectification of any ambiguities, defective provisions, errors or omissions herein of a non-substantive nature.

8.2 Warrants Transferable

These Warrants are transferable on the books of the Company at its principal office by the Holder upon surrender of this Warrant Certificate properly endorsed, and subject to compliance with this Section 7.2 and applicable federal and state securities laws. The Company shall issue and deliver to the transferee a new Warrant Certificate representing the Warrants so transferred (a “New Warrant Certificate”). Upon any partial transfer, the Company will issue and deliver to the Holder a New Warrant Certificate with respect to the portion of the Warrants not so transferred.

As a condition to any transfer of these Warrants or any or all of the Shares issuable upon exercise of these Warrants, other than a transfer registered under the 1933 Act, the Company may request a legal opinion, in form and substance reasonably satisfactory to the Company and its counsel, stating that such transfer is exempt from the registration requirements of the 1933 Act.  Any purported transfer of all or any portion of these Warrants in violation of the provisions of this Warrant Certificate shall be null and void.

[SIGNATURE PAGE FOLLOWS]

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DATED as of the date first above written in these Terms and Conditions.

GRYPHON GOLD CORPORATION

By:

John L. Key, Chief Executive Officer

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FORM OF SUBSCRIPTION

TO: Gryphon Gold Corporation

Suite 711, 875 West Hastings Street

Vancouver, B.C., Canada  V6B 1N2

The undersigned Holder of the within Series P Warrants hereby subscribes for _______ shares of common stock (the “Shares”) of Gryphon Gold Corporation (the “Company) pursuant to the within Warrants at the Exercise Price on the terms specified in the said Warrants.  This subscription is (check one):

¨ accompanied by a certified cheque or bank draft payable to or to the order of the Company for the whole amount of the purchase price of the Shares; or

¨ being exercised pursuant to Section 4.1(b)(ii) of the Warrant Certificate.

In connection with this exercise, the undersigned hereby (check one):

_____1. represents to the Company that (i) the holder was the original subscriber for the Warrants from the Company, and (ii) the representations, warranties and covenants set forth in the debenture and warrant purchase agreement pursuant to which the holder purchased the Warrants from the Company (the “Purchase Agreement”) are true and correct on the date of exercise in relation to the exercise of the Warrants, including, without limitation, the representations and warranties in the U.S. Accredited Investor Questionnaire attached to the Purchase Agreement as Exhibit H; or

_____2. confirms that the undersigned is tendering with thisform of subscription a written opinion of counsel reasonably satisfactory to the Company to the effect that the Shares to be delivered upon exercise of these Warrants have been registered under the United States Securities Act of 1933, as amended, (the "1933 Act") and the securities laws of all applicable states of the United States or are exempt from such registration requirements.

The undersigned hereby directs that the Shares be registered as follows:

NAME(S) IN FULL	ADDRESS(ES)	NUMBER OF SHARES
	TOTAL:

(Please print full name in which share certificates are to be issued, stating whether Mr., Mrs. or Miss is applicable).

DATED this ________  day of __________________ , 20__.

In the presence of:

Signature of Witness Signature of Holder

Please print below your name and address in full.

Name (Mr./Mrs./Miss)    

Address                             

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INSTRUCTIONS FOR SUBSCRIPTION

The signature to the subscription must correspond in every particular with the name written upon the face of the Warrant Certificate without alteration or enlargement or any change whatever.  If there is more than one subscriber, all must sign.

In the case of persons signing by agent or attorney or by personal representative(s), the authority of such agent, attorney or representative(s) to sign must be proven to the satisfaction of the Company.

If the Warrant Certificate and the form of subscription are being forwarded by mail, registered mail must be employed.

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TRANSFER FORM

 Dated ___________ ___, _____

FOR VALUE RECEIVED, ___________________________________ hereby sells, assigns and transfers unto_____________________________(the “Transferee”),

(please type or print in block letters)

(insert address)

the Warrants represented by these Series P Warrants and does hereby irrevocably constitute and appoint _______________________ Attorney, to transfer the same on the books of the Company, with full power of substitution in the premises.

The undersigned understands that, as a condition to any transfer of these Warrants, the Company may request a legal opinion, in form and substance reasonably satisfactory to the Company and its counsel, stating that such transfer is exempt from the registration requirements of the 1933 Act.

SPACE FOR GUARANTEES OF SIGNATURES (BELOW)	) ) ) )	__________________________________ Signature of Transferor
_________________________________ Guarantor’s Signature/Stamp	) ) )	__________________________________ Name of Transferor

THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”) OR THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.  THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AND, IF REQUESTED BY THE COMPANY, THE SELLER FURNISHES TO THE COMPANY AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY TO SUCH EFFECT.

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CERTAIN REQUIREMENTS RELATING TO TRANSFERS – READ CAREFULLY

The signature(s) of the transferor(s) must correspond with the name(s) as written upon the face of this certificate(s), in every particular, without alteration or enlargement, or any change whatsoever.  The signature(s) on this form must be guaranteed in accordance with the transfer agent’s then current guidelines and requirements at the time of transfer.  Notarized or witnessed signatures are not acceptable as guaranteed signatures.  As at the time of closing, you may choose one of the following methods (although subject to change in accordance with industry practice and standards):

·   Canada and the USA: A Medallion Signature Guarantee obtained from a member of an acceptable Medallion Signature Guarantee Program (STAMP, SEMP, NYSE MSP).  Many commercial banks, savings banks, credit unions, and all broker dealers participate in a Medallion Signature Guarantee Program.  The Guarantor must affix a stamp bearing the actual words “Medallion Guaranteed”, with the correct prefix covering the face value of the certificate.

·   Canada:  A Signature Guarantee obtained from the Guarantor must affix a stamp bearing the actual words “Signature Guaranteed”.  Signature Guarantees are not accepted from Treasury Branches, Credit Unions or Caisse Populaires unless they are members of a Medallion Signature Guarantee Program. For corporate holders, corporate signing resolutions, including certificate of incumbency, are also required to accompany the transfer, unless there is a “Signature & Authority to Sign Guarantee” Stamp affixed to the transfer (as opposed to a “Signature Guarantee” Stamp) obtained from an authorized officer of a major Canadian Schedule 1 chartered bank.

·   Outside North America:  For holders located outside North America, present the certificates(s) and/or document(s) that require a guarantee to a local financial institution that has a corresponding Canadian or American affiliate which is a member of an acceptable Medallion Signature Guarantee Program.  The corresponding affiliate will arrange for the signature to be over-guaranteed.

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EX-10.1

AGENCY AGREEMENT

Effective July 8, 2011

Gryphon Gold Corporation

611N Nevada Street

Carson City, Nevada

89703

Attention:	Mr. John L. Key
	Chief Executive Officer

Re: Issue and Sale of Units

Acumen Capital Finance Partners Limited (the "Lead Agent") and Roth Capital Partners, LLC (the "U.S. Agent") (the Lead Agent and the U.S. Agent together being, the "Agents" and individually the "Agent") understand that Gryphon Gold Corporation (the "Corporation") proposes to issue and sell, by way of private placement, 3,000 units of the Corporation ("Units") at a price of $1,000.00 Cdn per Unit for aggregate gross proceeds of $3,000,000 Cdn, subject to the terms and conditions as set out below (the "Offering").  Each Unit will be comprised of 10% subordinated secured notes (a "Debenture"), each with a principal face value of $1,000 Cdn, and 1,500 warrants ("Warrants") to acquire one Common Share (as hereinafter defined) of the Corporation (a "Warrant Share") at a price of $0.20 US for a period of 18 months from the Closing Date (as hereinafter defined).  The Debentures and the Warrants comprising the Units offered hereby are collectively referred to as the "Offered Securities".

Subject to the terms and conditions hereof, the Agents agree to act as, and the Corporation agrees to appoint the Agents as the exclusive agents of the Corporation to offer the Units for sale on the Closing Date in the Selling Jurisdictions (as hereinafter defined) on a private placement basis at the price of $1,000.00 Cdn per Unit and to use their commercially reasonable efforts to secure subscriptions therefor.  The Corporation acknowledges and agrees that the Agents may, but are not obligated to, purchase any of the Units as principal.

The Offered Securities comprising the Units may be issued and sold pursuant to exemptions under Applicable Securities Laws (as hereinafter defined) in the Selling Jurisdictions including to "accredited investors" pursuant to National Instrument 45-106 - Prospectus and Registration Exemptions and to Accredited Investors (as hereinafter defined) in accordance with the provisions hereof.  The Agents will offer the Units for sale directly by the Corporation in compliance with Rule 506 of Regulation D (as hereinafter defined) and/or Section 4(2) (as hereinafter defined).

In connection with the Offering, the Agents shall be entitled to retain as sub-agents other registered securities dealers and may receive (for delivery to the Corporation at the Closing Time) subscriptions for Units from other registered securities dealers.  The fee payable to such sub-agents shall be for the account of the Agents and shall not exceed the fee payable to the Agents hereunder. The Agents shall, however, be under no obligation to engage any sub-agent.

In consideration for its services hereunder, including, but not limited to, the ancillary service of acting as financial advisor to the Corporation in respect of the issue of the Offered Securities and advising on the terms and conditions of the Offering, the Agents shall be entitled to: (i) the fee provided for in Subsection 9(a), which fee shall be payable from the proceeds of the Offering at the Closing Time upon the sale of the Units; and (ii) be issued the Broker Warrants provided for in Subsection 9(b), which Broker Warrants shall be substantially in the form set out in Schedule A hereto.  For greater certainty, the services provided by the Agents pursuant to this Agreement will not be subject to the Goods and Services Tax provided for in the Excise Tax Act (Canada) and taxable supplies will be incidental to the exempt financial services provided.

The following are the further terms and conditions of this Agreement:

1. Definitions

As used in this Agreement, including the paragraphs prior to this definitional section and any amendments hereto, unless the context otherwise requires:

(a) "Accredited Investor" means "accredited investor", as such term is defined in Rule 501(a) of Regulation D;

(b) "affiliate" has the meaning ascribed thereto in the BCBCA and, for the purposes of Section 28 of this Agreement, shall have the meaning ascribed to it in Rule 405 under the U.S. Securities Act;

(c) "Agents' counsel" means Blake, Cassels & Graydon LLP, or such other legal counsel as the Agents, with the consent of the Corporation, may retain;

(d) "Agreement" means this agreement and not any particular Article, Section or Subsection or other portion except as may be specified, and words such as "hereto", "herein" and "hereby" refer to this Agreement as the context requires;

(e) "Applicable Securities Laws" includes, without limitation, all applicable securities and corporate laws, rules, regulations, instruments, notices, blanket orders, decision documents, statements, circulars, procedures and policies in the Selling Jurisdictions including, without limitation, the policies and by-laws of the Exchange;

(f) "BCBCA" means the Business Corporations Act (British Columbia), as amended, including the regulations promulgated thereunder;

(g) "Broker Shares" means the Common Shares issuable to the Agents upon the due exercise of the Broker Warrants;

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(h) "Broker Warrant Certificate(s)" means the certificate(s) representing the Broker Warrants held by the Agents, which certificate(s) shall govern the terms and conditions of the Broker Warrants and shall be substantially in the form attached as Schedule A hereto;

(i) "Broker Warrants" means the compensation warrants to be issued to the Agents as provided for in Subsection 9(b), each Broker Warrant entitling the holder thereof to acquire one Broker Share at a price of $0.20 US per Broker Share at any time prior to the date which is 18 months from the Closing Date, all pursuant to the Broker Warrant Certificates;

(j) "business day" means a day which is not Saturday, Sunday or a legal holiday in Calgary, Alberta;

(k) "Closing Date" means July 26, 2011, or such other date or dates as the Agents and the Corporation may agree in writing;

(l) "Closing Time" means 10:00 a.m. (Calgary time), or such other time on the Closing Date as the Agents and the Corporation may agree;

(m) "Common Shares" means the shares of common stock in the capital of the Corporation and, where appropriate in the context, includes the Warrant Shares and the Broker Shares;

(n) "Corporation" means Gryphon Gold Corporation, a corporation duly formed pursuant to the laws of the state of Nevada and, when the context requires or permits, includes its Subsidiary;

(o) "Corporation's Canadian counsel" means Borden Ladner Gervais LLP, or such other legal counsel as the Corporation, with the consent of the Agents, may appoint;

(p) "Corporation's US counsel" means Dorsey & Whitney LLP, or such other legal counsel as the Corporation, with the consent of the Agents may appoint;

(q) "Debenture Certificates" means the certificates representing the Debentures which certificates shall be governed by the terms and conditions set forth in the Trust Indenture and shall be in form and substance satisfactory to the Corporation and the Agents, acting reasonably.

(r) "Documents" means, collectively:

(i) The Annual Report on Form 10-K (including all Exhibits) of the Corporation for the year ended March 31, 2011 filed with the United States Securities and Exchange Commission on June 30, 2011;

(ii) the Financial Statements;

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(iii) the Technical Report;

(iv) the Current Reports on Form 8-K (including all Exhibits) of the Corporation filed with the United States Securities and Exchange Commission since March 31, 2011;

(v) the material change reports of the Corporation subsequent to March 31, 2011;

(vi) the press releases of the Corporation subsequent to March 31, 2011; and

(vii) the management proxy statement and information circular of the Corporation dated July 6, 2010 relating to the annual meeting of shareholders on August 20, 2010;

(s) "Due Diligence Session" has the meaning ascribed thereto in Section 2(f) hereof;

(t) "Due Diligence Session Responses" means the responses provided by the Corporation, as given by any director or senior officer of the Corporation, at a Due Diligence Session, excluding the portion of such responses which are forward-looking or relate to projections or forecasts but including the portion of such responses which relate to the properties and resources of the Corporation;

(u) "Exchange" means the Toronto Stock  Exchange or any successor thereto;

(v) "Expert" means John D. Walsh, P.E.;

(w) "Expiry Date" means the date that is 18 months from the Closing Date;

(x) "Expiry Time" means 5:00 p.m. (Vancouver time) on the Expiry Date;

(y) "Financial Statements" means, collectively, the audited consolidated financial statements of the Corporation as at and for the years ended March 31, 2011 and 2010, together with the report of the Corporation's auditors thereon and the notes thereto including, in each instance, management's discussion and analysis of the Corporation's financial condition and results of operations related thereto;

(z) "General Solicitation" and "General Advertising" mean "general solicitation" and "general advertising", respectively, as used in Rule 502(c) under the U.S. Securities Act, including, but not limited to, advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, disseminated over the Internet, or any seminar or meeting whose attendees had been invited by general solicitation or general advertising;

(aa) "Lead Agent" means Acumen Capital Finance Partners Limited;

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(bb) "NI 43-101" means National Instrument 43-101 - Standards of Disclosure for Mineral Projects;

(cc) "Pledge and Security Agreement" means the pledge and security agreement to be dated as of the Closing Date by and among the Corporation and the Trustee, as trustee to the Purchasers, substantially in form attached as Exhibit D to the Purchase Agreement;

(dd) "Public Record" means all information filed by or on behalf of the Corporation with the Securities Commissions, including, without limitation, the Documents and any other information filed with any Securities Commission in compliance, or intended compliance, with any Applicable Securities Laws;

(ee) "Purchase Agreements" means the debenture and warrant purchase agreements, including the Schedules thereto, to be entered into at closing between the Corporation and each of the Purchasers setting out the contractual relationship between the Corporation and the Purchasers, in form and substance satisfactory to the Corporation and the Agents;

(ff) "Purchaser" means a person resident in the Selling Jurisdictions who subscribes for Units;

(gg) "Regulation D" means Regulation D adopted by the SEC under the U.S. Securities Act;

(hh) "SEC" means the United States Securities and Exchange Commission;

(ii) "Section 4(2)" means Section 4(2) of the U.S. Securities Act;

(jj) "Securities Commissions" means, collectively, the securities commissions or similar regulatory authorities in each of the Selling Jurisdictions and "Securities Commission" means any of them;

(kk) "SEDAR" means the system for electronic document analysis and retrieval;

(ll) "Selling Dealer Group" means the dealers and brokers, other than the Agents, who participate in the offer and sale of the Offered Securities pursuant to this Agreement;

(mm) "Selling Jurisdictions" means the provinces of British Columbia, Alberta, Saskatchewan, and Ontario and the United States and other eligible foreign jurisdictions as may be agreed by the Agents and the Corporation prior to the Closing Date as evidenced by the Corporation's acceptance of a Purchase Agreement with respect thereto;

(nn) "Subsidiary" means Borealis Mining Company;

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(oo) "Swaps" means any transaction which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option, forward sale, exchange traded futures contract or any other similar transaction (including any option with respect to any of these transactions or any combination of these transactions);

(pp) "Technical Report" means the report dated April 25, 2011 prepared by the Expert entitled "NI 43-101 Pre-Feasibility Study Update of the Mineral Resources of the Borealis Gold Project located in Mineral county, Nevada, USA", as filed on SEDAR;

(qq) "Transaction Documents" means the Trust Indenture, the Pledge and Security Agreement, the Warrant Certificates, the Broker Warrant Certificates and the Purchase Agreements;

(rr) "Trust Indenture" means the Note Indenture to be dated as of the Closing Date between the Corporation and the Trustee substantially in the form attached as Exhibit B to the Purchase Agreement;

(ss) "Trustee" means Computershare Trust Company of Canada;

(tt) "United States" means the United States of America, its territories and possessions, any State of the United States, and the District of Columbia;

(uu) "U.S. Agent" means Roth Capital Partners, LLC;

(vv) "U.S. Exchange Act" means the United States Securities Exchange Act of 1934, as amended;

(ww) "U.S. Securities Act" means the United States Securities Act of 1933, as amended;

(xx) "Warrant Certificates" means the certificates representing the Warrants held by Purchasers of Units, which certificates shall govern the terms and conditions of the Warrants and shall be substantially in the form attached as Exhibit C to the Purchase Agreement;

(yy) "Warrant Shares" means the Common Shares issuable to the holders of Warrants upon the due and proper exercise of the Warrants in accordance with their terms; and

"misrepresentation", "material change" and "material fact" shall have the meanings ascribed thereto under the Applicable Securities Laws of the Selling Jurisdictions; "distribution" means "distribution" or "distribution to the public", as the case may be, as defined under the Applicable Securities Laws of the Selling Jurisdictions; and "distribute" has a corresponding meaning. In this Agreement, words importing the singular include the plural and words importing gender include all genders.

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2. Corporation's Covenants as to Issuance

The Corporation agrees:

(a) that the Offered Securities will be duly and validly created, authorized and, upon receipt of full payment therefore shall be legal, valid and binding obligations of the Corporation enforceable against the Corporation in accordance with their terms, subject to applicable bankruptcy, insolvency or similar laws and general equitable principles;

(b) to comply with all covenants of the Corporation set forth in this Agreement and the Transaction Documents and to duly, punctually and faithfully perform all the obligations to be performed by it under this Agreement and the Transaction Documents;

(c) to deliver to the Agents as many copies of the Documents as the Agents may reasonably request and such delivery shall constitute the Corporation's authorization for the Agents to use the Documents in connection with the Offering of the Offered Securities for sale in the Selling Jurisdictions;

(d) to file all necessary forms and reports with the appropriate Securities Commissions and other regulatory authorities in connection with the issuance of the Offered Securities and the Broker Warrants;

(e) as soon as reasonably possible, and in any event by the Closing Date, to take all such steps as may reasonably be necessary to enable the Units, including the Offered Securities, to be offered for sale and sold on a private placement basis in the Selling Jurisdictions through the Agents or any other investment dealers or brokers registered in the Selling Jurisdictions by way of the exemptions under Applicable Securities Laws as contemplated hereby; and

(f) prior to the Closing Date and during the period from the effective date hereof until the completion of the distribution of the Units, to allow the Agents to conduct all due diligence which the Agents may reasonably require in order to: (i) confirm the Public Record is accurate, current and complete in all material respects; and (ii) fulfill the Agents' obligations as agents, and will provide to the Agents and their counsel and consultants reasonable access to the Corporation's properties, senior management personnel and corporate, financial and other records for the purposes of conducting such due diligence reviews. Without limiting the generality of the foregoing, the Corporation shall make available its directors, senior management, auditors, legal counsel and independent engineers to answer any reasonable questions which the Agents may have and to participate in one or more due diligence sessions to be held prior to the Closing Time (collectively, the "Due Diligence Session").  The Agents shall distribute a list of written questions to be answered in advance of such Due Diligence Session and the Corporation shall provide oral responses to such questions and shall use its commercially reasonable efforts to have its auditors, legal counsel and independent engineers provide oral responses to such questions in advance of the Due Diligence Session.

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3. Corporation's Covenants as to Changes

The Corporation agrees that:

(a) during the period commencing with the date hereof and ending at the Closing Time, the Corporation will promptly inform the Agents of the full particulars of:

(i) any material change (actual, anticipated or threatened) in the assets, liabilities (absolute, accrued, contingent or otherwise), business, operations, capital or condition (financial or otherwise) of the Corporation and its Subsidiary (taken as a whole), including but not limited to any legal or regulatory changes that may reasonably affect the assets, liabilities (absolute, accrued, contingent or otherwise), business, operations, capital or condition (financial or otherwise) of the Corporation or the Subsidiary; or

(ii) any change in any material fact contained or referred to in the Public Record;

(iii) the occurrence or discovery of, or change in, a material fact or event which, in any such case, is, or may be, of such a nature as to: (A) render any statement in the Public Record untrue, false or misleading in a material respect in light of the circumstances in which it was made; (B) result in a misrepresentation in any part of the Public Record; or (C) result in any part of the Public Record not complying with Applicable Securities Laws; or

(iv) the discovery by the Corporation of any misrepresentation in any part of the Public Record or in any information regarding the Corporation previously provided to the Agents by the Corporation;

provided that if the Corporation is uncertain as to whether a material change of the nature referred to in this subsection has occurred, the Corporation shall promptly inform the Agents of the full particulars of the material change giving rise to the uncertainty and shall consult with the Agents to determine whether a material change has occurred;

(b) during the period commencing with the date hereof and ending on the Closing Date, the Corporation will promptly inform the Agents of the full particulars of:

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(i) any request of any Securities Commission or other securities commission or similar regulatory authority for any amendment to any part of the Public Record or for any additional information which may be material to the distribution of the Offered Securities, the Warrant Shares, the Broker Warrants or the Broker Shares;

(ii) the issuance by any Securities Commission or other securities commission or similar regulatory authority, the Exchange or by any other competent authority of any order to cease or suspend trading of any securities of the Corporation or of the institution or threat of institution of any proceedings for that purpose; or

(iii) the receipt by the Corporation of any communication from any Securities Commission or other securities commission or similar regulatory authority, the Exchange or any other competent authority relating to any part of the Public Record or the distribution of the Offered Securities, the Warrant Shares, or the Broker Warrants or the Broker Shares;

and except as otherwise agreed by the Agents, acting reasonably, the Corporation will use its reasonable best efforts to prevent the issuance of any such cease trading order or suspension order and, if issued, to obtain the withdrawal thereof as soon as possible;

(c) during the period commencing on the date hereof and ending on the date which is 30 days after the Closing Date, the Corporation will promptly provide to the Agents, for review by the Agents and the Agents' counsel, prior to the publication, filing or issuance thereof, any press release (subject to the Corporation's obligations under Applicable Securities Laws to make timely disclosure of material information); and

(d) the Corporation shall promptly comply, to the reasonable satisfaction of the Agents and the Agents' counsel, with all applicable filing and other requirements under Applicable Securities Laws with respect to any material change, change, occurrence or event of the nature referred to or contemplated in Section 3(a) or Section 3(b) and shall provide an opportunity for the prior review and approval thereof by the Agents, acting reasonably, prior to the filing of any such amendment.

