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):  April 6, 2012

EASTERN RESOURCES, INC.

(Exact name of registrant as specified in its charter)

Delaware	333-149850	45-0582098
(State or Other Jurisdiction	(Commission File	(I.R.S. Employer
of Incorporation)	Number)	Identification Number)

1610 Wynkoop Street, Suite 400

Denver, CO 80202

(Address of principal executive offices, including zip code)

(303) 893-2334

(Registrant’s telephone number, including area code)

Copy to:

Adam S. Gottbetter, Esq.

Gottbetter & Partners, LLP

488 Madison Avenue, 12th Floor

New York, NY  10022

Phone:  (212) 400-6900

Facsimile:  (212) 400-6901

166 East 34th Street, Suite 18K

New York, NY 10016

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

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

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

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

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

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

Table of Contents

Forward-Looking Statements		3
Explanatory Note		5
Item 1.01	Entry into a Material Definitive Agreement	5
Item 2.01	Completion of Acquisition or Disposition of Assets	6
	The Merger and Related Transactions	6
	Description of Business	12
	Description of Properties	37
	Risk Factors	39
	Management’s Discussion and Analysis of Financial Condition and Plan of Operations	55
	Security Ownership of Certain Beneficial Owners and Management	67
	Directors, Executive Officers, Promoters and Control Persons	69
	Executive Compensation	75
	Summary Compensation Table	75
	Certain Relationships and Related Transactions	77
	Market Price of and Dividends on Common Equity and Related Stockholder Matters	81
	Dividend Policy	81
	Description of Securities	84
	Legal Proceedings	86
	Indemnification of Directors and Officers	86
Item 3.02	Unregistered Sales of Equity Securities	87
Item 5.01	Changes in Control of Registrant	88
Item 5.02	Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers	88
Item 9.01	Financial Statements and Exhibits	88
Glossary of Relevant Mining Terms
Signatures

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FORWARD-LOOKING STATEMENTS

This Current Report contains forward-looking statements, including, without limitation, in the sections captioned “Description of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Plan of Operations,” and elsewhere. Any and all statements contained in this Report that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro-forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future,” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this Report may include, without limitation, statements regarding (i) the plans and objectives of management for future operations, including plans or objectives relating to exploration programs, (ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the SEC, and (iv) the assumptions underlying or relating to any statement described in points (i), (ii) or (iii) above.

In addition to the specific statements referenced above and the factors identified under “Item 1A. Risk Factors” in this Current Report below, other uncertainties that could affect the accuracy of our forward-looking statements include:

§ The effect of government regulations on our business;

§ Our ability to secure additional capital;

§ Unexpected changes in business and economic conditions, including the rate of inflation;

§ Changes in interest rates and currency exchange rates;

§ Timing and amount of production, if any;

§ Technological changes in the mining industry;

§ Our costs;

§ Changes in exploration and overhead costs;

§ Access and availability of materials, equipment, supplies, labor and supervision, power and water;

§ Results of current and future feasibility studies;

§ The level of demand for our products;

§ Changes in our business strategy, plans and goals;

§ Interpretation of drill hole results and the geology, grade and continuity of mineralization;

§ The uncertainty of mineralized material estimates and timing of development expenditures;

§ Commodity price fluctuations;

§ Operational and environmental risks associated with the mining industry; and

§ Lack of clear title to some of our mineral prospects.

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The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the inaccuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation, our inability to obtain adequate financing, insufficient cash flows and resulting illiquidity, our inability to expand our business, government regulations, lack of diversification, volatility in the price of gold, zinc, silver, lead and copper, increased competition, results of arbitration and litigation, stock volatility and illiquidity, and our failure to implement our business plans or strategies. A description of some of the risks and uncertainties that could cause our actual results to differ materially from those described by the forward-looking statements in this Report appears in the section captioned “Risk Factors” and elsewhere in this Report.

Readers are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them and to the risk factors. We disclaim any obligation to update the forward-looking statements contained in this Report to reflect any new information or future events or circumstances or otherwise.

Readers should read this Report in conjunction with the discussion under the caption “Risk Factors,” our financial statements and the related notes thereto in this Report, and other documents which we may file from time to time with the Securities and Exchange Commission (the “SEC”).

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EXPLANATORY NOTE

We were incorporated as Eastern Resources, Inc., in Delaware on March 15, 2007.  Prior to the Merger (as defined below), our business was to engage in the acquisition, production and distribution of independent films.

As used in this Current Report, unless otherwise stated or the context clearly indicates otherwise, the term “ESRI” refers to Eastern Resources, Inc., before giving effect to the Merger, the term “MTMI” refers to Montana Tunnels Mining, Inc., a Delaware corporation, the term “EGI” refers to Elkhorn Goldfields, Inc., a Montana corporation, and the terms “Company,” “we,” “us,” and “our” refer to Eastern Resources, Inc., and its wholly-owned subsidiaries, including MTMI and EGI, after giving effect to the Merger.

On April 6, 2012, (i) MTMI Acquisition Corp., a Delaware corporation formed on February 27, 2012 and a wholly-owned subsidiary of ESRI (“MTMI Acquisition Sub”), merged with and into MTMI, a wholly-owned subsidiary of Elkhorn Goldfields LLC, a Delaware limited liability company (“EGLLC”), with MTMI as the surviving corporation and (ii) EGI Acquisition Corp., a Montana corporation formed on February 27, 2012 and a wholly-owned subsidiary of ESRI (“EGI Acquisition Sub”), merged with and into EGI, a wholly-owned subsidiary of EGLLC, with EGI as the surviving corporation (collectively, the “Merger”). As a result of the Merger and the Split-Off (as defined below), ESRI discontinued its pre-Merger business and acquired the business of MTMI and EGI, and will continue the existing business operations of MTMI and EGI as a publicly-traded company under the name Eastern Resources, Inc.

This Current Report contains summaries of the material terms of various agreements executed in connection with the transactions described herein. The summaries of these agreements are subject to, and are qualified in their entirety by, reference to these agreements, all of which are incorporated herein by reference.

This Current Report is being filed in connection with a series of transactions consummated by the Company and certain related events and actions taken by the Company.

This Current Report responds to the following Items in Form 8-K:

Item 1.01 Entry into a Material Definitive Agreement

Item 2.01	Completion of Acquisition or Disposition of Assets
Item 3.02	Unregistered Sales of Equity Securities

Item 5.01 Changes in Control of Registrant

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

Item 9.01 Financial Statements and Exhibits

Item 1.01 Entry into a Material Definitive Agreement

On April 6, 2012, ESRI, MTMI Acquisition Sub, EGI Acquisition Sub, MTMI, EGI and EGLLC entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”), which closed on the same date.  Pursuant to the terms of the Merger Agreement, (i) MTMI Acquisition Sub merged with and into MTMI with MTMI as the surviving corporation and (ii) EGI Acquisition Sub merged with and into EGI with EGI as the surviving corporation. MTMI and EGI became wholly-owned subsidiaries of ESRI. For a description of the Merger and the material agreements entered into in connection with the Merger, see the disclosures set forth in Item 2.01 to this Current Report, which disclosures are incorporated into this Item by reference.

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Item 2.01 Completion of Acquisition or Disposition of Assets

THE MERGER AND RELATED TRANSACTIONS

Merger Agreement

On April 6, 2012, ESRI, MTMI Acquisition Sub, EGI Acquisition Sub, MTMI, EGI and EGLLC entered into the Merger Agreement, which closed on the same date, and pursuant to which (i) MTMI Acquisition Sub merged with and into MTMI with MTMI as the surviving corporation and (ii) EGI Acquisition Sub merged with and into EGI with EGI as the surviving corporation. MTMI and EGI became wholly-owned subsidiaries of ESRI.

Pursuant to the Merger, we ceased to engage in the acquisition, production and distribution of independent films and acquired the business of MTMI and EGI to engage in exploration and production activities in the precious metals mining industry, as a publicly-traded company under the name Eastern Resources, Inc.  See “Split-Off” below.

At the closing of the Merger, (i) each of the 100 shares of MTMI’s common stock issued and outstanding immediately prior to the closing of the Merger was converted into 45,000,000 shares of common stock, par value $0.001 per share (“Common Stock”), and 5,000,000 shares of Series A preferred stock, par value $0.001 per share (“Series A Preferred Stock” and, together with the Common Stock, the “Capital Stock”), of the Company and (ii) each of the 100 shares of EGI’s common stock issued and outstanding immediately prior to the closing of the Merger was converted into 45,000,000 shares of Common Stock and 5,000,000 shares of Series A Preferred Stock. As a result, an aggregate of 90,000,000 shares of our Common Stock 10,000,000 shares of our Series A Preferred Stock were issued to EGLLC, as the sole stockholder of each of MTMI and EGI. MTMI and EGI did not have any stock options or warrants to purchase shares of their capital stock outstanding at the time of the Merger.

The Merger Agreement contained customary representations and warranties and pre- and post-closing covenants of each party and customary closing conditions. Breaches of the representations and warranties will be subject to customary indemnification provisions, subject to specified aggregate limits of liability.

The Merger will be treated as a recapitalization of the Company for financial accounting purposes. MTMI and EGI will be considered the acquirers for accounting purposes, and the historical financial statements of ESRI before the Merger will be replaced with the historical combined financial statements of MTMI and EGI before the Merger in all future filings with the SEC.

The parties have taken all actions necessary to ensure that the Merger is treated as a tax-free exchange under Section 368(a) of the Internal Revenue Code of 1986, as amended.

The issuance of shares of Common Stock and Series A Preferred Stock to holders of MTMI’s and EGI’s capital stock in connection with the Merger was not registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act, which exempts transactions by an issuer not involving any public offering, and Regulation D promulgated by the SEC under that section. These securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirement.

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Merger Related Agreements

At the closing of the Merger, Dylan Hundley, a holder of 5,751,000 shares of our Common Stock prior to the Merger, surrendered to us for cancellation all of her shares. Ms. Hundley agreed to the surrender of her shares to enhance our ability to complete the Merger and the Split-Off (discussed below).

Also at the closing of the Merger, holders of approximately $270,000 of ESRI convertible promissory notes surrendered these notes to ESRI for cancellation. These note holders agreed to release ESRI from any obligations to them relating to the notes.

Tri-Party Agreement; Security Interest in MTMI and EGI Assets; and Pledge of Series A Preferred Stock

From time to time between 2006 and 2009, EGLLC and MFPI Partners, LLC, a Delaware limited liability company whose sole members are Michael Feinberg and Patrick Imeson (“MFPI”), raised approximately $6,000,000 and $13,000,000, respectively, through the sale of promissory notes to certain investors (the “Secured Lenders”). The notes issued by EGLLC included a $5,000,000 secured note issued in 2006 and a $1,000,000 secured bridge note issued in 2009 and subsequently repaid in April, 2011. The $5,000,000 secured note was revised in May of 2009 to include accrued interest. The revised note is in the principal amount of $5,800,000. The notes issued by MFPI included an $8,000,000 note issued in 2007 and a $5,000,000 note issued in 2008. The MFPI notes were revised in May of 2009 to include accrued interest. The revised notes are in the principal amounts of $9,700,000 and $6,100,000 respectively. During that time, EGLLC raised an additional $16,500,000 from the sale of unsecured bonds issued at a 40% discount to face value to certain investors, including MFPI, which invested $8,000,000 in the unsecured EGLLC bonds from the proceeds of the $13,000,000 it borrowed from the Secured Lenders.

EGLLC used $5,000,000 from the 2006 notes to purchase a loan and mortgage on property owned by an unrelated mining company and used $14,250,000 of the $16,500,000 in proceeds from the issuance of the unsecured bonds to complete a joint venture with Apollo Gold, Inc. that entitled EGLLC to 50% of the assets and distributions of Montana Tunnels Mine – See Description of Business for additional information. In October 2009, EGLLC paid $250,000 in cash and in February 2010 assigned that loan and mortgage on the property owned by the unrelated mining company to Apollo Gold, Inc. for 100% ownership in MTMI (owner of Montana Tunnels Mine) and, concurrently with the closing of that payment and assignment, EGLLC and Apollo dissolved their joint venture.

In May 2009, as a condition to the additional $1,000,000 bridge loan (that was subsequently repaid) from the Secured Lenders to EGLLC and as an inducement for the Secured Lenders to stand still regarding an event of default on the part of EGLLC, (i) the $5,000,000 secured notes issued by EGLLC, (ii) the $8,000,000 loan to MFPI to purchase the unsecured bonds, (iii) a $5,000,000 loan to MFPI whose proceeds were used to make an unrelated investment¹ and (iv) a redemption right allowing the Secured Lenders to obligate MFPI to purchase from the Secured Lenders a $5,950,000 equity investment made in one of the investment funds that is an owner of EGLLC and is managed by Black Diamond have been included under a security agreement with the Secured Lenders.

¹ MFPI invested $5,000,000 in Global VR, Inc. a private company managed by Black Diamond Holdings, LLC, which is managed by Patrick Imeson and Eric Altman, principals of the Company

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Currently, the notes and rights secured by the Company’s assets include (i) approximately $21,600,000 in principal amount of notes, including the $5,800,000 issued by EGLLC in 2006, $9,700,000 issued by MFPI in 2007 and $6,100,000 issued by MFPI in 2008, plus accrued and unpaid interest thereon through May 2009, and (ii) the redemption rights on the Secured Lenders’ $5,950,000 equity investment in EGLLC. The approximate amount of principal, accrued but unpaid interest and redemption rights as of December 31, 2011 was approximately $46,350,000. The notes and rights have been secured by two first lien mortgages on all of the property and assets of EGI and MTMI. Under the terms of these mortgages, the administrative agent representing the Secured Lenders was required to consent to the transfer by EGLLC to ESRI of the capital stock of EGI and MTMI. Pursuant to the terms of a tri-party agreement by and among the Company, EGLLC and the administrative agent dated as of the Merger closing date, the administrative agent consented to this transfer and ESRI acknowledged and agreed to cause EGI and MTMI to perform and keep all the covenants and obligations set forth in the two mortgages.

Additionally, because certain of the secured notes were in default prior to the Merger closing date, the administrative agent required that EGLLC and MFPI enter into a loan reinstatement and modification agreement, effective as of the Merger closing date, pursuant to which EGLLC agreed to pledge, in accordance with the terms of a separate pledge agreement, to the Secured Lenders all of its interest in the Series A Preferred Stock. Under the tri-party agreement, the Company acknowledged and agreed to treat the administrative agent as the owner and holder of the Series A Preferred Stock upon notice from the administrative agent of a default by EGLLC under the pledge agreement.

Under the Merger Agreement, EGLLC has covenanted that, for so long as any of its payment obligations under the loan restatement and modification agreement remain outstanding, EGLLC will designate all proceeds derived from the Series A Preferred Stock, including from preferential dividends that may be paid on this stock, to repay principal and interest due on the secured loans.

Each of the tri-party agreement, loan reinstatement and modification agreement and pledge agreement has been filed as Exhibit 10.4, 10.3, and 10.5, respectively, to this Current Report and is incorporated herein by reference.

The EGI Bridge Financing

Prior to the closing of the Merger, EGI completed a number of closings of a bridge financing with Black Diamond Holdings LLC (“BDH”), our beneficial stockholder through holdings in EGLLC, and another investor. In this bridge financing, EGI sold an aggregate of $300,000 in principal amount of its 12% unsecured convertible bridge notes (the “Bridge Notes”) to BDH and $1,500,000 in principal amount of these Bridge Notes to the other investor. The Bridge Notes mature on August 29, 2012 and, prior to that date but after the closing of the Merger, may be converted, at the sole discretion of each of the note holders, including accrued but unpaid interest, into units of the Company’s securities (the “Units”) at a conversion price of $2.00 per Unit, each Unit consisting of: (i) one share of Common Stock, (ii) and a five year warrant to purchase one-half share of Common Stock, exercisable at a price of $3.00 per whole share, and (iii) a special warrant exercisable upon the closing of the Company’s planned private placement, provided the share price of the Common Stock offered in the private placement is less than $2.50 per share, so that the exercise of the special warrant will reduce the lender’s effective conversion price for the Common Stock at a 25% discount to the private placement offering price, such special warrant exercisable at a price of $0.01 per share

Split-Off

In conjunction with the Merger and concurrent with the closing of the Merger, ESRI split off (the “Split-Off”) its wholly owned subsidiary, Buzz Kill, Inc., a New York corporation (“Split Corp.”). Split Corp. had been formed to produce the feature length film entitled “BuzzKill” and to market the film to distributors in the United States and abroad. The Split-Off was accomplished through the exchange of 5,793,000 shares of our Common Stock held by certain ESRI shareholders (the “Split-Off Shareholders”) for all of the issued and outstanding shares of common stock of Split Corp. Thomas H. Hanna, Jr., our sole officer and director prior to the Merger, exchanged 5,755,000 shares of our Common Stock for Split Corp. shares as part of the Split-Off.  We executed a Split-Off Agreement and General Release Agreement with Split Corp. and the Split-Off Shareholders, copies of which are attached to this Current Report and are incorporated herein by reference.

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As an inducement to the Split-Off Shareholders to agree to the Split-Off, ESRI and Buzz Kill terminated and cancelled an investment agreement between them dated May 1, 2007. Pursuant to this agreement cancellation, ESRI relinquished its right to recoup its $800,000 investment in Buzz Kill and Buzz Kill no longer is required to share 50% of its net revenue from sales of the film BuzzKill with ESRI.

At the closing of the Merger, holders of approximately $233,755 of Split Corp. promissory notes agreed to release ESRI from any obligations ESRI might have had with respect to these notes having been the parent company of Split Corp. prior to the Split-Off.

2012 Equity Incentive Plan

Before the Merger, our Board of Directors (sometimes referred to herein as the “Board”) adopted, and our stockholders approved, the Company’s 2012 Equity Incentive Plan (the “2012 Plan”), which provides for the issuance of incentive awards of up to 10,000,000 shares of Common Stock to officers, directors, employees and consultants of the Company and its affiliates. No awards have been granted under the 2012 Plan.  See “Market Price of and Dividends on Common Equity and Related Stockholder Matters—Securities Authorized for Issuance under Equity Compensation Plans” below for more information about the 2012 Plan.

Departure and Appointment of Directors and Officers

Our Board consists of five members. On the Closing Date, Thomas H. Hanna, Jr., the sole director of the Company before the Merger, resigned his position as a director of the Company, and Patrick Imeson, Robert Trenaman, Michael Feinberg and Kenneth Hamlet were appointed to the Company’s Board.   Pursuant to the terms of the Merger Agreement, the stockholders of ESRI before the Merger have the right to designate one person as a director to fill the vacancy on the Board prior to the next annual meeting of stockholders of the Company.

Also on the Closing Date, Mr. Hanna, the sole officer of the Company before the Merger, resigned his position as an officer of the Company, and Patrick Imeson was appointed as our Chairman and Chief Executive Officer, Robert Trenaman was appointed as our President and Chief Operating Officer, Eric Altman was appointed as our Chief Financial Officer, Treasurer and Vice President–Finance, and Timothy G. Smith was appointed as a Vice President–General Manager–Montana Tunnels Mine. See “Management – Directors and Executive Officers.”

Lock-up Agreements and Other Restrictions

In connection with the Merger, holders (the “Pubco Holders”) of the free trading shares of ESRI immediately prior to the Merger (the “Public Float Shares”) entered into lock-up agreements with ESRI whereby the Pubco Holders agreed that forty percent (40%) of their Public Float Shares may not be sold for a period of twelve (12) months following the Merger closing date.

Further, for a period of twelve (12) months after the Merger closing, the Public Holders have agreed to be subject to restrictions on engaging in certain transactions, including effecting or agreeing to effect short sales, whether or not against the box, establishing any “put equivalent position” with respect to the Public Float Shares, borrowing or pre-borrowing any shares of Common Stock, or granting other rights (including put or call options) with respect to the Public Float Shares or with respect to any security that includes, relates to or derives any significant part of its value from the Public Float Shares, or otherwise seeking to hedge their position in the Public Float Shares.

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In addition, all officers, directors, stockholders holding ten percent (10%) or more of the Common Stock of ESRI after giving effect to the Merger and the Split-Off, and certain key employees (the “Restricted Holders”) have agreed that, for a period of twelve (12) months after the Merger closing date, the Restricted Holders will be subject to restrictions on engaging in certain transactions, including effecting or agreeing to effect short sales, whether or not against the box, establishing any “put equivalent position” with respect to shares of our Common Stock, borrowing or pre-borrowing any shares of Common Stock, or granting other rights (including put or call options) with respect to our Common Stock or with respect to any security that includes, relates to or derives any significant part of its value from our Common Stock, or otherwise seeking to hedge their position in the Common Stock.

Pro Forma Ownership

Immediately after giving effect to (i) the closing of the Merger and (ii) the cancellation of 5,793,000 shares of Common Stock in the Split-Off and an additional 5,751,000 shares of our Common Stock surrendered for cancellation by Dylan Hundley, there were 109,085,000 issued and outstanding shares of Capital Stock, as follows:

· EGLLC, as the sole stockholder of each of MTMI and EGI, held an aggregate of 90,000,000 shares of Common Stock and 10,000,000 shares of Series A Preferred Stock; and

· The stockholders of the Company prior to the Merger held an aggregate of 9,085,000 shares of Common Stock.

In addition,

· The 2012 Plan authorized issuance of up to 10,000,000 shares of Common Stock as incentive awards to officers, directors, employees and consultants; awards totaling 5,445,000 shares of Common Stock have been granted under the 2012 Plan; and

· The Bridge Notes, may be converted, at the sole discretion of each of the note holders, including accrued but unpaid interest, into Units of the Company’s securities at a conversion price of $2.00 per Unit, each Unit consisting of: (i) one share of Common Stock, (ii) a warrant to purchase one-half share of Common Stock, exercisable at a price of $3.00 per whole share, and (iii) a special warrant exercisable upon the closing of the Company’s planned private placement, provided the share price of the Common Stock offered in the private placement is less than $2.50 per share, so that the exercise of the special warrant will reduce the lender’s effective conversion price for the Common Stock at a 25% discount to the private placement offering price, such special warrant exercisable at a price of $0.01 per share

No other securities convertible into or exercisable or exchangeable for Common Stock (including options or warrants) are outstanding.

Our common stock is quoted on the OTC Bulletin Board under the symbol “ESRI”.

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Accounting Treatment; Change of Control

The Merger is being accounted for as a “reverse merger,” and MTMI and EGI are deemed to be the acquirers in the reverse merger. Consequently, the assets and liabilities and the historical operations that will be reflected in the financial statements prior to the Merger will be those of MTMI and EGI and will be recorded at the historical cost basis of MTMI and EGI, and the consolidated financial statements after completion of the Merger will include the assets and liabilities of MTMI and EGI, historical operations of MTMI and EGI and operations of the Company and its subsidiaries from the closing date of the Merger. As a result of the issuance of the shares of Common Stock and Series A Preferred Stock pursuant to the Merger, a change in control of the Company occurred as of the date of consummation of the Merger. Except as described in this Current Report, no arrangements or understandings exist among present or former controlling stockholders with respect to the election of members of our Board of Directors and, to our knowledge, no other arrangements exist that might result in a change of control of the Company.

We continue to be a “smaller reporting company,” as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), following the Merger.

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DESCRIPTION OF BUSINESS

Immediately following the Merger and the Split-Off, the business of MTMI and EGI, to engage in the exploration and production activities in the precious and base metal industry, became the business of the Company.

GENERAL BACKGROUND

Montana Tunnels Mining, Inc., a Delaware corporation (“MTMI”), was formed in 1998 to own and operate the Montana Tunnels gold-zinc-silver-lead open pit mining operation (the “Montana Tunnels Mine”). The Montana Tunnels Mine has been in operation since 1987. Elkhorn Goldfields, Inc., a Montana corporation (“EGI”), was formed in 1998 and owns the Elkhorn Project, which includes the Golden Dream mine – a planned gold-copper underground mining operation (“Golden Dream Mine”). Prior to the Merger, MTMI and EGI were wholly-owned subsidiaries of Elkhorn Goldfields, LLC, a Delaware limited liability company (“EGLLC”). EGLLC is a mining holding company and is owned by the private equity investment funds that are managed by Black Diamond Financial Group LLC, a Delaware limited liability company (“Black Diamond”).

Corporate History

Pegasus Gold Inc., a Province of British Columbia corporation (“Pegasus”), had operations in Montana, Nevada and Australia. Pegasus commenced operations at the Montana Tunnels Mine in 1987. In January 1998, due to struggling mine operations external to the Montana Tunnels Mine, Pegasus was unable to service approximately $238 million in debt and filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. Under the reorganization plan, Pegasus incorporated a holding company named Apollo Gold Inc., a Delaware corporation, and Apollo Gold Inc. became the owner/operator of the Montana Tunnels Mine.

During the second quarter of 2002, Apollo Gold Inc. was acquired by a Toronto Stock Exchange listed company – Nevoro Gold Inc. – which, upon closing of the acquisition, changed its name to Apollo Gold Corporation (“Apollo”) and traded publicly on the Toronto Stock Exchange as such.

On July 28, 2006, EGLLC earned a 50% interest in the Montana Tunnels Mine and related assets by providing $14,250,000 to establish a joint venture with Apollo to remediate the “L” Pit and put the Montana Tunnels Mine back into production. Montana Tunnels Mine is an open pit mine. Each pit expansion shell is named in alphanumeric order. The “L” Pit was the south and west wall layback. Before that was the “K” Pit which was the east wall layback.

In July 2006, EGLLC established, and owned 100% of, Elkhorn Tunnels, LLC to facilitate the joint venture with Apollo. The “L” pit was mined out in November 2008. In June 2009, Apollo advised EGLLC that it intended to market its position in the joint venture. EGLLC optioned to purchase Apollo’s interest which it exercised in the fall of 2009 and paid $250,000 as the first installment on the purchase. In February 2010, EGLLC and Apollo renegotiated the form of payment and the terms of the purchase of Apollo’s 50% interest in MTMI was modified to include the $250,000 cash already paid plus an assignment to Apollo of EGLLC’s interest in a certain loan and mortgage on a property owned by an unrelated mining company. Elkhorn Tunnels, LLC was dissolved following EGLLC’s completion of its acquisition of the remaining interest in MTMI.

EGI is the operator of the Golden Dream Mine located at 2725-A Elkhorn Road, Boulder, Montana. The mine is located near the historic town of Elkhorn which dates back to the 1870s. The Golden Dream Mine is located about 15 air miles south east of the Montana Tunnels Mine and the over-the-road distance between the mines is approximately 30 miles. EGI was purchased by Calim Private Equity, LLC from Elkhorn Gold Mining Corporation, a Canadian corporation, in October 2000. Calim Private Equity, LLC, a private equity company, later created EGLLC and assigned its 100% interest in EGI to EGLLC.

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montana tunnels mine

MTMI is an integrated mining company which is seeking to recommence mining and milling operations at the Montana Tunnels Mine. Currently, MTMI’s operations are limited to care and maintenance functions. MTMI’s staff engineers, in association with outside independent mining consultants, have designed a mine plan around the “M” Pit deposit of the Montana Tunnels Mine incorporating a proven and probable mineral reserve of 37.8 million tons (a ton is equal to 2,000 pounds) of ore containing 488,000 ounces of gold, 8.2 million ounces of silver, 358 million pounds of zinc and 124 million pounds of lead (the “M” Pit Mine Plan”), as documented in the Montana Tunnels Technical Report dated November 2010 (the “Nov. 2010 MTTR”). Table 21.3 M-Pit Production Schedule below:

	M-Pit Totals
TONS MOVED
Ore		20,166,779
Lowgrade Ore		17,562,688
Waste - Rock		136,143,834
Waste - Alluvium		-
Rehandle/Other/Topsoil		6,304,696
Total Tons Moved		180,177,997
TONS MILLED		37,820,640
Grade:   Au  (oz/ton)		0.0129
Ag  (oz/ton)		0.218
Pb   (%)		0.164
Zn   (%)		0.473
PRODUCTION (GROSS)
Gold (oz)		487,886
Silver (oz)		8,244,900
Lead  (lbs)		124,051,699
Zinc  (lbs)		357,783,254
PRODUCTION PAYABLE SOLD
Gold (oz)		346,681
Silver (oz)		4,651,964
Lead  (lbs)		87,971,673
Zinc  (lbs)		238,955,526

Source: Montana Tunnels Technical Report – Table 21.3 (page 113)

During 2011, gold prices peaked at $1,895 per ounce on the London Metal Exchange (“LME”) and silver prices reached levels not seen since 1980, exceeding $30 per ounce on the LME. As such, management believes that now is the ideal time to recommence development and production at the Montana Tunnels Mine.

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A common misconception is that the current gold prices and predictions are in record territory; however, in 1980 gold traded at an average of $1,849 and peaked at $2,337 in 2011 dollars. The chart below reflects this inflation adjusted pricing.

The Montana Tunnels Mine lies within Jefferson County, Montana – approximately 5 miles west of Jefferson City. Access to the mine site is from U.S. Highway #15 at the Jefferson City exit approximately 19 miles south of Helena, Montana. From Jefferson City the mine is located 3.5 miles along Spring Creek road.

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Aerial view of the existing open pit Mine at the Montana Tunnels Operation.

History of the Montana Tunnels Mine

To a large extent, mining activity developed and settled much of Montana during the 1860s and 1870s, including the historic “Wickes-Corbin” silver district in which the current Montana Tunnels Mine is centrally located. The Wickes-Corbin district thrived from the 1860s into the early 1890s, at which time the U.S. Government repealed the Sherman Silver Purchase Act (1893) sending silver prices plummeting and spelling the eventual demise of many silver producing mining camps, including the Wickes-Corbin camp.

In the early 1980s, with the price of silver trading at $50 per ounce on the LME, many historic silver camps were re-examined employing modern exploration techniques. It was during this period that the Montana Tunnels deposit – a named derived from the boring of two exploratory tunnels driven into the deposit in the early 1900s – was discovered. By 1986 Pegasus had commenced development of the Montana Tunnels Mine and construction of a 15,000 ton per day milling facility.

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View of the Montana Tunnels Milling Facility, Crushing Facility and Administrative offices.

The open pit mine is located to the top and left of this photograph.

Since the commencement of production at Montana Tunnels Mine in early 1987, the mine has produced, under its previous owners, 99.6 million tons of ore containing 1.7 million ounces of gold, 30.9 million ounces of silver, 551,400 tons of zinc and 202,800 tons of lead, as reported through public filings of the parent companies. Using average prices as of January 2012, the cumulative value of the metals mined from the Montana Tunnels Mine since 1987 would total in excess of $4 billion. All metals mined at the Montana Tunnels Mine were sold prior to 2010.

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The table below sets forth the Montana Tunnels Mine production history from 1987 to 2009.

Montana Tunnels Technical Report - November 2010

Table 1.1 Montana Tunnels Production History (Page 2)

		Mill Tons		Au		Oz Au		Ag		Oz A		Pb		Tons Pb		Zn		Tons Zn
Year		000's		oz Au/t		000's		oz Ag/t		000's		%		000's		%		000's
	1987		2,018		0.0198		39.9		0.485		979.7		0.377		7.6		0.923		18.6
	1988		3,982		0.0228		90.7		0.430		1,711.4		0.281		11.2		0.788		31.4
	1989		4,047		0.0204		82.5		0.488		1,974.5		0.250		10.1		0.674		27.3
	1990		4,149		0.0184		76.2		0.451		1,872.8		0.222		9.2		0.627		26.0
	1991		4,271		0.0185		78.9		0.428		1,829.7		0.233		10.0		0.638		27.2
	1992		4,573		0.0199		91.2		0.441		2,014.9		0.217		9.9		0.609		27.9
	1993		5,045		0.0173		87.5		0.440		2,218.5		0.195		9.8		0.523		26.4
	1994		5,411		0.0185		100.3		0.323		1,746.5		0.240		13.0		0.555		30.0
	1995		5,474		0.0202		110.8		0.314		1,716.4		0.200		11.0		0.582		31.8
	1996		5,467		0.0167		91.4		0.274		1,497.9		0.186		10.2		0.509		27.8
	1997		5,145		0.0194		100.0		0.242		1,245.3		0.224		11.5		0.576		29.6
	1998		4,833		0.0188		91.0		0.207		998.8		0.189		9.1		0.686		33.2
	1999		5,078		0.0174		88.2		0.225		1,142.7		0.203		10.3		0.614		31.2
	2000		5,384		0.0145		77.9		0.375		2,020.5		0.177		9.5		0.481		25.9
	2001		5,424		0.0168		91.0		0.281		1,525.2		0.182		9.9		0.552		29.9
	2002		2,881		0.0156		45.0		0.238		684.9		0.167		4.8		0.470		13.5
	2003		4,695		0.0157		73.5		0.202		947.4		0.193		9.1		0.440		20.6
	2004		5,394		0.0096		51.7		0.318		1,713.0		0.138		7.4		0.374		20.2
	2005		4,955		0.0130		64.3		0.190		939.8		0.155		7.7		0.337		16.7
	2006		1,427		0.0077		11.0		0.169		240.4		0.097		1.4		0.201		2.9
	2007		3,971		0.0123		49.0		0.221		876.4		0.197		7.8		0.466		18.5
	2008		4,510		0.0144		64.9		0.175		788.0		0.221		10.0		0.629		28.4
	2009		1,430		0.0100		14.3		0.176		251.0		0.160		2.3		0.442		6.3
Totals			99,563		0.0164		1,671.4		0.30		30,935.6		0.20		202.8		0.54		551.4

Products and mining industry trends

The deposit type currently being exploited at the Montana Tunnels Mine is precious and base metal mineralization (gold, silver, zinc and lead) occurring as disseminated and veined sulfides internal to a volcanic diatreme. Through the mining and treatment of the Montana Tunnels deposit, the mine will produce (i) gold, (ii) silver, (iii) zinc and (iv) lead. Minor amounts of other metals are also contained within the deposit but not of marketable quantities.

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Cross section cartoon depicting the Montana Tunnels deposit showing current Pit development.

I. Gold

Under the “M” Pit Mine Plan, over the 9 years that MTMI is planning to mine and treat ore at the Montana Tunnels Mine (the “Life of Mine”), we expect that 37.8 million tons of ore containing 488,000 ounces of gold will be mined and processed at the Montana Tunnels Mine, as documented in the Nov 2010 MTTR. Table 21.3 M-Pit Production Schedule. Considering associated dilution and deletion, mill recovery losses and smelter losses and deductions which are all within industry standards, we estimate that the Montana Tunnels Mine will produce 347,000 recoverable ounces of gold over the Life of Mine of the “M” Pit.

The Gold Market

The market for gold is large, liquid and global. Gold continues to see demand in the jewelry, industrial and health science industries; however, gold’s main demand comes in the form of safe haven investment. From economic, political and social uncertainty to a hedge against inflation, gold is, and has long been, considered by many a commodity of refuge from concerns with fiat currencies and their corresponding economies.

The World Gold Council (“WGC”), a leading international gold industry research organization, published on its website that total gold demand for the fourth quarter of 2011 rose 21% to 1,017 metric tonnes (a metric tonne is equal to 2,204.6 pounds) year-on-year. Of this increase, investment demand posted the largest segment increase, more than offsetting the decline in gold jewelry demand.

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Gold prices over the past five years (courtesy Kitco).

II. Silver

Over the planned Life of Mine for “M” Pit, we expect to mine and process 37.8 million tons of ore containing 8.24 million ounces of silver at Montana Tunnels Mine, as documented in the Nov. 2010 MTTR. (Source: Table 21.3 M-Pit Production Schedule). Taking Montana Tunnels Mine historical mine deletion, mill recoveries and industry-standard smelter payment terms into consideration, we estimate recovering 4.65 million recoverable ounces of silver (losses from reserve ounces to payable ounces are within industry standards).

The Silver Market

Unlike the gold market, demand within the silver market has been predominantly for fabrication – mainly industrial application, photography and jewelry – with investment making up only a small portion of total yearly demand.

Silver prices over the past five years (courtesy Kitco).

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III. Zinc

Over the planned Life of Mine for “M” Pit, we project total payable zinc production to be in excess of 239 million pounds, as documented in the Nov. 2010 MTTR. (Source: Table 21.3 M-Pit Production Schedule). At planned production rates, Montana Tunnels Mine should produce approximately 0.2% of the current annual global demand for zinc.

The Zinc Market

Zinc is fourth in terms of tonnage on the list of metals produced globally on an annual basis. Zinc is mainly used as coating to protect iron and steel from corrosion, as alloying metal to make bronze and brass, as zinc-based die casting alloy and as rolled zinc.

Pie chart depicting the various uses of Zinc.

As documented by the International Lead and Zinc Study Group, global zinc supply has been in a surplus situation since late 2007. This supply surplus is forecast to continue through 2012. It is currently projected that a supply shortfall will occur during 2013 and continues until 2017. As a result, due to the lengthy time to restart mine production, a zinc supply shortfall may likely exist for some years after Montana Tunnels Mine is anticipating a restart of its operations.

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Global Zinc supply and demand for years 2005 through 2010 (actual) and years 2011 through 2017 (forecast).

As of January 26, 2012, zinc prices are trading at around U.S. $1.00 per pound on the LME which is slightly above zinc’s 5-year average price as depicted in the chart below:

Zinc prices over the past five years (courtesy Kitco)

IV. Lead

Over the planned Life of Mine for “M” Pit, we project total recoverable lead production to be approximately 88 million pounds, as documented in the Nov. 2010 MTTR. Table 21.3 M-Pit Production Schedule.

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The Lead Market

As with the other metals that the Montana Tunnels Mine will produce, the market for lead is global in nature and active in terms of participants. This ensures that the metals produced from the Montana Tunnels Mine will be competitively priced.

Lead has been mined and used in daily life for at least 5,000 years, mainly for corrosion-resistant items such as roofs, pipes and windows. Lead’s use increased through the 1900s in items such as batteries and as an additive in gasoline until the mid-1980s when environmental regulations significantly reduced the use of lead in non-battery products. Per various public research publications, by the early 2000s the total demand for lead for use in battery-related items represented 88% of lead production. Other uses include ammunition, casting metals and oxides in glass and ceramics.

As of January 26, 2012, lead prices are trading at around U.S. $1.00 per pound on the LME which is slightly above lead’s 5-year average price as depicted in the chart below:

Lead prices over the past five years (courtesy Kitco)

In total, we project that the Montana Tunnels Mine “M” Pit deposit will produce 347,000 ounces of gold, 4.65 million ounces of silver, 239 million pounds of zinc and 88 million pounds of lead over the planned Life of Mine, as documented in the Nov. 2010 MTTR.

OPERATIONS SUMMARY

Mission. MTMI is an integrated mining company focused on the exploration, development and mineral extraction of the Montana Tunnels Mine. MTMI has produced gold, silver, zinc and lead from the Montana Tunnels Mine starting in 1987. We believe that extracting the remaining deposit will be more than ample to provide sufficient mineral resources to establish a mine plan to continue profitable mining and milling operations on the current target at Montana Tunnels Mine for approximately 9 years.

The Operations. The Montana Tunnels Mine is a fully integrated open-pit mine and concentrating facility. The goal in any successful metal mining operation is to take a lower concentration of metals per ton of rock – raw ore – and upgrade the valuable metal content per ton – while minimizing the loss of that metal content – thereby improving, or “concentrating” the value per ton.

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This process is generally done in three steps – (1) mining, (2) beneficiation (concentration) and (3) smelting.

1.           Mining Operations at Montana Tunnels Mine. There are four distinct stages to production mining at the Montana Tunnels Mine – (i) drilling, (ii) blasting, (iii) loading and (iv) hauling.

(i) Drilling – Following directions provided by the engineering, geological and technical staff, workers drill 6.75-inch diameter holes to depths of usually 20 feet on what are called “benches” using rotary percussion drills as depicted below. Samples from the drill piles are taken for analysis at the onsite assay lab to determine the ore value component of the rock to ensure, once the rock is blasted, that ore is being taken to the concentrator and waste is taken to the waste areas.

(ii) Blasting – Once drilling is completed on a “bench”, the drilled out holes are filled with ANFO explosive (ammonium nitrate/fuel oil mixture) and, following a detonation pattern, are blasted.

(iii) Loading – The blasted rock material is loaded by 21 yard shovels or by 13 yard front-end loaders into waiting haul trucks.

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(iv) Hauling – A fleet of haul trucks capable of hauling between 85 to 150 tons of ore or waste material per load work in unison with the loaders to quickly remove the blasted rock to the crushing facility, in the case of ore or, in the case of waste, to the waste rock dump for eventual reclamation. Once the blasted material is removed, the next cycle of drilling commences again.

2.           Beneficiation Operations at Montana Tunnels. Beneficiation is the act of crushing and separating ore into valuable substances by any of a variety of techniques so that metal can be recovered at a profit. Montana Tunnels Mine beneficiation plant is rated at 15,000 tons per day and consists of three distinct stages – (i) crushing, (ii) grinding and (iii) flotation & filtration.

(i) Crushing – Ore grade material from the mine is delivered to the crushing circuit where primary and secondary “jaw crushers”, used in series, crush the rock to between 5” and 7” in size. At times, ore from the open-pit is too large to enter the mouth of the jaw crusher and pneumatic rock breakers are employed to reduce the size to enable the rock to enter the jaw crusher. The crushed rock is stored on the “coarse ore stockpile” awaiting entry into the grinding circuit.

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Ore leaving the crushing circuit going to the coarse ore stockpile

(ii) Grinding – From the coarse ore stockpile apron feeders draw the ore onto conveyor belts and deliver the coarse ore to a semi-autogenous grinding mill where it is mixed with water and 5” steel balls and ground to create coarse slurry. This slurry discharges from the semi-autogenous mill and, dependent upon size, is either sent to a cone crusher if oversized, or sent to the ball mill for further size reduction. The oversized material, once treated by the cone crusher, re-enters the semi-autogenous mill for additional grinding before being directed to the ball mill for additional size reduction.

The ground ore material/slurry from the ball mill is pumped to the gravity circuit where gravity cyclones (funnel-shaped devices that separate particles entering the funnel by density), Knelson concentrators (machines that utilize the principles of a centrifuge to enhance gravitational force experienced by feed particles to effect separation based on particle density), sluices (troughs with riffles in the bottom that provide a lodging place for heavy or dense material such as gold) and separating tables work to separate the coarse gold-silver particles from the slurry. This gold-silver concentrated product is smelted onsite to produce doré bullion bars or flats.

Material passes from the gravity circuit to hyrocyclones where it is once again separated. The oversized material from this separation reports back to the ball mill for further grinding while the fine slurry or pulp material is pumped to the lead flotation circuit to commence the flotation and filtration process.

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Montana Tunnels Semi-Autogenous Mill (left) and Ball Mill (right).

(iii) Flotation and filtration – The flotation circuit is made up of a series of large tanks, or cells, with each cell containing an agitator and air blower. There is a set of cells for concentrating the lead minerals and an independent set of cells for concentrating the zinc minerals.

The process for concentrating the minerals occurs as the mineralized pulp enters the first in this series of tanks. At this point two reagents – a frothing reagent and a collecting reagent – are added to the pulp. These reagents create the conditions within the tanks to compel the lead and lead-associated minerals to attach to “bubbles” created by the frothing reagent mixed with air from the air blower. These mineral-ladened bubbles are collected through this series of cells, cleaned, thickened and filtered using a drum filter to make a final lead concentrate. Historically, the Montana Tunnels Mine lead concentrates contain 50% to 55% lead, 2.0 to 3.5 ounces per ton gold and 20 to 50 ounces per ton silver. Moisture content is between 8% and 10%.

After the pulp exits the final lead cell, reagents are again introduced to the pulp which activates the zinc minerals to attach to bubbles. As with the lead circuit, these zinc-ladened bubbles are collected, cleaned, thickened and filtered – this time using a pressure filter – to make a final zinc concentrate. The Montana Tunnels Mine final zinc concentrate traditionally have contained 52% to 56% zinc, 0.1 to 0.3 ounces per ton gold, 5 to 20 ounces per ton silver with a moisture content of between 8% and 10%.

Finally, with this pulp denuded of minerals it is pumped to a designed and approved area for storing the treated waste fraction of an ore or the “Tailings Impoundment Area” for eventual reclamation.

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Schematic of Montana Tunnels beneficiation operations

3.           Smelting and Refining of the Montana Tunnels Mine Products. We project that for the Life of Mine of the “M” Pit deposit, annual production of lead concentrate will be 16,000 tons and annual production of zinc concentrate will be approximately 46,000 tons, based upon historical production and the Nov. 2010 MTTR. Smelting of these concentrates has traditionally been carried out at a smelter facility in Trail, British Columbia, Canada which is owned by mining conglomerate Teck Corp. While we anticipate competitively shopping for alternative smelter facilities, we have identified Teck Corp. as the best situated smelting facility for the Montana Tunnels Mine.

From the Montana Tunnels Mine, lead and zinc concentrates are loaded separately into over-the-road haul trucks and delivered to railheads near Helena, Montana. From there, the concentrate products are delivered to Teck Corp.’s lead and zinc smelter approximately 400 miles via rail from Helena, Montana where they are smelted and refined into saleable lead and zinc products. Teck Corp. charges MTMI a smelting charge per metric tonne which is within industry standards.

A third product produced from the Montana Tunnels Mine is gold doré flats (a mold of semi-pure alloy consisting of gold and silver created at the mine site). Historically, between 8% to 12% of the gold recovered at Montana Tunnels reports to the gravity circuit and is smelted onsite into doré flats. In the past, these doré flats have been refined into gold bars by Johnson Matthey Inc.’s refining facility in Salt Lake City, Utah.

Montana Tunnels Mine “M” Pit Expansion

In December 2008, Montana Tunnels Mine was placed into a care and maintenance operational mode at the completion of the “L” Pit permit. The newly permitted “M” Pit is an expansion of the existing “L” Pit to enable the Company to continue to mine an additional 37.8 million tons of ore as an extension to the same ore body that has been previously mined since the inception of the Montana Tunnels Mine operation. The expansion plan will “layback” or expand the perimeter of the current pit making it wider, and making an additional 7.0 years of ore available to be mined from the bottom of the expanded pit.

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We have completed ore-delineation drilling beneath the current pit elevation and have identified proven and probable reserves of the “M” Pit expansion as detailed in the table below:

Proven and Probable Reserves Montana Tunnels Technical Report Montana Tunnels Mining, Inc.
			Grade
Pit Design	Classification		Tons		Gold		Silver		Lead			Zinc
M – Pit		Proven		27,673,000		0.0129		0.212		0.164	%		0.487	%
M – Pit		Probable		10,105,000		0.0129		0.211		0.160	%		0.434	%
Total 2P Reserves				37,778,000		0.0129		0.212		0.163	%		0.474	%

Gold and Silver grades in ounces per ton, Lead and Zinc grades as percentage mineral content.

In 2004, MTMI commenced the process of permitting the “M” Pit expansion by filing a major amendment to the Montana Tunnels Operating Permit #00113 to expand the open pit and process ores from the “M” Pit mine design. An updated Environmental Impact Statement was completed and Records of Decisions to mine and process the “M” Pit were finally received in November 2008, subject to the addition of approximately $16 million to the current $18 million of reclamation bonds pledged by MTMI with the Montana Department of Environmental Quality (“MDEQ”). The reclamation bond can be in the form of cash, surety bond, letter of credit, company-owned land or a combination of any of these subject to the approval of the MDEQ.

The “M” Pit Mine Plan calls for an 18 to 24 month period of pit expansion development in which 53 million tons of waste rock will be removed to access the ore below the waste rock. The “M” Pit Mine Plan is contingent on the Company obtaining the capital required to begin the expansion development. The Company will seek to obtain funding from debt and the capital markets. If the Company is unable to secure acceptable terms from these markets the expansion development will begin only when the cash flow from the Golden Dream Mine (discussed below) can support the capital needs of the Plan.

Although we expect that some fringe ores will be encountered during the pit expansion, this ore will be stockpiled during the pit expansion phase. Only after primary ores are being mined from the pit on a continuous and sufficient basis to maintain continuous operation of the concentrator, will ore processing through the concentrator begin. It is planned that this will occur approximately 18 to 20 months after commencement of “M” Pit expansion development. Cash flow is expected to begin the month after the concentration mill is restarted.

Currently, MTMI has eight staff individuals working at the mine site conducting care and maintenance of the mine. This team also supports operations at the Golden Dream Mine (see discussion below). These individuals occupy the key positions in management, engineering, environmental, human resources and accounting. Upon financing, MTMI will quickly increase the number of full-time hourly employees to approximately 160 and 190 individuals. Being within commuting distance from Montana’s capital city – Helena – and the major mining communities of Butte and Whitehall should allow for a quick filling of these hourly positions. In August 2006, when MTMI re-commenced operations, it took approximately 4 weeks to hire 125 qualified mine equipment operators and mechanics. In August 2006, the unemployment rate in Montana was 3.3%. As of December 2011, unemployment in Montana was approximately 6.6%, according to the United States Department of Labor, Bureau of Labor Statistics.

The existing Montana Tunnels Mine mining equipment has been in use since the early-to-mid 1990s and, as such, now is prone to maintenance costs and associated downtime. We plan to use the existing mining fleet at Montana Tunnels Mine augmented with new equipment as it becomes available. The existing and new planned equipment are listed in the tables below:

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Existing Equipment Description	Size	Quantity
Caterpillar 5230 Hydraulic Front Shovel	21 cubic yard	2
Caterpillar 992 Loader	13.5 cubic yard	3
Caterpillar 785 Truck	150 ton	12
Caterpillar 777 Truck	85 ton	2
Caterpillar D9N Bulldozer	370 Horsepower	2
Ingersoll-Rand DN45E Drill	6.75 inch hole	3
Caterpillar 16-G Motor Grader	16 foot blade	2
Caterpillar 950 F11 Loader		1
Caterpillar 325B Excavator		1

Existing Montana Tunnels Mining Equipment

New Equipment Description	Size	Quantity
Shovel – Terex, Komatsu, Caterpillar	20 cubic yard	2
Caterpillar 993K Loader	15 cubic yard	1
Caterpillar 785D Truck	150 ton	9
Caterpillar D10T Bulldozer		1
Caterpillar D9T Bulldozer		1
Caterpillar D25KS Drill		2
Caterpillar 16-M Motor Grader	10.1 foot blade base	2
Light Plant		4
Lube Truck		2
Stemming Truck		1
Caterpillar 777D/Water Truck		1

New Equipment planned for Montana Tunnels Mine “M” Pit expansion

As described above under the beneficiation section, the existing Montana Tunnels Mine concentrating and processing facility equipment consists of a number of components used in the crushing, grinding, flotation and filtration of gold, zinc, silver, lead and copper ores. In April 2009, the MTMI concentrator was turned off in a systematic way over a period of three weeks to ensure that recommencement of the facility would be seamless. All components of the MTMI concentrating facility are intact and the only piece of equipment contemplated to be replaced is the zinc pressure filter. Replacement of this component will be carried out in conjunction with the restart of the MTMI concentrating facility.

The Montana Tunnels Mine operation has been through several phases of exploration, development and production since the mid-1980s. Through this quarter century of operational experience, our management team has acquired the skills and knowledge to accurately plan and project development and operations timelines and costs.

The operational and cost components with the greatest influence relate to: (i) grade of the ore; (ii) mill recoveries; (iii) development and mining costs; and (iv) smelting and outside treatment costs. The grade of Montana Tunnels Mine “M” Pit has been delineated to standards employing defined requirements as set by the mining industry.

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Historical – 1988 through 2009 – Montana Tunnels Mine mill recoveries for each of the payable metals are compiled in the table below (mill recovery is a calculation showing the percentage of recovered metals by analyzing the grade of pre-processed rock (heads) and comparing that with the grade of the same post-processed rock (tails)):

Metal	Gold			Silver			Lead			Zinc
Mill Recovery		79.9	%		73.7	%		86.0	%		84.7	%

Montana Tunnels Mine Historical Mill Recoveries (1988 through 2009)

MTMI’s engineering and management staff have projected development and operating costs combining a mix of the planned new equipment and existing equipment applying each particular piece of equipment’s operating specifications.

Over the 20-plus years of operations at Montana Tunnels Mine, various smelting and outside treatment options have been explored and utilized. Because of its relative proximity and its smelter payment terms, the most appropriate smelter for Montana Tunnels’ zinc and lead concentrates, found to date, is Teck Corp.’s Trail, B.C. Smelter. World benchmark smelter treatment charges are established annually between miners and smelters for both zinc and lead concentrates.

A gold doré flat ready for shipment to

Johnson Matthey Inc. (2006)

The ELKHORN project and the Golden Dream Mine

The Golden Dream Mine lies within the boundaries of EGI’s Elkhorn Project approximately 35 road miles to the south-east of the Montana Tunnels Mine. The Elkhorn Project consists of a collection of patented and unpatented mineral claims totaling approximately 4,500 acres.

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The Elkhorn Project and Golden Dream Mine are located approximately 35 road miles from Montana Tunnels.

Similar to the area in which the Montana Tunnels Mine is located, the area in which the Golden Dream Mine is located was extensively explored and settled during the 1870s through the 1890s. The present ghost town of Elkhorn, which lays just outside the Elkhorn Project property boundaries, once boosted a population in excess of 2,000 people in the 1880s. The major operating mine during this period was the Elkhorn Mine, a silver-lead mine, but several smaller silver, gold and copper mines were also being worked in the area. By 1894, the town’s population had diminished to 600 people and mining activity – due in large part to the collapse in silver prices – steadily declined through the 1890s.

During the early 1980s reconnaissance exploration started on the Elkhorn Project. Over the next decade extensive core drilling, analysis, planning and design work was carried out by Gold Fields Corp. (NYSE: GFI) and Santa Fe Pacific Gold Corp (“Santa Fe”) on the Elkhorn Project. In 1997 Newmont Corp (NYSE: NEM) acquired Santa Fe thereby creating the opportunity for EGI to acquire the Elkhorn Project.

At the time EGI acquired the Elkhorn Project from Newmont in 1998, exploration work performed by Santa Fe Pacific Gold Corporation had identified a geologic resource containing 1.653 million ounces of gold located within four deposits – Carmody, Gold Hill, East Butte and Golden Dream .

During EGI’s ownership of the Elkhorn Project it has focused its ore delineation drilling, analysis, design, planning and permitting on the Golden Dream deposit. EGI staff engineers have outlined in an internal feasibility study of the Golden Dream deposit a probable underground mineral reserve of 1.17 million tons containing 258,000 ounces of gold and 8.3 million pounds of copper and designed a Mine Plan around this mineral reserve as depicted below in computer-generated Mine Plan model.

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Computerized schematic of the Golden Dream Mine showing planned tunnels and actual drill holes and ore blocks.

Unlike the Montana Tunnels Mine, the Golden Dream Mine is an underground mine with tunnels being approximately 14 feet high and 14 feet wide. The solid green bands in the above computer model represent the tunnels accessing the initial ore and the various other ore levels. It will be through these tunnels that the mined ore will be transported to the surface and then transported by haul trucks to the Montana Tunnels Mill Facility for processing (once the Montana Tunnels Mill Facility is up and running). Prior to the restart of the Montana Tunnels Mine Facility the ore may be shipped to other regional mills for processing.

Production mining will be undertaken using two different methods – cut-and-fill and sub-level stopping. The cut-and-fill method will be utilized on the upper levels of the Golden Dream Mine which are more oxidized or weathered.

Although the cut-and-fill method of mining is more expensive on a per ton basis, it is used in mining situations where waste rock, or country rock, around the ore to be mined is weaker and subject to falling in and diluting the ore. In the cut-and-fill mining method, ore is mined or “cut” along strike by driving a tunnel to remove the ore. This “cut” is then backfilled with cemented “fill” and another cut in the ore is driven alongside or above the cemented fill. The cemented backfill provides additional support to the country rock. Utilizing this mining method in the oxidized portions of the Golden Dream Mine should reduce dilution to the ore and provide a stable pillar that will not collapse or subside as the deeper sub-level areas are opened and mined.

As the mine reaches a depth below the first 150 feet of ore, the country rock turns from an oxidized, or weathered, material to a more solid, competent rock. At this point production mining will move from the cut-and-fill method to a sub-level stopping method. In the sub-level mining method, two drifts are driven, one at the top and one at the bottom of a block of ore 45 to 60 feet thick. Holes can then be drilled between the two levels and loaded with explosives and the ore blasted out. The mined out areas remaining from this procedure would be backfilled with loose rock or cemented backfill, if needed, for ground support.

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The broken ore from either method of mining will be loaded into underground haul trucks and transported to the surface where it will be transferred into 30 ton covered over-the-road haul trucks and transported to the Montana Tunnels Mill Facility for processing (once the Montana Tunnels Mill Facility is up and running). Prior to the restart of the Montana Tunnels Mine Facility the ore may be shipped to other regional mills for processing.

Whereas in an open-pit operation the general goal is to move material for the lowest cost per ton – a bulk mining exercise – the general goal in an underground operation is to move fewer tons of material with the highest grade – an ore control exercise. Using the geologic model determined by core drilling analysis, staff engineers and geologists completed a production model and associated financial pro-forma employing capital and operating costs, mill recoveries and outside smelting and refining charges.

The current Golden Dream Mine Plan extends only to a depth of approximately 850 feet below surface. Drill intercepts by the prior owners of the Elkhorn Project have intersected ore grade mineralization on the Golden Dream deposit to depths of 1,400 feet below surface. EGI has also completed drilling and analysis laterally along the Golden Dream Mine deposit mineralized structure with positive results. Although the drill density in these locations is insufficient to define them as mineral reserves, there is a strong likelihood that additional mineable reserves will be identified upon commencement of mining operations at the Golden Dream Mine.

In addition to the mineralization in and around the Golden Dream Mine deposit, EGI and the property’s predecessors have completed drilling on the other mineralized deposits on the Elkhorn Project, namely Gold Hill, East Butte and Carmody. The current Elkhorn Project reserves and resources, as reported in the Santa Fe prefeasibility and EGI feasibility studies, including all deposits are outlined in the table below:

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Golden Dream Project Underground Development

During the third quarter of 2011, EGI commenced development of the Golden Dream deposit. As of April 6, 2012, EGI has developed approximately 650 feet of 14’ X 14’ main underground access tunnel and 350 feet of 12’ X 12’ underground ore access tunnel to reach a specific level of the ore body. We are currently completing underground and surface water treatment and disposal infrastructure pursuant to our Operating Permit and, upon completion of this work we will commence development of the next stage at the decline into the lower level ore zones.

Golden Dream Main Access Decline (September 2011)

Company’s Two-Boom Jumbo working in 6500 level ore access ramp at Golden Dream Deposit (November 2011)

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Trench being completed for Golden Dream water disposal (January 2012).

Golden Dream Main Access Decline and Mine shop buildings in background

Compliance with Government and Environmental Regulation

The Company’s mining, processing operations and exploration activities are subject to various laws and regulations governing the protection of the environment (federal regulator is the Bureau of Land Management (“BLM”) and state regulator is the Montana Department of Environmental Quality (“MDEQ”), exploration (BLM and MDEQ), mine safety, development and production (federal regulator is the Mine Safety and Health Administration (“MSHA”), exports, taxes, labor standards, occupational health (MSHA), waste disposal (BLM and MDEQ), toxic substances, water rights (federal regulator is the Department of Natural Resources and Conservation (“DNRC”), explosives (federal regulator is the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”) and other matters. New laws and regulations, amendments to existing laws and regulations or more stringent implementation of existing laws and regulations could have a material adverse impact on the Company, increase costs, cause a reduction in levels of, or suspension of, production and/or delay or prevent the development of new mining properties.

The Company believes it is currently in compliance in all material respects with all applicable environmental laws and regulations. Such compliance requires significant expenditures and increases mine development and operating costs. Mining is subject to potential risks and liabilities associated with pollution of the environment and the disposal of waste products occurring as a result of mineral exploration and production. Environmental liability may result from mining activities conducted by others prior to the Company’s ownership of a property. To the extent the Company is subject to uninsured environmental liabilities, the payment of such liabilities would reduce the Company’s otherwise available earnings and could have a material adverse effect on the Company. Should the Company be unable to fully fund the cost of remedying an environmental problem, it might be required to suspend operations or enter into interim compliance measures pending completion of the required remedy, which could have a material adverse effect on the Company. In addition, the Company does not have coverage for certain environmental losses and other risks as such coverage cannot be purchased at a commercially reasonable cost.

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Licenses and Permits

The Company’s operations require licenses and permits from various governmental authorities. The Company believes it holds all material licenses and permits required under applicable laws and regulations and believes it is presently complying in all material respects with the terms of such licenses and permits. However, such licenses and permits are subject to change in various circumstances. There can be no guarantee that the Company will be able to obtain or maintain all necessary licenses and permits that may be required to explore and develop its properties, commence construction or operation of mining facilities and properties under exploration or development or to maintain continued operations that economically justify the cost.

Mine Safety and Health Administration Regulations

We consider health, safety and environmental stewardship to be a core value for the Company.

Pursuant to Section 1503(a) of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act, issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities. During the fiscal year ended December 31, 2011, the Company reported no lost time accidents. During this same fiscal year the Company incurred nine MSHA citations, seven of which have been cleared. The remaining two citations are being contested. All of the citations are covered by Section 104 (a) of the Mine Safety Act.

Competition

Because the life of a mine is limited by its mineral reserves, the Company is continually seeking to replace and expand its reserves through the exploration of existing properties as well as through acquisitions of interests in new properties or of interests in companies which own such properties. The Company encounters competition from other mining companies in connection with the acquisition of properties and with the engaging and maintaining of qualified industry experienced personnel. This competition may increase the cost of acquiring suitable properties and retaining qualified industry experienced personnel.