4. Corporation's Other Covenants

The Corporation agrees that:

(a) the Corporation shall not take any action that would prevent the Corporation and the Agents from relying on the exemptions from the prospectus and registration requirements of Applicable Securities Laws as contemplated by the Purchase Agreements;

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(b) the Corporation will use the proceeds from the issuance and sale of the Units to fund the purchase of an Absorption, Desorption and Recovery Plant for, and installation of electrical power to, the Corporation's Borealis project located in the Walker Lane gold belt of Western Nevada and for general working capital purposes;

(c) the Corporation will allow the Agents and the Agents' counsel, acting reasonably, to participate fully in the preparation of the Transaction Documents;

(d) the Corporation will make available at reasonable times and places its senior management persons to meet with potential investors if so requested by the Agents;

(e) the Corporation will use its commercially reasonable efforts to obtain all necessary approvals of the Exchange for the issuance of and the listing and posting of the Warrant Shares and the Broker Shares for trading on the Exchange, subject only to the filing of required documents and payment of applicable fees which cannot reasonably be filed until after the Closing Time;

(f) the Corporation shall use its commercially reasonable efforts to maintain its (or any successors') status as a reporting issuer not in default of any Applicable Securities Laws in the Selling Jurisdictions in Canada in which it is a reporting issuer until 180 days after the Closing Date in the Selling Jurisdictions in which it is or in which it becomes a reporting issuer;

(g) the Corporation will carry on its business in a prudent manner in accordance with industry standards and good business practice and will keep or cause to be kept proper books of accounts in accordance with applicable law;

(h) the Corporation will not, from the date hereof until that date that is 120 days following the Closing Date, directly or indirectly, sell, or offer to sell, or announce the offering of, or enter into or make any agreement or understanding, or announce the making or entry into of any agreement or understanding, to issue, sell or exchange any preferred shares, common shares or securities exchangeable or convertible into common shares without the prior written consent of the Agents, not to be unreasonably withheld, provided that notwithstanding the foregoing the Corporation may: (i) grant stock options under the Corporation's existing employee stock option plan (not in excess of the number of options allowable under the rules of the Exchange); and (ii) issue Common Shares to the holders thereof or to the holders of other stock options, warrants or other convertible securities or instruments of the Corporation existing at the date hereof; and;

(i) the Corporation will file all necessary forms and reports in connection with the issuance of the Offered Securities, the Warrant Shares, the Broker Warrants and the Broker Warrant Shares with the appropriate Securities Commissions and other regulatory authorities.

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5. Agents' Covenants

Each of the Agents covenants and agrees with the Corporation that it will:

(a) conduct its activities in connection with the proposed offer and sale of the Units in compliance with this Agreement and all Applicable Securities Laws and cause each member of the Selling Dealer Group established in connection with the distribution of the Offered Securities to acknowledge its agreement to be bound by the provisions of this Agreement;

(b) comply with the applicable United States offering restrictions imposed by the laws of the United States and comply with the offering procedures set forth in Section 29 hereof;

(c) not solicit subscriptions for Offered Securities, trade in Units or otherwise do any act in furtherance of a trade of Offered Securities outside of the Selling Jurisdictions except in any other jurisdiction in compliance with the applicable laws thereof, and provided that the Agents may so solicit, trade or act within such jurisdiction only with the express written consent of the Corporation and if such solicitation, trade or act is in compliance with applicable securities laws in such jurisdiction and does not: (i) obligate the Corporation to take any action to qualify or register any of its securities or any trade of any of its securities (including the distribution of the Offered Securities) in such jurisdiction; (ii) obligate the Corporation to establish or maintain any office or director or officer in such jurisdiction; or (iii) subject the Corporation to any reporting or other requirement in such jurisdiction;

(d) obtain from each Purchaser an executed Purchase Agreement and all applicable undertakings, questionnaires and other forms required under Applicable Securities Laws or requirements of the Exchange and supplied to the Agents by the Corporation for completion in connection with the distribution of the Offered Securities; and

(e) not advertise the proposed offering or sale of the Units in printed media of general and regular paid circulation, radio, television or telecommunications, including electronic display, nor provide or make available to prospective purchasers of Units any document or material which would constitute or require the Corporation to prepare an offering memorandum, registration statement or prospectus as defined under Applicable Securities Laws.

6. Representations and Warranties of the Corporation

The Corporation represents and warrants to the Agents and the Purchasers, and acknowledges that the Agents and the Purchasers are relying upon such representations and warranties, as follows:

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(a) Due Incorporation. The Corporation has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Nevada, with full corporate power and authority to own, lease and operate its properties and conduct its business, to execute and deliver this Agreement and to issue, sell and deliver the Offered Securities as contemplated herein.

(b) Foreign Qualifications. The Corporation is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the ownership or leasing of its properties or the conduct of its business requires such qualification, except where the failure to be so qualified and in good standing would not, individually or in the aggregate, be reasonably expected to (i) have a material adverse effect on the business, prospects, properties, management, financial condition or results of operations of the Corporation and the Subsidiary, taken as a whole, or (ii) prevent or interfere with consummation of the transactions contemplated hereunder or in connection herewith or (the occurrence of any such effect or any such prevention or interference or any such result described in the foregoing clauses (i) and (ii) being herein referred to as a "Material Adverse Effect").

(c) Subsidiaries. The Corporation does not have any subsidiaries other than the Subsidiary; all of the issued and outstanding shares of common stock or other voting stock of the Subsidiary are owned or held directly by the Corporation, are registered in the Corporation's name and are validly issued as fully paid and non-assessable, and the Corporation holds all such shares of common stock with valid and marketable title thereto free and clear of any liens, pledges, charges, encumbrances, security interests or other adverse claims whatsoever (other than pursuant to the Trust Indenture or Pledge and Security Agreement), the Corporation is not "affiliated" with or a "holding corporation" of any other body corporate (within the meaning of those terms in the BCBCA), nor is it a partner of any partnerships (other than participating in industry partnerships in the ordinary course of business) or limited partnerships, and the Corporation has no material shareholdings in any other corporation or business organization.

(d) Public Record.  The information and statements set forth in the Public Record were true, correct, and complete and did not contain any misrepresentations, as of the date of such information or statement, and were prepared in accordance with and complied with Applicable Securities Laws and the Corporation has not filed any confidential material change reports still maintained on a confidential basis.

(e) Description of Capital Stock.  The authorized capital of the Corporation consists of 250,000,000 Common Shares and 15,000,000 shares of preferred stock, of which [•] Common Shares and nil shares of preferred stock are currently issued and outstanding, each of which shares is validly issued as full paid and non assessable.

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(f) Authorization, Issuance. The Corporation has the corporate power and authority to enter into this Agreement and to authorize, issue and sell the Offered Securities as contemplated by this Agreement. All corporate action required to be taken by the Corporation for the authorization, issuance and sale of the Offered Securities has been duly and validly taken. The Offered Securities have been duly and validly authorized. When the Offered Securities have been issued and delivered against payment therefor as provided herein, the Offered Securities, when so issued and sold, will be legal, valid and binding obligations of the Corporation, enforceable against the Corporation in accordance with their terms, subject to applicable bankruptcy, insolvency or similar laws and general equitable principles and free of all statutory and contractual preemptive rights, resale rights, rights of first refusal and similar rights and will be free of any restriction upon the voting or transfer thereof pursuant to Applicable Securities Laws or the Corporation's charter or by-laws or any agreement or other instrument to which the Corporation is a party.

(g) Due Authorization. This Agreement has been duly authorized, executed and delivered by the Corporation and constitutes a valid, legal and binding obligation of the Corporation, enforceable against the Corporation in accordance with its terms, except as rights to indemnity hereunder may be limited by Applicable Securities Laws and except (i) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws of general applicability affecting the rights of creditors generally, (ii) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws in the United States or by federal and provincial laws in Canada, and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.

(h) No Violation. Neither the Corporation nor the Subsidiary is in breach or violation of or in default under (nor has any event occurred which would constitute any event which, with notice, lapse of time or both, would result in any breach or violation of or constitute a default under or give rise to any right of termination, cancellation or acceleration under) (A) its articles of incorporation or by-laws, or (B) any indenture, mortgage, deed of trust, bank loan or credit agreement or other evidence of indebtedness, or any license, lease, contract or other agreement or instrument to which it is a party or by which it or any of its properties may be bound or affected, or (C) any federal, state, provincial, local or foreign law, regulation or rule, or (D) any rule or regulation of any self-regulatory organization or other non-governmental regulatory authority (including, without limitation, any applicable rules and regulations of the OTC Bulletin Board (the "OTCBB") or the Exchange), or (E) any decree, judgment or order applicable to it or any of its properties; except, in the cases of clause (B), (C), (D) and (E), where such occurrence would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect.

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(i) No Conflict. The execution, delivery and performance of this Agreement, the issuance and sale of the Offered Securities and the consummation of the transactions contemplated hereby will not conflict with, result in any breach or violation of or constitute a default under (nor constitute any event which, with notice, lapse of time or both, would result in any breach or violation of or constitute a default under or give rise to any right of termination, cancellation or acceleration under) (or result in the creation or imposition of a lien, charge or encumbrance on any property or assets of the Corporation or the Subsidiary pursuant to) (A) the articles of incorporation or by-laws of the Corporation or the Subsidiary, or (B) any indenture, mortgage, deed of trust, bank loan or credit agreement or other evidence of indebtedness, or any license, lease, contract or other agreement or instrument to which the Corporation or the Subsidiary is a party or by which any of them or any of their respective properties may be bound or affected, or (C) any federal, state, provincial, local or foreign law, regulation or rule, or (D) any rule or regulation of any self-regulatory organization or other non-governmental regulatory authority (including, without limitation, any applicable rules and regulations of the OTCBB or the Exchange), or (E) any decree, judgment or order applicable to the Corporation or the Subsidiary or any of their respective properties; except, in the cases of clause (B), (C), (D) and (E), where such occurrence would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect.

(j) No Consents Required. No approval, authorization, consent or order of or filing with any federal, state, provincial, local or foreign governmental or regulatory commission, board, body, authority or agency, or of or with any self-regulatory organization or other non-governmental regulatory authority, or approval of the shareholders of the Corporation, is required in connection with the issuance and sale of the Offered Securities or the consummation by the Corporation of the transactions contemplated hereby, other than any necessary approvals under the listing requirements of the Exchange.

(k) No Rights. (i) No person has the right, contractual or otherwise, to cause the Corporation to issue or sell to such person any Common Shares or shares of any other capital stock or other equity interests of the Corporation, (ii) no person has any preemptive rights, resale rights, rights of first refusal or other rights to purchase any Common Shares or shares of any other capital stock of or other equity interests in the Corporation, (iii) no person has the right to act as an agent or as a financial advisor to the Corporation in connection with the offer and sale of the Offered Securities, and (iv) no person has the right, contractual or otherwise, to cause the Corporation to register under the U.S. Securities Act any Common Shares or shares of any other capital stock of, or other equity interests or securities in, the Corporation, other than the registration rights of the purchasers in the Corporation's private placement of units of the Corporation which closed in January, 2011.

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(l) Permits. Each of the Corporation and the Subsidiary has all necessary licenses, authorizations, consents and approvals and has made all necessary filings required under any applicable law, regulation or rule, and has obtained all necessary licenses, authorizations, consents and approvals from other persons, in order to conduct their respective businesses, except where the failure to have or obtain such licenses, authorizations, consents and approvals would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect; neither the Corporation nor the Subsidiary is in violation of, or in default under, or has received notice of any proceedings relating to revocation or modification of, any such license, authorization, consent or approval or any federal, state, provincial, local or foreign law, regulation or rule or any decree, order or judgment applicable to the Corporation or the Subsidiary, except where such violation, default, revocation or modification would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect.

(m) Mining Rights.

(i) Either the Corporation or the Subsidiary holds Mining Rights (as defined below) in respect of all of the Mineral Properties (defined below).  "Mining Rights" means marketable title, freehold title, leases, mining concessions, mining claims, licenses of occupation, participating interests or other conventional property or proprietary interests or rights recognized in the jurisdiction in which a particular property is located, in respect of the ore bodies and minerals located therein under valid, subsisting and enforceable title documents, or other recognized and enforceable agreements or instruments, sufficient to permit the Corporation or the Subsidiary to explore for mineral deposits relating thereto, free and clear of any liens, charges or encumbrances.  "Mineral Properties" means the material mineral properties of the Corporation as disclosed in the Documents, including, without limitation, the "Borealis Property" located along the Aurora-Bodie trend in the State of Nevada.

(ii) All material Mining Rights in which the Corporation or the Subsidiary holds an interest or right have been validly registered and recorded in accordance with all applicable laws and are valid and subsisting, and each of the Mining Rights and each of the documents, agreements and instruments and obligations relating thereto is currently in good standing in the name of the Corporation or the Subsidiary.

(iii) Neither the Corporation nor the Subsidiary has received any notice of the revocation, adverse modification or cancellation of, or any intention to revoke, adversely modify or cancel, any of the instruments conferring Mining Rights in respect of the Mineral Properties.

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(iv) The disclosure regarding the Mineral Properties and Mining Rights of the Corporation and the Subsidiary in the Documents, accurately describes all material facts regarding the Mineral Properties and all material Mining Rights held by the Corporation and the Subsidiary, and no other material property or assets are necessary for the conduct of the business of the Corporation and the Subsidiary as currently conducted; except as disclosed in the Documents the Corporation does not know of any claim or the basis for any claim that might or could materially and adversely affect the Corporation’s right to use, transfer or explore for mineral deposits on such Mineral Properties and, except as disclosed in the Documents the Corporation and the Subsidiary hold interests in such Mineral Properties free and clear of any material liens, charges or encumbrances and no material commission, royalty, license fee or similar payment to any person with respect to the Mineral Properties is payable.

(v) All exploration activities on the Mineral Properties by the Corporation or its Subsidiary have been conducted in all material respects in accordance with good exploration practices and in compliance with all applicable laws, regulations and policies in all material respects.

(n) Technical Reports.

(i) The Technical Report complies in all material respects with the requirements of NI 43-101 at the time of filing thereof and each of the Technical Report reasonably presents the quantity of mineral resources attributable to the properties evaluated therein as of the date stated therein based upon information available at the time the Technical Report was prepared; the Corporation made available to the authors of the Technical Report, prior to the issuance thereof and for the purpose of preparing such reports, all information requested by them, which information did not contain any misrepresentation at the time such information was so provided.

(ii) All of the material assumptions underlying the reserve and resource estimates in the Technical Report are, to the extent known to the Corporation, reasonable and appropriate.

(iii) Each of the authors and consultants of the Technical Report was, at the time of the Technical Report, "independent" (as such term is defined in NI 43-101). To the Corporation’s knowledge, each such author continues to qualify as being "independent" (as such term is defined in NI 43-101).

(iv) The Corporation is in compliance in all material respects with the provisions of NI 43-101 and has filed all technical reports required thereby and there has been no change to the Technical Report or the properties evaluated therein of which the Corporation is aware that would require the filing of new technical reports under NI 43-101.

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(o) Legal Proceedings. There are no actions, suits, claims, investigations or proceedings pending or, to the Corporation’s knowledge, threatened or contemplated, to which the Corporation or the Subsidiary or any of their respective directors or officers is or would be a party or of which any of their respective properties is or would be subject at law or in equity, before or by any federal, state, provincial, local or foreign governmental or regulatory commission, board, body, authority or agency, or before or by any self-regulatory organization or other non-governmental regulatory authority or the OTCBB or the Exchange, except any such action, suit, claim, investigation or proceeding which, if resolved adversely to the Corporation or the Subsidiary, would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect.

(p) Independent Accountants.  DeCoria Maichel & Teague, is an independent registered public accountant with respect to the Corporation as required by the Applicable Securities Laws, and by the rules of the Public Company Accounting Oversight Board and, to the best of the Corporation's knowledge, is registered as such.

(q) Financial Statements. The Financial Statements, together with the related notes and schedules, present fairly in all material respects the consolidated financial position of the Corporation and the Subsidiary as of the dates indicated and the consolidated results of operations, cash flows and changes in shareholders’ equity of the Corporation for the periods specified have been prepared in compliance with the applicable requirements of the U.S. Securities Act and the U.S. Exchange Act and in conformity with U.S. generally accepted accounting principles ("GAAP") applied on a consistent basis during the periods involved.

(r) Absence of Material Changes.  Subsequent to the respective date of the Financial Statements there has not been (i) any event or occurrence that, individually or in the aggregate, has resulted in or may result in a Material Adverse Effect, (ii) any obligation or liability, direct or contingent (including any off-balance sheet obligations), incurred by the Corporation or the Subsidiary, which, individually or in the aggregate, has resulted in or may result in a Material Adverse Effect, (iii) any change in the capital stock of the Corporation, except for the issuance of stock pursuant to the exercise of stock options or warrants outstanding, or pursuant to the equity incentive plans of the Corporation then in effect, or outstanding indebtedness of the Corporation or the Subsidiary, or (iv) any dividend or distribution of any kind declared, paid or made on the capital stock of the Corporation or the Subsidiary.

(s) Not an Investment Company. Neither the Corporation nor the Subsidiary is, and, after giving effect to the offering and sale of the Offered Securities and the application of the proceeds thereof, none of them will be, an "investment company" or an entity "controlled" by an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended (the "Investment Company Act").

(t) Good Title to Property.  The Corporation and the Subsidiary have good and marketable title to all of their respective properties, free and clear of all liens, claims, security interests or other encumbrances, except as described in the Documents such as would not individually or in the aggregate, be reasonably expected to have a Material Adverse Effect; all of the properties held under lease by the Corporation or the Subsidiary is held thereby under valid, subsisting and enforceable leases except such as would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect.

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(u) Material Contracts. Except such as would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect, each material contract, agreement and license, to which the Corporation or its Subsidiary is bound (all of which are set forth in Schedule E hereto), is legal, valid, binding, enforceable and in full force and effect against the Corporation or the Subsidiary, as applicable, and, to the knowledge of the Corporation, each other party thereto, except to the extent such enforceability is subject to (i) laws of general application relating to bankruptcy, insolvency, moratorium and the relief of debtors and (ii) the availability of specific performance, injunctive relief and other equitable remedies. Neither the Corporation nor its Subsidiary nor, to the Corporation's knowledge, any other party, is in material breach or default with respect to any such contract, agreement or license. To the Corporation's knowledge, no event has occurred which with notice or lapse of time would constitute a material breach or default, or permit termination, modification, or acceleration, under any such contract, agreement or license. No party has repudiated any material provision of any such contract, agreement or license.

(v) Intellectual Property. The Corporation and the Subsidiary own, or have obtained valid and enforceable licenses for, or other rights to use, the inventions, patent applications, patents, trademarks (both registered and unregistered), trade names, service names, copyrights, trade secrets and other proprietary information described in the Documents, as being owned or licensed by them or which are necessary for the conduct of their respective businesses as currently conducted or as proposed to be conducted except such as would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect (collectively, "Intellectual Property"); to the Corporation's knowledge, there are no third parties who have, or will be able to establish, rights to any Intellectual Property, except for, and to the extent of, the ownership rights of the owners of the Intellectual Property which is licensed to the Corporation and the license rights of any third parties to which the Intellectual Property is licensed; to the knowledge of the Corporation, there is no infringement by third parties of any material Intellectual Property; there is no pending or, to the Corporation's knowledge, threatened, action, suit, proceeding or claim by any third party challenging the Corporation's rights in or to any material Intellectual Property, and the Corporation is unaware of any facts which could form a reasonable basis for any such action, suit, proceeding or claim; there is no pending or, to the Corporation's knowledge, threatened, action, suit, proceeding or claim by others challenging the validity, enforceability or scope of any material Intellectual Property, and the Corporation is unaware of any facts which could form a reasonable basis for any such action, suit, proceeding or claim; there is no pending or, to the Corporation’s knowledge, threatened, action, suit, proceeding or claim by others that the Corporation or the Subsidiary infringes or otherwise violates, any patent, trademark, trade name, service name, copyright, trade secret or other proprietary rights of others, and the Corporation is unaware of any facts which could form a reasonable basis for any such action, suit, proceeding or claim; the Corporation and the Subsidiary have complied in all material respects with the terms of each agreement pursuant to which any material Intellectual Property has been licensed to the Corporation or the Subsidiary, and all such agreements are in full force and effect except such as would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect; to the knowledge of the Corporation, there is no patent or patent application that contains claims that interfere with the issued or pending claims of any material Intellectual Property or that challenges the validity, enforceability or scope of any material Intellectual Property; to the knowledge of the Corporation, there is no prior art that may render any patent application within the Intellectual Property unpatentable that has not been disclosed to the U.S. Patent and Trademark Office.

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(w) Labor Matters. Neither the Corporation nor the Subsidiary is engaged in any unfair labor practice; except for matters which would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect, (i) there is (A) no unfair labor practice complaint pending or, to the Corporation's knowledge, threatened against the Corporation or the Subsidiary before the National Labor Relations Board, and no grievance or arbitration proceeding arising out of or under collective bargaining agreements is pending or, to the Corporation’s knowledge, threatened, (B) no strike, labor dispute, slowdown or stoppage pending or, to the Corporation’s knowledge, threatened against the Corporation or the Subsidiary and (C) no union representation dispute currently existing concerning the employees of the Corporation or the Subsidiary; (ii) to the Corporation's knowledge, no union organizing activities are currently taking place concerning the employees of the Corporation or the Subsidiary; and (iii) there has been no violation of any federal, state, provincial, local or foreign law relating to discrimination in the hiring, promotion or pay of employees, any applicable wage or hour laws, any provision of the Worker Adjustment and Retraining Notification Act of 1988, as amended ("WARN Act"), or the WARN Act’s state, provincial, foreign or local equivalent, or any provision of the Employee Retirement Income Security Act of 1974 ("ERISA"), or the rules and regulations promulgated thereunder concerning the employees of the Corporation or the Subsidiary; the Corporation and the Subsidiary are in compliance with all presently applicable provisions of ERISA, except where such non-compliance would not be reasonably expected to result in a Material Adverse Effect; no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) to which the Corporation or the Subsidiary contributes or which the Corporation or the Subsidiary maintains; the Corporation and the Subsidiary has not incurred and does not expect to incur liability under (x) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan" or (y) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the "Code"); and each "pension plan" for which the Corporation or the Subsidiary would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification.

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(x) Compliance with Environmental Laws. Except as disclosed in the Documents, the Corporation and the Subsidiary and their respective properties, assets and operations are in compliance with, and the Corporation and the Subsidiary hold all permits, authorizations and approvals required under, Environmental Laws (as defined below), except to the extent that failure to so comply or to hold such permits, authorizations or approvals would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect; there are no past, present or, to the Corporation’s knowledge, reasonably anticipated future, events, conditions, circumstances, activities, practices, actions, omissions or plans that could reasonably be expected to give rise to any material costs or liabilities to the Corporation or the Subsidiary under, or to interfere with or prevent compliance by the Corporation or the Subsidiary with, Environmental Laws; except as would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect or as disclosed in the Documents, neither the Corporation nor the Subsidiary (i) is the subject of any investigation, (ii) has received any notice or claim, (iii) is a party to or affected by any pending or, to the Corporation’s knowledge, threatened, action, suit or proceeding, (iv) is bound by any judgment, decree or order or (v) has entered into any agreement, in each case relating to any alleged violation of any Environmental Law or any actual or alleged release or threatened release or cleanup at any location of any Hazardous Materials (as defined below) (as used herein, "Environmental Law" means any federal, state, provincial, local or foreign law, statute, ordinance, rule, regulation, order, decree, judgment, injunction, permit, license, authorization or other binding requirement, or common law, relating to health, safety or the protection, cleanup or restoration of the environment or natural resources, including those relating to the distribution, processing, generation, treatment, storage, disposal, transportation, other handling or release or threatened release of Hazardous Materials, and "Hazardous Materials" means any material (including, without limitation, pollutants, contaminants, hazardous or toxic substances or wastes) that is regulated by or may give rise to liability under any Environmental Law).

(y) Taxes. The Corporation and its Subsidiary have paid all federal, state, local, provincial and foreign taxes and filed all tax returns required to be filed through the date hereof (except for (i) any taxes that are being disputed in good faith by appropriate proceedings and for which the Corporation or the Subsidiary, as appropriate, holds adequate reserves in accordance with GAAP and (ii) those returns for which a request for extension has been filed); and there is no material tax deficiency that has been, or could reasonably be expected to be, asserted against the Corporation or the Subsidiary or any of their respective properties or assets.

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(z) Insurance. The Corporation and the Subsidiary maintain insurance covering their respective properties, operations, personnel and businesses as the Corporation reasonably deems adequate; such insurance insures against such losses and risks to an extent which is adequate in accordance with customary industry practice to protect the Corporation and the Subsidiary and their respective businesses; all such insurance is fully in force on the date hereof and will be fully in force at the Closing Time, as applicable; neither the Corporation nor any Subsidiary has reason to believe that it will not be able to renew any such insurance as and when such insurance expires.

(aa) Termination of Contracts. Neither the Corporation nor the Subsidiary has sent or received any communication regarding termination of, or intent not to renew, any of the contracts or agreements referred to or described in the Documents, and no such termination or non-renewal has been threatened by the Corporation or the Subsidiary or, to the Corporation’s knowledge, any other party to any such contract or agreement, except for such terminations or non-renewals which would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect.

(bb) Accounting Controls. The Corporation and the Subsidiary maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

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(cc) Disclosure Controls; Sarbanes-Oxley Act. The Corporation has established and maintains and evaluates "disclosure controls and procedures" (as such term is defined in Rules 13a-15 and 15d-15 under the U.S. Exchange Act) and "internal control over financial reporting" (as such term is defined in Rules 13a-15 and 15d-15 under the U.S. Exchange Act); such disclosure controls and procedures are designed to ensure that material information relating to the Corporation, including its consolidated subsidiaries, is made known to the Corporation's Chief Executive Officer and its Chief Financial Officer by others within those entities, and, except as disclosed in the Corporation’s filings with the SEC, and as of the date of the Corporation’s most recent evaluation, such disclosure controls and procedures are effective to perform the functions for which they were established; to the Corporation's knowledge, the Corporation's independent auditors and the Audit Committee of the Board of Directors of the Corporation have been advised of: (i) all significant deficiencies, if any, in the design or operation of internal control over financial reporting which could adversely affect the Corporation's ability to record, process, summarize and report financial data; and (ii) all fraud, if any, whether or not material, that involves management or other employees who have a role in the Corporation's internal control over financial reporting; all material weaknesses, if any, in internal control over financial reporting have been identified to the Corporation's independent auditors; since the date of the most recent evaluation of such disclosure controls and procedures and internal control over financial reporting, there have been no significant changes in internal control over financial reporting or in other factors that could be reasonably expected to significantly affect internal control over financial reporting, including any corrective actions with regard to significant deficiencies and material weaknesses, except for those that are disclosed in the Corporation's filings with the SEC or those that are intended to remediate or otherwise improve upon the Corporation's disclosure controls and procedures and internal control over financial reporting; the principal executive officers (or their equivalents) and principal financial officers (or their equivalents) of the Corporation have made all certifications required by the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") and any related rules and regulations promulgated by the SEC, and the statements contained in each such certifications, are complete and correct in all material respects as of the dates such certifications were made; the Corporation, the Subsidiary and the Corporation's directors and officers are each in compliance in all material respects with all applicable effective provisions of the Sarbanes-Oxley Act and the rules and regulations of the SEC promulgated thereunder.

(dd) Forward-Looking Statements. Each "forward-looking statement" (within the meaning of Section 27A of the U.S. Securities Act or Section 21E of the U.S. Exchange Act) contained the Documents, if any, has been made or reaffirmed with a reasonable basis and in good faith.

(ee) Statistical and Market-Related Data. All statistical or market-related data included or incorporated by reference in the Documents, are based on or derived from sources that the Corporation reasonably believes to be reliable and accurate, and the Corporation has obtained the written consent to the use of such data from such sources to the extent required.

(ff) Corrupt Practices. Neither the Corporation nor the Subsidiary nor, to the knowledge of the Corporation, any director, officer, agent, employee, representative or affiliate of the Corporation or the Subsidiary is aware of or has taken any action, directly or indirectly, that would result in a violation by such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder; and the Corporation, the Subsidiary and, to the knowledge of the Corporation, its affiliates, have taken all steps reasonably necessary to ensure continued compliance therewith.

(gg) Money Laundering Laws. The operations of the Corporation and the Subsidiary are and have been conducted at all times in compliance in all material respects with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, and the applicable and material money laundering statutes of all jurisdictions in which the Corporation operates or has operated and the rules and regulations thereunder (collectively, "Money Laundering Laws"); and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator or non-governmental authority involving the Corporation or the Subsidiary with respect to Money Laundering Laws is pending or, to the Corporation’s knowledge, threatened.

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(hh) OFAC. Neither the Corporation nor the Subsidiary nor, to the knowledge of the Corporation, any director, officer, agent, employee or affiliate of the Corporation or the Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department ("OFAC"); and the Corporation will not, directly or indirectly, use the proceeds of the offering of the Offered Securities contemplated hereby, or lend, contribute or otherwise make available such proceeds to the Subsidiary, joint venture partner or other person or entity for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

(ii) Dividends. The Subsidiary is not currently prohibited, directly or indirectly, from paying any dividends to the Corporation, from making any other distribution on the Subsidiary’s capital stock, from repaying to the Corporation any loans or advances to the Subsidiary from the Corporation or from transferring any of the Subsidiary’s property or assets to the Corporation.

(jj) Preemptive Rights. The issuance and sale of the Offered Securities as contemplated hereby will not cause any holder of any shares of capital stock, securities convertible into or exchangeable or exercisable for capital stock or options, warrants or other rights to purchase capital stock or any other securities of the Corporation to have any right to acquire any shares of preferred stock of the Corporation.

(kk) U.S. Exchange Act Registration. The Common Shares are registered pursuant to Section 12(g) of the U.S. Exchange Act, the Common Shares are quoted for trading on the OTCBB and listed on the Exchange, and the Corporation has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Shares under the U.S. Exchange Act, ending quotations of the Common Shares on the OTCBB or delisting the Common Shares from the Exchange, nor has the Corporation received any notification that the SEC, the OTCBB or the Exchange is contemplating terminating such quotation, registration or listing.

(ll) Brokers Fees. Except pursuant to this Agreement, neither the Corporation nor the Subsidiary has incurred any liability for any finder’s or broker’s fee or agent’s commission in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.

(mm) No Price Stabilization. Neither the Corporation nor the Subsidiary nor any of their respective directors, officers or, to the knowledge of the Corporation, any of their affiliates or controlling persons, has taken, directly or indirectly, any action designed to, or which has constituted or might reasonably be expected to, cause or result in the stabilization or manipulation of the price of any security of the Corporation to facilitate the sale or resale of the Offered Securities.

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(nn) Corporate Records. The minute books of the Corporation and the Subsidiary representing all existing records of all meetings and actions of the board of directors (including all committees of the board of directors) and stockholders of the Corporation and the Subsidiary (collectively, the "Corporate Records") through the date of the latest meeting and action have been furnished to the Agents. All such Corporate Records are complete and accurately reflect, in all material respects, all transactions referred to in such Corporate Records. There are no material transactions, agreements or other actions that have been consummated by the Corporation or the Subsidiary that are not properly approved and/or recorded in the Corporate Records of the Corporation and the Subsidiary.

(oo) Federal Reserve Board. Neither the Corporation nor the Subsidiary owns any "margin securities" as that term is defined in Regulation U of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), and none of the proceeds of the sale of the Offered Securities will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Offered Securities to be considered a "purpose credit" within the meanings of Regulation T, U or X of the Federal Reserve Board.

(pp) Rating Organization. As of the date of this Agreement there were not, and as of the Closing Time, there will not be, any securities of or guaranteed by the Corporation or the Subsidiary that are rated by a "nationally recognized statistical rating organization," as that term is defined in Rule 436(g)(2) promulgated under the U.S. Securities Act.

(qq) U.S. Exchange Act Requirements. The Corporation has filed in a timely manner all reports required to be filed pursuant to Sections 13(a), 13(e), 14 and 15(d) of the U.S. Exchange Act during the preceding twelve (12) months.

(rr) Transfer Agent.  Computershare Trust Company of Canada at its principal offices in the City of Vancouver, British Columbia is the duly appointed registrar and transfer agent of the Corporation with respect to its Common Shares and the trustee pursuant to the Trust Indenture.

(ss) Reporting Issuer in Canada. The Corporation is a "reporting issuer" in each of the Qualifying Provinces within the meaning of the Canadian Securities Laws in such provinces and is not in default of any requirement of Canadian Securities Laws, except such as would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect.

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(tt) Representations and Warranties.  The representations and warranties made by the Corporation in the Purchase Agreements will be true and correct as of the date at which they are made.

(uu) Warrants. The Corporation has the corporate power and authority to issue the Warrants and Broker Warrants and to perform its obligations thereunder. The Warrants and Broker Warrants have been duly authorized and constitute valid and binding obligations of the Corporation, enforceable against the Corporation in accordance with their terms except (i) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws of general applicability affecting the rights of creditors generally, and (ii) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws in the United States or under the Canadian Securities Laws in Canada. The Warrant Shares and Brokers Shares have been duly authorized and reserved for issuance, and when issued to the holder(s) of the Warrants and Broker Warrants in accordance with the terms of the Warrants and Broker Warrants against payment therefor, will be validly issued, fully paid and nonassessable. The Warrant Shares and Broker Shares when issued upon exercise of the Warrants and Broker Warrants will be free of statutory and contractual preemptive rights, resale rights, rights of first refusal and restrictions upon voting and transfer (except for applicable transfer restrictions under the U.S. Securities Act and any applicable state securities laws). The offering and issuance of the Warrants and Broker Warrants and the Warrant Shares and Broker Shares are pursuant to an exemption from the registration requirements of the U.S. Securities Act.

In addition to the foregoing representations and warranties, any certificate signed by any officer of the Corporation or the Subsidiary and delivered to the Agents in connection with the Offering shall be deemed to be a representation and warranty by the Corporation to the Agents as to the matters covered thereby.

7. Conditions

The obligations of the Agents hereunder shall be conditional upon the Agents receiving, and the Agents shall have the right on the Closing Date on behalf of Purchasers to withdraw all Purchase Agreements delivered and not previously withdrawn by Purchasers unless the Agents receive, at the Closing Time:

(a) a legal opinion of the Corporation's Canadian counsel (addressed to the Agents, the Purchasers and the Agents' counsel) in form and substance satisfactory to the Agents, acting reasonably, relating to the offering, issuance and sale of the Offered Securities and the issuance of the Broker Warrants, Warrants Shares and the Broker Shares, including, without limitation, the matters set forth in Schedule B and as to all other legal matters, including compliance with Applicable Securities Laws in the Selling Jurisdictions in Canada, in any way connected with the offering, issuance, sale and delivery of the Offered Securities and the issuance of the Debentures, Warrants, Broker Warrants, Warrant Shares and Broker Shares as the Agents may reasonably request.

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It is understood that the Corporation's Canadian counsel may rely on the opinions of local counsel acceptable to them as to matters governed by the laws of jurisdictions other than British Columbia, Alberta and Ontario and on certificates of officers of the Corporation, the transfer agent of the Common Shares and the auditors of the Corporation as to relevant matters of fact.

(b) a legal opinion of the Corporation's US counsel (addressed to the Agents and the Purchasers), in form and substance satisfactory to the Agents, acting reasonably, relating to the matters set forth in Schedule C and as to all other legal matters as the Agents may reasonably request;

(c) a legal opinion of the Corporation's counsel in Nevada (addressed to the Agents, the Purchasers and the Agents' counsel) in form and substance satisfactory to the Agents, acting reasonably, relating to the matters set forth in Schedule D and as to all other legal matters as the Agents may reasonably request;

(d) a certificate of the Corporation dated the Closing Date, addressed to the Agents and the Purchasers and signed on the Corporation's behalf by any two senior officers or directors of the Corporation satisfactory to the Agents, acting reasonably, certifying that:

(i) the Corporation has complied with and satisfied all terms and conditions of the Transaction Documents on its part to be complied with or satisfied at or prior to the Closing Time, other than those which have been waived in writing by the Agents;

(ii) the representations and warranties of the Corporation set forth in the Transaction Documents are true and correct, in all material respects, at the Closing Time, as if made at such time;

(iii) no event of a nature referred to in Subsection 12(a), (b), (d) or (e) has occurred or to the knowledge of such officers is pending, contemplated or threatened;

(iv) the Corporation has made and/or obtained, on or prior to the Closing Time, all necessary filings, approvals, consents and acceptances of applicable regulatory authorities, and under any applicable agreement or document to which the Corporation is a party or by which it is bound, required for the execution and delivery of the Transaction Documents, the offering and sale of the Offered Securities and the issuance of the Warrant Shares, Broker Warrants and Broker Shares in the Selling Jurisdictions and the consummation of the other transactions contemplated hereby (subject to completion of filings with, and the payment of fees to, certain regulatory authorities following the Closing Date);

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(v) there have been no material changes to the Due Diligence Session Responses; and

(vi) such other matters as may be reasonably requested by the Agents or the Agents' counsel;

and the Agents shall have no knowledge to the contrary;

(e) evidence satisfactory to the Agents, acting reasonably, that the Corporation has obtained all necessary approvals of the Exchange for the issuance of the Offered Securities, the Warrant Shares, the Broker Warrants and the Broker Shares;

(f) definitive certificates representing, in the aggregate, all of the Offered Securities subscribed for or purchased registered in such name or names as the Agents shall notify the Corporation in writing not less than 24 hours prior to the Closing Time, provided such certificates registered in such names may, subject to receipt by the Corporation and the Trustee of a satisfactory indemnity, be delivered in advance of the Closing Date to the Agents or such other parties in such locations as the Agents may direct and the Agents and the Corporation may agree;

(g) executed copies of this Agreement and the Transaction Documents, each in form and substance reasonably satisfactory to the Agents and the Agents' counsel;

(h) evidence of registration of security interests created pursuant to the Transaction Documents in form and substance satisfactory to the Agents and the Agents' counsel;

(i) such further and other documentation as may be contemplated by this Agreement or the Transaction Documents that may reasonably be requested by the Agents or the Agents' counsel; and

(j) the Agents having completed due diligence with respect to the Corporation and its Subsidiary that is satisfactory to the Agents, acting reasonably.

The foregoing conditions are for the sole benefit of the Agents and may be waived in whole or in part by the Agents at any time and, without limitation, the Agents shall have the right, prior to the Closing Time, on behalf of potential subscribers, to withdraw all Purchase Agreements delivered and not previously withdrawn or rescinded by such persons. If any of the foregoing conditions are not met, the Agents may terminate their obligations under this Agreement without prejudice to any other remedies they may have.

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8. Closing

The issue and sale of the Offered Securities shall be completed at the Closing Time at the offices of the Corporation's Canadian Counsel in Torontoor at such other place as the Corporation and the Agents may agree. Subject to the conditions set forth in Section 7, the Agents, on the Closing Date, shall deliver to the Corporation:

(a) all completed Purchase Agreements duly executed by the Purchasers (including any applicable documents and schedules specifically referred to in the Purchase Agreements), in form and substance reasonably satisfactory to the Corporation and the Corporation's counsel; and

(b) a wire transfer of funds to the Corporation in an amount equal to the aggregate of all subscriptions for Offered Securities delivered to and accepted by the Corporation;

against delivery by the Corporation of:

(c) definitive certificates referred to in Subsection 7(f) representing, in the aggregate, all of the Offered Securities subscribed for;

(d) the certificates representing the Broker Warrants, as provided in Subsection 9(b) hereof; and

(e) such further documentation as may be contemplated by this Agreement or that may reasonably be requested by the Agents' counsel.

The Corporation may not reject any properly completed Purchase Agreement which is in compliance with Applicable Securities Laws, unless the number of Offered Securities subscribed for or purchased pursuant to all Purchase Agreements tendered by the Agents exceeds the maximum number of Offered Securities to be sold under this Agreement, in which case Purchase Agreements representing the over-allotment shall, in consultation with the Agents, be rejected or accepted, unless the acceptance of such Purchase Agreement may breach or violate any Applicable Securities Laws.

9. Fees

In consideration for its services hereunder, the Corporation agrees to:

(a) pay to the Agents a fee equal to the amount of 6.0% of the aggregate gross proceeds of the sale of the Units, and for which the subscription is accepted by the Corporation, which aggregate fee of up to $180,000 shall be payable on the Closing Date; and

(b) issue to the Agents at the Closing Time an aggregate number of Broker Warrants as is equal to 5.0% of the number of Warrants issued pursuant to the offering.

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The foregoing fee referred to in Subsection 9(a) may, at the sole option of the Agents, be deducted from the aggregate gross proceeds of the sale of the Offered Securities and withheld for the account of the Agents.

10. Expenses

Whether or not the transactions contemplated herein shall be completed, all costs and expenses of or incidental to the creation, issue, sale or distribution of the Offered Securities shall be borne by the Corporation, including, without limitation, all costs and expenses of or incidental to the private placement of the Offered Securities, the fees and expenses of the Corporation's counsel, agent counsel retained by the Corporation's counsel, the Corporation's auditors, the Corporation's engineers, the Trustee, the reasonable out-of-pocket expenses of the Agents, including, but not limited to, travel and road show expenses and the Agents' legal fees (to a maximum of $40,000, exclusive of taxes) and expenses, and all other costs and expenses relating to the transactions contemplated herein.  In addition, the Corporation shall pay the Lead Agent a corporate finance fee of $40,000, plus applicable taxes.

The foregoing fees referred to in Subsection 10 may, at the sole option of the Lead Agent, be deducted from the aggregate gross proceeds of the sale of the Offered Securities and withheld for the account of the Agents.

11. Waiver

The Agents may, in respect of the Corporation, waive in whole or in part any breach of, default under or non-compliance with any representation, warranty, covenant, term or condition hereof, or extend the time for compliance therewith, without prejudice to any of its rights in respect of any other representation, warranty, covenant, term or condition hereof or any other breach of, default under or non-compliance with any other representation, warranty, covenant, term or condition hereof, provided that any such waiver or extension shall be binding on the Agents only if the same is in writing.

12. Termination Events

Each of the Agents may terminate their obligations hereunder, without any liability on such Agent's part, by written notice to the Corporation, in the event that after the date hereof and at or prior to the Closing Time:

(a) any order to cease or suspend trading in any securities of the Corporation, or prohibiting or restricting the distribution of the Offered Securities, the Broker Warrants, the Warrant Shares or the Broker Shares is made, or proceedings are announced, commenced or threatened for the making of any such order, by any securities commission or similar regulatory authority, the Exchange or by any other competent authority, and the same has not been rescinded, revoked or withdrawn;

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(b) any inquiry, investigation or other proceeding (whether formal or informal) in relation to the Corporation or any of its directors or officers is announced or commenced by any securities commission or similar regulatory authority, the Exchange or by any other competent authority or any order is issued under or pursuant to any statute of Canada or of any of the provinces of Canada, or any other applicable law or regulatory authority (unless based on the activities or alleged activities of the Agent or its agents), or there is any change of law, regulation or policy or the interpretation or administration thereof, which, in the sole opinion of the Agent, acting reasonably, materially adversely affects, or may materially adversely affect, the Corporation, the trading in the Common Shares or the distribution of the Offered Securities, the Broker Warrants, the Warrant Shares or the Broker Shares;

(c) there should develop, occur or come into effect or existence any event, action, state, condition (including, without limitation, terrorism or accident) or major financial occurrence of national or international consequence, or any action by government, law or regulation, or any other such occurrence of any nature whatsoever, which, in the sole opinion of the Agent, acting reasonably, materially adversely affects or involves, or might be expected to materially adversely affect or involve, the financial markets or the business, operations or affairs of the Corporation;

(d) there should occur any change, event, fact or circumstance (actual, contemplated or threatened) of a nature referred to in Subsection 3(a) hereof or any development that could result in such a change, event, fact or circumstance, any of which, in the opinion of the Agent, as determined by the Agent in its sole discretion, acting reasonably, could reasonably be expected to have a material adverse effect on the business, operations or affairs of the Corporation or the market price or value or the marketability of the Offered Securities, the Broker Warrants, the Warrant Shares or the Broker Shares;

(e) the Agent, acting reasonably, determines that the Corporation shall be in breach of, default under or non-compliance with any material representation, warranty, covenant, term or condition of this Agreement or the Purchase Agreements;

(f) the Agent shall become aware, as a result of its due diligence review (including the Due Diligence Session) or otherwise, of any adverse material information, fact or change (determined solely by the Agent, acting reasonably) with respect to the Corporation which had not been publicly disclosed or disclosed in writing to the Agent prior to the date hereof or which occurred after the effective date hereof but prior to the Closing Time; or

(g) the state of the financial markets in Canada or the United States becomes such that the Units cannot, in the opinion of the Agent, acting reasonably, be profitably marketed,

in any of which cases, the Agent shall be entitled, at its option, to terminate and cancel its obligations to the Corporation under this Agreement and the obligations of any Purchaser under any Purchase Agreement.

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13. Continuation of Termination Right

Each of the Agents may exercise any or all of the rights provided for in Section 7, Section 11 or Section 12 notwithstanding any material change, change, event or state of facts and notwithstanding any act or thing taken or done by the Agent or any inaction by the Agent, whether before or after the occurrence of any material change, change, event or state of facts including, without limitation, any act of the Agent related to the offering or continued offering of the sale of the Offered Securities.  An Agent shall only be considered to have waived or be estopped from exercising or relying upon any of its rights under or pursuant to Section 7, Section 11 or Section 12 if such waiver or estoppel is in writing and specifically waives or estops such exercise or reliance.

14. Exercise of Termination Right

Any termination pursuant to the terms of this Agreement shall be effected by notice in writing delivered to the Corporation, with a copy to the other Agent, prior to the Closing Time, provided that no termination shall discharge or otherwise affect any obligation of the Corporation under Section 10, Section 15, Section 16, Section 17, Section 18 or Section 19.  The rights of the Agents to terminate their obligations hereunder are in addition to, and without prejudice to, any other remedies they may have.

15. Survival

All representations, warranties, covenants, terms and conditions herein or contained in certificates or documents submitted pursuant to or in connection with the transactions contemplated herein shall survive the payment by the Agents for the Offered Securities and the issuance of the Offered Securities and shall continue in full force and effect for the benefit of the Agents and the Purchasers regardless of any investigation by or on behalf of the Agents with respect thereto.