Employees

As of December 31, 2011, we had 18 full-time employees and two part-time employees, including our executive officers.  We believe the relationship we have with our employees is good.  In 2012 we anticipate the need to hire additional technical, mining and administrative personnel. Although demand for quality staff is high in the mining industry, we believe we will be able to fill these positions in a timely manner.

Financial Statements and “Going Concern” Opinion

The auditor’s report accompanying our audited financial statements for the years ended December 31, 2011 and 2010, included in Item 9.01 of this Current Report, contained an explanation that our financial statements were prepared assuming that we will continue as a going concern.  The report cites the generation of significant losses from operations, an accumulated stockholders’ deficit, and a working capital deficit.  Our ability to continue operating as a going concern will depend on our ability to derive sufficient funds from sales of equity and/or debt securities or our creation of a source of recurring revenue, to generate operating capital in excess of our required cash expenditures and, thereafter, to generate sufficient funds to allow us to effectuate our business plan.  Further, to the extent that funds for our operations and business plan are required that exceed our gross revenues, our ability to continue operating as a going concern will also depend on our ability to obtain sufficient financing, whether in the form of debt or equity.  We cannot provide any assurance that we will have sufficient sales or that sufficient financing will be available to us on terms or at times that we may require.  Failure in any of these efforts may materially and adversely affect our ability to continue our operations or for you to receive any positive return on your investment in us.

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DESCRIPTION OF PROPERTIES

Montana Tunnels Mine, Jefferson City, Montana

The Montana Tunnels Mine is an open pit poly-metallic mine located about five miles west of Jefferson City, Montana and operated between 1987 and 2009. The mine is located in the historic “Wickes-Corbin” mining district in Section 8 of Township 7 North, Range 4 West, with approximate latitude of 46° 22’ and longitude 112° 8’. The administrative offices are located at 270 Montana Tunnels Road, Jefferson City, Montana.

The total land area controlled by the Montana Tunnels Mine is 9,293 acres consisting of 2,404 acres of wholly or partially owned Patented Mineral Claims², 45 acres of leased Patented Mineral Claims, 2,584 acres of fee land, and 4,260 acres of Unpatented Mineral Claims.

The area encompassed in MTMI’s M-Pit Permit Boundary and outlying facilities is 2,385 acres of which greater than 90% is privately owned by MTMI. Within this Permit Boundary 332 acres are designated for the M-Pit Mine open-pit area and perimeter of which greater than 99% is overlain by private property wholly owned by MTMI. Within the M-Pit Mine open-pit area lays one 0.3 acre Unpatented Mineral Claim (MF-1) and three leased Patented Mineral Claims (Mineral Survey numbers 6758, 6634 and 6640). The three leased Patented Mineral Claims carry a 4.5% Net Smelter royalty but overlie minor amounts of mineralization and insignificant royalty payments are anticipated when this area is eventually mined.

In October and November, 2008 MTMI was granted positive Records of Decisions by the lead government regulating agencies – the Montana Department of Environmental Quality ("MDEQ") and the Bureau of Land Management (“BLM”) – approving a major amendment – the M-Pit Expansion Plan – to Operating Permit #00113, subject to the placement of a Reclamation Bond pursuant to the approved Mining and Reclamation Plan.

Mortgages on MTMI Property

A Mortgage, Security Agreement, Assignment of Leases and Rents, and Fixture Filing in favor of the administrative agent of certain Secured Lenders to EGLLC and MFPI has been executed and delivered by MTMI, as mortgagor for the benefit of the Secured Lenders, recorded on February 22, 2010 in the official records of Jefferson County, Montana as documents numbered 236384 (mortgage) and 236385 (UCC filing).

Elkhorn Project – The Golden Dream Mine, Boulder, Montana

The Elkhorn Project consists of four known gold and gold-copper mineral deposits which we are planning to operate using underground mining methods. The property is located 22 miles southeast of Helena, Montana and occupies portions of Sections 9, 10, 11, 14, 15 and 16 in Township 6 North, Range 3 West with approximate latitude of 45° 15’ and longitude of 111° 55’. The administrative offices are located at 2725-A Elkhorn Road, Boulder, Montana.

² A Patented Mineral Claim is a claim on which a patent has been secured from the United States Government and exclusive title has passed to the claimant. It gives the owner title to the surface rights, locatable minerals and other resources. An Unpatented Mineral Claim is a parcel of Federal land on which the claimant is provided rights to locatable minerals but no land ownership rights are conveyed to the claimant.

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The Elkhorn Project consists of 236 Unpatented Mineral Claims encompassing approximately 4,000 acres and 35 wholly or partially owned Patented Mineral Claims encompassing an additional 573 acres.

In 2007 EGI applied for a Mine Operating Permit to allow for the extraction of between 500 and 1,000 tons per day from an underground mine located on its 100% owned Golden Dream Mineral Claim (US Mineral Survey #7176). The Company’s application sought a Mine Permit boundary consisting of 382.5 acres of Patented Mineral Claims surrounding the Golden Dream Claim. Approximately 40% of the Patented Mineral Claims contained within the Mine Permit boundary are subject to a Mining Lease Agreement with Mt. Heagan Development Inc. whereby EGI leases the Mineral Claims from Mt. Heagan subject to a “3% Net Return royalty from any ores, mineral or other products removed” from the Mineral Claims covered under the terms of the Agreement. EGI pays to Mt. Heagan an “advanced minimum royalty” of $5,000 per month which is “creditable and recoupable” against any production royalty payments. The remaining 60% of the Patented Mineral Claims contained within the Mine Permit Boundary are 100% owned by EGI.

In July, 2008 the Company was granted an Operating Permit by the lead government regulating agency – the MDEQ – subject to the placement of a Reclamation Bond pursuant to the approved Mining and Reclamation Plan.  In November 2011, upon EGI posting the necessary Reclamation Bond in the amount of $591,474, the MDEQ approved the Golden Dream Operating Permit #00173.

Mortgages on EGI Property

A Mortgage, Security Agreement, Assignment of Leases and Rents, and Fixture Filing in favor of the administrative agent of certain Secured Lenders to EGLLC and MFPI has been executed and delivered by EGI, as mortgagor for the benefit of the Secured Lenders, recorded on May 29, 2009 in the official records of Jefferson County, Montana as documents numbered 233612 (mortgage) and 233614 (First Priority UCC filing).

In connection with a Minerals Product Receivables Purchase Agreement (the “MPRPA”) dated as of April 15, 2011, by and among EGI, EGLLC and BDH and a related security agreement of the same date by and between EGI and BDH, a UCC-1 (#584640340) was filed with Montana Secretary of State on November 17, 2011 with BDH as the secured party. This UCC-1 covers certain of EGI’s assets and property pursuant to the security agreement dated April 15, 2011.

Description of Corporate Offices

The Company’s corporate offices are located at 1610 Wynkoop Street, Suite 400, Denver, Colorado 80202 in space provided by Black Diamond Financial Group, LLC (“Black Diamond”). The corporate offices are maintained by two of the Company’s officers and accounting, finance and administrative support staff. Currently, the Company’s cost for this office space is covered under its Management Services Agreement with Black Diamond pursuant to which it pays Black Diamond $15,000 per month. See Executive Compensation – Management Services Agreement for additional information.

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RISK FACTORS

Our business is to engage in exploration and production activities in the precious minerals mining industry, which is a highly speculative activity. An investment in our securities involves a high degree of risk. You should not invest in our securities if you cannot afford to lose your entire investment. In deciding whether you should invest in our securities, you should carefully consider the following information together with all of the other information contained in this Current Report. Any of the following risk factors can cause our business, prospects, financial condition or results of operations to suffer and you to lose all or part of your investment.

RISKS RELATED TO OUR BUSINESS AND FINANCIAL CONDITION

Estimates of mineralized material are based on interpretation and assumptions and may yield less mineral production under actual conditions than is currently estimated.

There are numerous uncertainties inherent in estimating quantities of mineralized material such as gold, zinc, lead, copper and silver, including many factors beyond our control and no assurance can be given that the recovery of mineralized material will be realized. In general, estimates of mineralized material are based upon a number of factors and assumptions made as of the date on which the estimates were determined, including:

§ geological and engineering estimates that have inherent uncertainties and the assumed effects of regulation by governmental agencies;

§ the judgment of the engineers preparing the estimates;

§ estimates of future metals prices and operating costs;

§ the quality and quantity of available data;

§ the interpretation of that data; and

§ the accuracy of various mandated economic assumptions, all of which may vary considerably from actual results.

Until mineralized material is actually mined and processed, it must be considered an estimate only.  These estimates are imprecise and depend on geological interpretation and statistical inferences drawn from drilling and sampling analysis, which may prove to be unreliable.  We cannot assure you that these mineralized material estimates will be accurate or that this mineralized material can be mined or processed profitably.  Any material changes in estimates of mineralized material will affect the economic viability of placing a property into production and such property’s return on capital.  There can be no assurance that minerals recovered in small scale metallurgical tests will be recovered at production scale.

We may have difficulty meeting our current and future capital requirements.

Our management and our board of directors monitor our overall costs and expenses and, if necessary, adjust our programs and planned expenditures in an attempt to ensure we have sufficient operating capital.  We continue to evaluate our costs and planned expenditures for our on-going development and care and maintenance efforts at our mineral properties. We raised in excess of $10 million during our 2011 fiscal year from that certain MPRPA dated as of April 15, 2011 between EGI, EGLLC and BDH, and increased our cash and cash equivalent assets by $296,774. In February 2012, we raised an additional $1.8 million in bridge financing. However, the continued development and care and maintenance of our mineral properties will require significant amounts of additional capital.  As a result, we may need to explore raising additional capital during fiscal 2012 and beyond so that we can continue to fully fund our planned activities.  Our ability to obtain this financing will depend upon, among other things, the price of gold and the industry’s perception of its future price. The extraordinary conditions in the global financial and capital markets have currently limited the availability of this funding.  Therefore, availability of funding is dependent largely upon factors outside of our control, and cannot be accurately predicted. If the disruptions in the global financial and capital markets continue, debt or equity financing may not be available to us on acceptable terms, if at all.  If we are unable to fund future operations by way of financing, including public or private offerings of equity or debt securities, our business, financial condition and exploration activities will be adversely impacted.

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The outstanding debt instruments of our largest shareholder (EGLLC) and its affiliate (MFPI) contains restrictive covenants relating to our operations.

Pursuant to secured mortgages encumbering all of the assets and property of EGI and MTMI, the secured lenders to our largest shareholder, EGLLC, and its affiliate, MFPI, imposed restrictions on us that affect our ability to incur additional debt. Further, the Tri-Party Agreement by and among EGLLC, the Secured Lenders and the Company requires us to comply with various financial covenants set forth in the mortgages encumbering all of the assets and property of EGI and MTMI. A breach of the covenants could result in an acceleration of the debt obligations of EGLLC and MFPI and if a waiver or modification is not agreed upon with the Secured Lenders, our ability to continue as a going concern would be affected and the Secured Lenders would be able to foreclose on the assets and property of EGI and MTMI as provided for in the loan reinstatement and modification agreement by and among EGLLC and the Secured Lenders.

The volatility of the price of gold, zinc, lead, copper or silver could adversely affect our future operations and, if warranted, our ability to develop our properties.

The potential for profitability of our operations, the value of our properties and our ability to raise funding to conduct continued exploration and development, if warranted, are directly related to the market prices of gold, zinc, lead, copper, silver and other precious metals.  The prices of such metals fluctuate widely and are affected by numerous factors beyond our control, including interest rates, expectations for inflation, speculation, currency values (in particular the strength of the U.S. dollar), global and regional demand, political and economic conditions and production costs in major metal producing regions of the world. The price of gold may also have a significant influence on the market price of our common stock and the value of our properties.  Our decision to put a mine into production and to commit the funds necessary for that purpose must be made long before the first revenue from production would be received.  A decrease in the prices of gold, zinc, lead, copper or silver may prevent our property from being economically mined or result in the write-off of assets whose value is impaired as a result of lower gold, zinc, lead, copper or silver prices.  The prices of gold, zinc, lead, copper and silver is affected by numerous factors beyond our control, including inflation, fluctuation of the United States dollar and foreign currencies, global and regional demand, the sale of gold, zinc, lead, copper and silver by central banks, and the political and economic conditions of major gold and silver producing countries throughout the world.  

The volatility in gold, silver and copper prices is illustrated by the following table, which sets forth for each of the past five calendar years, the average annual market prices in U.S. dollars per ounce of gold and silver, based on the daily London P.M. fixing, and per ounce of copper, based on the Mundi Index:

Mineral	2007		2008		2009		2010		2011
Gold	$	695.39	$	871.96	$	972.35	$	1,224.52	$	1,571.52
Silver	$	13.41	$	15.00	$	14.69	$	20.20	$	35.26
Copper	$	3.23	$	3.16	$	2.34	$	3.42	$	4.00

The volatility of mineral prices represents a substantial risk which no amount of planning or technical expertise can fully eliminate.  In the event gold prices decline or remain low for prolonged periods of time, we might be unable to develop our properties, which may adversely affect our results of operations, financial performance and cash flows

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The nature of mineral exploration and production activities involves a high degree of risk and the possibility of uninsured losses.  

Exploration for and the production of minerals is highly speculative and involves greater risk than many other businesses.  Many exploration programs do not result in the discovery of mineralization, and any mineralization discovered may not be of sufficient quantity or quality to be profitably mined.  Our operations are, and any future development or mining operations we may conduct will be, subject to all of the operating hazards and risks normally incident to exploring for and development of mineral properties, such as, but not limited to:

§ Economically insufficient mineralized material;

§ Fluctuation in production costs that make mining uneconomical;

§ Labor disputes;

§ Unanticipated variations in grade and other geologic problems;

§ Environmental hazards;

§ Water conditions;

§ Difficult surface or underground conditions;

§ Industrial accidents;

§ Metallurgic and other processing problems;

§ Mechanical and equipment performance problems;

§ Failure of pit walls or dams;

§ Unusual or unexpected rock formations;

§ Personal injury, fire, flooding, cave-ins and landslides; and

§ Decrease in the value of mineralized material due to lower gold, zinc, lead, copper or silver prices.

Any of these risks can materially and adversely affect, among other things, the development of properties, production quantities and rates, costs and expenditures, potential revenues and production dates.  We currently have limited insurance to guard against some of these risks.  If we determine that capitalized costs associated with any of our mineral interests are not likely to be recovered, we would incur a writedown of our investment in these interests.  All of these factors may result in losses in relation to amounts spent which are not recoverable, or result in additional expenses.

Difficult conditions in the global capital markets and the economy generally may materially adversely affect our business and results of operations, and we do not expect these conditions to improve in the near future.

Our results of operations are materially affected by conditions in the domestic capital markets and the economy generally. The stress experienced by domestic capital markets that began in the second half of 2007 has continued and substantially increased into the present. Recently, concerns over inflation, energy costs, geopolitical issues, the availability and cost of credit, the U.S. mortgage market and a declining real estate market in the U.S. have contributed to increased volatility and diminished expectation for the economy and the markets going forward. These factors, combined with volatile oil and gas prices, declining business and consumer confidence and increased unemployment, have precipitated an economic slowdown and fears of a continued recession. In addition, the fixed-income markets are experiencing a period of extreme volatility which has negatively impacted market liquidity conditions.

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Initially, the concerns on the part of market participants were focused on the subprime segment of the mortgage-backed securities market. However, these concerns have since expanded to include a broad range of mortgage and asset-backed and other fixed income securities, including those rated investment grade, the U.S. and international credit and interbank money markets generally and a wide range of financial institutions and markets, asset classes and sectors. As a result, capital markets have experienced decreased liquidity, increased price volatility, credit downgrade events, and increased probabilities of default. These events and the continuing market upheavals may have an adverse effect on us because our liquidity and ability to fund our capital expenditures is dependent in part upon our access to the private and public capital markets. In addition, in the event of extreme prolonged market events, such as the global credit crisis, we could incur significant losses. Even in the absence of a market downturn, we are exposed to substantial risk of loss due to market volatility. The forgoing factors may have a negative impact on the value of our company, our assets, and our common stock resulting in illiquidity of our shares and potentially a total loss to our shareholders and a failure of our business.

Failure to extend the life of the Montana Tunnels Mine or Golden Dream Mine would significantly reduce our gold production.

Although our Montana Tunnels Mine has been in production from 1987 through 2008 the mine is currently on care and maintenance awaiting financing to recommence production. During its productive period the Montana Tunnels Mine produced in excess of 1.7 million ounces of gold. As of December 2011, we declared reserves of approximately 450,000 ounces of gold remaining at the Montana Tunnels Mine and 260,000 ounces of gold at the Golden Dream Mine recoverable by open pit or underground mining methods. Development of these reserves is dependent upon financing at reasonable terms and a sufficient gold price to provide a reasonable return on investment. The ultimate success of both mines depends largely on our ability to raise the necessary capital to recommence mining activities on the current mine lives (9 years for Montana Tunnels Mine and 5 years for Golden Dream Mine) and, in due course, expand the mine lives of both operations.

Title to our properties may be challenged or defective.

Our planned future operations, including our activities at the Golden Dream Mine and Montana Tunnels Mine projects and other exploration activities, may require amendments to our currently approved permits from various governmental authorities. Our operations are and will continue to be governed by laws and regulations governing prospecting, mineral exploration, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety, mining royalties and other matters. There can be no assurance that we will be able to acquire all required licenses, permits, amendments or property rights on reasonable terms or in a timely manner, or at all, and that such terms will not be adversely changed, that required extensions will be granted, or that the issuance of such licenses, permits or property rights will not be challenged by third parties.

We attempt to confirm the validity of our rights of title to, or contract rights with respect to, each mineral property in which we have a material interest. However, we cannot guarantee that title to our properties will not be challenged. Our mineral properties may be subject to prior unregistered agreements, interests or native land claims, and title may be affected by undetected defects. There may be valid challenges to the title of any of the claims comprising our mineral properties that, if successful, could impair possible development and/or operations with respect to such properties in the future. Challenges to permits or property rights, whether successful or unsuccessful; changes to the terms of permits or property rights; or a failure to comply with the terms of any permits or property rights that have been obtained, could have a material adverse effect on our business by delaying or preventing or making continued operations economically unfeasible.

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A title defect could result in EGI or MTMI losing all or a portion of its right, title, and interest in and to the properties to which the title defect relates. Title insurance generally is not available, and our ability to ensure that we have obtained secure title to individual mineral properties or mining concessions may be severely constrained. In addition, we may be unable to operate our properties as permitted or to enforce our rights with respect to our properties. We regularly monitor the official land records in the counties in which our mineral properties lie to determine if there are annotations indicating the existence of a legal challenge against the validity of any of our concessions. As of December 31, 2011, there were no such annotations, nor are we aware of any challenges from the government or from third parties.

We are subject to complex environmental and other regulatory risks, which could expose us to significant liability and delay, and potentially the suspension or termination of our development efforts.

Compliance with environmental quality requirements and reclamation laws imposed by federal, state, provincial, and local governmental authorities may:

§ require significant capital outlays;

§ materially affect the economics of a given property;

§ cause material changes or delays in our intended activities; and

§ expose us to lawsuits.

These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Applicable authorities may require us to prepare and present data pertaining to the effect or impact that any proposed exploration for or production of minerals may have upon the environment. The requirements imposed by any such authorities may be costly, time consuming, and may delay operations. Future legislation and regulations designed to protect the environment, as well as future interpretations of existing laws and regulations, may require substantial increases in equipment and operating costs and delays, interruptions, or a termination of operations. We cannot accurately predict or estimate the impact of any such future laws or regulations, or future interpretations of existing laws and regulations, on our operations.

Historic mining activities have occurred on certain of our properties. If such historic activities have resulted in releases or threatened releases of regulated substances to the environment, potential for liability may exist under federal or state remediation statutes. Such liability would include remediating any damage that we may have caused, including costs for removing or remediating the release and damage to natural resources, including ground water, as well as the payment of fines and penalties. Except as discussed in our periodic filings with the SEC, we are not aware of any such claims under these statutes at this time, and cannot predict whether any such claims will be asserted in the future.

We may produce air emissions and pollutions that could fall under the jurisdiction of U.S. federal laws.

Under the U.S. Resource Conservation and Recovery Act, mining companies may incur costs for generating, transporting, treating, storing, or disposing of hazardous waste, as well as for closure and post-closure maintenance once they have completed mining activities on a property. Our mining operations may produce air emissions, including fugitive dust and other air pollutants, from stationary equipment, storage facilities, and the use of mobile sources such as trucks and heavy construction equipment which are subject to review, monitoring and/or control requirements under the Federal Clean Air Act and state air quality laws. Permitting rules may impose limitations on our production levels or create additional capital expenditures in order to comply with the rules.

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Legislation has been proposed that would significantly affect the mining industry.    

Periodically, members of the U.S. Congress have introduced bills which would supplant or alter the provisions of the General Mining Law of 1872, which governs the unpatented claims that we control with respect to our U.S. properties. One such amendment has become law and has imposed a moratorium on the patenting of mining claims, which reduced the security of title provided by unpatented claims such as those on our U.S. properties. If additional legislation is enacted, it could substantially increase the cost of holding unpatented mining claims by requiring payment of royalties, and could significantly impair our ability to develop mineral estimates on unpatented mining claims. Such bills have proposed, among other things, to make permanent the patent moratorium, to impose a federal royalty on production from unpatented mining claims and to declare certain lands as unsuitable for mining. Although it is impossible to predict at this time what royalties may be imposed in the future, the imposition of such royalties could adversely affect the potential for development of such mining claims, and the economics of existing operating mines on federal unpatented mining claims. Passage of such legislation could adversely affect our business.

Our operations are subject to permitting requirements which could require us to delay, suspend or terminate our operations on our mining properties.  

Our operations, including ongoing exploration drilling programs, require permits from the state and federal governments, including permits for the use of water and for drilling wells for water. We may be unable to obtain these permits in a timely manner, on reasonable terms or on terms that provide us sufficient resources to develop our properties, or at all. Even if we are able to obtain such permits, the time required by the permitting process can be significant. If we cannot obtain or maintain the necessary permits, or if there is a delay in receiving these permits, our timetable and business plan for exploration of our properties will be adversely affected, which may in turn adversely affect our results of operations, financial condition and cash flows.

We may face a shortage of water.

Water is essential in all phases of the exploration, development and operation of mineral properties. With the nature of our operations, water is used in such processes as exploration, drilling, testing, dust suppression, milling and tailings disposal. Although currently both of our contemplated operations have adequate water supplies under permit for use in the operations, the lack of available water and the cost of acquisition may make an otherwise viable project economically impossible to complete.

Global climate change is an international concern, and could impact our ability to conduct future operations.   

Global climate change is an international issue and receives an enormous amount of publicity. We would expect that the imposition of international treaties or federal, state or local laws or regulations pertaining to mandatory reductions in energy consumption or emissions of greenhouse gasses could affect the feasibility of our mining projects and increase our operating costs.

Because access to the mineral property may be restricted by inclement weather or other hazards, we may be delayed in our development efforts.

We are subject to risks and hazards, including environmental hazards, the encountering of unusual or unexpected geological formations, cave-ins, flooding, earthquakes and periodic interruptions due to inclement or hazardous weather conditions. As a result, access to our mineral properties may be restricted during parts of the year. The properties are in a mountainous area in the Jefferson County and Broadwater County, Montana which is accessible by county roads, BLM roads, and private roads. Although these roads have been used for exploration, forestry and mining operations in the past, they are best traveled by four-wheel drive vehicles from spring to the beginning of winter. During the winter months, heavy snowfall can make it difficult to undertake work programs. We do not currently plan exploration drilling operations in the winter months. Frequent inclement weather in the winter months can make development and mining activities difficult for short periods of time.

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We may face a shortage of supplies, equipment and materials.

The mineral industry has experienced from time to time shortages of certain supplies, equipment and materials necessary in the exploration, evaluation, development and production of mineral deposits. The prices at which such supplies and materials are available have also greatly increased. Our planned operations could be subject to delays due to such shortages and further price escalations could increase our costs for such supplies, equipment and materials. Our experience and that of others in the industry is that suppliers are often unable to meet contractual obligations for supplies, equipment, materials, and services, and that alternate sources of supply do not exist.

The market for obtaining desirable properties, investment capital, and outside engineers and consultants is highly competitive.

Presently, we employ a limited number of full-time employees, utilize outside consultants, and in large part rely on the personal efforts of our officers and directors. Our success will depend, in part, upon the ability to attract and retain qualified outside engineers and other professionals to develop and operate our mineral properties, in addition to obtaining investment capital to conduct our mining operations. We believe that we will be able to attract competent employees and consultants, but no assurance can be given that we will be successful in this regard as competition for these professionals is highly competitive. If we are unable to engage and retain the necessary personnel, our business would be materially and adversely affected.

We depend upon a limited number of personnel and the loss of any of these individuals could adversely affect our business. 

If any of our current executive employees were to die, become disabled or leave our company, we would be forced to identify and retain individuals to replace them.  Messrs. Patrick W.M Imeson, Robert Trenaman, Eric Altman and Timothy Smith are our critical employees at this time. In addition to the executives, our company relies heavily on a several staff people that have extensive knowledge of our properties and mine plans.   There is no assurance that we can find suitable individuals to replace them or to add to our employee base if that becomes necessary.  We are entirely dependent on these individuals as our critical personnel at this time.  We have no life insurance on any of our employees, and we may be unable to hire a suitable replacement for them on favorable terms, should that become necessary.

Some of our directors may have conflicts of interest as a result of their involvement with other natural resource companies or with equity, preferred equity, or lost positions in the company.    

Some of our directors are directors or officers of other natural resource or mining-related companies, or may be involved in related pursuits that could present conflicts of interest with their roles at the Company. These associations may give rise to conflicts of interest from time to time.

In the event that any such conflict of interest arises, a director who has such a conflict is required to disclose the conflict to the board of directors of the company in question and to abstain from voting for or against approval of any matter in which such director may have a conflict. In appropriate cases, we will establish a special committee of independent directors to review a matter in which any director or member of management may have a conflict.

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We have incurred substantial losses since our inception and may never be profitable.

We have accumulated substantial losses, and we have very limited revenue from operations since the previous owners of Montana Tunnels Mine shut down the mill in 2009.  During the fiscal years ended 2011 and 2010, we have reported net losses of approximately $30 million and $10 million, respectively.  We had an accumulated deficit of approximately $59 million as of December 31, 2011.  We expect to continue to incur losses unless and until we generate sufficient revenue from production to fund continuing operations including exploration and development costs.  There is no assurance we will be profitable for any quarterly or annual period.  Our failure to report profits may adversely affect the price of our common stock and you may lose all or part of your investment. 

Except for the MPRPA (discussed below), we currently have not entered into forward sales, commodity, derivatives or hedging arrangements with respect to our gold production and as a result we are exposed to the impact of any significant decrease in the gold, zinc, lead, copper and silver prices.

We expect to sell the gold, zinc, lead, copper and silver we expect to be producing at prevailing market prices. Currently, we have not entered into forward sales, commodity, derivative or hedging arrangements to establish a price in advance for the sale of future production, although we may do so in the future. As a result, we may realize the benefit of any short-term increase in the gold price, but we are not protected against decreases in gold, zinc, lead, copper and silver prices, and if gold, zinc, lead, copper and silver prices decrease significantly, our expected future revenues may be materially adversely affected.

If we are unable to achieve mineral production levels anticipated from our Montana Tunnels Project and Elkhorn Goldfields Project, our financial condition and results of operation will be adversely affected.  

We are proceeding with the development of the Montana Tunnels open-pit mine expansion and the development of the Golden Dream underground mine based on estimates of mineralized material identified in our drilling programs and estimates of mineral recovery based on, in the case of Montana Tunnels, historical operating results and, in the case of the Golden Dream Mine, test work developed during our internal feasibility studies.  However, risks related to metallurgy are inherent when working with extractable minerals.  Sales of minerals, if any, that we realize from future mining activity will be less than anticipated if the mined material does not contain the concentration of minerals predicted by our geological exploration.  This risk may be increased since we have not sought or obtained a feasibility study or reserve report with regard to any of our properties.  If sales of our minerals are less than anticipated, we may not be able to recover our investment in our property and our operations may be adversely affected.  Our inability to realize production based on quarterly or annual projections may adversely affect the price of our common stock and you may lose all or part of your investment.

Our existing planned production is limited to two properties and our ability to become and remain profitable over the long term will depend on our ability to identify, explore and develop additional properties.  

Gold, zinc, lead, copper and silver properties are wasting assets.  They eventually become depleted or uneconomical to continue mining.  Under our current production plan and design at our open pit Montana Tunnels Mine, there are approximately eight years of commercial production from operations commencement.  Accordingly, our ability to become and remain profitable over the long term depends on our ability to finalize the design, permit, development and profitable extraction and recovery of mineral resources beyond the current planned nine year mine life for the Montana Tunnels Mine. At the Golden Dream Mine our current permitted production plan encompasses approximately five years of commercial production from operations commencement. As with the Montana Tunnels Mine our ability to become and remain profitable over the long term depends on our ability to finalize the design, permit, development and profitable extraction and recovery of mineral resources beyond the current five year mine life. If our ability to expand the operations beyond their current planned mined lives doesn’t occur we may seek to acquire other precious and base metals properties beyond our current properties. The acquisition of precious and base metals properties and their exploration and development are subject to intense competition.  Companies with greater financial resources, larger staff, more experience and more equipment for exploration and development may be in a better position than us to compete for such mineral properties.  If we are unable to find, develop, and economically mine new properties, we most likely will not be profitable on a long term basis and the price of our common stock may suffer.

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Since we have a very limited operating history, investors have little basis to evaluate our ability to operate. 

Our activities to date have been focused on raising financing, exploring our properties and preparing those properties for production.  Although our mine and concentrating facilities at the Montana Tunnels operation have operated from 1987 through to 2009, these operations were carried out under different ownership and, as a consequence we face all of the risks commonly encountered by other businesses that lack an established operating history, including the need for additional capital and personnel, and intense competition.  There is no assurance that our business plan will be successful.

The construction of our mines and optimization and continued operation of our mills are subject to all of the risks inherent in construction, start-up and operations. 

These risks include potential delays, cost overruns, shortages of material or labor, construction defects, breakdowns and injuries to persons and property.  We expect to engage self-employed personnel, subcontractors and material suppliers in connection with the construction and development of the Montana Tunnels Mine and Golden Dream Mine projects.  While we anticipate taking all measures which we deem reasonable and prudent in connection with construction of the mines and the operation of the mills, there is no assurance that the risks described above will not cause delays or cost overruns in connection with such construction or operation.  Any delays would postpone our anticipated receipt of revenue and adversely affect our operations, which in turn may adversely affect the price of our stock.

Our operations are subject to permitting requirements which could require us to delay, suspend or terminate our operations.  

Our operations require permits from the State of Montana and the U.S. federal government.  If we cannot obtain or maintain the necessary permits, or if there is a delay in receiving future permits, our timetable and business plan will be adversely affected.

We do not insure against all of the risks to which we may be subject in our operations. 

While we currently maintain insurance against general commercial liability claims and the physical assets at our projects, we do not maintain insurance to cover all of the potential risks associated with our operations.  We might be subject to liability for environmental, pollution or other hazards associated with mineral exploration and development, which risks may not be insured against, which may exceed the limits of our insurance coverage, or which we may elect not to insure against because of premium costs or other reasons.  We may also not be insured against interruptions to our operations.  Losses from these or other events may cause us to incur significant costs which could materially adversely affect our financial condition and our ability to fund activities on our property.  A significant loss could force us to reduce or terminate our operations.

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We may require significant additional capital to fund our business plan.

We will be required to expend significant funds to determine if proven and probable mineral reserves exist at some of our properties, to continue exploration and if warranted, develop our existing properties and to identify and acquire additional properties to diversify our property portfolio.  There can be no assurance that any of the development properties we now hold, or which we may acquire, will contain a commercial ore reserve, and therefore, no assurance that we will ever generate a positive cash flow from the sale of production on such properties. In addition, once we decide to place a property into production, risks still exist that the amount and grade of the reserves may be significantly less than predicted. We have spent and will be required to continue to expend significant amounts of capital for drilling, geological and geochemical analysis, assaying and feasibility studies with regard to the results of our exploration.  We may not benefit from these investments if we are unable to identify commercially exploitable mineralized material.  If we do locate commercially mineable material or decide to put additional properties into production, we may be required to upgrade our milling facility at the Montana Tunnels Mill Complex or construct new milling facilities.

Our ability to obtain necessary funding for these purposes, in turn, depends upon a number of factors, including the status of the national and worldwide economy and the prices of gold and other precious and base metals.  Capital markets worldwide have been adversely affected by substantial losses by financial institutions, in turn caused by investments in asset-backed securities.  We may not be successful in obtaining the required financing, or if we can obtain such financing, such financing may not be on terms that are favorable to us.  Failure to obtain such additional financing could result in delay or indefinite postponement of further mining operations or exploration and development and the possible partial or total loss of our potential interest in our properties.

We have significant obligations at the Montana Tunnels Mine, which may adversely impact liquidity.

Our Montana Tunnels Mine in Montana operates under a number of permits issued by local, state and federal agencies. Those agencies require us to post a total of $33.6 million in reclamation bonds in order to commence development of our “M” Pit expansion. We have partially collateralized the surety bonds at the Montana Tunnels Mine with $16 million in cash and reclamation bonds, $3.6 million in a security interest in real property mineral interests. In addition, the Golden Dream Mine has provided the regulatory agencies $604,021 in cash for its reclamation obligations pursuant to our operating and exploration permits.

Our operating costs could be adversely affected by inflationary pressures especially to labor and fuel costs.

The global economy is currently in a period of high commodity prices and as a result the mining industry is attempting to increase production. This has caused significant upward price pressures in the operating costs of mining companies especially in the area of skilled labor. The skilled labor needed by the mining industry is in tight supply and its cost is increasing. Many of our competitors have lower costs and their mines are located in better locations that may give them a competitive advantage in employee hiring and retention.

The cost of fuel to run machinery and generate electricity is closely correlated to the price of oil and energy. Over the past two years the price of oil has risen significantly and has increased the operating cost of mines dependent on fuel to run their business. Continued upward price pressures in our operating costs may cause us to generate significantly less operating cash flows than expected which would have an adverse impact to our business.

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Our continuing reclamation obligations at the Montana Tunnels Mine and our other properties could require significant additional expenditures.    

We are responsible for the reclamation obligations related to disturbances located on all of our mineral properties. We have posted bonds in the amount of the estimated reclamation obligation at the properties. The reclamation bond amount is an estimation based upon mine closure plans which have been designed by our employees and consultants and submitted to, and approved by, the Bureau of Land Management (“BLM”) and the Montana Department of Environmental Quality (“MDEQ”). Every five years the regulatory authorities review the reclamation plans and apply new costs based upon inflation rates and updated rates and costs for reclamation activities. There is a risk that we will be unable to fund these additional bonding requirements, and further that increase reclamation and bonding requirements may increase to such a degree that it would not be commercially reasonable to continue exploration activities, which may adversely affect our results of operations, financial performance and cash flows.

We will continue to incur losses for the foreseeable future.

Prior to completion of the development and pre-production stage, we anticipate that we will incur increased operating expenses without realizing any revenues. We expect to incur continuing and significant losses until such time as we achieve commercial production from our mining operations on our mineral claims.  As a result of continuing losses, we may exhaust all of our resources and be unable to complete development of our planned mining operations. Our accumulated deficit will continue to increase as we continue to incur losses. We may not be able to generate profits or continue operations if we are unable to generate significant revenues from future mining of the mineral claims and our business will most likely fail.

RISKS RELATED TO OUR COMMON STOCK

There currently is no public market for our Common Stock. Failure to develop or maintain a trading market could negatively affect the value of our Common Stock and make it difficult or impossible for you to sell your shares.

There is currently no public market for shares of our Common Stock and one may never develop. Our Common Stock is quoted on the OTC Bulletin Board operated by the Financial Industry Regulatory Authority, Inc. The OTC Bulletin Board is a thinly traded market and lacks the liquidity of certain other public markets with which some investors may have more experience. We may not ever be able to satisfy the listing requirements for our Common Stock to be listed on an exchange, which are often a more widely-traded and liquid market. Some, but not all, of the factors which may delay or prevent the listing of our Common Stock on a more widely-traded and liquid market include the following: our stockholders’ equity may be insufficient; the market value of our outstanding securities may be too low; our net income from operations may be too low; our Common Stock may not be sufficiently widely held; we may not be able to secure market makers for our Common Stock; and we may fail to meet the rules and requirements mandated by the several exchanges and markets to have our Common Stock listed.

We cannot assure you that the Common Stock will become liquid or that it will be listed on a securities exchange.

Until our Common Stock is listed on a national securities exchange such as the New York Stock Exchange or the Nasdaq Stock Market, we expect our Common Stock to remain eligible for quotation on the OTC Bulletin Board, or on another over-the-counter quotation system such as OTC Markets, Inc. In those venues, however, an investor may find it difficult to obtain accurate quotations as to the market value of our Common Stock. In addition, if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our Common Stock, which may further affect the liquidity of the Common Stock. This would also make it more difficult for us to raise capital.

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Our Common Stock is subject to the “Penny Stock” rules of the SEC and the trading market in the securities is limited, which makes transactions in the stock cumbersome and may reduce the value of an investment in the stock.

The SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:

· that a broker or dealer approve a person’s account for transactions in penny stocks; and

· the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:

· obtain financial information and investment experience objectives of the person; and

· make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth:

· the basis on which the broker or dealer made the suitability determination; and

· that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of common stock and cause a decline in the market value of stock.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

Our common stock is controlled by one shareholder.

EGLLC beneficially owns approximately 88.2% of our capital stock, on a fully diluted basis. Such concentrated control of the Company may adversely affect the price of our Common Stock. Investors who acquire Common Stock may have no effective voice in the management of the Company. Sales by this stockholder, along with any other market transactions, could affect the market price of the Common Stock. In addition, the Pubco Holders of our free trading shares of Common Stock immediately prior to the Merger, the Public Float Shares, entered into lock-up agreements with ESRI whereby the Pubco Holders agreed that forty percent (40%) of their Public Float Shares may not be sold for a period of twelve (12) months following the Merger closing date. These lock ups may also adversely affect the price of our Common Stock

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The price of our Common Stock may become volatile, which could lead to losses by investors and costly securities litigation.

The trading price of our Common Stock is likely to be highly volatile and could fluctuate in response to factors such as:

· actual or anticipated variations in our operating results;

· announcements of developments by us or our competitors;

· announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;

· adoption of new accounting standards affecting our Company’s industry;

· additions or departures of key personnel;

· sales of our Common Stock or other securities in the open market; and

· other events or factors, many of which are beyond our control.

The stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been initiated against the company. Litigation initiated against us, whether or not successful, could result in substantial costs and diversion of our management’s attention and resources, which could harm our business and financial condition.

Compliance with Sarbanes-Oxley may result in our inability to achieve profitability.

The Sarbanes-Oxley Act of 2002 was enacted to increase corporate responsibility and accountability, to provide for enhanced penalties for accounting and auditing improprieties relating to publicly-traded companies, and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to U.S. federal securities laws. The Sarbanes-Oxley Act generally applies to all companies that file or are required to file periodic reports with the SEC, under the Securities Exchange Act of 1934, as amended. Upon becoming a publicly reporting company, we are required to comply with the Sarbanes-Oxley Act and its costs to remain in compliance with the federal securities regulations. The enactment of the Sarbanes-Oxley Act has resulted in a series of rules and regulations by the SEC that increase responsibilities and liabilities of directors and executive officers. The perceived increased personal risk associated with these recent changes may make it more costly to attract or may deter qualified individuals from accepting these roles. If we are unable to attract and retain qualified officers, directors and board committee members, which are required pursuant to the Sarbanes-Oxley Act, we may not be able to provide effective management or comply with federal law. Additionally, significant costs incurred as a result of being a public company could divert the use of finances from our operations resulting in our inability to achieve profitability.

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We are required to annually evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have a material adverse effect on the price of our common stock.  

Under Section 404 of the Sarbanes-Oxley Act, we are additionally required to furnish a report by our management on internal control over financial reporting.  Such a report must contain, among other matters, an assessment of the effectiveness of our internal control over financial reporting, including a statement as to whether or not our internal control over financial reporting is effective.  This assessment must include disclosure of any material weaknesses in our internal control over financial reporting identified by our management.  In addition, our evaluation of the effectiveness of our internal controls will be subject to an annual audit by our independent registered public accounting firm and there is no assurance that they will agree with our assessment.  If we are unable to maintain and to assert that our internal control over financial reporting is effective, or if we disclose material weaknesses in our internal control over financial reporting, or if our independent registered public accounting firm does not agree with our assessment, investors could lose confidence in the accuracy and completeness of our financial reports, which could have a material adverse effect on our stock price. Furthermore, if our efforts to comply with new or changed laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

Compliance with U.S. securities laws, including the Sarbanes-Oxley Act, will be costly and time-consuming.

After completion of the Merger, we will continue as a reporting company under U.S. securities laws, and we will be obliged to comply with the provisions of applicable U.S. laws and regulations, including the Securities Act, the Exchange Act and the Sarbanes-Oxley Act of 2002 and the related rules of the SEC, and the rules and regulations of the relevant U.S. market. Preparing and filing annual and quarterly reports and other information with the SEC, furnishing audited reports to stockholders and other compliance with these rules and regulations will involve a material increase in regulatory, legal and accounting expenses and the attention of management, and there can be no assurance that we will be able to comply with the applicable regulations in a timely manner, if at all.

We do not anticipate dividends to be paid on our Common Stock, and investors may lose the entire amount of their investment.

Cash dividends have never been declared or paid on the Common Stock, and we do not anticipate such a declaration or payment for the foreseeable future. Furthermore, in accordance with the terms of our outstanding Series A Preferred Stock, we cannot pay dividends on the Common Stock so long as the Series A Preferred remains outstanding. We expect to use future earnings, if any, to fund business growth and pay our obligations under our Series A Preferred Stock. Therefore, stockholders will not receive any funds absent a sale of their shares. We cannot assure stockholders of a positive return on their investment when they sell their shares, nor can we assure that stockholders will not lose the entire amount of their investment.

If securities analysts do not initiate coverage or continue to cover our Common Stock or publish unfavorable research or reports about our business, this may have a negative impact on the market price of our Common Stock.

The trading market for the Common Stock will depend on the research and reports that securities analysts publish about our business and the Company. We do not have any control over these analysts. There is no guarantee that securities analysts will cover the Common Stock. If securities analysts do not cover the Common Stock, the lack of research coverage may adversely affect its market price. If we are covered by securities analysts, and our stock is the subject of an unfavorable report, our stock price and trading volume would likely decline. If one or more of these analysts ceases to cover the Company or fails to publish regular reports on the Company, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.

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State Blue Sky registration: potential limitations on resale of the shares.

The holders of the shares of the Company and persons who desire to purchase the shares in any trading market that might develop in the future, should be aware that there may be significant state law restrictions upon the ability of investors to resell the securities. Accordingly, investors should consider the secondary market for the Company’s securities to be a limited one. It is the intention of our management to seek coverage and publication of information regarding the Company in an accepted publication which permits a “manuals exemption.” This manuals exemption permits a security to be sold by shareholders in a particular state without being registered if the company issuing the security has a listing for that security in a securities manual recognized by that state. The listing entry must contain (i) the names of issuers, officers, and directors, (ii) an issuer’s balance sheet, and (iii) a profit and loss statement for either the fiscal year preceding the balance sheet or for the most recent fiscal year of operations. The principal accepted manuals are those published by Standard and Poor’s and Mergent, Inc. Many states expressly recognize these manuals. A smaller number of states declare that they recognize securities manuals, but do not specify the recognized manuals. Among others, the following states do not have any provisions and, therefore, do not expressly recognize the manuals exemption: Alabama, California, Georgia, Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont, and Wisconsin.

You may experience dilution of your ownership interests because of the future issuance of additional shares of our Common Stock.

In the future, we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders.  We are currently authorized to issue an aggregate of 310,000,000 shares of capital stock, consisting of 300,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock with preferences and rights to be determined by our Board of Directors. As of April 6, 2012, there were 99,085,000 shares of our Common Stock (including an aggregate of 90,000,000 shares entitled to be received by EGLLC in the Merger) and 10,000,000 shares of our Series A Preferred Stock (all entitled to be received by EGLLC in the Merger) issued and outstanding. There are 10,000,000 shares of our Common Stock reserved for issuance under our 2012 Equity Incentive Plan. As of the Merger Closing Date, stock options exercisable for 5,445,000 shares of our Common Stock have been granted under the 2012 Plan. There are also, $1,800,000 of EGI bridge loans outstanding that have the right to convert into 900,000 shares of Common Stock, warrants to purchase 450,000 shares of Common Stock at $3.00 per share and special warrants to purchase an indeterminate number of additional shares of Common Stock exercisable upon the closing of the Company’s next private placement, provided the share price of the Common Stock offered in that private placement is less than $2.50 per share, so that the exercise of the special warrant will reduce the lender’s effective conversion price of the bridge loan for the Common Stock by a 25% discount to the private placement offering price, such special warrant exercisable at a price of $0.01 per share.

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Any future issuance of our equity or equity-backed securities may dilute then-current stockholders’ ownership percentages and could also result in a decrease in the fair market value of our equity securities, because our assets would be owned by a larger pool of outstanding equity. As described above, we may need to raise additional capital through public or private offerings of our common or preferred stock or other securities that are convertible into or exercisable for our common or preferred stock. We may also issue such securities in connection with hiring or retaining employees and consultants (including stock options issued under our equity incentive plans), as payment to providers of goods and services, in connection with future acquisitions or for other business purposes. Our Board of Directors may at any time authorize the issuance of additional common or preferred stock without common stockholder approval, subject only to the total number of authorized common and preferred shares set forth in our articles of incorporation. The terms of equity securities issued by us in future transactions may be more favorable to new investors, and may include dividend and/or liquidation preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect. Also, the future issuance of any such additional shares of common or preferred stock or other securities may create downward pressure on the trading price of the common stock. There can be no assurance that any such future issuances will not be at a price (or exercise prices) below the price at which shares of the common stock are then traded.

RISKS RELATED TO OUR PREFERRED STOCK

We have issued 10,000,000 shares of our Series A Preferred Stock, which may limit your rights as a holder of our Common Stock.

We currently have 10,000,000 shares of our Series A Preferred Stock issued and outstanding. These shares carry, among other things, liquidation preferences redemption rights and dividend rights that prelude the issuance of dividends on our Common Stock so long as any shares of Series A Preferred Stock remain outstanding. These terms of the Series A Preferred Stock could adversely affect the rights of the holders of our Common Stock and, therefore, reduce the value of the Common Stock.

If we are unable to generate sufficient funds or obtain financing for future capital commitments, we may not be able to pay for redeemed Series A Preferred Stock, which could have a material adverse effect on us.

EGLLC, as the sole shareholder of the Series A Preferred Stock has the option, exercisable in whole or in part at any time and from time to time prior to the third anniversary of the issuance of the Series A Preferred Stock as provided in the certificate of designation, to require us to purchase for cash, out of legally available funds, any or all of the then-outstanding shares of Series A Preferred Stock at a price equal to $6.00 per share of an aggregate total of $60,000,000, subject to certain limitations. If we are unable to pay for EGLLC’s redeemed shares, such failure could result in an event of default under the loan reinstatement and modification agreement and a potential remedy of the Secured Lenders would be a foreclosure on all of the assets and property of EGI and MTMI. Our inability to fund these future commitments could have a material adverse effect on us. 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND PLAN OF OPERATIONS

The following management’s discussion and analysis should be read in conjunction with MTMI’s and EGI’s historical combined financial statements and the related notes. The management’s discussion and analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Current Report. The Company’s actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Current Report. Please see “Forward-Looking Statements” and “Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements.

As the result of the Merger and the change in business and operations of the Company to engaging in exploration and production activities in the precious metal industry, a discussion of the past financial results of ESRI is not pertinent, and the historical financial results of MTMI and EGI, the accounting acquirers, prior to the Merger are considered the historical financial results of the Company.

The following discussion highlights our plan of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described. This discussion contains forward-looking statements. The following discussion and analysis are based on MTMI’s and EGI’s financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles. You should read the discussion and analysis together with such financial statements and the related notes thereto.

The following discussion and analysis provides information which management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The discussion should be read in conjunction with our audited and unaudited financial statements and related notes and the other financial information included elsewhere in this report.

General Overview

Elkhorn Goldfields, Inc. (“EGI”) and Montana Tunnels Mining, Inc. (“MTMI”) (or combined as “Elkhorn”) were formed for the purpose of acquiring, holding, operating, selling, and otherwise dealing in assets of mining operations with gold and other metal reserves and exploration potential. Elkhorn’s objective is to operate mines and expand its interests through acquisition and exploration. Elkhorn has one mineral property, the Golden Dream Mine, that has completed the permitting process, is in the process of installing required infrastructure and has developed the 650 foot underground access ramp to reach the upper levels of the ore body and a second property, the Montana Tunnels Mine, that has completed the permitting except for posting the required reclamation bond. In addition, Elkhorn has several mineralized targets which are in the exploration stage. The permitted and nearly permitted mines consist of the Golden Dream Mine (formerly referred to as the Sourdough Mine) and the Montana Tunnels Mine. The mineralized targets are the East Butte, Gold Hill/Mount Heagan, Carmody, and the expansion of the previously operated Diamond Hill Mine. All the mines and properties are located in Jefferson County, Montana with the exception of the Diamond Hill Mine which is in Broadwater County, Montana. Elkhorn maintains its principal executive office in Denver, Colorado.

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Results from Operations

Revenue from the Sale of Gold

Elkhorn had no revenues from the sale of gold from the Golden Dream or the Montana Tunnels Mines in 2011 or 2010. In August, 2011, The Company did realize revenue (net of ore processing costs) of approximately $440,000 from the sale of 874 tons of stockpile of rock from past mining (resulting in 303 oz. of Gold) from the East Butte mine. The net revenue is included in other income for 2011.

Operating Expenses

Mine care and maintenance for the year ended December 31, 2011 were $1,037,199, compared to $1,236,832 for the year ended December 31, 2010. The decrease is a result of lower repairs and maintenance costs in 2011 as compared to 2010.

General and administrative expenses for the year ended December 31, 2011 were $850,616, compared to $1,580,991 for the year ended December 31, 2010. In June, 2011, development of the Golden Dream Mine commenced which resulted in the capitalization of payroll and related costs.

Accretion expense for the year ended December 31, 2011 were $1,327,221, compared to $1,535,632 for the year ended December 31, 2010. The decrease in 2011 as compared to 2010 is due to a reduction in accretion expense for the L-Pit at Montana Tunnels Mine. Management re-evaluates annually the timing of the deferred site closure and reclamation costs related to Montana Tunnels Mining mill and mine sites. They anticipate that reclamation of the mine and mill would be completed in 2024 which is extended several years from previous estimates. This extension is due to management pursuing financing to commence development of the M-Pit, which would extend the mine life by 9 years. The total cost of reclamation is consistent with previous estimates, however by extending the timeline, has reduced the related accretion expense.

Depreciation, depletion and amortization expenses for the year ended December 31, 2011 were $6,604, compared to $11,129 for the year ended December 31, 2010. Depreciation, depletion and amortization is calculated on the units of production basis over the remaining proven and probable reserves of the mine. Montana Tunnels Mine ceased mining during 2008 after completion of the L-Pit and completed milling of stockpiled ore during April, 2009 at which time the mine was placed on care and maintenance. Accordingly, there was no depreciation expense related to Montana Tunnels Mine for the years ended December 31, 2011 and 2010. For the year ended, December 31, 2011, $60,100 of depreciation expense for EGI was capitalized.

Total operating expenses for the year ended December 31, 2011 were $3,221,640, compared to $4,364,584 for the year ended December 31, 2010.

Other Income and Expense

Interest expense for the year ended December 31, 2011 was $8,083,445, compared to $5,546,184 for the year ended December 31, 2010. The increase from 2010 to 2011 of interest expense is a result annual compounding of accrued interest.

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Interest income for the year ended December 31, 2011 was $47,705, compared to $33,384 for the year ended December 31, 2010. Interest income is earned from restricted cash held directly by a surety in the form of certificates of deposit related to reclamation obligations. Interest income earned throughout the year is remitted to the company in the fourth quarter of each year. Slightly higher interest rates in 2011 resulted in addition interest income as compared to 2010.

Other income for the year ended December 31, 2011 was $512,066, compared to $6,628 for the year ended December 31, 2010. The increase in other income is primarily due to the one – time sale of stockpile of rock from past mining from the East Butte Mine totaling $440,000, net of processing costs.

Loss on related party ore purchase agreement for the year ended December 31, 2011 was $13,025,932, compared to nil for the year ended December 31, 2010. The loss relates to MPRPA as the Company recognized the difference fair value of gold at the agreement date and the contract price of gold in the agreement.

The change in fair value of the embedded derivative for the year ended December 31, 2011 was $5,793,013, compared to nil for the year ended December 31, 2010. The loss relates to the change in the fair value of the commodity future prices of the MPRPA from the date of closing to December 31, 2011 to reflect the loss in the change in fair value of the derivative instrument.

Going Concern

The attached annual report of contains explanatory language that substantial doubt exists about Elkhorn’s ability to continue as a going concern. This means that there is substantial doubt that Elkhorn can continue as an on-going business for the next twelve months unless we obtain additional capital to pay for development and operations. We believe that the completion of the proposed $7.5M Private Placement will be sufficient to get the company into a position that the Golden Dream Deposit will begin extracting and selling mineral and providing sufficient cash flow for operations of the Golden Dream Mine, care and maintenance of the Montana Tunnels Mine and other general and administrative expenses; however, since we have not generated revenues since Montana Tunnels Mine shuttered mining in 2008, there is no assurance we will ever reach that point.

Financing Operations and Capital Plan

In addition to the bridge financing we completed prior to the closing of the Merger, we will need to raise additional capital to move the Golden Dream Mine into full operations and commence the expansion and restart of the Montana Tunnels Mine. To accomplish this, we expect to engage in two private placement offerings to raise approximately $7.5 million and approximately $30 million for our two ongoing mining projects, respectively.

Completed Bridge Financing

In February of 2012, prior to the closing of the Merger, EGI completed a number of closings of a bridge financing with BDH, one of our beneficial stockholders through their holdings in EGLLC, and another investor. In this bridge financing, EGI sold an aggregate of $300,000 in principal amount of its 12% unsecured convertible Bridge Notes to BDH and $1,500,000 in principal amount of these Bridge Notes to the other investor. The Bridge Notes mature on August 29, 2012 and, prior to that date but after the closing of the Merger, may be converted, at the sole discretion of each of the note holders, including accrued but unpaid interest, into Units of the Company’s securities at a conversion price of $2.00 per Unit, each Unit consisting of: (i) one share of Common Stock, (ii) and a warrant to purchase one-half share of Common Stock, exercisable at a price of $3.00 per whole share, and (iii) a special warrant exercisable upon the closing of the Company’s planned private placement, provided the share price of the Common Stock offered in the private placement is less than $2.50 per share, so that the exercise of the special warrant will reduce the lender’s effective conversion price for the Common Stock at a 25% discount to the private placement offering price, such special warrant exercisable at a price of $0.01 per share. Funds raised through this financing are being used by EGI to advance Golden Dream Mine operations and for general working capital purposes.

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We believe we will be successful in our capital raising efforts; however, there can be no assurance we will be successful in raising additional debt or equity financing to fund our operations on terms agreeable to us.

Plan of Operations and Capital Requirements

For the remainder of 2012, we plan to continue mine development at the Golden Dream Mine, refurbishment of the Diamond Hill mill and maintenance of our equipment in advance of beginning the M- Pit Expansion at the Montana Tunnels Mine. At the Montana Tunnels Mine, we plan to begin the M- Pit Expansion with the existing haul fleet and equipment, and then augment our current equipment as new equipment and financing become available. Our 2012 budget will require approximately $37.5 million in new capital which we expect to raise through the proposed private placement offerings discussed above.

Our operating projections for the three years beginning 2012 are set forth below. These projections are based on certain assumptions including, but not limited to, our success in raising the required capital in our planned private placements. There can be no assurance that we will be successful in our capital raising efforts. Failure to reach our capital targets could adversely affect our ability to achieve our three-year target projections.

Operating Projections

Elkhorn Goldfields, Inc.

3 Year Budget

Metal Sales & Production	2012		2013		2014
Gold Production (k oz)		15.0		46.1		46.5
Gold Sales ($ million)	$	14.1	$	54.2	$	69.8
Copper Production (k lbs)		-		2.966.4		6.544.4
Copper Sales ($ million)	$	0.0	$	3.0	$	6.5

Financial Projection	2012			2013		2014
Revenue	$	14.1		$	57.2	$	76.3
Mine Operating Costs	$	15.7		$	27.3	$	20.4
General & Administrative Costs	$	1.7		$	3.3	$	3.9
EBITDA	$	(3.3	)	$	26.6	$	52.0
Interest Expense (Capital Lease)	$	0.3		$	0.5	$	0.4
Loss on related party ore purchase derivative	$	2.6		$	4.6	$	0.0
Depreciation/Amortization/Accretion	$	0.8		$	1.7	$	2.0
Net Income	$	(7.0	)	$	19.7	$	49.6
Preferred Dividends	$	1.8		$	7.2	$	7.2

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2012 & 2013 Gold Sales: EGI entered into an MPRPA with a related party to sell 80% of the first 41,700 ounces of gold produced from the Golden Dream Mine for an up-front payment of $10,000,000. The agreement requires the Company to pay all proceeds from the sale of gold in excess of $500 per ounce to the related party. EGI received the up-front payment in 2011 and recognized it as deferred revenue for the first 33,333 ounces of gold sales (80% of the first 41,700 ounces per the agreement). As a result, Gold Sales in 2012 and 2013 reflect 80% of the first 41,700 ounces at $800 per ounce and 20% at market price. Thereafter, all gold sales are at market prices.

Subject to successfully completing the $7.5M private placement offering, Management projects that the Golden Dream Mine should be in full production by the 3rd quarter of 2012. As a result, the above reflects metal sales commencing in September, 2012. The sales projections listed above assume a $1,500 per ounce market price for gold and a $3.75 per pound market price for copper.

Montana Tunnels Mining, Inc. 3 Year Plan

Expansion of the mine in order to resume full mining operations at MTMI is contingent upon raising sufficient capital to fund the M-Pit expansion, refurbishing the mill and existing equipment and fund additional reclamation bonding requirements. Successfully raising the required capital in the second half of 2012 would put the Montana Tunnels Mine on track to be in full operations in 2014. Once in full operations, the Montana Tunnels Mine is projected to produce approximately 50,000 ounces of gold and 34 million pounds of zinc annually, resulting in average net income of $49 million annually.

Liquidity and Capital Resources

Overview

We have funded our operations primarily through issuances of debt and equity securities and will be required to raise additional proceeds through the further issuance of debt and equity securities until at least one of our two mining properties generates positive cash flow from production.

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At December 31, 2011, our total assets were $43.9 million compared to $38.2 million at December 31, 2010. The increase in total assets is primarily attributable to the $3.9 million invested in mine development of the Golden Dream Mine and $1 million in additions to equipment at EGI

At December 31, 2011, we had restricted cash totaling $604,000 compared to $285,000 at December 31, 2010. Restricted cash represents cash held for the bonding requirements imposed by the MDEQ that relates to the future reclamation costs on the Company's properties.

At December 31, 2011 we had a reclamation bond totaling $16.2 million compared to $15.8 million at December 31, 2010. Reclamation bonds consist of cash held directly by a surety for the reclamation of the Montana Tunnels and Elkhorn Project. The restriction will be released when the reclamation is completed, which the Company expects to be in 2024 and 2018, respectively.

Cash

To date, the Company has funded its exploration, development and operations primarily through issuances of debt and equity securities. At December 31, 2011, the Company had cash of $358,125, compared to cash of $61,351 at December 31, 2010. The increase in cash since December 31, 2010 included operating cash inflows of $9,473,607, investing cash outflows of $5,181,276, financing cash outflows of $3,995,557. The primary source of cash inflows in 2011 was from the MPRPA with consideration of $10,000,000.

Liabilities

At December 31, 2011, the Company had liabilities of $103,259,388, compared to $65,126,180 at December 31, 2010. Liabilities increased during 2011 primarily due to the Company recognizing a MPRPA liability totaling $10,000,000 and $18,818,945 embedded derivative based on the contract terms, projected future gold prices and discount rate commensurate with estimates of contemporary credit risk using a discounted cash flow model. The increase in liabilities from 2010 to 2011 is also attributable to an increase in push down debt, interest and the redeemable obligation of parent and its affiliate of $6,655,104. The remainder of the increase is from the reclamation liability of $1,327,221.

During 2011, the Company entered into an MPRPA with a related party to sell 80% of the first 41,700 ounces of gold produced from the Golden Dream Mine for an up-front payment of $10,000,000. The agreement requires the Company sell 80% of the first 41,700 ounces of gold produced for $500 per ounce, if any, to the related party. Additionally, the related party may purchase 6.5% of the ounces produced after the mine has produced in excess of 250,000 aggregate ounces for a purchase price of $600 per ounce. The term of this agreement runs through the closure of the Golden Dream Mine, which is expected at least 5 years following the start of production.