16. Indemnity

The Corporation (the "Indemnitor") shall indemnify and save harmless the Agents and their respective affiliates, shareholders, directors, officers, partners, employees and agents (collectively, the "Indemnified Parties") from and against all actual or threatened claims, demands, actions, suits, investigations and proceedings (collectively, "Proceedings") and all losses (other than loss of profits), costs, expenses, fees, damages, obligations, payments and liabilities (collectively, "Liabilities") (including, without limitation, all statutory duties and obligations, and, subject to Section 18, all amounts paid to investigate, defend and settle any action or to satisfy any judgment or award and all legal fees and disbursements actually incurred) which now or any time hereafter are suffered or incurred by reason of any event, act or omission in any way caused by, or arising directly or indirectly from or in consequence of:

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(a) any information or statement contained in any part of the Public Record (other than any information or statement relating solely to the Agents and furnished to the Corporation by the Agents in writing expressly for inclusion in any part of the Public Record) or contained in this Agreement or any certificate or other document delivered by or on behalf of the Corporation to the Agents hereunder which is or is alleged to be untrue or any omission or alleged omission to provide any information or state any fact the omission of which makes or is alleged to make any such information or statement untrue or misleading in light of the circumstances in which it was made;

(b) any misrepresentation or alleged misrepresentation (except a misrepresentation which is based upon information relating to the Agents and furnished to the Corporation by the Agents in writing expressly for inclusion in the Public Record) contained in the Public Record;

(c) any prohibition or restriction of trading in the securities of the Corporation or any prohibition or restriction affecting the distribution of the Offered Securities, the Warrants, the Broker Warrants, the Warrant Shares or the Broker Shares (not based upon the activities or the alleged activities of the Agents or the Selling Dealer Group members, if any) imposed by any of the Securities Commissions, the SEC or any other competent authority;

(d) any order made or any inquiry, investigation (whether formal or informal) or other proceeding commenced or threatened by any of the Securities Commissions or any other one or more competent authorities (not based upon the activities or the alleged activities of the Agents or the Selling Dealer Group members, if any) into the affairs of the Corporation or its Subsidiary or any of its directors, officers or principal shareholders or relating to or affecting the trading or distribution of the Offered Securities, the Warrants, the Broker Warrants, the Warrant Shares or the Broker Shares;

(e) any breach of, default under or non-compliance by the Corporation with any representation, warranty, term or condition of the Transaction Documents or any certificate or document, delivered pursuant thereto or any requirement of Applicable Securities Laws; or

(f) the exercise by any purchaser of Offered Securities of any contractual or statutory right of rescission in connection with the purchase thereof,

provided that in the event and to the extent that a court of competent jurisdiction in a final judgment from which no appeal can be made or a regulatory authority in a final ruling from which no appeal can be made shall determine that such Proceedings or Liabilities resulted solely from the negligence, fraud or wilful misconduct of any Indemnified Party claiming indemnity, this indemnity shall not apply to such Proceeding or Liability.

The Corporation hereby waives its right to recover contribution from the Agents with respect to any liability of the Corporation by reason of or arising out of any misrepresentation in the Documents or any part of the Public Record provided, however, that such waiver shall not apply in respect of liability caused or incurred by reason of or arising out of: (i) any misrepresentation which is based upon information relating solely to the Agents contained in such document and furnished in writing to the Corporation by the Agents expressly for inclusion in such document; or (ii) any failure by the Agents to provide to prospective purchasers of Offered Securities any document which the Corporation is required to provide to such prospective purchasers and which the Corporation has provided to the Agents to forward to such prospective purchasers.

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17. Notice of Indemnity Claim

If any Proceeding is brought, instituted or threatened in respect of any Indemnified Party which may result in a claim for indemnification under this Agreement, such Indemnified Party shall promptly after receiving notice thereof notify the Corporation of the nature of such claim  and the Corporation shall be entitled (but not required) to assume conduct of the defence thereof and retain counsel on behalf of the Indemnified Party who is satisfactory to the Indemnified Party, acting reasonably, to represent the Indemnified Party in such Proceeding and the Corporation shall pay the fees and disbursements of such counsel and all other expenses of the Indemnified Party relating to such Proceeding as incurred.  Failure to so notify the Corporation shall not relieve the Corporation from liability except and only to the extent that the failure materially prejudices the Corporation.  If the Corporation assumes conduct of the defence for an Indemnified Party, the Indemnified Party shall fully cooperate in the defence including without limitation the provision of documents, appropriate officers and employees to give witness statements, attend examinations for discovery, make affidavits, meet with counsel, testify and divulge all information reasonably required to defend or prosecute the Proceedings.

In any such Proceeding the Indemnified Party shall have the right to employ separate counsel and to participate in the defence thereof if:

(a) the Indemnified Party has been advised in writing by counsel that there may be a reasonable legal defense available to the Indemnified Party that is different from or in addition to those available to the Corporation or that a conflict of interest exists or reasonably may exist which makes representation by counsel chosen by the Corporation not advisable (in which case the Corporation shall not have the right to assume the defense of such proceedings on behalf of the Indemnified Person);

(b) the Indemnitor shall not have undertaken the defense of such proceedings, or indicated its intent to do so, and employed counsel within ten days after notice of commencement of such proceedings; or

(c) the employment of such counsel has been authorized by the Corporation in connection with the defense of such proceeding;

in which event the fees and disbursements of such counsel (on a solicitor and his client basis) shall be paid by the Corporation.  It being understood, however, that the Corporation shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate law firm (in addition to any local counsel) in each jurisdiction for all such Indemnified Parties.

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18. Admission of Liability

No admission of liability and no settlement of any Proceeding shall be made by the Corporation without the prior written consent of the Indemnified Parties affected, such consent not to be unreasonably withheld.  No admission of liability and no settlement of any Proceeding shall be made by an Indemnified Party without the prior written consent of the Corporation and the other Indemnified Parties affected, such consent not to be unreasonably withheld.

19. Right of Contribution

In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in this Agreement is due in accordance with its terms but is (in whole or in part), for any reason, held by a court to be unavailable from the Corporation on grounds of policy or otherwise, each of the Corporation and the party or parties seeking indemnification shall contribute to the aggregate Liabilities (or Proceedings in respect thereof) to which they may be subject or which they may suffer or incur:

(a) in such proportion as is appropriate to reflect the relative benefit received by the Corporation on the one hand and by the Agent on the other hand from the offering of the Offered Securities; or

(b) if the allocation provided by Subsection19(a) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in Subsection19(a)but also to reflect the relative fault of the party or parties seeking indemnity, on the one hand, and the parties from whom indemnity is sought, on the other hand, in connection with the statement, omission, misrepresentation or alleged misrepresentation, order, inquiry, investigation or other matter or thing which resulted in such Liabilities, as well as any other relevant equitable considerations.

The relative benefits received by the Corporation, on the one hand, and the Agent, on the other hand, shall be deemed to be in the same proportion that the total proceeds of the Offering received by the Corporation (net of fees but before deducting expenses) bear to the fees received by the Agent.

The amount paid or payable by the Indemnitor as a result of any Proceedings or Liabilities shall, without limitation, include any legal or other expenses reasonably incurred by the Indemnified Person in connection with investigating or defending such Liabilities (or Proceedings in respect thereof), whether or not resulting in any action, suit, proceeding or claim.

The Corporation agrees that it would not be just and equitable if contributions pursuant to this Agreement were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in the immediately preceding sections.

Any liability of an Agent under this Section19shall be limited to the amount paid to such Agent pursuant to Section9(a).

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The rights to indemnity and right of contribution provided in the foregoing sections shall be in addition to, and without prejudice to and not in derogation of, any other right to contribution which the Indemnified Parties may have by statute or otherwise at law or in equity.  Subject to Section 16, the Indemnitor waives all rights of contribution that it may have against any Indemnified Party relating to any Liability in respect of which the Indemnitor has agreed to indemnify the Indemnified Parties hereunder.

It is the intention of the Corporation to constitute the Agents as trustee for the Indemnified Parties for the purposes of Section 15, Section 16, Section 17, Section 18 and Section 19 and the Agents shall be entitled, as trustee, to enforce such covenants on behalf of any other Indemnified Parties and the Agents agree to accept such trust and to hold and enforce such covenants on behalf of such persons.

If any Proceeding is brought in connection with the transactions contemplated by this Agreement and an Indemnified Party or other representative of the Agents is required to testify in connection therewith or is required to respond to procedures designed to discover information relating thereto, the Agents will have the right to employ their own counsel in connection therewith, and the reasonable fees and disbursements of such counsel in connection therewith as well as its reasonable fees at the normal per diem rate for its directors, officers, employees and agents involved in preparation for and attendance at such Proceeding or in so responding and any other reasonable costs and out-of-pocket expenses incurred by them in connection therewith will be paid by the Corporation as they are incurred.

The obligations under the indemnity and right of contribution provided herein shall apply whether or not the transactions contemplated by this Agreement are completed and shall survive the completion of the transactions contemplated under this Agreement and the termination of this Agreement.

20. Entire Agreement

It is understood that the terms and conditions of this Agreement supersede any previous verbal or written agreement between the Agents and the Corporation with respect to the issuance of securities by the Corporation and including, without limitation, the agreement constituted by the acceptance of the letter dated July 8, 2011 from the Agents to the Corporation.

21. Authority to Bind Agents

The Corporation shall be entitled to and shall act on any notice, waiver, extension or communication given by or on behalf of the Agents by the Lead Agent, which shall represent the Agents and which shall have the authority to bind the Agents in respect of all matters hereunder, except in respect of any settlement under Sections 16, 17, 18 or 19 or any matter referred to in Sections 12, 13 or 14.

22. Notices

Any notice or other communication to be given hereunder shall, in the case of notice to be given to the Corporation, be addressed to:

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Gryphon Gold Corporation

711 – 675 West Hastings Street

Vancouver, British Columbia

V6B 1N2

Attention:         John L. Key

Telecopy No.:  (604) 608-3262

with a copy to:

Borden Ladner Gravis LLP

40 King Street West

44th Floor

Toronto, Ontario

M5H 3Y4

Attention:         Philippe Tardif

Telecopy No.:  (416) 367-6749

with a copy to:

Dorsey & Whitney LLP

1400 Wewatta Street, Suite 400

Denver, Colorado

80202

Attention:         Kenneth Sam

Telecopy No.:  (303) 629-3450

and, in the case of notice to be given to the Agents, be addressed to:

Acumen Capital Finance Partners Limited.

Suite 700, 404 – 6th Avenue S.W.

Calgary, Alberta

T2P 0R9

Attention:         Kelly Hughes

Telecopy No.:  (403) 571-0310

and to:

Roth Capital Partners, LLC

24 Corporate Plaza Drive,

Newport Beach, California

92660

Attention:         John Dalphonsi

Telecopy No.: (310) 445-5864

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with a copy to:

Blake, Cassels & Graydon LLP

Suite 3500, Bankers Hall East

855 – 2nd Street S.W.

Calgary, Alberta

T2P 4J8

Attention:         William Van Horne

Telecopy No.:  (403) 260-9700

or to such other address as the party may designate by notice given to the others. Each communication shall be personally delivered to the addressee or sent by facsimile transmission to the addressee, and:

(a) a communication which is personally delivered shall, if delivered before 4:30 p.m. (local time) on a business day, be deemed to be given and received on that day and, in any other case be deemed to be given and received on the first business day following the day on which it is delivered; and

(b) a communication which is sent by facsimile transmission shall, if sent on a business day before 4:30 p.m. (local time), be deemed to be given and received on that day and, in any other case, be deemed to be given and received on the first business day following the day on which it is sent.

23. Trust

The Corporation hereby constitutes the Agents as trustee for the Purchasers in respect of the benefit of the representations, warranties and covenants of the Corporation set forth in this Agreement, and the Agents shall be entitled, as trustee, in addition to any rights of the Purchasers, to enforce such representations, warranties and covenants on behalf of the Purchasers.

24. Acknowledgement and Consent

The Corporation: (i) acknowledges and agrees that the Agents have certain statutory obligations as a registrant under the Applicable Securities Laws and have relationships with their clients; and (ii) consents to the Agents acting hereunder while continuing to act for their clients. To the extent that the Agents' statutory obligations as a registrant under Applicable Securities Laws or relationships with their clients conflict with their obligations hereunder, the Agents shall be entitled to fulfil their statutory obligations as a registrant under Applicable Securities Laws and their duties to their clients.  Nothing in this Agreement shall be interpreted to prevent the Agents from fulfilling their statutory obligations as a registrant under Applicable Securities Laws or to act for their clients.

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25. Severance

If one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be construed as if such invalid, illegal or unenforceable provision or provisions had never been contained herein.

26. Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the Province of British Columbia and the laws of Canada applicable therein.

27. Time of the Essence

Time shall be of the essence of this Agreement.

28. Counterpart Execution

This Agreement may be executed in one or more counterparts each of which so executed shall constitute an original and all of which together shall constitute one and the same agreement.

29. U.S. Securities Law Matters

Each Agent, severally and not jointly, and the Corporation agree as follows:

(a) The Agents acknowledge that none of the Offered Securities, Warrant Shares, Broker Warrants or Broker Warrant Shares have been or will be registered with the SEC under the U.S. Securities Act or the securities laws of any state of the United States. Each Agent represents and warrants that the Offered Securities are being offered and sold pursuant to the exemption from the registration requirements of the U.S. Securities Act provided by Section 4(2) and Rule 506 of Regulation D thereunder and in accordance with any applicable state securities laws of the United States.  Each Agent represents and warrants that it has not offered and will not offer any of the Offered Securities except in compliance with this Section 29.

(b) Each Agent shall require each Selling Dealer Group member to agree, for the benefit of the Corporation, to comply with, and shall use its best efforts to ensure that each Selling Dealer Group member complies with, the applicable provisions of this Section 29 as if such provisions applied to the Selling Dealer Group member.

(c) Each Agent represents and agrees that neither the Agent, nor its affiliates nor any person acting on its or their behalf has taken or will take any action that would constitute a violation of Regulation M under the U.S. Exchange Act in connection with the offer and sale of the Offered Securities.

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(d) Each Agent agrees that all offers and solicitations of offers in the United States shall be made by the U.S. Agent in compliance with all applicable federal and state laws and regulations governing the registration and conduct of broker-dealers and that the U.S. Agent was, is and will be, at the time of any such offer and subsequent sale by the Corporation, duly registered as a broker-dealer pursuant to Section 15(b) of the U.S. Exchange Act and under the laws of each applicable state of the United States (unless exempted from the respective state's broker-dealer registration requirements), and in good standing with the Financial Industry Regulatory Authority, Inc.

(e) The Corporation and the Agents agree that the Offered Securities may be offered by the Agents and sold directly by the Corporation pursuant to Section 4(2) and Rule 506 of Regulation D thereunder (and similar exemptions under applicable state securities laws), and only to persons whom the Agents had a reasonable basis to believe and do believe to be Accredited Investors and, in each case, on the Closing Date, continue to believe are Accredited Investors.

(f) The Agents agree not to offer or sell, or to solicit any offer to buy, Offered Securities by any form of General Solicitation or General Advertising or in any manner involving a public offering within the meaning of Section 4(2) of the U.S. Securities Act.

(g) The Agents agree that offers to sell, solicitations of offers to buy and sales of the Offered Securities in the United States shall be made only by the U.S. Agent in accordance with the registration or qualification requirements of applicable U.S. state securities ("Blue Sky") laws, in accordance with the applicable U.S. federal and state requirements relating to the registration of brokers and dealers.

(h) The Agents agree that offers to sell, solicitations of offers to buy and sales of the Offered Securities shall be made only to persons reasonably believed to be Accredited Investors who, prior to the sale and delivery of the Offered Securities to them, execute and deliver a Purchase Agreement in the form agreed upon by the Corporation and the Agents.

(i) The Agents agree to inform each Purchaser that the Offered Securities and Warrant Shares have not been and will not be registered under the U.S. Securities Act or the securities laws of any state in the United States and that the Offered Securities are being offered and sold in reliance upon exemptions from the registration requirement of Section 5 of the U.S. Securities Act provided by Section 4(2) of the U.S. Securities Act and Rule 506 of Regulation D thereunder and in accordance with applicable state securities laws.

(j) The Corporation represents and agrees that none of it, its affiliates, or any person acting on behalf of it or its affiliates (other than the Agents and any person acting on any of their behalf as to which the Corporation makes no representation or agreement):

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(i) has taken or will take any action that would (A) cause the exemptions from registration afforded by Section 4(2) and Rule 506 of Regulation D thereunder to be unavailable for offers and sales of the Offered Securities pursuant to this Agreement; or (B) constitute a violation of Regulation M under the U.S. Exchange Act in connection with the offer and sale of the Offered Securities; and

(ii) has engaged or will engage in any General Solicitation or General Advertising or has acted or will act in any manner involving a public offering under the meaning of Section 4(2) of the U.S. Securities Act.

(k) Within the six-month period prior to the commencement of the Offering through the six-month period following the Closing Date, the Corporation has not, and will not, as applicable, offered or sold or offer or sell any Offered Securities or other securities of the Corporation in a manner that would be integrated with the offer and sale of Offered Securities and would cause the exemption from registration set forth in Section 4(2) and Rule 506 of Regulation D thereunder to become unavailable with respect to any offers and sales of Offered Securities pursuant to this Agreement.

(l) None of the Corporation or any of its predecessors or affiliates has had the registration of a class of securities under the U.S. Exchange Act revoked by the SEC pursuant to Section 12(j) of the U.S. Exchange Act and any rules or regulations promulgated thereunder.

(m) None of the Corporation or any of its predecessors or affiliates has been subject to any order, judgment or decree of any court of competent jurisdiction temporarily, preliminarily or permanently enjoining such person for failure to comply with Rule 503 of Regulation D.

(n) The Corporation shall duly prepare and file with the SEC a Form D within 15 days after the first sale of Offered Securities, and will also file, within the prescribed time periods, such notices and any other documents as are required to be filed under the state securities or "blue sky" laws of the states in which the Offered Securities are sold to satisfy the requirements of applicable exemptions from registration or qualification of the Offered Securities under such laws.

(o) The Lead Agent has not entered, and will not enter, into any contractual arrangements with respect to the distribution of the Offered Securities in the United States other than with the U.S. Agent, or with the prior consent of the Corporation.

(p) The Agents will deliver to all offerees and Purchasers of the Offered Securities the same information relating to the Corporation (which information may include the Transaction Documents and the Documents) and the Agents agree that they have not and will not use any written material other than such documents in connection therewith.

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(q) At least one business day prior to the Closing Date, the Agents shall provide the Corporation with a list of all purchasers of Offered Securities in the United States and all purchasers who were offered Offered Securities in the United States.

(r) Each Agent acknowledges that until 40 days after the commencement of the Offering, an offer or sale of the Offered Securities within the United States by any dealer (whether or not participating in the Offering) may violate the registration requirements of the U.S. Securities Act if such offer or sale is made otherwise than in accordance with an exemption from the registration requirements of the U.S. Securities Act.

(s) Notwithstanding the foregoing provisions of this section, an Agent will not be liable to the Corporation under this section with respect to a violation by another Agent of the provisions of this section if the former Agent is not itself also in violation.

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If the foregoing is in accordance with your understanding and is agreed to by you, please confirm your acceptance by signing the enclosed copies of this letter at the place indicated and by returning the same to Kelly Hughes at Acumen Capital Partners Limited Finance.

ACUMEN CAPITAL FINANCE PARTNERS LIMITED
Per:
Name:	Kelly Hughes
Title:	Vice-President, Investment Banking
ROTH CAPITAL PARNTERS, LLC
Per:
Name:	John Dalfonsi
Title:	Managing Director, Investment Banking

ACCEPTED AND AGREED to effective as of the 8th day of July, 2011.

GRYPHON GOLD CORPORATION
Per:
Name:	John L. Key
Title:	Chief Executive Officer

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SCHEDULE A

FORM OF BROKER WARRANT

THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AND, IF REQUESTED BY THE COMPANY, THE SELLER FURNISHES TO THE COMPANY AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY TO SUCH EFFECT.

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE NOVEMBER 27, 2011.

THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.  THIS WARRANT MAY NOT BE EXERCISED UNLESS THE WARRANT AND THE UNDERLYING SHARES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE, AND THE HOLDER HAS DELIVERED AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE CORPORATION TO SUCH EFFECT.

THESE WARRANTS WILL EXPIRE AND BECOME NULL AND VOID

AT 5:00 P.M. (VANCOUVER TIME) ON JANUARY 26, 2013.

[•] BROKER WARRANTS

TO PURCHASE SHARES OF COMMON STOCK

GRYPHON GOLD CORPORATION

incorporated in the State of Nevada

THIS IS TO CERTIFY THAT [•] (the “Holder”), has the right to purchase, upon and subject to the terms and conditions hereinafter referred to, up to [•] fully paid and non-assessable shares of common stock (the “Shares”) in the capital of Gryphon Gold Corporation (hereinafter called the “Company”) on or before 5:00 p.m. (Vancouver time) on January 26, 2013 (the “Expiry Date”) at a price per Share (the “Exercise Price”) of US$0.20, on the terms and conditions attached hereto as Appendix “A” (the “Terms and Conditions”).

1. ONE (1) WHOLE BROKER WARRANT AND THE EXERCISE PRICE ARE REQUIRED TO PURCHASE ONE SHARE.  THIS CERTIFICATE REPRESENTS [•] BROKER WARRANTS.

2. These Warrants are issued subject to the Terms and Conditions, and the Warrant Holder may exercise the right to purchase Shares only in accordance with those Terms and Conditions.

3. Nothing contained herein or in the Terms and Conditions will confer any right upon the Holder hereof or any other person to subscribe for or purchase any Shares at any time subsequent to the Expiry Date, and from and after such time, these Warrants and all rights hereunder will be void and of no value.

IN WITNESS WHEREOF the Company has executed this Warrant Certificate this 26th day of July, 2011.

GRYPHON GOLD CORPORATION

Per:

John L. Key, Chief Executive Officer

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PLEASE NOTE THAT ALL SHARE CERTIFICATES MUST BE LEGENDED AS FOLLOWS DURING THE CURRENCY OF APPLICABLE HOLD PERIODS:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AND, IF REQUESTED BY THE COMPANY, THE SELLER FURNISHES TO THE COMPANY AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY TO SUCH EFFECT.

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE NOVEMBER 27, 2011.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO STOCK EXCHANGE (“TSX”); HOWEVER, THE SAID SECURITIES CANNOT BE TRADED THROUGH THE FACILITIES OF TSX SINCE THEY ARE NOT FREELY TRANSFERABLE, AND, CONSEQUENTLY, ANY CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON TSX.

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APPENDIX “A”

TERMS AND CONDITIONS dated July 26, 2011, attached to the Broker Warrants issued by Gryphon Gold Corporation

1. INTERPRETATION

1.1  Definitions

In these Terms and Conditions, unless there is something in the subject matter or context inconsistent therewith:

(a) “Business Day” means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York, New York are generally authorized or obligated by law or executive order to close;

(b) “Company” means Gryphon Gold Corporation until a successor corporation will have become such as a result of consolidation, amalgamation or merger with or into any other corporation or corporations, or as a result of the conveyance or transfer of all or substantially all of the properties and estates of the Company as an entirety to any other corporation and thereafter “Company” will mean such successor corporation;

(c) “Company’s Auditors” means an independent firm of accountants duly appointed as auditors of the Company;

(d) “Director” means a director of the Company for the time being, and reference, without more, to action by the directors means action by the directors of the Company as a Board, or whenever duly empowered, action by an executive committee of the Board;

(e) “Eligible Market” means any of NYSE, the NYSE Amex, The NASDAQ Global Market, The NASDAQ Global Select Market, The NASDAQ Capital Market or the Toronto Stock Exchange;

(f) “herein”, “hereby” and similar expressions refer to these Terms and Conditions as the same may be amended or modified from time to time; and the expression “Article” and “Section,” followed by a number refer to the specified Article or Section of these Terms and Conditions;

(g) “person” means an individual, corporation, partnership, trustee or any unincorporated organization and words importing persons have a similar meaning;

(h) “shares” means the common shares in the capital of the Company as constituted at the date hereof and any shares resulting from any subdivision or consolidation of the shares;

(i) “Trading Day” shall mean (a) any day on which the Common Stock is listed or quoted and traded on its primary Trading Market, (b) if the Common Stock is not then listed or quoted and traded on any Eligible Market, then a day on which trading occurs on the OTC Bulletin Board (or any successor thereto), or (c) if trading does not occur on the OTC Bulletin Board (or any successor thereto), any Business Day;

(j) “Trading Market” shall mean the OTC Bulletin Board or any Eligible Market or any other national securities exchange, market or trading or quotation facility on which the shares are then listed or quoted; and

(k) “Warrants” means the broker warrants of the Company issued and presently authorized and for the time being outstanding.

1.2  Gender

Words importing the singular number include the plural and vice versa and words importing the masculine gender include the feminine and neuter genders.

1.3  Interpretation not affected by Headings

The division of these Terms and Conditions into Articles and Sections, and the insertion of headings are for convenience of reference only and will not affect the construction or interpretation thereof.

1.4  Applicable Law

The Warrants will be construed in accordance with the laws of the State of New York without regard to its conflicts of law principles, and the federal law of the United States of America. The Company and Holder each irrevocably consents to the jurisdiction of the courts of the State of New York in connection with any action or proceeding arising out of, or relating to, these Warrants, any document or instrument delivered pursuant to, in connection with, or simultaneously with these Warrants, or a breach of the Terms and Conditions of these Warrants or any such document or instrument.

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1.5  Severability

In the event that any one or more of the provisions contained in this Warrant Certificate or in any other document referenced in this Warrant Certificate shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Warrant Certificate or any other such document.

1.6  Time is of the Essence

Time is absolutely of the essence in construing each provision of this Warrant Certificate.

2. ISSUE OF WARRANTS

2.1  Additional Warrants

The Company may at any time and from time to time issue additional warrants or grant options or similar rights to purchase shares of its capital stock.

2.2  Warrants to Rank Pari Passu

All Warrants and additional warrants, options or similar rights to purchase shares from time to time issued or granted by the Company, will rank pari passu whatever may be the actual dates of issue or grant thereof, or of the dates of the certificates by which they are evidenced.

2.3  Issue in substitution for Lost Warrants

(a) In case a Warrant Certificate becomes mutilated, lost, destroyed or stolen, the Company, at its discretion, may issue and deliver a new Warrant Certificate of like date and tenor as the one mutilated, lost, destroyed or stolen, in exchange for and in place of and upon cancellation of such mutilated Warrant Certificate, or in lieu of, and in substitution for such lost, destroyed or stolen Warrant Certificate and the substituted Warrant Certificate will be entitled to the benefit hereof and rank equally in accordance with its terms with all other Warrants issued or to be issued by the Company.

(b) The applicant for the issue of a new Warrant Certificate pursuant hereto will bear the cost of the issue thereof and in case of loss, destruction or theft furnish to the Company such evidence of ownership and of loss, destruction, or theft of the Warrant Certificate so lost, destroyed or stolen as will be satisfactory to the Company in its discretion and such applicant may also be required to furnish indemnity in amount and form satisfactory to the Company in its discretion, and will pay the reasonable charges of the Company in connection therewith.

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2.4  Warrant Holder Not a Shareholder

The holding of a Warrant will not constitute the Holder thereof a shareholder of the Company, nor entitle him to any right or interest in respect thereof except as in the Warrant Certificate expressly provided.

3. NOTICE

3.1  Notice to Holders

Any notice required or permitted to be given to the Holders will be in writing and may be given by prepaid registered post, electronic facsimile transmission, portable document format (pdf) transmission or other means of electronic communication capable of producing a printed copy to the address of the Holder appearing on the Holder’s Warrant Certificate or to such other address as any Holder may specify by notice in writing to the Company, and any such notice will be deemed to have been given and received by the Holder to whom it was addressed if mailed, on the third day following the mailing thereof, if by facsimile, pdf or other electronic communication, on successful transmission, or, if delivered, on delivery; but if at the time of mailing or between the time of mailing and the third business day thereafter there is a strike, lockout, or other labour disturbance affecting postal service, then the notice will not be effectively given until actually delivered.

3.2  Notice to the Company

Any notice required or permitted to be given to the Company will be in writing and may be given by prepaid registered post, electronic facsimile transmission, portable document format (pdf) transmission or other means of electronic communication capable of producing a printed copy to the address of the Company set forth below or such other address as the Company may specify by notice in writing to the Holder, and any such notice will be deemed to have been given and received by the Company to whom it was addressed if mailed, on the third day following the mailing thereof, if by facsimile, pdf or other electronic communication, on successful transmission, or, if delivered, on delivery; but if at the time or mailing or between the time of mailing and the third business day thereafter there is a strike, lockout, or other labour disturbance affecting postal service, then the notice will not be effectively given until actually delivered:

Gryphon Gold Corporation

Suite 711, 675 West Hastings Street

Vancouver, B.C.

Canada  V6B 1N2

Attention:  Lisanna Lewis

Fax No. (604) 608-3262

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4. EXERCISE OF WARRANTS

4.1  Method of Exercise of Warrants

(a) The right to purchase shares conferred by the Warrants may be exercised by the Holder surrendering the Warrant Certificate representing same, with a duly completed and executed Form of Subscription in the form attached hereto and a bank draft or certified cheque payable to or to the order of the Company, at par, in Vancouver, BC, Canada, for the purchase price applicable at the time of surrender in respect of the shares subscribed for in lawful money of the United States of America, to the Company at the address set forth in, or from time to time specified by the Company pursuant to, Section 3.2.

(b)  Net Issue Exercise.

(i) Section 4.1(b)(ii) shall not apply and shall have no force or effect if the shares issuable upon exercise of these Warrants have been registered for resale under the Securities Act of 1933, as amended (the “1933 Act”), on a Registration Statement on Form S-1, S-3, or another appropriate form and such Registration Statement remains effective under the 1933 Act and available for use by Holder at the time of exercise or the shares issuable upon exercise of these Warrants may otherwise be immediately resold upon exercise pursuant to available exemptions from the 1933 Act and any applicable securities laws of any state of the United States.

(ii) Subject to Section 4.1(b)(i), if, at any time after the issuance of these Warrants but prior to the Expiry Date, the Fair Market Value of one share is greater than the Exercise Price, in lieu of exercising these Warrants for cash, the Holder may elect to receive shares equal to the value (as determined below) of these Warrants (or the portion thereof being exercised) by surrender of this Warrant Certificate at the principal office of the Company with a duly completed and executed Form of Subscription in the form attached hereto in which event the Company shall issue to the Holder a number of shares computed using the following formula:

X = (Y (A - B)) / A

Where X = the number of shares to be issued to Holder

Y = the number of shares purchasable under the Warrants or, if only a portion of the Warrants are being exercised, the portion of the Warrants being exercised (at the date of such calculation)

A = the Fair Market Value of one share (at the date of such calculation)

B = Exercise Price (at the date of such calculation)

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For purposes of the above calculation, the “Fair Market Value” of one share shall mean (i) the average of the closing sales prices for the shares on the Eligible Market on which the shares are listed or traded as reported by Bloomberg Financial Markets (or a comparable reporting service of national reputation selected by the Company and reasonably acceptable to the Holder if Bloomberg Financial Markets is not then reporting sales prices of such security) (collectively, “Bloomberg”) for the ten (10) consecutive Trading Days immediately prior to the Exercise Date, or (ii) if an Eligible Market is not the principal Trading Market for the shares, the average of the reported sales prices reported by Bloomberg on the principal Trading Market for the shares during the same period, or, if there is no sales price for such period, the last sales price reported by Bloomberg for such period, or (iii) if neither of the foregoing applies, the last sales price of such security in the over-the-counter market on the pink sheets or bulletin board for such security as reported by Bloomberg, or if no sales price is so reported for such security, the last bid price of such security as reported by Bloomberg, or (iv) if fair market value cannot be calculated as of such date on any of the foregoing bases, the fair market value shall be as determined by the Board of Directors of the Company in the exercise of its good faith judgment.

4.2  Effect of Exercise of Warrants

(a) Upon surrender and payment (unless exercise is pursuant to Section 4.1(b)(ii)) as aforesaid the shares so subscribed for will be deemed to have been issued and such person or persons will be deemed to have become the Holder or Holders of record of such shares on the date of such surrender and payment, and such shares will be issued based on the Exercise Price in effect on the date of such surrender and payment.

(b) Within ten (10) business days after surrender and payment (unless exercise is pursuant to Section 4.1(b)(ii)) as aforesaid, the Company will forthwith cause to be delivered to the person or persons in whose name or names the Shares so subscribed for are to be issued as specified in such Form of Subscription or mailed to him or them at his or their respective addresses specified in such Form of Subscription, a certificate or certificates for the appropriate number of Shares not exceeding those which the Holder is entitled to purchase pursuant to the Warrant Certificate surrendered.

4.3  Restrictions on Exercise of Warrants

The Warrants represented by this Warrant Certificate may only be exercised by or for the account or benefit of a holder who, at the time of exercise, either:

(a) represents to the Company, pursuant to subparagraph 1 of the attached Form of Subscription, that (i) the holder was the original subscriber for the Warrants from the Company, and (ii) the representations, warranties and covenants set forth in the debenture and warrant purchase agreement pursuant to which the holder purchased the Warrants from the Company (the “Purchase Agreement”) are true and correct on the date of exercise in relation to the exercise of the Warrants, including, without limitation, the representations and warranties in the U.S. Accredited Investor Questionnaire attached to the Purchase Agreement as Exhibit H; or

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(b) provides, pursuant to subparagraph 2 of the attached Form of Subscription, a written opinion of counsel or other evidence of exemption in form and substance reasonably satisfactory to the Company that the Shares to be delivered upon exercise of the Warrants have been registered under the 1933 Act and the securities laws of all applicable states of the United States or are exempt from such registration requirements.

4.4  Subscription for Less Than Entitlement

The Holder of any Warrant may subscribe for and purchase a number of shares less than the number which he is entitled to purchase pursuant to the surrendered Warrant Certificate. In the event of any purchase of a number of shares less than the number which can be purchased pursuant to a Warrant Certificate, the Holder thereof upon exercise thereof will in addition be entitled to receive a new Warrant Certificate in respect of the balance of the shares which he was entitled to purchase pursuant to the surrendered Warrant Certificate and which were not then purchased.

4.5  Warrants for Fractions of Shares

To the extent that the Holder of any Warrant is entitled to receive on the exercise or partial exercise thereof a fraction of a share, such right may be exercised in respect of such fraction only in combination with another Warrant or other Warrants which in the aggregate entitle the Holder to receive a whole number of such shares.

4.6  Expiration of Warrants

After the expiration of the period within which a Warrant is exercisable, all rights thereunder will wholly cease and terminate and such Warrant will be void and of no effect.

4.7  Exercise Price; Beneficial Ownership Limitation

Each whole Warrant is exercisable at a price per share (the “Exercise Price”) of US$0.20if exercised on or before 5:00 p.m. (Vancouver time) on January 26, 2013.  One (1) Warrant and the Exercise Price are required to subscribe for each Share during the term of the Warrants.

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Notwithstanding any other provision hereof, no Holder shall exercise Warrants if as a result of such exercise the Holder would then become a “ten percent beneficial owner” (as defined in Rule 16a-2 under the Securities Exchange Act of 1934, as amended) of Shares.  For greater certainty, the Warrants shall not be exercised by the Holder, and the Company shall not give effect to any exercise of Warrants, if, after giving effect to such exercise, the Holder of such securities, together with its affiliates, would in aggregate beneficially own, or exercise control or direction over that number of voting securities of the Company which is 10% or greater of the total issued and outstanding voting securities of the Company, immediately after giving effect to such exercise.

For purposes of the foregoing paragraph, the number of Shares beneficially owned by the Holder and its affiliates shall include the number of Shares issuable upon exercise of these Warrants with respect to which such determination is being made, but shall exclude the number of Shares which would be issuable upon (i) exercise of the remaining, nonexercised portion of these Warrants beneficially owned by the Holder or any of its affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 4.7, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 4.7 applies, the determination of whether these Warrants are exercisable (in relation to other securities owned by the Holder together with any affiliates) and of which portion of these Warrants is exercisable shall be in the sole discretion of the Holder, and the submission of a Form of Subscription shall be deemed to be the Holder’s determination of whether these Warrants are exercisable (in relation to other securities owned by the Holder together with any affiliates) and of which portion of these Warrants is exercisable, in each case subject to the “ten percent beneficial owner” limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. For purposes of this Section 4.7, in determining the number of outstanding Shares, a Holder may rely on the number of outstanding Shares as reflected in (A) the Company’s most recent periodic or annual report filed with the Securities and Exchange Commission, as the case may be, (B) a more recent public announcement by the Company, or (C) a more recent written notice by the Company or its transfer agent setting forth the number of Shares outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of Shares then outstanding. In any case, the number of outstanding Shares shall be determined after giving effect to the conversion or exercise of securities of the Company, including these Warrants, by the Holder or its affiliates since the date as of which such number of outstanding Shares was reported.

4.8  Adjustment of Exercise Price

The Exercise Price and the number of Shares purchasable hereunder (or any shares of stock or other securities or property receivable or issuable upon exercise of this Warrant) are subject to adjustment from time to time as follows:

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(a) Reclassification of Shares. If the Company at any time shall, by reclassification or exchange of securities or otherwise, change all of the outstanding Shares into the same or a different number of securities of any other class or classes, this Warrant Certificate shall thereafter represent the right to acquire such number and kind of securities as would have been issuable hereunder had the Holder exercised its rights with respect to all of the Shares then represented by this Warrant Certificate immediately prior to such combination, reclassification, exchange, subdivision or other change.

(b) Subdivision, Split, Reverse Split or Combination of Shares. If the Company at any time shall subdivide or split its Shares into a larger number of outstanding Shares, the Exercise Price shall be proportionately decreased and the number of Shares issuable upon exercise of these Warrants (or any shares of stock or other securities at the time issuable upon exercise of these Warrants) shall be proportionally increased to reflect any such subdivision or stock split. If the Company at any time shall reverse split or combine its Shares into a smaller number of outstanding Shares, the Exercise Price of these Warrants shall be proportionally increased and the number of Shares issuable upon exercise of these Warrants (or any shares of stock or other securities at the time issuable upon exercise of these Warrants) shall be proportionally decreased to reflect any such reverse stock split or combination.

(c) Stock Dividends or Other Non-Cash Distributions. If the Company at any time shall make, issue, fix a record date for or pay a dividend or other distribution with respect to the Shares (or any shares of stock or other securities at the time issuable upon exercise of the Warrants) payable in (i) securities of the Company or (ii) assets (excluding cash dividends), then, in each such case, the Holder on exercise of these Warrants at any time after the consummation, effective date or record date of such dividend or other distribution, shall receive, in addition to the Shares (or such other stock or securities) issuable on such exercise prior to such date, and without the payment of additional consideration therefor, the securities or such other assets of the Company to which such Holder would have been entitled upon such date if such Holder had exercised these Warrants on the date hereof and had thereafter, during the period from the date hereof to and including the date of such exercise, retained such shares and all such additional securities or other assets distributed with respect to such shares as aforesaid during such period giving effect to all adjustments called for by this Section 4.8.

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(d) Capital Reorganization, Merger or Consolidation. In case of any capital reorganization of the capital stock of the Company (other than a combination, stock split, reverse stock split, reclassification or subdivision of shares otherwise provided for herein), or any merger or consolidation of the Company with or into another corporation, or the sale of all or substantially all the assets of the Company then, and in each such case, as a part of such reorganization, merger, consolidation, sale or transfer, lawful provision shall be made so that the Holder shall thereafter be entitled to receive upon exercise of these Warrants until the Expiry Date and upon payment of the Exercise Price (or use of net exercise if then permitted hereunder), the number of shares or other securities or property of the successor corporation resulting from such reorganization, merger, consolidation, sale or transfer that a holder of the Shares deliverable upon exercise of these Warrants would have been entitled to receive in such reorganization, consolidation, merger, sale or transfer if these Warrants had been exercised immediately before such reorganization, merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 4.8. The foregoing provisions of this Section 4.8(d) shall similarly apply to successive reorganizations, consolidations, mergers, sales and transfers and to the stock or securities of any other corporation that are at the time receivable upon the exercise of these Warrants. If the per-Share consideration payable to the Holder hereof for Shares in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by the Company’s Board of Directors. In addition to the adjustments set forth above, appropriate adjustments (as determined in good faith by the Company’s Board of Directors) shall be made in the application of the provisions of this Warrant Certificate with respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Warrant Certificate shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of these Warrants.

(e) Certificate as to Adjustments. In each case of any adjustment in the Exercise Price, or number or type of Shares or other securities or property issuable upon exercise of these Warrants, the Chief Financial Officer or Controller of the Company shall compute such adjustment in accordance with the terms of this Warrant Certificate and prepare a certificate setting forth such adjustment and showing in detail the facts upon which such adjustment is based, including a statement of the adjusted Exercise Price and/or Shares, other securities or property issuable upon exercise, as applicable. The Company shall promptly send a copy of each such certificate to the Holder.

4.9  Determination of Adjustments

If any questions will at any time arise with respect to the Exercise Price or any adjustment provided for in Section 4.8, such questions will be conclusively determined by the Company’s Auditors, or, if they decline to so act any other firm of certified public accountants in the United States of America that the Company may designate and who will have access to all appropriate records and such determination will be binding upon the Company and the Holders of the Warrants.

4.10  Charges, Taxes and Expenses

Issuance of certificates for Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder (or in such name or names as may be directed by the Holder).

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5. REPRESENTATIONS AND WARRANTIES, OTHER AGREEMENTS OF THE COMPANY

5.1  Due Authorization; Consents

The Company hereby represents and warrants to the Holder that all corporate authorizations necessary for the execution and delivery of, and the performance of all obligations of the Company under, this Warrant have been obtained. This Warrant constitutes a valid and binding obligation of the Company enforceable in accordance with its terms, subject, as to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and similar laws affecting creditors’ rights generally and to general equitable principles.

5.2  Organization

The Company hereby represents and warrants to Holder that the Company is a corporation duly organized and validly existing under the laws of the State of Nevada and has all requisite corporate power to own, lease and operate its property and to carry on its business as now being conducted and as currently proposed to be conducted.

5.3  Reservation of Shares

The Company has duly authorized and reserved, and shall at all times have authorized and reserved, a sufficient number of shares of its Common Stock to provide for the exercise of the rights to purchase the Shares as provided in this Warrant Certificate.

5.4  Valid Issuance

All Shares issued upon the exercise of these Warrants shall be validly issued, fully paid and nonassessable when issued consistent with the terms hereof, and free from all taxes, liens and charges created by the Company in respect of the issue thereof. The Company will take all such reasonable action as may be necessary to assure that such Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any Trading Market upon which the Shares may be listed.

Before taking any action which would result in an adjustment in the number of Shares for which these Warrants are exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

6. HOLDER REPRESENTATIONS AND WARRANTIES

Holder hereby represents and warrants as follows:

6.1  Securities Not Registered

The Holder understands that neither the Warrants nor the Shares have been registered under the 1933 Act or the securities laws of any state of the United States and are being issued in reliance on exemptions or exclusions from such registration requirements.

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6.2  Restricted Shares/Legend

The Holder understands that the Company will treat the Shares issuable upon the exercise of the Warrants under this Warrant Certificate as “restricted securities” as that term is defined in Rule 144 promulgated under the 1933 Act, and the Share certificates representing the Shares shall bear a legend in the form substantially set forth on the second page of this Warrant Certificate.

7. WAIVER OF CERTAIN RIGHTS

7.1  Immunity of Shareholders, etc.

The Holder, as part of the consideration for the issue of the Warrants, waives and will not have any right, cause of action or remedy now or hereafter existing in any jurisdiction against any past, present or future incorporator, shareholder, Director or Officer (as such) of the Company for the issue of shares pursuant to any Warrant or on any covenant, agreement, representation or warranty by the Company herein contained or in the Warrant.

8. MODIFICATION OF TERMS, MERGER, SUCCESSORS

8.1  Modification of Terms and Conditions for Certain Purposes

From time to time the Company may, subject to the provisions hereof, modify the Terms and Conditions hereof, for the purpose of correction or rectification of any ambiguities, defective provisions, errors or omissions herein of a non-substantive nature.

8.2  Warrants Transferable

These Warrants are transferable on the books of the Company at its principal office by the Holder upon surrender of this Warrant Certificate properly endorsed, and subject to compliance with this Section 7.2 and applicable federal and state securities laws. The Company shall issue and deliver to the transferee a new Warrant Certificate representing the Warrants so transferred (a “New Warrant Certificate”). Upon any partial transfer, the Company will issue and deliver to the Holder a New Warrant Certificate with respect to the portion of the Warrants not so transferred.

As a condition to any transfer of these Warrants or any or all of the Shares issuable upon exercise of these Warrants, other than a transfer registered under the 1933 Act, the Company may request a legal opinion, in form and substance reasonably satisfactory to the Company and its counsel, stating that such transfer is exempt from the registration requirements of the 1933 Act.  Any purported transfer of all or any portion of these Warrants in violation of the provisions of this Warrant Certificate shall be null and void.

[SIGNATURE PAGE FOLLOWS]

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DATED as of the date first above written in these Terms and Conditions.

GRYPHON GOLD CORPORATION
By:
	John L. Key, Chief Executive Officer

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FORM OF SUBSCRIPTION

TO: Gryphon Gold Corporation

Suite 711, 875 West Hastings Street

Vancouver, B.C., Canada  V6B 1N2

The undersigned Holder of the within Broker Warrants hereby subscribes for _______ shares of common stock (the “Shares”) of Gryphon Gold Corporation (the “Company) pursuant to the within Warrants at the Exercise Price on the terms specified in the said Warrants.  This subscription is (check one):

¨ accompanied by a certified cheque or bank draft payable to or to the order of the Company for the whole amount of the purchase price of the Shares; or

¨ being exercised pursuant to Section 4.1(b)(ii) of the Warrant Certificate.

In connection with this exercise, the undersigned hereby (check one):

_____1. represents to the Company that (i) the holder was the original subscriber for the Warrants from the Company, and (ii) the representations, warranties and covenants set forth in the debenture and warrant purchase agreement pursuant to which the holder purchased the Warrants from the Company (the “Purchase Agreement”) are true and correct on the date of exercise in relation to the exercise of the Warrants, including, without limitation, the representations and warranties in the U.S. Accredited Investor Questionnaire attached to the Purchase Agreement as Exhibit H; or

_____2. confirms that the undersigned is tendering with this form of subscription a written opinion of counsel reasonably satisfactory to the Company to the effect that the Shares to be delivered upon exercise of these Warrants have been registered under the United States Securities Act of 1933, as amended, (the "1933 Act") and the securities laws of all applicable states of the United States or are exempt from such registration requirements.

The undersigned hereby directs that the Shares be registered as follows:

NAME(S) IN FULL	ADDRESS(ES)	NUMBER OF SHARES
	TOTAL:

(Please print full name in which share certificates are to be issued, stating whether Mr., Mrs. or Miss is applicable).

DATED this ________  day of __________________ , 20__.

In the presence of:

Signature of Witness	Signature of Holder
Please print below your name and address in full.

Name (Mr./Mrs./Miss)

Address

INSTRUCTIONS FOR SUBSCRIPTION

The signature to the subscription must correspond in every particular with the name written upon the face of the Warrant Certificate without alteration or enlargement or any change whatever.  If there is more than one subscriber, all must sign.