The related party ore purchase liability is comprised of $10,000,000 of up-front consideration, a recognized loss of $13,025,932 reflecting the difference between the fair value of the commodity future prices of the gold at the agreement date and the contract price of gold. The change in fair value of the embedded derivative of $5,793,013 is a reflection of the change in the fair value of the derivative instrument contract from the date of closing to December 31, 2011.

The Company’s assets serve as collateral for multiple loans and a redemption obligation of EGLLC and MFPI. Although the Company is not a maker or guarantor on the secured loans or redemption obligation, these loans and obligation have been “pushed down” to the Company as reflected in its audited financial statements. The redemption obligation was extended by MFPI to compensate and induce certain of its lenders who are also the Secured Lenders of EGLLC, obligating MFPI to purchase, at the Secured Lenders’ option, the $5,950,000 equity investment made in an investment fund that is an owner of EGLLC and is managed by Black Diamond. The Company’s mining properties and equipment have been pledged as collateral to the Secured Lenders under two filed and recorded mortgages. The loans of the EGLLC and MFPI are accruing interest between 15% and 18% per year. At December 31 2011 and 2010, the outstanding principal and interest was $46,343,292 and $39,688,188.

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EGI also owes $1,399,779 in Series A 8% bonds. The bonds mature during July 2012, with interest accruing at 8%. In the case of default, interest on the bonds accrues at 12%. The Company recorded accrued interest of $106,358 as of December 31, 2011.

On May 24, 2010, the Environmental Protection Agency (the “EPA”) issued an “Action Memorandum” which documented the determination that soil removal was necessary to mitigate threats posed by soils containing elevated levels of lead and arsenic located in historic mining areas near the MTMI property (the “Site”). Site clean-up commenced in June 2010 and was completed by August 2010 at a total cost to the EPA of approximately $1,700,000. On August 26, 2010, MTMI and the EPA entered into an Access and Compensation Agreement (“A&C Agreement”) pursuant to which MTMI has agreed to pay to the EPA a total of $380,000. MTMI will remit $2,500 per month with a balloon payment due at month 36. The total amount due to the EPA is included in Accrued Liabilities in the audited financial statements. It is expected that MTMI will start making these monthly payments by the third quarter of 2012.

Recent Developments

The EGI Bridge Financing

In February of 2012, prior to the closing of the Merger, EGI completed a bridge financing, wherein it sold an aggregate of $1,800,000 in principal amount of its 12% unsecured convertible Bridge Notes to two accredited investors, one of whom is an affiliate of the Company. The Bridge Notes mature on August 29, 2012 and, prior to that date but after the closing of the Merger, may be converted, along with accrued but unpaid interest, at the sole discretion of the lender, into Units of the Company’s securities at a conversion price of $2.00 per Unit, each Unit consisting of: (i) one share of Common Stock, (ii) and a warrant to purchase one-half share of Common Stock, exercisable at a price of $3.00 per whole share, and (iii) a special warrant exercisable upon the closing of the Company’s planned private placement, provided the share price of the Common Stock offered in the private placement is less than $2.50 per share, so that the exercise of the special warrant will reduce the lender’s effective conversion price for the Common Stock at a 25% discount to the private placement offering price, such special warrant exercisable at a price of $0.01 per share.

Series A Preferred Stock

As of the closing of the Merger and pursuant to the Merger Agreement, we issued 10,000,000 shares of our designated Series A Preferred Stock to EGLLC (as more fully described in the certificate of designations). EGLLC is entitled to receive, out of funds legally available therefor, cumulative non-compounding preferential dividends at the rate of 12% of the stated value of $6.00 per share per annum (the “Preferential Dividend”). In the event of any defined liquidation event, no distribution can be made to holders of shares of our capital stock ranking junior to the Series A Preferred Stock, including the Common Stock, unless, prior thereto, EGLLC shall have received an amount per share equal to $6.00 (the “Liquidation Amount”) per share, plus the amount of any accrued and unpaid Preferential Dividend owed to EGLLC. EGLLC has the option, exercisable in whole or in part at any time and from time to time prior to the third anniversary of the issuance of the Series A Preferred Stock, to require us to purchase for cash, out of legally available funds, any or all of the then-outstanding shares of Series A Preferred Stock at a price equal to $6.00 per share. We have the option, exercisable in whole or in part at any time and from time to time prior to the third anniversary of the issuance of the Series A Preferred Stock, to redeem any or all of the then-outstanding shares of Series A Preferred Stock at a price equal to $7.00 per share.

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Provided that neither EGLLC nor the Company has exercised its redemption options in full by the third anniversary of the issuance of the Series A Preferred Stock, each share of then-outstanding Series A Preferred Stock shall automatically and immediately convert into one fully paid and non-assessable share of Common Stock of the Company.

Pursuant to the loan reinstatement and modification agreement between EGLLC and the Secured Lenders, EGLLC has informed us that it may exercise its redemption rights in accordance to the following schedule:

Date	Series A Convertible Preferred Stock
9/30/2012		500,000
12/31/2012		583,333
3/31/2013		666,667
6/30/2013		750,000
9/30/2013		833,333
12/31/2013		916,667
3/31/2014		1,000,000
6/30/2014		1,000,000
9/30/2014		1,000,000
12/31/2014		1,000,000
2/28/2015		1,000,000

We believe our cash on hand, anticipated operating cash flow from the Golden Dream Mine, proceeds from the potential sale of mineral interests pursuant to the MPRPA and the proceeds from the EGI bridge financing and proposed private placements will be sufficient to meet EGLLC’s redemption exercises over the next year.

Capital Needs - Availability of Additional Funds

We expect to be engaging in two private placement offerings to raise approximately $7.5 million and approximately $30 million for our two ongoing mining projects. The successful completion of the $7.5 million private placement will be critical to reaching full operations at the Golden Dream Mine, completing the necessary maintenance and restart protocols at the smaller of the Company’s two mill circuits and repaying certain debt that is due in 2012. In addition, some of these proceeds may be used to complete safety and maintenance checks and engine rebuilds, if necessary of the haul trucks, loaders and shovels in anticipation of the Montana Tunnels Mine restart. Once the Golden Dream Mine reaches full production, we believe the expected cash flow from that operation will significantly diminish our need to rely on further issuance of debt and equity securities.

If these assumptions prove correct, our second, planned private placement to raise up to $30 million will become less critical, because proceeds from the Golden Dream Mine would be used to develop the Montana Tunnels Mine. However, proceeds from a second private placement would enable us to advance the development of the Montana Tunnels Mine on a pace more accelerated than we could achieve from waiting for the cash flow to be generated from the Golden Dream Mine.

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We plan to continue raising capital in order to meet our liquidity needs. However, we may be unable to raise sufficient additional capital when we need it or to raise capital on favorable terms. If we are unable to obtain adequate funds on reasonable terms, we may be required to significantly curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms.

Off-Balance Sheet Arrangements

We have no off-balance sheets arrangements.

Critical Accounting Policies

Inventory

Doré inventory is stated at the lower of weighted-average production cost and net realizable value. Production costs for doré inventory include direct production costs, attributable overhead, and depreciation incurred to bring the material to its current point in the processing cycle. Stockpiled ore inventory represents ore that has been mined and is available for further processing. Work-in-process inventory, including stockpiled ore and in-circuit gold inventory, is valued at the lower of weighted average production cost and net realizable value. Materials and supplies are valued at the lower of average direct cost of acquisition and net realizable value.

Buildings and Equipment

MTMI buildings and equipment are recorded at acquisition cost and amortized on a units-of production basis over the remaining proven and probable reserves of the mine. Equipment under capital lease is valued at the lower of fair market value or net present value of the minimum lease payments at the inception of the lease. Equipment that is mobile is amortized on a straight-line basis over the estimated useful life of the equipment ranging from five to ten years, not to exceed the related estimated mine lives.

EGI buildings and equipment are stated at cost. Repair and maintenance costs are expensed as incurred. Depreciation is provided utilizing the straight-line method over the estimated useful lives for owned assets taking into account estimated salvage values, ranging from 3 to 39 years.

Mine Development

The costs of removing overburden and waste materials to access the ore prior to the production phase are referred to as "mine development costs." Mine development costs are capitalized during the development of the mine. Mine development costs are amortized using the units-of-production method based on estimated recoverable tons of proven and probable reserves. To the extent that these costs benefit the mine, they are amortized over the estimated life of the mine. Development costs incurred after the first saleable ore is extracted from the mine (i.e. post-production costs) are a component of mineral inventory cost. All post-production costs are considered variable production costs that are included in the costs of the inventory produced during the period that the mining costs are incurred.

Mining Properties and Mine Development

For new projects without established reserves, all costs, other than acquisition costs, are expensed prior to the establishment of proven and probable reserves. Reserves designated as proven and probable are supported by a feasibility study, indicating that the reserves have had the requisite geologic, technical, and economic work performed and are legally extractable at the time of reserve determination. Once proven and probable reserves are established, all development and other site-specific costs are capitalized, including general and administrative charges for actual time and expenses incurred in connection with site supervision. Development drilling costs incurred to infill mineralized material to increase the confidence level in order to develop or increase proven and probable reserves are capitalized. If subsequent events or circumstances arise which would preclude further development of the reserves under the then existing laws and regulations, additional costs are expensed until the impediments have been removed and the property would be subject to ongoing impairment reviews. When a mine is placed into production, the capitalized acquisition and mine development costs are reclassified to mining properties and are amortized to operations using the units-of-production method based on the estimated metals that can be recovered.

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Mineral Interests

Mineral interests include the cost of obtaining patented and unpatented mining claims and the initial cost of acquiring mineral interests. If a mineable ore body is discovered, such costs are amortized when production begins using the units-of-production method based on proven and probable reserves. If no mineable ore body is discovered or such rights are otherwise determined to have no value, such costs are expensed in the period in which it is determined the property has no future economic value. For the years ended December 31, 2011 and 2010, there are no mineral interest impairments.

Reclamation Liability

The Company’s mining and exploration activities are subject to various federal and state laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. The Company conducts its operations to protect public health and the environment and believes its operations are in compliance with applicable laws and regulations in all material respects. The company has made, and expects to make in the future, expenditures to comply with such laws and regulations, but cannot predict the full amount of such future expenditures. Estimated future reclamation costs are based principally on legal and regulatory requirements. Estimated future costs are discounted to their present value using a 12% discount rate. Reclamation obligations are secured by cash held directly by a surety or certificates of deposit. The following table summarizes the activity for the Company's asset retirement obligation for the years ended December 31, 2011 and 2010:

	December 31,
	2011		2010
Asset retirement obligations at January 1	$	21,465,966	$	19,930,334
Accretion expense		1,327,221		1,535,632
Liabilities incurred		-		-
Liabilities assumed		-		-
Liabilities settled		-		-
Revision in estimates		-		-
Asset retirement obligations at December 31		22,793,187		21,465,966
Less current portion of asset retirement obligations		-		-
Asset retirement obligations at December 31, less current portion	$	22,793,187	$	21,465,966

Fair Value of Financial Instruments

The carrying amounts of financial instruments including cash, accounts payable and accrued liabilities approximated fair value as of December 31, 2011 and 2010, because of the relatively short maturity of these instruments.

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The Company applies the guidance to non-financial assets and liabilities measured at fair value on a non-recurring basis. The guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions of what market participants would use in pricing the asset or liability based on the best information available in the circumstances. The financial and non-financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities;

Level 2: Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability; or

Level 3: Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.

The following assets are measured at fair value as of December 31, 2011:

Description	Level 1		Level 2		Level 3			Total
Certificate of deposits	$	604,021	$	-	$	-		$	604,021
Reclamation bonds	$	-	$	-	$	16,190,556		$	16,190,556
Embedded derivative	$	-	$	-	$	(18,818,945	)	$	(18,818,945	)

The following assets are measured at fair value as of December 31, 2010:

Description	Level 1		Level 2		Level 3		Total
Certificate of deposits	$	284,467	$	-	$	-	$	284,467
Reclamation bonds	$	-	$	-	$	15,842,403	$	15,842,403

Certificates of deposit: Recorded at cost, which approximates fair value due to the short duration of the investment.

Reclamation Bonds: Recorded at the amount provided by the Montana Department of Environmental Quality, which is based upon the fair value of the cash underlying the bond.

Embedded Derivatives: Based on contract terms, projected future gold prices, and discount rate commensurate with estimates of contemporary credit risk using a discounted cash flow model. The model is most sensitive to the future price of gold.

There were no changes to the valuation techniques used during the year ended December 31, 2011.

Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011- 04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”).” This pronouncement was issued to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and IFRS. ASU 2011-04 changes certain fair value measurement principles and changes the disclosure requirements to include quantitative information about unobservable inputs used for level 3 fair value measurements. This pronouncement is effective for reporting periods beginning on or after December 15, 2011 (early adoption is prohibited). The Company is evaluating the potential impact of adopting this guidance on its combined financial position, results of operations, cash flows, and disclosures.

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In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income.” ASU 2011-05 eliminates the option to report other comprehensive income and its components in the statement of changes in stockholders’ equity and requires an entity to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement or in two separate but consecutive statements. This pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 (early adoption is permitted). The Company is evaluating the potential impact of adopting this guidance on its combined financial position, results of operations, cash flows, and disclosures.

In December 2011, the FASB issued ASU No. 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.” ASU 2011-12 indefinitely defers certain provisions of ASU 2011-05 relating to the presentation of reclassification adjustments out of accumulated other comprehensive income by component. This pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

MANAGEMENT

The following tables sets forth information with respect to the beneficial ownership of our Common Stock and our Series A Preferred Stock as of April 6, 2012, by (i) each stockholder known by us to be the beneficial owner of more than 5% of our Common Stock or our Series A Preferred Stock, (ii) each of our directors and executive officers, and (iii) all of our directors and executive officers as a group. We have two classes of voting securities - the Common Stock and the Series A Preferred Stock. To the best of our knowledge, except as otherwise indicated, each of the persons named in the table has sole voting and investment power with respect to the shares of Common Stock beneficially owned by such person, except to the extent such power may be shared with a spouse. To our knowledge, none of the shares listed below are held under a voting trust or similar agreement. Other than the Merger, to our knowledge, there is no arrangement, including any pledge by any person of securities of the Company or any of its parents, the operation of which may at a subsequent date result in a change in control of the Company.

Unless otherwise indicated in the following tables, the address for each person named in the tables is c/o Eastern Resources, Inc., 1610 Wynkoop Street, Suite 400, Denver, CO 80202.

Title of Class: Common Stock

Name and Address of Beneficial Owner	Amount of Beneficial Ownership1			Percentage of Class2
Patrick Imeson		3,177,000	(3)(4)		3.21	%
Robert Trenaman		—			—
Eric Altman		144,000	(3)(5)		*
Tim Smith		—			—
Michael Feinberg		45,441,000	(6)		45.86	%
Kenneth Hamlet		—			—
All directors and officers as a group (6 persons)		48,762,000			49.21	%
Elkhorn Goldfields, LLC		90,000,000	(3)		90.84	%

* Less than 1%.

Title of Class: Series A Preferred Stock

Name and Address of Beneficial Owner	Amount of Beneficial Ownership1			Percentage of Class8
Patrick Imeson		353,000	(3)(4)		3.53	%
Robert Trenaman		—			—
Eric Altman		16,000	(3)(5)		*
Tim Smith		—			—
Michael Feinberg		5,049,000	(6)		50.49	%
Kenneth Hamlet		—			—
All directors and officers as a group (6 persons)		5,418,000			54.18	%
Elkhorn Goldfields, LLC		10,000,000	(7)		100.0	%

* Less than 1%.

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¹ Beneficial ownership is determined in accordance with the rules of the SEC and generally includes having or sharing voting or investment power with respect to securities. Shares of Common Stock or Series A Preferred Stock, as the case may be, subject to options or warrants currently exercisable or convertible, or exercisable or convertible within 60 days of April 6, 2012, are deemed outstanding for computing the percentage of the person holding such option or warrant but are not deemed outstanding for computing the percentage of any other person.

² Percentages are based upon 99,085,000 shares of Common Stock issued and outstanding as of April 6, 2012, after giving effect to the Merger, the Split Off and the cancellation of 5,751,000 shares of our Common Stock surrendered by Dylan Hundley.

³ Patrick Imeson and Eric Altman are the managers of Black Diamond. Black Diamond is the manager of BDH. BDH is the owner of ninety-nine percent (99%) of the membership interests of EGLLC. As such, Patrick Imeson and Eric Altman have sole voting and investment power with respect to our Common Stock and Series A Preferred Stock owned by EGLLC and may be deemed to beneficially own all of that stock owned by EGLLC. Messrs. Imeson and Altman disclaim beneficial ownership of this stock.

⁴ Patrick Imeson owns indirectly, through certain investment funds that comprise BDH, 3.53% of the membership interests of EGLLC. As such, Mr. Imeson is deemed to beneficially own 3.21% of the Common Stock of ESRI (3,177,000 shares) and 3.53% of Series A Preferred Stock of ESRI (353,000 shares) owned by EGLLC.

⁵ Eric Altman owns indirectly, through certain investment funds that comprise BDH, 0.16% of the membership interests of EGLLC. As such, Mr. Altman is deemed to beneficially own 0.15% of the Common Stock of ESRI (144,000 shares) and 0.16% of the Series A Preferred Stock of ESRI (16,000 shares) owned by EGLLC.

⁶ Michael Feinberg owns directly 0.49% and indirectly, through certain investment funds that comprise BDH, 50% of the membership interests of EGLLC, for a total of 50.49%. As such, Mr. Feinberg is deemed to beneficially own 45.86% of the Common Stock of ESRI (45,441,000 shares) and 50.49% of the Series A Preferred Stock of ESRI (5,049,000 shares) owned by EGLLC.

⁷ Percentages are based upon 10,000,000 shares of Series A Preferred Stock issued and outstanding as of April 6, 2012, after giving effect to the Merger.

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DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

Directors and Executive Officers

Below are the names and certain information regarding the Company’s executive officers and directors who were appointed effective upon the closing of the Merger:

Name	Age	Position(s)	Date Named to Board of Directors
Patrick Imeson	63	Chief Executive Officer and Director	April 6, 2012
Robert Trenaman	51	Chief Operating Officer, President and Director	April 6, 2012
Eric Altman	42	Chief Financial Officer, Vice President-Finance and Treasurer
Timothy G. Smith	55	Vice President – Operations and General Manager – Montana Tunnels Mine
Michael Feinberg	67	Director	April 6, 2012
Kenneth Hamlet	67	Director	April 6, 2012

Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Pursuant to the terms of the Merger Agreement, the parties agreed that the Company’s Board of Directors, as of the closing of the Merger, would consist of five members. Our Board of directors is now comprised of four members, all of whom have been designated by EGLLC. One member of the Board of Directors remains to be appointed. That person shall be designated by the stockholders of ESRI prior the Merger, pursuant to the terms of the Merger Agreement. Executive officers are appointed by the Board of Directors and serve at its pleasure.

The principal occupation and business experience during the past five years for our executive officers and directors is as follows:

Patrick Imeson has served as our Chief Executive Officer and Chairman of our Board of Directors since April 6, 2012. Mr. Imeson began assembling the Elkhorn properties and management team in 2000. Mr. Imeson draws upon a diverse career in finance and company operations. As a senior vice president of a midsized asset management firm, he led initiatives in sales and marketing of alternative investments as well as building international relationships. He has also held senior executive and entrepreneurial responsibilities in sectors including engineering, regional airlines, insurance, food & beverage, and mining. Imeson was educated at New Mexico Military Institute and attended two years at the U.S. Naval Academy at Annapolis, MD prior to leaving to pursue a career in business and finance.

Robert Trenaman has served as our President, Chief Operating Officer and a director since April 6, 2012. Mr. Trenaman brings over 25 years of experience within the mining industry. Mr. Trenaman has spent over 12 years in Montana initially acquiring the Elkhorn Project nearby the Montana Tunnels Mine for Treminco Resources Ltd from Newmont in 1998. Mr. Trenaman was part of the team that successfully completed the U.S. $14.25 million investment in MTMI in 2006 on behalf of EGLLC. As a result, MTMI restarted commercial production in March 2007 with EGLLC being a 50% Joint Venture partner. In February 2010, EGLLC acquired a full interest in the Montana Tunnels Mine through the 100% acquisition of the MTMI.

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From 1986 through to 2000, Mr. Trenaman was involved in building Treminco Resources, Ltd. Under his leadership, Treminco evolved from an exploration company listed on the Vancouver Stock Exchange, to a two-operation, 120-employee, underground-focused mining company listed on the Toronto Stock Exchange. He has successfully managed corporate, financial and operational affairs, negotiated smelter contracts, union contracts, term lending facilities and public company financings. Mr. Trenaman is a graduate of the University of British Columbia.

Eric Altman has served as our Chief Financial Officer, Vice President – Finance and Treasurer since April 6, 2012. Mr. Altman brings experience in financing companies that are the developmental stage along with public, tax and industry accounting/finance experience. In his career as the CFO and Portfolio Manager of a private equity firm and as a senior accountant with Coopers & Lybrand, Fidelity Investments, and several smaller firms, he has worked with companies in sectors such as software, biotechnology, energy consulting, construction, real estate and lodging, mutual funds, and venture capital. Altman holds a BS in industrial economics from Union College and a joint MS/MBA degree from the Graduate School of Professional Accounting at Northeastern University.

Timothy G. Smith has served as our Vice President – Operations and General Manager – Montana Tunnels Mine since April 2011. Mr. Smith also serves as Chief Operating Officer for Fire River Gold Corporation. Previous to these appointments, Mr. Smith was Vice President – U.S. and Canadian Operations of Apollo Gold and, before that, was Vice President and General Manager of Montana Tunnels Mining, Inc. Mr. Smith has over 35 years of mine operations experience in gold, copper, coal and lead and zinc mining. Mr. Smith holds a Bachelor of Engineering –Metallurgical, from McGill University and is a Professional Engineer registered in British Columbia.

Michael Feinberg has served as a director since April 6, 2012. Mr. Feinberg, draws on a 40 year experience as a property developer and owner and investor in growth companies. He has owned and/or developed residential and office buildings in the greater metropolitan New York and South Florida areas. Additionally, Mr. Feinberg currently as a director of Rackwise Inc. (a public company) and Transnetyx Inc. (a privately held company) and is the owner and designed the course at The Club at Emerald Hills in Hollywood, Florida, was one of the earlier financiers of Ultimate Software, a leading provider of end-to-end strategic human resources, payroll, and talent management solutions; invested in the 2006 recapitalization of the Indian Wells Tennis Tournament and is an investor in the funds managed by Black Diamond Financial Group.

Kenneth Hamlet has served as a director since April 6, 2012. Mr. Hamlet has a wide spectrum of executive experience, notably his tenure as president and CEO of Holiday Inns Inc. Hotel Group. After the sale of Holiday Inns, Inc., Mr. Hamlet founded, in 1990, and became chairman and CEO of Hamlet Holdings LLC, which held interests in a diverse set of industries including: real estate development, manufacturing, services, retail, investment banking, agriculture and computer-based entertainment in hotel rooms. Mr. Hamlet has also served in a variety of leadership roles of not-for-profit organizations including the co-chairman of the U.S. Olympic Committee for the Mid-South Region, president of the Boy’s Club of Memphis, vice chairman of the United Way’s mid-South fundraising campaign, club master for the Boy Scouts of America, board member of the UCSD Graduate School of International Relations and Pacific Studies. He has been an active board member of the Conrad Foundation since July 2009, a Senior Advisor at Crestview Partners since July 2010, an advisory board member of BDH since October 2011 and is also currently the co-managing member of Monalex Partners, LLC.

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Key Employees

John Schaefer, Environmental Manager – Montana Tunnels Mine. Mr. Schaefer has 40 years of experience in the mining and manufacturing industries with more than 20 years focused on environmental compliance and management. Mr. Schaefer has been employed at the Montana Tunnels Mine for 23 years while managing the facility’s environmental programs for the past 14 years. Holding a Bachelor of Science degree in chemistry, Mr. Schaefer brings a wide range of experience in environmental matters, analytical chemistry and manufacturing production management from past employment with Kaiser Aluminum and Chemical Corporation, Rockwell International, Alunite Metallurgical Center, Hazen Research and Northern Testing Laboratories. From 2004 through 2008, Mr. Schaefer managed the Environmental Impact Statement process for a major permit amendment to the Montana Tunnels’ Mine plan that resulted in favorable Records of Decision from regulatory agencies for the next expansion phase of mine operations. In addition to environmental affairs, Mr. Schaefer oversees land matters, reclamation bonding, laboratory operations and all operating licenses for MTMI.

Chris Frank, Chief Engineer – Golden Dream Mine. After studying mining engineering at the Montana College of Mineral Sciences and Technology Mr. Frank commenced his career with Diamond Hill Mines, Inc. as an engineering tech at the Diamond Hill mine near Townsend, MT.  The Diamond Hill mine was a 500 ton-per-day underground gold mine producing from a skarn deposit utilizing long-hole open stopping.  After Diamond Hill closed Mr. Frank became the Senior Mine Engineer at the Montana Tunnels mine:  a 15,000 ton per day open pit gold, zinc, silver and lead operation where he was responsible for grade control, short to medium term planning, mine budgeting, drill and blast design, and cost tracking.  After operations were suspended at Montana Tunnels, Frank became the Senior Mine Engineer at the Black Fox mine near Matheson, Ont.  The Black Fox mine is a 2,000 metric tonne per day underground and open-pit gold operation.  Frank was responsible for short to medium term planning, drill and blast design, locating and collapsing underground workings within the pit, ore grade control, updating the block model with definition drilling, and assisting in the design and building of infrastructure at the mine site to support open pit and underground operations.

Shane Hanninen, Mine Operations Manager – Golden Dream Mine. Mr. Hanninen commenced his career in the mining industry with Newmont Mining Corp. in 1992 where he expanded upon his hands-on knowledge operating all aspects of open-pit mine equipment as well as gaining field supervisory experience. In 2005, Mr. Hanninen oversaw open pit mine operations at the molybdenum mine owned by Montana Molybdenum Corp.’s in the capacity of Mine Foreman. In 2006 he joined Montana Tunnels Mining, Inc. as Safety Director and in 2011 became Mine Operations Manager for the Golden Dream Mine. Mr. Hanninen is a Certified Mine Safety and Health Administration (“MSHA”) instructor.

Shane Parrow, Advisor. Mr. Parrow led the team that developed the Golden Dream Mine plan and obtained the operating permit. He has over 15 years of mining experience and has established excellent public relations within the local community. Mr. Parrow will bring his extensive knowledge regarding rock mechanics, blasting, materials handling, mine valuation, ventilation, environmental considerations, mine safety, and the design and operation of surface and underground mines. This includes: project management for start-up underground mining operations; general manager responsible for underground mine planning, designs, budgeting, permitting, and exploration; production foreman/mine engineer with task of short and long-range mine planning; production engineer for oil and gas company; and underground mine manager/mill process production foreman. In addition to serving as an advisor to us, Mr. Parrow is an Associate Professor in the Mine Engineering department of Montana Tech.

We intend to hire independent geologists, engineers, landmen and various subcontractors on an as-needed basis.  We have not entered into any negotiations or contracts with any such persons.

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Involvement in Certain Legal Proceedings

During the past ten (10) years, none of the above individuals has:

· been subject to a petition under the federal bankruptcy laws or any state insolvency law, filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

· been convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

· been the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:

· acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

· engaging in any type of business practice; or

· engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;

· been the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to act as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity, or to be associated with persons engaged in any such activity;

· been found by a court of competent jurisdiction in a civil action or by the Commission to have violated any federal or state securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated; or

· been found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated.

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Director Independence

We are not currently listed on any national securities exchange or quoted on an inter-dealer quotation system that has a requirement that certain of the members of the Board of Directors be independent. However, the Board of Directors has made a determination as to which of its members are independent. In evaluating the independence of its members and the composition of the committees of the Board of Directors, the Board utilizes the definition of “independence” developed by the Nasdaq Stock Market and in SEC rules, including the rules relating to the independence standards in audit committee members and the non-employee director definition of Rule 16b-3 promulgated under the Exchange Act.

The Board of Directors expects to continue to evaluate whether and to what extent the members of the Board and its committees are independent. The Company intends to appoint persons to the Board and committees of the Board who will meet the corporate governance requirements imposed by a national securities exchange. Therefore, the Company expects that a majority of its directors will be independent directors of which at least one director will qualify as an “audit committee financial expert,” within the meaning of SEC rules.

Additionally, the Board of Directors is expected to appoint an audit committee, governance committee and compensation committee and to adopt charters relative to each such committee.

We believe that Mr. Hamlet is currently an “independent” director as that term is defined in the listing standards of the Nasdaq Stock Market and SEC rules, including the rules relating to the independence standards for audit committee members and the non-employee director definition of Rule 16b-3 promulgated under the Exchange Act.

Board Committees

The Company currently has not established any committees of the Board of Directors.  Our Board of Directors may designate from among its members an executive committee and one or more other committees in the future.  We do not have a nominating committee or a nominating committee charter.  Further, we do not have a policy with regard to the consideration of any director candidates recommended by security holders.  To date, no security holders have made any such recommendations.  The entire Board of Directors performs all functions that would otherwise be performed by committees.  Given the present size of our board it is not practical for us to have committees.  If we are able to grow our business and increase our operations, we intend to expand the size of our board and allocate responsibilities accordingly.

Audit Committee Financial Expert

We have no separate audit committee at this time.  The entire Board of Directors shall oversee our audits and auditing procedures.

Shareholder Communications

Currently, we do not have a policy with regard to the consideration of any director candidates recommended by security holders. To date, no security holders have made any such recommendations.

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Code of Ethics

We have adopted a written Code of Ethics. We believe that the Code of Ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. A copy of our Code of Ethics will be provided to any person requesting same without charge. To request a copy of our Code of Ethics, please make written request to our Chief Executive Officer, c/o Eastern Resources, Inc., 1610 Wynkoop Street, Suite 400, Denver, CO 80202.

Compliance with Section 16(a) of the Exchange Act

Our Common Stock is not registered pursuant to Section 12 of the Exchange Act. Accordingly, our officers, directors and principal shareholders are not subject to the beneficial ownership reporting requirements of Section 16(a) of the Exchange Act.

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EXECUTIVE COMPENSATION

The following table sets forth information concerning the total compensation paid or accrued by us during the fiscal year ended December 31, 2011 to (i) all individuals that served as our principal executive officer or acted in a similar capacity for us at any time during the fiscal year ended December 31, 2011; (ii) all individuals that served as our principal financial officer or acted in a similar capacity for us at any time during the fiscal year ended December 31, 2011; and (iii) all individuals that served as executive officers of ours at any time during the fiscal year ended December 31, 2011 that received annual compensation during the fiscal year ended December 31, 2011 in excess of $100,000.

Summary Compensation Table

Name and Principal Position	Year		Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($)	Non-Equity Incentive Plan Compen- sation ($)	Non-qualified Deferred Compen- sation Earnings ($)	All Other Compensation ($)		Total ($)
Patrick Imeson, Chief		2011		0		0		0					0		0
Executive Officer and Chairman		2010		0		0		0					0		0
Eric Altman, Chief		2011		0		0		0					0		0
Financial Officer		2010		0		0		0					0		0
Robert Trenaman, President		2011		132,500		0		0							132,500
and Chief Operating Officer		2010		90,000		0		0							90,000

Outstanding Equity Awards at Fiscal Year-End

We have one compensation plan approved by our stockholders, the 2012 Plan.  As of the closing of the Merger, we have granted option awards under the 2012 Plan to certain of our officers, directors and employees for a total of 5,320,000 shares of our Common Stock. We have also granted options for a total 50,000 shares of our Common Stock to our independent director and option for a total of 75,000 shares to certain contractors and advisors.  

We have no plans in place and have never maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred contribution plans and nonqualified deferred contribution plans.

Except as indicated below, we have no contracts, agreements, plans or arrangements, whether written or unwritten, that provide for payments to the named executive officers listed above.

Employment Agreements

Robert Trenaman salary for 2010 and 2011 was paid by EGLLC pursuant to an offer of employment letter dated July 1, 2011 according to which EGLLC agreed to pay Mr. Trenaman an annual base salary of $180,000. This letter was modified as of that same date by a side agreement between EGLLC and Mr. Trenaman, which reduced Mr. Trenaman’s monthly salary, beginning July 1, 2011, to $12,500, until the Gold Dream Mine enters commercial production.

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We have entered into employment agreements with certain of our executive officers effective April 6, 2012, upon the closing of the Merger.

On April 6, 2012, we entered into executive employment agreements with (i) Patrick Imeson, our Chief Executive Officer and Chairman, (ii) Robert Trenaman, our President and Chief Operating Officer, (iii) Eric Altman, our Chief Financial Officer and Treasurer, and (iv) Tim Smith, our Vice President – Operations and General Manager of MTMI. The term of each of these employment agreements is three (3) years. Mr. Imeson’s agreement provides for annual compensation of $60,000 and an option grant of 1,000,000 shares of our Common Stock under our 2012 Plan; Mr. Altman’s agreement also provide for annual compensation of $60,000 and an option grant of 500,000 shares of our Common Stock under the 2012 Plan; Mr. Trenaman’s agreement provides for compensation that includes an annual base salary of $225,000 and an option grant under the 2012 Plan of 3,000,000 shares; and Mr. Smith’s agreement provides for compensation that includes an annual base salary of $100,000 and an option grant under the 2012 Plan of 500,000 shares.

Base salaries will be subject to annual review by our Board of Directors and increase (but not decrease) as the Board determines. Our Board shall determine in its sole discretion, following the closing of the Merger, what bonuses, if any, our executive officers shall be entitled to, based on milestones to be agreed upon by the Board and each of the executives. Each of our executive officers shall be eligible to participate in any other bonus or incentive program established by us for executives of the Company and shall be entitled to other benefits as may be adopted by us from time to time for the benefit of our executives, as determined by our Board.

The employment agreements with each of Messrs. Imeson, Altman, Trenaman and Smith are filed as Exhibits to this Current Report and are incorporated herein by reference.

Management Services Agreement

Effective April 6, 2012 upon the closing of the Merger, Black Diamond, owned and managed by Messrs. Imeson and Altman, entered into a management services agreement with us pursuant to which Black Diamond has agreed to provide certain management, financial and accounting services to us and to make available Messrs. Imeson and Altman to serve as our Chief Executive Officer and Chief Financial Officer, respectively. The agreement has an initial term of three years and may be extended thereafter for successive one-year terms. The agreement may be terminated (i) by either party upon thirty (30) days’ notice prior to the end of the then-current term or earlier if one of the parties commits a material breach of the agreement and (ii) by us for any reason provided that we pay Black Diamond all fees due through the end of the then-current term. Under this agreement, we have agreed to pay Black Diamond $15,000 per month plus further compensation at a rate of $200 per hour for each additional hour that Black Diamond renders services to us under the agreement in excess of 125 hours. We have also granted to certain employees of Black Diamond options to purchase up to 50,000 shares of our Common Stock under the 2012 Plan. The agreement also provides for the provision of office space for our executive offices at 1610 Wynkoop Street, Suite 400, Denver, Colorado 80202, our deemed principal place of business. This agreement replaces and supersedes a similar agreement dated November 1, 2010 between Black Diamond and EGLLC.

This management services agreement has been filed as Exhibit 10.21 to this Current Report and is incorporated herein by reference.

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Director Compensation

Prior to the Merger, ESRI did not pay its directors any cash compensation for services on its Board of Directors.  

Following the consummation of the Merger, our directors will be entitled to receive compensation as follows: Each non-employee director will receive an initial grant under our 2012 Plan of options to purchase 50,000 shares of our Common Stock. Each non-employee director will also receive an annual retainer of $25,000. The Chairman of the Board of Directors, if a non-employee, will receive an additional annual retainer of $15,000. The audit committee chairman will receive an annual fee of $10,000 and other committee chairpersons will receive $5,000 annually, once these committees are established. Members of the Board of Directors will receive a fee of $750 for each Board meeting that they attend in person and $500 for a meeting attended telephonically. Each director will receive a travel fee of $500 per day, not including the day of the Board meeting, and related travel and out-of-pocket expenses will be reimbursed.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions involving ESRI and/or ESRI Stockholders

Split-Off and Release

Concurrent with the closing of the Merger, ESRI exchanged with certain of our former stockholders all of the outstanding shares of common stock of Split Corp that it previously held for 5,793,000 shares of our Common Stock .

Related to the Split-Off, ESRI and Buzz Kill terminated and cancelled an investment agreement between them dated May 1, 2007. Pursuant to this agreement cancellation, ESRI relinquished its right to recoup its $800,000 investment in Buzz Kill and Buzz Kill no longer is required to share 50% of its net revenue from sales of the film BuzzKill with ESRI.

At the closing of the Merger, holders of approximately $233,000 of Split Corp. promissory notes agreed to release ESRI from any obligations ESRI might have had with respect to these notes having been the parent company of Split Corp. prior to the Split-Off.

Employment Agreements

On April 6, 2012, we entered into executive employment agreements with (i) Patrick Imeson, our Chief Executive Officer and Chairman, (ii) Robert Trenaman, our President and Chief Operating Officer, (iii) Eric Altman, our Chief Financial Officer and Treasurer, and (iv) Tim Smith, our Vice President – Operations and General Manager of MTMI. The term of each of these employment agreements is three (3) years. Mr. Imeson’s agreement provides for annual compensation of $60,000 and an option grant of 1,000,000 shares of our Common Stock under our 2012 Plan; Mr. Altman’s agreement also provides for annual compensation of $60,000 and an option grant of 500,000 shares of our Common Stock under the 2012 Plan; Mr. Trenaman’s agreement provides for compensation that includes an annual base salary of $225,000 and an option grant under the 2012 Plan of 3,000,000 shares; and Mr. Smith’s agreement provides for compensation that includes an annual base salary of $100,000 and an option grant under the 2012 Plan of 500,000 shares.

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Lock-up Agreements 

In connection with the Merger, the Pubco Holders entered into lock-up agreements with ESRI whereby they agreed that forty percent (40%) of their Public Float Shares may not be sold for a period of twelve (12) months following the Merger closing date.

Forgiveness of Debt; Share Surrender and Cancellation

At the closing of the Merger, holders of ESRI promissory notes discharged and forgave notes, including all accrued but unpaid interest, in the aggregate principal amount of approximately $276,000.  

Additionally, Dylan Hundley, a holder of 5,751,000 shares of ESRI Common Stock prior to the Merger, surrendered to us for cancellation all of her shares.

Transactions involving EGLLC and/or EGLLC Related Parties

Minerals Product Receivables Purchase Agreement

On April 15, 2011, EGI, EGLLC and BDH entered into a Minerals Product Receivables Purchase Agreement (the “MPRPA”) pursuant to which EGI agreed to sell a certain percentage of the gold output from the Golden Dream Mine to BDH for the life of the Golden Dream Mine. On that date, EGI and BDH also entered into a security agreement to secure the payment of EGI’s obligations under the MPRPA pursuant to which EGI granted BDH a continuing security interest in all of the assets and property of EGI.

In accordance with the terms of the MPRPA, EGI has agreed to sell BDH eighty percent (80%) of the first 41,700 ounces and six and one-half percent (6.5%) of the ounces produced over 250,000, of the gold produced from the Golden Dream Mine, subject to certain specified reductions, free and clear of any liens and encumbrances. Under this agreement, BDH paid EGI “pre-closing payments” of $525,000 and additional “balance payments” of $9,475,000 to meet EGI’s cash flow needs prior to the commencement of commercial production at the Golden Dream Mine.

For each ounce of gold delivered to BDH under the MPRPA, BDH will pay EGI, subject to certain adjustments, (i) with respect to 80% of the first 41,700 ounces sold to BDH, the lesser of $500 per ounce or the latest COMEX spot gold price at the time of sale and (ii) with respect to each ounce of gold over 250,000 ounces, the lesser of $600 or the latest COMEX spot gold price at the time of sale. All pricing is subject to adjustment by an agreed upon inflation factor.

The MPRPA and related security agreement have been filed as Exhibits 10.23, and 10.25, respectively, to this Current Report and are incorporated herein by reference.

Employee Leasing Agreement between EGI and MTMI

On August 1, 2011, EGI and MTMI entered into an employee leasing agreement pursuant to which EGI retained the services of certain employees of MTMI so that these MTMI employees could work on properties and projects owned by EGI. Pursuant to the terms of this agreement, EGI agreed to pay a certain percentage of MTMI’s wages and employee benefit costs associated with the MTMI employees identified in the agreement.

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Management Services Agreement with Black Diamond

Effective April 6, 2012 upon the closing of the Merger, Black Diamond Financial Group, LLC (“Black Diamond”), owned and managed by Messrs. Imeson and Altman, entered into a management services agreement with us pursuant to which Black Diamond has agreed to provide certain management, financial and accounting services to us and to make available Messrs. Imeson and Altman to serve as our Chief Executive Officer and Chief Financial Officer, respectively. The agreement has an initial term of three years and may be extended thereafter for successive one-year terms. The agreement may be terminated (i) by either party upon thirty (30) days’ notice prior to the end of the then-current term or earlier if one of the parties commits a material breach of the agreement and (ii) by us for any reason provided that we pay Black Diamond all fees due through the end of the then-current term. Under this agreement, we have agreed to pay Black Diamond $15,000 per month plus further compensation at a rate of $200 per hour for each additional hour that Black Diamond renders services to us under the agreement in excess of 125 hours. We have also agreed to grant to certain principals and employees of Black Diamond options to purchase up to 100,000 shares of our Common Stock under the 2012 Plan. The agreement also provides us with office space allocation at 1610 Wynkoop Street, Suite 400, Denver, Colorado 80202 for our principal place of business. This agreement replaces and supersedes a similar agreement dated November 1, 2010 between Black Diamond and EGLLC.

Contributions and Distribution between EGLLC and its subsidiaries (EGI and MTMI)

In 2011 and 2010, EGLLC made equity contributions of $260,000 and $870,000 to EGI and MTMI, respectively. Also, EGI and MTMI made distributions to EGLLC of $4,377,779 and 964,091, respectively. These distributions were to repay certain bridge loans and accrued operating expenses of EGLLC.

EGI 2010 Private Placement – Series A Bonds Outstanding

During 2010 and 2011, EGI issued an 8% Series A Bond to Black Diamond Bridge Capital Fund I, LLC (an entity controlled by Black Diamond) in the principal amount of $1,199,779. This bond matures in July, 2012 and accrues interest at a rate of 8% per annum.

The EGI Bridge Financing

Prior to the closing of the Merger, EGI completed a number of closings of a bridge financing with BDH, one of our beneficial stockholders through holdings in EGLLC, and another investor. In this bridge financing, EGI sold an aggregate of $300,000 in principal amount of its 12% unsecured convertible Bridge Notes to BDH and $1,500,000 in principal amount of these Bridge Notes to the other investor. The Bridge Notes mature on August 29, 2012 and, prior to that date but after the closing of the Merger, may be converted, at the sole discretion of each of the note holders, including accrued but unpaid interest, into Units of the Company’s securities at a conversion price of $2.00 per Unit, each Unit consisting of: (i) one share of Common Stock, (ii) and a warrant to purchase one-half share of Common Stock, exercisable at a price of $3.00 per whole share, and (iii) a special warrant exercisable upon the closing of the Company’s planned private placement, provided the share price of the Common Stock offered in the private placement is less than $2.50 per share, so that the exercise of the special warrant will reduce the lender’s effective conversion price for the Common Stock at a 25% discount to the private placement offering price, such special warrant exercisable at a price of $0.01 per share.

Tri-Party Agreement; Security Interest in MTMI and EGI Assets; and Pledge of Series A Preferred Stock

From time to time between 2006 and 2009, EGLLC and MFPI Partners, LLC, a Delaware limited liability company whose sole members are Michael Feinberg and Patrick Imeson (“MFPI”), raised approximately $6,000,000 and $13,000,000, respectively, through the sale of promissory notes to certain investors (the “Secured Lenders”). The notes issued by EGLLC included a $5,000,000 secured note issued in 2006 and a $1,000,000 secured bridge note issued in 2009. The notes issued by MFPI included an $8,000,000 note issued in 2007 and a $5,000,000 note issued in 2008. During that time, EGLLC raised an additional $16,500,000 from the sale of unsecured bonds issued at a 40% discount to face value to certain investors, including MFPI, which invested $8,000,000 in the unsecured EGLLC bonds from the proceeds of the $13,000,000 it borrowed from the Secured Lenders.

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EGLLC used $5,000,000 from the 2006 notes to purchase a loan and mortgage on property owned by an unrelated mining company and used $14,250,000 of the $16,500,000 in proceeds from the issuance of the unsecured bonds to complete a joint venture with Apollo Gold, Inc. that entitled EGLLC to 50% of the assets and distributions of Montana Tunnels Mine – See Description of Business for additional information. In October 2009, EGLLC paid $250,000 in cash and in February 2010 assigned that loan and mortgage on the property owned by the unrelated mining company to Apollo Gold, Inc. for 100% ownership in MTMI (owner of Montana Tunnels Mine) and, concurrently with the closing of that payment and assignment, EGLLC and Apollo dissolved their joint venture.

In May 2009, as a condition to the additional $1,000,000 bridge loan (that was subsequently repaid) from the Secured Lenders to EGLLC and as an inducement for the Secured Lenders to stand still regarding an event of default on the part of EGLLC, (i) the $8,000,000 loan to MFPI to purchase the unsecured bonds, (ii) a $5,000,000 loan to MFPI whose proceeds were used to make an unrelated investment³ and (iii) a redemption right allowing the Secured Lenders to obligate MFPI to purchase from the Secured Lenders a $5,950,000 equity investment made in one of the investment funds that is an owner of EGLLC and is managed by Black Diamond have been included under a security agreement with the Secured Lenders.

Currently, the notes and rights secured by the Company’s assets include (i) $21,600,000 in principal amount of notes, including the $5,800,000 issued by EGLLC in 2006, $9,700,000 issued by MFPI in 2007 and $6,100,000 issued by MFPI in 2008, plus accrued and unpaid interest thereon through May 2009, and (ii) the redemption rights on the Secured Lenders’ $5,950,000 equity investment in EGLLC. The approximate amount of principal, accrued but unpaid interest and redemption rights as of December 31, 2011 was $46,350,000. The notes and rights have been secured by two first lien mortgages on all of the property and assets of EGI and MTMI. Under the terms of these mortgages, the administrative agent representing the Secured Lenders was required to consent to the transfer by EGLLC to ESRI of the capital stock of EGI and MTMI. Pursuant to the terms of a tri-party agreement by an among the Company, EGLLC and the administrative agent dated as of the Merger closing date, the administrative agent consented to this transfer and ESRI acknowledged and agreed to cause EGI and MTMI to perform and keep all the covenants and obligations set forth in the two mortgages

Additionally, because certain of the secured notes were in default prior to the Merger closing date, the administrative agent required that EGLLC and MFPI enter into a loan reinstatement and modification agreement, effective as of the Merger closing date, pursuant to which EGLLC agreed to pledge, in accordance with the terms of a separate pledge agreement, to the Secured Lenders all of its interest in the Series A Preferred Stock. Under the tri-party agreement, the Company acknowledged and agreed to treat the administrative agent as the owner and holder of the Series A Preferred Stock upon notice from the administrative agent of a default by EGLLC under the pledge agreement.

Under the Merger Agreement, EGLLC has covenanted that, for so long as any of its payment obligations under the loan restatement and modification agreement remain outstanding, EGLLC will designate all proceeds derived from the Series A Preferred Stock, including from preferential dividends that may be paid on this stock, to repay principal and interest due on the secured loans.

³ MFPI invested $5,000,000 in Global VR, Inc. a private company managed by Black Diamond Holdings, LLC, which is managed by Patrick Imeson and Eric Altman, principals of the Company

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MARKET PRICE OF AND DIVIDENDS ON COMMON EQUITY

AND RELATED STOCKHOLDER MATTERS

Our Common Stock is currently eligible for quotation on the OTC Bulletin Board under the symbol “ESRI.OB.”  The trading of our common stock began on September 2, 2008.  There has been very limited trading in our Common Stock to date.  As of the date of this Current Report, we had 99,085,000 shares of Common Stock outstanding held by approximately 11 stockholders of record. To date, we have not paid dividends on our common stock. As of the date of this Current Report, we have 10,000,000 outstanding shares of our Series A Preferred Stock held by one stockholder of record.

Trades in our Common Stock may be subject to Rule 15g-9 under the Exchange Act, which imposes requirements on broker/dealers who sell securities subject to the rule to persons other than established customers and accredited investors. For transactions covered by the rule, broker/dealers must make a special suitability determination for purchasers of the securities and receive the purchaser’s written agreement to the transaction before the sale.

The SEC also has rules that regulate broker/dealer practices in connection with transactions in “penny stocks.” Penny stocks generally are equity securities with a price of less than $5.00 (other than securities listed on certain national exchanges, provided that the current price and volume information with respect to transactions in that security is provided by the applicable exchange or system). The penny stock rules require a broker/dealer, before effecting a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the SEC that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker/dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker/dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker/dealer and salesperson compensation information, must be given to the customer orally or in writing before effecting the transaction, and must be given to the customer in writing before or with the customer’s confirmation. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for shares of Common Stock. As a result of these rules, investors may find it difficult to sell their shares.

Dividend Policy

We have never paid any cash dividends on our capital stock and do not anticipate paying any cash dividends on the Common Stock in the foreseeable future.  Also, the terms of the Series A Preferred Stock restrict our ability to pay dividends.  (See “Description of Securities—Series A Preferred Stock” below.) We intend to retain future earnings to fund ongoing operations and future capital requirements. Any future determination to pay cash dividends will be at the discretion of our Board of Directors and will be dependent upon financial condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant.

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Securities Authorized for Issuance under Equity Compensation Plans

Plan Category	Number of shares to be issued upon exercise of outstanding options, warrants and rights		Weighted- average exercise price of outstanding options, warrants and rights		Number of shares remaining available for future issuance under equity compensation plans (excluding shares reflected in the first column)
Equity compensation plans approved by security holders		5,445,000	$	2.00		4,555,000
Equity compensation plans not approved by security holders		—		—		—
Total		5,445,000	$	2.00		4,555,000

The Company had no equity compensation plans as of the end of fiscal year 2011.

2012 Equity Incentive Plan

On February 1, 2012, our Board of Directors of the Company adopted, and on February 29, 2012, our stockholders approved, the 2012 Equity Incentive Plan, which reserves a total of 10,000,000 shares of our Common Stock for issuance under the 2012 Plan. If an incentive award granted under the 2012 Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to us in connection with an incentive award, the shares subject to such award and the surrendered shares will become available for further awards under the 2012 Plan.

In addition, the number of shares of Common Stock subject to the 2012 Plan, any number of shares subject to any numerical limit in the 2012 Plan, and the number of shares and terms of any incentive award are expected to be adjusted in the event of any change in our outstanding Common Stock by reason of any stock dividend, spin-off, split-up, stock split, reverse stock split, recapitalization, reclassification, merger, consolidation, liquidation, business combination or exchange of shares or similar transaction.

Administration

The compensation committee of the Board, or the Board in the absence of such a committee, will administer the 2012 Plan. Subject to the terms of the 2012 Plan, the compensation committee has complete authority and discretion to determine the terms of awards under the 2012 Plan.

Grants

The 2012 Plan authorizes the grant to participants of nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance grants intended to comply with Section 162(m) of the Internal Revenue Code (as amended, the “Code”) and stock appreciation rights, as described below:

· Options granted under the 2012 Plan entitle the grantee, upon exercise, to purchase a specified number of shares from us at a specified exercise price per share. The exercise price for shares of Common Stock covered by an option cannot be less than the fair market value of the Common Stock on the date of grant unless agreed to otherwise at the time of the grant.  

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· Restricted stock awards and restricted stock units may be awarded on terms and conditions established by the compensation committee, which may include performance conditions for restricted stock awards and the lapse of restrictions on the achievement of one or more performance goals for restricted stock units.

· The compensation committee may make performance grants, each of which will contain performance goals for the award, including the performance criteria, the target and maximum amounts payable, and other terms and conditions.

· The 2012 Plan authorizes the granting of stock awards. The compensation committee will establish the number of shares of Common Stock to be awarded and the terms applicable to each award, including performance restrictions.

· Stock appreciation rights (“SARs”) entitle the participant to receive a distribution in an amount not to exceed the number of shares of Common Stock subject to the portion of the SAR exercised multiplied by the difference between the market price of a share of Common Stock on the date of exercise of the SAR and the market price of a share of Common Stock on the date of grant of the SAR.

Duration, Amendment, and Termination

The Board has the power to amend, suspend or terminate the 2012 Plan without stockholder approval or ratification at any time or from time to time. No change may be made that increases the total number of shares of Common Stock reserved for issuance pursuant to incentive awards or reduces the minimum exercise price for options or exchange of options for other incentive awards, unless such change is authorized by our stockholders within one year. Unless sooner terminated, the 2012 Plan would terminate ten years after it is adopted.

As of the closing of the Merger, we have granted option awards under the 2012 Plan to certain of our officers, directors and employees for a total of 5,320,000 shares of our Common Stock. We have also granted options for 50,000 shares of our Common Stock to our independent director and 75,000 to certain advisors and consultants.  Each of these options has been granted with a term of ten years and an exercise price of $2.00 per share, which price the Board of Directors has deemed to be the fair market value of the Company’s stock on the date of grant. Each option vests in three equal installments on the first, second and third anniversary of the Merger closing date.

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DESCRIPTION OF SECURITIES

We have authorized capital stock consisting of 300,000,000 shares of common stock, $0.001 par value, and 10,000,000 shares of preferred stock, $0.001 par value. As of the date of this Report, we had 99,085,000 shares of common stock issued and outstanding and 10,000,000 shares of Series A preferred stock issued and outstanding.

Common Stock

The holders of outstanding shares of common stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends of such times and in such amounts as the board from time to time may determine. Holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of shareholders. There is no cumulative voting of the election of directors then standing for election. The common stock is not entitled to pre-emptive rights and is not subject to conversion or redemption. Upon liquidation, dissolution or winding up of our company, the assets legally available for distribution to stockholders are distributable ratably among the holders of the common stock after payment of liquidation preferences, if any, on any outstanding payment of other claims of creditors. Each outstanding share of common stock is duly and validly issued, fully paid and non-assessable.

Preferred Stock

Shares of preferred stock may be issued from time to time in one or more series, each of which will have such distinctive designation or title as shall be determined by our Board of Directors prior to the issuance of any shares thereof. Preferred stock will have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated in such resolution or resolutions providing for the issue of such class or series of preferred stock as may be adopted from time to time by the Board of Directors prior to the issuance of any shares thereof. The number of authorized shares of preferred stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all the then outstanding shares of our capital stock entitled to vote generally in the election of the directors, voting together as a single class, without a separate vote of the holders of the preferred stock, or any series thereof, unless a vote of any such holders is required pursuant to any preferred stock designation.

We are authorized to issue 10,000,000 shares of “blank check” preferred stock, par value $0.001 per share. As of the closing of the Merger and pursuant to the Merger Agreement, we issued 10,000,000 shares of our designated Series A Preferred Stock to EGLLC with the following terms (as more fully described in the certificate of designations):

· Voting Rights. Each share of Series A Preferred Stock entitles the holder to one vote on all matters submitted to a vote of the holders of our common stock;

· Dividends. The holder of the Series A Preferred Stock is entitled to receive, out of funds legally available therefor, cumulative non-compounding preferential dividends at the rate of 12% of the stated value of $6.00 per share per annum (the “Preferential Dividend”). No dividends may be declared or paid on the shares of common stock or any other capital stock of the Company so long as any shares of Series A Preferred Stock remain outstanding;

· Liquidation Preference. In the event of any defined liquidation event, no distribution can be made to holders of shares of our capital stock ranking junior to the Series A Preferred Stock, unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received an amount per share equal to $6.00 (the “Liquidation Amount”) per share, plus the amount of any accrued and unpaid Preferential Dividend owed to holders of shares of the Series A Preferred Stock;

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· Holder Optional Redemption. The holder of the Series A Preferred Stock has the option, exercisable in whole or in part at any time and from time to time prior to the third anniversary of the issuance of the Series A Preferred Stock, to require us to purchase for cash, out of legally available funds, any or all of the then-outstanding shares of Series A Preferred Stock at a price equal to $6.00 per share ;

· Company Optional Redemption. We have the option, exercisable in whole or in part at any time and from time to time prior to the third anniversary of the issuance of the Series A Preferred Stock, to redeem any or all of the then-outstanding shares of Series A Preferred Stock at a price equal to $7.00 per share;

· Automatic Conversion. Provided that neither the holder not the Company has exercised their redemption options in full, by the third anniversary of the issuance of the Series A Preferred Stock, each share of then-outstanding Series A Preferred Stock shall automatically and immediately convert into one fully paid and non-assessable share of common stock of the Company; and

· Protection Provisions. So long as any shares of the Series A Preferred Stock are outstanding, the Company cannot take any of the following corporate actions (whether by merger, consolidation or otherwise) without first obtaining the approval of the holder of the Series A Preferred Stock: encumber the assets of the Corporation; alter or change the rights, preferences or privileges of the Series A Preferred Stock, or increase the authorized number of shares of Series A Preferred Stock; alter or change the rights, preferences or privileges of any capital stock of the Corporation so as to affect adversely the Series A Preferred Stock; create or issue any securities senior to or Pari Passu with the Series A Preferred Stock; issue any additional shares of Series A Preferred Stock; issue any debt securities, incur any indebtedness or enter into any other agreement or arrangement that would entitle any third party to any preferences over the Series A Preferred Stock upon the occurrence of a Liquidation Event; enter into any agreement, commitment, understanding or other arrangement to take any of the foregoing actions; or cause or authorize any subsidiary of the Corporation to engage in any of the foregoing actions

The certificate of designations, preferences and rights of the Series A Preferred Stock is filed as Exhibit 4.1 to this Current Report and is incorporated herein by reference.

Options under the Plan

The Company has adopted its 2012 Equity Incentive Plan pursuant to which 10,000,000 shares of the Company’s Common Stock are reserved for issuance to employees, directors, consultants, and other service providers of the Company and its affiliates. On April 6, 2012, we authorized for issuance an aggregate of 5,445,000 options exercisable at $2.00 per share to certain of our executive officers, directors, employees and advisors. Each of these options has been granted with a term of ten years and an exercise price of $2.00 per share, which price the Board of Directors has deemed to be the fair market value of the Company’s stock on the date of grant. Each option vests in three equal installments on the first, second and third anniversary of the Merger closing date.

Warrants

As of the date hereof, the Company has no warrants outstanding.

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Convertible Securities

As of the date hereof, the Company has not issued any convertible securities other than the convertible notes issued by ESRI prior to, and cancelled upon, the closing of the Merger.

Transfer Agent

The transfer agent for the Common Stock is Continental Stock Transfer & Trust Company. The transfer agent’s address is 17 Battery Place, New York, New York 10004, and its telephone number is (212) 845-3212.

LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business.

Except for the matter described below, we are currently not aware of any pending legal proceedings to which we are a party or of which any of our property is the subject, nor are we aware of any such proceedings that are contemplated by any governmental authority. Although there can be no assurance as to the ultimate outcome, we have denied liability in the case pending against us, and we intend to defend vigorously such case. Based on information currently available, we believe the amount, or range, of reasonably possible losses in connection with the action against us not to be material to our consolidated financial condition or cash flows. However, losses may be material to our operating results for any particular future period, depending on the level of income for such period.

On May 24, 2010, the EPA issued an “Action Memorandum” which documented the determination that soil removal was necessary to mitigate threats posed by elevated levels of lead and arsenic in the soil located on property in close proximity to MTMI. The work of clean-up conducted by the EPA of the Site commenced in June 2010 and was completed by August of the same year. On August 26, 2010, MTMI and the EPA entered into an “Access and Compensation Agreement” which detailed the responsibilities of both the EPA and MTMI with respect to the clean-up and disposal of contaminated soils from the Site. On October 26, 2011 the EPA proposed a settlement of $380,000. On November 04, 2011, MTMI agreed to the EPA proposed amount of $380,000 but added a stipulation that the amount be payable over time depending upon the status of MTMI’s operations. On February 21, 2012, MTMI heard back from the EPA tacitly agreeing to the total amount of $380,000 on a monthly schedule of $2,500 per month with a balloon payment at month 36.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Delaware General Corporation Law and our Certificate of Incorporation allow us to indemnify our officers and directors from certain liabilities and our Bylaws state that we shall indemnify every (i) present or former director, advisory director or officer of us, (ii) any person who while serving in any of the capacities referred to in clause (i) served at our request as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, and (iii) any person nominated or designated by (or pursuant to authority granted by) the Board of Directors or any committee thereof to serve in any of the capacities referred to in clauses (i) or (ii) (each an “Indemnitee”).

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Our Bylaws provide that we shall indemnify an Indemnitee against all judgments, penalties (including excise and similar taxes), fines, amounts paid in settlement and reasonable expenses actually incurred by the Indemnitee in connection with any proceeding in which he was, is or is threatened to be named as defendant or respondent, or in which he was or is a witness without being named a defendant or respondent, by reason, in whole or in part, of his serving or having served, or having been nominated or designated to serve, if it is determined that the Indemnitee (a) conducted himself in good faith, (b) reasonably believed, in the case of conduct in his official capacity, that his conduct was in our best interests and, in all other cases, that his conduct was at least not opposed to our best interests, and (c) in the case of any criminal proceeding, had no reasonable cause to believe that his conduct was unlawful; provided, however, that in the event that an Indemnitee is found liable to us or is found liable on the basis that personal benefit was improperly received by the Indemnitee, the indemnification (i) is limited to reasonable expenses actually incurred by the Indemnitee in connection with the proceeding and (ii) shall not be made in respect of any proceeding in which the Indemnitee shall have been found liable for willful or intentional misconduct in the performance of his duty to us.