In the case of persons signing by agent or attorney or by personal representative(s), the authority of such agent, attorney or representative(s) to sign must be proven to the satisfaction of the Company.

If the Warrant Certificate and the form of subscription are being forwarded by mail, registered mail must be employed.

A - 2

TRANSFER FORM

Dated ___________ ___, _____

FOR VALUE RECEIVED, ___________________________________ hereby sells, assigns and transfers unto_____________________________(the “Transferee”),

(please type or print in block letters)

(insert address)

the Warrants represented by these Broker Warrants and does hereby irrevocably constitute and appoint _______________________ Attorney, to transfer the same on the books of the Company, with full power of substitution in the premises.

The undersigned understands that, as a condition to any transfer of these Warrants, the Company may request a legal opinion, in form and substance reasonably satisfactory to the Company and its counsel, stating that such transfer is exempt from the registration requirements of the 1933 Act.

SPACE FOR GUARANTEES OF	)
SIGNATURES (BELOW)	)
	)	Signature of Transferor
	)
	)
Guarantor’s Signature/Stamp	)	Name of Transferor
	)

THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”) OR THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.  THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AND, IF REQUESTED BY THE COMPANY, THE SELLER FURNISHES TO THE COMPANY AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY TO SUCH EFFECT.

A - 3

CERTAIN REQUIREMENTS RELATING TO TRANSFERS – READ CAREFULLY

The signature(s) of the transferor(s) must correspond with the name(s) as written upon the face of this certificate(s), in every particular, without alteration or enlargement, or any change whatsoever.  The signature(s) on this form must be guaranteed in accordance with the transfer agent’s then current guidelines and requirements at the time of transfer.  Notarized or witnessed signatures are not acceptable as guaranteed signatures.  As at the time of closing, you may choose one of the following methods (although subject to change in accordance with industry practice and standards):

· Canada and the USA: A Medallion Signature Guarantee obtained from a member of an acceptable Medallion Signature Guarantee Program (STAMP, SEMP, NYSE MSP).  Many commercial banks, savings banks, credit unions, and all broker dealers participate in a Medallion Signature Guarantee Program.  The Guarantor must affix a stamp bearing the actual words “Medallion Guaranteed”, with the correct prefix covering the face value of the certificate.

· Canada:  A Signature Guarantee obtained from the Guarantor must affix a stamp bearing the actual words “Signature Guaranteed”.  Signature Guarantees are not accepted from Treasury Branches, Credit Unions or Caisse Populaires unless they are members of a Medallion Signature Guarantee Program. For corporate holders, corporate signing resolutions, including certificate of incumbency, are also required to accompany the transfer, unless there is a “Signature & Authority to Sign Guarantee” Stamp affixed to the transfer (as opposed to a “Signature Guarantee” Stamp) obtained from an authorized officer of a major Canadian Schedule 1 chartered bank.

· Outside North America:  For holders located outside North America, present the certificates(s) and/or document(s) that require a guarantee to a local financial institution that has a corresponding Canadian or American affiliate which is a member of an acceptable Medallion Signature Guarantee Program.  The corresponding affiliate will arrange for the signature to be over-guaranteed.

A - 4

SCHEDULE B

1. Based on the provisions of the Tax Act and the Regulations thereunder in force as of the date hereof and the Proposed Amendments, provided the common shares in the capital of the Company are listed on a designated stock exchange (which currently includes the Toronto Stock Exchange), the Debentures, the Warrant Shares and Broker Warrant Shares are qualified investments under the Tax Act and the Regulations thereunder for trusts governed by registered retirement savings plans, registered retirement income funds, deferred profit sharing plans, registered education savings plans, registered disability savings plans and tax free savings accounts, except that in the case of a deferred profit sharing plan: i) the Company deals at arm’s length with each person who is an annuitant, a beneficiary, an employer or a subscriber under such deferred profit sharing plan and ii) the Company or a corporation with which the Company does not deal at arm’s length is not an employer.

2. The offering, sale and issuance of the Securities through the Agents are exempt from the prospectus requirements of the Securities Laws, and the only filing, proceeding, approval, permit, consent or authorization required to be made, taken or obtained under the Securities Laws is the filing with the applicable provincial securities regulatory authority within the prescribed time periods, a report in Form 45-106F1, as prescribed by NI 45-106, prepared and executed in accordance with applicable Securities Laws, together with the requisite filing fees, assuming distribution by registrants who comply with the relevant provisions of such applicable Securities Laws.

3. The issuance and delivery of the:

(a) Warrant Shares upon the exercise of the Warrants in accordance with the terms of the Warrant Certificates; or

(b) Broker Warrant Shares upon the exercise of the Broker Warrants in accordance with the terms of the Broker Warrant Certificates,

are exempt from the prospectus requirements of the Securities Laws and no prospectus is required, nor are any other documents required to be filed, no proceeding is required to be taken and no approval, permit, consent, order or authorization of any regulatory authority is required to be obtained under the Securities Laws to permit such exercises and issuances.

4. The first trade of the Securities, Warrant Shares, Broker Warrants and Broker Warrant Shares will be a distribution subject to the prospectus requirements of the Securities Laws unless:

(a) at the time of the trade, the Company is and has been a “reporting issuer”, as defined in the Securities Laws, in a province or territory of Canada for the four months immediately preceding the trade;

(b) at the time of the trade, at least four months have elapsed from the “distribution date” (as such term is defined in National Instrument 45-102 - Resale of Securities (“NI 45-102”));

(c) the certificates representing the Debentures, Warrants and Broker Warrants (and the Warrant Shares and Broker Warrant Shares, if issued within four months of the Closing Date) that are the subject of the trade carry a legend in the form as set out in Section 2.5(2)3(i) of NI 45-102, or if the certificate(s) representing the Debentures, Warrants and Broker Warrants (and the Warrant Shares and Broker Warrant Shares, if issued within four months of the Closing Date) is entered into a direct registration or other electronic book-entry system or if the Purchaser did not directly receive a certificate representing such securities, the Purchaser received written notice containing the legend restriction notation set out in Section 2.5(2)3(i) of NI 45-102;

(d) the trade is not a “control distribution” as defined in NI 45-102;

(e) no unusual effort is made to prepare the market or create a demand for the Debentures that are the subject of the trade;

(f) no extraordinary commission or consideration is paid to a person or company in respect of the trade; and

(g) if the Purchaser is an insider or officer of the Company at the time of the trade, the Purchaser has no reasonable grounds to believe that the Company is in default of securities legislation (as defined in National Instrument 14-101).

5. The Company is:

(a) a “reporting issuer” under the Securities Act (Alberta) and is not in default of filing requirements concerning continuous disclosure obligations required by that Act or the rules made under that Act;

(b) a “reporting issuer” under The Securities Act, 1988 (Saskatchewan) and is not included on the list of defaulting issuers maintained by the Saskatchewan Financial Services Commission; and

(c) a “reporting issuer” under the Securities Act (Ontario) and is not indicated on the Ontario Reporting Issuer List as having failed to comply with a requirement of Ontario Securities Laws as of the date of the list.

6. The Toronto Stock Exchange has confirmed that it has pre-cleared the form of the Warrant Certificates.

7. The Agency Agreement constitutes a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms.

8. The execution and delivery of the Agency Agreement and the fulfillment of the terms thereof by the Company and the performance of and compliance with the terms of the Agency Agreement by the Company does not and will not result in a breach of, or constitute a default under, and does not and will not create a state of facts which, after notice or lapse of time or both, will result in a breach of or constitute a default under any applicable laws of the Province of British Columbia or the federal laws of Canada applicable therein.

SCHEDULE C

1. The Debentures are in the form of the Debenture Certificate and the Warrants are in the form of the Warrant Certificates and are consistent with the form of Debenture and form of Warrant, respectively, approved in the Board Resolutions and described in the Transaction Documents.

2. The Debentures have been duly executed and issued by the Corporation and, assuming they have been duly certified and authenticated by the Trustee and validly issued, constitute valid and legally binding obligations of the Corporation, enforceable against it in accordance with their terms.  All conditions precedent provided for in the Trust Indenture relating to the authorization, execution, issuance, certification and delivery of the Debentures and all legal requirements in connection with the issuance of the Debentures have been complied with or satisfied by the Corporation.

3. Each of the Transaction Documents has been duly authorized, executed and delivered by the Corporation, and each constitutes a legal, valid and binding obligation of the Corporation, enforceable against the Corporation in accordance with its terms.

4. The execution and delivery of the Transaction Documents and the fulfillment of the terms thereof by the Corporation and the performance of and compliance with the terms of the Transaction Documents by the Corporation do not and will not result in a breach of, or constitute a default under, and do not and will not create a state of facts which, after notice or lapse of time or both, will result in a breach of or constitute a default under, (i) any statute of the United States or the State of New York or any rule or regulation of any governmental authority or regulatory body of the United States or the State of New York, (ii) to our knowledge, any resolutions of the directors (or a committee thereof) or shareholders of the Corporation or its subsidiary, Borealis Mining Company, a Nevada corporation (the "Subsidiary"), (iii) to our knowledge, any mortgage, note, indenture, contract, agreement (written or oral), instrument, lease or other document to which the Corporation or its Subsidiary is a party or by which it is bound, or (iv) to our knowledge, any judgment, decree or order of any court, governmental agency or body or regulatory authority of the State of New York, which breach or default might reasonably be expected to materially adversely affect the business, operations, capital or condition (financial or otherwise) of the Corporation and its Subsidiary (taken as a whole).

5. The rights, privileges, restrictions and conditions attached to the Securities conform in all material respects with the description thereof contained in the Agency Agreement and the Purchase Agreements.

6. The Security and Pledge Agreement creates a valid security interest in the Collateral to the extent of the respective rights of the Corporation in such Collateral.  Under Article 9 of the UCC – New York and Article 9 of the UCC-Nevada, the State of Nevada is the proper jurisdiction in which to file a financing statement to perfect the Trustee's security interest in the Collateral.

7. The Financing Statement is sufficient in form for filing with the Nevada Secretary of State and, upon such filing, will perfect the Trustee's security interest in the Collateral to the extent a security interest in the Collateral may be perfected under the UCC-Nevada by filing financing statements with the Nevada Secretary of State.

8. Pursuant to Sections 9-301(2) and 9-305(a)(1) of the UCC-New York, the local law of the jurisdiction where certificated securities are actually located governs perfection of a possessory security interest in such securities.  Assuming the Trustee takes delivery and retains possession (as those terms are used in Section 8-301 and Section 9-313 of the UCC-New York) of certificates representing the securities pledged to the Trustee pursuant to the Security and Pledge Agreement (the "Pledged Securities") and further assuming the Pledged Securities are each duly indorsed to the Trustee or in blank by an effective endorsement or are accompanied by undated stock powers with respect thereto duly indorsed to the Trustee or in blank by an effective endorsement, the Trustee’s security interest in the Corporation’s rights in the Pledged Securities will be perfected by "control" (within the meaning of the UCC-New York).

9. No consent, approval, authorization of, or registration or filing with, any State of New York or federal governmental authority is required to be obtained or made by the Corporation to make valid and legally binding the execution, delivery and performance by the Corporation of its agreementsunder the Transaction Documents to which the Corporation is a party, except such as have been obtained or made, which includes the filing of the Financing Statements filed in connection with the Security and Pledge Agreement.

10. The issuance and sale of the Offered Securities in the Offering by the Corporation and the offer of such Offered Securities by the Agents in the manner contemplated by the Agency Agreement and the Transaction Documents does not require registration under the U.S. Securities Act.

SCHEDULE D

1. The Corporation has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Nevada.

2. Borealis Mining Company, a Nevada corporation, has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Nevada.

3. The Corporation has all requisite corporate power and capacity to conduct its business as it is now carried on and to enter into and to perform its obligations under the Agency Agreement, the Purchase Agreements and the certificates representing the Warrants and the Broker Warrants, and to create and issue the Offered Securities, the Warrant Shares and the Broker Shares.  No approval by the security holders of the Corporation is required pursuant to the Articles of Incorporation of the Corporation in connection with the issuance and sale of the Offered Securities, the Warrant Shares and the Broker Shares or with the consummation by the Corporation of the transactions contemplated by the Transaction Documents.

4. The Debentures, once duly executed and issued by the Corporation and certified by the Trustee under the Indenture, will be validly issued.

5. Each of the Transaction Documents has been duly authorized by the Corporation.

6. The execution and delivery of the Transaction Documents, the fulfillment of the terms thereof and the performance and compliance with the terms of them by the Corporation, do not and will not result in a breach of, or constitute a default under, and do not and will not create a state of facts which, after notice or lapse of time or both, will result in a breach of or constitute a default under, the Articles of Incorporation of the Corporation.

7. The authorized capital of the Corporation consists of 250,000,000 Common Shares and 15,000,000 of Preferred Stock.  Based solely on the Officer's Certificate attached hereto, _____________ Common Shares and no shares of Preferred Stock are issued and outstanding.

8. The Common Shares to be issued upon exercise of the Warrants and the Broker Warrants are free of preemptive rights, resale rights, rights of first refusal and restrictions upon voting and transfer, in each event created by Nevada corporate statutes.

9. The Warrants and Broker Warrants have been duly created and validly authorized.  The Warrant Shares and Broker Shares have been duly and validly created, reserved, allotted and authorized to be issued as fully paid and nonassessable upon receipt by the Corporation of full payment therefor.

SCHEDULE E

MATERIAL CONTRACTS

1. Assignment of Borealis Mining Lease, dated January 10, 2005, between Golden Phoenix Mineral Company and Borealis Mining Company

2. Agreement and Consent to Assignment of Borealis Mining Lease, entered into as of January 26, 2005, between Richard J. Cavell, Hardrock Mining Company, John W. Whitney, Golden Phoenix Minerals, Inc., Borealis Mining Company and Gryphon Gold Corporation

3. Escrow Agreement, dated January 10, 2005, between Borealis Mining Company, Gryphon Gold Company and Lawyers Title Agency of Arizona

4. Purchase Agreement dated January 10, 2005, as amended, Seller: Golden Phoenix Minerals, Inc., Buyer: Borealis Mining Company and Guarantor: Gryphon Gold Corporation

5. Agreement between Golden Phoenix Minerals, Inc. and Borealis Mining Company (Borealis Property, Mineral County, Nevada), dated July 21, 2003

6. Membership Interest Purchase Agreement for Nevada Eagle Resources LLC Properties

7. Employment Agreement between the Registrant and John L. Key, dated July 21, 2008

8. Financial Services Agreement between the Registrant and Tony Ker, dated September 1, 2008

9. Transition Agreement between the Registrant and Tony Ker, dated July 21, 2008

10. Option to Restructure Debt Agreement between the Registrant and Nevada Eagle Resources, dated August 5, 2008

11. Financial and Advisory Services Agreement between the Registrant and Matter & Associates, dated October 1, 2008

12. Option to Amend the Mining Lease on the Borealis Property, dated effective August 22, 2008

13. Termination of Financial Services Agreement between the Registrant and Tony Ker, dated effective September 28, 2008

14. Consulting Agreement between the Registrant and Steven Craig, dated November 1, 2008

15. Consulting Agreement between the Registrant and Michael Longinotti, dated November 12, 2008

16. Interim Consulting Agreement between the Registrant and Mr. R. William Wilson, dated January 6, 2010

17. Amendment No. 1 to the Option Agreement between the Registrant, Gerald W. and Fabiola Baughman, and Nevada Eagle Resources LLC, dated February 5, 2010

18. Option Consideration Agreement between the Registrant and Gerald W. and Fabiola Baughman, dated February 5, 2010

19. Amendment No. 2 to the Option Agreement between the Registrant, Gerald W. and Fabiola Baughman, and Nevada Eagle Resources LLC, dated February 12, 2010

20. Binding Letter of Intent (between the Registrant and Sage Gold Inc., dated February 23, 2010

21. Option Agreement between the Registrant, Borealis Mining Company, and Sage Gold Inc. dated March 5, 2010

22. Amendment No. 1 to Option Agreement and Amendment No. 1 to Subscription Agreement between the Registrant, Borealis Mining Company, and Sage Gold Inc. dated March 26, 2010

23. Amendment No. 1 to Option to Amend Mining Lease dated August 7, 2009

24. Amendment No. 2 to Option to Amend Mining Lease dated February 12, 2010

25. Amendment No. 3 to Option to Amend Mining Lease dated August 17, 2010

26. Amendment No. 4 to Option to Amend Mining Lease dated February 22, 2010

27. Amendment No. 2 to Option Agreement between the Registrant, Borealis Mining Company and Sage Gold, dated April 19, 2010

28. Membership Interest Purchase Agreement between the Registrant and Fronteer Development (USA) Inc. dated April 23, 2010

29. Amendment No. 3 to Option Agreement and Amendment No. 2 to Subscription Agreement between the Registrant, Borealis Mining Company and Sage Gold, dated April 19, 2010

30. Amendment No. 4 to Option Agreement between the Registrant, Borealis Mining Company and Sage Gold, dated June 15, 2010

31. Amendment to Mining Lease dated effective May 20, 2011

EX-10.2

DEBENTURE AND WARRANT PURCHASE

AGREEMENT

Dated as of July 27, 2011

by and among

GRYPHON GOLD CORPORATION

611 N. Nevada Street, Carson City, NV, 89703

and

THE PURCHASERS LISTED ON EXHIBIT A

THE SECURITIES TO WHICH THIS AGREEMENT RELATES HAVE NOT BEEN APPROVED OR RECOMMENDED BY ANY CANADIAN SECURITIES COMMISSION OR REGULATORY AUTHORITY, THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED ON THE ACCURACY OR ADEQUACY OF THIS AGREEMENT.  ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE SECURITIES TO WHICH THIS AGREEMENT RELATES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), UNDER ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR UNDER ANY APPLICABLE CANADIAN SECURITIES LEGISLATION, AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, EXCEPT PURSUANT TO REGISTRATION UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, SUCH REGISTRATION REQUIREMENTS, OR IN CANADA EXCEPT PURSUANT TO EXEMPTIONS FROM CANADIAN PROSPECTUS DELIVERY REQUIREMENTS AND PROVINCIAL SECURITIES LAWS.

DEBENTURE AND WARRANT PURCHASE AGREEMENT

This DEBENTURE AND WARRANT PURCHASE AGREEMENT dated as of July 27, 2011   this (“Agreement”) by and among Gryphon Gold Corporation, a Nevada corporation (the "Company"), and each of the purchasers, whose names are set forth on Exhibit A attached hereto (each a "Purchaser" and collectively, the "Purchasers"), of Units of the Company (the “Units”), each Unit consisting of 10% Subordinated Secured Debentures in the principal amount of Cdn$1,000 (the “Debentures”), maturing twelve (12) months from the Closing Date (as defined herein), and 1,500 share purchase warrants (the “Warrants”), each Warrant exercisable to acquire one share of common stock the Company, par value $0.001 per share (the “Common Stock”), at the exercise price of US$0.20 (the “Exercise Price”) for a period of eighteen (18) months from the Closing Date.  The Units, Debentures, Warrants and Common Stock acquirable upon exercise of the Warrants are collectively referred to as the “Securities”.

The parties hereto agree as follows:

ARTICLE I

PURCHASE AND SALE OF DEBENTURES AND WARRANTS

Section 1.1            Purchase and Sale of Debentures and Warrants.

(a)           Upon the following terms and conditions, the Company shall issue and sell to each Purchaser, and each Purchaser shall purchase from the Company, that number of Units set forth beside each Purchaser’s name on Exhibit A, for the purchase price of Cdn$1,000 per Unit (the “Unit Price”), for aggregate gross proceeds to the Company of Three Million Dollars (Cdn$3,000,000).  The Company and the Purchasers are executing and delivering this Agreement in accordance with and in reliance upon (i) the exemptions from securities registration requirements of the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "U.S. Securities Act"), including Rule 506 of Regulation D under the U.S. Securities Act ("Regulation D") and/or Section 4(2) of the U.S. Securities Act; and (ii) exemptions from the prospectus filing requirements in Canada and pursuant to exemptions from provincial securities laws.

(b)           The Debentures will be issued pursuant to the Trust Indenture, by and between the Company and Computershare Trust Company of Canada, in substantially the form attached hereto as Exhibit B (the "Trust Indenture").

(c)           Upon the following terms and conditions, the Purchasers shall be issued Series P Warrants, in substantially the form attached hereto as Exhibit C (the “Warrant Certificates”), each Warrant exercisable to acquire one share of Common Stock at the Exercise Price for a period of eighteen (18) months from the Closing Date.

Section 1.2           Purchase Price and Closing.  Subject to the terms and conditions hereof, the Company agrees to issue and sell to the Purchasers and, in consideration of and in express reliance upon the representations, warranties, covenants, terms and conditions of this Agreement, the Purchasers, severally but not jointly, agree to purchase the Debentures and Warrants for an aggregate purchase price of up to Three Million Dollars (Cdn$3,000,000) (the “Purchase Price”).  The closing of the purchase and sale of the Debentures and Warrants to be acquired by the Purchasers from the Company under this Agreement shall take place at the offices of Blake, Cassels & Graydon LLP, 855 – 2nd Street S.W., Suite 3500, Bankers Hall East Tower, Calgary, Alberta, Canada, T2P 4J8 (the “Closing”) at 10:00 a.m., Calgary time (i) on July 27, 2011; provided, that all of the conditions set forth in Article IV hereof and applicable to the Closing shall have been fulfilled or waived in accordance herewith, or (ii) at such other time and place or on such date as the Purchasers and the Company may agree upon in writing (the "Closing Date").  Subject to the terms and conditions of this Agreement, at the Closing, the Company shall deliver or cause to be delivered to each Purchaser (x) its Debenture for the principal amount set forth opposite the name of such Purchaser on Exhibit A hereto, (y) a Warrant to purchase such number of shares of Common Stock as is set forth opposite the name of such Purchaser on Exhibit A attached hereto and (z) any other deliveries as required by Article IV.  At the Closing, each Purchaser shall deliver its respective portion of the Purchase Price as set forth opposite the name of such Purchaser on Exhibit A by wire transfer to an account designated by the Company.

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Section 1.3            Documents Required from Company.  The Company must complete, sign and deliver at Closing executed copies of the following:

(a)           this Agreement;

(b)           the Trust Indenture;

(c)           the Security and Pledge Agreement, in substantially the form attached as Exhibit D (the “Company Security Agreement”);

(d)           the Stock Power of Attorney, in substantially the form attached as Exhibit E (the "Stock POA");

(e)           the certificates representing the issued and outstanding shares of the Subsidiary (as defined herein) (the "Subsidiary Certificates")and

(f)           the Warrant Certificates.

The Agreement, the Trust Indenture, the Company Security Agreement and the Warrant Certificates are collectively referred to as the “Transaction Documents.”

Section 1.4            Documents Required from Purchasers.  The Purchaser must complete, sign and return to the Company:

(a)           an executed copy of this Agreement;

(b)           for all Purchasers, a U.S. Accredited Investor Questionnaire in the form attached as Exhibit F (the “U.S. Accredited Investor Questionnaire”); and

(c)           for all Purchasers, a Canadian Accredited Investor Questionnaire in the form attached as Exhibit G (together with the U.S. Accredited Investor Questionnaire, the “Questionnaires”).

In addition, the Purchaser shall complete, sign and return to the Company as soon as possible, on request by the Company, any documents, questionnaires, notices and undertakings as may be required by regulatory authorities and applicable law.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

Section 2.1            Representations and Warranties of the Company.  The Company hereby represents and warrants to the Purchasers, as of the date hereof and the Closing Date, as follows:

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(a)           The Company is a corporation duly incorporated and in good standing under the laws of the State of Nevada, and has the requisite corporate power and authority to conduct its business as it is currently being conducted. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the ownership or leasing of its properties or the conduct of its business requires such qualification, except where the failure to be so qualified and in good standing would not, individually or in the aggregate, be reasonably expected to result in (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the business, prospects, properties, management, financial condition or results of operations of the Company and the Subsidiary (as defined below) taken as a whole, or (iii)  a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (the occurrence of any such effect described in the foregoing clauses (i), (ii) and (iii) being herein referred to as a “Material Adverse Effect”). No proceeding has been instituted in any jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

(b)           The Company has no subsidiaries (as defined under the U.S. Securities Act) other than Borealis Mining Company, a Nevada corporation (the “Subsidiary”).  The Company owns all of the issued and outstanding capital stock of the Subsidiary and all of the issued and outstanding shares of capital stock of the Subsidiary are validly issued and are fully paid and non-assessable.  There are no outstanding rights to subscribe for or purchase securities of the Subsidiary. The Subsidiary is a corporation duly incorporated and in good standing under the laws of the State of Nevada, and has the requisite corporate power and authority to conduct its business as it is currently being conducted. The Subsidiary is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the ownership or leasing of its properties or the conduct of its business requires such qualification, except where the failure to be so qualified and in good standing would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect.

(c)           The Company files reports and other documents under the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “1934 Act”), and at the Closing Date, the Company will have filed, in a timely manner, all reports and other documents that it is required to file under the provisions of the 1934 Act since January 1, 2008 (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”).  The Company is a reporting issuer under the securities acts of British Columbia, Alberta, Manitoba and Ontario (the “Canadian Securities Acts”), and at the Closing Date the Company will have filed all documents that it is required to file under the Canadian Securities Acts since January 1, 2008 (the “CSA Reports”).

(d)           As of their respective filing dates, each of the Company’s SEC Reports (unless such SEC Report filed prior to the date of this Agreement was amended or superseded by a filing prior to the date of the Closing Date, then as of the date of filing of such amendment or superseding filing) filed on or after January 1, 2008, (i) complied in all material respects with the requirements of the U.S. Securities Act or the 1934 Act, as the case may be, applicable to such SEC Reports, (ii) did not contain any untrue statements of a material fact and did not omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and (iii) are all the forms, reports and documents required to be filed by the Company with the Securities and Exchange Commission since that time.

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(e)           Each set of audited consolidated financial statements and unaudited consolidated interim financial statements of the Company (including any notes thereto) included in the SEC Reports (i) complied in all material respects with the published rules and regulations of the SEC with respect thereto as in effect at the time of filing, and (ii) have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto) and fairly present, in all material respects, the financial position of the Company and its consolidated Subsidiary as of the dates thereof and the results of its operations and cash flows for the periods then ended, subject, in the case of the unaudited consolidated interim financial statements, to normal year-end adjustments which were not or are not expected to be material in amount.

(f)           The authorized capital of the Company consists of 250,000,000 shares of common stock, par value $0.001 per share, and 15,000,000 shares of preferred stock, par value $0.001 per share. There are currently issued and outstanding 193,769,882 shares of common stock and nil shares of preferred stock.

(g)           The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations thereunder.  The execution and delivery by the Company of the Transaction Documents have been duly authorized by all necessary action on the part of the Company, and no further consent or action is required by the Company, its Board of Directors or its stockholders.  Each of the Transaction Documents constitutes, or will, when duly authorized, executed and delivered by all parties thereto, other than the Company, constitute, a valid and binding obligation of the Company, enforceable against the Company in accordance with the terms thereof, except that (i) the enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally, (ii) equitable remedies, including, without limitation, specific performance and injunction, may be granted only in the discretion of a court of competent jurisdiction, (iii) rights of indemnity, contribution and the waiver of contribution provided for herein, and any provisions exculpating a party from a liability or duty otherwise owed by it, may be limited under applicable law, and (iv) the enforceability of provisions in any Transaction Document which purport to sever any provision which is prohibited or unenforceable under applicable law without affecting the enforceability or validity of the remainder of such Transaction Document would be determined only in the discretion of the court.

(h)           The execution, delivery and performance by the Company of the Transaction Documents, the issue and sale of the Securities and the consummation by the Company of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any of the terms of the Company’s or the Subsidiary’s incorporating documents, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or the Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject, or by which any property or asset of the Company or the Subsidiary is bound or affected, except in respect of (ii) and (iii) above, where such would not have a Material Adverse Effect.

(i)           The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than the customary post-Closing filings to be made with the applicable Canadian and United States securities regulatory authorities.

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(j)           The Securities have been duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable (in the case of shares of Common Stock), free and clear of all liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents. The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant to this Agreement, including pursuant to the exercise of the Warrant.

(k)           The Company’s class of Common Stock is currently listed for trading on the Toronto Stock Exchange and quoted for trading on Financial Industry Regulatory Authority, Inc.’s Over-the-Counter Bulletin Board.  No order ceasing or suspending trading in securities of the Company nor prohibiting the sale of such securities has been issued to and is outstanding against the Company or its directors, officers or promoters or against any other companies that have common directors, officers or promoters and, to the best of the Company’s knowledge, no investigations or proceedings for such purposes are pending or threatened.

(l)           Except for agents’ fees paid to Acumen Capital Finance Partners Limited and Roth Capital Partners, LLC (collectively, the “Agents”), no person, firm or corporation acting or purporting to act at the request of the Company is entitled to any brokerage, agency or finder’s fee in connection with the purchase and sale of the Units described herein.

(m)           The Purchasers shall have the benefit of the representations and warranties made by the Company in the Agency Agreement between the Company and the Agents dated July 27, 2011 (save and except as waived by the Agents) as if such representations and warranties were made by the Company in this Agreement.

Section 2.2           Representations and Warranties of the Purchasers.  Each of the Purchasers hereby represents and warrants to the Company with respect solely to itself and not with respect to any other Purchaser as follows as of the date hereof and as of the Closing Date:

(a)           Organization and Standing of the Purchasers.  If the Purchaser is:

(i)           a corporation, the Purchaser is duly incorporated and is validly subsisting under the laws of its jurisdiction of incorporation and has all requisite legal and corporate power and authority to execute and deliver this Agreement, to subscribe for the Securities as contemplated herein and to carry out and perform its covenants and obligations under the terms of this Agreement;

(ii)           a partnership, syndicate or other form of unincorporated organization, the Purchaser has the necessary legal capacity and authority to execute and deliver this Agreement and to observe and perform its covenants and obligations hereunder and has obtained all necessary approvals in respect thereof; or

(iii)         an individual, the Purchaser has the legal capacity and competence to enter into and to execute this Agreement and to observe and perform his or her covenants and obligations hereunder.

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(b)           Authorization and Power.  Each Purchaser has the requisite power and authority to enter into and perform the Transaction Documents and to purchase the Securities being sold to it hereunder.  The execution, delivery and performance of the Transaction Documents by each Purchaser and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate or partnership action, and no further consent or authorization of such Purchaser or its Board of Directors, stockholders, or partners, as the case may be, is required.  When executed and delivered by the Purchasers, the other Transaction Documents shall constitute valid and binding obligations of each Purchaser enforceable against such Purchaser in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor's rights and remedies or by other equitable principles of general application.

In the case of the purchase by the Purchaser of the Securities as agent or trustee for any principal, the Purchaser is the duly authorized trustee or agent of such beneficial purchaser with due and proper power and authority to execute and deliver, on behalf of each such beneficial purchaser, this Agreement and all other documentation in connection with the purchase of the Securities hereunder, to agree to the terms and conditions herein and therein set out and to make the representations, warranties, acknowledgements and covenants herein and therein contained, all as if each such beneficial purchaser were the Purchaser and is subscribing as principal for its own account and not for the benefit of any other person for investment only and not for resale and the Purchaser’s actions as trustee or agent are in compliance with applicable law and the Purchaser and each beneficial purchaser acknowledges that the Company may be required by law to disclose to certain regulatory authorities the identity of each beneficial purchaser of Securities for whom it may be acting.

(c)           No Conflict.  The execution, delivery and performance of the Transaction Documents by the Purchaser and the consummation by the Purchaser of the transactions contemplated thereby and hereby do not and will not (i) violate any provision of the Purchaser’s charter or organizational documents, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, debenture, bond, license, lease agreement, instrument or obligation to which the Purchaser is a party or by which the Purchaser’s respective properties or assets are bound, or (iii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Purchaser or by which any property or asset of the Purchaser are bound or affected, except, in all cases, other than violations pursuant to clauses (i) or (iii) (with respect to federal and state securities laws) above, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, materially and adversely affect the Purchaser’s ability to perform its obligations under the Transaction Documents.

(d)           Acquisition for Investment.  Each Purchaser is purchasing the Securities solely for its own account and not with a view to or for sale in connection with distribution.  Each Purchaser does not have a present intention to sell any of the Securities, nor a present arrangement (whether or not legally binding) or intention to effect any distribution of any of the Securities to or through any person or entity; provided, however, that by making the representations herein, such Purchaser does not agree to hold the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with the U.S. Securities Act and any applicable securities laws of any state of the United States applicable to such disposition.  Each Purchaser acknowledges that it (i) has such knowledge and experience in financial and business matters such that the Purchaser is capable of evaluating the merits and risks of such Purchaser's investment in the Company, (ii) is able to bear the financial risks associated with an investment in the Securities and (iii) has been given full access to such records of the Company and the Subsidiary and to the officers of the Company and the Subsidiary as it has deemed necessary or appropriate to conduct its due diligence investigation.

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(e)           U.S. Securities Act Exemptions.  Each Purchaser understands that the Securities have not been registered under the U.S. Securities Act or any applicable securities laws of any state of the United States or qualified under a prospectus filed under Canadian securities laws, and are being offered and sold pursuant to exemptions from such registration requirements and prospectus requirements, and that the Securities may not be offered or sold, directly or indirectly, without registration under the U.S. Securities Act or compliance with the requirements of an exemption from registration requirements and in accordance with any applicable securities laws of any state of the United States.

(f)           No Offering Memorandum.  The Purchaser has not received and has not been provided with documents that bay be construed as an “offering memorandum” under applicable securities legislation, and that the decision to enter into this Agreement and purchase the Securities has not been based upon any verbal or written representation as to fact or otherwise made by or on behalf of the Company except as set forth in this Agreement

(g)           Offering Jurisdiction. The Purchaser is resident of and was offered the Securities in the jurisdiction set out in Exhibit A.

(h)           Tax.        The Purchaser understands that the investment in and disposition of the Securities may have material tax consequences under the laws of the United States and Canada, that none of the Company, nor its counsel, gives any opinion and makes no representation with respect to the tax status of the Company or the consequences to the Purchaser, and that it is the Purchaser’s sole responsibility to determine and assess such tax consequences as may apply to its particular circumstances.

(i)           General.  Each Purchaser understands that the Securities are being offered and sold in reliance on a transactional exemption from the registration requirements of federal and state securities laws and the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of such Purchaser set forth herein in order to determine the applicability of such exemptions and the suitability of such Purchaser to acquire the Securities.  Each Purchaser understands that no United States federal or state agency or any government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.

(j)           No General Solicitation or General Advertising or Directed Selling Efforts.  Each Purchaser acknowledges that the Securities were not offered to such Purchaser by means of any form of “general solicitation” or “general advertising” (as such terms are used in Regulation D), or publicly disseminated advertisements or sales literature, including, but not limited to, (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media, or broadcast over television or radio or the internet, or (ii) any seminar or meeting to which such Purchaser was invited by any of the foregoing means of communications.  Each Purchaser, in making the decision to purchase the Securities, has relied upon independent investigation made by it and has not relied on any information or representations made by third parties.

(k)           Qualified Investor.  Each Purchaser has such knowledge and experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in the Securities.   Each Purchaser has executed a Canadian Accredited Investor Questionnaire and each Purchaser has executed a U.S. Accredited Investor Questionnaire. Each Purchaser acknowledges that an investment in the Securities is speculative and involves a high degree of risk.

(l)           Public Information.  Each Purchaser has not received nor been provided with, has not requested and does not have any need to receive, a prospectus or offering memorandum, within the meaning of applicable securities laws, or any sales or advertising literature in connection with the offering of the Units, and the Purchaser’s decision to subscribe for the Units was based upon the Transaction Documents, the Company’s publicly available documents included in the Edgar database administered by the Securities and Exchange Commission and the SEDAR database administered under the direction of the Canadian Securities Administrators. Such Purchaser’s investment decision was not otherwise based upon, and such Purchaser has not relied upon, any other verbal or written representations as to facts made by or on behalf of the Company.

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(m)           Certain Fees.  Each Purchaser acknowledges that the Company has agreed to pay agents’ fees to Acumen Capital Finance Partners Limited and Roth Capital Partners, LLC (the “Agents”).   No Purchaser has employed any broker or finder or incurred any liability for any brokerage or investment banking fees, commissions, finders' structuring fees, financial advisory fees or other similar fees in connection with the Transaction Documents.

(n)           PATRIOT ACT.  Each Purchaser represents that the funds representing its respective portion of the Purchase Price for the Purchaser’s Units which will be advanced by the Purchaser to the Company hereunder are not proceeds of crime as defined in the Proceeds of Crime (Money Laundering) Act (Canada) (the “PCMLA”) or Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (the “PATRIOT Act”) and the Purchaser acknowledges that the Company may in the future be required by law to disclose the Purchaser’s name and other information relating to this Agreement and the Purchaser’s subscription hereunder, on a confidential basis, pursuant to the PCMLA or PATRIOT Act. To the best of its knowledge (i) none of the Proceeds to be provided by the Purchaser (A) have been or will be derived from or related to any activity that is deemed criminal under the law of Canada, the United States of America, or any other jurisdiction, or (B) are being tendered on behalf of a person or entity who has not been identified to the Purchaser, and (ii) the Purchaser shall promptly notify the Company if the Purchaser discovers that any of such representations ceases to be true, and to provide the Company with appropriate information in connection therewith.

(o)           Personal Information.  The Purchaser acknowledges that this Agreement requires the Purchaser to provide certain Personal Information to the Company.  Such information is being collected by the Company for the purposes of completing the proposed offering of Securities, which includes, without limitation, determining the Purchaser's eligibility to purchase the Securities under applicable securities laws, preparing and registering certificates representing the Securities and completing filings required by securities regulatory authorities and/or the Toronto Stock Exchange. The Purchaser's Personal Information may be disclosed by the Company or the Agents to: (a) stock exchanges or securities regulatory authorities, (b) the Company's registrar and transfer agent, and (c) any of the other parties involved in the proposed offering, including legal counsel, and may be included in record books in connection with the offering.  The Purchaser further acknowledges that the collection, use and disclosure of Personal Information by the Corporation for corporate finance and shareholder communication purposes or such other purposes as are necessary to the Corporation's business.  By executing this Agreement, the Purchaser is deemed to be consenting to the foregoing collection, use and disclosure of Personal Information.  Without limiting the generality of the foregoing, the Purchaser specifically acknowledges that:

(i) it has been notified by the Company that if the Company files a report on Form 45-106 F1 with the Ontario Securities Commission in connection with this  Agreement:

(A) the Company is required to deliver the Personal Information to the Ontario Securities Commission;

(B) the Personal Information is being collected indirectly by the Ontario Securities Commission under the authority granted to it under securities legislation;

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(C) the Personal Information is being collected for the purposes of the administration and enforcement of the securities legislation of Ontario; and

(D) the public official in Ontario who can answer questions about the Ontario Securities Commission's indirect collection of the Personal Information is the Administrative Assistant to the Director of Corporate Finance at the Ontario Securities Commission, Suite 1903, Box 55, 20 Queen Street West, Toronto, Ontario M5H 3S8, telephone number 416-593-8086; and

(ii) it has authorized the indirect collection of the Personal Information by the Ontario Securities Commission.

ARTICLE III

LEGENDING AND RESTRICTIONS

Section 3.1           Legending.  Each Purchaser hereby acknowledges that upon the issuance thereof, and until such time as the same is no longer required under the applicable securities laws and regulations, the certificates representing any of the Securities will bear a legend in substantially the following form:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AND, IF REQUESTED BY THE COMPANY, THE SELLER FURNISHES TO THE COMPANY AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY TO SUCH EFFECT.

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE [THE DATE THAT IS FOUR (4) MONTHS AND A DAY AFTER THE CLOSING DATE].

Section 3.2           TSX Legend.  Each Purchaser hereby acknowledges that upon the issuance thereof, and until such time as the same is no longer required under the rules of the Toronto Stock Exchange, the certificates representing any of the Common Stock issuable upon exercise of the Warrants will bear a legend in substantially the following form:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO STOCK EXCHANGE (“TSX”); HOWEVER, THE SAID SECURITIES CANNOT BE TRADED THROUGH THE FACILITIES OF THE TSX SINCE THEY ARE NOT FREELY TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON TSX.

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Section 3.3            Warrant Restrictions. Each Purchaser acknowledges and agrees that upon the original issuance of the Warrants, and until such time as it is no longer required under applicable requirements of the Securities Act or applicable state securities laws, all certificates representing the Warrants and all certificates issued in exchange therefor or in substitution thereof, shall bear the following legend:

THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.  THIS WARRANT MAY NOT BE EXERCISED UNLESS THE WARRANT AND THE UNDERLYING SHARES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE, AND THE HOLDER HAS DELIVERED AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION IN FORM AND REASONABLY SUBSTANCE SATISFACTORY TO THE CORPORATION TO SUCH EFFECT.

Section 3.4           Hold Periods.  The Securities will be deemed “restricted securities” as defined in Rule 144 under the U.S. Securities Act ("Rule 144"), and may not be resold unless registered under the U.S. Securities Act and any applicable securities laws of any state of the United States or exempt from such registration requirements.  Each Purchaser acknowledges that the Securities will be subject to a minimum hold period of at least six (6) months under Rule 144, and the hold period on Common Stock issued upon exercise of Warrants commences on the date of such exercise (unless exercised on a cashless basis).  Each Purchaser acknowledges that it has been advised to obtain independent legal and professional advice on the requirements of Rule 144, and that such Purchaser has been advised that resales of the Securities may be made only under certain circumstances.  Each Purchaser understands that to the extent that Rule 144 is not available, such Purchaser will be unable to sell any Securities without either registration under the U.S. Securities Act or the existence of another exemption from such registration requirement, and in all cases pursuant to exemptions from applicable securities laws of any state of the United States.  The Purchaser consents to the Company making a notation on its records or giving instructions to any transfer agent of the Securities in order to implement the restrictions on transfer set out and described herein.

Section 3.5           Legend Removal.  Certificates evidencing the Securities shall not contain any legend (i)(A) following any sale of such Securities pursuant to all applicable provisions of Rule 144, if available, (B) if such Securities are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information requirement under Rule 144 as to such Securities and without volume or manner-of-sale restrictions, or (C) if such legend is not required under applicable requirements of the U.S. Securities Act and the holder of the Securities has provided to the Company an opinion of counsel of recognized standing or other evidence of exemption in form and substance reasonably satisfactory to the Company to the effect that the legend is no longer required under the U.S. Securities Act, and (ii) if such legend is not required under applicable Canadian securities laws. In relation to (i)(A) and (B) above, the Company shall use commercially reasonable efforts to cause its legal counsel to issue a legal opinion to the applicable transfer agent for the Securities promptly if required by the transfer agent to effect the removal of the legend hereunder, provided that (x) legal counsel to the Company agrees that the legend may be removed under applicable securities laws and (y) the holder of the Securities has provided to such legal counsel all necessary representation letters and other evidence as may reasonably be required by legal counsel to satisfy legal counsel that the legend may be removed under applicable securities law and to permit legal counsel to issue the legal opinion. The Company agrees that at such time as such legend is no longer required under this Section 3.5, it will, no later than three business days following the delivery by a Purchaser to the Company or the transfer agent of a certificate representing Securities, as the case may be, issued with a restrictive legend, and, where required, delivery to the Company’s legal counsel of any required representation letters and other evidence as may be required pursuant to this Section 3.5, deliver or cause to be delivered to such Purchaser a certificate representing such Securities that is free from all restrictive and other legends.

10

Section 3.6           Furnishing of Information; Public Information. Until the earliest of the time that (i) no Purchaser owns Securities or (ii) the Securities are eligible to be resold by a non-affiliate pursuant to Rule 144(b)(i) without regard for Rule 144(c)(i), the Company covenants to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the 1934 Act and to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the 1934 Act even if the Company is not then subject to the reporting requirements of the 1934 Act.

Section 3.7           Canadian Exemptions.  The Purchaser acknowledges that the Securities are subject to resale restrictions in Canada and may not be traded in Canada except as permitted under applicable Canadian securities legislation.  Pursuant to National Instrument 45-102, a subsequent trade in the Debentures, Warrants or Common Stock acquireable upon exercise of the Warrant will be a distribution subject to the prospectus and registration requirements of applicable Canadian securities legislation unless certain conditions are met, which conditions include a hold period of four (4) months (the “Canadian Hold Period”) that shall have elapsed from the date on which the Debentures and Warrants were issued to the Purchaser and, during the currency of the Canadian Hold Period, any certificate representing the Securities is to be imprinted with a restrictive legend.

Section 3.8           Exchange Restrictions.  The Purchaser acknowledges that it is aware that until the expiry of all such “hold periods” and resale restrictions as described in Sections 3.4, (i) the Securities cannot be traded through the facilities of the TSX, since the certificate is not freely transferable and consequently is not “good delivery” in settlement of transactions on the TSX; (ii) the TSX would deem the selling security holder to be responsible for any loss incurred on a sale made by him in such securities; and (iii) removal of the U.S. legend on such Securities, if required, may delay settlement on resale of such Securities.

Section 3.9           Warrant Exercise Restrictions. The Warrants may not be exercised unless the Warrants and the Common Stock issuable upon exercise of the Warrants are registered under the U.S. Securities Act and the applicable securities laws of any state of the United States or an exemption is available from the registration requirements of such laws, and the holder has furnished an opinion of counsel or other evidence of exemption reasonably satisfactory to the Company to such effect; provided that a Purchaser of Units pursuant to this Offering will not be required to deliver an opinion of counsel or other evidence in connection with the due exercise of the Warrants at a time when the representations, warranties and covenants made by the Purchaser herein and in the U.S. Accredited Investor Questionnaire remain true and correct in respect of the exercise of the Warrants and the Purchaser makes a representation to the Company to such effect.

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ARTICLE IV

CONDITIONS

Section 4.1           Conditions Precedent to the Obligation of the Company to Close and to Sell the Securities.  The obligation hereunder of the Company to close and issue and sell the Securities to the Purchasers at the Closing is subject to the satisfaction or waiver, at or before the Closing, of the conditions set forth below.  These conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion.

(a)           Accuracy of the Purchasers’ Representations and Warranties.  The representations and warranties of each Purchaser shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time, except for representations and warranties that are expressly made as of a particular date, which shall be true and correct in all material respects as of such date.

(b)           Performance by the Purchasers.  Each Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Purchasers at or prior to the Closing Date.

(c)           No Injunction.  No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement.

(d)           Delivery of Purchase Price.  The Purchase Price for the Securities shall have been delivered to the Company on the Closing Date.

(e)           Delivery of Transaction Documents.  The applicable Transaction Documents shall have been duly executed and delivered by the Purchasers to the Company.

Section 4.2           Conditions Precedent to the Obligation of the Purchasers to Close and to Purchase the Securities.  The obligation hereunder of the Purchasers to purchase the Securities and consummate the transactions contemplated by this Agreement is subject to the satisfaction or waiver, at or before the Closing, of each of the conditions set forth below.  These conditions are for the Purchasers’ sole benefit and may be waived by the Purchasers at any time in their sole discretion.