Other than in the limited situation described above, our Bylaws provide that no indemnification shall be made in respect to any proceeding in which such Indemnitee has been (a) found liable on the basis that personal benefit was improperly received by him, whether or not the benefit resulted from an action taken in the Indemnitee’s official capacity, or (b) found liable to us. The termination of any proceeding by judgment, order, settlement or conviction, or on a plea of nolo contendere or its equivalent, is not of itself determinative that the Indemnitee did not meet the requirements set forth in clauses (a) or (b) above. An Indemnitee shall be deemed to have been found liable in respect of any claim, issue or matter only after the Indemnitee shall have been so adjudged by a court of competent jurisdiction after exhaustion of all appeals therefrom. Reasonable expenses shall, include, without limitation, all court costs and all fees and disbursements of attorneys for the Indemnitee. The indemnification provided shall be applicable whether or not negligence or gross negligence of the Indemnitee is alleged or proven.

Other than discussed above, neither our Bylaws nor our Certificate of Incorporation includes any specific indemnification provisions for our officers or directors against liability under the Securities Act. Additionally, insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

Item 3.02   Unregistered Sales of Equity Securities

Shares Issued in Connection with the Merger

On the closing date of the Merger, EGLLC, the sole holder of common stock of MTMI and EGI, surrendered all of its 100 issued and outstanding MTMI shares and 100 issued and outstanding EGI shares, and received an aggregate of 90,000,000 shares of the Company’s Common Stock and 10,000,000 shares of the Company’s Series A Preferred Stock.

The ESRI stockholders retained 9,085,000 shares of Common Stock in the Merger.

The transactions described above were exempt from registration under Section 4(2) of the Securities Act and Rule 506 of Regulation D as promulgated by the SEC. None of the securities were sold through an underwriter and, accordingly, there were no underwriting discounts or commissions involved.

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Item 5.01  Changes in Control of Registrant.

See Item 1.01 and Item 2.01.

Item 5.02  Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

See Item 1.01 and Item 2.01.

Item 9.01  Financial Statements and Exhibits.

(a)  Financial statements of business acquired.

In accordance with Item 9.01(a), audited combined financial statements of MTMI and EGI as of, and for the years ended, December 31, 2011 and 2010 are included in this Report beginning on Page F-1.

(b)  Pro forma financial information.

In accordance with Item 9.01(b), unaudited pro forma combined financial statements of MTMI and EGI as of, and for the year ended, December 31, 2011 are included in this Report beginning on Page F-26.

(d)  Exhibits

Exhibit Number	SEC Report Reference Number	Description
2.1	2.1	Agreement and Plan of Merger and Reorganization, dated as of April 6, 2012, by and among the Registrant, MTMI Acquisition Corp., (a Delaware corporation), EGI Acquisition Corp., (a Montana corporation), Elkhorn Goldfields LLC, (a Delaware limited liability company), Montana Tunnels Mining, Inc. (a Delaware corporation) and Elkhorn Goldfields, Inc. (a Montana Corporation) (1)
2.2	2.2	Certificate of Merger dated as of April 5, 2012,filed with Delaware Secretary of State for the merger of MTMI Acquisition Corp. into Montana Tunnels Mining, Inc. (1)
2.3	2.3	Articles of Merger dated as of April 6 2012, filed with Montana Secretary of State for the merger of EGI Acquisition Corp. into Elkhorn Goldfields LLC (1)
3.1	3.1	Certificate of Incorporation of the Registrant (2)
3.2	3.2	Certificate of Amendment to Certificate of Incorporation of the Registrant, filed with the Delaware Secretary of State on April 4, 2012 (1)
3.3	3.2	Bylaws of the Registrant (2)
4.1	4.1	Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock of the Registrant (2)
4.2	*	Form of 2012 Bridge 12% Unsecured Convertible Promissory Note of Elkhorn Goldfields, Inc.

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4.3	*	Form of 8% Series A Bond due July 31, 2012 of Elkhorn Goldfields, Inc.
10.1	*	Share Cancellation Agreement dated April 6, 2012 between the Registrant and Dylan Hundley
10.2	*	Form of Note Cancellation and General Release Agreement dated April 6, 2012 by and between the Registrant and certain note holders
10.3	10.1	Loan Reinstatement and Modification Agreement between Gordon Snyder as Administrative Agent of Certain Note Holders, MFPI Partners, LLC, a Delaware limited liability company, and Elkhorn Goldfields, LLC (1)
10.4	10.2	Tri-Party Agreement by and among the Registrant, Elkhorn Goldfields LLC and Gordon Snyder as Administrative Agent of Certain Note Holders (1)
10.5	10.3	Pledge Agreement between Gordon Snyder as Administrative Agent of Certain Note Holders, MFPI Partners, LLC, a Delaware limited liability company, and Elkhorn Goldfields, LLC (1)
10.6	*	Split-Off Agreement dated as of April 6, 2012, by and among the Registrant, Buzz Kill, Inc. (a New York corporation) and the Buyers listed on Exhibit A thereto
10.7	*	General Release Agreement dated as of April 6, 2012, by and among the Registrant, Buzz Kill, Inc. and the Buyers listed on Exhibit A thereto
10.8	*	Termination of Investment Agreement dated April 6, 2012 by and between the Registrant and Buzz Kill, Inc.
10.9	*	Form of General Release of the Registrant by Certain Note Holders of Buzz Kill, Inc.
10.10	*	Form of Public Float Shares Lock-Up Agreement between the Registrant and certain stockholders
10.11	*	Form of Public Float Shares Escrow Agreement between the Registrant and certain stockholders
10.12	*	Form of No Short Selling Agreement between the Registrant and the officers, directors, certain employees and certain stockholders
10.13	*	Form of Indemnification Escrow Agreement between the Registrant. and the officers, directors and employees party thereto
10.14	10.4	Registrant’s 2012 Equity Incentive Plan (1)
10.15	*	Form of Incentive Stock Option Agreement
10.16	*	Form of Non-Qualified Stock Option Agreement

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10.17	*	Executive Employment Agreement for Patrick Imeson
10.18	*	Executive Employment Agreement for Robert Trenaman
10.19	*	Executive Employment Agreement for Eric Altman
10.20	*	Executive Employment Agreement for Tim Smith
10.21	*	Management Services Agreement between the Registrant and Black Diamond Financial Services Group, LLC
10.22	*	Form of Subscription Agreement for 8% Series A Bond of Elkhorn Goldfields, Inc.
10.23	*	Mineral Product Receivables Purchase Agreement dated April 15, 2011 by and among Elkhorn Goldfields, Inc., Elkhorn Goldfields, LLC and Black Diamond Holdings LLC
10.24	*	Mining Lease with Option to Purchase between Mt. Heagan Development, Inc. and Elkhorn Goldfields, Inc. and Extension Letter
10.25	*	Security Agreement dated April 15, 2011 between Elkhorn Goldfields, Inc. and Black Diamond Holdings LLC
10.26	*	Employee Leasing Agreement dated August 1, 2011 by and between Elkhorn Goldfields, Inc. and Montana Tunnels Mining, Inc.
14.1	14.1	Code of Ethics (3)
21.1	*	List of Subsidiaries

* Filed herewith.

(1) Incorporated by reference to the exhibit numbered as indicated above to the Registrant‘s Form 8-A, File Number 000-54645, filed with the SEC on April 6, 2012.

(2) Incorporated by reference to the exhibit numbered as indicated above to the Registrant‘s Form S-1, File Number 333-149850, filed with the SEC on March 21, 2008.

(3) Incorporated by reference to the exhibit numbered as indicated above to the Registrant‘s Annual Report Form 10-K for the fiscal year ended December 31, 2008, File Number 333-149850, filed with the SEC on March 31, 2009.

90

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.

Table of Contents

Combined Financial Statements

and

Independent Auditors’ Report

December 31, 2011 and 2010

	Page
Independent Auditors’ Report	F-2
Combined Financial Statements
Combined Balance Sheets	F-3
Combined Statements of Operations	F-4
Combined Statement of Changes in Stockholders’ Deficit	F-5
Combined Statements of Cash Flows	F-6
Notes to Combined Financial Statements	F-8

EASTERN RESOURCES, INC. AND

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.

SELECTED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA

Explanatory Notes	F-26
Balance Sheet	F-27
Statement of Operations	F-28
Adjustments	F-29

F-1

INDEPENDENT AUDITORS’ REPORT

To the Stockholders of

Elkhorn Goldfields, Inc. and Montana Tunnels Mining, Inc.

Denver, Colorado

We have audited the accompanying combined balance sheets of Elkhorn Goldfields, Inc. and Montana Tunnels Mining, Inc. (collectively the “Company”) as of December 31, 2011 and 2010 and the related combined statements of operations, changes in stockholders’ deficit, and cash flows for the years then ended. These combined financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these combined financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements and assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall combined financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

The accompanying combined financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the combined financial statements, the Company has not generated any revenues to fund operations and has a working capital deficit and a stockholders’ deficit of $53,561,713 and $59,310,302, respectively, which raises substantial doubt about the ability of the Company to continue as a going concern. Management’s plans regarding those matters also are described in Note 2. The combined financial statements do not include any adjustments that might result from the outcome of this uncertainty.

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of Elkhorn Goldfields, Inc. and Montana Tunnels Mining, Inc. as of December 31, 2011 and 2010 and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Ehrhardt Keefe Steiner & Hottman PC

March 15, 2012

Denver, Colorado

F-2

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.

Combined Balance Sheets

	December 31,
	2011			2010
Assets
Current assets
Cash and cash equivalents	$	358,125		$	61,351
Inventory, net		912,676			1,038,524
Other current assets		12,433			9,242
Total current assets		1,283,234			1,109,117
Non-current assets
Buildings, equipment, and land, net		5,621,186			4,588,602
Mine development		3,869,342			-
Mining properties and mineral interests, net		16,380,747			16,358,839
Restricted cash		604,021			284,467
Reclamation bonds		16,190,556			15,842,403
Total non-current assets		42,665,852			37,074,311
Total assets	$	43,949,086		$	38,183,428
Liabilities and Stockholders’ Deficit
Current liabilities
Accounts payable	$	282,141		$	86,040
Accrued liabilities		3,247,232			2,650,486
Current portion of capital lease obligation		335,093			-
Series A 8% bonds		1,399,779			1,235,500
Deferred revenue, related party ore purchase agreement		3,237,410			-
Push-down redeemable obligation of Parent and its affiliate		11,085,960			10,117,659
Push-down interest of Parent and its affiliate		13,677,484			7,071,953
Push-down debt of Parent and its affiliate		21,579,848			22,498,576
Total current liabilities		54,844,947			43,660,214
Non-current liabilities
Capital lease obligations, less current portion		39,719			-
Reclamation liability		22,793,187			21,465,966
Deferred revenue, related party ore purchase agreement, less current portion		6,762,590			-
Related party ore purchase derivative contract		18,818,945			-
Total non-current liabilities		48,414,441			21,465,966
Total liabilities		103,259,388			65,126,180
Commitments and contingencies
Stockholders’ deficit		(59,310,302	)		(26,942,752	)
Total liabilities and stockholders’ deficit	$	43,949,086		$	38,183,428

See notes to combined financial statements.

F-3

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.

Combined Statements of Operations

	December 31,
	2011			2010
Operating expenses
General and administrative	$	850,616		$	1,580,991
Accretion expense		1,327,221			1,535,632
Mine care and maintenance		1,037,199			1,236,832
Depreciation, depletion, and amortization		6,604			11,129
Total operating expenses		3,221,640			4,364,584
Loss from operations		(3,221,640	)		(4,364,584	)
Other (expense) income
Interest expense		(8,083,445	)		(5,546,184	)
Interest income		47,705			33,384
Other income		512,066			6,628
Loss on related party ore purchase derivative		(13,025,932	)		-
Change in fair value of derivative instrument contract		(5,793,013	)		-
Total other expense		(26,342,619	)		(5,506,172	)
Net loss	$	(29,564,259	)	$	(9,870,756	)

See notes to combined financial statements.

F-4

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.

Combined Statement of Changes in Stockholders’ Deficit

For the Years Ended December 31, 2011 and 2010

									Total
	Capital					Accumulated			Stockholders’
	Stock		Amount			Deficit			Deficit
Balance - December 31, 2009		200	$	11,280,392		$	(31,948,297	)	$	(20,667,905	)
Non-cash contributions		-		3,690,000			-			3,690,000
Cash distributions		-		(964,091	)		-			(964,091	)
Cash contributions		-		870,000			-			870,000
Net loss		-		-			(9,870,756	)		(9,870,756	)
Balance - December 31, 2010		200		14,876,301			(41,819,053	)		(26,942,752	)
Non-cash contribution		-		1,314,488			-			1,314,488
Cash distributions		-		(4,377,779	)		-			(4,377,779	)
Cash contributions		-		260,000			-			260,000
Net loss		-		-			(29,564,259	)		(29,564,259	)
Balance - December 31, 2011		200	$	12,073,010		$	(71,383,312	)	$	(59,310,302	)

See notes to combined financial statements.

F-5

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.

Combined Statements of Cash Flows

	For the Years Ended
	December 31,
	2011			2010
Cash flows from operating activities
Net loss	$	(29,564,259	)	$	(9,870,756	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities
Inventory reserve		242,329			601,241
Depreciation, depletion, and amortization		6,604			11,129
Accretion expense		1,327,221			1,535,632
Loss on related party ore purchase derivative contract		13,025,932			-
Change in fair value of derivative instrument		5,793,013			-
Push-down redeemable obligation of Parent and its affiliate		968,301			3,240,579
Push-down interest of Parent and its affiliate		7,001,291			2,254,375
Changes in operating assets and liabilities
Mineral sales receivable		-			111,704
Inventory		(116,481	)		5,570
Other current assets		(3,191	)		56,414
Accounts payable		196,101			(517,592	)
Accrued liabilities		596,746			1,570,400
Deferred revenue, related party ore purchase agreement		10,000,000			-
		39,037,866			8,869,452
Net cash provided by (used in) operating activities		9,473,607			(1,001,304	)
Cash flows from investing activities
Purchase of building and equipment		(682,419	)		(79,480	)
Cash received from acquisition of the remaining 50% interest in Montana Tunnels Mine		-			44,044
Additions to mine development		(3,809,242	)		-
Additions to mining properties and mineral interests		(21,908	)		(41,149	)
Change in restricted cash		(319,554	)		(478	)
Change in reclamation bonds		(348,153	)		(92,687	)
Net cash used in investing activities		(5,181,276	)		(169,750	)
Cash flows from financing activities
Proceeds from Series A 8% bonds		164,279			1,235,500
Payments on capital lease obligations		(42,057	)		(80,197	)
Proceeds from stockholder contributions		260,000			870,000
Payments of distributions to stockholders		(4,377,779	)		(964,091	)
Net cash (used in) provided by financing activities		(3,995,557	)		1,061,212
Net increase (decrease) in cash and cash equivalents		296,774			(109,842	)
Cash and cash equivalents - beginning of period		61,351			171,193
Cash and cash equivalents - end of period	$	358,125		$	61,351

(Continued on the following page)

See notes to combined financial statements.

F-6

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.

Combined Statements of Cash Flows

(Continued from the previous page)

Supplemental disclosure of cash flow information:

Cash paid for interest for the years ended December 31, 2011 and 2010 was $45,708 and $13,017, respectively.

Supplemental disclosure of non-cash investing and financing activity:

During 2011, the Company acquired $416,869 of equipment through a capital lease.

During 2011, $60,100 of depreciation expense was capitalized to mine development.

During 2011, Elkhorn Goldfields, LLC (the “Parent”) paid on behalf of the Company $1,314,488 of accrued pushed-down interest and debt.

During 2010, the Parent transferred the value of its Calais Resources, Inc. investment for the remaining 50% interest of the net assets of Montana Tunnels. The following is the allocation of the remaining 50% interest of the assets and liabilities acquired of Montana Tunnel as of December 31, 2011:

Cash and cash equivalents	$	44,044
Mineral sales receivable		78,704
Inventory		822,456
Other current assets		543
Buildings and equipment, net		2,210,717
Mining properties, mine development, and mineral interests, net		3,123,652
Restricted cash and reclamation bonds		8,184,845
Accounts payable		(306,398	)
Accrued liabilities		(471,698	)
Capital lease obligations		(35,716	)
Reclamation liability		(9,961,149	)
Investment in debt securities, at estimated fair value	$	3,690,000

See notes to combined financial statements.

F-7

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements

Note 1 - Description of Business and Summary of Significant Accounting Policies

Elkhorn Goldfields, Inc. (“EGI”) and Montana Tunnels Mining, Inc. (“MTMI”) (collectively, the “Company”) were formed for the purpose of acquiring, holding, operating, selling, and otherwise dealing in assets of mining operations with gold and other metal reserves and exploration potential. The Company’s objective is to operate mines and expand its interests through acquisition and exploration. The Company has one mineral property that has completed the permitting process. That property has developed the 650-foot underground access tunnel to reach the top of the ore body and is in the process of installing required infrastructure to allow the Company to access the lower levels of ore. In addition, a second property has completed the permitting, except for posting the required reclamation bonding. Lastly, the Company has several mineralized targets in the exploration stage. The permitted or nearly permitted mines include Golden Dream Mine (formerly referred to as the Sourdough Mine) and Montana Tunnels Mine (“Montana Tunnels”), and the mineralized properties available to develop mine plans are East Butte, Gold Hill/Mount Heagan, and Carmody (collectively, the “Elkhorn Project”), and the expansion of the previously operated Diamond Hill Mine. All the mines and properties are located in Jefferson County, Montana, with the exception of the Diamond Hill Mine, which is in Broadwater County, Montana. The Company maintains its principal executive office in Denver, Colorado.

During July 2006, Elkhorn Goldfields, LLC (the entity that wholly owns the Company) (the “Parent”) entered into a 50% joint venture interest (the “JV”) with the former owner of MTMI). The JV agreement called for the Parent to contribute $14,250,000 in return for a 50% interest in the assets relating to Montana Tunnels, including the mining equipment and mill. Montana Tunnels is an open pit mine that produced gold doré, lead-gold, and zinc-gold concentrates. Montana Tunnels ceased mining in an area referred to as the L Pit and completed milling of stockpiled ore at the end of April 2009, at which time the mine was placed on care and maintenance. The Company is currently completing plans to enlarge the L Pit. The enlargement and further mine development is referred as the M Pit.

On February 1, 2010, the Parent acquired the remaining 50% interest in Montana Tunnels and the related assets, plus acquired Diamond Hill Mine and Mill and has pushed-down the assets to the Company as of February 1, 2010 (Note 3).

Principles of Combination

For the years ended December 31, 2011 and 2010, the accompanying combined financial statements include the accounts of EGI and MTMI. EGI includes the property and equipment relating to the Golden Dream Mine and the mineralized targets of the Elkhorn Project. MTMI includes the property, mill, and equipment relating to Montana Tunnels and Diamond Hill Mine. All intercompany accounts and transactions have been eliminated.

F-8

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements

Note 1 - Description of Business and Summary of Significant Accounting Policies (continued)

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company continually monitors its positions with, and the credit quality of, the financial institutions with which it invests. As of the balance sheet dates, and periodically throughout the years, the Company has maintained balances in various operating accounts in excess of federally insured limits.

Inventory

Doré inventory is stated at the lower of weighted-average production cost and net realizable value. Production costs for doré inventory include direct production costs, attributable overhead, and depreciation incurred to bring the material to its current point in the processing cycle. Stockpiled ore inventory represents ore that has been mined and is available for further processing. Work-in-process inventory, including stockpiled ore and in-circuit gold inventory, is valued at the lower of weighted-average production cost and net realizable value. Materials and supplies are valued at the lower of average direct cost of acquisition and net realizable value.

Buildings and Equipment

MTMI buildings and equipment are recorded at acquisition cost and amortized on a units-of-production basis over the remaining proven and probable reserves of the mine. Equipment under capital lease is valued at the lower of fair market value or net present value of the minimum lease payments at the inception of the lease. Equipment that is mobile is amortized on a straight-line basis over the estimated useful life of the equipment ranging from five to ten years, not to exceed the related estimated mine lives.

EGI buildings and equipment are stated at cost. Repair and maintenance costs are expensed as incurred. Depreciation is provided utilizing the straight-line method over the estimated useful lives for owned assets taking into account estimated salvage values, ranging from 3 to 39 years.

Mine Development

The costs of removing overburden and waste materials to access the ore prior to the production phase are referred to as “mine development costs.” Mine development costs are capitalized during the development of the mine. Mine development costs are amortized using the units-of-production method based on estimated recoverable tons of proven and probable reserves. To the extent that these costs benefit the mine, they are amortized over the estimated life of the mine. Development costs incurred after the first saleable ore is extracted from the mine (i.e., post-production costs) are a component of mineral inventory cost. All post-production costs are considered variable production costs that are included in the costs of the inventory produced during the period in which the mining costs are incurred.

F-9

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements

Note 1 - Description of Business and Summary of Significant Accounting Policies (continued)

Mining Properties and Mineral Interests

Mining Properties

For new projects without established reserves, all costs, other than acquisition costs, are expensed prior to the establishment of proven and probable reserves. Reserves designated as proven and probable are supported by a feasibility study, indicating that the reserves have had the requisite geologic, technical, and economic work performed and are legally extractable at the time of reserve determination. Once proven and probable reserves are established, all development and other site-specific costs are capitalized, including general and administrative charges for actual time and expenses incurred in connection with site supervision as mine development costs. Development drilling costs incurred to infill mineralized material to increase the confidence level in order to develop or increase proven and probable reserves are also capitalized as mine development costs. If subsequent events or circumstances arise that would preclude further development of the reserves under the then existing laws and regulations, additional costs are expensed until the impediments have been removed and the property would be subject to ongoing impairment reviews. When a mine is placed into production, the capitalized acquisition and mine development costs are reclassified to mining properties and are amortized to operations using the units-of-production method based on the estimated metals that can be recovered.

Mineral Interests

Mineral interests include the cost of obtaining patented and unpatented mining claims and the initial cost of acquiring mineral interests. If a mineable ore body is discovered, such costs are amortized when production begins using the units-of-production method based on proven and probable reserves. If no mineable ore body is discovered or such rights are otherwise determined to have no value, such costs are expensed in the period in which it is determined the property has no future economic value. For the years ended December 31, 2011 and 2010, there are no mineral interest impairments.

Restricted Cash

Restricted cash consists of cash held in certificates of deposit for the reclamation of the Elkhorn Project. The restriction will be released when the reclamation is completed, which the Company does not expect to happen prior to 2018.

Bond Reclamation

Bond reclamation consists of cash held directly by a surety for reclamation of Montana Tunnels and the Elkhorn Project. The restriction will be released when the reclamation is completed, which the Company expects to be in 2024 and 2018, respectively.

F-10

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements

Note 1 - Description of Business and Summary of Significant Accounting Policies (continued)

Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. The Company looks primarily to the estimated undiscounted future cash flows in its assessment of whether or not long-lived assets have been impaired. If impairment has occurred, the long-lived assets are written down to its estimated fair value.

Fair Value of Financial Instruments

The carrying amounts of financial instruments, including cash, accounts payable, and accrued liabilities, approximated fair value as of December 31, 2011 and 2010 because of the relatively short maturity of these instruments.

The Company applies the guidance to non-financial assets and liabilities measured at fair value on a non-recurring basis. The guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability based on the best information available in the circumstances. The financial and non-financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement.

The hierarchy is broken down into three levels based on the reliability of the inputs as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities;

Level 2: Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability; or

Level 3: Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.

The following assets are measured at fair value as of December 31, 2011:

Description	Level 1		Level 2		Level 3			Total
Certificate of deposits	$	604,021	$	-	$	-		$	604,021
Reclamation bonds	$	-	$	-	$	16,190,556		$	16,190,556
Embedded derivative	$	-	$	-	$	(18,818,945	)	$	(18,818,945	)

F-11

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements

Note 1 - Description of Business and Summary of Significant Accounting Policies (continued)

Fair Value of Financial Instruments (continued)

The following assets are measured at fair value as of December 31, 2010:

Description	Level 1		Level 2		Level 3		Total
Certificate of deposits	$	284,467	$	-	$	-	$	284,467
Reclamation bonds	$	-	$	-	$	15,842,403	$	15,842,403

Certificates of Deposit: Recorded at cost, which approximates fair value due to the short duration of the investment.

Reclamation Bonds: Recorded at the amount provided by the Montana Department of Environmental Quality, which is based upon the fair value of the cash underlying the bond.

Embedded Derivatives: Based on contract terms, projected future gold prices, and discount rate commensurate with estimates of contemporary credit risk using a discounted cash flow model. The model is most sensitive to the future price of gold.

There were no changes to the valuation techniques used during the year ended December 31, 2011.

The following is a reconciliation of the beginning and ending balances for assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the period ended December 31, 2011:

	Embedded Derivative			Reclamation Bonds
Beginning balance	$	-		$	15,842,403
Issuances		(13,025,932	)		-
Total gains or losses (realized/unrealized)
Included in earnings		(5,793,013	)		-
Included on the balance sheet		-			348,153
Transfers in and/or out of Level 3		-			-
Ending balance	$	(18,818,945	)	$	16,190,556

F-12

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements

Note 1 - Description of Business and Summary of Significant Accounting Policies (continued)

Reclamation Liability

The Company’s mining and exploration activities are subject to various federal and state laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. The Company conducts its operations to protect public health and the environment and believes its operations are in compliance with applicable laws and regulations in all material respects. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations, but cannot predict the full amount of such future expenditures. Estimated future reclamation costs are based principally on legal and regulatory requirements. Estimated future costs are discounted to their present value using a 12% discount rate. Reclamation obligations are secured by cash held directly by a surety or certificates of deposit.

The following table summarizes the activity for the Company’s asset retirement obligations:

	For the Years Ended December 31,
	2011		2010
Asset retirement obligations at January 1	$	21,465,966	$	19,930,334
Accretion expense		1,327,221		1,535,632
Liabilities incurred		-		-
Asset retirement obligations at December 31		22,793,187		21,465,966
Less current portion of asset retirement obligations		-		-
Asset retirement obligations at December 31, less current portion	$	22,793,187	$	21,465,966

Income Taxes

The Company recognizes deferred tax liabilities and assets based on the differences between the tax basis of assets and liabilities and the reported amounts in the combined financial statements that will result in taxable or deductible amounts in future years. The Company’s temporary differences result primarily from net operating losses and depreciation. A valuation allowance is established for deferred tax assets to the extent there is uncertainty regarding the ultimate utilization. To date, no deferred tax assets have been recognized in the accompanying combined financial statements because of the uncertainty of the realization of those assets.

F-13

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements

Note 1 - Description of Business and Summary of Significant Accounting Policies (continued)

Income Taxes (continued)

The Company applies guidance on accounting for uncertainty in income taxes. Under this guidance, the Company recognizes the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous. As such, the Company is required to make many subjective assumptions and judgments regarding income tax exposures. Interpretations of and guidance surrounding income tax law and regulations change over time and may result in changes to its subjective assumptions and judgments that can materially affect amounts recognized in its combined balance sheets and statements of operations.

Interest and penalties associated with tax positions are recorded in the period assessed as general and administrative expenses. No interest or penalties have been assessed for the years ended December 31, 2011 and 2010. The Company’s returns for tax years subject to examination by tax authorities include 2007 and 2008 through the current period for state and federal tax reporting purposes, respectively.

Revenue Recognition

The Company recognizes revenue from the sale of gold and co-products when the following conditions are met: persuasive evidence of an arrangement exists, delivery has occurred in accordance with the terms of the arrangement, the price is fixed or determinable, and collectibility is reasonably assured.

Revenue for gold bullion is recognized at the time of delivery and transfer of title to counterparties.

The Company received an up-front payment of $10,000,000 to sell 80% of the first 41,700 ounces of gold and 6.5% of the gold produced after 250,000 ounces to a related party. The $10,000,000 payment has been recognized as deferred revenue until the gold is sold. The Company will recognize revenue of $800 per ounce as the 80% of the first 41,700 ounces is sold.

Use of Estimates

The preparation of combined financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the combined financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

F-14

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements

Note 2 - Management’s Plan

At December 31, 2011, the Company has not generated any revenues to fund operations. The continuation of the Company as a going concern is dependent upon the ability of the Company to meet financial requirements for mine development and raise additional capital, which will likely involve the issuance of debt and/or equity securities. These factors raise substantial doubt as to the Company’s ability to continue as a going concern. The combined financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Note 3 - Acquisition of the Remaining 50% in Montana Tunnels

On February 1, 2010, the Parent acquired the remaining 50% interest in MTMI, from Apollo Gold (“Apollo”) in exchange for certain promissory notes from Calais Resources, Inc. (“Calais”) held by the Parent and certain investors in the Parent or its affiliates with an aggregate outstanding face balance and a carrying value of $3,440,000 and $250,000 deposit reflected in mining properties. Such value was based upon the appraised value of the real estate collateralizing the notes. The acquisition allows the Company to own and develop Montana Tunnels. The acquisition of the remaining 50% has been “pushed down” and reflected as a non-cash contribution as on February 1, 2010 in the combined financial statements.

The Company ascribed a value of $3,690,000 to the remaining 50% interest and the net assets acquired from MTMI representing the value of the Calais investment. The following is the allocation of the remaining 50% interest of the assets and liabilities acquired at February 1, 2010:

Cash and cash equivalents	$	44,044
Mineral sales receivable		78,704
Inventory		822,456
Other current assets		543
Buildings and equipment, net		2,210,717
Mining properties, mine development, and mineral interests, net		3,123,652
Restricted cash and reclamation bonds		8,184,845
Accounts payable		(306,398	)
Accrued liabilities		(471,698	)
Capital lease obligations		(35,716	)
Reclamation liability		(9,961,149	)
	$	3,690,000

The results of operations related to the 50% interest of MTMI has been included in the combined statements of operations from the date of acquisition, February 1, 2010, and summarized in the pro forma information for the 12 months ended December 31, 2010. January 2010 has been omitted as there were no mining operations during the month. The pro forma information reflects the push-down basis of accounting for the fair values of these transactions from the Parent to the subsidiary, EGI.

F-15

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements

Note 4 - Consolidated Balance Sheet Disclosures

Inventory

Inventory is summarized as follows:

	December 31,
	2011			2010
Materials and supplies	$	2,136,302		$	2,168,717
Stockpiled ore		693,700			544,804
Allowance for obsolete materials and supplies inventory		(1,917,326	)		(1,674,997	)
	$	912,676		$	1,038,524

There were no mineral inventory impairments during 2011 or 2010.

Buildings, Equipment, and Land

Buildings, equipment, and land consist of the following:

	December 31,
	2011			2010
Mining equipment	$	8,886,851		$	8,886,851
Crushers		2,371,808			2,371,808
Buildings		871,703			871,703
Equipment		1,380,173			280,885
Land		164,752			164,752
Office equipment		113,542			113,542
Vehicles		117,830			117,830
Software		39,899			39,899
Computer equipment		17,972			17,972
		13,964,530			12,865,242
Less accumulated depreciation		(8,343,344	)		(8,276,640	)
	$	5,621,186		$	4,588,602

Depreciation expense for the years ended December 31, 2011 and 2010 was $6,604 and $11,129, respectively. For the year ended December 31, 2011, $60,100 of depreciation expense was capitalized.

F-16

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements

Note 4 - Consolidated Balance Sheet Disclosures (continued)

Montana Tunnels ceased mining during November 2008, after completion of the L-Pit, and completed milling of stockpiled ore at the end of April 2009, at which time the mine was placed on care and maintenance until finances are secured to initiate the mine pit (M-Pit) expansion. Accordingly, there was no depreciation expense relating to Montana Tunnels for the years ended December 31, 2011 and 2010.

Net Mining Properties, Mine Development, and Mineral Interests

Mine development and mineral interests consist of the following:

	December 31,
	2011						2010
	Mine Development		Mining Properties and Mineral Interest		Total Book Value		Mine Development		Mining Properties and Mineral Interest		Total Book Value
Montana Tunnels	$	-	$	13,129,669	$	13,129,669	$	-	$	13,167,893	$	13,167,893
Golden Dream Mine		3,869,342		2,615,195		6,484,537		-		2,615,195		2,615,195
Gold Hill/Mount Heagan		-		635,883		635,883		-		575,751		575,751
Total mine development and mineral interest, net	$	3,869,342	$	16,380,747	$	20,250,089	$	-	$	16,358,839	$	16,358,839

Depletion expense related to MTMI mining properties for the years ended December 31, 2011 and 2010 was zero. MTMI ceased mining during November 2008 and completed milling of stockpiled ore at the end of April 2009, at which time the mine was placed on care and maintenance. Accordingly, there was no depletion for the years ended December 31, 2011 and 2010.

Other Mine Development and Mineral Interests

EGI owns the Elkhorn Project, located in the Elkhorn Mountains of Jefferson County, Montana. The Elkhorn Project consists of one permitted mine and three known gold mineralized deposits – Golden Dream Mine (formerly referred to as the Sourdough Mine), and the Elkhorn Project mineralized deposits. The Company developed a five-year mine plan on the Golden Dream Mine deposit, which is projected to mine and process 1.2 million tons of gold and copper bearing ore. The permit process has been completed, and the Company has initiated mine development activities. The Elkhorn Project are in the preliminary stages of drilling to define the ore body, developing the mine plan, and applying for the required permits from the regulatory agencies before proceeding with mining operations.

The costs associated with the Mount Heagan mineral property are net smelter royalty payments with a monthly minimum to allow for the development of the property. The monthly minimum payments are $5,000. The total payments made under the agreement from the inception of the agreement are $640,000 and will not exceed $1,500,000.

F-17

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements

Note 4 - Consolidated Balance Sheet Disclosures (continued)

Other Mine Development and Mineral Interests (continued)

The costs associated with the Golden Dream Mine property were used to establish the viability of the mine site. These include all direct costs of development since the Company’s internal evaluation established proven and probable reserves.

Accrued Liabilities

Accrued liabilities consist of the following:

	December 31,
	2011		2010
Property and mining taxes payable	$	2,630,365	$	2,502,663
Environmental remediation		380,000		-
Payroll and related expenses		130,509		109,610
Other expenses		106,358		38,213
	$	3,247,232	$	2,650,486

F-18

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements

Note 5 - Notes Payable

Series A 8% Bonds

	December 31,
	2011			2010
During July 2010, the Company entered into Series A 8% bonds for a total of $5,000,000, of which $1,235,500 was funded during 2010 and $164,279 was funded during 2011. The bonds mature during July 2012, with interest accruing at 8%. In the case of default, interest on the bonds accrues at 12%. The unpaid interest on the bonds shall be due and payable quarterly in arrears on the last day of each October, January, April, and July commencing in October 2010. The Company will make a bonus payment of $50,000 per bond upon maturity. The Company has not made the quarterly interest payments on the bonds; thus, an event of default is present. Because of the non-payment of interest, the Company has classified the bonds as current.
The holders each received five-year warrants to purchase 0.67 membership units of the Parent per $50,000 bond at a purchase price of $37,500 per membership unit. If the 2010 issuance is not paid prior to July 31, 2011, then the Company will issue separate four-year warrants to purchase 0.67 equity units per $50,000 bond at a purchase price of $37,500 per membership unit. The warrants expire July 31, 2015.	$	1,399,779		$	1,235,500
Less current portion		(1,399,779	)		(1,235,500	)
	$	-		$	-

Current Notes Payable Maturities

Maturities of notes payable obligations are as follows:

Year Ending December 31,	Related Party		Other
2012	$	1,199,779	$	200,000

F-19

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements

Note 6 - Push-Down Debt, Interest and Redemption Obligation of Parent and Its Affiliate

The Company’s assets serve as collateral for multiple loans of the Parent. Although the Company is not a maker or guarantor on the loans, the loans have been “pushed down” to the Company in the accompanying combined financial statements in accordance with Statement of Accounting Bulletin No. 54. The following is a summary of the loans as of December 31, 2011 and 2010.

Series A Convertible Notes

	December 31,
	2011		2010
$5,000,000, 12% Series A convertible notes.  These notes were due in December 2007.  The notes pay interest at the rate of 12% per annum, payable on the maturity date or within 30 days after conversion.  In the case of default, interest on the notes accrues at 18%.  During 2007, the notes were extended to December 2009.  During May 2009, the accrued and unpaid interest was included in the revised notes.  Included in the revision, the convertible notes accrue interest at 18% per annum compounded quarterly and are due in November 2013.  Interest only payments equivalent to 12% of the face amount commenced during April 2010 and were to be made quarterly.  At the election of the holder, principal amounts of the notes are convertible into membership units at $50,000 per membership unit or into membership interests of the Parent.  The Company’s mining properties and equipment have been pledged as collateral to these notes.	$	5,791,701	$	5,791,701
On May 14, 2007, an affiliate of the parent entered into a loan for $8,050,000.  The loan was due May 2009.  The loan pays interest at the rate of 12% per annum, payable monthly.  During May 2009, the accrued and unpaid interest was included in the revised notes.  Included in the revision, the loans accrue interest at 18% per annum compounded quarterly and are due November 2013.  At the election of the holder, the principal amount of the loan can be exchanged for $13,416,666 of Series A Bonds of the Parent that is held by the affiliate.  The Company’s mining properties and equipment have been pledged as collateral to this note.		9,680,125		9,680,125

F-20

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements

Note 6 - Push-Down Debt, Interest and Redemption Obligation of Parent and Its Affiliate (continued)

Series A Convertible Notes (continued)

	December 31,
	2011		2010
On January 22, 2008, an affiliate of the Parent entered into a loan for $5,000,000.  The loan was due January 2009.  The loan pays interest at the rate of 12% per annum, payable monthly.  During May 2009, as part of the $1,000,000 note agreement, the accrued and unpaid interest was included in the revised notes.  Included in the revision, the loans accrue interest at 18% per annum compounded quarterly and are due November 2013.  At the election of the holder, the principal amount of the loan can be exchanged for shares of an investment of the Parent at $1.00 per share, exchanged for $1,350,000 of Series A Convertible Bond, or exchanged for bonds of an investment of the Parent at $1.00 principal for each $1.00 par amount of a bond.  The Company’s mining properties and equipment have been pledged as collateral to this note.		6,108,022		6,108,022
On May 13, 2009 the Company entered into a promissory note (“Promissory Note”) for a total of $1,000,000.  As of December 31, 2011, the Promissory Note and accrued interest were paid in full.		-		918,728
Total push-down debt of Parent and its affiliate		21,579,848		22,498,576
An affiliate of the Parent offered redeemable options to certain debt holders (“Optionee”) to purchase membership units in a equity owner of the Parent.  The affiliate as Optionor grants to each Optionee the option to put all or any portion of the membership units to the affiliate, whereupon the affiliate shall have the obligation to purchase the put units at the Optionees’ cost plus 15% annualized return, less cash distributions or the fair market value of in-kind distributions, which shall first be deducted from the 15% annualized return from each Optionee’s date of acquisition of the units.  The affiliate will satisfy the put by executing and delivering to each Optionee the affiliates’ fully amortized 60-month note in the amount of the put price bearing interest at 12% per annum.  The Optionees have the right to exercise the put at any time until 60 days after all push-down debt and related interest have been repaid in full.   The Company’s mining properties and equipment have been pledged as collateral to the redeemable interest.		11,085,960		10,117,659
Push-down accrued interest of Parent and its affiliate		13,677,484		7,071,953
	$	46,343,292	$	39,688,188

During 2011, the Company has not made the interest payments on the notes or bonds; thus, an event of default is present. Because of the non-payment of interest, the Company has classified the notes and bonds as current.

F-21

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements

Note 7 - Capital Leases

The Company has acquired equipment under the provisions of long-term capitalized leases. For financial reporting purposes, the present value of future minimum lease payments relating to the assets has been capitalized. The leases expire in September 2013. Amortization of the leased property is included in depreciation expense.

The assets under capital lease have cost and accumulated amortization as follows at December 31, 2011:

Equipment	$	416,869
Less accumulated depreciation		(9,993	)
	$	406,876

Maturities of capital lease obligations are as follows:

Year Ending December 31,
2012	$	385,358
2013		49,780
Total minimum lease payments		435,138
Amount representing interest		(60,326	)
Present value of net minimum lease payments		374,812
Less current portion		(335,093	)
Long-term capital lease obligation	$	39,719

Note 8 - Income Taxes

Deferred income taxes have been provided for temporary differences that exist between the financial reporting and income tax bases of assets and liabilities and have been classified as either current or non-current based upon the related assets or liabilities. As of December 31, 2011 and 2010, primary components of the net deferred tax liabilities include accrued reclamation, inventory reserves, depreciation, amortization, and net operating loss carryforwards. The effective tax rate in 2011 and 2010 differs from the expected federal statutory rate primarily due to change in valuation allowance, state income taxes, and deductions disallowed for tax purposes, primarily penalties, and losses from transactions with related parties.

F-22

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements

Note 8 - Income Taxes (continued)

As of December 31, 2011 and 2010, EGI had federal net operating loss carryforwards of $1.9 million. These losses may be carried forward and will expire over the period from 2023 through 2030. As of December 31, 2011 and 2010, MTMI had federal net operating loss carryforwards of $6.8 million and $5.9 million, respectively. These losses may be carried forward and will expire over the period from 2018 through 2031. The annual utilization of the net operating carryforwards may be subject to certain limitations under Section 382 of the Internal Revenue Code of 1986, as amended, and other limitations under state tax laws.

As of December 31, 2011 and 2010, the Company has a valuation allowance on its deferred tax assets, since it cannot conclude that it is more likely than not that the deferred tax assets will be fully realized on future income tax returns. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers past history, the scheduled reversal of deferred tax liabilities, available taxes in carryback periods, future taxable income projections, and tax planning strategies in making this assessment. The Company will continue to evaluate whether the valuation allowance is needed in future reporting periods.

The Company did not have any unrecognized tax benefits as of the years ended December 31, 2011 or 2010.

Note 9 - Related Party Transactions

During 2011, the Company entered into an ore purchase agreement (“Agreement”) with an affiliate of the Parent to sell 80% of the first 41,700 ounces of gold produced from the Golden Dream Mine for an up-front payment of $10,000,000 of consideration. The Agreement requires the Company to pay all proceeds from the sale of gold in excess of $500 per ounce or the latest COMEX spot gold price, if any, to the related party. Additionally, the related party may purchase 6.5% of the ounces produced by the mine after the mine has produced in excess of 250,000 aggregate ounces for a purchase price of the lesser of $600 per ounce or the latest COMEX spot gold price. The term of the Agreement is through the closure of the Golden Dream Mine. Currently the Company estimates reserves at approximately 258,000 ounces of gold. On that date, the Company entered into a security agreement with its Parent to secure the payment of EGI’s obligations under the Agreement pursuant to which EGI granted the Parent a continuing security interest in all of the assets and property of EGI.

F-23

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements

Note 9 - Related Party Transactions

The Agreement included an embedded derivative, which is valued using a discounted cash flow model with the major inputs of: (i) a 25% discount rate, (ii) gold future pricing, (iii) April 15, 2011 measurement date, and (iv) and management’s forecast to produce 41,700 ounces by December 2013. The Company recognized a $13,025,932 loss on related party ore purchase agreement to reflect the difference between fair value of gold at the agreement date and the contract price of gold in the agreement. As the result, the offering will be amortized by the Company with the delivery of the gold. The fair value of the embedded derivative fluctuates with changes in the price of gold. The change in fair value of the embedded derivative from the date of closing to December 31, 2011 resulted in a loss of $5,793,013, which was recorded in the combined statements of operations in the change in fair value of the derivative instrument.

Note 10 - Commitments and Contingencies

Litigation

In the normal course of business, the Company is party to litigation from time to time. The Company maintains insurance to cover certain actions and believes that resolution of such litigation will not have a material adverse effect on the Company.

Environmental Matters

The Company’s mining and exploration activities are subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. The Company conducts its operations so as to protect the public health and environment and believes its operations are in compliance with applicable laws and regulations in all material respects. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations, but cannot predict the full amount of such future expenditures.

Estimated future reclamation costs are based principally on legal and regulatory requirements. At December 31, 2011 and 2010, approximately $22,800,000 and $21,500,000, respectively, were accrued for reclamation costs relating to currently producing mineral properties in accordance with asset retirement obligation guidance.

Property Taxes

The Company is not current with its 2010 and 2009 property taxes. The total amount past due as of December 31, 2011 is approximately $2,600,000.

F-24

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements

Note 11 - Subsequent Events

During February 2012, the Company entered into three convertible bridge loans with a related party for $1,800,000. The loans are unsecured and call for 12% annual interest on the outstanding unpaid principal. The loans are convertible into common stock of the potential acquirer if the acquisition consummates at $2.00 per share. The holder will receive one five-year warrant attached to each share of acquirer. Two warrants will acquire an additional share of common stock for $3.00 of acquirer. In addition, the holder will be issued warrants exercisable at $0.01 per share, exercisable at the time of closing a private placement offering (“PPO”) of acquirer or the next round of funding of acquirer. If the share value is less than $2.50, an appropriate number of warrants may be exercised by the holder giving the holder additional shares at the cost of $0.01 per share to effect conversion at a 25% discount from the share price of the PPO or the next round of funding. Assuming the public transaction completes, but the PPO or other equity financing is not completed within six months, the holder may put the shares to the Company at $4.00 per share. The loans mature on August 29, 2012, and prior to that date, but after the closing of the PPO.

F-25

EASTERN RESOURCES, INC. AND

ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.

SELECTED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA

Explanatory Notes

The unaudited pro forma financial data set forth below at and for the year ended December 31, 2011 is based upon Eastern Resources, Inc (ERSI) historical financial statements, adjusted to give effect to:

• The transaction with Elkhorn Goldfields, Inc. (EGI) and Montana Tunnels Mining Inc. (MTMI) and

• The contemporaneous sale of the corporation to the purchasing corporation.

On April 6, 2012, we entered into an Agreement and Plan of Merger with ESRI a public company. ERSI was merged into EGI and MTMI EGI and MTMI, as the Surviving Corporation, became a wholly-owned subsidiary of ERSI. We issued 90,000,000 shares of our common stock and 10,000,000 preferred stock to acquire EGI and MTMI, which resulted in the stockholders of EGI and MTMI owning approximately 91.6% of our outstanding common stock after the consummation of the Merger.

The pro forma financial information at and for the year ended December 31, 2011 has been developed from ESRI’s audited financial statements and EGI and MTMI audited financial statements, and the notes to those financial statements, which are included elsewhere in this document.

The unaudited pro forma consolidated financial data is provided for illustrative purposes only and does not purport to represent what ESRI’s actual consolidated results of operations or ESRI’s financial position would have been had the transaction and corporation sale occurred on the dates assumed, nor is it necessarily indicative of future consolidated results of operations or financial position.

The unaudited pro forma combined financial data is based on preliminary estimates and various assumptions that EGI and MTMI and ERSI believe are reasonable in these circumstances. Because the former stockholders of EGI and MTMI will own approximately 92% of the combined company on completion of the exchange, calculated on a fully diluted basis and ERSI is selling its existing operations in conjunction with the transaction, the transaction and corporation sale will be accounted for as a recapitalization through a reverse acquisition, with no goodwill or other intangibles recorded. As such, the pro forma financial information reflects the historical financial information of EGI and MTMI and the remaining assets and liabilities of ERSI brought over at historical cost. Costs of the transaction will be charged to operations. ERSI does not anticipate that any cost savings, revenue enhancements or synergies will be realized in connection with the transaction and corporation sale. The unaudited pro forma financial statements reflect the EGI and MTMI accounting policies, as those accounting policies will govern EGI and MTMI accounting after the transaction and corporation sale.

The summary consolidated statement of operations data for the year ended December 30, 2011 gives effect to the transaction and corporation sale as if each had occurred on January 1, 2011.

F-26

EASTERN RESOURCES, INC. & ELKHORN GOLDFIELDS, INC. & MONTANA TUNNELS MINING, INC.

BALANCE SHEET

	December 31, 2011 Elkhorn Gold & MTMI			December 31, 2011 ERSI			December 31, 2011 Total			Adjustments to Reflect Reverse Acquisition			Pro Forma Combined
Assets
Current assets
Cash and cash equivalents	$	358,125		$	2,125		$	360,250		$	-		$	360,250
Inventory, net		912,676			-			912,676			-			912,676
Other current assets		12,433			-			12,433			-			12,433
Total current assets		1,283,234			2,125			1,285,359			-			1,285,359
Non-current assets
Buildings, equipment, and land, net		5,621,186			-			5,621,186			-			5,621,186
Mine development		3,869,342			-			3,869,342			-			3,869,342
Mining properties and mineral interest, net		16,380,747			-			16,380,747			-			16,380,747
Restricted cash		604,021			-			604,021			-			604,021
Reclamation bonds		16,190,556			-			16,190,556			-			16,190,556
Prepaid expenses		-			3,236			3,236			-			3,236
Total non-current assets		42,665,852			3,236			42,669,088			-			42,669,088
Total assets	$	43,949,086		$	5,361		$	43,954,447		$	-		$	43,954,447
Liabilities and Stockholders’ Deficit
Current liabilities
Accounts payable	$	282,141		$	79,423		$	361,564		$	-		$	361,564
Accrued liabilities		3,247,232			-			3,247,232			-			3,247,232
Current portion capital lease obligation		335,093			-			335,093			-			335,093
Series A 8% bonds		1,399,779			-			1,399,779			-			1,399,779
Deferred revenue, related party ore purchase agreement		3,237,410			-			3,237,410			-			3,237,410
Push-down redeemable obligation of Parent and its affiliate		11,085,960			-			11,085,960			(11,085,960	)(1)		-
Push-down interest of Parent and its affiliate		13,677,484			-			13,677,484			(13,677,484	)(1)		-
Push-down debt of Parent and its affiliate		21,579,848			-			21,579,848			(21,579,848	)(1)		-
Loan payable-stockholder		-			40,000			40,000			(40,000	)(2)		-
Notes payable		-			297,388			297,388			(297,388	)(2)		-
8.25% Convertible debenture		-			54,820			54,820			(54,820	)(2)		-
10% Convertible debenture		-			139,270			139,270			(139,270	)(2)		-
Compensation payable		-			355,462			355,462			(355,462	)(2)		-
Total current liabilities		54,844,947			966,363			55,811,310			(47,230,232	)		8,581,078
Non-current liabilities
Capital lease obligations, less current portion		39,719			-			39,719			-			39,719
Reclamation liability		22,793,187			-			22,793,187			-			22,793,187
Deferred revenue, related party ore purchase agreement less current portion		6,762,590			-			6,762,590			-			6,762,590
Related party ore purchase derivative contract		18,818,945			-			18,818,945			-			18,818,945
Notes payable, non-current		-			8,757			8,757			(8,757	)(2)		-
10% Convertible debenture, net discount of $845 and $1,294 as of December 31, 2011 and 2010, respectively		-			82,599			82,599			(82,599	)(2)		-
Derivative liability		-			471			471			(471	)(2)		-
Total non-current liabilities		48,414,441			91,827			48,506,268			(91,827	)		48,414,441
Total liabilities		103,259,388			1,058,190			104,317,578			(47,322,059	)		56,995,519
Preferred stock liability		-			-			-			60,000,000			60,000,000
Commitments and contingencies
Stockholders’ deficit
Preferred stock, $.001 par value		-			-			-			-			-
Common stock, $.001 par value		12,073,010			20,629			12,093,639			99,085	(3)		99,085
											(20,629	)(2)
											(12,073,010	)(3)
Additional paid-in capital		-			903,771			903,771			(99,085	)(3)		5,443,155
											20,629	(2)
											(1,977,229	)(2)
											12,073,010	(3)
											978,767	(2)
											46,343,292	(1)
											(60,000,000	)(1)
											7,200,000	(4)
											(7,200,000	)(4)
Accumulated deficit		(71,383,312	)		(1,977,229	)		(73,360,541	)		1,977,229	(2)		(78,583,312	)
Total stockholders’ deficit		(59,310,302	)		(1,052,829	)		(60,363,131	)		(12,677,941	)		(73,041,072	)
Total liabilities and stockholders’ deficit	$	43,949,086		$	5,361		$	43,954,447		$	-		$	43,954,447

F-27

EASTERN RESOURCES, INC. AND ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.

Statement of Operations

	December 31, 2011 Elkhorn Gold			December 31, 2011 ERSI			December 31, 2011 Total			Adjustments to Reflect Reverse Acquisition			Pro Forma Combined
Cost of revenue
Impairment of capitalized film costs	$	-		$	(1,284,866	)	$	(1,284,866	)	$	1,284,866	(2)	$	-
Total costs of revenue		-			(1,284,866	)		(1,284,866	)		1,284,866			-
Gross profit		-			(1,284,866	)		(1,284,866	)		1,284,866			-
Operating expenses
General and administrative		850,616			164,816			1,015,432			(164,816	)(2)		850,616
Accretion expense		1,327,721			-			1,327,221			-			1,327,221
Mine care and maintenance		1,037,199			-			1,037,199			-			1,037,199
Depreciation, depletion, and amortization		6,604			-			6,604			-			6,604
Total operating expenses		3,221,640			164,816			3,386,456			(164,815	)		3,221,640
Loss from operations		(3,221,640	)		(1,449,682	)		(4,671,322	)		1,449,682			(3,221,640	)
Other (expense) income
Interest expense		(8,083,445	)		(46,486	)		(8,129,931	)		46,486	(2)		(8,083,445	)
Interest income		47,705			15			47,720			(15	)(2)		47,705
Other income		512,066			-			512,066						512,066
Loss on related party ore purchase derivative		(13,025,932	)					(13,025,932	)					(13,025,932	)
Change in fair value of derivative instrument contract		(5,793,013	)		924			(5,792,089	)		(924	)(2)		(5,793,013	)
Amortization of discount		-			(1,625	)		(1,625	)		1,625	(2)		-
Gain on forgiveness of debt		-			86,956			86,956			(86,956	)(2)		-
Total other (expense) income		(26,342,619	)		39,784			(26,302,835	)		(39,784	)		(26.342.619	)
Preferred stock dividend											(7,200,000	)(4)		(7,200,000	)
Net loss attributable to common stockholder	$	(29,564,259	)	$	(1,409,898	)	$	(30,974,157	)	$	(5,790,102	)	$	(36,764,259	)
Basic and diluted loss per share
Basic and diluted net loss per common share	$	(147,821.30	)	$	(0,07	)							$	(0.37	)
Weighted average number of common shares outstanding		200			20,629,000									99,085,000

F-28

Adjustment #1

Additional paid-in capital	$	60,000,000
Preferred stock liability			$	60,000,000
Push-down redeemable obligation of Parent and its affiliate	$	11,085,960
Push down interest of Parent and its affiliate	$	13,677,484
Push down debt of Parent and its affiliate	$	21,579,848
Additional paid-in capital			$	46,343,292

Memo: To record the 60,000,000 shares of redeemable preferred stock to the Company’s parent. The preferred stock has a 12% per annum dividend and can be redeemed for 1,000,000 shares per quarter ($6,000,000). The preferred stock is issued to provide cash flow to the Parent to service the debt of the Parent, which is collateralized by the Company’s assets. The debt, redeemable LLC interest and accrued interest “pushed down” from the Parent of $46,343,292 is eliminated with the issuance of the preferred stock so that the debt is not recorded twice.

Adjustment #2

	$	1,977,229
Additional paid-in capital			$	1,977,229
Accumulated deficit	$	20,629
Common stock, $0.001 par value (ERSI)			$	20,629
Additional paid-in capital	$	978,767
ERSI liabilities			$	978,767
Additional paid in capital

Memo: Elimination of ERSI liabilities, equity, and common stock as well as its expenses. ERSI is the public shell. This is accounted for as a reverse acquisition and none of the equity or liabilities of ERSI continue in the new entity.

Adjustment #3 

Common stock, $0.001 par value (EGI and MTMI)	$	12,073,010
Additional paid-in capital			$	12,073,010
Common stock, $0.001 par value	$	99,085
Additional paid in capital			$	99,085

Memo: Elimination of EGI and MTMI common stock and the issuance of 99,085,000 shares of common stock. Elkhorn Goldfields, Inc. and Montana Tunnels Mining, Inc. assigns 100% of the stock to ERSI (or subsidiary). ERSI assigns 90M shares of common stock and 10M shares of preferred stock to Elkhorn Goldfields Inc. and Montana Tunnels Mining, Inc.

Adjustment #4

Accumulated deficit	$	7,200,000
Additional paid-in capital			$	7,200,000

Memo: Preferred stock dividend $60,000,000 at 12% interest.

F-29

GLOSSARY OF RELEVANT MINING TERMS

Acre - A measure of surficial area, usually of land. The statute acre of the United States and England contains 43,560 ft² (4,840 yd²; 4,047 m² ; or 160 square rods).

Base Metal - Any of the more common and more chemically active metals, e.g., lead, zinc and copper.

COMEX - Commodity Exchange, Inc.

Commercial Production - normally considered to be the first day of the first ninety-day period throughout which the mill operated consistently at 60% capacity or more.

Decline – A tunnel driven at a downward slope.

Doré Flat – A mold of semi-pure alloy consisting of gold and silver created at the mine site.

Grade of ore - The relative quantity or the percentage of ore-mineral or metal content in an ore body

Inferred Resource - Resources from which estimates are based on an assumed continuity beyond measured and/or indicated resources, for which there is geologic evidence. Inferred resources may or may not be supported by samples or measurements.

Life of Mine - The time in which, through the employment of the available capital, the ore reserves—or such reasonable extension of the ore reserves as conservative geological analysis may justify—will be extracted.

Metric Tonne -a unit of weight equivalent to 1,000 kilograms (or 2,204.6 pounds).

Mill Recovery - that portion of the metal contained in the ore that is successfully extracted by processing, expressed as a percentage.

Mine Plan – A plan of the mine operations detailing development and operating schedules and parameters.

Mineral Reserve - The quantity of mineral that is calculated to lie within given boundaries. It is described as total (or gross), workable, or probable working, depending on the application of certain arbitrary limits in respect of deposit thickness, depth, quality, geological conditions, and contemporary economic factors. Proved, probable, and possible reserves are other terms used in general mining practice.

Patented Mineral Claim - A claim to which a patent has been secured from the U.S. Government, in compliance with the laws relating to such claims.

Payable metals – The amount of metal - in ounces or pounds - paid out by the Smelter and/or Refiner.

Poly-metallic – holds significant resources in more than one base metal.

Precious Metal - Any of several relatively scarce and valuable metals, such as gold, silver, and the platinum-group metals.

Probable reserves means reserves for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation.

Recoverable Metal – the portion of metal contained in a whole ore or concentrated mineral product which is paid to the product supplier by a smelter or refiner.

Refiner -A facility in which relatively crude smelter products are refined and emerge as acceptably pure products.

Smelter - An establishment where ores are smelted to produce metal.

Sulfide - A mineral compound characterized by the linkage of sulfur with a metal or semimetal.

Ton - a unit of weight equivalent to 2,000 pounds (907 kg).

Unpatented Mineral Claim - Mining claim to which a deed from the U.S. Government has not been received. A claim is subject to annual assessment work, to maintain ownership.

Volcanic Diatreme - A breccia-filled volcanic pipe that was formed by a gaseous explosion.

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.

	EASTERN RESOURCES, INC.
Dated:  April 11, 2012	By:	/s/Patrick W. M. Imeson
		Name: Patrick W. M. Imeson
		Title: Chief Executive Officer

EX-4.2

12% UNSECURED CONVERTIBLE PROMISSORY NOTE

Naperville, Illinois

February 29, 2012

Original Principal Amount: $1,500,000.00

THIS 12% UNSECURED CONVERTIBLE PROMISSORY NOTE (the “Note”), is made as of February 29, 2012 by and among Elkhorn Goldfields, Inc., a Montana corporation (the “Borrower”) and [____________] (the “Lender”).

WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, after the closing of the Merger (defined below) and at the sole discretion of the Lender, the Note may be converted upon the same terms and conditions as that certain bridge note financing (“Bridge Notes”) offered by the Borrower, whereby all of the outstanding principal amount of, and accrued but upaid interest on, the Bridge Notes shall automatically be converted into units (“Units”) of a publicly traded company currently listed on OTC Markets and registered under the Securities Exchange Act of 1934, as amended (“Exchange Act”) or not registered under the Exchange Act, but whose shares are registered pursuant to the Securities Act (“Pubco”), at a conversion price of $2.00 per Unit, each Unit consisting of: (i) one share of Pubco’s common stock, (the “Common Stock”) (as converted, the “Conversion Shares”), (ii) and a warrant to purchase one-half share of Common Stock of Pubco (“Conversion Warrants”), exercisable at a price of $3.00, and (iii) a special warrant exercisable upon the closing of the PPO (as defined below); provided the share price of the Common Stock offered in the PPO is less than $2.50 per share, so that the exercise of the special warrants will reduce buyer’s effective conversion price for the Common Stock equal to a 25% discount on the PPO (“Special Warrants”) exercisable at a price of $0.01 per full share; and

WHEREAS, the Borrower and its parent company (i) is currently negotiating a reverse triangular merger with Pubco (the “Merger”) and (ii) Pubco will be conducting a private placement offering (the “PPO”) of Common Stock of Pubco at the market price or at such appropriate discounted price per share as the Board of Directors of Pubco determine, in their sole discretion to close within 90 days after the closing of the Merger;

WHEREAS, upon the Lenders election to convert into the Note as provided herein, the Borrower shall afford the Lender the opportunity to become a party to all agreements and instruments executed by the investors in the PPO, including, but not limited to, a registration rights agreement; and

NOW THEREFORE, in consideration of the amounts advanced hereunder, Borrower hereby promises to pay to the order of Lender the original principal sum of ONE MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($1,500,000.00) (the “Outstanding Indebtedness”).

Borrower's Initials: ________

The Borrower further promises to pay interest on the unpaid principal amount of this Note at a rate per annum equal to twelve percent (12%), payable on the Maturity Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months for the actual number of days elapsed.

Borrower and Lender agree that the maturity date of the Outstanding Indebtedness shall be August 29, 2012 (the “Maturity Date”). Borrower shall make a final and full payment of the entire Outstanding Indebtedness on or before the Maturity Date. Payments of both principal and interest are to be made in lawful money of the United States of America. The Borrower may prepay the principal balance of the Outstanding Indebtedness under this Note, or any part of this Promissory Note, without penalty at any time.

After the closing of the Merger and at the sole discretion of Lender, Lender may convert all of the outstanding principal amount of, and accrued but unpaid interest on, this Note may convert into Units of Pubco at a price of $2.00 per Unit (the “Conversion Price”), subject to adjustment as provided herein. No fractional Units will be issued on conversion, but the number of Units shall be rounded to the nearest whole number of Units. Each Unit will consist of: (i) the Conversion Shares, (ii) Conversion Warrants, and (iii) Special Warrants.

The date upon which the conversion shall be effective (the “Conversion Date”) shall be deemed to be the date on which the Lender provides written notice to Borrower. The number of Units issuable upon conversion of this Note shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note and accrued but unpaid interest hereon on the Conversion Date by (y) the Conversion Price then in effect. The calculation by the Borrower of the number of Units to be received by the Lender upon conversion hereof, and of the applicable Conversion Price, shall be conclusive absent manifest error.

If any interest in excess of the amount permitted by law is called for in this Note, or is adjudicated to be so, the provisions of this paragraph shall govern, and neither Borrower nor any of Borrower’s successors and assigns shall be obligated to pay the amount of such interest to the extent that it is in excess of the amount permitted under Illinois law, and such amounts so paid, at the option of the Lender, shall either be applied against the principal balance of this Promissory Note or rebated to Borrower within thirty (30) days after such determination.

A default of this Note shall consist of any payment not made when due or a default on any other obligation Borrower has with Lender. In the event of a default, the unpaid Outstanding Indebtedness of this Note (principal plus accrued interest, penalties and fees, if any) shall be accelerated and become immediately due and payable, and Lender may exercise its rights to any collateral under any security agreement or mortgage made by Borrower for Lender’s benefit, if any. In the event of a default on this Note, Borrower agrees to pay default interest at a rate of 14% per annum, compounded monthly until full payment hereunder is made, including without limitation, all collection costs of Lender, including but not limited to any expenses Lender incurs (i) in locating, storing, repairing, or selling any collateral securing this Note or any other obligation Borrower has with Lender; (ii) reasonable attorneys' fees and legal expenses (whether or not suit is commenced and whether or not incurred in connection with the appeal of a lower court's judgment or order and in collecting any judgment entered hereon); and (iii) any other costs or fees awarded to Lender by a court of competent jurisdiction.

Borrower's Initials: ________

All of the rights, remedies, powers and privileges (together, "Rights") of Lender provided in this Note and in any other related document are cumulative of each other and of any and all other Rights at law or in equity. The resort to any Right shall not prevent the concurrent or subsequent employment of any other appropriate Right. No single or partial exercise of any Right shall exhaust it or preclude any other or further exercise thereof, and every Right may be exercised at any time and from time to time. No failure by Lender to exercise and no delay in exercising any Right, including the right to accelerate the maturity of this Note, shall be construed as a waiver of any event of default or as a waiver of any Right. Without limiting the generality of the foregoing provisions, the acceptance by Lender from time to time of any payment under this Note which is past due or which is less than the payment in full of all amounts due and payable at the time of such payment shall (i) not constitute a waiver of or impair or extinguish the right of Lender to accelerate the maturity of this Note or to exercise any other Right at the time or at any subsequent time or nullify any prior exercise of any such Right, (ii) not constitute a waiver of the requirement of punctual payment and performance or a novation in any respect, or (iii) in any way excuse the existence of an event of default.

This Note is made under, and shall be interpreted and enforced in accordance with, the laws of the State of Illinois.

A determination that any provision of this Note is unenforceable or invalid shall not affect the enforceability or validity of any other provision and the determination that the application of any provision of this Note to any person or circumstance is illegal or unenforceable shall not affect the enforceability or validity of such provision as it may apply to other persons or circumstances.

This Note shall be binding on and enforceable against the maker hereof and its successors, heirs, executors, representatives and assigns.

This Note may not be modified except in writing signed by both parties. Time is of the essence of this Note.

BORROWER WAIVES PRESENTMENT, DEMAND FOR PAYMENT, NOTICE OF DISHONOR, PROTEST, AND NOTICE OF PROTEST. THE ADDITION OR RELEASE OF ANY PARTY, SURETY OR GUARANTOR OF COLLATERAL SHALL NOT AFFECT BORROWER'S LIABILITY UNDER THIS NOTE.

TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER WAIVES THE BENEFIT OF ANY LAW THAT WOULD OTHERWISE RESTRICT OR LIMIT LENDER'S EXERCISE OF ITS RIGHTS OR REMEDIES HEREUNDER, WHICH BORROWER HEREBY ACKNOWLEDGES, FROM TIME TO TIME FOLLOWING THE OCCURRENCE OF AN EVENT OF DEFAULT, WITHOUT DEMAND OR NOTICE OF ANY KIND.

Borrower's Initials: ________

BORROWER AGREES THAT LENDER SHALL NOT BE LIABLE FOR ANY ERROR OF JUDGMENT OR MISTAKES OF FACT OR LAW, EXCEPT FOR ANY ERROR OR MISTAKE TO THE EXTENT ARISING SOLELY FROM LENDER'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

BORROWER HEREBY WAIVES TRIAL BY JURY IN RESPECT OF ANY SUIT UNDER THIS NOTE. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY BORROWER, AND BORROWER HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY PERSON OR ENTITY TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THE LOAN DOCUMENTS. BORROWER AND LENDER ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER OF JURY TRIAL. BORROWER FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

TO INDUCE LENDER TO FUND THE LOAN EVIDENCED BY THIS NOTE, THE AND OTHER AGREEMENTS EXECUTED ANCILLARY HERETO, BORROWER IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER, OR RESPECT ARISING OUT OF OR FROM OR RELATED TO THIS NOTE OR THE LOAN DOCUMENTS OR OTHER AGREEMENTS SHALL BE LITIGATED ONLY IN COURTS HAVING SITUS WITHIN DUPAGE COUNTY, ILLINOIS. BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED WITHIN SAID COUNTY AND STATE. BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST BORROWER BY LENDER IN ACCORDANCE WITH THIS PARAGRAPH.

[Signature page follows]

Borrower's Initials: ________

IN WITNESS WHEREOF, Borrower has executed this Note on the date first written above.

ELKHORN GOLDFIELDS, INC.,
a Montana corporation
By:
Name:	Robert Trenaman
Its:	President

Borrower's Initials: ________

EX-4.3

ELKHORN GOLDFIELDS, INC.

a Montana Corporation

US $5,000,000

8% SERIES A BONDS

DUE JULY 31, 2012

No. ___ JULY 31, 2012 $                                        

ELKHORN GOLDFIELDS, INC, a Montana Corporation (the “Company”), for value received promises to pay to:

the registered holder of this Bond (the “Holder”), or its assigns the principal amount of:

TWO HUNDRED THOUSAND DOLLARS

on July 31, 2012 (the “Maturity Date”), in lawful money of the United States of America, together with interest from the Advance Date (as hereinafter defined), calculated on the basis of a 360-day year of 12, 30-day months, on the unpaid principal balance from time to time outstanding, computed until maturity at the rate per annum equal to the lesser of (i) the Applicable Rate (as hereinafter defined), or (ii) the Maximum Rate (as hereinafter defined).

1.          Definitions. When used in this Bond, the following terms shall have the respective meanings specified herein or in the section referred to:

“Advance Date” means the date on which this Bond is issued by the Company and sold to the Holder in exchange for payment of the original principal amount stated above (July 21, 2010).

“Authorized Denominations” means US $50,000 and integral multiples thereof.

“Applicable Rate” means (i) for each day during the time that this Bond is outstanding and in which no Event of Default exists and is continuing, the rate of 8 percent per annum, and (ii) for each day during the time this Bond is outstanding and an Event of Default exists and is continuing, the rate of 12 percent per annum.

“Bond Obligations” shall mean all indebtedness, liabilities and obligations of the Company arising under all of the Bonds, including all obligations to pay the principal of and interest on this Bond as and when due.

“Bonds” means, collectively, the Company’s aggregate US $5,000,000 8% Series A Bonds due July 31, 2012, of which this Bond is one.

“Bonus Payments” means, the Company will make a bonus payment of $25,000 per Bond if the Bond Principal and accrued Interest is redeemed and fully paid by January 31, 2011, otherwise the Company will make a bonus payment of $50,000 per Bond.

“Business Day” means any day other than a Saturday, Sunday, or other day on which banks in Montana, are authorized or required to be closed by law.

“By Laws” means the By Laws of the Company as amended to the date hereof.

“Event of Default” means any of the events described in Section 4 below.

“Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

“Free Cash Flow” means payments by the smelter, less US $550 per ounce of gold and gold equivalents sold, which has been determined to be sufficient to provide for the mining, milling, and transportation costs.

“Holders” means, collectively, the Holder of this Bond and the holders of all other Bonds outstanding.

“Initial Funding Date” means the date that the first Bonds are sold in the Offering and the proceeds thereof are received by or on behalf of the Company.

“Interest Payment Date” means payable quarterly in arrears on the last day of each October, January, April and July, commencing on October 31, 2010.

“Majority Action” means a vote or action taken or a determination otherwise made at any time by the Holders of a majority of the principal amount of the Bonds then outstanding.

“Maturity Date” means July 31 2012.

“Maximum Rate” means the highest non-usurious rate of interest (if any) permitted from time to time by applicable law.

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“Member” means a Person owning Units and otherwise constituting a member of the Company under the Operating Agreement.

“Offering” means the offering of the Bonds made pursuant to and as described in a Confidential Private Offering Memorandum dated as of July 1, 2010 and related documents.

“Person” means any natural person, individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, charitable foundation, unincorporated organization, government or any agency or political subdivision thereof, or any other entity.

“Priority Payments/Redemptions” means the Company is will reserve fifty percent (50%) of the Free Cash Flow from production of the Sourdough Mine, (as defined under “Free Cash Flow”) to distribute to the Bond Holders quarterly as Interest, Principal, and Bonus payments. However, the Company has the right to retain up to the first US $5,000,000 in Free Cash Flow as working capital only, if deemed necessary to maintain ongoing mining and milling. Should any of the first US $5,000,000 in Free Cash Flow herein described not be required for working capital, 50% of those funds shall also be allocated to the Bond Holders. The Company may make Interest, Principal and Bonus Payments to Bond Holders at anytime but no later than on the quarterly interest payment dates for the previous quarter.

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

“Securities Act” means the United States Securities Act of 1933, as amended.

“Warrant” means the rights to purchase Membership Units in Elkhorn Goldfields LLC as specified in the Confidential Private Offering Memorandum dated July 1, 2010.

2.            Advance; Payment.

(a)          Advance. On the Advance Date, the Holder shall lend to the Company, in a single advance, the principal amount of this Bond specified above, in immediately available funds to or at the direction of the Company.

(b)          Interest and Principal Payments. The unpaid principal of and interest on this Bond shall be due and payable (i) with respect to interest, on each Interest Payment Date, (ii) with respect to unpaid principal and bonus payments in the amount of the reserved free cash flow on each Interest Payment Date, and (iii) with respect to remaining unpaid principal, bonus payment and accrued and unpaid interest on this Bond, on the Maturity Date.

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(c)          Optional Prepayment. This Bond may be prepaid by or on behalf of the Company on or on any Business Day.

(d)          Payments Generally. Except as otherwise provided herein, all payments of principal of and interest on this Bond shall be made by the Company to the Holder in cash or other immediately available funds. Should the principal of, or any installment of the principal of or interest on, this Bond become due and payable on any day other than a Business Day, such payment shall be made on the next following Business Day. Payments made to the Holder by the Company on the Maturity Date shall be applied first to accrued interest and then to principal.

3.          Certain Waivers. Except as provided herein, the Company and each surety, endorser, guarantor and other party ever liable for payment of any sums of money payable upon this Bond, jointly and severally waive presentment, demand, protest, notice of protest and non-payment or other notice of default, notice of acceleration and intention to accelerate, or other notice of any kind, and agree that their liability under this Bond shall not be affected by any renewal or extension in the time of payment hereof, or in any indulgences, or by any release or change in any security for the payment of this Bond, and hereby consent to any and all renewals, extensions, indulgences, releases, or changes, regardless of the number of such renewals, extensions, indulgences, releases, or changes.

4.            Events of Default and Remedies.

(a)          Events of Default. For purposes of this Bond, it shall be an Event of Default if (i) the Company shall fail to pay when due any principal of or interest upon this Bond or any other Bond Obligation and such failure shall have continued for 45 days; (ii) the Company shall fail to perform any of the covenants or agreements contained herein and such default shall not be remedied within 60 days following the earlier of (A) notice from the Holder thereof, (B) the date of discovery by the Company, or (C) the date that such default should, in the exercise of diligence, have been discovered by the Company; provided that any such default which is, as of the date of default, not reasonably capable of remedy within 60 days shall constitute an Event of Default immediately upon its occurrence; (iii) any representation or warranty made by the Company to the Holders in the Bonds shall prove to be untrue or inaccurate in any material respect when made; (iv) the Company shall (A) apply for or consent to the appointment of a receiver, trustee, intervener, custodian, or liquidator of itself or of all or a substantial part of its assets, (B) be adjudicated bankrupt or insolvent or file a voluntary petition for bankruptcy or admit in writing that it is unable to pay its debts as they become due, (C) make a general assignment for the benefit of creditors, (D) file a petition or answer seeking reorganization or an arrangement with creditors or to take advantage of any bankruptcy or insolvency laws, or (E) file an answer admitting the material allegations of, or consent to, or default in answering, a petition filed against it in any bankruptcy, reorganization, or insolvency proceeding, or take corporate action for the purpose of effecting any of the foregoing; (v) an order, judgment, or decree shall be entered by any court of competent jurisdiction or other competent authority approving a petition seeking reorganization of the Company or appointing a receiver, trustee, intervener, or liquidator of the Company or of all or substantially all of its assets, and such order, judgment, or decree shall continue unstayed and in effect for a period of 30 days; or (vi) the Company shall dissolve or be liquidated.

-4-

(b)          Remedies. Upon the occurrence of any Event of Default the Holder may, at its option (i) declare the entire unpaid principal balance of and accrued interest on this Bond to be immediately due and payable or (ii) pursue and enforce any of the Holder’s rights and remedies available pursuant to any applicable law or agreement.

(c)          Collective Action. Notwithstanding (b) above, in the case of any Event of Default applicable to all Bonds and Holders, the remedies of the Holders shall be exercised by the Holders acting pursuant to Majority Action. In connection therewith, the Holders may, among other things, appoint by Majority Action one or more among themselves to act on behalf of all with respect to an Event of Default and the exercise and defense of the rights of the Holders with respect thereto.

5.            Representations and Covenants.

(a)          Representations. The Company represents and warrants to the Holder that:

(i)          the Company is duly organized and in good standing under the laws of the State of Montana and has the power to own its property and to carry on its business in each jurisdiction in it operates;

(ii)         the Company has duly qualified to do business in and is in good standing under the laws of the State of Montana;

(iii)        the Company has full power and authority to execute and deliver this Bond and to incur the obligations provided for in the Bonds, all of which has been duly authorized by all necessary action; and

(iv)        the Bonds are the legal and binding obligations of the Company, enforceable in accordance with their terms.

(b)          Affirmative Covenants. Until payment in full of the Bond Obligations, the Company agrees and covenants that the Company shall:

-5-

(i)          conduct its business in an orderly and efficient manner consistent with good business practices in the ordinary course and in accordance with all valid regulations, laws, and orders of any governmental authority;

(ii)         maintain complete and accurate books and records of its transactions in accordance with generally accepted accounting principles, and, if an Event of Default exists, give the Holder access during business hours to all books, records and documents of the Company and permit the Holder to make and take away copies thereof;

(iii)        furnish to the Holder as soon as available and in any event within 120 days after the close of each fiscal year of the Company, copies of the balance sheet of the Company as of the close of such fiscal year, statements of income and retained earnings, changes in cash flow, and member’s equity of the Company for such fiscal year, if any;

(iv)        furnish to the Holder, upon becoming aware of the existence of any condition or event constituting an Event of Default or event which, with the lapse of time or the provision of notice or both would constitute an Event of Default, written notice specifying the nature and period of existence thereof and any action which the Company is taking or proposes to take with respect thereto;

(vi)        promptly notify the Holder of (A) any material adverse change in its financial condition or business, (B) any default under any material agreement, contract or other instrument to which the Company is a party or by which any of its properties are bound, or any acceleration of any maturity of any indebtedness owing by any Company that is material to the Company’s financial condition or business, (C) any material adverse claim against or affecting the Company or any of its properties that is material to the Company’s financial condition or business, and (D) any litigation, or any claim or controversy which might become the subject of litigation, against the Company or affecting any of its properties, if such litigation or potential litigation might, in the event of an unfavorable outcome, have a material adverse effect on the Company’s financial condition or business or might cause an Event of Default;

(vii)       promptly furnish to the Holder, at the Holder’s reasonable request, such additional financial or other information concerning assets, liabilities, operations and transactions of the Company as the Holder may from time to time reasonably request;

(viii)      comply with all applicable legal requirements of any governmental authority;

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(ix)         preserve and maintain all licenses, privileges, franchises, certificates and the like necessary for the operation of its business; and

(x)          pay and discharge all taxes, assessments, and governmental charges or levies imposed upon it or upon its income or profits, or upon any property belonging to it, before such amounts become delinquent.

(c)          Special Covenant. The Bonds are pari passu with each other in right to payment and all other applicable obligations, and the Company covenants and agrees that it shall not treat any Holder or any Bond with a preference over any other Holder or any other Bond. Each Holder shall have the right to enforce this covenant by any action at law or in equity, including specific performance and equitable relief such as injunction, notwithstanding any other provision herein to the contrary or any provision requiring Majority Action.

6.            No Waiver. No waiver by the Holder of any of its rights or remedies hereunder or under any other document evidencing or securing this Bond or otherwise, shall be considered a waiver of any other subsequent right or remedy of the Holder; no delay or omission in the exercise or enforcement by the Holder of any rights or remedies shall ever be construed as a waiver of any right or remedy of the Holder; and no exercise or enforcement of any such rights or remedies shall ever be held to exhaust any right or remedy of the Holder.

7.            Usury Laws. Regardless of any provision contained in this or any other Bond, the Holder shall never be deemed to have contracted for or be entitled to receive, collect, or apply as interest on this Bond (whether termed interest herein or deemed to be interest by judicial determination or operation of law) any amount in excess of the Maximum Rate, and, in the event that the Holder ever receives, collects, or applies as interest any such excess, such amount which would be excessive interest shall be applied to the reduction of the unpaid principal balance of this Bond, and, if the principal balance of this Bond is paid in full, then any remaining excess shall forthwith be paid to the Company. In determining whether or not the interest paid or payable under any specific contingency exceeds the highest Maximum Rate, the Company and the Holder shall, to the maximum extent permitted under applicable law (i) characterize any non-principal payment (other than payments which are expressly designated as interest payments hereunder) as an expense or fee rather than as interest; (ii) exclude voluntary prepayments and the effect thereof; and (iii) spread the total amount of interest throughout the entire contemplated term of this Bond so that the interest rate is uniform throughout such term; provided that if this Bond is converted and paid or otherwise paid and performed in full prior to the Maturity Date, and if the interest received for the actual period this Bond remains outstanding exceeds the Maximum Rate, if any, then the Holder shall refund to the Company the amount of such excess.

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9.          Notices. All notices, requests and demands to or upon the Company or the Holder pursuant to this Bond shall be effective and shall be deemed to have been duly given or made, unless otherwise expressly provided herein, when deposited in the mail, postage prepaid, or when made by hand delivery or recognized commercial overnight delivery service and addressed:

If to the Company:	Elkhorn Goldfields, Inc.
	PO Box 370657
	Denver, Colorado 80212
	Attention: Robert Trenaman/Eric Altman
If to the Holder:

Addresses to which notices shall be sent may be changed by providing each party with notice of the change in address in the method provided above.

10.         Amendment. This Bond may be amended or modified only by written instrument duly executed by the Company and the Holder.

11.         Costs. If this Bond is placed in the hands of an attorney for collection, or if it is collected through any legal proceeding at law or in equity, or in bankruptcy, receivership, or other court proceedings, then the Company agrees to pay all costs of collection, including without limitation court costs and reasonable attorneys’ fees.

12.         Successors and Assigns. This Bond shall inure to the benefit of the Holder and its successors and assigns; provided that the Holder may not sell, transfer, convey, assign or negotiate this Bond to any Person unless this Bond has been registered with the SEC under the Securities Act or the Holder has established to the satisfaction of the Company that such transfer is exempt from such registration requirements.

13.         Governing Law. THIS BOND SHALL BE GOVERNED BY AND CONSTRUED, INTERPRETED, AND APPLIED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MONTANA.

[Remainder of Page Intentionally Left Blank]

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EXECUTED AND DELIVERED this           of July, 2010.

ELKHORN GOLDFIELDS, INC
By:	By: ERIC ALTMAN
	its Chief Financial Officer
	By:

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ASSIGNMENT

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto (print or typewrite name, address and zip code of transferee):

(Social Security or other identifying number:           )

this Bond and all rights hereunder and hereby irrevocably constitutes and appoints                                   attorney to transfer this Bond on the books kept for registration hereof, with full power of substitution in the premises.

Dated:

NOTICE:      The signature on this Assignment must correspond with the name of the registered owner as it appears on the face of this Bond in every particular and must be guaranteed in a manner satisfactory to the Company.

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EXHIBIT A

Form of Warrant

EX-10.1

CANCELLATION AGREEMENT

CANCELLATION AGREEMENT, dated April 6, 2012 (this “Agreement”), by and between, Eastern Resources, Inc., a Delaware corporation (the “Company”), and Dylan Hundley (the “Cancelling Party”).

BACKGROUND

WHEREAS, in connection with a proposed merger transaction (the “Merger”) between the Company and an unrelated third party, Buzz Kill, Inc. (“Buzz Kill”), a wholly owned subsidiary of ESRI, is entering into a Split-Off Agreement with ESRI pursuant to which certain shareholders of ESRI (the “Shareholders”) will exchange their shares of common stock of ESRI for shares of common stock of Buzz Kill and Buzz Kill will be split off from ESRI with, as a result, the Shareholders becoming the owners of Buzz Kill (the “Split-Off”), the Split-Off being a condition precedent to the consummation of the Merger;

WHEREAS, the Cancelling party is the record and beneficial owner of 5,751,000 shares of the common stock of ESRI (the “Shares”); and

WHEREAS, in an effort to enhance ESRI’s ability complete the Split-Off and the Merger and to induce certain of the Shareholders to agree to the Split-Off, the Cancelling Party desires to have cancelled and ESRI desires to cancel the Shares.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual promises herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1.            Cancellation of Shares. The Cancelling Party has delivered to the Company for cancellation stock certificates representing the Shares along with duly executed medallion guaranteed stock powers covering the Shares (or such other documents acceptable to the Company’s transfer agent) and hereby irrevocably instructs the Company and the Company’s transfer agent to cancel the Shares such that the Shares will no longer be outstanding on the stock ledger of the Company and such that the Cancelling Party shall no longer have any interest in the Shares whatsoever. The Company shall promptly deliver to the Company’s transfer agent irrevocable instructions providing for the cancellation of the Shares.

2.            Representations by the Cancelling Party.

(a)             The Cancelling Party owns the Shares, of record and beneficially, free and clear of all liens, claims, charges, security interests, and encumbrances of any kind whatsoever. The Cancelling Party has sole control over the Shares or sole discretionary authority over any account in which they are held. Except for this Agreement, no person has any option or right to purchase or otherwise acquire the Shares, whether by contract of sale or otherwise, nor is there a “short position” as to the Shares.

(b)             The Cancelling Party has full right, power and authority to execute, deliver and perform this Agreement and to carry out the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Cancelling Party and constitutes a valid, binding obligation of the Cancelling Party, enforceable against it in accordance with its terms (except as such enforceability may be limited by laws affecting creditor's rights generally).

3.             Further Assurances. Each party to this Agreement will use his or its best efforts to take all action and to do all things necessary, proper, or advisable in order to consummate and make effective the transactions contemplated by this Agreement (including the execution and delivery of such other documents and agreements as may be necessary to effectuate the cancellation of the Shares).

4.             Amendment and Waiver. Any term, covenant, agreement or condition of this Agreement may be amended, with the written consent of the Company and the Cancelling Party, or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), by one or more substantially concurrent written instruments signed by the Company and the Cancelling Party.

5.             Survival of Agreements, Representations and Warranties, etc. All representations and warranties contained herein shall survive the execution and delivery of this Agreement.

6.             Successors and Assigns. This Agreement shall bind and inure to the benefit of and be enforceable by the Company and the Cancelling Party, and their respective successors and assigns.

7.             Governing Law. This Agreement (including the validity thereof and the rights and obligations of the parties hereunder and thereunder) and all amendments and supplements hereof and thereof and all waivers and consents hereunder and thereunder shall be construed in accordance with and governed by the internal laws of the State of New York without regard to its conflict of laws rules.

8.             Miscellaneous. This Agreement embodies the entire agreement and understanding between the parties hereto and supersedes all prior agreements and understandings relating to the subject matter hereof. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. This Agreement may be executed in any number of counterparts and by the parties hereto on separate counterparts but all such counterparts shall together constitute but one and the same instrument. This Agreement may be reproduced by any electronic, photographic, photostatic, magnetic, microfilm, microfiche, microcard, miniature photographic, facsimile or other similar process and the original thereof may be destroyed. The parties agree that any such reproduction shall, to the extent permitted by law, be as admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not the reproduction was made in the regular course of business) and that any enlargement, facsimile or further reproduction shall likewise be admissible in evidence. Facsimile execution and delivery of this Agreement is legal, valid and binding execution and delivery for all purposes.

[Signature Page Follows]

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

EASTERN RESOURCES, INC.
By:	/s/ Thomas H. Hanna, Jr.
Name:	Thomas H. Hanna, Jr.
Title:	Chief Executive Officer

CANCELLING PARTY

/s/ Dylan Hundley

Name: Dylan Hundley

EX-10.2

NOTE CANCELLATION

AND

GENERAL RELEASE

TO ALL WHO THESE PRESENTS SHALL COME OR MAY CONCERN, know that the undersigned, ______________________________ (the “Releasor”), in consideration of good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, from EASTERN RESOURCES, INC., a Delaware corporation (the “Releasee”), releases and discharges the Releasee, the Releasee’s servants, agents, principals, stockholders, affiliates, employees, subsidiaries, parents, heirs, executors, administrators, successors and assigns and the Releasee’s attorneys, together with their present, future and former officers, directors, shareholders, partners, members, employees, agents, attorneys, parents, subsidiaries, affiliates or other representatives, heirs, executors, administrators, successors and assigns (collectively, the “Released Parties”) from all actions, causes of action, suits, debts, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, any and all claims and demands whatsoever, in law, admiralty or equity, which against the Releasee or any of the other Released Parties, the Releasor and the Releasor’s officers, directors, employees, members, servants, agents, affiliates, subsidiaries, parents, partners, heirs, executors, administrators, successors and assigns ever had, now have or hereafter can, shall or may have for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date of this Release including, but not limited to, the promissory note of the Releasee in favor of the Releasor dated [__________], in the principal amount of $[__________], which promissory note hereby is cancelled without obligation of Releasee to make any payments of principal or interest thereon.

The Releasor expressly warrants and covenants that it will not bring suit, claim or cause of action against any of the Released Parties in connection with any and all past, present and future claims, demands, obligations, causes of action or rights which the Releasor now has or which may hereinafter accrue.

This Note Cancellation and General Release is not being signed under any duress, threat, undue influence and is being executed after adequate consultation with counsel of Releasor’s choosing.

This Note Cancellation and General Release cannot be modified orally and can only be modified through a written document signed by both parties.

This Note Cancellation and General Release shall be governed by, and construed in accordance with, the laws of the State of New York without giving effect to conflict of laws principles.

This Note Cancellation and General Release may be executed in counterparts and each of such counterparts shall be deemed to be an original, and such counterparts shall together constitute but one and the same instrument and shall bind all parties signing such counterpart.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties have executed this Note Cancellation and General Release on the ____ day of _______________, 2012.

RELEASOR
By:
	Signature
Name:
Title:
Address:

EX-10.6

SPLIT-OFF AGREEMENT

This SPLIT-OFF AGREEMENT, dated as of April 6, 2012 (this “Agreement”), is entered into by and among Eastern Resources, Inc., a Delaware corporation (“ESRI”), Buzz Kill, Inc., a New York corporation (“Buzz Kill”), and each of the persons named on Exhibit A attached hereto (“Buyers”).

RECITALS:

WHEREAS, ESRI is the owner of all of the issued and outstanding capital stock of Buzz Kill; and since the organization of Buzz Kill, ESRI has conducted all of its operations through Buzz Kill and has no business or operations other than those it conducts through Buzz Kill;

WHEREAS, contemporaneously with the execution of this Agreement, ESRI, Elkhorn Goldfields, LLC, a Delaware limited liability company (“Elkhorn”), Montana Tunnels Mining, Inc., A Delaware corporation (“MTMI”), Elkhorn Goldfields, Inc., a Montana Corporation (“EGI”) and two newly-formed wholly-owned subsidiaries of ESRI, MTMI Acquisition Corp. (“MTMI Acquisition Subsidiary”) and EGI Acquisition Corp. (“EGI Acquisition Subsidiary”), will enter into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) pursuant to which MTMI Acquisition Subsidiary will merge with and into MTMI and EGI Acquisition Subsidiary will merge with and into EGI with MTI and EGI remaining as the surviving entities and wholly owned subsidiaries of ESRI (the “Merger”); and the equity holders of MTMI and EGI will receive securities of ESRI in exchange for their equity interests in MTI and EGI;

WHEREAS, the execution and delivery of this Agreement is required by Elkhorn as a condition to its execution of the Merger Agreement and the consummation of the purchase and sale transactions contemplated by this Agreement is also a condition to the completion of the Merger pursuant to the Merger Agreement, and ESRI has represented to Elkhorn in the Merger Agreement that the transactions contemplated by this Agreement will be consummated in conjunction with the closing of the Merger, and Elkhorn relied on such representation in entering into the Merger Agreement;

WHEREAS, Buyers desire to purchase the Shares (as defined in Section 1.1) from ESRI, on the terms and subject to the conditions specified in this Agreement; and

WHEREAS, ESRI desires to sell and transfer the Shares to Buyers, on the terms and subject to the conditions specified in this Agreement;

NOW, THEREFORE, in consideration of the premises and the covenants, promises and agreements herein set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending legally to be bound, agree as follows:

I.           PURCHASE AND SALE OF STOCK.

1.1           Purchased Shares. Subject to the terms and conditions provided below, ESRI shall sell and transfer to each of the Buyers and each of the Buyers shall purchase from ESRI, on the Closing Date (as defined in Section 2.1), that number of issued and outstanding shares of common stock of Buzz Kill (the “Shares”) as set forth in Exhibit A attached hereto, which in the aggregate totals 6,185,000 shares of common stock of Buzz Kill.

1.2           Purchase Price. The purchase price for the Shares shall be the transfer and delivery by each Buyer to ESRI of the number of shares of common stock of ESRI that such Buyer owns (the “Purchase Price Securities”), as set forth in Exhibit A attached hereto, deliverable as provided in Section 2.3, which aggregate to 5,798,000 shares of common stock of ESRI.

II.          CLOSING.

2.1           Closing. The closing of the transactions contemplated in this Agreement (the “Closing”) shall take place as soon as practicable following the execution of this Agreement. The date on which the Closing occurs shall be referred to herein as the “Closing Date.”

2.2           Transfer of Shares. At the Closing, ESRI shall deliver to each Buyer certificates representing the Shares purchased by such Buyer, duly registered in the name of such Buyer or as directed by such Buyer, which delivery shall vest such Buyer with good and marketable title to such Shares, free and clear of all liens and encumbrances.

2.3           Delivery of Purchase Price Securities. At the Closing, each Buyer shall deliver to ESRI a certificate or certificates representing such Buyer’s Purchase Price Securities duly endorsed to ESRI with signatures guaranteed by a member of the “Medallion” program, which delivery shall vest ESRI with good and marketable title to the Purchase Price Securities, free and clear of all liens and encumbrances.

2.4           Transfer of Records. (a) On or before the Closing, ESRI shall transfer to Buzz Kill all existing corporate books and records in ESRI’s possession relating to Buzz Kill and its business, including but not limited to all agreements, litigation files, real estate files, personnel files and filings with governmental agencies; provided, however, when any such documents relate to both ESRI and Buzz Kill, only copies of such documents need be furnished.

(b) On or before the Closing, Buyers and Buzz Kill shall transfer to ESRI all existing corporate books and records in the possession of Buyers or Buzz Kill relating to ESRI, including but not limited to all corporate minute books, stock ledgers, certificates and corporate seals of ESRI, correspondence with ESRI’s stockholders and all agreements, litigation files, tax returns and tax files, real property files, personnel files and filings and correspondence with governmental agencies (including but not limited to the SEC); provided, however, when any such documents relate to both ESRI and Buzz Kill or its business, only copies of such documents need be furnished.

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III.         BUYERS’ REPRESENTATIONS AND WARRANTIES. Each Buyer represents and warrants to ESRI that:

3.1           Capacity and Enforceability. Buyer has the legal capacity to execute and deliver this Agreement and the documents to be executed and delivered by Buyer at the Closing pursuant to the transactions contemplated hereby. This Agreement and all such documents constitute valid and binding agreements of Buyer, enforceable in accordance with their terms.

3.2           Compliance. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby by Buyer will result in the breach of any term or provision of, or constitute a default under, or violate any agreement, indenture, instrument, order, law or regulation to which Buyer is a party or by which Buyer is bound.

3.3           Purchase for Investment. Buyer is financially able to bear the economic risks of acquiring the Shares and the other transactions contemplated hereby, and has no need for liquidity in his investment in the Shares. Buyer has such knowledge and experience in financial and business matters in general, and with respect to businesses of a nature similar to the business of Buzz Kill (after giving effect to the Assignment), so as to be capable of evaluating the merits and risks of, and making an informed business decision with regard to, the acquisition of the Shares and the other transactions contemplated hereby. Buyer is an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities Act. Buyer is acquiring the Shares solely for his own account and not with a view to or for resale in connection with any distribution or public offering thereof, within the meaning of any applicable securities laws and regulations, unless such distribution or offering is registered under the Securities Act of 1933, as amended (the “Securities Act”), or an exemption from such registration is available. Buyer has (i) received all the information he has deemed necessary to make an informed decision with respect to the acquisition of the Shares and the other transactions contemplated hereby; (ii) had an opportunity to make such investigation as he has desired pertaining to Buzz Kill and the acquisition of an interest therein and the other transactions contemplated hereby, and to verify the information which is, and has been, made available to him; and (iii) had the opportunity to ask questions of ESRI concerning Buzz Kill. Buyer acknowledges that he has adequate knowledge of the business, operations and financial affairs of Buzz Kill. Buyer has received no public solicitation or advertisement with respect to the offer or sale of the Shares. Buyer realizes that the Shares are “restricted securities” as that term is defined in Rule 144 promulgated by the Securities and Exchange Commission under the Securities Act, the resale of the Shares is restricted by federal and state securities laws and, accordingly, the Shares must be held indefinitely unless their resale is subsequently registered under the Securities Act or an exemption from such registration is available for their resale. Buyer understands that any resale of the Shares by him must be registered under the Securities Act (and any applicable state securities law) or be effected in circumstances that, in the opinion of counsel for Buzz Kill at the time, create an exemption or otherwise do not require registration under the Securities Act (or applicable state securities laws). Buyer acknowledges and consents that certificates now or hereafter issued for the Shares will bear a legend substantially as follows:

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THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS (THE “STATE ACTS”), HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND QUALIFICATION UNDER THE STATE ACTS OR PURSUANT TO EXEMPTIONS FROM SUCH REGISTRATION OR QUALIFICATION REQUIREMENTS (INCLUDING, IN THE CASE OF THE SECURITIES ACT, THE EXEMPTIONS AFFORDED BY SECTION 4(1) OF THE SECURITIES ACT AND RULE 144 THEREUNDER). AS A PRECONDITION TO ANY SUCH TRANSFER, THE ISSUER OF THESE SECURITIES SHALL BE FURNISHED WITH AN OPINION OF COUNSEL OPINING AS TO THE AVAILABILITY OF EXEMPTIONS FROM SUCH REGISTRATION AND QUALIFICATION AND/OR SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY THERETO THAT ANY SUCH TRANSFER WILL NOT VIOLATE THE SECURITIES LAWS.

Buyer understands that the Shares are being sold to him pursuant to the exemption from registration contained in Section 4(1) of the Securities Act and that ESRI is relying upon the representations made herein as one of the bases for claiming the Section 4(1) exemption.

3.4           Liabilities. Following the Closing, ESRI will have no liability for any debts, liabilities or obligations (whether incurred before or after the Closing) of Buzz Kill or its business or activities (whether conducted before or after the Closing), and there are no outstanding guaranties, performance or payment bonds, letters of credit or other contingent contractual obligations that have been undertaken by ESRI directly or indirectly in relation to Buzz Kill or its business and that may survive the Closing.

3.5           Title to Purchase Price Securities. Each Buyer is the sole record and beneficial owner of his Purchase Price Securities, and such Purchase Price Securities constitute all securities of ESRI owned by such Buyer. At Closing, Buyer will have good and marketable title to his Purchase Price Securities, which Purchase Price Securities are, and at the Closing will be, free and clear of all options, warrants, pledges, claims, liens and encumbrances, and any restrictions or limitations prohibiting or restricting transfer to ESRI, except for restrictions on transfer as contemplated by applicable securities laws.

IV.         ESRI’S REPRESENTATIONS AND WARRANTIES. ESRI represents and warrants to Buyers and Buzz Kill that:

4.1           Organization and Good Standing. ESRI is a corporation duly incorporated, validly existing, and in good standing under the laws of their respective states of incorporation.

4.2           Authority and Enforceability. The execution and delivery of this Agreement and the documents to be executed and delivered at the Closing pursuant to the transactions contemplated hereby, and performance in accordance with the terms hereof and thereof, have been duly authorized by ESRI and all such documents constitute valid and binding agreements of ESRI enforceable in accordance with their terms.

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4.3           Title to Shares. ESRI is the sole record and beneficial owner of the Shares. At Closing, ESRI will have good and marketable title to the Shares, which Shares are, and at the Closing will be, free and clear of all options, warrants, pledges, claims, liens and encumbrances, and any restrictions or limitations prohibiting or restricting transfer to Buyers, except for restrictions on transfer as contemplated by Section 3.3 above. The Shares are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities of Buzz Kill and constitute all of the issued and outstanding shares of capital stock of Buzz Kill.

V.          BUZZ KILL’S REPRESENTATIONS AND WARRANTIES. Buzz Kill represents and warrants to ESRI and Buyers that:

5.1           Organization and Good Standing. Buzz Kill is a corporation duly incorporated, validly existing, and in good standing under the laws of their respective states of incorporation.

5.2           Authority and Enforceability. The execution and delivery of this Agreement and the documents to be executed and delivered at the Closing pursuant to the transactions contemplated hereby, and performance in accordance with the terms hereof and thereof, have been duly authorized by Buzz Kill and all such documents constitute valid and binding agreements of Buzz Kill enforceable in accordance with their terms.

5.3           Representations in Merger Agreement. Buzz Kill represents and warrants that all of the representations and warranties by ESRI, insofar as they relate to Buzz Kill, contained in the Merger Agreement are true and correct.

VI.        OBLIGATIONS OF BUYERS PENDING CLOSING. Each Buyer covenants and agrees that between the date hereof and the Closing:

6.1           Not Impair Performance. Buyer shall not take any intentional action that would cause the conditions upon the obligations of the parties hereto to effect the transactions contemplated hereby not to be fulfilled, including, without limitation, taking or causing to be taken any action that would cause the representations and warranties made by any party herein not to be true, correct and accurate as of the Closing, or in any way impairing the ability of ESRI to satisfy its obligations as provided in Article VII.

6.2           Assist Performance. Buyer shall exercise its reasonable best efforts to cause to be fulfilled those conditions precedent to ESRI’s obligations to consummate the transactions contemplated hereby which are dependent upon actions of Buyer and to make and/or obtain any necessary filings and consents in order to consummate the sale transaction contemplated by this Agreement.

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VII.       OBLIGATIONS OF ESRI PENDING CLOSING. ESRI covenants and agrees that between the date hereof and the Closing:

7.1           Business as Usual. Buzz Kill shall operate and ESRI shall cause Buzz Kill to operate in accordance with past practices and shall use best efforts to preserve its goodwill and the goodwill of its employees, customers and others having business dealings with Buzz Kill. Without limiting the generality of the foregoing, from the date of this Agreement until the Closing Date, Buzz Kill shall (a) make all normal and customary repairs to its equipment, assets and facilities, (b) keep in force all insurance, if any (c) preserve in full force and effect all material franchises, licenses, contracts and real property interests and comply in all material respects with all laws and regulations, (d) collect all accounts receivable and pay all trade creditors in the ordinary course of business at intervals historically experienced, and (e) preserve and maintain Buzz Kill’s assets in their current operating condition and repair, ordinary wear and tear excepted. From the date of this Agreement until the Closing Date, Buzz Kill shall not (i) amend, terminate or surrender any material franchise, license, contract or real property interest, or (ii) sell or dispose of any of its assets except in the ordinary course of business. Neither Buzz Kill nor Buyers shall take or omit to take any action that results in ESRI incurring any liability or obligation prior to or in connection with the Closing.

7.2           Not Impair Performance. ESRI shall not take any intentional action that would cause the conditions upon the obligations of the parties hereto to effect the transactions contemplated hereby not to be fulfilled, including, without limitation, taking or causing to be taken any action which would cause the representations and warranties made by any party herein not to be materially true, correct and accurate as of the Closing, or in any way impairing the ability of Buyers to satisfy his obligations as provided in Article VI.

7.3           Assist Performance. ESRI shall exercise its reasonable best efforts to cause to be fulfilled those conditions precedent to Buyers’ obligations to consummate the transactions contemplated hereby which are dependent upon the actions of ESRI and to work with Buyers to make and/or obtain any necessary filings and consents. ESRI shall cause Buzz Kill to comply with its obligations under this Agreement.

VIII.       ESRI’S AND BUZZ KILL’S CONDITIONS PRECEDENT TO CLOSING. The obligations of ESRI and Buzz Kill to close the transactions contemplated by this Agreement are subject to the satisfaction at or prior to the Closing of each of the following conditions precedent (any or all of which may be waived by ESRI in writing):

8.1           Representations and Warranties; Performance. All representations and warranties of Buyers contained in this Agreement shall have been true and correct, in all material respects, when made and shall be true and correct, in all material respects, at and as of the Closing, with the same effect as though such representations and warranties were made at and as of the Closing. Buyers and Buzz Kill shall have performed and complied with all covenants and agreements and satisfied all conditions, in all material respects, required by this Agreement to be performed or complied with or satisfied by Buyers or Buzz Kill at or prior to the Closing.

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8.2           Additional Documents. Each Buyer shall deliver or cause to be delivered such additional documents as may be necessary in connection with the consummation of the transactions contemplated by this Agreement and the performance of his obligations hereunder.

8.3           Release by Buzz Kill. At the Closing, Buzz Kill shall execute and deliver to ESRI a general release which in substance and effect releases ESRI from any and all liabilities and obligations that ESRI may owe to Buzz Kill in any capacity, and from any and all claims that Buzz Kill may have against ESRI or its officers, directors, stockholders, employees and agents (other than those arising pursuant to this Agreement or any document delivered in connection with this Agreement).

IX.         BUYERS’ CONDITIONS PRECEDENT TO CLOSING. The obligation of each Buyer to close the transactions contemplated by this Agreement is subject to the satisfaction at or prior to the Closing of each of the following conditions precedent (any and all of which may be waived by such Buyer in writing):

9.1           Representations and Warranties; Performance. All representations and warranties of ESRI and Buzz Kill contained in this Agreement shall have been true and correct, in all material respects, when made and shall be true and correct, in all material respects, at and as of the Closing with the same effect as though such representations and warranties were made at and as of the Closing. ESRI and Buzz Kill shall have performed and complied with all covenants and agreements and satisfied all conditions, in all material respects, required by this Agreement to be performed or complied with or satisfied by them at or prior to the Closing.

9.2           Additional Documents. Each of ESRI and Buzz Kill shall deliver or cause to be delivered such additional documents as may be necessary in connection with the consummation of the transactions contemplated by this Agreement and the performance of his obligations hereunder.

9.3           Termination of Investment Agreement. At the closing, ESRI and Buzz Kill shall execute a termination agreement terminating that certain Investment Agreement dated as of May 1, 2007 by and between ERI and Buzz Kill (the “Investment Agreement”).

9.4           Release by ESRI. At the Closing, ESRI shall execute and deliver to Buzz Kill a general release which in substance and effect releases Buzz Kill from any and all liabilities and obligations that Buzz Kill may owe to ESRI in any capacity, and from any and all claims that ESRI may have against Buzz Kill or its officers, directors, stockholders, employees and agents (including, but not limited to, claims arising out of the Investment Agreement, but other than those arising pursuant to this Agreement or any document delivered in connection with this Agreement).

X.          OTHER AGREEMENTS.

10.1        Expenses. Except as otherwise provided herein, each party hereto shall bear its own expenses in connection with this Agreement and with the performance of its obligations hereunder.

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10.2        Confidentiality. Buyers shall not make any public announcements concerning this transaction without the prior written agreement of ESRI, other than as may be required by applicable law or judicial process. If for any reason the transactions contemplated hereby are not consummated, then Buyers shall return any information received by Buyers from ESRI or Buzz Kill, and Buyer shall cause all confidential information obtained by Buyers concerning Buzz Kill and its business to be treated as such.

10.3        Brokers’ Fees. In connection with the transaction specifically contemplated by this Agreement, no party to this Agreement has employed the services of a broker and each agrees to indemnify the other against all claims of any third parties for fees and commissions of any brokers claiming a fee or commission related to the transactions contemplated hereby.

10.4        Access to Information Post-Closing; Cooperation.

(a)          Following the Closing, Buyers and Buzz Kill shall afford to ESRI and its authorized accountants, counsel and other designated representatives, reasonable access (and including using reasonable efforts to give access to persons or firms possessing information) and duplicating rights during normal business hours to allow records, books, contracts, instruments, computer data and other data and information (collectively, “Information”) within the possession or control of Buyers or Buzz Kill insofar as such access is reasonably required by ESRI. Information may be requested under this Section 10.4(a) for, without limitation, audit, accounting, claims, litigation and tax purposes, as well as for purposes of fulfilling disclosure and reporting obligations and performing this Agreement and the transactions contemplated hereby. No files, books or records of Buzz Kill existing at the Closing Date shall be destroyed by Buyers or Buzz Kill after Closing but prior to the expiration of any period during which such files, books or records are required to be maintained and preserved by applicable law without giving ESRI at least 30 days’ prior written notice, during which time ESRI shall have the right to examine and to remove any such files, books and records prior to their destruction.

(b)          Following the Closing, ESRI shall afford to Buzz Kill and its authorized accountants, counsel and other designated representatives reasonable access (including using reasonable efforts to give access to persons or firms possessing information) duplicating rights during normal business hours to Information within ESRI’s possession or control relating to the business of Buzz Kill. Information may be requested under this Section 10.4(b) for, without limitation, audit, accounting, claims, litigation and tax purposes as well as for purposes of fulfilling disclosure and reporting obligations and for performing this Agreement and the transactions contemplated hereby. No files, books or records of Buzz Kill existing at the Closing Date shall be destroyed by ESRI after Closing but prior to the expiration of any period during which such files, books or records are required to be maintained and preserved by applicable law without giving Buyers at least 30 days prior written notice, during which time Buyers shall have the right to examine and to remove any such files, books and records prior to their destruction.

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(c)          At all times following the Closing, ESRI, Buyers and Buzz Kill shall use their reasonable efforts to make available to the other party on written request, the current and former officers, directors, employees and agents of ESRI or Buzz Kill for any of the purposes set forth in Section 10.4(a) or (b) above or as witnesses to the extent that such persons may reasonably be required in connection with any legal, administrative or other proceedings in which ESRI or Buzz Kill may from time to time be involved.

(d)          The party to whom any Information or witnesses are provided under this Section 10.4 shall reimburse the provider thereof for all out-of-pocket expenses actually and reasonably incurred in providing such Information or witnesses.

(e)          ESRI, Buyers, Buzz Kill and their respective employees and agents shall each hold in strict confidence all Information concerning the other party in their possession or furnished by the other or the other’s representative pursuant to this Agreement with the same degree of care as such party utilizes as to such party’s own confidential information (except to the extent that such Information is (i) in the public domain through no fault of such party or (ii) later lawfully acquired from any other source by such party), and each party shall not release or disclose such Information to any other person, except such party’s auditors, attorneys, financial advisors, bankers, other consultants and advisors or persons with whom such party has a valid obligation to disclose such Information, unless compelled to disclose such Information by judicial or administrative process or, as advised by its counsel, by other requirements of law.

(f)          ESRI, Buyers and Buzz Kill shall each use their best efforts to forward promptly to the other party all notices, claims, correspondence and other materials which are received and determined to pertain to the other party.

10.5        Guarantees, Surety Bonds and Letter of Credit Obligations. In the event that ESRI is obligated for any debts, obligations or liabilities of Buzz Kill by virtue of any outstanding guarantee, performance or surety bond or letter of credit provided or arranged by ESRI on or prior to the Closing Date, Buyers and Buzz Kill shall use their best efforts to cause to be issued replacements of such bonds, letters of credit and guarantees and to obtain any amendments, novations, releases and approvals necessary to release and discharge fully ESRI from any liability thereunder following the Closing. Buyers and Buzz Kill, jointly and severally, shall be responsible for, and shall indemnify, hold harmless and defend ESRI from and against, any costs or losses incurred by ESRI arising from such bonds, letters of credits and guarantees and any liabilities arising therefrom and shall reimburse ESRI for any payments that ESRI may be required to pay pursuant to enforcement of its obligations relating to such bonds, letters of credit and guarantees.

10.6        Filings and Consents. Each Buyer, at its risk, shall determine what, if any, filings and consents must be made and/or obtained prior to Closing to consummate the purchase and sale of the Shares. Each Buyer shall indemnify the ESRI Indemnified Parties (as defined in Section 12.1 below) against any Losses (as defined in Section 12.1 below) incurred by such ESRI Indemnified Parties by virtue of the failure to make and/or obtain any such filings or consents. Recognizing that the failure to make and/or obtain any filings or consents may cause ESRI to incur Losses or otherwise adversely affect ESRI, Buyers and Buzz Kill confirm that the provisions of this Section 10.6 will not limit ESRI’s right to treat such failure as the failure of a condition precedent to ESRI’s obligation to close pursuant to Article VIII above.

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10.7        Insurance. Each Buyer acknowledges that on the Closing Date, effective as of the Closing, any insurance coverage and bonds provided by ESRI for Buzz Kill, and all certificates of insurance evidencing that BUZZ KILL maintains any required insurance by virtue of insurance provided by ESRI, will terminate with respect to any insured damages resulting from matters occurring subsequent to Closing.

10.8        Agreements Regarding Taxes.

(a)          Tax Sharing Agreements. Any tax sharing agreement between ESRI and Buzz Kill is terminated as of the Closing Date and will have no further effect for any taxable year (whether the current year, a future year or a past year).

(b)          Returns for Periods Through the Closing Date. ESRI will include the income and loss of Buzz Kill (including any deferred income triggered into income by Reg. §1.1502-13 and any excess loss accounts taken into income under Reg. §1.1502-19) on ESRI’s consolidated federal income tax returns for all periods through the Closing Date and pay any federal income taxes attributable to such income. ESRI and Buzz Kill agree to allocate income, gain, loss, deductions and credits between the period up to Closing (the “Pre-Closing Period”) and the period after Closing (the “Post-Closing Period”) based on a closing of the books of Buzz Kill, and both ESRI and Buzz Kill agree not to make an election under Reg. §1.1502-76(b)(2)(ii) to ratably allocate the year’s items of income, gain, loss, deduction and credit. ESRI, Buzz Kill and Buyers agree to report all transactions not in the ordinary course of business occurring on the Closing Date after Buyers’ purchase of the Shares on Buzz Kill’s tax returns to the extent permitted by Reg. §1.1502-76(b)(1)(ii)(B). Each Buyer agrees to indemnify ESRI for any additional tax owed by ESRI (including tax owned by ESRI due to this indemnification payment) resulting from any transaction engaged in by Buzz Kill during the Pre-Closing Period or on the Closing Date after such Buyer’s purchase of the Shares. Buzz Kill will furnish tax information to ESRI for inclusion in ESRI’s consolidated federal income tax return for the period which includes the Closing Date in accordance with Buzz Kill’s past custom and practice.

(c)          Audits. ESRI will allow Buzz Kill and its counsel to participate at Buzz Kill’s expense in any audits of ESRI’s consolidated federal income tax returns to the extent that such audit raises issues that relate to and increase the tax liability of Buzz Kill. ESRI shall have the absolute right, in its sole discretion, to engage professionals and direct the representation of ESRI in connection with any such audit and the resolution thereof, without receiving the consent of Buyers or Buzz Kill or any other party acting on behalf of Buyers or Buzz Kill, provided that ESRI will not settle any such audit in a manner which would materially adversely affect Buzz Kill after the Closing Date unless such settlement would be reasonable in the case of a person that owned Buzz Kill both before and after the Closing Date, or unless the Buzz Kill consents, such consent not to be unreasonably withheld. In the event that after Closing any tax authority informs Buyers or Buzz Kill of any notice of proposed audit, claim, assessment or other dispute concerning an amount of taxes which pertain to ESRI, or to Buzz Kill during the period prior to Closing, Buyers or Buzz Kill must promptly notify ESRI of the same within 15 calendar days of the date of the notice from the tax authority. In the event Buyers or Buzz Kill do not notify ESRI within such 15 day period, Buyers and Buzz Kill, jointly and severally, will indemnify ESRI for any incremental interest, penalty or other assessments resulting from the delay in giving notice. To the extent of any conflict or inconsistency, the provisions of this Section 10.8 shall control over the provisions of Section 12.3 below.

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(d)          Cooperation on Tax Matters. Buyers, ESRI and Buzz Kill shall cooperate fully, as and to the extent reasonably requested by any party, in connection with the filing of tax returns pursuant to this Section and any audit, litigation or other proceeding with respect to taxes. Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Buzz Kill shall (i) retain all books and records with respect to tax matters pertinent to Buzz Kill relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by ESRI, any extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into with any taxing authority, and (ii) give ESRI reasonable written notice prior to transferring, destroying or discarding any such books and records and, if ESRI so requests, Buyers agree to cause Buzz Kill to allow ESRI to take possession of such books and records.

10.9         ERISA. Effective as of the Closing Date, Buzz Kill shall terminate its participation in, and withdraw from, any employee benefit plans sponsored by ESRI, and ESRI and Buyers shall cooperate fully in such termination and withdrawal. Without limitation, Buzz Kill shall be solely responsible for (i) all liabilities under those employee benefit plans notwithstanding any status as an employee benefit plan sponsored by ESRI, and (ii) all liabilities for the payment of vacation pay, severance benefits, and similar obligations, including, without limitation, amounts which are accrued but unpaid as of the Closing Date with respect thereto. Buyers and Buzz Kill acknowledge that Buzz Kill is solely responsible for providing continuation health coverage, as required under the Consolidated Omnibus Reconciliation Act of 1985, as amended (“COBRA”), to each person, if any, participating in an employee benefit plan subject to COBRA with respect to such employee benefit plan as of the Closing Date, including, without limitation, any person whose employment with Buzz Kill is terminated after the Closing Date.

XI.         TERMINATION. This Agreement may be terminated at, or at any time prior to, the Closing by mutual written consent of ESRI, Buzz Kill and Buyers.

If this Agreement is terminated as provided herein, it shall become wholly void and of no further force and effect and there shall be no further liability or obligation on the part of any party except to pay such expenses as are required of such party.

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XII.        INDEMNIFICATION.

12.1         Indemnification by Buzz Kill. Buzz Kill covenants and agrees to indemnify, defend, protect and hold harmless ESRI and Elkhorn, and their present, future and former respective officers, directors, employees, stockholders, members, agents, attorneys, representatives and affiliates (collectively, the “ESRI Indemnified Parties”) at all times from and after the date of this Agreement from and against all losses, liabilities, damages, claims, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys’ fees and expenses of investigation), whether or not involving a third party claim (collectively, “Losses”) and regardless of any negligence of any ESRI Indemnified Party, incurred by any ESRI Indemnified Party as a result of or arising from (i) any breach of the representations and warranties of Buzz Kill set forth herein or in certificates delivered in connection herewith, (ii) any breach or nonfulfillment of any covenant or agreement (including any other agreement of Buzz Kill to indemnify set forth in this Agreement) on the part of Buzz Kill under this Agreement, (iii) any debt, liability or obligation of Buzz Kill, (iv) the conduct and operations, whether before or after Closing, of Buzz Kill, (v) claims asserted, whether before or after Closing, against Buzz Kill, or (vi) any federal or state income tax payable by ESRI and attributable to the business or operations of Buzz Kill or the transactions contemplated by this Agreement.

12.2         Indemnification by ESRI. ESRI covenants and agrees to indemnify, defend, protect and hold harmless Buzz Kill and each Buyer, and their respective present, future and former officers, directors, employees, stockholders, members, agents, attorneys, representatives and affiliates (collectively, the “Buyer Indemnified Parties”) at all times from and after the date of this Agreement from and against all Losses and regardless of any negligence of any Buyer Indemnified Party, incurred by any Buyer Indemnified Party as a result of or arising from (i) any breach of the representations and warranties of ESRI set forth herein or in certificates delivered in connection herewith, (ii) any breach or nonfulfillment of any covenant or agreement (including any other agreement of ESRI to indemnify set forth in this Agreement) on the part of ESRI under this Agreement, (iii) any other debt, liability or obligation of ESRI arising after the Closing, (iv) the conduct and operations, after Closing, of the business of ESRI, (v) claims asserted after Closing and arising after the Closing against ESRI, or (vi) any federal or state income tax payable by ESRI and attributable to the transactions contemplated by this Agreement.

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12.3         Third Party Claims.

(a)          Defense. If any claim or liability (a “Third-Party Claim”) should be asserted against any of the ESRI Indemnified Parties or Buyer Indemnified Parties (the “Indemnitee”) by a third party after the Closing for which a party has an indemnification obligation under the terms of Section 12.1 or Section12.2, then the Indemnitee shall notify the party having such indemnification obligation (the “Indemnitor”) within 20 days after the Third-Party Claim is asserted by a third party (said notification being referred to as a “Claim Notice”) and give the Indemnitor a reasonable opportunity to take part in any examination of the books and records of the Indemnitee relating to such Third-Party Claim and to assume the defense of such Third-Party Claim in connection therewith and to conduct any proceedings or negotiations relating thereto and necessary or appropriate to defend the Indemnitee and/or settle the Third-Party Claim. The expenses (including reasonable attorneys’ fees) of all negotiations, proceedings, contests, lawsuits or settlements with respect to any Third-Party Claim shall be borne by the Indemnitor. If the Indemnitor agrees to assume the defense of any Third-Party Claim in writing within 20 days after the Claim Notice of such Third-Party Claim has been delivered, through counsel reasonably satisfactory to Indemnitee, then the Indemnitor shall be entitled to control the conduct of such defense, and any decision to settle such Third-Party Claim, and shall be responsible for any expenses of the Indemnitee in connection with the defense of such Third-Party Claim so long as the Indemnitor continues such defense until the final resolution of such Third-Party Claim. The Indemnitor shall be responsible for paying all settlements made or judgments entered with respect to any Third-Party Claim the defense of which has been assumed by the Indemnitors. Except as provided on subsection (b) below, both the Indemnitor and the Indemnitee must approve any settlement of a Third-Party Claim. A failure by the Indemnitee to timely give the Claim Notice shall not excuse Indemnitor from any indemnification liability except only to the extent that the Indemnitor is materially and adversely prejudiced by such failure.