(a)           Accuracy of the Company's Representations and Warranties.  Each of the representations and warranties of the Company in this Agreement and the other Transaction Documents shall be true and correct in all material respects as of the Closing Date, except for representations and warranties that speak as of a particular date, which shall be true and correct in all material respects as of such date.

(b)           Performance by the Company.  The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date.

(c)           No Injunction.  No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement.

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(d)           No Proceedings or Litigation.  No action, suit or proceeding before any arbitrator or any governmental authority shall have been commenced, and no investigation by any governmental authority shall have been threatened, against the Company or the Subsidiary, or any of the officers, directors or affiliates of the Company or the Subsidiary seeking to restrain, prevent or change the transactions contemplated by this Agreement, or seeking damages in connection with such transactions.

(e)           Debentures and Warrants.  At or prior to the Closing, the Company shall have delivered to the Purchasers the Debentures (in such denominations as each Purchaser may request) and the Warrants (in such denominations as each Purchaser may request).

(f)           Trust Indenture.  As of the Closing Date, the Company and the Trustee shall have executed and delivered the Trust Indenture.

(g)           Security Agreement.  As of the Closing Date, the Company shall have executed and delivered the Security Agreement.

(h)           Registration.  As of the Closing Date, the Company shall have delivered proof of registration of the security granted in connection with this Transaction in each of the United States and Alberta, Canada.

(i)           Material Adverse Effect.  No Material Adverse Effect shall have occurred at or before the Closing Date.

ARTICLE V

MISCELLANEOUS

Section 5.1           Fees and Expenses.  Each party shall pay the fees and expenses of its advisors, counsel, accountants and other experts, if any, and all other expenses, incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.

Section 5.2            Specific Performance; Consent to Jurisdiction; Venue.

(a)           The Company and the Purchasers acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement or the other Transaction Documents were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement or the other Transaction Documents and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity.

(b)           The parties agree that venue for any dispute arising under this Agreement will lie exclusively in the state or federal courts located in the borough of Manhattan, New York, New York, and the parties irrevocably waive any right to raise forum non conveniens or any other argument that New York is not the proper venue.  The parties irrevocably consent to personal jurisdiction in the state and federal courts in the borough of Manhattan, New York, New York.  The Company and each Purchaser consent to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing in this Section 5.2 shall affect or limit any right to serve process in any other manner permitted by law.  The Company and the Purchasers hereby agree that the prevailing party in any suit, action or proceeding arising out of or relating to the Securities, this Agreement or the other Transaction Documents, shall be entitled to reimbursement for reasonable legal fees from the non-prevailing party.  The parties hereby waive all rights to a trial by jury.

13

Section 5.3           Entire Agreement; Amendment.  This Agreement and the Transaction Documents contain the entire understanding and agreement of the parties with respect to the matters covered hereby and, except as specifically set forth herein or in the other Transaction Documents, neither the Company nor any Purchaser make any representation, warranty, covenant or undertaking with respect to such matters, and they supersede all prior understandings and agreements with respect to said subject matter, all of which are merged herein.  No provision of this Agreement may be waived or amended other than by a written instrument signed by the Company and the Purchasers holding at least a majority of the principal amount of the Debentures then held by the Purchasers.  Any amendment or waiver effected in accordance with this Section 5.3 shall be binding upon each Purchaser (and their permitted assigns) and the Company.

Section 5.4           Notices.  Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery by telecopy or facsimile at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be:

If to the Company:	Gryphon Gold Corporation
	611 N. Nevada Street
	Carson City, NV, 89703
	Attention:  President
	Tel. No.: (775) 883-1456
	Fax No.: (604) 608-3262
with copies (which copies
shall not constitute notice
to the Company) to:	Dorsey & Whitney, LLP
	1400 Wewatta St.
	Denver, CO  80202
	Attention: Kenneth Sam
	Tel. No.: (303) 629-3400
	Fax No.: (303) 629-3450

If to any Purchaser: At the address of such Purchaser set forth on Exhibit A to this Agreement, with copies to Purchaser’s counsel as set forth on Exhibit A or as specified in writing by such Purchaser with copies to:

14

Blake, Cassels & Graydon LLP

855 – 2nd Street S.W., Suite 3500, Bankers Hall East Tower

Calgary, Alberta, Canada, T2P 4J8

Attention:  William Van Horne

Tel. No.: (403) 260-9788

Fax No.: (403) 260-9700

Any party hereto may from time to time change its address for notices by giving written notice of such changed address to the other party hereto.

Section 5.5            Waivers.  No waiver by either party of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.  No consideration shall be offered or paid to any Purchaser to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration is also offered to all of the parties to the Transaction Documents.  This provision constitutes a separate right granted to each Purchaser by the Company and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.

Section 5.6           Headings.  The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose and shall not be deemed to limit or affect any of the provisions hereof.

Section 5.7           Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns.  After the Closing, the assignment by a party to this Agreement of any rights hereunder shall not affect the obligations of such party under this Agreement.  Subject to Section 5.1 hereof, the Purchasers may assign the Securities and its rights under this Agreement and the other Transaction Documents and any other rights hereto and thereto without the consent of the Company.

Section 5.8           No Third Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

Section 5.9           Governing Law.  This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any of the conflicts of law principles which would result in the application of the substantive law of another jurisdiction.  This Agreement shall not be interpreted or construed with any presumption against the party causing this Agreement to be drafted.

Section 5.10         Survival.  The representations and warranties of the Company and the Purchasers shall survive the execution and delivery hereof and the Closing until the second anniversary of the Closing Date, except the agreements and covenants set forth in Articles I, III and V of this Agreement shall survive the execution and delivery hereof and the Closing hereunder.

15

Section 5.11         Counterparts.  This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and shall become effective when counterparts have been signed by each party and delivered (including by pdf or facsimile format) to the other parties hereto, it being understood that all parties need not sign the same counterpart.

Section 5.12         Publicity and Post-Closing Filings.  The Company agrees that it will not disclose, and will not include in any public announcement, the names of the Purchasers without the consent of the Purchasers, which consent shall not be unreasonably withheld or delayed, or unless and until such disclosure is required by law, rule or applicable regulation and then only to the extent of such requirement. If required by applicable Securities Laws, each Purchaser will execute, deliver and file or assist the Company in filing such reports, undertakings and other documents with respect to the issue of the Securities as may be required by any applicable regulatory authority.

Section 5.13         Securities Laws Disclosure.  The Company shall, by 8:30 a.m. (New York City time) on the business day immediately following the date hereof, issue a Current Report on Form 8-K and press release disclosing the material terms of the transactions contemplated hereby, and including the Transaction Documents as exhibits to such Form 8-K. From and after the issuance of such press release, the Company shall have publicly disclosed all material, non-public information delivered to any of the Purchasers by the Company, or any of its officers, directors, employees or agents in connection with the transactions contemplated by the Transaction Documents.

Section 5.14         Severability.  The provisions of this Agreement are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement and this Agreement shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of such provision, had never been contained herein, so that such provisions would be valid, legal and enforceable to the maximum extent possible.

Section 5.15         Further Assurances.  From and after the date of this Agreement, upon the request of the Purchasers or the Company, the Company and each Purchaser shall execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement and the other Transaction Documents.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

16

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.

GRYPHON GOLD CORPORATION
By:
	Name:
	Title:
PURCHASER:
By:
	Name:
	Title:

EXHIBIT A

LIST OF PURCHASERS

Names and Addresses	Investment Amount and Number of	Purchase
of Purchasers	Debentures and Warrants Purchased	Price

A-1

EXHIBIT B

FORM OF TRUST DEBENTURE

B-1

EXHIBIT C

FORM OF WARRANT

C-1

EXHIBIT D

COMPANY SECURITY AND PLEDGE AGREEMENT

D-1

EXHIBIT E

STOCK POWER OF ATTORNEY

E-1

EXHIBIT F

U.S. ACCREDITED INVESTOR QUESTIONNAIRE

The Purchaser understands and agrees that the Securities have not been and will not be registered under the U.S. Securities Act, or applicable securities laws of any state of the United States, and the Units are being offered and sold to the Purchaser in reliance upon exemptions available under Rule 506 of Regulation D under the U.S. Securities Act and/or Section 4(2) of the U.S. Securities Act.

Capitalized terms used in this Schedule F and defined in the Agreement to which this Schedule F is attached have the meaning defined in the Agreement unless otherwise defined herein.

The undersigned (the “Purchaser”) represents, warrants and covenants (which representations, warranties and covenants shall survive the Closing) to the Company, (and acknowledges that the Company is relying thereon)that:

(a) it is purchasing the Units for its own account or for the account of one or more persons for whom it is exercising sole investment discretion, (a “Beneficial Purchaser”), for investment purposes only and not with a view to resale or distribution in violation of applicable securities laws; provided, however, that this paragraph shall not restrict the Purchaser from selling or otherwise disposing of any of the Securities pursuant to registration thereof pursuant to the U.S. Securities Act and any applicable state securities laws or under an exemption from such registration requirements;

(b) it, and if applicable, each Beneficial Purchaser for whose account it is purchasing the Units is an “accredited investor” that satisfies one or more of the criteria set forth in Rule 501(a) of Regulation D, as indicated below (the Purchaser must initial “PUR” for the Purchaser, and “BP” for each Beneficial Purchaser, if any, on the appropriate line(s)):

  Category 1. A bank, as defined in Section 3(a)(2) of the U.S. Securities Act, whether acting in its individual or fiduciary capacity; or

  Category 2. A savings and loan association or other institution as defined in Section 3(a)(5)(A) of the U.S. Securities Act, whether acting in its individual or fiduciary capacity; or

  Category 3. A broker or dealer registered pursuant to Section 15 of the United States Securities Exchange Act of 1934, as amended; or

  Category 4. An insurance company as defined in Section 2(a)(13) of the U.S. Securities Act; or

  Category 5. An investment company registered under the United States Investment Company Act of 1940, as amended; or

  Category 6. A business development company as defined in Section 2(a)(48) of the United States Investment Company Act of 1940, as amended; or

  Category 7. A small business investment company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the United States Small Business Investment Act of 1958, as amended; or

F-1

 Category 8. A plan established and maintained by a state, its political subdivisions or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, with total assets in excess of US $5,000,000; or

  Category 9. An employee benefit plan within the meaning of the United States Employee Retirement Income Security Act of 1974, as amended, in which the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company or registered investment adviser, or an employee benefit plan with total assets in excess of US $5,000,000 or, if a self-directed plan, the investment decisions are made solely by persons who are accredited investors; or

  Category 10. A private business development company as defined in Section 202(a)(22) of the United States Investment Advisers Act of 1940, as amended; or

  Category 11. An organization described in Section 501(c)(3) of the United States Internal Revenue Code of 1986, as amended, a corporation, a Massachusetts or similar business trust, limited liability company or a partnership, not formed for the specific purpose of acquiring the Units offered, with total assets in excess of US $5,000,000; or

  Category 12. Any director or executive officer of the Company; or

  Category 13. A natural person (or an IRA (Individual Retirement Account), the beneficial owner of which is such natural person) whose individual net worth, or joint net worth with his or her spouse, excluding the value of his or her primary residence net of any mortgage obligation secured by the property, exceeds US$1,000,000. For purposes of this calculation, if the mortgage or other indebtedness secured by the Purchaser’s primary residence exceeds its value and the mortgagee or other lender has recourse to the Purchaser personally for any deficiency, the amount of any excess must be considered a liability and deducted from the Purchaser’s net worth; or

  Category 14. A natural person (or an IRA (Individual Retirement Account), the beneficial owner of which is such natural person) who had an individual income in excess of US $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of US $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; or

  Category 15. A trust, with total assets in excess of US $5,000,000, not formed for the specific purpose of acquiring the Units offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D under the U.S. Securities Act; or

  Category 16. Any entity in which all of the equity owners meet the requirements of at least one of the above categories;

F-2

The Purchaser undertakes to notify the Corporation immediately of any change in any representation, warranty or other information relating to the Purchaser or any Beneficial Purchaser set forth herein which takes place prior to the Closing.

Name of Entity

Type of Entity

Signature of Person(s) Signing

Print or Type Name and Title(s) of Person(s) Signing

F-3

EXHIBIT G

CANADIAN ACCREDITED INVESTOR QUESTIONNAIRE

By initialling where indicated below, the Purchaser is confirming its representation and warranty regarding the category or categories under which it qualifies as an “accredited investor” within the meaning of National Instrument 45-106 Prospectus and Registration Exemptions:

[MARK BELOW THE CATEGORY OR CATEGORIES WHICH DESCRIBES YOU]

(a)	a Canadian financial institution, or a Schedule III bank;	q
(b)	the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada);	q
(c)	a subsidiary of any person referred to in paragraphs (a) or (b), if the person owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary;	q
(d)	a person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer, other than a person registered solely as a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador);	q
(e)	an individual registered or formerly registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (d);	q
(f)	the Government of Canada or a jurisdiction of Canada, or any crown corporation, agency or wholly owned entity of the Government of Canada or a jurisdiction of Canada;	q
(g)	a municipality, public board or commission in Canada and a metropolitan community, school board, the Comité de gestion de la taxe scolaire de l'île de Montréal or an intermunicipal management board in Québec;	q
(h)	any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government;	q
(i)	a pension fund that is regulated by either the Office of the Superintendent of Financial Institutions (Canada) or a pension commission or similar regulatory authority of a jurisdiction of Canada;	q
(j)	an individual who, either alone or with a spouse, beneficially owns financial assets having an aggregate realizable value that before taxes, but net of any related liabilities, exceeds $1,000,000;	q

G-1

(k)	an individual whose net income before taxes exceeded $200,000 in each of the 2 most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year;		q
(l)	an individual who, either alone or with a spouse, has net assets of at least  $5,000,000;		q
(m)	a person, other than an individual or investment fund, that has net assets of at least $5,000,000 as shown on its most recently prepared financial statements (prepared in accordance with applicable generally accepted accounting principles), and that was not created or used solely to purchase or hold securities as an accredited investor;		q
(n)	an investment fund that distributes or has distributed its securities only to:		q
	(i)	a person that is or was an accredited investor at the time of the distribution;	q
	(ii)	a person that acquires or acquired securities in the circumstances referred to in sections 2.10 or 2.19 of National Instrument 45-106, or	q
	(iii)	a person described in paragraph (i) or (ii) that acquires or acquired securities under section 2.18 of National Instrument 45-106;	q
(o)	an investment fund that distributes or has distributed securities under a prospectus in a jurisdiction of Canada for which the regulator or, in Québec, the securities regulatory authority, has issued a receipt;		q
(p)	a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully managed account managed by the trust company or trust corporation, as the case may be;		q
(q)	a person acting on behalf of a fully managed account managed by that person, if that person:		q
	(i)	is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction; and	q
	(ii)	in Ontario, is purchasing a security that is not a security of an investment fund;	q
(r)	a registered charity under the Income Tax Act (Canada) that, in regard to the trade, has obtained advice from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity to give advice on the securities being traded;		q

G-2

(s)	an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (a) to (d) or paragraph (i) in form and function;	q
(t)	a person in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons that are accredited investors (as defined in National Instrument 45-106);	q
(u)	an investment fund that is advised by a person registered as an adviser or a person that is exempt from registration as an adviser; or	q
(v)	a person that is recognized or designated by the securities regulatory authority or, except in Ontario and Québec, the regulator as an accredited investor.	q

Note: A summary of the meanings of certain of the terms used in this certificate follows the signature block below.

DATED  , 2011

Signature of Purchaser

Name of Purchaser

Address of Purchaser

For the purposes of this certificate, the following definitions are included for convenience:

(a)  “Canadian financial institution” means

(i) an association governed by the Cooperative Credit Associations Act (Canada) or a central cooperative credit society for which an order has been made under section 473(1) of that Act, or

(ii) a bank, loan corporation, trust company, trust corporation, insurance company, treasury branch, credit union, caisse populaire, financial services cooperative, or league that, in each case, is authorized by an enactment of Canada or a jurisdiction of Canada to carry on business in Canada or a jurisdiction of Canada;

 (b) “control person” has the same meaning as in securities legislation except in Manitoba, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Prince Edward Island and Québec where control person means any person that holds or is one of a combination of persons that holds

(i) a sufficient number of any of the securities of an issuer so as to affect materially the control of the issuer, or

(ii) more than 20% of the outstanding voting securities of an issuer except where there is evidence showing that the holding of those securities does not affect materially the control of the issuer;

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(c)  “director” means

(i) a member of the board of directors of a company or an individual who performs similar functions for a company, and

(ii) with respect to a person that is not a company, an individual who performs functions similar to those of a director of a company;

(d)  “eligibility adviser” means

(i) a person that is registered as an investment dealer and authorized to give advice with respect to the type of security being distributed, and

(ii) in Saskatchewan and Manitoba, also means a lawyer who is a practicing member in good standing with a law society of a jurisdiction of Canada or a public accountant who is a member in good standing of an institute or association of chartered accountants, certified general accountants or certified management accountants in a jurisdiction of Canada provided that the lawyer or public accountant must not

(A) have a professional, business or personal relationship with the issuer, or any of its directors, executive officer, founders, or control persons, and

(B) have acted for or been retained personally or otherwise as an employee, executive officer, director, associate or partner of a person that has acted for or been retained by the issuer or any of its directors, executive officers, founders or control persons within the previous 12 months;

(e)  “executive officer” means, for an issuer, an individual who is

(i) a chair, vice-chair or president,

(ii) a vice-president in charge of a principal business unit, division or function including sales, finance or production, or

(iii) performing a policy-making function in respect of the issuer;

(f)  “financial assets” means

(i) cash,

(ii) securities, or

(iii) a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation;

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(g) “foreign jurisdiction” means a country other than Canada or a political subdivision of a country other than Canada;

(h)  “founder” means, in respect of an issuer, a person who,

(i) acting alone, in conjunction, or in concert with one or more persons, directly or indirectly, takes the initiative in founding, organizing or substantially reorganizing the business of the issuer, and

(ii) at the time of the trade is actively involved in the business of the issuer;

(i) “fully managed account” means an account of a client for which a person makes the investment decisions if that person has full discretion to trade in securities for the account without requiring the client's express consent to a transaction;

(j) “investment fund” means a mutual fund or a non-redeemable investment fund, and, for greater certainty in British Columbia, includes and EVVC and a VCC (as such terms are defined in National Instrument 81-106 – Investment Fund Continuous Disclosure);

(k) “jurisdiction” means a province or territory of Canada except when used in the term foreign jurisdiction;

(l)  “local jurisdiction” means the jurisdiction in which the Canadian securities regulatory authority is situate;

(m)  “non-redeemable investment fund” means an issuer,

(i) whose primary purpose is to invest money provided by its securityholders,

(ii) that does not invest,

(A) for the purpose of exercising or seeking to exercise control of an issuer, other than an issuer that is a mutual fund or a non-redeemable investment fund, or

(B) for the purpose of being actively involved in the management of any issuer in which it invests, other than an issuer that is a mutual fund or a non-redeemable investment fund, and

(iii) that is not a mutual fund;

(n)  “person” includes

(i) an individual,

(ii) a corporation,

(iii) a partnership, trust, fund and an association, syndicate, organization or other organized group of persons, whether incorporated or not, and

(iv) an individual or other person in that person's capacity as a trustee, executor, administrator or personal or other legal representative;

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(o) “regulator” means, for the local jurisdiction, the Executive Director, Director or Superintendent of the local jurisdiction or Registrar or Autorité des marchés financiers, as the case may be;

(p)  “related liabilities” means

(i) liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets, or

(ii) liabilities that are secured by financial assets;

(q)  “Schedule III bank”means an authorized foreign bank named in Schedule III of the Bank Act (Canada);

(r)  “spouse” means, an individual who,

(i) is married to another individual and is not living separate and apart within the meaning of the Divorce Act (Canada), from the other individual,

(ii) is living with another individual in a marriage-like relationship, including a marriage-like relationship between individuals of the same gender, or

(iii) in Alberta, is an individual referred to in paragraph (i) or (ii), or is an adult interdependent partner within the meaning of the Adult Interdependent Relationships Act (Alberta);

(s) “subsidiary” means an issuer that is controlled directly or indirectly by another issuer and includes a subsidiary of that subsidiary.

All monetary references in this Schedule are in Canadian Dollars.

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EX-99.1

Gryphon Gold Closes $3 million Private Placement of Units

July 27, 2011 – Vancouver, British Columbia.  Gryphon Gold Corporation (GGN: TSX; GYPH: OTC.BB) ("Gryphon" or the "Company") is pleased to announce that it has closed a $3,000,000 CAD private placement of units (the "Units") at a price of $1,000 CAD per Unit.  The offering was conducted by a lead agent in Canada and by a U.S. agent in the United States.  Each Unit consists of $1,000 CAD principal amount of 10% secured subordinated debentures maturing July 28, 2012 (the "Debentures") and 1,500 warrants (the "Warrants").  Each Warrant entitles the holder thereof to purchase one common share in the capital of the Company at a price of $0.20 USD per share.  The Warrants expire on January 27, 2013.

Under the private placement, 3,000 Units will be sold, representing $3,000,000 CAD aggregate principal amount of Debentures and 4,500,000 Warrants.  The proceeds received by the Company from the sale of the Units will be used to purchase equipment, install power to the Company's Borealis project, and will also be used for general working capital purposes.

The Debentures will bear interest from the date of issue at 10.0% per annum, payable quarterly on March 31, June 30, September 30 and December 31 of each year, commencing on September 30, 2011. The Debentures will mature 12 months from the closing date of the Offering (the "Maturity Date").  Neither the Debentures nor the Warrants will be listed on the Toronto Stock Exchange.

Except in certain circumstances related to a change of control of the Company, the Debentures will not be redeemable. In the event of a change of control, the debentures may be redeemable at a price equal to 110% of the principal amount plus accrued and unpaid interest.

This press release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities described herein. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws, or qualified by prospectus under Canadian securities law, and may not be offered or sold unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available or within Canada or to persons in Canada unless qualified by prospectus under Canadian securities laws or an exemption from such requirement is available.

For further information please contact:

John L. Key, CEO and President

1-775-883-1456 jkey@grypyhongold.com

Lisanna Lewis, VP, Treasurer, Investor Relations

1-604-261-2229 llewis@gryphongold.com

ABOUT GRYPHON GOLD:

Gryphon Gold is a Nevada-focused gold exploration company.  The Company’s principal property is its Borealis gold project located in the Walker Lane gold belt of western Nevada.

This press release contains “forward-looking statements” and "forward-looking information" within the meaning of United States and Canadian securities laws, which may include, but are not limited to, statements relating to the Company’s proposed use of proceeds from the sale of the Units.   Such forward-looking statements and forward-looking information reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions, including, the risk that additional  financing for the development of the Borealis Oxide Heap Leach Project may be required and, if so, may not be available on terms satisfactory to the Company if at all, risks associated with the start up of mining operations, and the risks and uncertainties outlined under the section headings “Forward-Looking Statements” and “Risks Factors and Uncertainties” in the Company’s annual report on Form 10-K, as filed with the SEC and Canadian securities administrators on June 30, 2011, and in the Company’s other reports, documents, and registration statements filed with the SEC (available at www.sec.gov) and with Canadian securities administrators (available at www.sedar.com ). Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected.  The Company does not undertake to update forward-looking statements or forward-looking information, except as may be required by law. Full financial statements and securities filings are available on the Company’s website: www.gryphongold.com and www.sec.gov or www.sedar.com.