(b)          Failure to Defend. If the Indemnitor shall not agree to assume the defense of any Third-Party Claim in writing within 20 days after the Claim Notice of such Third-Party Claim has been delivered, or shall fail to continue such defense until the final resolution of such Third-Party Claim, then the Indemnitee may defend against such Third-Party Claim in such manner as it may deem appropriate and the Indemnitee may settle such Third-Party Claim, in its sole discretion, on such terms as it may deem appropriate. The Indemnitor shall promptly reimburse the Indemnitee for the amount of all settlement payments and expenses, legal and otherwise, incurred by the Indemnitee in connection with the defense or settlement of such Third-Party Claim. If no settlement of such Third-Party Claim is made, then the Indemnitor shall satisfy any judgment rendered with respect to such Third-Party Claim before the Indemnitee is required to do so, and pay all expenses, legal or otherwise, incurred by the Indemnitee in the defense against such Third-Party Claim.

12.4         Non-Third-Party Claims. Upon discovery of any claim for which an Indemnitor has an indemnification obligation under the terms of Section 12.1 or Section 12.2 which does not involve a claim by a third party against the Indemnitee, the Indemnitee shall give prompt notice to the Indemnitor of such claim and, in any case, shall give the Indemnitor such notice within 30 days of such discovery. A failure by Indemnitee to timely give the foregoing notice to the indemnitor shall not excuse the Indemnitor from any indemnification liability except to the extent that Buyer is materially and adversely prejudiced by such failure.

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12.5         Survival. Except as otherwise provided in this Section 12.5, all representations and warranties made by ESRI, Buyers and Buzz Kill in connection with this Agreement shall survive the Closing. Anything in this Agreement to the contrary notwithstanding, the liability of all Indemnitors under this Article XII shall terminate on the third (3^rd) anniversary of the Closing Date, except with respect to (a) liability for any item as to which, prior to the third (3^rd) anniversary of the Closing Date, any Indemnitee shall have asserted a Claim in writing, which Claim shall identify its basis with reasonable specificity, in which case the liability for such Claim shall continue until it shall have been finally settled, decided or adjudicated, (b) liability of any party for Losses for which such party has an indemnification obligation, incurred as a result of such party’s breach of any covenant or agreement to be performed by such party after the Closing, (c) liability of an Indemnitor for Losses incurred by a ESRI Indemnified Party or Buyer Indemnified Party (as the case may be) due to breaches of Buyers representations and warranties in Article III of this Agreement or breaches of ESRI representations and warranties in Article IV of this Agreement (as the case may be), and (d) liability of an Indemnitor for Losses arising out of Third-Party Claims for which such Indemnitor has an indemnification obligation, which liability shall survive until the statute of limitation applicable to any third party’s right to assert a Third-Party Claim bars assertion of such claim.

XIII.      MISCELLANEOUS.

13.1         Notices. All notices, requests, demands, claims, and other communications hereunder shall be in writing. Any notice, request, demand, claim or other communication hereunder shall be deemed duly delivered four business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent for next business day delivery via a reputable nationwide overnight courier service, in each case to the intended recipient as set forth below:

If to ESRI:	Copy to (which copy shall not constitute notice hereunder):
Eastern Resources, Inc., Inc.	Gottbetter & Partners, LLP
166 East 34th Street, Suite 18K.	488 Madison Avenue, 12th Floor
New York, NY  10016	New York, NY  10022
Attn:  Thomas H. Hanna Jr., CEO	Attention:  Adam S. Gottbetter, Esq.
Facsimile:	Facsimile:  212.400.6901
If to Buyer or Buzz Kill, addressed to:	With a copy to (which shall not constitute notice hereunder):
Buzz Kill, Inc.
166 East 34th Street, Suite 18K.
New York, NY  10016
Attn:  Thomas H. Hanna Jr., CEO
Facsimile:

or to such other address as any party hereto shall specify pursuant to this Section 13.1 from time to time.

13.2         Exercise of Rights and Remedies. Except as otherwise provided herein, no delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver.

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13.3         Time. Time is of the essence with respect to this Agreement.

13.4         Reformation and Severability. In case any provision of this Agreement shall be invalid, illegal or unenforceable, it shall, to the extent possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties, and if such modification is not possible, such provision shall be severed from this Agreement, and in either case the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby.

13.5         Further Acts and Assurances. From and after the Closing, ESRI, Buyers and Buzz Kill agree that each will act in a manner supporting compliance, including compliance by its affiliates, with all of its obligations under this Agreement and, from time to time, shall, at the request of another party hereto, and without further consideration, perform such other acts which may be reasonably necessary to effectuate the purposes of this Agreement.

13.6         Entire Agreement; Amendments. This Agreement contains the entire understanding of the parties relating to the subject matter contained herein. This Agreement cannot be amended or changed except through a written instrument signed by all of the parties hereto.

13.7         Assignment. No party may assign his, her or its rights or obligations hereunder, in whole or in part, without the prior written consent of the other parties.

13.8         Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to principles of conflicts or choice of laws thereof.

13.9         Counterparts. This Agreement may be executed in one or more counterparts, with the same effect as if all parties had signed the same document. Each such counterpart shall be an original, but all such counterparts taken together shall constitute a single agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page was an original thereof.

13.10      Section Headings and Gender. The Section headings used herein are inserted for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. All personal pronouns used in this Agreement shall include the other genders, whether used in the masculine, feminine or neuter, and the singular shall include the plural, and vice versa, whenever and as often as may be appropriate.

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13.11      Specific Performance; Remedies. Each of ESRI, Buyer and Buzz Kill acknowledges and agrees that the other parties hereto would be damaged irreparably if any provision of this Agreement is not performed in accordance with its specific terms or is otherwise breached. Accordingly, each of ESRI, Buyer and Buzz Kill agrees that each party will be entitled to seek an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and its terms and provisions in any action instituted in any court of the United States or any state thereof having jurisdiction over the parties and the matter, subject to Section 13.8, in addition to any other remedy to which such party may be entitled, at law or in equity. Except as expressly provided herein, the rights, obligations and remedies created by this Agreement are cumulative and are in addition to any other rights, obligations or remedies otherwise available at law or in equity, and nothing herein will be considered an election of remedies.

13.12      Submission to Jurisdiction; Process Agent; No Jury Trial.

(a)          Each party to the Agreement hereby submits to the jurisdiction of any state or federal court sitting in the State of New York in any action arising out of or relating to this Agreement and agrees that all claims in respect of the action may be heard and determined in any such court. Each party to the Agreement also agrees not to bring any action arising out of or relating to this Agreement in any other court. Each party to the Agreement agrees that a final judgment in any action so brought will be conclusive and may be enforced by action on the judgment or in any other manner provided at law or in equity. Each party to the Agreement waives any defense of inconvenient forum to the maintenance of any action so brought and waives any bond, surety or other security that might be required of any other party with respect thereto.

(b)          EACH PARTY TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RIGHTS TO JURY TRIAL OF ANY DISPUTE BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER AGREEMENTS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT OR ANY DEALINGS AMONG THEM RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY. The scope of this waiver is intended to be all encompassing of any and all actions that may be filed in any court and that relate to the subject matter of the transactions, including contract claims, tort claims, breach of duty claims and all other common law and statutory claims. Each party to the Agreement hereby acknowledges that this waiver is a material inducement to enter into a business relationship and that they will continue to rely on the waiver in their related future dealings. Each party to the Agreement further represents and warrants that it has reviewed this waiver with its legal counsel, and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED ORALLY OR IN WRITING, AND THE WAIVER WILL APPLY TO ANY AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS BETWEEN THE PARTIES RELATING HERETO. In the event of commencement of any action, this Agreement may be filed as a written consent to trial by a court.

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13.13         Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties hereto and no presumption or burden of proof will arise favoring or disfavoring any party because of the authorship of any provision of this Agreement. Any reference to any federal, state, local or foreign law will be deemed also to refer to law as amended and all rules and regulations promulgated thereunder, unless the context requires otherwise. The words “include,” “includes,” and “including” will be deemed to be followed by “without limitation.” The words “this Agreement,” “herein,” “hereof,” “hereby,” “hereunder,” and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The parties hereto intend that each representation, warranty and covenant contained herein will have independent significance. If any party hereto has breached any representation, warranty or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) which that party has not breached will not detract from or mitigate the fact that such party is in breach of the first representation, warranty or covenant.

[Signature page follows this page.]

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Signature Page to Split-Off Agreement

IN WITNESS WHEREOF, the parties hereto have duly executed this Split-Off Agreement as of the day and year first above written.

EASTERN RESOURCES, INC.
By:	/s/ Thomas H. Hanna, Jr.
Name:	Thomas H. Hanna, Jr.
Title:	CEO
BUZZ KILL, INC.
By:	/s/ Thomas H. Hanna, Jr.
Name:	Thomas H. Hanna, Jr.
Title:	CEO

[signature pages continue]

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Signature Page to Split-Off Agreement

BUYER

Name of Buyer: 

Signature:

If Buyer is an entity,

Name and Title of Signatory:  

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EXHIBIT A

Buyer	Purchase Price Securities Shares of ESRI Common Stock)		Number of Buzz Kill Shares to be Received
Christopher Goercke		1,000		10,000
Christopher W. Smollon		1,000		10,000
Claire Entahisle		1,000		10,000
Deborah O/Brien		1,000		10,000
Jill Rothstein		1,000		10,000
Joan Corbo		5,000		50,000
Joan Shorr Hundley		1,000		10,000
Estate of Lillian S. Hubbard		1,000		10,000
Mary Scott		1,000		10,000
Patrick McGowan		1,000		10,000
Peter L. Coker		10,000		100,000
Peter McClellan		1,000		10,000
Sandra Hundley		1,000		10,000
Steven Kampmann		1,000		10,000
Susan H. Coker		10,000		100,000
Thomas H. Hanna, Jr.		5,755,000		5,755,000
Todd R. Steiner		1,000		10,000
Total		5,793,000		6,135,000

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EX-10.7

General RELEASE agreement

This General Release Agreement (this “Agreement”), dated as of April 6, 2012, is entered into by and among Eastern Resources, Inc., Inc., a Delaware corporation (“Seller”), Buzz Kill, Inc., a New York corporation (“Split-Off Subsidiary”), and each of the persons named on Exhibit A attached hereto (“Buyers”). In consideration of the mutual benefits to be derived from this Agreement, the covenants and agreements set forth herein, and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the execution and delivery hereof, the parties hereto hereby agree as follows:

1.          Split-Off Agreement. This Agreement is executed and delivered by Split-Off Subsidiary and Seller pursuant to the requirements of Sections 8.3 and 9.4, respectively, of that certain Split-Off Agreement (the “Split-Off Agreement”) by and among Seller, Split-Off Subsidiary and Buyers as a condition precedent to the closing (the “Closing”) of the Split-Off Agreement.

2.          Release and Waiver by Split-Off Subsidiary. For and in consideration of the covenants and promises contained herein and in the Split-Off Agreement, the receipt and sufficiency of which are hereby acknowledged, Split-Off Subsidiary, on behalf of itself and its assigns, representatives and agents, if any, hereby covenants not to sue and fully, finally and forever completely releases Seller, along with its present, future and former officers, directors, stockholders, members, employees, agents, attorneys and representatives (collectively, the “Seller Released Parties”), of and from any and all claims, actions, obligations, liabilities, demands and/or causes of action, of whatever kind or character, whether now known or unknown, which Split-Off Subsidiary has or might claim to have against the Seller Released Parties for any and all injuries, harm, damages (actual and punitive), costs, losses, expenses, attorneys’ fees and/or liability or other detriment, if any, whenever incurred or suffered by Split-Off Subsidiary arising from, relating to, or in any way connected with, any fact, event, transaction, action or omission that occurred or failed to occur on or prior to the date of the Closing.

3.          Release and Waiver by Buyers. For and in consideration of the covenants and promises contained herein and in the Split-Off Agreement, the receipt and sufficiency of which are hereby acknowledged, each of the Buyers on behalf of itself and its assigns, representatives and agents, if any, hereby covenants not to sue and fully, finally and forever completely releases the Seller Released Parties of and from any and all claims, actions, obligations, liabilities, demands and/or causes of action, of whatever kind or character, whether now known or unknown which Buyer has or might claim to have against the Seller Released Parties for any and all injuries, harm, damages (actual and punitive), costs, losses, expenses, attorneys’ fees and/or liability or other detriment, if any, whenever incurred or suffered by Buyer arising from, relating to, or in any way connected with, any fact, event, transaction, action or omission that occurred or failed to occur on or prior to the date of the Closing.

4.          Release and Waiver by Seller. For and in consideration of the covenants and promises contained herein and in the Split-Off Agreement, the receipt and sufficiency of which are hereby acknowledged, Seller, on behalf of itself and its assigns, representatives and agents, if any, hereby covenants not to sue and fully, finally and forever completely releases Split-Off Subsidiary and Buyers, along with their present, future and former officers, directors, stockholders, members, employees, agents, attorneys and representatives (collectively, the “Split-Off Subsidiary and Buyer Released Parties”), of and from any and all claims, actions, obligations, liabilities, demands and/or causes of action, of whatever kind or character, whether now known or unknown, which Seller has or might claim to have against the Split-Off Subsidiary and Buyer Released Parties for any and all injuries, harm, damages (actual and punitive), costs, losses, expenses, attorneys’ fees and/or liability or other detriment, if any, whenever incurred or suffered by Seller arising from, relating to, or in any way connected with, any fact, event, transaction, action or omission that occurred or failed to occur on or prior to the date of the Closing.

5.          Additional Covenants and Agreements.

(a)          Each of Split-Off Subsidiary and each Buyer, on the one hand, and Seller, on the other hand, waives and releases the other from any claims that this Agreement was procured by fraud or signed under duress or coercion so as to make this Agreement not binding.

(b)          Each of the parties hereto acknowledges and agrees that the releases set forth herein do not include any claims the other party hereto may have against such party for such party’s failure to comply with or breach of any provision in this Agreement or the Split-Off Agreement.

(c)          Notwithstanding anything contained herein to the contrary (including the Releases granted under Sections 3 and 4), this Agreement shall not release or waive, or in any manner affect or void, any party’s rights and obligations under the Split-Off Agreement (including without limitation, Section 12.1 of the Split-Off Agreement).

6.          Modification. This Agreement cannot be modified orally and can only be modified through a written document signed by both parties.

7.          Severability. If any provision contained in this Agreement is determined to be void, illegal or unenforceable, in whole or in part, then the other provisions contained herein shall remain in full force and effect as if the provision that was determined to be void, illegal or unenforceable had not been contained herein.

8.          Expenses. The parties hereto agree that each party shall pay its respective costs, including attorneys’ fees, if any, associated with this Agreement.

9.          Further Acts and Assurances. Seller, Split-Off Subsidiary and Buyers agree that each of them will act in a manner supporting compliance, including compliance by their respective Affiliates, with all of their respective obligations under this Agreement and, from time to time, shall, at the request of Seller or Split-Off Subsidiary, as the case may be, and without further consideration, cause the execution and delivery of such other instruments of release or waiver and take such other action or execute such other documents as such party may reasonably request in order to confirm or effect the releases, waivers and covenants contained herein, and, in the case of any claims, actions, obligations, liabilities, demands and/or causes of action that cannot be effectively released or waived without the consent or approval of other persons or entities that is unobtainable, to use its best reasonable efforts to ensure that the Seller Released Parties or the Split-Off Subsidiary and Buyer Released Parties, as the case may be, receive the benefits thereof to the maximum extent permissible in accordance with applicable law or other applicable restrictions, and shall perform such other acts which may be reasonably necessary to effectuate the purposes of this Agreement. For the purposes of this Agreement, an “Affiliate” is a person or entity that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, another specified person or entity.

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10.         Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to principles of conflicts or choice of laws thereof.

11.         Entire Agreement. This Agreement and the Split-Off Agreement constitute the entire understanding and agreement of Seller, Split-Off Subsidiary and Buyers and supersedes prior understandings and agreements, if any, among or between Seller, Split-Off Subsidiary and Buyers with respect to the subject matter of this Agreement, other than as specifically referenced herein. This Agreement does not, however, operate to supersede or extinguish any confidentiality, non-solicitation, non-disclosure or non-competition obligations owed by Split-Off Subsidiary or Buyers to Seller under any prior agreement.

[Signature Page Follows]

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Signature Page to Buzz Kill, Inc. General Release Agreement

IN WITNESS WHEREOF, the undersigned have executed this General Release Agreement as of the day and year first above written.

EASTERN RESOURCES, INC.
By:	/s/ Thomas H. Hanna, Jr.
Name:	Thomas H. Hanna, Jr.
Title:	Chief Executive Officer
BUZZ KILL, INC.
By:	/s/ Thomas H. Hanna, Jr.
Name:	Thomas H. Hanna, Jr.
Title:	Chief Executive Officer

Signature Page to Buzz Kill, Inc. General Release Agreement

BUYER

Name of Buyer: 

Signature: 

If Buyer is an entity,

Name and Title of Signatory:

EXHIBIT A

Buyer

Christopher Goercke

Christopher W. Smollon

Claire Entahisle

Deborah O/Brien

Jill Rothstein

Joan Corbo

Joan Shorr Hundley

Estate of Lillian S. Hubbard

Mary Scott

Patrick McGowan

Peter L. Coker

Peter McClellan

Sandra Hundley

Steven Kampmann

Susan H. Coker

Thomas H. Hanna, Jr.

Todd R. Steiner

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EX-10.8

TERMINATION OF INVESTMENT AGREEMENT

This Termination of Investment Agreement (this “Agreement”) is made as of April 6, 2012 (the “Effective Date”), by and between Buzz Kill, Inc., a New York corporation (“Buzz Kill”), and Eastern Resources, Inc., a Delaware corporation (“ESRI”). Each of Buzz Kill and ESRI may hereinafter be referred to as a “Party” and may collectively be referred to as the “Parties”.

RECITALS

WHEREAS, the Parties entered into the Investment Agreement, dated as of May 1, 2007 (the “Investment Agreement”), pursuant to which ESRI provided Buzz Kill with the amount of Eight Hundred Thousand Dollars ($800,000) in connection with the production of a motion picture entitled “Buzz Kill”; and

WHEREAS, the Parties have elected to terminate the Investment Agreement on the terms and conditions set forth herein and to terminate, release and discharge each other of any and all obligations and security interests created under the Investment Agreement, wherever they may be;

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the Parties hereby agree as follows:

1.       Termination of Investment Agreement. Each Party hereto, on behalf of itself and its affiliates and its and their respective predecessors, successors, parents, subsidiaries, agents, attorneys, officers, employees, directors, members, managers, partners, shareholders, representatives and assigns (collectively, the “Releasing Parties,” each a “Releasing Party”), severally agrees (notwithstanding and irrespective of any agreement, document, matter, or thing (including, but not limited to, any terms of the Investment Agreement)) that the Investment Agreement is hereby terminated in its entirety (including, but not limited to, any and all powers of attorney granted therein) and that the Investment Agreement shall have no force and/or effect (past, present and /or future) whatsoever. For the avoidance of doubt, ESRI confirms that (i) ESRI no longer has a right to recoup its $800,000 investment in Buzz Kill and (ii) Buzz Kill no longer is required to share 50% of its net revenue with ESRI.

2.       Release of Obligations. No Party hereto shall have any right, obligation, and/or liability (past, present or future) whatsoever arising under or in connection with the Investment Agreement. Each Releasing Party agrees that each other Party to the Investment Agreement, including its affiliates and its and their respective predecessors, successors, parents, subsidiaries, agents, attorneys, officers, employees, directors, members, managers, partners, shareholders, representatives and assigns (collectively, the “Released Parties”, each a “Released Party”), is irrevocably and unconditionally fully released and discharged from any and all liabilities, obligations, adjustments, executions, offsets, actions, causes of action, suits, debts, costs, expenses, sums of money, accounts, reckonings, bonds, bills, covenants, contracts, controversies, agreements, promises, damages, judgments, claims, demands and/or losses whatsoever, whether known or unknown, asserted or unasserted, liquidated or unliquidated, absolute or contingent, accrued or non-accrued, actual and/or prospective (collectively, “Claims”, each a “Claim”), which any Releasing Party may in the past, future or present have or claim to have or assert against any Released Party, relating to, arising under or in connection with any of the Investment Agreement. Each Releasing Party represents and warrants to each Released Party that it has not assigned or transferred or purported to assign or transfer to any person or entity all or any portion of any Claim released by the Releasing Parties herein

3.       (a)       Buzz Kill represents that it is not in breach of the Investment Agreement as of the Effective Date.

(b)       ESRI represents that it is not in breach of the Investment Agreement as of the Effective Date.

4.       Governing Law.    This Agreement and all the rights and duties of the Parties arising from or relating to the subject matter of this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, without regard to conflicts of laws principles.

5.       Consent to Jurisdiction and Service of Process.    All judicial proceedings brought against the Parties hereto arising out of or relating to this Agreement, or any obligations hereunder, may be brought in any state or federal court of competent jurisdiction in the state, county and city of New York.

6.       Waiver of Jury Trial.    THE PARTIES HERETO HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.

7.       Further assurances.    In respect of the matters set forth in this Agreement, each of the Parties hereto shall do and execute or procure to be done and executed all necessary acts, deeds, documents and/or things as may be reasonably requested of it by any other Party hereto by written notice to give effect to this Agreement.

8.       Amendment and Waiver.    No provision of this Agreement may be waived or amended except in a written instrument signed by the Parties.

9.       Severability.    If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of this Agreement is not affected in any manner materially adverse to any Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner.

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10.       Assignment.    No Party may, without the prior written consent of each other Party, assign any of its rights or transfer any of its obligations under this Agreement.

11.       Entire Agreement.    This Agreement sets forth the final agreement among the Parties as to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings and negotiations, both written and oral, among the Parties regarding the subject matter hereof.

12.       Counterparts.    This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different Parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties have executed this Termination of Investment Agreement as of the Effective Date.

BUZZ KILL, INC.		EASTERN RESOURCES, INC.
By:	/s/  Thomas H. Hanna, Jr.	/s/ Thomas H. Hanna, Jr.
Name:  Thomas H. Hanna, Jr.		Name:  Thomas H. Hanna, Jr.
Title:    President		Title:     President

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EX-10.9

GENERAL RELEASE

TO ALL WHO THESE PRESENTS SHALL COME OR MAY CONCERN, know that the undersigned, ______________________________ (the “Releasor”), in consideration of good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, releases and discharges EASTERN RESOURCES, INC., a Delaware corporation (the “Releasee”), the Releasee’s servants, agents, principals, stockholders, affiliates, employees, subsidiaries, parents, heirs, executors, administrators, successors and assigns and the Releasee’s attorneys, together with their present, future and former officers, directors, shareholders, partners, members, employees, agents, attorneys, parents, subsidiaries, affiliates or other representatives, heirs, executors, administrators, successors and assigns (collectively, the “Released Parties”) from all actions, causes of action, suits, debts, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, any and all claims and demands whatsoever, in law, admiralty or equity, which against the Releasee or any of the other Released Parties, the Releasor and the Releasor’s officers, directors, employees, members, servants, agents, affiliates, subsidiaries, parents, partners, heirs, executors, administrators, successors and assigns ever had, now have or hereafter can, shall or may have for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date of this Release including, but not limited to, the promissory note of Buzz Kill, Inc., a New York corporation and a subsidiary of Releasee (“Buzz Kill”), in favor of the Releasor dated [__________], in the principal amount of $[__________], which promissory note the Releasor hereby acknowledges the Releasee shall have no obligation to make any payments of principal or interest thereon. The Releasor further acknowledges that the Investment Agreement, dated as of May 1, 2007 (the “Investment Agreement”), by and between the Releasee and Buzz Kill has been terminated and that, as a result of the termination of the Investment Agreement, (i) the Releasee no longer has a right to recoup its $800,000 investment in Buzz Kill and (ii) Buzz Kill no longer is required to share 50% of its net revenue with the Releasee.

The Releasor expressly warrants and covenants that it will not bring suit, claim or cause of action against any of the Released Parties in connection with any and all past, present and future claims, demands, obligations, causes of action or rights which the Releasor now has or which may hereinafter accrue.

This General Release is not being signed under any duress, threat, undue influence and is being executed after adequate consultation with counsel of Releasor’s choosing.

This General Release cannot be modified orally and can only be modified through a written document signed by both parties.

This General Release shall be governed by, and construed in accordance with, the laws of the State of New York without giving effect to conflict of laws principles.

This General Release may be executed in counterparts and each of such counterparts shall be deemed to be an original, and such counterparts shall together constitute but one and the same instrument and shall bind all parties signing such counterpart.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties have executed this General Release on the ____ day of _______________, 2012.

RELEASOR
By:
	Signature
Name:
Title:
Address:

Please return this signed signature page to the attention of Paul C. Levites, Esq. via fax (212-400-6937) or email pcl@gottbetter.com , at Gottbetter & Partners, LLP, 488 Madison Avenue, 12^th Floor, New York, New York 10022 Tel. 212-400-6900.

EX-10.10

LOCK-UP AGREEMENT

This LOCK-UP AGREEMENT (this “Agreement”) is made as of __________, 2012, by and between the undersigned person or entity (the “Restricted Holder”) and Eastern Resources, Inc., a Delaware corporation (the “Company”). Capitalized terms used and not otherwise defined herein shall have the meanings given to such terms in the Merger Agreement (as defined herein).

WHEREAS, pursuant to the transactions contemplated under that certain Agreement and Plan of Merger and Reorganization, dated as of __________, 2012 (the “Merger Agreement”), by and among the Company, Elkhorn A Acquisition Corp., a Delaware corporation, Elkhorn B Acquisition Corp., a Montana corporation, Elkhorn Goldfields LLC, a Delaware limited liability company (“Seller”), Montana Tunnels Mining, Inc., a Delaware corporation (“MTMI”) and Elkhorn Goldfields, Inc., a Montana corporation (“EGI”), with the result of such merger being that MTMI and EGI will be the surviving entities and become wholly-owned subsidiaries of the Company, with the Seller exchanging its shares in MTMI and EGI for shares of common stock and preferred stock of the Company, all pursuant to the terms of the Merger Agreement (the “Merger”);

WHEREAS, the Restricted Holder is a beneficial owner of ______________ free trading shares of common stock, par value $0.001 per share (the “Common Stock”) of the Company;

WHEREAS, the Merger Agreement provides that, among other things, forty percent (40%) of the free trading shares of Common Stock owned by the Restricted Holder immediately prior to the closing of the Merger (the “Restricted Securities”) shall be subject to certain restrictions on Disposition (as defined herein) during the period of twelve (12) months immediately following the closing date of the Merger, all as more fully set forth herein. The twelve (12) month lock-up period is hereafter referenced to as the “Restricted Period.”

NOW, THEREFORE, as an inducement to and in consideration of the Company’s agreement to enter into the Merger Agreement and proceed with the Merger, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

1.           Lock Up Period.

(a)         During the Restricted Period, the Restricted Holder will not, directly or indirectly: (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, make any short sale, lend or otherwise dispose of or transfer any Restricted Securities or any securities convertible into or exercisable or exchangeable for Restricted Securities, or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, any of the economic consequences of ownership of any Restricted Securities (with the actions described in clause (i) or (ii) above being hereinafter referred to as a “Disposition”). The foregoing restrictions are expressly agreed to preclude the Restricted Holder from engaging in any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result in a sale or disposition of any of the Restricted Securities of the Restricted Holder during the Restricted Period, even if such securities would be disposed of by someone other than the Restricted Holder.

(b)         In addition, during the Restricted Period, the Restricted Holder will not, directly or indirectly, effect or agree to effect any short sale (as defined in Rule 200 under Regulation SHO of the Securities Exchange Act of 1934 (the “Exchange Act”)), whether or not against the box, establish any “put equivalent position” (as defined in Rule 16a-1(h) under the Exchange Act) with respect to the Common Stock, borrow or pre-borrow any shares of Common Stock, or grant any other right (including, without limitation, any put or call option) with respect to the Common Stock or with respect to any security that includes, is convertible into or exercisable for or derives any significant part of its value from the Common Stock or otherwise seek to hedge the Restricted Holder’s position in the Common Stock.

(c)         Notwithstanding anything contained herein to the contrary, the Restricted Holder shall be permitted to engage in any Disposition where the other party to such Disposition is another Restricted Holder or and Disposition to an affiliate as long as such affiliate executes a copy of this Agreement.

2.           Escrow of Shares. In accordance with the terms of the Merger Agreement, the Restricted Securities will, upon issuance, be held in escrow by Gottbetter & Partners, LLP, as escrow agent pursuant to an Escrow Agreement dated the date hereof (the “Escrow Agreement”). Upon termination of the Restricted Period and release of the Restricted Securities from escrow, the lock up restriction on the Restricted Securities will no longer apply.

3.           Legends; Stop Transfer Instructions.

(a)         In addition to any legends to reflect applicable transfer restrictions under federal or state securities laws, each stock certificate representing Restricted Securities shall be stamped or otherwise imprinted with the following legend:

“THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS OF A LOCK-UP AGREEMENT, DATED AS OF __________, 2012, BETWEEN THE HOLDER HEREOF AND THE ISSUER AND MAY ONLY BE SOLD OR TRANSFERRED IN ACCORDANCE WITH THE TERMS THEREOF.”

(b)         The Restricted Holder hereby agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the Restricted Securities or securities convertible into or exchangeable for Restricted Securities held by the Restricted Holder except in compliance with this Agreement.

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4.             Miscellaneous.

(a)         Specific Performance. The Restricted Holder agrees that in the event of any breach or threatened breach by the Restricted Holder of any covenant, obligation or other provision contained in this Agreement, then the Company shall be entitled (in addition to any other remedy that may be available to the Company) to: (i) a decree or order of specific performance or mandamus to enforce the observance and performance of such covenant, obligation or other provision; and (ii) an injunction restraining such breach or threatened breach. The Restricted Holder further agrees that neither the Company nor any other person or entity shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this Section 3, and the Restricted Holder irrevocably waives any right that he, she, or it may have to require the obtaining, furnishing or posting of any such bond or similar instrument.

(b)         Other Agreements. Nothing in this Agreement shall limit any of the rights or remedies of the Company under the Merger Agreement, or any of the rights or remedies of the Company or any of the obligations of the Restricted Holder under any other agreement between the Restricted Holder and the Company or any certificate or instrument executed by the Restricted Holder in favor of the Company; and nothing in the Merger Agreement or in any other agreement, certificate or instrument shall limit any of the rights or remedies of the Company or any of the obligations of the Restricted Holder under this Agreement.

(c)         Notices. All notices, requests, demands, claims, and other communications hereunder shall be in writing. Any notice, request, demand, claim or other communication hereunder shall be deemed duly delivered four business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent for next business day delivery via a reputable nationwide overnight courier service, in each case to the intended recipient as set forth below:

If to the Company:	Copy to (which copy shall not constitute notice hereunder):
Eastern Resources, Inc.	Gottbetter & Partners, LLP
1610 Wynkoop Street, Suite 400	488 Madison Avenue, 12th FLoor
Denver, CO 80202	New York, NY 10022
Attn: Patrick W. M. Imeson, Chairman	Attn: Adam S. Gottbetter, Esq.
Facsimile: ___________________	Facsimile: 212-400-6901

Any Party may give any notice, request, demand, claim or other communication hereunder using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the Party for whom it is intended. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth.

(d)         Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the parties hereto agree that the court making such determination shall have the power to limit the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified. In the event such court does not exercise the power granted to it in the prior sentence, the parties hereto agree to replace such invalid or unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable term.

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(e)         Applicable Law; Jurisdiction. THIS AGREEMENT IS MADE UNDER, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED SOLELY THEREIN, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. In any action between or among any of the parties arising out of this Agreement, (i) each of the parties irrevocably and unconditionally consents and submits to the exclusive jurisdiction and venue of the state and federal courts having jurisdiction over New York County, New York; (ii) if any such action is commenced in a state court, then, subject to applicable law, no party shall object to the removal of such action to any federal court having jurisdiction over New York County, New York; (iii) each of the parties irrevocably waives the right to trial by jury; and (iv) each of the parties irrevocably consents to service of process by first class certified mail, return receipt requested, postage prepared, to the address at which such party is to receive notice in accordance with this Agreement.

(f)          Waiver; Termination. No failure on the part of the Company to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of the Company in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy. The Company shall not be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of the Company; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given. If the Merger Agreement is terminated, this Agreement shall thereupon terminate.

(g)         Captions. The captions contained in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.

(h)         Further Assurances. The Restricted Holder hereby represents and warrants that the Restricted Holder has full power and authority to enter into this Agreement and that this Agreement constitutes the legal, valid and binding obligation of the Restricted Holder, enforceable in accordance with its terms. The Restricted Holder shall execute and/or cause to be delivered to the Company such instruments and other documents and shall take such other actions as the Company may reasonably request to effectuate the intent and purposes of this Agreement.

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(i)          Entire Agreement. This Agreement and the Merger Agreement collectively set forth the entire understanding of the Company and the Restricted Holder relating to the subject matter hereof and supersedes all other prior agreements and understandings between the Company and the Restricted Holder relating to the subject matter hereof.

(j)          Non-Exclusivity. The rights and remedies of the Company hereunder are not exclusive of or limited by any other rights or remedies which the Company may have, whether at law, in equity, by contract or otherwise, all of which shall be cumulative (and not alternative).

(k)         Amendments. This Agreement may not be amended, modified, altered or supplemented other than by means of a written instrument duly executed and delivered on behalf of the Company and the Restricted Holder.

(l)          Assignment. This Agreement and all obligations of the Restricted Holder hereunder are personal to the Restricted Holder and may not be transferred or delegated by the Restricted Holder at any time. The Company may freely assign any or all of its rights under this Agreement, in whole or in part, to any successor entity without obtaining the consent or approval of the Restricted Holder.

(m)        Binding Nature. Subject to Section 3(l) above, this Agreement will inure to the benefit of the Company and its successors and assigns and will be binding upon the Restricted Holder and the Restricted Holder’s representatives, executors, administrators, estate, heirs, successors and assigns.

(n)         Survival. Each of the representations, warranties, covenants and obligations contained in this Agreement shall survive the consummation of the Merger.

(o)         Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed an original and both of which shall constitute one and the same instrument.

[signature page follows]

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first set forth above.

EASTERN RESOURCES, INC.

By: Thomas H. Hanna, Jr.

Its:  Chief Executive Officer

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first set forth above.

RESTRICTED HOLDER:

[                          ]

By:

Its:

Address:___________________________________________

Fax: (      ) _________________

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EX-10.11

LOCK-UP ESCROW AGREEMENT

This LOCK-UP ESCROW AGREEMENT (this “Agreement”) is made as of __________, 2012, by and among the undersigned person or entity (each, a “Restricted Holder” and collectively, the “Restricted Holders”), Eastern Resources, Inc., a Delaware corporation (the “Company”), and Gottbetter & Partners, LLP, as escrow agent (the “Escrow Agent”). Capitalized terms used and not otherwise defined herein shall have the meanings given to such terms in the Lock-Up Agreement (as defined herein).

WHEREAS, pursuant to that certain Lock-Up Agreement, dated as of __________, 2012 (the “Lock-Up Agreement”), by and between each Restricted Holder and the Company, the Restricted Holder agreed that forty percent (40%) of the free trading shares of common stock of the Company owned by such Restricted Holder immediately prior to the closing of the Merger (the “Restricted Securities”) shall be subject to certain restrictions on Disposition during the period of twelve (12) months immediately following the closing date of the Merger (the “Restricted Period”), all as more fully set forth therein;

WHEREAS, the Lock-Up Agreement provides that an escrow account be established to hold the Restricted Securities until the termination of the Restricted Period; and

WHEREAS, the parties hereto desire to establish the terms and conditions pursuant to which such escrow account will be established and maintained.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

1.           Escrow.

(a)          Escrow of Restricted Securities. As soon as practicable following the execution of this Agreement, upon issuance, the Restricted Holders shall deposit with the Escrow Agent certificates representing an aggregate of [__________] shares of common stock, par value $0.001 per share, of the Company (the “Escrow Shares”), as determined pursuant to the Lock-Up Agreement, issued in the names of the Restricted Holders, as set forth on Schedule A attached hereto. The Escrow Shares shall be held as a trust fund and shall not be subject to any lien, attachment, trustee process or any other judicial process of any creditor of any party hereto. The Escrow Agent agrees to hold the Escrow Shares in an escrow account (the “Escrow Account”), subject to the terms and conditions of this Agreement.

(b)          Dividends, Etc. Any securities distributed in respect of or in exchange for any of the Escrow Shares, whether by way of stock dividends, stock splits or otherwise, shall be delivered to the Escrow Agent, who shall hold such securities in the Escrow Account. Such securities shall be considered Escrow Shares for purposes hereof. Any cash dividends or property (other than securities) distributed in respect of the Escrow Shares shall promptly be distributed by the Escrow Agent to the Restricted Holders in accordance with Section 2(b) hereof in direct proportion to the number of Escrow Shares delivered on behalf of each such Restricted Holder.

(c)          Voting of Shares. Each Restricted Holder has the right to direct the Escrow Agent in writing as to the exercise of any voting rights pertaining to such Restricted Holder’s Escrow Shares, and the Escrow Agent shall comply with any such written instructions. In the absence of such instructions, the Escrow Agent shall not vote any of the Escrow Shares.

(d)          Transferability. The respective interests of each Restricted Holder in the Escrow Shares shall not be assignable or transferable, other than by operation of law or as provided in the Lock-Up Agreement. Notice of any such assignment or transfer shall be given to the Escrow Agent and the Company, and no such assignment or transfer shall be valid until such notice is given.

2.            Distribution of Escrow Shares.

(a)          The Escrow Agent shall distribute the Escrow Shares only in accordance with (i) a written instruction delivered to the Escrow Agent that is executed by the Company that instructs the Escrow Agent as to the distribution of the Escrow Shares, or (ii) an order of a court of competent jurisdiction, a copy of which is delivered to the Escrow Agent by the Company that instructs the Escrow Agent as to the distribution of the Escrow Shares. Pursuant to Section 2 of the Lock-Up Agreement, upon the termination of the Restricted Period, the Escrow Agent shall, automatically, without any notice required, return to the Restricted Holders all of the Escrow Shares then held in escrow in accordance with Section 2(c) hereof in direct proportion to the number of Escrow Shares delivered on behalf of each such Restricted Holder.

(b)          Distributions of Escrow Shares to the Restricted Holders shall be made by mailing certificates to each such Restricted Holder at such Restricted Holder’s respective address shown on the books of the Company.

3.            Fees and Expenses of Escrow Agent. The Company shall pay the Escrow Agent a fee of $2,500 for the services to be rendered by the Escrow Agent hereunder.

4.            Limitation of Escrow Agent’s Liability.

(a)          The Escrow Agent shall have no liability or obligation with respect to the Escrow Shares except for the Escrow Agent’s willful misconduct or gross negligence. The Escrow Agent’s sole responsibility shall be for the safekeeping and distribution of the Escrow Shares in accordance with the terms of this Agreement. The Escrow Agent shall have no implied duties or obligations and shall not be charged with knowledge or notice of any fact or circumstance not specifically set forth herein. The Escrow Agent may rely upon any instrument, not only as to its due execution, validity and effectiveness, but also as to the truth and accuracy of any information contained therein, which the Escrow Agent shall in good faith believe to be genuine, to have been signed or presented by the person or parties purporting to sign the same and conform to the provisions of this Agreement. In no event shall the Escrow Agent be liable for incidental, indirect, special, and consequential or punitive damages. The Escrow Agent shall not be obligated to take any legal action or commence any proceeding in connection with the Escrow Shares, any account in which the funds are deposited, this Agreement or the Lock-Up Agreement, or to appear in, prosecute or defend any such legal action or proceeding. The Escrow Agent may consult legal counsel selected by it in any event of any dispute or question as to construction of any of the provisions hereof or of any other agreement or its duties hereunder, or relating to any dispute involving any party hereto, and shall incur no liability and shall be fully indemnified from any liability whatsoever in acting in accordance with the opinion or instructions of such counsel. The Company and the Restricted Holders shall promptly pay, upon demand, the reasonable fees and expenses of any such counsel as stated in the prior sentence, except in the event of gross negligence or willful misconduct by the Escrow Agent to the extent if found in a final judgment by a court of competent jurisdiction.

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(b)          The Escrow Agent is hereby authorized, in its sole discretion, to comply with orders issued or process entered by any court with respect to the Escrow Shares, without determination by the Escrow Agent of such court’s jurisdiction in the matter. If any portion of the Escrow Shares is at any time attached, garnished or levied upon under any court order, or in case the payment, assignment, transfer, conveyance or delivery of any such property shall be stayed or enjoined by any court order, or in any case any order judgment or decree shall be made or entered by any court affecting such property or any part thereof, then and in any such event, the Escrow Agent is authorized, in its sole discretion, to rely upon and comply with any such order, writ, judgment or decree which it is advised by legal counsel selected by it to be binding upon it, without the need for appeal or other action; and if the Escrow Agent complies with any such order, writ, judgment or decree, it shall not be liable to any of the parties hereto or to any other person or entity by reason of such compliance even though such order, writ, judgment or decree may be subsequently reversed, modified, annulled, set aside or vacated.

(c)          From and at all times after the date of this Agreement, the Company and the Restricted Holders, jointly and severally, shall, to the fullest extent permitted by law and to the extent provided herein, indemnify and hold harmless the Escrow Agent and each partner, director, officer, employee, attorney, agent and affiliate of the Escrow Agent (collectively, the “Indemnified Parties”) against any and all actions, claims (whether or not valid), losses, damages, liabilities, costs and expenses of any kind or nature whatsoever (including without limitation reasonable attorney’s fees, costs and expenses) incurred by or asserted against any of the Indemnified Parties from and after the date hereof, whether direct, indirect or consequential, as a result of or arising from or in any way relating to any claim, demand, suit, action, or proceeding (including any inquiry or investigation) by any person, including without limitation the parties to this Agreement, whether threatened or initiated, asserting a claim for any legal or equitable remedy against any person under any statute or regulation, including, but not limited to, any federal or state securities laws, or under any common law or equitable cause or otherwise, arising from or in connection with the negotiation, preparation, execution, performance or failure of performance of this Agreement or any transaction contemplated herein, whether or not any such Indemnified Party is a party to any such action or proceeding, suit or the target of any such inquiry or investigation; provided, however, that no Indemnified Party shall have the right to be indemnified hereunder for liability finally determined by a court of competent jurisdiction, subject to no further appeal, to have resulted from the gross negligence or willful misconduct of such Indemnified Party. The obligations of the parties under this section shall survive any termination of this Agreement, and resignation or removal of Escrow Agent shall be independent of any obligation of Escrow Agent.

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(d)          If at any time, there shall exist any dispute with respect to holding or disposition of any portion of the Escrow Shares or any other obligations of the Escrow Agent hereunder, or if at any time the Escrow Agent is unable to determine, to the Escrow Agent’s sole satisfaction, the proper disposition of any portion of the Escrow Shares or the Escrow Agent’s proper actions with respect to its obligations hereunder, or if the Company has not within thirty (30) days of the furnishing by the Escrow Agent of a notice of resignation pursuant to the notice provisions hereof, appointed a successor Escrow Agent to act hereunder, then the Escrow Agent may, in its sole discretion, take either or both of the following actions:

(i)          suspend the performance of any of its obligations (including without limitation any disbursement obligations) under this Agreement until such dispute or uncertainty shall be resolved to the sole satisfaction of the Escrow Agent or until a successor Escrow Agent shall be appointed (as the case may be); provided, however, the Escrow Agent shall continue to hold the Escrow Shares in accordance with the terms hereof; or

(ii)         petition (by means of an interpleader action or any other appropriate method) any court of competent jurisdiction in any venue convenient to the Escrow Agent, for instructions with respect to such dispute or uncertainty, and to the extent required by law, pay into such court, for holding and disposition in accordance with the instructions of such court, all securities and all funds held by it in the Escrow Account, after deduction and payment to the Escrow Agent of all fees and expenses (including court costs and attorneys’ fees) payable to, incurred by, or expected to be incurred by Escrow Agent in connection with performance of its duties and the exercise of its rights hereunder.

(e)          The Escrow Agent may resign from the performance of its duties hereunder at any time by giving thirty (30) days’ prior written notice to the Company or may be removed, with or without cause, by the Company by furnishing a written direction to the Escrow Agent, at any time by the giving of ten (10) days’ prior written notice to the Escrow Agent as provided herein below. Upon any such notice of resignation or removal, the Company shall appoint a successor Escrow Agent hereunder, which shall be a commercial bank, trust company or other financial institution with a combined capital and surplus in excess of $10,000,000.00. Upon the acceptance in writing of any appointment of an escrow agent hereunder by a successor Escrow Agent, such successor Escrow Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Escrow Agent, and the retiring Escrow Agent shall be discharged from its duties and obligations under this Agreement, but shall not be discharged from any liability for actions taken as escrow agent hereunder prior to such succession. After any retiring Escrow Agent’s resignation or removal, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it while it was escrow agent under this Agreement. The retiring Escrow Agent shall transmit all records pertaining to the Escrow Shares and shall deliver all securities and all funds held by it in the Escrow Account to the successor Escrow Agent, after making copies of such records as the retiring Escrow Agent deems advisable and after deduction and payment to the retiring Escrow Agent of all fees and expenses (including court costs and attorneys’ fees) payable to, incurred by, or expected to be incurred by the retiring Escrow Agent in connection with the performance of its duties and the exercise of its rights hereunder.

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5.            Termination. This Agreement shall terminate upon the distribution by the Escrow Agent of all of the Escrow Shares in accordance with this Agreement; provided that the provisions of Section 4 shall survive such termination.

6.            Notices. All notices, requests, demands, claims, and other communications hereunder shall be in writing. Any notice, request, demand, claim or other communication hereunder shall be deemed duly delivered four business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent for next business day delivery via a reputable nationwide overnight courier service, in each case to the intended recipient as set forth below:

If to the Company:

Eastern Resources, Inc.

1610 Wynkoop Street, Suite 400

Denver, CO 80202

Attn: Patrick W. M. Imeson, Chairman

Facsimile: __________

with a copy to (which shall not constitute notice hereunder):

Gottbetter & Partners, LLP

488 Madison Avenue, 12^th Floor

New York, NY 10022

Attn: Adam S. Gottbetter, Esq.

Facsimile: (212) 400-6901

If to a Restricted Holder, at such Restricted Holder’s respective address shown on the books of the Company.

If to the Escrow Agent:

Gottbetter & Partners, LLP

488 Madison Avenue, 12^th Floor

New York, NY 10022

Attn: Adam S. Gottbetter, Esq.

Facsimile: (212) 400-6901

Any party may give any notice, request, demand, claim or other communication hereunder using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the party for whom it is intended. Any party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other parties notice in the manner herein set forth.

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7.            General.

(a)          Applicable Law; Jurisdiction. THIS AGREEMENT IS MADE UNDER, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED SOLELY THEREIN, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. In any action between or among any of the parties arising out of this Agreement, (i) each of the parties irrevocably and unconditionally consents and submits to the exclusive jurisdiction and venue of the state and federal courts having jurisdiction over New York County, New York; (ii) if any such action is commenced in a state court, then, subject to applicable law, no party shall object to the removal of such action to any federal court having jurisdiction over New York County, New York; (iii) each of the parties irrevocably waives the right to trial by jury; and (iv) each of the parties irrevocably consents to service of process by first class certified mail, return receipt requested, postage prepared, to the address at which such party is to receive notice in accordance with this Agreement.

(b)          Entire Agreement. Except for those provisions of the Lock-Up Agreement referenced herein, this Agreement constitutes the entire understanding and agreement of the parties with respect to the subject matter of this Agreement and supersedes all prior agreements or understandings, written or oral, between the parties with respect to the subject matter hereof.

(c)          Waivers. No waiver by any party hereto of any condition or of any breach of any provision of this Agreement shall be effective unless in writing. No waiver by any party of any such condition or breach, in any one instance, shall be deemed to be a further or continuing waiver of any such condition or breach or a waiver of any other condition or breach of any other provision contained herein.

(d)          Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the parties hereto agree that the court making such determination shall have the power to limit the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified. In the event such court does not exercise the power granted to it in the prior sentence, the parties hereto agree to replace such invalid or unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable term.

(e)          Amendment. This Agreement may not be amended, modified, altered or supplemented other than by means of a written instrument duly executed and delivered on behalf of the Company, the Escrow Agent and the Restricted Holders.

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(f)          Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.

(g)          Acknowledgement and Waiver of Conflict. The parties hereby acknowledge that the Escrow Agent has represented the Company in connection with the Merger. The Company and the Restricted Holders hereby waive any conflict of interest arising by virtue of the Escrow Agent’s representation of the Company, and hereby agree to acknowledge and approve the taking of any action by the Escrow Agent reasonably necessary to protect and preserve its rights under this Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties have duly executed this Lock-Up Escrow Agreement as of the day and year first above written.

EASTERN RESOURCES, INC.
By:
Name:	Thomas H. Hanna, Jr.
Title:	Chief Executive Officer

GOTTBETTER & PARTNERS, LLP
By:
Name:	Adam S. Gottbetter
Title:	Managing Partner

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Lock-Up Escrow Agreement as of the date first set forth above.

RESTRICTED HOLDER:

[                                        ]

By:

Its:

Address: __________________________________________

Fax: (_____) _______________________________________

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SCHEDULE A

ESCROW SHARES

RESTRICTED HOLDER  NAME AND ADDRESS	CERTIFICATE NUMBER	NUMBER OF ESCROW SHARES
NAME ADDRESS ADDRESS
NAME ADDRESS ADDRESS
NAME ADDRESS ADDRESS
NAME ADDRESS ADDRESS
NAME ADDRESS ADDRESS
NAME ADDRESS ADDRESS
NAME ADDRESS ADDRESS
		____________________
TOTAL

EX-10.12

FORM OF NO SHORT SELLING AGREEMENT

This NO SHORT SELLING AGREEMENT (this “Agreement”) is made as of __________, 2012, by and between the undersigned person or entity (the “Restricted Holder”) and Eastern Resources, Inc., a Delaware corporation (the “Company”). Capitalized terms used and not otherwise defined herein shall have the meanings given to such terms in the Merger Agreement (as defined herein).

WHEREAS, pursuant to the transactions contemplated under that certain Agreement and Plan of Merger and Reorganization, dated as of __________, 2012 (the “Merger Agreement”), by and among the Company, MTMI Acquisition Corp., EGI Acquisition Corp., Elkhorn Goldfields LLC, a Delaware limited liability company (“Seller”), Montana Tunnels Mining, Inc. a Delaware corporation and wholly owned subsidiary of Seller (“Target A”), and Elkhorn Goldfields, Inc., a Montana corporation and wholly owned subsidiary of Seller (“Target B” and, together with Target A, “Targets”), Target A will merge with MTMI Acquisition Corp., with the result of such merger being that Target A will be the surviving entity and become a wholly owned subsidiary of the Company, and Target B will merge with EGI Acquisition Corp., with the result of such merger being that Target B will be the surviving entity and become a wholly owned subsidiary of the Company, with all the stockholders of Targets exchanging their shares in each Target for shares of common stock of the Company (the “Common Stock”), all pursuant to the terms of the Merger Agreement (the “Merger”);

WHEREAS, the Restricted Holder will be an officer, director and/or key employee of the Company immediately after the closing of the Merger and/or the Restricted Holder will be a beneficial owner of ten percent (10%) or more of the outstanding shares of Common Stock of the Company immediately after the closing of the Merger;

WHEREAS, the Merger Agreement provides that, among other things, the Restricted Holder shall be subject to certain restrictions on transactions in securities of the Company during the period of twelve (12) months immediately following the closing date of the Merger (the “Restricted Period”).

NOW, THEREFORE, as an inducement to and in consideration of the Company’s agreement to enter into the Merger Agreement and proceed with the Merger, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

1.            No Short Period. During the Restricted Period, the Restricted Holder will not, directly or indirectly, effect or agree to effect any short sale (as defined in Rule 200 under Regulation SHO of the Securities Exchange Act of 1934 (the “Exchange Act”)), whether or not against the box, establish any “put equivalent position” (as defined in Rule 16a-1(h) under the Exchange Act) with respect to the Common Stock, borrow or pre-borrow any shares of Common Stock, or grant any other right (including, without limitation, any put or call option) with respect to the Common Stock or with respect to any security that includes, is convertible into or exercisable for or derives any significant part of its value from the Common Stock or otherwise seek to hedge the Restricted Holder’s position in the Common Stock.

2.             Miscellaneous.

(a)          Specific Performance. The Restricted Holder agrees that in the event of any breach or threatened breach by the Restricted Holder of any covenant, obligation or other provision contained in this Agreement, then the Company shall be entitled (in addition to any other remedy that may be available to the Company) to: (i) a decree or order of specific performance or mandamus to enforce the observance and performance of such covenant, obligation or other provision; and (ii) an injunction restraining such breach or threatened breach. The Restricted Holder further agrees that neither the Company nor any other person or entity shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this Section 2, and the Restricted Holder irrevocably waives any right that he, she, or it may have to require the obtaining, furnishing or posting of any such bond or similar instrument.

(b)          Other Agreements. Nothing in this Agreement shall limit any of the rights or remedies of the Company under the Merger Agreement, or any of the rights or remedies of the Company or any of the obligations of the Restricted Holder under any other agreement between the Restricted Holder and the Company or any certificate or instrument executed by the Restricted Holder in favor of the Company; and nothing in the Merger Agreement or in any other agreement, certificate or instrument shall limit any of the rights or remedies of the Company or any of the obligations of the Restricted Holder under this Agreement.

(c)          Notices. All notices, requests, demands, claims, and other communications hereunder shall be in writing. Any notice, request, demand, claim or other communication hereunder shall be deemed duly delivered four business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent for next business day delivery via a reputable nationwide overnight courier service, in each case to the intended recipient as set forth below:

If to the Company:	Copy to (which copy shall not constitute notice hereunder):
1610 Wynkoop Street #400	Gottbetter & Partners, LLP
Denver, CO  80202	488 Madison Ave., 12th Floor
Attn: Patrick W.M. Imeson	New York, NY  10022
Facsimile: __________________	Attn: Adam S. Gottbetter, Esq.
	Facsimile: 212-400-6901

Any Party may give any notice, request, demand, claim or other communication hereunder using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the Party for whom it is intended. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth.

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(d)          Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the parties hereto agree that the court making such determination shall have the power to limit the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified. In the event such court does not exercise the power granted to it in the prior sentence, the parties hereto agree to replace such invalid or unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable term.

(e)         Applicable Law; Jurisdiction. THIS AGREEMENT IS MADE UNDER, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED SOLELY THEREIN, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. In any action between or among any of the parties arising out of this Agreement, (i) each of the parties irrevocably and unconditionally consents and submits to the exclusive jurisdiction and venue of the state and federal courts having jurisdiction over New York County, New York; (ii) if any such action is commenced in a state court, then, subject to applicable law, no party shall object to the removal of such action to any federal court having jurisdiction over New York County, New York; (iii) each of the parties irrevocably waives the right to trial by jury; and (iv) each of the parties irrevocably consents to service of process by first class certified mail, return receipt requested, postage prepared, to the address at which such party is to receive notice in accordance with this Agreement.

(f)          Waiver; Termination. No failure on the part of the Company to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of the Company in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy. The Company shall not be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of the Company; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given. If the Merger Agreement is terminated, this Agreement shall thereupon terminate.

(g)         Captions. The captions contained in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.

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(h)         Further Assurances. The Restricted Holder hereby represents and warrants that the Restricted Holder has full power and authority to enter into this Agreement and that this Agreement constitutes the legal, valid and binding obligation of the Restricted Holder, enforceable in accordance with its terms. The Restricted Holder shall execute and/or cause to be delivered to the Company such instruments and other documents and shall take such other actions as the Company may reasonably request to effectuate the intent and purposes of this Agreement.

(i)          Entire Agreement. This Agreement and the Merger Agreement collectively set forth the entire understanding of the Company and the Restricted Holder relating to the subject matter hereof and supersedes all other prior agreements and understandings between the Company and the Restricted Holder relating to the subject matter hereof.

(j)          Non-Exclusivity. The rights and remedies of the Company hereunder are not exclusive of or limited by any other rights or remedies which the Company may have, whether at law, in equity, by contract or otherwise, all of which shall be cumulative (and not alternative).

(k)         Amendments. This Agreement may not be amended, modified, altered or supplemented other than by means of a written instrument duly executed and delivered on behalf of the Company and the Restricted Holder.

(l)          Assignment. This Agreement and all obligations of the Restricted Holder hereunder are personal to the Restricted Holder and may not be transferred or delegated by the Restricted Holder at any time. The Company may freely assign any or all of its rights under this Agreement, in whole or in part, to any successor entity without obtaining the consent or approval of the Restricted Holder.

(m)        Binding Nature. Subject to Section 3(l) above, this Agreement will inure to the benefit of the Company and its successors and assigns and will be binding upon the Restricted Holder and the Restricted Holder’s representatives, executors, administrators, estate, heirs, successors and assigns.

(n)         Survival. Each of the representations, warranties, covenants and obligations contained in this Agreement shall survive the consummation of the Merger.

(o)         Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed an original and both of which shall constitute one and the same instrument.

[signature page follows]

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first set forth above.

EASTERN RESOURCES, INC.
By:
Name:	Thomas H. Hanna
Title:	President

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first set forth above.

RESTRICTED HOLDER:

[                               ]

By:

Its:

Address:__________________________________________

Fax: (   ) _________________

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EX-10.13

INDEMNIFICATION ESCROW AGREEMENT

This Escrow Agreement (this “Agreement”) is entered into as of _______ __, 2012 by and between Eastern Resources, Inc., a Delaware corporation (the “Parent”), Patrick W.M. Imeson (the “Indemnification Representative”) and Gottbetter & Partners, LLP (the “Escrow Agent”).

WHEREAS, the Parent has entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Elkhorn Goldfields, LLC, a Delaware limited liability company (the “Seller”), Montana Tunnels Mining, Inc., a Delaware corporation and wholly-owned subsidiary of Seller (“Company A”) and Elkhorn Goldfields, Inc., a Montana corporation and wholly-owned subsidiary of Seller (“Company B” and, together with Company A, the “Companies”), (i) pursuant to which a wholly-owned subsidiary of the Parent will merge with and into Company A, with Company A surviving the merger, and another wholly-owned subsidiary of the Parent will merge with and into Company B, with Company B surviving the merger, (ii) each Company will become a wholly-owned subsidiary of the Parent, and (iii) the stockholders of the Companies (the “Company Stockholders”) will receive shares of common stock of the Parent (the “Merger Shares”);

WHEREAS, the Merger Agreement provides that 95% of the Merger Shares (the “Initial Shares”) to be issued to such Company Stockholders shall be delivered to such Company Stockholders and 5% of the Merger Shares (the “Escrow Shares”) to be issued to such Company Stockholders shall be delivered to the Escrow Agent to secure the indemnification obligations of the Company Stockholders as of the Closing Date, as such term is defined in the Merger Agreement (collectively, the “Indemnifying Stockholders”), to the Parent; and

WHEREAS, the Merger Agreement provides for the execution of this Agreement and the establishment of an escrow account and the parties hereto desire to establish the terms and conditions pursuant to which such escrow account will be established and maintained.

NOW, THEREFORE, the parties hereto hereby agree as follows:

1.            Escrow and Indemnification.

(a)          Escrow of Shares. Simultaneously with the execution of this Agreement, the Parent shall cause to be issued and shall deposit with the Escrow Agent certificates representing an aggregate number of shares of common stock of the Parent, as determined pursuant to Section 1.8(b) of the Merger Agreement, issued in the name of the Escrow Agent. The shares deposited with the Escrow Agent pursuant to this Section 1(a) are referred to herein as the “Escrow Shares.” The Escrow Shares shall be held as a trust fund and shall not be subject to any lien, attachment, trustee process or any other judicial process of any creditor of any party hereto. The Escrow Agent agrees to hold the Escrow Shares in an escrow account (the “Escrow Account”), subject to the terms and conditions of this Agreement.

(b)          Indemnification. The Indemnifying Stockholders have agreed in Section 6.1 of the Merger Agreement to indemnify and hold harmless the Parent from and against certain Damages (as defined in Section 6.1 of the Merger Agreement). The Escrow Shares shall be (i) security for such indemnity obligation of the Indemnifying Stockholders, subject to the limitations, and in the manner provided, in this Agreement and the Merger Agreement and (ii) shall be the exclusive means for the Parent to collect any Damages with respect to which the Parent is entitled to indemnification under Article VI of the Merger Agreement.

(c)          Dividends, Etc. Any securities distributed in respect of or in exchange for any of the Escrow Shares, whether by way of stock dividends, stock splits or otherwise, shall be issued in the name of the Escrow Agent or its nominee and shall be delivered to the Escrow Agent, who shall hold such securities in the Escrow Account. Such securities shall be considered Escrow Shares for purposes hereof. Any cash dividends or property (other than securities) distributed in respect of the Escrow Shares shall be distributed within five business days by the Escrow Agent to the Indemnifying Stockholders in accordance with Section 3(c) hereof.

(d)          Voting of Shares. The Indemnification Representative shall have the right, in his sole discretion, on behalf of the Indemnifying Stockholders, to direct the Escrow Agent in writing as to the exercise of any voting rights pertaining to the Escrow Shares, and the Escrow Agent shall comply with any such written instructions. In the absence of such instructions, the Escrow Agent shall not vote any of the Escrow Shares. The Indemnification Representative shall have no obligation to solicit consents or proxies from the Indemnifying Stockholders for purposes of any such vote.

(e)          Transferability. The respective interests of the Indemnifying Stockholders in the Escrow Shares shall not be assignable or transferable, other than by operation of law. Notice of any such assignment or transfer by operation of law shall be given to the Escrow Agent and the Parent, and no such assignment or transfer shall be valid until such notice is given.

2.            Intentionally Omitted.

3.            Distribution of Escrow Shares.

(a)          The Escrow Agent shall distribute the Escrow Shares only in accordance with (i) a written instrument delivered to the Escrow Agent that is executed by both the Parent and the Indemnification Representative and that instructs the Escrow Agent as to the distribution of some or all of the Escrow Shares, (ii) an order of a court of competent jurisdiction, a copy of which is delivered to the Escrow Agent by either the Parent or the Indemnification Representative, that instructs the Escrow Agent as to the distribution of some or all of the Escrow Shares, or (iii) the provisions of Section 3(b) hereof.

(b)          Within five business days after _________ __, 2014 (the “Termination Date”), the Escrow Agent shall distribute to the Indemnifying Stockholders all of the Escrow Shares then held in escrow, registered in the names of the Indemnifying Stockholders. Notwithstanding the foregoing, if the Parent has previously delivered to the Escrow Agent a copy of a Claim Notice (as hereinafter defined) and the Escrow Agent has not received written notice of the resolution of the claim covered thereby, or if the Parent has previously delivered to the Escrow Agent a copy of an Expected Claim Notice (as hereinafter defined) and the Escrow Agent has not received written notice of the resolution of the anticipated claim covered thereby, the Escrow Agent shall retain in escrow after the Termination Date such number of Escrow Shares as have a Value (as defined in Section 4 below) equal to the Claimed Amount (as hereinafter defined) covered by such Claim Notice or equal to the estimated amount of Damages set forth in such Expected Claim Notice, as the case may be. Any Escrow Shares so retained in escrow shall be distributed only in accordance with the terms of clauses (i) or (ii) of Section 3(a) hereof. For purposes of this Agreement, a Claim Notice means a written notification under the Merger Agreement given by the Parent to the Indemnifying Stockholders which contains (i) a description and the amount (the “Claimed Amount”) of any Damages incurred or reasonably expected to be incurred by the Parent, (ii) a statement that the Parent is entitled to indemnification under Article 6 of the Merger Agreement for such Damages and a reasonable explanation of the basis therefor, and (iii) a demand for payment (in the manner provided in Section 6.3 of the Merger Agreement) in the amount of such Damages. For purposes of this Agreement, an Expected Claim Notice means a notice delivered pursuant to the Merger Agreement by the Parent to an Indemnifying Stockholder, before expiration of a representation or warranty, to the effect that, as a result a legal proceeding instituted by or written claim made by a third party, the Parent reasonably expects to incur Damages as a result of a breach of such representation or warranty.

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(c)          Any distribution of all or a portion of the Escrow Shares (or cash or other property pursuant to Section 2(c)) to the Indemnifying Stockholders shall be made by delivery of stock certificates issued in the name of the Indemnifying Stockholders (or cash or other property), covering such percentage of the Escrow Shares (or cash or other property) being distributed as is calculated in accordance with the percentages set forth opposite each such Indemnifying Stockholder’s name on Attachment A attached hereto (which Attachment A shall be updated after the date hereof if the Parent deposits additional Escrow Shares in the Escrow Account on behalf of additional Company Stockholders after the Closing Date). Distributions to the Indemnifying Stockholders shall be made by mailing stock certificates to such holders at their respective addresses shown on Attachment A (or such other address as may be provided in writing to the Escrow Agent by any such Indemnifying Stockholder). No fractional Escrow Shares shall be distributed to Indemnifying Stockholders pursuant to this Agreement. Instead, the number of shares that each Indemnifying Stockholder shall receive shall be rounded up or down to the nearest whole number (provided that the Indemnification Representative shall have the authority to effect such rounding in such a manner that the total number of whole Escrow Shares to be distributed equals the number of Escrow Shares then held in the Escrow Account).

4.            Valuation of Escrow Shares. For purposes of this Agreement, the “Value” of any Escrow Shares shall be $_.__ per share, multiplied by the number of such Escrow Shares.

5.            Fees and Expenses of Escrow Agent. The Parent shall pay the $2,500 fee of the Escrow Agent for the services to be rendered by the Escrow Agent hereunder.

6.            Limitation of Escrow Agent’s Liability.

(a)          The Escrow Agent shall incur no liability with respect to any action taken or suffered by it in reliance upon any notice, direction, instruction, consent, statement or other documents believed by it to be genuine and duly authorized, nor for other action or inaction except its own willful misconduct or gross negligence. The Escrow Agent shall not be responsible for the validity or sufficiency of this Agreement. In all questions arising under the Escrow Agreement, the Escrow Agent may rely on the advice of counsel, and the Escrow Agent shall not be liable to anyone for anything done, omitted or suffered in good faith by the Escrow Agent based on such advice. The Escrow Agent shall not be required to take any action hereunder involving any expense unless the payment of such expense is made or provided for in a manner reasonably satisfactory to it. In no event shall the Escrow Agent be liable for indirect, punitive, special or consequential damages.

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(b)          The Parent and the Indemnifying Stockholders agree to indemnify the Escrow Agent for, and hold it harmless against, any loss, liability or expense incurred without gross negligence or willful misconduct on the part of Escrow Agent, arising out of or in connection with its carrying out of its duties hereunder. The Parent, on the one hand, and the Indemnifying Stockholders, on the other hand, shall each be liable for one-half of such amounts.

7.            Liability and Authority of Indemnification Representative; Successors and Assignees.

(a)          The Indemnification Representative shall not incur any liability with respect to any action taken or suffered by him in reliance upon any note, direction, instruction, consent, statement or other documents believed by him to be genuinely and duly authorized, nor for other action or inaction except his own willful misconduct or gross negligence. The Indemnification Representative may, in all questions arising under the Escrow Agreement, rely on the advice of counsel and the Indemnification Representative shall not be liable to the Indemnifying Stockholders for anything done, omitted or suffered in good faith by the Indemnification Representative based on such advice.

(b)          In the event of the death or permanent disability of the Indemnification Representative, or his or her resignation or termination as an Indemnification Representative, a successor Indemnification Representative shall be elected by a majority vote of the Indemnifying Stockholders, with each such Indemnifying Stockholder (or his, her or its successors or assigns) to be given a vote equal to the number of votes represented by the shares of stock of the Company held by such Indemnifying Stockholder immediately prior to the effective time of the Merger Agreement. Each successor Indemnification Representative shall have all of the power, authority, rights and privileges conferred by this Agreement upon the original Indemnification Representative, and the term “Indemnification Representative” as used herein shall be deemed to include each successor Indemnification Representative.

(c)          The Indemnification Representative shall have full power and authority to represent the Indemnifying Stockholders, and their successors, with respect to all matters arising under this Agreement and Article 6 of the Merger Agreement and all actions taken by the Indemnification Representative hereunder or under Article 6 of the Merger Agreement shall be binding upon the Indemnifying Stockholders, and their successors, as if expressly confirmed and ratified in writing by each of them. Without limiting the generality of the foregoing, the Indemnification Representative shall have full power and authority to interpret all of the terms and provisions of this Agreement, to compromise any claims asserted hereunder and to authorize any release of the Escrow Shares to be made with respect thereto, on behalf of the Indemnifying Stockholders and their successors.

(d)          After Closing Date, the majority vote of the Indemnifying Stockholders may terminate the Indemnification Representative and appoint a successor Indemnification Representative in accordance with the terms of Section 7(b) above.

(e)          The Escrow Agent may rely on the Indemnification Representative as the exclusive agent of the Indemnifying Stockholders under this Agreement and shall incur no liability to any party with respect to any action taken or suffered by it in good faith reliance thereon.

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8.            Amounts Payable by Indemnifying Stockholders. The amounts payable by the Indemnifying Stockholders under this Agreement (i.e., the indemnification obligations pursuant to Section 6(b)) shall be payable solely as follows. The Escrow Agent shall notify the Indemnification Representative of any such amount payable by the Indemnifying Stockholders as soon as it becomes aware that any such amount is payable, with a copy of such notice to the Parent. On the sixth business day after the delivery of such notice, the Escrow Agent shall sell such number of Escrow Shares (up to the number of Escrow Shares then available in the Escrow Account), subject to compliance with all applicable securities laws, as is necessary to raise such amount, and shall be entitled to apply the proceeds of such sale in satisfaction of such indemnification obligations of the Indemnifying Stockholders; provided that if the Indemnification Representative delivers to the Escrow Agent (with a copy to the Parent), within five business days after delivery of such notice by the Indemnification Representative, a written notice contesting the legitimacy or reasonableness of such amount, then the Escrow Agent shall not sell Escrow Shares to raise the disputed portion of such claimed amount except in accordance with the terms of clauses (i) or (ii) of Section 3(a).

9.            Termination. This Agreement shall terminate upon the distribution by the Escrow Agent of all of the Escrow Shares in accordance with this Agreement; provided that the provisions of Sections 6 and 7 shall survive such termination.

10.          Notices. All notices, instructions and other communications given hereunder or in connection herewith shall be in writing. Any such notice, instruction or communication shall be sent either (i) by registered or certified mail, return receipt requested, postage prepaid, or (ii) via a reputable nationwide overnight courier service, in each case to the address set forth below. Any such notice, instruction or communication shall be deemed to have been delivered five business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent via a reputable nationwide overnight courier service.

If to the Parent: 

______________

______________

Attn:   

Facsimile:  _______________

with a copy to (which shall not constitute notice hereunder):

Gottbetter & Partners, LLP

488 Madison Avenue, 12th Floor

New York, NY 10022

Attn:  Adam S. Gottbetter, Esq. 

Facsimile:  212.400.6901

If to the Indemnification Representative:

Patrick W.M. Imeson

1610 Wynkoop Street, #400

Denver, CO 80202 

Facsimile:  303.957.5536-

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with a copy to (which shall not constitute notice hereunder):

Messner & Reeves, LLC

1430 Wynkoop Street, Suite 400

Denver, CO 80205

Attn: Steven N. Levine, Esq. 

Facsimile: 303.623.0552

If to the Escrow Agent:

Gottbetter & Partners, LLP

488 Madison Avenue, 12th Floor

New York, NY 10022

Attn:  Adam S. Gottbetter, Esq. 

Facsimile:  212.400.6901

Any party may give any notice, instruction or communication in connection with this Agreement using any other means (including personal delivery, telecopy or ordinary mail), but no such notice, instruction or communication shall be deemed to have been delivered unless and until it is actually received by the party to whom it was sent. Any party may change the address to which notices, instructions or communications are to be delivered by giving the other parties to this Agreement notice thereof in the manner set forth in this Section 10.

11.         Successor Escrow Agent. In the event the Escrow Agent becomes unavailable or unwilling to continue in its capacity herewith, the Escrow Agent may resign and be discharged from its duties or obligations hereunder by delivering a resignation to the parties to this Escrow Agreement, not less than 60 days prior to the date when such resignation shall take effect. The Parent may a successor Escrow Agent with the consent of the Indemnification Representative, which shall not be unreasonably withheld. If, within such notice period, the Parent provides to the Escrow Agent written instructions with respect to the appointment of a successor Escrow Agent and directions for the transfer of any Escrow Shares then held by the Escrow Agent to such successor, the Escrow Agent shall act in accordance with such instructions and promptly transfer such Escrow Shares to such designated successor. If no successor Escrow Agent is named as provided in this Section 11 prior to the date on which the resignation of the Escrow Agent is to properly take effect, the Escrow Agent may apply to a court of competent jurisdiction for appointment of a successor Escrow Agent.

12.         General.

(a)          Governing Law; Assigns. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York without regard to conflict-of-law principles and shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns.

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

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(c)          Entire Agreement. Except for those provisions of the Merger Agreement referenced herein, this Agreement constitutes the entire understanding and agreement of the parties with respect to the subject matter of this Agreement and supersedes all prior agreements or understandings, written or oral, between the parties with respect to the subject matter hereof.

(d)          Waivers. No waiver by any party hereto of any condition or of any breach of any provision of this Agreement shall be effective unless in writing. No waiver by any party of any such condition or breach, in any one instance, shall be deemed to be a further or continuing waiver of any such condition or breach or a waiver of any other condition or breach of any other provision contained herein.

(e)          Amendment. This Agreement may be amended only with the written consent of the Parent, the Escrow Agent and the Indemnification Representative.

(f)          Consent to Jurisdiction and Service. The parties hereby absolutely and irrevocably consent and submit to the jurisdiction of the courts in the State of New York and of any Federal court located in the State of New York in connection with any actions or proceedings brought against any party hereto by the Escrow Agent arising out of or relating to this Escrow Agreement. In any such action or proceeding, the parties hereby absolutely and irrevocably waive personal service of any summons, complaint, declaration or other process and hereby absolutely and irrevocably agree that the service thereof may be made by certified or registered first-class mail directed to such party, at their respective addresses in accordance with Section 10 hereof.

[signature page follows]

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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first above written.

EASTERN RESOURCES, INC.
By:
Name:	Thomas H. Hanna
Title:	President
Patrick W.M. Imeson, Individually and as Indemnification Representative
GOTTBETTER & PARTNERS, LLP
By:
Name:	Adam S. Gottbetter
Title:	Managing Partner

ATTACHMENT A 

(Company Stockholders’ information)

Name	Escrow Shares	Address
TOTAL Escrow Shares (5%)	xxxx

EX-10.15

EASTERN RESOURCES, INC.

Incentive Stock Option Agreement

Granted Under 2012 Equity Incentive Plan

1. Grant of Option.

This agreement (this “Agreement”) evidences the grant by Eastern Resources, Inc., a Delaware corporation (the “Company”), on __________, 2012 (the “Grant Date”) to ______________________________, an employee of the Company (the “Participant”), of an option (the “Option”) to purchase, in whole or in part, on the terms provided herein and in the Company’s 2012 Equity Incentive Plan (the “Plan”), a total of ______________________________ shares (the “Shares”) of common stock of the Company (“Common Stock”) at $2.00 per Share. Unless earlier terminated, this option shall expire at 5:00 p.m., Eastern Time, on __________, 2022 (the “Final Exercise Date”).

It is intended that the Option evidenced by this Agreement shall be an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”). However, to the extent that the aggregate fair market value of stock with respect to which incentive stock options, including the Option, are exercisable for the first time by the Participant during any calendar year, exceeds $100,000, such options shall be treated as not qualifying under Code Section 422, but rather shall be treated as non-qualified stock options to the extent required by Code Section 422.

Except as otherwise indicated by the context, the term “Participant”, as used in this Agreement, shall be deemed to include any person who acquires the right to exercise this option validly under its terms.

In order to obtain the tax treatment provided for incentive stock options by Section 422 of the Code, the Shares received upon exercising any incentive stock options received pursuant to this Agreement must be sold, if at all, after a date which is the later of two (2) years from the date of this Agreement or one (1) year from the date upon which the Option is exercised. The Participant agrees to report sales of Shares prior to the above determined date (a “Disqualifying Disposition”) to the Company within five (5) business days after such sale is concluded. The Participant also agrees to pay to the Company, within ten (10) business days after such sale is concluded, the amount necessary for the Company to satisfy its withholding requirement required by the Code in the manner specified in Section 13 of the Plan. Nothing herein is intended as a representation that the Shares may be sold without registration under state and federal securities laws or an exemption therefrom or that such registration or exemption will be available at any specified time.

2. Vesting Schedule.

The Option will vest and become exercisable to 33.333% of the original number of Shares (__________ Shares) on each of the first, second and third anniversary of the Grant Date.

The right of exercise shall be cumulative so that to the extent the Option is not exercised in any period to the maximum extent permissible it shall continue to be exercisable, in whole or in part, with respect to all Shares for which it is vested until the earlier of the Final Exercise Date or as provided in Section 3 hereof or in the Plan.

3. Exercise of Option.

(a)           (i)    Manner of Exercise.  Each election to exercise the Option shall be in writing, in substantially the form of Notice of Election to Exercise attached hereto as Exhibit A (the “Exercise Notice”), signed by the Participant, and received by the Company at its principal office, accompanied by this Agreement, and payment in full in the manner provided herein. The Participant may purchase less than the number of Shares covered hereby, provided that no partial exercise of the Option may be for any fractional share.

(ii)    Manner of Payment.  Payment of the exercise price may be made in cash, by certified or cashier’s check or on a cashless basis. The Participant may exercise the Option, in whole or in part, on a cashless basis determined by the following formula:

X=Y*(A-B)

A

Where    X = the number of Shares to be issued to the Participant.

Y = the number of exercised Shares.

A = the Fair Value (as defined below) of one Share (determined at the date of delivery of the Exercise Notice).

B = the Exercise Price (as adjusted to the date of such calculation).

(iii)    For the purposes of Section 3(a)(ii), Fair Value per share of Common Stock shall mean the average Closing Price (as defined below) per share of Common Stock on the five (5) trading days immediately preceding the date on which the Notice of Exercise is received by the Company. Closing Price means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market or the NASDAQ Capital Market or any other national securities exchange, the closing price per share of the Common Stock for such date (or the nearest preceding date) on the primary eligible market or exchange on which the Common Stock is then listed or quoted; (b) if prices for the Common Stock are then quoted on the OTC Bulletin Board, the closing bid price per share of the Common Stock for such date (or the nearest preceding date) so quoted; or (c) if prices for the Common Stock are then reported in the “Pink Sheets” published by the National Quotation Bureau Incorporated (or a similar organization or agency succeeding to its functions of reporting prices), the most recent closing bid price per share of the Common Stock so reported. If the Common Stock is not publicly traded as set forth above, the Fair Value per share of Common Stock shall be reasonably and in good faith determined by the Board of Directors of the Company as of the date which the Notice of Exercise is received by the Company.

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(b)    Continuous Relationship with the Company Required.  Except as otherwise provided in this Section 3, the Option may not be exercised unless the Participant, at the time he or she exercises the Option, is, and has been at all times since the Grant Date, an employee of the Company or any parent or subsidiary of the Company as defined in Section 424(e) or (f) of the Code (an “Eligible Participant”).

(c)    Termination of Relationship with the Company.  If the Participant ceases to be an Eligible Participant for any reason, then, except as provided in paragraphs (d) through (g) below, the right to exercise the Option shall terminate three months after such cessation (but in no event after the Final Exercise Date), provided that the Option shall be exercisable only to the extent that the Participant was entitled to exercise the Option on the date of such cessation.

Unless otherwise provided by the Board of Directors of the Company and except as provided in paragraph (g) below, all of the Options that have not yet vested as of the date the Participant ceases to be an Eligible Participant shall terminate immediately upon such cessation for any reason whatsoever, including cause, disability and death.

(d)    Termination for Cause. Notwithstanding anything herein contained to the contrary, the Option shall terminate upon the date of the first discovery by the Company of any reason for the termination of the Participant as an Eligible Participant for cause (as determined in the sole discretion of the Board of Directors of the Company). If the Participant’s status as an Eligible Participant is suspended pending any investigation by the Company as to whether the Participant should be terminated for cause, the Participant’s rights under this Agreement and the Plan shall likewise be suspended during the period of any such investigation.

(e)    Exercise Period Upon Disability.  If the Participant becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to the Final Exercise Date while he or she is an Eligible Participant, the Option shall be exercisable, only to the extent that the Participant was entitled to exercise the Option on the date of such disability, within the period of one year following the date of disability of the Participant, by the Participant, provided that the Option shall not be exercisable after the Final Exercise Date.

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(f)    Exercise Period Upon Death.  If the Participant dies prior to the Final Exercise Date while he or she is an Eligible Participant, the Option shall be exercisable, only to the extent that the Participant was entitled to exercise the Option on the date of death, within the period of one year following the date of death of the Participant, by the person(s) to whom the Participant’s rights under the Option shall pass by the Participant’s will or by the laws of descent and distribution, provided that the Option shall not be exercisable after the Final Exercise Date.

(g)    Termination Without Cause. Notwithstanding anything herein contained to the contrary and pursuant to an employment agreement between the Company and the Participant, if a Participant is terminated without “cause” (as defined in the applicable employment agreement between the Participant and the Company), if so provided in such employment agreement, all of the Options that have not yet vested as of the date of such termination shall vest immediately and the Option shall be exercisable, within the period of three months following the date of termination, by the Participant, provided that the Option shall not be exercisable after the Final Exercise Date.

4. Tax Matters.

(a)    Withholding.  No Shares will be issued pursuant to the exercise of the Option unless and until the Participant pays to the Company, or makes provision satisfactory to the Company for payment of, any federal, state or local withholding taxes required by law to be withheld in respect of the Option. Regardless of any action the Company or the Participant take with respect to any or all income tax (including federal, state, local and foreign tax), social insurance, payroll tax, payment on account or other tax-related items related to the Participant’s participation in the Plan and legally applicable to the Participant (“Tax-Related Items”), the Participant acknowledges that the ultimate liability for all Tax-Related Items is and remains the Participant’s responsibility and may exceed the amount actually withheld by the Company.

5. Transfer Restrictions.

(a)    The Option may not be sold, assigned, transferred, pledged or otherwise encumbered by the Participant, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the lifetime of the Participant, the Option shall be exercisable only by the Participant.

(b)    The issuance and transfer of Shares shall be subject to compliance by the Company and the Participant with all applicable requirements of federal, state, local or foreign securities laws and with all applicable requirements of any stock exchange or trading market on which the Shares may be listed at the time of such issuance or transfer.

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6. Nature of the Grant.

By entering into this Agreement and accepting the grant of the Option evidenced hereby, the Participant acknowledges that: (i) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time unless otherwise provided in the Plan and this Agreement; (ii) the grant of the Option is voluntary and occasional and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (iii) all decisions with respect to future grants, if any, will be at the sole discretion of the Company; (iv) the Participant’s participation in the Plan shall not create a right to further employment with the Company and shall not interfere with the ability of the Company to terminate the Participant’s employment relationship at any time; (v) the Participant’s participation in the Plan is voluntary; (vi) the future value of the underlying Shares is unknown and cannot be predicted with certainty, and if the Participant exercises the Option and obtains Shares, the value of those Shares may increase or decrease in value, even below the exercise price; and (vii) if the underlying Shares do not increase in value, the Option will have no value.

7. 409A Disclaimer.

This Agreement shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A of the Code. The Company reserves the right, to the extent the Company deems necessary or advisable in its sole discretion, to unilaterally amend or modify this Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Company determines are necessary or appropriate to ensure that the Option qualifies for exemption from, or complies with the requirements of, Code Section 409A; provided, however, that the Company makes no representation that the Option will be exempt from, or will comply with, Section 409A of the Code, and makes no undertakings to preclude Section 409A of the Code from applying to the Option or to ensure that it complies with Section 409A of the Code. For the avoidance of doubt, the Participant hereby acknowledges and agrees that the Company will have no liability to the Participant or any other party if the grant, vesting, exercise, issuance of shares or any other transaction under this Agreement is not exempt from, or compliant with, Code Section 409A, or for any action taken by the Company with respect thereto.

8. Additional Terms.

The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, to the extent the Company determines it is necessary or advisable in order to comply with local law or facilitate the administration of the Plan, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

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9. Investment Intent.

By accepting the Option, the Participant represents and agrees that none of the Shares of Common Stock purchased upon exercise of the Option will be distributed in violation of applicable federal and state laws and regulations. In addition, the Company may require, as a condition of exercising the Option, that the Participant execute an undertaking, in such a form as the Company shall reasonably specify, that the Shares are being purchased only for investment and without any then-present intention to sell or distribute such shares.

10. Adjustments for Stock Splits, Stock Dividends, Etc.

(a)    In the case of any recapitalization, reclassification, consolidation, stock split, stock dividend, subdivision or combination of shares or like change in the nature of the Common Stock covered by this Agreement, the number of Options and exercise price shall be proportionately adjusted.

(b)    The existence of the Options shall not affect in any way the right or power of the Company or its shareholders to make or authorize any adjustments, recapitalizations, reorganizations, or other changes in the Company’s capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or preference stocks ahead of or affecting the shares issuable upon exercise of the Options, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

11. Professional Advice.

The acceptance of the Option, exercise of the Option, and the sale of Common Stock issued following the exercise of Option may have consequences under federal and state tax and securities laws which may vary depending upon the individual circumstances of the Participant. Accordingly, the Participant acknowledges that he or she has been advised to consult his or her personal legal and tax advisor in connection with this Agreement and his or her dealings with respect to the Options. Without limiting other matters to be considered with the assistance of the Participant’s professional advisors, the Participant should consider: (a) whether upon the exercise of the Options, the Participant will file an election with the Internal Revenue Service pursuant to Section 83(b) of the Code and the implications of alternative minimum tax pursuant to the Code; (b) the merits and risks of an investment in the underlying Shares of Common Stock; and (c) any resale restrictions that might apply under applicable securities laws.

12. Provisions of the Plan.

The terms of the Options are subject to the provisions of the Plan, as the same may from time to time be amended, and any inconsistencies between this Agreement and the Plan, as the same may be from time to time amended, shall be governed by the provisions of the Plan, a copy of which has been delivered to the Participant, and which is available for inspection at the principal offices of the Company.

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13. Miscellaneous.

(a)    Disputes. Any dispute or disagreement that may arise under or as a result of this Agreement, or any question as to the interpretation of this Agreement, may be determined by the Company’s Board of Directors in its absolute and uncontrolled discretion, and any such determination shall be final, binding, and conclusive on all affected persons.

(b)    Notices. Any notice that a party may be required or permitted to give to the other shall be in writing, and may be delivered personally, by overnight courier or by certified or registered mail, postage prepaid, addressed to the parties at their current principal addresses, or such other address as either party, by notice to the other, may designate in writing from time to time.

(c)    Law Governing. This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado, without reference to the principles thereof relating to the conflict of laws.

(d)    Agreement Binding. This Agreement shall be binding upon the heirs, executors, administrators, successors and assigns of the parties hereto.

(e)    Further Action. The parties hereto shall execute and deliver all documents, provide all information and take or forbear from all such action as may be necessary or appropriate to achieve the purposes of the Agreement.

(f)    Parties of Interest. Nothing herein shall be construed to be to the benefit of any third party, nor is it intended that any provision shall be for the benefit of any third party.

(g)    Savings Clause. If any provision of this Agreement, or the application of such provision to any person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby.

[signature page follows]

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IN WITNESS WHEREOF, the Company has caused this Incentive Stock Option Agreement to be executed under its corporate seal by its duly authorized officer. This Agreement shall take effect as a sealed instrument.

EASTERN RESOURCES, INC.

By:

Name:

Title:

8

PARTICIPANT’S ACCEPTANCE

The undersigned hereby accepts the foregoing Option and agrees to the terms and conditions thereof. The undersigned hereby acknowledges receipt of a copy of Eastern Resources, Inc.’s 2012 Equity Incentive Plan.

PARTICIPANT:

Address:

EXHIBIT A

To:

Eastern Resources, Inc.

1610 Wynkoop Street, Suite 400

Denver, CO 80202

Notice of Election to Exercise

This Notice of Election to Exercise shall constitute proper notice pursuant to Eastern Resources, Inc.’s (the “Company”) 2012 Equity Incentive Plan (the “Plan”) and Section 3(a)(i) of that certain Incentive Stock Option Agreement (the “Agreement”) dated as of __________, 2012, between the Company and the undersigned.

The undersigned hereby elects to exercise Participant’s option to purchase ____________________ shares of common stock of the Company at a price of US$_______ per share, for aggregate consideration of US$__________, on the terms and conditions set forth in the Agreement and the Plan.

Payment is to be made as follows:

¨ Cash

¨ Bank or Certified Check

¨ Cashless Exercise Pursuant to Section 3(a)(ii) of this Agreement

The Optionee hereby directs the Company to issue, register and deliver the certificates representing the shares as follows:

Registration Information:	Delivery Instructions:
(Name to appear on certificates)	Name
Address:	Address:
	Telephone Number:

DATED at ______________________________, the _____ day of __________, 20_____.

(Name of Optionee – Please type or print)

(Signature and, if applicable, Title)

(Address of Optionee)

(City, State and Zip Code of Optionee)

EX-10.16

EASTERN RESOURCES, INC.

Non-Statutory Stock Option Agreement

Granted Under 2012 Equity Incentive Plan

1. Grant of Option.

This agreement (this “Agreement”) evidences the grant by Eastern Resources, Inc., a Delaware corporation (the “Company”), on __________, 2012 (the “Grant Date”) to ______________________________, an employee, director, consultant or advisor of the Company (the “Participant”), of an option (the “Option”) to purchase, in whole or in part, on the terms provided herein and in the Company’s 2012 Equity Incentive Plan (the “Plan”), a total of ______________________________ shares (the “Shares”) of common stock of the Company (“Common Stock”) at $2.00 per Share. Unless earlier terminated, this option shall expire at 5:00 p.m., Eastern Time, on __________, 2022 (the “Final Exercise Date”).

It is not intended that the Option evidenced by this Agreement be an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”). Accordingly, the Option shall be treated as a non-qualified stock option.

Except as otherwise indicated by the context, the term “Participant”, as used in this Agreement, shall be deemed to include any person who acquires the right to exercise this option validly under its terms.

The Participant agrees to report sales of Shares that were issued pursuant to Option exercises to the Company within five (5) business days after such sale is concluded. The Participant also agrees to pay to the Company, within ten (10) business days after such sale is concluded, the amount necessary for the Company to satisfy its withholding requirement required by the Code in the manner specified in Section 13 of the Plan. Nothing herein is intended as a representation that the Shares may be sold without registration under state and federal securities laws or an exemption therefrom or that such registration or exemption will be available at any specified time.

2. Vesting Schedule.

The Option will vest and become exercisable to 33.333% of the original number of Shares (__________ Shares) on each of the first, second and third anniversary of the Grant Date.

The right of exercise shall be cumulative so that to the extent the Option is not exercised in any period to the maximum extent permissible it shall continue to be exercisable, in whole or in part, with respect to all Shares for which it is vested until the earlier of the Final Exercise Date or as provided in Section 3 hereof or in the Plan.

3. Exercise of Option.

(a)    (i)     Manner of Exercise.  Each election to exercise the Option shall be in writing, in substantially the form of Notice of Election to Exercise attached hereto as Exhibit A (the “Exercise Notice”), signed by the Participant, and received by the Company at its principal office, accompanied by this Agreement, and payment in full in the manner provided herein. The Participant may purchase less than the number of Shares covered hereby, provided that no partial exercise of the Option may be for any fractional share.

(ii)     Manner of Payment.  Payment of the exercise price may be made in cash, by certified or cashier’s check or on a cashless basis. The Participant may exercise the Option, in whole or in part, on a cashless basis determined by the following formula:

X=Y*(A-B)

A

Where       X = the number of Shares to be issued to the Participant.

Y = the number of exercised Shares.

A = the Fair Value (as defined below) of one Share (determined at the date of delivery of the Exercise Notice).

B = the Exercise Price (as adjusted to the date of such calculation).

(iii)    For the purposes of Section 3(a)(ii), Fair Value per share of Common Stock shall mean the average Closing Price (as defined below) per share of Common Stock on the five (5) trading days immediately preceding the date on which the Notice of Exercise is received by the Company. Closing Price means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market or the NASDAQ Capital Market or any other national securities exchange, the closing price per share of the Common Stock for such date (or the nearest preceding date) on the primary eligible market or exchange on which the Common Stock is then listed or quoted; (b) if prices for the Common Stock are then quoted on the OTC Bulletin Board, the closing bid price per share of the Common Stock for such date (or the nearest preceding date) so quoted; or (c) if prices for the Common Stock are then reported in the “Pink Sheets” published by the National Quotation Bureau Incorporated (or a similar organization or agency succeeding to its functions of reporting prices), the most recent closing bid price per share of the Common Stock so reported. If the Common Stock is not publicly traded as set forth above, the Fair Value per share of Common Stock shall be reasonably and in good faith determined by the Board of Directors of the Company as of the date which the Notice of Exercise is received by the Company.

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(b)    Continuous Relationship with the Company Required.  Except as otherwise provided in this Section 3, the Option may not be exercised unless the Participant, at the time he or she exercises the Option, is, and has been at all times since the Grant Date, an employee, consultant, director or advisor of the Company or any parent or subsidiary of the Company as defined in Section 424(e) or (f) of the Code (an “Eligible Participant”).

(c)    Termination of Relationship with the Company.  If the Participant ceases to be an Eligible Participant for any reason, then, except as provided in paragraphs (d) through (g) below, the right to exercise the Option shall terminate three months after such cessation (but in no event after the Final Exercise Date), provided that the Option shall be exercisable only to the extent that the Participant was entitled to exercise the Option on the date of such cessation.

Unless otherwise provided by the Board of Directors of the Company and except as provided in paragraph (g) below, all of the Options that have not yet vested as of the date the Participant ceases to be an Eligible Participant shall terminate immediately upon such cessation for any reason whatsoever, including cause, disability and death.

(d)    Termination for Cause. Notwithstanding anything herein contained to the contrary, the Option shall terminate upon the date of the first discovery by the Company of any reason for the termination of the Participant as an Eligible Participant for cause (as determined in the sole discretion of the Board of Directors of the Company). If the Participant’s status as an Eligible Participant is suspended pending any investigation by the Company as to whether the Participant should be terminated for cause, the Participant’s rights under this Agreement and the Plan shall likewise be suspended during the period of any such investigation.

(e)    Exercise Period Upon Disability.  If the Participant becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to the Final Exercise Date while he or she is an Eligible Participant, the Option shall be exercisable, only to the extent that the Participant was entitled to exercise the Option on the date of such disability, within the period of one year following the date of disability of the Participant, by the Participant, provided that the Option shall not be exercisable after the Final Exercise Date.

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(f)     Exercise Period Upon Death.  If the Participant dies prior to the Final Exercise Date while he or she is an Eligible Participant, the Option shall be exercisable, only to the extent that the Participant was entitled to exercise the Option on the date of death, within the period of one year following the date of death of the Participant, by the person(s) to whom the Participant’s rights under the Option shall pass by the Participant’s will or by the laws of descent and distribution, provided that the Option shall not be exercisable after the Final Exercise Date.

(g)    Termination Without Cause. Notwithstanding anything herein contained to the contrary and pursuant to an employment agreement between the Company and the Participant,  if a Participant is terminated without “cause” (as defined in the applicable employment agreement between the Participant and the Company), if so provided in such employment agreement, all of the Options that have not yet vested as of the date of such termination shall vest immediately and the Option shall be exercisable, within the period of three months following the date of termination, by the Participant, provided that the Option shall not be exercisable after the Final Exercise Date.

4. Tax Matters.

(a)     Withholding.  No Shares will be issued pursuant to the exercise of the Option unless and until the Participant pays to the Company, or makes provision satisfactory to the Company for payment of, any federal, state or local withholding taxes required by law to be withheld in respect of the Option. Regardless of any action the Company or the Participant take with respect to any or all income tax (including federal, state, local and foreign tax), social insurance, payroll tax, payment on account or other tax-related items related to the Participant’s participation in the Plan and legally applicable to the Participant (“Tax-Related Items”), the Participant acknowledges that the ultimate liability for all Tax-Related Items is and remains the Participant’s responsibility and may exceed the amount actually withheld by the Company.

5. Transfer Restrictions.

(a)    The Option may not be sold, assigned, transferred, pledged or otherwise encumbered by the Participant, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the lifetime of the Participant, the Option shall be exercisable only by the Participant.

(b)    The issuance and transfer of Shares shall be subject to compliance by the Company and the Participant with all applicable requirements of federal, state, local or foreign securities laws and with all applicable requirements of any stock exchange or trading market on which the Shares may be listed at the time of such issuance or transfer.

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6. Nature of the Grant.

By entering into this Agreement and accepting the grant of the Option evidenced hereby, the Participant acknowledges that: (i) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time unless otherwise provided in the Plan and this Agreement; (ii) the grant of the Option is voluntary and occasional and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (iii) all decisions with respect to future grants, if any, will be at the sole discretion of the Company; (iv) the Participant’s participation in the Plan shall not create a right to further employment with the Company and shall not interfere with the ability of the Company to terminate the Participant’s employment relationship at any time; (v) the Participant’s participation in the Plan is voluntary; (vi) the future value of the underlying Shares is unknown and cannot be predicted with certainty, and if the Participant exercises the Option and obtains Shares, the value of those Shares may increase or decrease in value, even below the exercise price; and (vii) if the underlying Shares do not increase in value, the Option will have no value.

7. 409A Disclaimer.

This Agreement shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A of the Code. The Company reserves the right, to the extent the Company deems necessary or advisable in its sole discretion, to unilaterally amend or modify this Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Company determines are necessary or appropriate to ensure that the Option qualifies for exemption from, or complies with the requirements of, Code Section 409A; provided, however, that the Company makes no representation that the Option will be exempt from, or will comply with, Section 409A of the Code, and makes no undertakings to preclude Section 409A of the Code from applying to the Option or to ensure that it complies with Section 409A of the Code. For the avoidance of doubt, the Participant hereby acknowledges and agrees that the Company will have no liability to the Participant or any other party if the grant, vesting, exercise, issuance of shares or any other transaction under this Agreement is not exempt from, or compliant with, Code Section 409A, or for any action taken by the Company with respect thereto.

8. Additional Terms.

The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, to the extent the Company determines it is necessary or advisable in order to comply with local law or facilitate the administration of the Plan, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

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9. Investment Intent.

By accepting the Option, the Participant represents and agrees that none of the Shares of Common Stock purchased upon exercise of the Option will be distributed in violation of applicable federal and state laws and regulations. In addition, the Company may require, as a condition of exercising the Option, that the Participant execute an undertaking, in such a form as the Company shall reasonably specify, that the Shares are being purchased only for investment and without any then-present intention to sell or distribute such shares.

10. Adjustments for Stock Splits, Stock Dividends, Etc.

(a)     In the case of any recapitalization, reclassification, consolidation, stock split, stock dividend, subdivision or combination of shares or like change in the nature of the Common Stock covered by this Agreement, the number of Options and exercise price shall be proportionately adjusted.

(b)    The existence of the Options shall not affect in any way the right or power of the Company or its shareholders to make or authorize any adjustments, recapitalizations, reorganizations, or other changes in the Company’s capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or preference stocks ahead of or affecting the shares issuable upon exercise of the Options, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

11. Professional Advice.

The acceptance of the Option, exercise of the Option, and the sale of Common Stock issued following the exercise of Option may have consequences under federal and state tax and securities laws which may vary depending upon the individual circumstances of the Participant. Accordingly, the Participant acknowledges that he or she has been advised to consult his or her personal legal and tax advisor in connection with this Agreement and his or her dealings with respect to the Options. Without limiting other matters to be considered with the assistance of the Participant’s professional advisors, the Participant should consider: (a) whether upon the exercise of the Options, the Participant will file an election with the Internal Revenue Service pursuant to Section 83(b) of the Code and the implications of alternative minimum tax pursuant to the Code; (b) the merits and risks of an investment in the underlying Shares of Common Stock; and (c) any resale restrictions that might apply under applicable securities laws.

12. Provisions of the Plan.

The terms of the Options are subject to the provisions of the Plan, as the same may from time to time be amended, and any inconsistencies between this Agreement and the Plan, as the same may be from time to time amended, shall be governed by the provisions of the Plan, a copy of which has been delivered to the Participant, and which is available for inspection at the principal offices of the Company.

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13. Miscellaneous.

(a)    Disputes. Any dispute or disagreement that may arise under or as a result of this Agreement, or any question as to the interpretation of this Agreement, may be determined by the Company’s Board of Directors in its absolute and uncontrolled discretion, and any such determination shall be final, binding, and conclusive on all affected persons.

(b)    Notices. Any notice that a party may be required or permitted to give to the other shall be in writing, and may be delivered personally, by overnight courier or by certified or registered mail, postage prepaid, addressed to the parties at their current principal addresses, or such other address as either party, by notice to the other, may designate in writing from time to time.

(c)    Law Governing. This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado, without reference to the principles thereof relating to the conflict of laws.

(d)    Agreement Binding. This Agreement shall be binding upon the heirs, executors, administrators, successors and assigns of the parties hereto.

(e)    Further Action. The parties hereto shall execute and deliver all documents, provide all information and take or forbear from all such action as may be necessary or appropriate to achieve the purposes of the Agreement.

(f)    Parties of Interest. Nothing herein shall be construed to be to the benefit of any third party, nor is it intended that any provision shall be for the benefit of any third party.

(g)    Savings Clause. If any provision of this Agreement, or the application of such provision to any person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby.

[signature page follows]

7

IN WITNESS WHEREOF, the Company has caused this Non-Statutory Stock Option Agreement to be executed under its corporate seal by its duly authorized officer. This Agreement shall take effect as a sealed instrument.

EASTERN RESOURCES, INC.

By:

Name:

Title:

8

PARTICIPANT’S ACCEPTANCE

The undersigned hereby accepts the foregoing Option and agrees to the terms and conditions thereof. The undersigned hereby acknowledges receipt of a copy of Eastern Resources, Inc.’s 2012 Equity Incentive Plan.

PARTICIPANT:

Address:

EXHIBIT A

To:

Eastern Resources, Inc.

1610 Wynkoop Street, Suite 400

Denver, CO 80202

Notice of Election to Exercise

This Notice of Election to Exercise shall constitute proper notice pursuant to Eastern Resources, Inc.’s (the “Company”) 2012 Equity Incentive Plan (the “Plan”) and Section 3(a)(i) of that certain Non-Statutory Stock Option Agreement (the “Agreement”) dated as of __________, 2012, between the Company and the undersigned.

The undersigned hereby elects to exercise Participant’s option to purchase ____________________ shares of common stock of the Company at a price of US$_______ per share, for aggregate consideration of US$__________, on the terms and conditions set forth in the Agreement and the Plan.

Payment is to be made as follows:

¨ Cash

¨ Bank or Certified Check

¨ Cashless Exercise Pursuant to Section 3(a)(ii) of this Agreement

The Optionee hereby directs the Company to issue, register and deliver the certificates representing the shares as follows:

Registration Information:	Delivery Instructions:
(Name to appear on certificates)	Name
Address:	Address:
	Telephone Number:

DATED at ______________________________, the _____ day of __________, 20_____.

(Name of Optionee – Please type or print)

(Signature and, if applicable, Title)

(Address of Optionee)

(City, State and Zip Code of Optionee)

EX-10.17

EMPLOYMENT SERVICES AGREEMENT

This Employment Services Agreement (the “Agreement”) is entered into as of the 6th day of April, 2012, by and between EASTERN RESOURCES, INC., a Delaware corporation, with a business address of 1610 Wynkoop Street, Suite 400, Denver, CO 80202 (the “Company”), and Patrick Imeson, an individual residing at One Lincoln Park, 2001 Lincoln Street, Denver, CO 80202 (the “Executive”).

INTRODUCTION

WHEREAS, the Company desires to employ the Executive under the title and capacity set forth on Schedule A hereto and the Executive desires to be employed by the Company in such capacity, subject to the terms of this Agreement;

AGREEMENT

NOW, THEREFORE, in consideration of the premises and mutual promises herein below set forth, the parties hereby agree as follows:

1.           Employment Period. The term of the Executive’s employment by the Company (directly or through its subsidiary) pursuant to this Agreement (the “Employment Period”) shall commence upon the date hereof (the “Effective Date”) and shall continue for that period of calendar months from the Effective Date set forth on Schedule A hereto. Thereafter, the Employment Period shall automatically renew for successive periods of one (1) year each, unless either party shall have given to the other at least thirty (30) days’ prior written notice of their intention not to renew the Executive’s employment prior to the end of the Employment Period or the then applicable renewal term, as the case may be. In any event, the Employment Period may be terminated as provided herein.

2.           Employment; Duties.

(a)      General.       Subject to the terms and conditions set forth herein, the Company shall employ the Executive to act for the Company during the Employment Period in the capacity set forth on Schedule A hereto, and the Executive hereby accepts such employment. The duties and responsibilities of the Executive shall include such duties and responsibilities appropriate to such office as the Company’s Board of Directors (the “Board”) may from time to time reasonably assign to the Executive, as initially specified on Schedule A attached hereto, with such authority and responsibilities, including Company-wide executive, administrative and finance functions as are normally associated with and appropriate for such position.

(b)      Executive recognizes that during the period of Executive’s employment hereunder, Executive owes an undivided duty of loyalty to the Company, and Executive will use Executive’s good faith efforts to promote and develop the business of the Company and its subsidiaries (the Company’s subsidiaries from time to time, together with any other affiliates of the Company, the “Affiliates”). Executive shall devote all of Executive’s business time, attention and skills to the performance of Executive’s services as an executive of the Company except as set forth in Schedule A. Recognizing and acknowledging that it is essential for the protection and enhancement of the name and business of the Company and the goodwill pertaining thereto, Executive shall perform the Executive’s duties under this Agreement professionally, in accordance with the applicable laws, rules and regulations and such standards, policies and procedures established by the Company and the industry from time to time.

(c)      However, the parties agree that: (i) Executive may devote a reasonable amount of his time to civic, community, or charitable activities and may serve as a director of other corporations (provided that any such other corporation is not a competitor of the Company, as determined by the Board) and to other types of business or public activities not expressly mentioned in this paragraph and (ii) Executive may participate as a non-employee director and/or investor in other companies and projects as described by Executive to the Board, so long as Executive’s responsibilities with respect thereto do not conflict or interfere with the faithful performance of his duties to the Company.

(d)      Place of Employment. The Executive’s services shall be performed at the Company’s offices located in Denver, Colorado, any other locus where the Company now or hereafter has a business facility and at any other location where Executive’s presence is necessary to perform his duties. The parties acknowledge, however, that the Executive may be required to travel in connection with the performance of his duties hereunder.

3.           Base Salary.      The Executive shall be entitled to receive a salary from the Company during the Employment Period at a rate per year indicated on Schedule A hereto (the “Base Salary”). Once the Board has established the Base Salary, such Base Salary may be increased on each anniversary of the Effective Date, at the Board’s sole discretion. The parties expressly agree that what the Executive receives now or in the future, in addition to the regular Base Salary, whether this be in the form of benefits or regular or occasional aid/assistance, such as recreation, club memberships, meals, education for his family, vehicle, lodging or clothing, occasional bonuses or anything else he receives, during the Employment Period and any renewals thereof, in cash or in kind, shall not be deemed as salary. However, because the Company is a public company subject to the reporting requirements of, inter alia, the US Securities and Exchange Commission (the “SEC”), both parties acknowledge that the Executive’s annual compensation (as determined by the rules of the SEC or any other regulatory body or exchange having jurisdiction), which may include some or all of the foregoing, may be required to be publicly disclosed.

4.           Bonus.      (a) The Company may pay the Executive an annual bonus (the “Annual Bonus”), at such time and in such amount as may be determined by the Board in its sole discretion. The Board may or may not determine that all or any portion of the Annual Bonus shall be earned upon the achievement of operational, financial or other milestones (“Milestones”) established by the Board in consultation with the Executive and that all or any portion of any Annual Bonus shall be paid in cash, securities or other property.

(b) The Executive shall be eligible to participate in any other bonus or incentive program established by the Company for executives of the Company.

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5. Other Benefits

(a)          Stock Option Grant.    The Executive shall be entitled to receive those stock options under the Company’s 2012 Equity Incentive Plan as specified in Schedule A hereto. Any additional option grants to the Executive shall be at the option of the Board.

(b)          Insurance and Other Benefits.     During the Employment Period, the Executive and the Executive’s dependents shall be entitled to participate in the Company’s insurance programs and any ERISA benefit plans, as the same may be adopted and/or amended from time to time (the “Benefits”). The Executive shall be entitled to paid personal days on a basis consistent with the Company’s other senior executives, as determined by the Board. The Executive shall be bound by all of the policies and procedures established by the Company from time to time. However, in case any of those policies conflict with the terms of this Agreement, the terms of this Agreement shall control.

(c)          Vacation.     During the Employment Period, the Executive shall be entitled to an annual vacation of at least that number of working days set forth on Schedule A hereto.

(d)          Expense Reimbursement.    The Company shall reimburse the Executive for all reasonable business, promotional, travel and entertainment expenses incurred or paid by the Executive during the Employment Period in the performance of Executive’s services under this Agreement, provided that the Executive furnishes to the Company appropriate documentation required by the Internal Revenue Code in a timely fashion in connection with such expenses and shall furnish such other documentation and accounting as the Company may from time to time reasonably request.

6.             Termination; Compensation Due.    The Executive’s employment hereunder may terminate, and the Executive’s right to compensation for periods after the date the Executive’s employment with the Company terminates shall be determined, in accordance with the provisions of paragraphs (a) through (e) below:

(a)          Voluntary Resignation; Termination without Cause.

(i)   Voluntary Resignation.    The Executive may terminate his employment at any time upon thirty (30) days prior written notice to the Company. In the event of the Executive’s voluntary termination of his employment other than for Good Reason (as defined below), the Company shall have no obligation to make payments to the Executive in accordance with the provisions of Sections 3 or 4 above, except as otherwise required by this Agreement or by applicable law, or to provide the benefits described in Section 5 above, for periods after the date on which the Executive’s employment with the Company terminates due to the Executive’s voluntary termination, except for the payment of the Base Salary accrued through the date of such resignation.

(ii)  Termination without Cause.    The Company may terminate the Executive’s employment with the Company at any time with or without cause, by delivery to the Executive of a written notice of termination from the Chief Executive Officer of the Company.

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(A)    If the Executive’s employment is terminated by the Company without Cause (as defined below): (1) the Company shall (x) continue to pay the Executive the Base Salary (at the rate in effect on the date the Executive’s employment is terminated) until the end of the Severance Period (as defined in Section 6(e) below), (y) with respect to the Annual Bonus, to the extent the Milestones are achieved, pay the Executive a pro rata portion of the Annual Bonus for the year of the Employment Period on the date such Annual Bonus would have been payable to the Executive had the Executive remained employed by the Company, and (z) pay any other accrued compensation and Benefits; and (2) any of the Executive’s unvested stock options as outlined on Schedule A attached hereto shall automatically vest upon the Executive’s termination without Cause. The Executive shall not have any further rights under this Agreement or otherwise to receive any other compensation or benefits after such termination of employment.

(B)    If, following a termination of employment without Cause, the Executive breaches the provisions of Sections 7, 8 or 9 hereof, the Executive shall not be eligible, as of the date of such breach, for the payments and benefits described in Section 6 (a)(ii)(A) above, and any and all obligations and agreements of the Company with respect to such payments shall thereupon cease.

(b)          Discharge for Cause. Upon written notice to the Executive, the Company may terminate the Executive’s employment for “Cause” if any of the following events shall occur:

(i)    any act or omission that constitutes a material breach by the Executive of any of his obligations under this Agreement;

(ii)    the willful and continued failure or refusal of the Executive to satisfactorily perform the duties reasonably required of him as an employee of the Company;

(iii)    the Executive’s conviction of, or plea of nolo contendere to, (i) any felony or (ii) a crime involving dishonesty or moral turpitude or which could reflect negatively upon the Company or otherwise impair or impede its operations;

(iv)    the Executive’s engaging in any misconduct, negligence, act of dishonesty (including, without limitation, theft or embezzlement), violence, threat of violence or any activity that could result in any violation of federal securities laws, in each case, that is injurious to the Company or any of its Affiliates;

(v)    the Executive’s material breach of a written policy of the Company or the rules of any governmental or regulatory body applicable to the Company;

(vi)    the Executive’s refusal to follow the directions of the Board;

(vii)    any other willful misconduct by the Executive which is materially injurious to the financial condition or business reputation of the Company or any of its Affiliates, or

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(viii)    the Executive’s breach of his obligations under Section 7, 8 or 9 of this Agreement.

In the event the Executive is terminated for Cause, the Company shall have no obligation to make payments to the Executive in accordance with the provisions of Sections 3 or 4 above, or, except as otherwise required by law, to provide the benefits described in Section 5 above, for periods after the Executive’s employment with the Company is terminated on account of the Executive’s discharge for Cause except for the then applicable Base Salary accrued through the date of such termination.

(c)          Disability. The Company shall have the right, but shall not be obligated to terminate the Executive’s employment hereunder in the event the Executive becomes disabled such that he is unable to discharge his duties to the Company for a period of ninety (90) consecutive days or one hundred twenty (120) days in any one hundred eighty (180) consecutive day period, provided longer periods are not required under applicable local labor regulations (a “Permanent Disability”). In the event of a termination of employment due to a Permanent Disability, the Company shall be obligated to continue to make payments to the Executive in an amount equal to the then applicable Base Salary for the Severance Period (as defined below) after the Executive’s employment with the Company is terminated due to a Permanent Disability. A determination of a Permanent Disability shall be made by a physician satisfactory to both the Executive and the Company; provided, however, that if the Executive and the Company do not agree on a physician, the Executive and the Company shall each select a physician and those two physicians together shall select a third physician, whose determination as to a Permanent Disability shall be binding on all parties.

(d)          Death. The Executive’s employment hereunder shall terminate upon the death of the Executive. The Company shall have no obligation to make payments to the Executive in accordance with the provisions of Sections 3 or 4 above, or, except as otherwise required by law or the terms of any applicable benefit plan, to provide the benefits described in Section 5 above, for periods after the date of the Executive’s death except for then applicable Base Salary earned and accrued through the date of death, payable to the Executive or his successor.

(e)          Termination for Good Reason. The Executive may terminate this Agreement at any time for Good Reason. In the event of termination under this Section 6(e), the Company shall pay to the Executive severance in an amount equal to the then applicable Base Salary for a period equal to the number of months set forth on Schedule A hereto (the “Severance Period”), subject to the Executive’s continued compliance with Sections 7, 8 and 9 of this Agreement for the applicable Severance Period following the Executive’s termination, and subject to the Company’s regular payroll practices and required withholdings. Such severance shall be reduced by any cash remuneration paid to the Executive because of the Executive’s employment or self-employment during the Severance Period. The Executive shall continue to receive all Benefits during the Severance Period. The Executive shall not have any further rights under this Agreement or otherwise to receive any other compensation or benefits after such resignation. For the purposes of this Agreement, “Good Reason” shall mean any of the following (without Executive’s express written consent):

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(i) the assignment to the Executive of duties that are significantly different from, and that result in a substantial diminution of, the duties that he assumed on the Effective Date;

(ii) removal of the Executive from his position as indicated on Schedule A hereto, or the assignment to the Executive of duties that are significantly different from, and that result in a substantial diminution of, the duties that he assumed under this Agreement, within twelve (12) months after a Change of Control (as defined below);

(iii) a reduction by the Company in the then applicable Base Salary or other compensation, unless said reduction is pari passu with other senior executives of the Company;

(iv) the taking of any action by the Company that would, directly or indirectly, materially reduce the Executive’s benefits, unless said reductions are pari passu with other senior executives of the Company; or

(v) a breach by the Company of any material term of this Agreement that is not cured by the Company within 30 days following receipt by the Company of written notice thereof.

For purposes of this Agreement, “Change of Control” shall mean the occurrence of any one or more of the following: (i) the accumulation, whether directly, indirectly, beneficially or of record, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of 50% or more of the shares of the outstanding equity securities of the Company, (ii) a merger or consolidation of the Company in which the Company does not survive as an independent company or upon the consummation of which the holders of the Company’s outstanding equity securities prior to such merger or consolidation own less than 50% of the outstanding equity securities of the Company after such merger or consolidation, or (iii) a sale of all or substantially all of the assets of the Company; provided, however, that the following acquisitions shall not constitute a Change of Control for the purposes of this Agreement: (A) any acquisitions of common stock or securities convertible into common stock directly from the Company, or (B) any acquisition of common stock or securities convertible into common stock by any employee benefit plan (or related trust) sponsored by or maintained by the Company.

(f)    Notice of Termination.    Any termination of employment by the Company or the Executive shall be communicated by a written ‘‘Notice of Termination’’ to the other party hereto given in accordance with Section 15 of this Agreement. In the event of a termination by the Company for Cause, the Notice of Termination shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (iii) specify the date of termination, which date shall be the date of such notice. The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

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(g)    Resignation from Directorships and Officerships.    The termination of the Executive’s employment for any reason will constitute the Executive’s resignation from (i) any director, officer or employee position the Executive has with the Company or any of its Affiliates, and (ii) all fiduciary positions (including as a trustee) the Executive holds with respect to any employee benefit plans or trusts established by the Company. The Executive agrees that this Agreement shall serve as written notice of resignation in this circumstance, unless otherwise required by any plan or applicable law.

7. Non-Competition; Non-Solicitation.

(a)         For the duration of the Employment Period and, unless the Company terminates the Executive’s employment without Cause, during the Severance Period (the “Non-compete Period”), the Executive shall not, directly or indirectly, except as specifically provided in the last sentence of Section 2(c) hereof, engage or invest in, own, manage, operate, finance, control or participate in the ownership, management, operation, financing, or control of, be employed by, associated with, or in any manner connected with, lend any credit to, or render services or advice to, any business, firm, corporation, partnership, association, joint venture or other entity that engages or conducts any business the same as or substantially similar to the business of the Company or any other business engaged in or proposed to be engaged in or conducted by the Company and/or any of its Affiliates during the Employment Period, or then included in the future strategic plan of the Company and/or any of its Affiliates, anywhere within the states in which the Company or any of its Affiliates at that time is operating; provided, however, that the Executive may own less than 5% in the aggregate of the outstanding shares of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise) including those engaged in the mining business, other than any such enterprise with which the Company competes or is currently engaged in a joint venture, if such securities are listed on any national or regional securities exchange or have been registered under Section 12(b) or (g) of the Exchange Act. Notwithstanding the foregoing, if the Executive shall present to the Board any opportunity within the scope of the prohibited activities described above, and the Company shall not elect to pursue such opportunity within a reasonable time, then the Executive shall be permitted to pursue such opportunity, subject to the requirements of Section 2(c) hereof.

(b)         During the Employment Period and for a period of twelve (12) months following termination of the Executive’s employment with the Company, the Executive shall not:

(i) persuade, solicit or hire, or attempt to recruit, persuade, solicit or hire, any employee, or independent contractor of, or consultant to, the Company, or its Affiliates, to leave the employment (or independent contractor relationship) thereof, whether or not any such employee or independent contractor is party to an employment agreement; or

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(ii) attempt in any manner to solicit or accept from any customer or client of the Company or any of its Affiliates, with whom the Company or any of its Affiliates had significant contact during the term of this Agreement, business of the kind or competitive with the business done by the Company or any of its Affiliates with such customer or to persuade or attempt to persuade any such customer to cease to do business or to reduce the amount of business which such customer has customarily done or is reasonably expected to do with the Company or any of its Affiliates or if any such customer elects to move its business to a person other than the Company or any of its Affiliates, provide any services (of the kind or competitive with the Business of the Company or any of its Affiliates) for such customer, or have any discussions regarding any such service with such customer, on behalf of such other person.

The Executive recognizes and agrees that because a violation by the Executive of his obligations under this Section 7 will cause irreparable harm to the Company that would be difficult to quantify and for which money damages would be inadequate, the Company shall have the right to injunctive relief to prevent or restrain any such violation, without the necessity of posting a bond. The Non-compete Period will be extended by the duration of any violation by the Executive of any of his obligations under this Section 7.

The Executive expressly agrees that the character, duration and scope of the covenant not to compete are reasonable in light of the circumstances as they exist at the date upon which this Agreement has been executed. However, should a determination nonetheless be made by a court of competent jurisdiction at a later date that the character, duration or geographical scope of the covenant not to compete is unreasonable in light of the circumstances as they then exist, then it is the intention of the Executive, on the one hand, and the Company, on the other, that the covenant not to compete shall be construed by the court in such a manner as to impose only those restrictions on the conduct of the Executive which are reasonable in light of the circumstances as they then exist and necessary to assure the Company of the intended benefit of the covenant not to compete.

8.         Inventions and Patents.    The Executive acknowledges that all inventions, innovations, improvements, know-how, plans, development, methods, designs, analyses, specifications, software, drawings, reports and all similar or related information (whether or not patentable or reduced to practice) which related to any of the Company’s actual or proposed business activities and which are created, designed or conceived, developed or made by the Executive during the Executive’s past or future employment by the Company or any Affiliates, or any predecessor thereof (“Work Product”), belong to the Company, or its Affiliates, as applicable. Any copyrightable work falling within the definition of Work Product shall be deemed a “work made for hire” and ownership of all right title and interest shall rest in the Company. The Executive hereby irrevocably assigns, transfers and conveys, to the full extent permitted by law, all right, title and interest in the Work Product, on a worldwide basis, to the Company to the extent ownership of any such rights does not automatically vest in the Company under applicable law. The Executive will promptly disclose any such Work Product to the Company and perform all actions requested by the Company (whether during or after employment) to establish and confirm ownership of such Work Product by the Company (including, without limitation, assignments, consents, powers of attorney and other instruments).

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9. Confidentiality Covenants.

(a)         The Executive understands that the Company and/or its Affiliates, from time to time, may impart to the Executive confidential information, whether such information is written, oral or graphic.

For purposes of this Agreement, “Confidential Information” means information, which is used in the business of the Company or its Affiliates and (i) is proprietary to, about or created by the Company or its Affiliates, (ii) gives the Company or its Affiliates some competitive business advantage or the opportunity of obtaining such advantage or the disclosure of which could be detrimental to the interests of the Company or its Affiliates, (iii) is designated as Confidential Information by the Company or its Affiliates, is known by the Executive to be considered confidential by the Company or its Affiliates, or from all the relevant circumstances should reasonably be assumed by the Executive to be confidential and proprietary to the Company or its Affiliates, or (iv) is not generally known by non-Company personnel. Such Confidential Information includes, without limitation, the following types of information and other information of a similar nature (whether or not reduced to writing or designated as confidential):

(i) Internal personnel and financial information of the Company or its Affiliates, vendor information (including vendor characteristics, services, prices, lists and agreements), purchasing and internal cost information, internal service and operational manuals, and the manner and methods of conducting the business of the Company or its Affiliates;

(ii) Marketing and development plans, price and cost data, price and fee amounts, pricing and billing policies, bidding, quoting procedures, marketing techniques, forecasts and forecast assumptions and volumes, and future plans and potential strategies (including, without limitation, all information relating to any acquisition prospect and the identity of any key contact within the organization of any acquisition prospect) of the Company or its Affiliates which have been or are being discussed;

(iii) Names of customers and their representatives, contracts (including their contents and parties), customer services, and the type, quantity, specifications and content of products and services purchased, leased, licensed or received by customers of the Company or its Affiliates; and

(iv) Confidential and proprietary information provided to the Company or its Affiliates by any actual or potential customer, government agency or other third party (including businesses, consultants and other entities and individuals).

The Executive hereby acknowledges the Company’s exclusive ownership of such Confidential Information.

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(b)    The Executive agrees as follows: (1) only to use the Confidential Information to provide services to the Company and its Affiliates; (2) only to communicate the Confidential Information to fellow employees, agents and representatives on a need-to-know basis; and (3) not to otherwise disclose or use any Confidential Information, except as may be required by law or otherwise authorized by the Board. Upon demand by the Company or upon termination of the Executive’s employment, the Executive will deliver to the Company all manuals, photographs, recordings and any other instrument or device by which, through which or on which Confidential Information has been recorded and/or preserved, which are in the Executive’s possession, custody or control.

10.         Representation.    The Executive hereby represents that the Executive’s entry into this Agreement and performance of the services hereunder will not violate the terms or conditions of any other agreement to which the Executive is a party.

11.         Arbitration.    In the event of any breach arising from the performance of this Agreement, either party may request arbitration. In such event, the parties will submit to arbitration by a qualified arbitrator with the definition and laws of the State of Colorado. Such arbitration shall be final and binding on both parties.

12.         Governing Law/Jurisdiction.    This Agreement and any disputes or controversies arising hereunder shall be construed and enforced in accordance with and governed by the internal laws of the State of Colorado without regard to the conflicts of laws principles thereof.

13.         Public Company Obligations.    Executive acknowledges that the Company is a public company whose common stock has been registered under the US Securities Act of 1933, as amended (the “Securities Act”), and registered under the Exchange Act, and that this Agreement may be subject to the public filing requirements of the Exchange Act. Executive acknowledges and agrees that the applicable insider trading rules, transaction reporting rules, limitations on disclosure of non-public information and other requirements set forth in the Securities Act, the Exchange Act and rules and regulations promulgated by the SEC may apply to this Agreement and Executive’s employment with the Company. Executive (on behalf of himself, as well as the Executive’s executors, heirs, administrators and assigns), absolutely and unconditionally agrees to indemnify and hold harmless the Company and all of its past, present and future affiliates, executors, heirs, administrators, shareholders, employees, officers, directors, attorneys, accountants, agents, representatives, predecessors, successors and assigns from any and all claims, debts, demands, accounts, judgments, causes of action, equitable relief, damages, costs, charges, complaints, obligations, controversies, actions, suits, proceedings, expenses, responsibilities and liabilities of every kind and character whatsoever (including, but not limited to, reasonable attorneys’ fees and costs) in the event of Executive’s breach of any obligation of Executive under the Securities Act, the Exchange Act, any rules promulgated by the SEC and any other applicable federal, state or foreign laws, rules, regulations or orders.

14.         Entire Agreement.    This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and thereof and supersedes and cancels (i) any and all previous agreements, written and oral, regarding the subject matter hereof between the parties hereto. This Agreement shall not be changed, altered, modified or amended, except by a written agreement signed by both parties hereto.

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15.         Notices.    All notices, requests, demands and other communications called for or contemplated hereunder shall be in writing and shall be deemed to have been given when delivered to the party to whom addressed or when sent by telecopy (if promptly confirmed by registered or certified mail, return receipt requested, prepaid and addressed) to the parties, their successors in interest, or their assignees at the following addresses, or at such other addresses as the parties may designate by written notice in the manner aforesaid:

(a)         to the Company at:

Eastern Resources, Inc.

1610 Wynkoop Street, Suite 400

Denver, CO 80202

Phone: (303) 893-2334

Fax: (303) 957-5536

Attn: Eric Altman

with a copy to:

Gottbetter & Partners, LLP

488 Madison Avenue

New York, NY 10022-5718

Attn: Adam S. Gottbetter

Fax: (212) 400-6901

(b)          to the Executive at:

Address listed on Schedule A attached hereto.

All such notices, requests and other communications will (i) if delivered personally to the address as provided in this Section, be deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided for in this Section, be deemed given upon facsimile confirmation, (iii) if delivered by mail in the manner described above to the address as provided for in this Section, be deemed given on the earlier of the third business day following mailing or upon receipt and (iv) if delivered by overnight courier to the address as provided in this Section, be deemed given on the earlier of the first business day following the date sent by such overnight courier or upon receipt (in each case regardless of whether such notice, request or other communication is received by any other person to whom a copy of such notice is to be delivered pursuant to this Section). Either party may, by notice given to the other party in accordance with this Section, designate another address or person for receipt of notices hereunder.

16.         Severability.    If any term or provision of this Agreement, or the application thereof to any person or under any circumstance, shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such terms to the persons or under circumstances other than those as to which it is invalid or unenforceable, shall be considered severable and shall not be affected thereby, and each term of this Agreement shall be valid and enforceable to the fullest extent permitted by law. The invalid or unenforceable provisions shall, to the extent permitted by law, be deemed amended and given such interpretation as to achieve the economic intent of this Agreement.

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17.         Waiver.    The failure of any party to insist in any one instance or more upon strict performance of any of the terms and conditions hereof, or to exercise any right or privilege herein conferred, shall not be construed as a waiver of such terms, conditions, rights or privileges, but same shall continue to remain in full force and effect. Any waiver by any party of any violation of, breach of or default under any provision of this Agreement by the other party shall not be construed as, or constitute, a continuing waiver of such provision, or waiver of any other violation of, breach of or default under any other provision of this Agreement.

18.         Successors and Assigns.    This Agreement shall be binding upon the Company and any successors and assigns of the Company. Neither this Agreement nor any right or obligation hereunder may be assigned by the Executive. The Company may assign this Agreement and its right and obligations hereunder, in whole or in part.

19.         Counterparts.    This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.Additionally, a facsimile counterpart of this Agreement shall have the same effect as an originally executed counterpart.

20.         Headings.    Headings in this Agreement are for reference purposes only and shall not be deemed to have any substantive effect.

21.         Opportunity to Seek Advice.    The Executive acknowledges and confirms that he has had the opportunity to seek such legal, financial and other advice and representation as he has deemed appropriate in connection with this Agreement, that the Executive is fully aware of its legal effect, and that Executive has entered into it freely based on the Executive’s judgment and not on any representations or promises other than those contained in this Agreement.

22.         Withholding and Payroll Practices.    All salary, severance payments, bonuses or benefits payments made by the Company under this Agreement shall be net of any tax or other amounts required to be withheld by the Company under applicable law and shall be paid in the ordinary course pursuant to the Company’s then existing payroll practices.

[The next page is the signature page]

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IN WITNESS WHEREOF, the parties have executed this Employment Services Agreement as of the date first written above.

EXECUTIVE:
/s/ Patrick Imeson
Patrick Imeson
EASTERN RESOURCES, INC.
By:	/s/ Robert Trenaman
	Name: Robert Trenaman
	Title: Chief Operating Officer

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Schedule A

1. Employment Period: 36 calendar months.

2. Employment

Title: Chairman of Board and Chief Executive Officer

Executive Duties:

Chairman

o The Chairman is responsible for leadership of the Board. In particular, he will:

§ Ensure effective operation of the Board and its committees in conformity with the highest standards of corporate governance.

§ Ensure effective communication with shareholders, host governments and other relevant constituencies and that the views of these groups are understood by the Board.

§ Set the agenda, style and tone of Board discussions to promote constructive debate and effective decision-making.

§ Chair the Nominations Committee and build an effective and complementary Board, initiating change and planning succession on Board and Group Executive appointments.

§ Ensure that all Board committees are properly established, composed and operated.

§ Ensure comprehensive induction programmes for new directors and updates for all directors as and when necessary.

§ Support the Chief Executive in the development of strategy and, more broadly, to support and advise the Chief Executive.

§ Maintain access to senior management as is necessary and useful, but not intrude on the Chief Executive’s responsibilities.

§ Promote effective relationships and communications between non-executive directors and members of the Group Executive Committee.

§ Ensure that the performance of the Board, its main committees and individual directors is formally evaluated on an annual basis.

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§ Establish a harmonious and open relationship with the Chief Executive.

Chief Executive Officer

§ The Chief Executive is responsible for leadership of the business and managing it within the authorities delegated by the Board. In particular, he will:

§ Develop strategy proposals for recommendation to the Board and ensure that agreed strategies are reflected in the business.

§ Develop annual plans, consistent with agreed strategies, for presentation to the Board for support.

§ Plan human resourcing to ensure that the Company has the capabilities and resources required to achieve its plans.

§ Develop an organisational structure and establish processes and systems to ensure the efficient organisation of resources.

§ Be responsible to the Board for the performance of the business consistent with agreed plans, strategies and policies.

§ Lead the executive team, including the development of performance contracts and appraisals.

§ Ensure that financial results, business strategies and, where appropriate, targets and milestones are communicated to the investment community.

§ Develop and promote effective communication with shareholders and other relevant constituencies.

§ Ensure that business performance is consistent with the Business Principles.

§ Ensure that robust management succession and management development plans are in place and presented to the Board from time to time.

§ Develop processes and structures to ensure that capital investment proposals are reviewed thoroughly, that associated risks are identified and appropriate steps taken to manage the risks.

§ Develop and maintain an effective framework of internal controls over risk in relation to all business activities including the Group’s trading activities.

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§ Ensure that the flow of information to the Board is accurate, timely and clear.

§ Establish a close relationship of trust with the Chairman, reporting key developments to him in a timely manner and seeking advice and support as appropriate.

The Company recognizes that Imeson also holds the position of Managing Director for Black Diamond Financial Groups and several of its managed funds a and will be splitting his time and attention to approximately one quarter for ESRI and the remaining for Black Diamond Financial Group. This arrangement is contingent that this activity does not conflict with the interests of the Company or impairs his employment performance.

3. Base Salary: $60,000 per year.

5(a). Initial Stock Option Grant: 1,000,000

These options are intended to be issued as incentive stock options under IRC requirements.

a. Should the Company terminate the Executive without Cause pursuant to Section 6(a)(ii) of the Agreement, any unvested stock options shall automatically vest upon the Executive’s termination without Cause.

5(c). Vacation: To accrue at 1.67 days per month for a total of 20 days per annum

6(e). Severance Period: Twelve (12) Months

15(b).    Executive Contact Information:	Patrick Imeson
	One Lincoln Plark,
	2001 Lincoln Street,
	Denver, CO 80202

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EX-10.18

EMPLOYMENT SERVICES AGREEMENT

This Employment Services Agreement (the “Agreement”) is entered into as of the 6^th day of April, 2012, by and between EASTERN RESOURCES, INC., a Delaware corporation, with a business address of 1610 Wynkoop Street, Suite 400, Denver, CO 80202 (the “Company”), and Robert Trenaman, an individual residing at 4626 Lockehaven Place, North Vancouver, BC (the “Executive”).

INTRODUCTION

WHEREAS, the Company desires to employ the Executive under the title and capacity set forth on Schedule A hereto and the Executive desires to be employed by the Company in such capacity, subject to the terms of this Agreement;

AGREEMENT

NOW, THEREFORE, in consideration of the premises and mutual promises herein below set forth, the parties hereby agree as follows:

1.          Employment Period.  The term of the Executive’s employment by the Company (directly or through its subsidiary) pursuant to this Agreement (the “Employment Period”) shall commence upon the date hereof (the “Effective Date”) and shall continue for that period of calendar months from the Effective Date set forth on Schedule A hereto.  Thereafter, the Employment Period shall automatically renew for successive periods of one (1) year each, unless either party shall have given to the other at least thirty (30) days’ prior written notice of their intention not to renew the Executive’s employment prior to the end of the Employment Period or the then applicable renewal term, as the case may be.  In any event, the Employment Period may be terminated as provided herein.

2.           Employment; Duties.  

(a)          General.          Subject to the terms and conditions set forth herein, the Company shall employ the Executive to act for the Company during the Employment Period in the capacity set forth on Schedule A hereto, and the Executive hereby accepts such employment.  The duties and responsibilities of the Executive shall include such duties and responsibilities appropriate to such office as the Company’s Board of Directors (the “Board”) may from time to time reasonably assign to the Executive, as initially specified on Schedule A attached hereto, with such authority and responsibilities, including Company-wide executive, administrative and finance functions as are normally associated with and appropriate for such position.

(b)          Executive recognizes that during the period of Executive’s employment hereunder, Executive owes an undivided duty of loyalty to the Company, and Executive will use Executive’s good faith efforts to promote and develop the business of the Company and its subsidiaries (the Company’s subsidiaries from time to time, together with any other affiliates of the Company, the “Affiliates”).  Executive shall devote all of Executive’s business time, attention and skills to the performance of Executive’s services as an executive of the Company.  Recognizing and acknowledging that it is essential for the protection and enhancement of the name and business of the Company and the goodwill pertaining thereto, Executive shall perform the Executive’s duties under this Agreement professionally, in accordance with the applicable laws, rules and regulations and such standards, policies and procedures established by the Company and the industry from time to time.    

(c)          However, the parties agree that:  (i) Executive may devote a reasonable amount of his time to civic, community, or charitable activities and may serve as a director of other corporations (provided that any such other corporation is not a competitor of the Company, as determined by the Board) and to other types of business or public activities not expressly mentioned in this paragraph and (ii) Executive may participate as a non-employee director and/or investor in other companies and projects as described by Executive to the Board, so long as Executive’s responsibilities with respect thereto do not conflict or interfere with the faithful performance of his duties to the Company.  

(d)          Place of Employment.            The Executive’s services shall be performed at the Company’s offices located in Vancouver, British Columbia or Denver, Colorado, any other locus where the Company now or hereafter has a business facility and at any other location where Executive’s presence is necessary to perform his duties.  The parties acknowledge, however, that the Executive may be required to travel in connection with the performance of his duties hereunder.

3.           Base Salary.  The Executive shall be entitled to receive a salary from the Company during the Employment Period at a rate per year indicated on Schedule A hereto (the “Base Salary”).  Once the Board has established the Base Salary, such Base Salary may be increased on each anniversary of the Effective Date, at the Board’s sole discretion.  The parties expressly agree that what the Executive receives now or in the future, in addition to the regular Base Salary, whether this be in the form of benefits or regular or occasional aid/assistance, such as recreation, club memberships, meals, education for his family, vehicle, lodging or clothing, occasional bonuses or anything else he receives, during the Employment Period and any renewals thereof, in cash or in kind, shall not be deemed as salary.  However, because the Company is a public company subject to the reporting requirements of, inter alia, the US Securities and Exchange Commission (the “SEC”), both parties acknowledge that the Executive’s annual compensation (as determined by the rules of the SEC or any other regulatory body or exchange having jurisdiction), which may include some or all of the foregoing, may be required to be publicly disclosed.

4.           Bonus.  (a) The Company may pay the Executive an annual bonus (the “Annual Bonus”), at such time and in such amount as may be determined by the Board in its sole discretion.  The Board may or may not determine that all or any portion of the Annual Bonus shall be earned upon the achievement of operational, financial or other milestones (“Milestones”) established by the Board in consultation with the Executive and that all or any portion of any Annual Bonus shall be paid in cash, securities or other property.

(b) The Executive shall be eligible to participate in any other bonus or incentive program established by the Company for executives of the Company.

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5.           Other Benefits

(a)         Stock Option Grant. The Executive shall be entitled to receive those stock options under the Company’s 2012 Equity Incentive Plan as specified in Schedule A hereto.  Any additional option grants to the Executive shall be at the option of the Board.

(b)         Insurance and Other Benefits.  During the Employment Period, the Executive and the Executive’s dependents shall be entitled to participate in the Company’s insurance programs and any ERISA benefit plans, as the same may be adopted and/or amended from time to time (the “Benefits”).  The Executive shall be entitled to paid personal days on a basis consistent with the Company’s other senior executives, as determined by the Board.  The Executive shall be bound by all of the policies and procedures established by the Company from time to time.  However, in case any of those policies conflict with the terms of this Agreement, the terms of this Agreement shall control.

(c)         Vacation.  During the Employment Period, the Executive shall be entitled to an annual vacation of at least that number of working days set forth on Schedule A hereto.

(d)          Expense Reimbursement.  The Company shall reimburse the Executive for all reasonable business, promotional, travel and entertainment expenses incurred or paid by the Executive during the Employment Period in the performance of Executive’s services under this Agreement, provided that the Executive furnishes to the Company appropriate documentation required by the Internal Revenue Code in a timely fashion in connection with such expenses and shall furnish such other documentation and accounting as the Company may from time to time reasonably request.

6.           Termination; Compensation Due.  The Executive’s employment hereunder may terminate, and the Executive’s right to compensation for periods after the date the Executive’s employment with the Company terminates shall be determined, in accordance with the provisions of paragraphs (a) through (e) below:

(a)         Voluntary Resignation; Termination without Cause.  

(i) Voluntary Resignation.          The Executive may terminate his employment at any time upon thirty (30) days prior written notice to the Company.  In the event of the Executive’s voluntary termination of his employment other than for Good Reason (as defined below), the Company shall have no obligation to make payments to the Executive in accordance with the provisions of Sections 3 or 4 above, except as otherwise required by this Agreement or by applicable law, or to provide the benefits described in Section 5 above, for periods after the date on which the Executive’s employment with the Company terminates due to the Executive’s voluntary termination, except for the payment of the Base Salary accrued through the date of such resignation.

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(ii)Termination without Cause. The Company may terminate the Executive’s employment with the Company at any time with or without cause, by delivery to the Executive of a written notice of termination from the Chief Executive Officer of the Company.

(A)    If the Executive’s employment is terminated by the Company without Cause (as defined below): (1) the Company shall (x) continue to pay the Executive the Base Salary (at the rate in effect on the date the Executive’s employment is terminated) until the end of the Severance Period (as defined in Section 6(e) below), (y) with respect to the Annual Bonus, to the extent the Milestones are achieved, pay the Executive a pro rata portion of the Annual Bonus for the year of the Employment Period on the date such Annual Bonus would have been payable to the Executive had the Executive remained employed by the Company, and (z) pay any other accrued compensation and Benefits; and (2) any of the Executive’s unvested stock options as outlined on Schedule A attached hereto shall automatically vest upon the Executive’s termination without Cause. The Executive shall not have any further rights under this Agreement or otherwise to receive any other compensation or benefits after such termination of employment.

(B)    If, following a termination of employment without Cause, the Executive breaches the provisions of Sections 7, 8 or 9 hereof, the Executive shall not be eligible, as of the date of such breach, for the payments and benefits described in Section 6 (a)(ii)(A) above, and any and all obligations and agreements of the Company with respect to such payments shall thereupon cease.

(b)          Discharge for Cause.  Upon written notice to the Executive, the Company may terminate the Executive’s employment for “Cause” if any of the following events shall occur:

(i)         any act or omission that constitutes a material breach by the Executive of any of his obligations under this Agreement;

(ii)         the willful and continued failure or refusal of the Executive to satisfactorily perform the duties reasonably required of him as an employee of the Company;

(iii)         the Executive’s conviction of, or plea of nolo contendere to, (i) any felony or (ii) a crime involving dishonesty or moral turpitude or which could reflect negatively upon the Company or otherwise impair or impede its operations;

(iv)         the Executive’s engaging in any misconduct, negligence, act of dishonesty (including, without limitation, theft or embezzlement), violence, threat of violence or any activity that could result in any violation of federal securities laws, in each case, that is injurious to the Company or any of its Affiliates;

(v)         the Executive’s material breach of a written policy of the Company or the rules of any governmental or regulatory body applicable to the Company;

(vi)          the Executive’s refusal to follow the directions of the Board;

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(vii)          any other willful misconduct by the Executive which is materially injurious to the financial condition or business reputation of the Company or any of its Affiliates, or

(viii)          the Executive’s breach of his obligations under Section 7, 8 or 9 of this Agreement.

In the event the Executive is terminated for Cause, the Company shall have no obligation to make payments to the Executive in accordance with the provisions of Sections 3 or 4 above, or, except as otherwise required by law, to provide the benefits described in Section 5 above, for periods after the Executive’s employment with the Company is terminated on account of the Executive’s discharge for Cause except for the then applicable Base Salary accrued through the date of such termination.

(c)          Disability.  The Company shall have the right, but shall not be obligated to terminate the Executive’s employment hereunder in the event the Executive becomes disabled such that he is unable to discharge his duties to the Company for a period of ninety (90) consecutive days or one hundred twenty (120) days in any one hundred eighty (180) consecutive day period, provided longer periods are not required under applicable local labor regulations (a “Permanent Disability”).  In the event of a termination of employment due to a Permanent Disability, the Company shall be obligated to continue to make payments to the Executive in an amount equal to the then applicable Base Salary for the Severance Period (as defined below) after the Executive’s employment with the Company is terminated due to a Permanent Disability.  A determination of a Permanent Disability shall be made by a physician satisfactory to both the Executive and the Company; provided, however, that if the Executive and the Company do not agree on a physician, the Executive and the Company shall each select a physician and those two physicians together shall select a third physician, whose determination as to a Permanent Disability shall be binding on all parties.

(d)          Death.  The Executive’s employment hereunder shall terminate upon the death of the Executive.  The Company shall have no obligation to make payments to the Executive in accordance with the provisions of Sections 3 or 4 above, or, except as otherwise required by law or the terms of any applicable benefit plan, to provide the benefits described in Section 5 above, for periods after the date of the Executive’s death except for then applicable Base Salary earned and accrued through the date of death, payable to the Executive or his successor.

(e)          Termination for Good Reason.  The Executive may terminate this Agreement at any time for Good Reason.  In the event of termination under this Section 6(e), the Company shall pay to the Executive severance in an amount equal to the then applicable Base Salary for a period equal to the number of months set forth on Schedule A hereto (the “Severance Period”), subject to the Executive’s continued compliance with Sections 7, 8 and 9 of this Agreement for the applicable Severance Period following the Executive’s termination, and subject to the Company’s regular payroll practices and required withholdings.  Such severance shall be reduced by any cash remuneration paid to the Executive because of the Executive’s employment or self-employment during the Severance Period.  The Executive shall continue to receive all Benefits during the Severance Period.  The Executive shall not have any further rights under this Agreement or otherwise to receive any other compensation or benefits after such resignation.  For the purposes of this Agreement, “Good Reason” shall mean any of the following (without Executive’s express written consent):  

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(i) the assignment to the Executive of duties that are significantly different from, and that result in a substantial diminution of, the duties that he assumed on the Effective Date;

(ii) removal of the Executive from his position as indicated on Schedule A hereto, or the assignment to the Executive of duties that are significantly different from, and that result in a substantial diminution of, the duties that he assumed under this Agreement, within twelve (12) months after a Change of Control (as defined below);

(iii) a reduction by the Company in the then applicable Base Salary or other compensation, unless said reduction is pari passu with other senior executives of the Company;

(iv) the taking of any action by the Company that would, directly or indirectly, materially reduce the Executive’s benefits, unless said reductions are pari passu with other senior executives of the Company; or

(v) a breach by the Company of any material term of this Agreement that is not cured by the Company within 30 days following receipt by the Company of written notice thereof.

For purposes of this Agreement, “Change of Control” shall mean the occurrence of any one or more of the following: (i) the accumulation, whether directly, indirectly, beneficially or of record, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of 50% or more of the shares of the outstanding equity securities of the Company, (ii) a merger or consolidation of the Company in which the Company does not survive as an independent company or upon the consummation of which the holders of the Company’s outstanding equity securities prior to such merger or consolidation own less than 50% of the outstanding equity securities of the Company after such merger or consolidation, or (iii) a sale of all or substantially all of the assets of the Company; provided, however, that the following acquisitions shall not constitute a Change of Control for the purposes of this Agreement: (A) any acquisitions of common stock or securities convertible into common stock directly from the Company, or (B) any acquisition of common stock or securities convertible into common stock by any employee benefit plan (or related trust) sponsored by or maintained by the Company.

(f)    Notice of Termination.    Any termination of employment by the Company or the Executive shall be communicated by a written ‘‘Notice of Termination’’ to the other party hereto given in accordance with Section 15

of this Agreement. In the event of a termination by the Company for Cause, the Notice of Termination shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (iii) specify the date of termination, which date shall be the date of such notice. The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

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(g)    Resignation from Directorships and Officerships.    The termination of the Executive’s employment for any reason will constitute the Executive’s resignation from (i) any director, officer or employee position the Executive has with the Company or any of its Affiliates, and (ii) all fiduciary positions (including as a trustee) the Executive holds with respect to any employee benefit plans or trusts established by the Company. The Executive agrees that this Agreement shall serve as written notice of resignation in this circumstance, unless otherwise required by any plan or applicable law.

7.           Non-Competition; Non-Solicitation.  

(a)          For the duration of the Employment Period and, unless the Company terminates the Executive’s employment without Cause, during the Severance Period (the “Non-compete Period”), the Executive shall not, directly or indirectly, except as specifically provided in the last sentence of Section 2(c) hereof, engage or invest in, own, manage, operate, finance, control or participate in the ownership, management, operation, financing, or control of, be employed by, associated with, or in any manner connected with, lend any credit to, or render services or advice to, any business, firm, corporation, partnership, association, joint venture or other entity that engages or conducts any business the same as or substantially similar to the business of the Company or any other business engaged in or proposed to be engaged in or conducted by the Company and/or any of its Affiliates during the Employment Period, or then included in the future strategic plan of the Company and/or any of its Affiliates, anywhere within the states in which the Company or any of its Affiliates at that time is operating; provided, however, that the Executive may own less than 5% in the aggregate of the outstanding shares of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise) including those engaged in the mining business, other than any such enterprise with which the Company competes or is currently engaged in a joint venture, if such securities are listed on any national or regional securities exchange or have been registered under Section 12(b) or (g) of the Exchange Act.  Notwithstanding the foregoing, if the Executive shall present to the Board any opportunity within the scope of the prohibited activities described above, and the Company shall not elect to pursue such opportunity within a reasonable time, then the Executive shall be permitted to pursue such opportunity, subject to the requirements of Section 2(c) hereof.

(b)          During the Employment Period and for a period of twelve (12) months following termination of the Executive’s employment with the Company, the Executive shall not:

(i) persuade, solicit or hire, or attempt to recruit, persuade, solicit or hire, any employee, or independent contractor of, or consultant to, the Company, or its Affiliates, to leave the employment (or independent contractor relationship) thereof, whether or not any such employee or independent contractor is party to an employment agreement; or

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(ii) attempt in any manner to solicit or accept from any customer or client of the Company or any of its Affiliates, with whom the Company or any of its Affiliates had significant contact during the term of this Agreement, business of the kind or competitive with the business done by the Company or any of its Affiliates with such customer or to persuade or attempt to persuade any such customer to cease to do business or to reduce the amount of business which such customer has customarily done or is reasonably expected to do with the Company or any of its Affiliates or if any such customer elects to move its business to a person other than the Company or any of its Affiliates, provide any services (of the kind or competitive with the Business of the Company or any of its Affiliates) for such customer, or have any discussions regarding any such service with such customer, on behalf of such other person.

The Executive recognizes and agrees that because a violation by the Executive of his obligations under this Section 7 will cause irreparable harm to the Company that would be difficult to quantify and for which money damages would be inadequate, the Company shall have the right to injunctive relief to prevent or restrain any such violation, without the necessity of posting a bond. The Non-compete Period will be extended by the duration of any violation by the Executive of any of his obligations under this Section 7.

The Executive expressly agrees that the character, duration and scope of the covenant not to compete are reasonable in light of the circumstances as they exist at the date upon which this Agreement has been executed.  However, should a determination nonetheless be made by a court of competent jurisdiction at a later date that the character, duration or geographical scope of the covenant not to compete is unreasonable in light of the circumstances as they then exist, then it is the intention of the Executive, on the one hand, and the Company, on the other, that the covenant not to compete shall be construed by the court in such a manner as to impose only those restrictions on the conduct of the Executive which are reasonable in light of the circumstances as they then exist and necessary to assure the Company of the intended benefit of the covenant not to compete.

8.          Inventions and Patents. The Executive acknowledges that all inventions, innovations, improvements, know-how, plans, development, methods, designs, analyses, specifications, software, drawings, reports and all similar or related information (whether or not patentable or reduced to practice) which related to any of the Company’s actual or proposed business activities and which are created, designed or conceived, developed or made by the Executive during the Executive’s past or future employment by the Company or any Affiliates, or any predecessor thereof (“Work Product”), belong to the Company, or its Affiliates, as applicable.  Any copyrightable work falling within the definition of Work Product shall be deemed a “work made for hire” and ownership of all right title and interest shall rest in the Company.  The Executive hereby irrevocably assigns, transfers and conveys, to the full extent permitted by law, all right, title and interest in the Work Product, on a worldwide basis, to the Company to the extent ownership of any such rights does not automatically vest in the Company under applicable law.  The Executive will promptly disclose any such Work Product to the Company and perform all actions requested by the Company (whether during or after employment) to establish and confirm ownership of such Work Product by the Company (including, without limitation, assignments, consents, powers of attorney and other instruments).

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9.           Confidentiality Covenants.

(a)         The Executive understands that the Company and/or its Affiliates, from time to time, may impart to the Executive confidential information, whether such information is written, oral or graphic.  

For purposes of this Agreement, “Confidential Information” means information, which is used in the business of the Company or its Affiliates and (i) is proprietary to, about or created by the Company or its Affiliates, (ii) gives the Company or its Affiliates some competitive business advantage or the opportunity of obtaining such advantage or the disclosure of which could be detrimental to the interests of the Company or its Affiliates, (iii) is designated as Confidential Information by the Company or its Affiliates, is known by the Executive to be considered confidential by the Company or its Affiliates, or from all the relevant circumstances should reasonably be assumed by the Executive to be confidential and proprietary to the Company or its Affiliates, or (iv) is not generally known by non-Company personnel.  Such Confidential Information includes, without limitation, the following types of information and other information of a similar nature (whether or not reduced to writing or designated as confidential):  

(i) Internal personnel and financial information of the Company or its Affiliates, vendor information (including vendor characteristics, services, prices, lists and agreements), purchasing and internal cost information, internal service and operational manuals, and the manner and methods of conducting the business of the Company or its Affiliates;

(ii) Marketing and development plans, price and cost data, price and fee amounts, pricing and billing policies, bidding, quoting procedures, marketing techniques, forecasts and forecast assumptions and volumes, and future plans and potential strategies (including, without limitation, all information relating to any acquisition prospect and the identity of any key contact within the organization of any acquisition prospect) of the Company or its Affiliates which have been or are being discussed;

(iii) Names of customers and their representatives, contracts (including their contents and parties), customer services, and the type, quantity, specifications and content of products and services purchased, leased, licensed or received by customers of the Company or its Affiliates; and

(iv) Confidential and proprietary information provided to the Company or its Affiliates by any actual or potential customer, government agency or other third party (including businesses, consultants and other entities and individuals).

The Executive hereby acknowledges the Company’s exclusive ownership of such Confidential Information.

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(b)         The Executive agrees as follows: (1) only to use the Confidential Information to provide services to the Company and its Affiliates; (2) only to communicate the Confidential Information to fellow employees, agents and representatives on a need-to-know basis; and (3) not to otherwise disclose or use any Confidential Information, except as may be required by law or otherwise authorized by the Board. Upon demand by the Company or upon termination of the Executive’s employment, the Executive will deliver to the Company all manuals, photographs, recordings and any other instrument or device by which, through which or on which Confidential Information has been recorded and/or preserved, which are in the Executive’s possession, custody or control.

10.          Representation.  The Executive hereby represents that the Executive’s entry into this Agreement and performance of the services hereunder will not violate the terms or conditions of any other agreement to which the Executive is a party.

11.          Arbitration.  In the event of any breach arising from the performance of this Agreement, either party may request arbitration.  In such event, the parties will submit to arbitration by a qualified arbitrator with the definition and laws of the State of Colorado.  Such arbitration shall be final and binding on both parties.

12.          Governing Law/Jurisdiction.  This Agreement and any disputes or controversies arising hereunder shall be construed and enforced in accordance with and governed by the internal laws of the State of Colorado without regard to the conflicts of laws principles thereof.

13.          Public Company Obligations.  Executive acknowledges that the Company is a public company whose common stock has been registered under the US Securities Act of 1933, as amended (the “Securities Act”), and registered under the Exchange Act, and that this Agreement may be subject to the public filing requirements of the Exchange Act.  Executive acknowledges and agrees that the applicable insider trading rules, transaction reporting rules, limitations on disclosure of non-public information and other requirements set forth in the Securities Act, the Exchange Act and rules and regulations promulgated by the SEC may apply to this Agreement and Executive’s employment with the Company.  Executive (on behalf of himself, as well as the Executive’s executors, heirs, administrators and assigns), absolutely and unconditionally agrees to indemnify and hold harmless the Company and all of its past, present and future affiliates, executors, heirs, administrators, shareholders, employees, officers, directors, attorneys, accountants, agents, representatives, predecessors, successors and assigns from any and all claims, debts, demands, accounts, judgments, causes of action, equitable relief, damages, costs, charges, complaints, obligations, controversies, actions, suits, proceedings, expenses, responsibilities and liabilities of every kind and character whatsoever (including, but not limited to, reasonable attorneys’ fees and costs) in the event of Executive’s breach of any obligation of Executive under the Securities Act, the Exchange Act, any rules promulgated by the SEC and any other applicable federal, state or foreign laws, rules, regulations or orders.

14.          Entire Agreement.  This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and thereof and supersedes and cancels (i) any and all previous agreements, written and oral, regarding the subject matter hereof between the parties hereto and (ii) that certain employment agreement dated as of July 1, 2011 by and between the Executive and Elkhorn Goldfields LLC.  This Agreement shall not be changed, altered, modified or amended, except by a written agreement signed by both parties hereto.

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15.          Notices.  All notices, requests, demands and other communications called for or contemplated hereunder shall be in writing and shall be deemed to have been given when delivered to the party to whom addressed or when sent by telecopy (if promptly confirmed by registered or certified mail, return receipt requested, prepaid and addressed) to the parties, their successors in interest, or their assignees at the following addresses, or at such other addresses as the parties may designate by written notice in the manner aforesaid:

(a)          to the Company at:

Eastern Resources, Inc.

1610 Wynkoop Street, Suite 400

Denver, CO 80202

Phone: (303) 893-2334

Fax: (303) 957-5536

Attn: Eric Altman

with a copy to:

Gottbetter & Partners, LLP

488 Madison Avenue

New York, NY 10022-5718

Attn: Adam S. Gottbetter

Fax: (212) 400-6901

(b)          to the Executive at:

Address listed on Schedule A attached hereto.

All such notices, requests and other communications will (i) if delivered personally to the address as provided in this Section, be deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided for in this Section, be deemed given upon facsimile confirmation, (iii) if delivered by mail in the manner described above to the address as provided for in this Section, be deemed given on the earlier of the third business day following mailing or upon receipt and (iv) if delivered by overnight courier to the address as provided in this Section, be deemed given on the earlier of the first business day following the date sent by such overnight courier or upon receipt (in each case regardless of whether such notice, request or other communication is received by any other person to whom a copy of such notice is to be delivered pursuant to this Section).  Either party may, by notice given to the other party in accordance with this Section, designate another address or person for receipt of notices hereunder.

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16.          Severability.  If any term or provision of this Agreement, or the application thereof to any person or under any circumstance, shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such terms to the persons or under circumstances other than those as to which it is invalid or unenforceable, shall be considered severable and shall not be affected thereby, and each term of this Agreement shall be valid and enforceable to the fullest extent permitted by law.  The invalid or unenforceable provisions shall, to the extent permitted by law, be deemed amended and given such interpretation as to achieve the economic intent of this Agreement.

17.          Waiver.  The failure of any party to insist in any one instance or more upon strict performance of any of the terms and conditions hereof, or to exercise any right or privilege herein conferred, shall not be construed as a waiver of such terms, conditions, rights or privileges, but same shall continue to remain in full force and effect.  Any waiver by any party of any violation of, breach of or default under any provision of this Agreement by the other party shall not be construed as, or constitute, a continuing waiver of such provision, or waiver of any other violation of, breach of or default under any other provision of this Agreement.

18.          Successors and Assigns.  This Agreement shall be binding upon the Company and any successors and assigns of the Company.  Neither this Agreement nor any right or obligation hereunder may be assigned by the Executive.  The Company may assign this Agreement and its right and obligations hereunder, in whole or in part.

19.          Counterparts.  This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.Additionally, a facsimile counterpart of this Agreement shall have the same effect as an originally executed counterpart.

20.          Headings.  Headings in this Agreement are for reference purposes only and shall not be deemed to have any substantive effect.

21.          Opportunity to Seek Advice.  The Executive acknowledges and confirms that he has had the opportunity to seek such legal, financial and other advice and representation as he has deemed appropriate in connection with this Agreement, that the Executive is fully aware of its legal effect, and that Executive has entered into it freely based on the Executive’s judgment and not on any representations or promises other than those contained in this Agreement.

22.          Withholding and Payroll Practices.  All salary, severance payments, bonuses or benefits payments made by the Company under this Agreement shall be net of any tax or other amounts required to be withheld by the Company under applicable law and shall be paid in the ordinary course pursuant to the Company’s then existing payroll practices.

[The next page is the signature page]

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IN WITNESS WHEREOF, the parties have executed this Employment Services Agreement as of the date first written above.

EXECUTIVE:
/s/ Robert Trenaman
Robert Trenaman
EASTERN RESOURCES, INC.
By:	/s/ Patrick Imeson
	Name: Patrick Imeson
	Title: Chief Executive Officer

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Schedule A

1. Employment Period: 36 calendar months.

2. Employment

a. Title: President, Chief Operating Officer and Director

b. Executive Duties:  

To provide overall direction and guidance to the operational activities of the organization with the objective of maximizing growth and profitability with employee and environmental safety a priority as well as day-to-day leadership and management to all company operations functions

Primary Duties and Responsibilities:

i. Establishes and manages organization operations by directing and coordinating activities consistent with established goals, objectives, and policies.

ii. Implements programs to ensure attainment of business plan for growth and profit.

iii. Provides direction and structure for operating units.

iv. Implements improved processes and management methods to generate higher productivity and workflow optimization.

v. Develop and create strategies and policies aligned with organizational goals.

vi. Provide mentoring and guidance to subordinates and other employees.

vii. Follows directives set by Chief Executive Officer and Board of Directors.

Reports to the Chief Executive Officer and Board of Directors

3. Base Salary:  $225,000 per year.

5(a). Initial Stock Option Grant:  3,000,000.  These options are intended to be issued as incentive stock options under IRC requirements.

a. Should the Company terminate the Executive without Cause pursuant to Section 6(a)(ii) of the Agreement, any unvested stock options shall automatically vest upon the Executive’s termination without Cause.

5(c). Vacation:  To accrue at 1.67 days per month for a total of 20 days per annum

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6(e). Severance Period:  Twelve (12) Months

15(b).	Executive Contact Information:	Robert Trenaman
		North Vancouver, BC

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EX-10.19

EMPLOYMENT SERVICES AGREEMENT

This Employment Services Agreement (the “Agreement”) is entered into as of the 6^th day of April, 2012, by and between EASTERN RESOURCES, INC., a Delaware corporation, with a business address of 1610 Wynkoop Street, Suite 400, Denver, CO 80202 (the “Company”), and Eric Altman, an individual residing at 1800 15^th Street #200, Denver, CO 80202 (the “Executive”).

INTRODUCTION

WHEREAS, the Company desires to employ the Executive under the title and capacity set forth on Schedule A hereto and the Executive desires to be employed by the Company in such capacity, subject to the terms of this Agreement;

AGREEMENT

NOW, THEREFORE, in consideration of the premises and mutual promises herein below set forth, the parties hereby agree as follows:

1.          Employment Period.  The term of the Executive’s employment by the Company (directly or through its subsidiary) pursuant to this Agreement (the “Employment Period”) shall commence upon the date hereof (the “Effective Date”) and shall continue for that period of calendar months from the Effective Date set forth on Schedule A hereto.  Thereafter, the Employment Period shall automatically renew for successive periods of one (1) year each, unless either party shall have given to the other at least thirty (30) days’ prior written notice of their intention not to renew the Executive’s employment prior to the end of the Employment Period or the then applicable renewal term, as the case may be.  In any event, the Employment Period may be terminated as provided herein.

2.           Employment; Duties.  

(a)           General.           Subject to the terms and conditions set forth herein, the Company shall employ the Executive to act for the Company during the Employment Period in the capacity set forth on Schedule A hereto, and the Executive hereby accepts such employment.  The duties and responsibilities of the Executive shall include such duties and responsibilities appropriate to such office as the Company’s Board of Directors (the “Board”) may from time to time reasonably assign to the Executive, as initially specified on Schedule A attached hereto, with such authority and responsibilities, including Company-wide executive, administrative and finance functions as are normally associated with and appropriate for such position.

(b)           Executive recognizes that during the period of Executive’s employment hereunder, Executive owes an undivided duty of loyalty to the Company, and Executive will use Executive’s good faith efforts to promote and develop the business of the Company and its subsidiaries (the Company’s subsidiaries from time to time, together with any other affiliates of the Company, the “Affiliates”).  Executive shall devote all of Executive’s business time, attention and skills to the performance of Executive’s services as an executive of the Company except as set forth in Schedule A.  Recognizing and acknowledging that it is essential for the protection and enhancement of the name and business of the Company and the goodwill pertaining thereto, Executive shall perform the Executive’s duties under this Agreement professionally, in accordance with the applicable laws, rules and regulations and such standards, policies and procedures established by the Company and the industry from time to time.    

(c)           However, the parties agree that:  (i) Executive may devote a reasonable amount of his time to civic, community, or charitable activities and may serve as a director of other corporations (provided that any such other corporation is not a competitor of the Company, as determined by the Board) and to other types of business or public activities not expressly mentioned in this paragraph and (ii) Executive may participate as a non-employee director and/or investor in other companies and projects as described by Executive to the Board, so long as Executive’s responsibilities with respect thereto do not conflict or interfere with the faithful performance of his duties to the Company.  

(d)           Place of Employment.             The Executive’s services shall be performed at the Company’s offices located in Denver, Colorado, any other locus where the Company now or hereafter has a business facility and at any other location where Executive’s presence is necessary to perform his duties.  The parties acknowledge, however, that the Executive may be required to travel in connection with the performance of her duties hereunder.

3.           Base Salary.  The Executive shall be entitled to receive a salary from the Company during the Employment Period at a rate per year indicated on Schedule A hereto (the “Base Salary”).  Once the Board has established the Base Salary, such Base Salary may be increased on each anniversary of the Effective Date, at the Board’s sole discretion.  The parties expressly agree that what the Executive receives now or in the future, in addition to the regular Base Salary, whether this be in the form of benefits or regular or occasional aid/assistance, such as recreation, club memberships, meals, education for his family, vehicle, lodging or clothing, occasional bonuses or anything else he receives, during the Employment Period and any renewals thereof, in cash or in kind, shall not be deemed as salary.  However, because the Company is a public company subject to the reporting requirements of, inter alia, the US Securities and Exchange Commission (the “SEC”), both parties acknowledge that the Executive’s annual compensation (as determined by the rules of the SEC or any other regulatory body or exchange having jurisdiction), which may include some or all of the foregoing, may be required to be publicly disclosed.

4.           Bonus.  (a) The Company may pay the Executive an annual bonus (the “Annual Bonus”), at such time and in such amount as may be determined by the Board in its sole discretion.  The Board may or may not determine that all or any portion of the Annual Bonus shall be earned upon the achievement of operational, financial or other milestones (“Milestones”) established by the Board in consultation with the Executive and that all or any portion of any Annual Bonus shall be paid in cash, securities or other property.

(b) The Executive shall be eligible to participate in any other bonus or incentive program established by the Company for executives of the Company.

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5.           Other Benefits

(a)          Stock Option Grant.   The Executive shall be entitled to receive those stock options under the Company’s 2012 Equity Incentive Plan as specified in Schedule A hereto.  Any additional option grants to the Executive shall be at the option of the Board.

(b)           Insurance and Other Benefits.  During the Employment Period, the Executive and the Executive’s dependents shall be entitled to participate in the Company’s insurance programs and any ERISA benefit plans, as the same may be adopted and/or amended from time to time (the “Benefits”).  The Executive shall be entitled to paid personal days on a basis consistent with the Company’s other senior executives, as determined by the Board.  The Executive shall be bound by all of the policies and procedures established by the Company from time to time.  However, in case any of those policies conflict with the terms of this Agreement, the terms of this Agreement shall control.

(c)          Vacation.  During the Employment Period, the Executive shall be entitled to an annual vacation of at least that number of working days set forth on Schedule A hereto.

(d)           Expense Reimbursement.  The Company shall reimburse the Executive for all reasonable business, promotional, travel and entertainment expenses incurred or paid by the Executive during the Employment Period in the performance of Executive’s services under this Agreement, provided that the Executive furnishes to the Company appropriate documentation required by the Internal Revenue Code in a timely fashion in connection with such expenses and shall furnish such other documentation and accounting as the Company may from time to time reasonably request.

6.           Termination; Compensation Due.   The Executive’s employment hereunder may terminate, and the Executive’s right to compensation for periods after the date the Executive’s employment with the Company terminates shall be determined, in accordance with the provisions of paragraphs (a) through (e) below:

(a)          Voluntary Resignation; Termination without Cause.  

(i) Voluntary Resignation.           The Executive may terminate his employment at any time upon thirty (30) days prior written notice to the Company.  In the event of the Executive’s voluntary termination of his employment other than for Good Reason (as defined below), the Company shall have no obligation to make payments to the Executive in accordance with the provisions of Sections 3 or 4 above, except as otherwise required by this Agreement or by applicable law, or to provide the benefits described in Section 5 above, for periods after the date on which the Executive’s employment with the Company terminates due to the Executive’s voluntary termination, except for the payment of the Base Salary accrued through the date of such resignation.

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(ii)Termination without Cause. The Company may terminate the Executive’s employment with the Company at any time with or without cause, by delivery to the Executive of a written notice of termination from the Chief Executive Officer of the Company.

(A)    If the Executive’s employment is terminated by the Company without Cause (as defined below): (1) the Company shall (x) continue to pay the Executive the Base Salary (at the rate in effect on the date the Executive’s employment is terminated) until the end of the Severance Period (as defined in Section 6(e) below), (y) with respect to the Annual Bonus, to the extent the Milestones are achieved, pay the Executive a pro rata portion of the Annual Bonus for the year of the Employment Period on the date such Annual Bonus would have been payable to the Executive had the Executive remained employed by the Company, and (z) pay any other accrued compensation and Benefits; and (2) any of the Executive’s unvested stock options as outlined on Schedule A attached hereto shall automatically vest upon the Executive’s termination without Cause. The Executive shall not have any further rights under this Agreement or otherwise to receive any other compensation or benefits after such termination of employment.

(B)    If, following a termination of employment without Cause, the Executive breaches the provisions of Sections 7, 8 or 9 hereof, the Executive shall not be eligible, as of the date of such breach, for the payments and benefits described in Section 6 (a)(ii)(A) above, and any and all obligations and agreements of the Company with respect to such payments shall thereupon cease.

(b)          Discharge for Cause.  Upon written notice to the Executive, the Company may terminate the Executive’s employment for “Cause” if any of the following events shall occur:

(i)          any act or omission that constitutes a material breach by the Executive of any of his obligations under this Agreement;

(ii)         the willful and continued failure or refusal of the Executive to satisfactorily perform the duties reasonably required of him as an employee of the Company;

(iii)        the Executive’s conviction of, or plea of nolo contendere to, (i) any felony or (ii) a crime involving dishonesty or moral turpitude or which could reflect negatively upon the Company or otherwise impair or impede its operations;

(iv)        the Executive’s engaging in any misconduct, negligence, act of dishonesty (including, without limitation, theft or embezzlement), violence, threat of violence or any activity that could result in any violation of federal securities laws, in each case, that is injurious to the Company or any of its Affiliates;

(v)        the Executive’s material breach of a written policy of the Company or the rules of any governmental or regulatory body applicable to the Company;

(vi)       the Executive’s refusal to follow the directions of the Board;

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(vii)       any other willful misconduct by the Executive which is materially injurious to the financial condition or business reputation of the Company or any of its Affiliates, or

(viii)      the Executive’s breach of his obligations under Section 7, 8 or 9 of this Agreement.

In the event the Executive is terminated for Cause, the Company shall have no obligation to make payments to the Executive in accordance with the provisions of Sections 3 or 4 above, or, except as otherwise required by law, to provide the benefits described in Section 5 above, for periods after the Executive’s employment with the Company is terminated on account of the Executive’s discharge for Cause except for the then applicable Base Salary accrued through the date of such termination.

(c)           Disability.  The Company shall have the right, but shall not be obligated to terminate the Executive’s employment hereunder in the event the Executive becomes disabled such that he is unable to discharge his duties to the Company for a period of ninety (90) consecutive days or one hundred twenty (120) days in any one hundred eighty (180) consecutive day period, provided longer periods are not required under applicable local labor regulations (a “Permanent Disability”).  In the event of a termination of employment due to a Permanent Disability, the Company shall be obligated to continue to make payments to the Executive in an amount equal to the then applicable Base Salary for the Severance Period (as defined below) after the Executive’s employment with the Company is terminated due to a Permanent Disability.  A determination of a Permanent Disability shall be made by a physician satisfactory to both the Executive and the Company; provided, however, that if the Executive and the Company do not agree on a physician, the Executive and the Company shall each select a physician and those two physicians together shall select a third physician, whose determination as to a Permanent Disability shall be binding on all parties.

(d)           Death.  The Executive’s employment hereunder shall terminate upon the death of the Executive.  The Company shall have no obligation to make payments to the Executive in accordance with the provisions of Sections 3 or 4 above, or, except as otherwise required by law or the terms of any applicable benefit plan, to provide the benefits described in Section 5 above, for periods after the date of the Executive’s death except for then applicable Base Salary earned and accrued through the date of death, payable to the Executive or his successor.

(e)           Termination for Good Reason.  The Executive may terminate this Agreement at any time for Good Reason.  In the event of termination under this Section 6(e), the Company shall pay to the Executive severance in an amount equal to the then applicable Base Salary for a period equal to the number of months set forth on Schedule A hereto (the “Severance Period”), subject to the Executive’s continued compliance with Sections 7, 8 and 9 of this Agreement for the applicable Severance Period following the Executive’s termination, and subject to the Company’s regular payroll practices and required withholdings.  Such severance shall be reduced by any cash remuneration paid to the Executive because of the Executive’s employment or self-employment during the Severance Period.  The Executive shall continue to receive all Benefits during the Severance Period.  The Executive shall not have any further rights under this Agreement or otherwise to receive any other compensation or benefits after such resignation.  For the purposes of this Agreement, “Good Reason” shall mean any of the following (without Executive’s express written consent):  

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(i) the assignment to the Executive of duties that are significantly different from, and that result in a substantial diminution of, the duties that he assumed on the Effective Date;

(ii) removal of the Executive from his position as indicated on Schedule A hereto, or the assignment to the Executive of duties that are significantly different from, and that result in a substantial diminution of, the duties that he assumed under this Agreement, within twelve (12) months after a Change of Control (as defined below);

(iii) a reduction by the Company in the then applicable Base Salary or other compensation, unless said reduction is pari passu with other senior executives of the Company;

(iv) the taking of any action by the Company that would, directly or indirectly, materially reduce the Executive’s benefits, unless said reductions are pari passu with other senior executives of the Company; or

(v) a breach by the Company of any material term of this Agreement that is not cured by the Company within 30 days following receipt by the Company of written notice thereof.

For purposes of this Agreement, “Change of Control” shall mean the occurrence of any one or more of the following: (i) the accumulation, whether directly, indirectly, beneficially or of record, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of 50% or more of the shares of the outstanding equity securities of the Company, (ii) a merger or consolidation of the Company in which the Company does not survive as an independent company or upon the consummation of which the holders of the Company’s outstanding equity securities prior to such merger or consolidation own less than 50% of the outstanding equity securities of the Company after such merger or consolidation, or (iii) a sale of all or substantially all of the assets of the Company; provided, however, that the following acquisitions shall not constitute a Change of Control for the purposes of this Agreement: (A) any acquisitions of common stock or securities convertible into common stock directly from the Company, or (B) any acquisition of common stock or securities convertible into common stock by any employee benefit plan (or related trust) sponsored by or maintained by the Company.

(f)    Notice of Termination.    Any termination of employment by the Company or the Executive shall be communicated by a written ‘‘Notice of Termination’’ to the other party hereto given in accordance with Section 15 of this Agreement. In the event of a termination by the Company for Cause, the Notice of Termination shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (iii) specify the date of termination, which date shall be the date of such notice. The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

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(g)    Resignation from Directorships and Officerships.    The termination of the Executive’s employment for any reason will constitute the Executive’s resignation from (i) any director, officer or employee position the Executive has with the Company or any of its Affiliates, and (ii) all fiduciary positions (including as a trustee) the Executive holds with respect to any employee benefit plans or trusts established by the Company. The Executive agrees that this Agreement shall serve as written notice of resignation in this circumstance, unless otherwise required by any plan or applicable law.

7.           Non-Competition; Non-Solicitation.  

(a)           For the duration of the Employment Period and, unless the Company terminates the Executive’s employment without Cause, during the Severance Period (the “Non-compete Period”), the Executive shall not, directly or indirectly, except as specifically provided in the last sentence of Section 2(c) hereof, engage or invest in, own, manage, operate, finance, control or participate in the ownership, management, operation, financing, or control of, be employed by, associated with, or in any manner connected with, lend any credit to, or render services or advice to, any business, firm, corporation, partnership, association, joint venture or other entity that engages or conducts any business the same as or substantially similar to the business of the Company or any other business engaged in or proposed to be engaged in or conducted by the Company and/or any of its Affiliates during the Employment Period, or then included in the future strategic plan of the Company and/or any of its Affiliates, anywhere within the states in which the Company or any of its Affiliates at that time is operating; provided, however, that the Executive may own less than 5% in the aggregate of the outstanding shares of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise) including those engaged in the mining business, other than any such enterprise with which the Company competes or is currently engaged in a joint venture, if such securities are listed on any national or regional securities exchange or have been registered under Section 12(b) or (g) of the Exchange Act.  Notwithstanding the foregoing, if the Executive shall present to the Board any opportunity within the scope of the prohibited activities described above, and the Company shall not elect to pursue such opportunity within a reasonable time, then the Executive shall be permitted to pursue such opportunity, subject to the requirements of Section 2(c) hereof.

(b)           During the Employment Period and for a period of twelve (12) months following termination of the Executive’s employment with the Company, the Executive shall not:

(i) persuade, solicit or hire, or attempt to recruit, persuade, solicit or hire, any employee, or independent contractor of, or consultant to, the Company, or its Affiliates, to leave the employment (or independent contractor relationship) thereof, whether or not any such employee or independent contractor is party to an employment agreement; or

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(ii) attempt in any manner to solicit or accept from any customer or client of the Company or any of its Affiliates, with whom the Company or any of its Affiliates had significant contact during the term of this Agreement, business of the kind or competitive with the business done by the Company or any of its Affiliates with such customer or to persuade or attempt to persuade any such customer to cease to do business or to reduce the amount of business which such customer has customarily done or is reasonably expected to do with the Company or any of its Affiliates or if any such customer elects to move its business to a person other than the Company or any of its Affiliates, provide any services (of the kind or competitive with the Business of the Company or any of its Affiliates) for such customer, or have any discussions regarding any such service with such customer, on behalf of such other person.

The Executive recognizes and agrees that because a violation by the Executive of his obligations under this Section 7 will cause irreparable harm to the Company that would be difficult to quantify and for which money damages would be inadequate, the Company shall have the right to injunctive relief to prevent or restrain any such violation, without the necessity of posting a bond. The Non-compete Period will be extended by the duration of any violation by the Executive of any of his obligations under this Section 7.

The Executive expressly agrees that the character, duration and scope of the covenant not to compete are reasonable in light of the circumstances as they exist at the date upon which this Agreement has been executed.  However, should a determination nonetheless be made by a court of competent jurisdiction at a later date that the character, duration or geographical scope of the covenant not to compete is unreasonable in light of the circumstances as they then exist, then it is the intention of the Executive, on the one hand, and the Company, on the other, that the covenant not to compete shall be construed by the court in such a manner as to impose only those restrictions on the conduct of the Executive which are reasonable in light of the circumstances as they then exist and necessary to assure the Company of the intended benefit of the covenant not to compete.

8.           Inventions and Patents. The Executive acknowledges that all inventions, innovations, improvements, know-how, plans, development, methods, designs, analyses, specifications, software, drawings, reports and all similar or related information (whether or not patentable or reduced to practice) which related to any of the Company’s actual or proposed business activities and which are created, designed or conceived, developed or made by the Executive during the Executive’s past or future employment by the Company or any Affiliates, or any predecessor thereof (“Work Product”), belong to the Company, or its Affiliates, as applicable.  Any copyrightable work falling within the definition of Work Product shall be deemed a “work made for hire” and ownership of all right title and interest shall rest in the Company.  The Executive hereby irrevocably assigns, transfers and conveys, to the full extent permitted by law, all right, title and interest in the Work Product, on a worldwide basis, to the Company to the extent ownership of any such rights does not automatically vest in the Company under applicable law.  The Executive will promptly disclose any such Work Product to the Company and perform all actions requested by the Company (whether during or after employment) to establish and confirm ownership of such Work Product by the Company (including, without limitation, assignments, consents, powers of attorney and other instruments).

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9.           Confidentiality Covenants.

(a)          The Executive understands that the Company and/or its Affiliates, from time to time, may impart to the Executive confidential information, whether such information is written, oral or graphic.  

For purposes of this Agreement, “Confidential Information” means information, which is used in the business of the Company or its Affiliates and (i) is proprietary to, about or created by the Company or its Affiliates, (ii) gives the Company or its Affiliates some competitive business advantage or the opportunity of obtaining such advantage or the disclosure of which could be detrimental to the interests of the Company or its Affiliates, (iii) is designated as Confidential Information by the Company or its Affiliates, is known by the Executive to be considered confidential by the Company or its Affiliates, or from all the relevant circumstances should reasonably be assumed by the Executive to be confidential and proprietary to the Company or its Affiliates, or (iv) is not generally known by non-Company personnel.  Such Confidential Information includes, without limitation, the following types of information and other information of a similar nature (whether or not reduced to writing or designated as confidential):  

(i) Internal personnel and financial information of the Company or its Affiliates, vendor information (including vendor characteristics, services, prices, lists and agreements), purchasing and internal cost information, internal service and operational manuals, and the manner and methods of conducting the business of the Company or its Affiliates;

(ii) Marketing and development plans, price and cost data, price and fee amounts, pricing and billing policies, bidding, quoting procedures, marketing techniques, forecasts and forecast assumptions and volumes, and future plans and potential strategies (including, without limitation, all information relating to any acquisition prospect and the identity of any key contact within the organization of any acquisition prospect) of the Company or its Affiliates which have been or are being discussed;

(iii) Names of customers and their representatives, contracts (including their contents and parties), customer services, and the type, quantity, specifications and content of products and services purchased, leased, licensed or received by customers of the Company or its Affiliates; and

(iv) Confidential and proprietary information provided to the Company or its Affiliates by any actual or potential customer, government agency or other third party (including businesses, consultants and other entities and individuals).

The Executive hereby acknowledges the Company’s exclusive ownership of such Confidential Information.

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(b)          The Executive agrees as follows: (1) only to use the Confidential Information to provide services to the Company and its Affiliates; (2) only to communicate the Confidential Information to fellow employees, agents and representatives on a need-to-know basis; and (3) not to otherwise disclose or use any Confidential Information, except as may be required by law or otherwise authorized by the Board. Upon demand by the Company or upon termination of the Executive’s employment, the Executive will deliver to the Company all manuals, photographs, recordings and any other instrument or device by which, through which or on which Confidential Information has been recorded and/or preserved, which are in the Executive’s possession, custody or control.

10.           Representation.  The Executive hereby represents that the Executive’s entry into this Agreement and performance of the services hereunder will not violate the terms or conditions of any other agreement to which the Executive is a party.

11.           Arbitration.  In the event of any breach arising from the performance of this Agreement, either party may request arbitration.  In such event, the parties will submit to arbitration by a qualified arbitrator with the definition and laws of the State of Colorado.  Such arbitration shall be final and binding on both parties.

12.           Governing Law/Jurisdiction.  This Agreement and any disputes or controversies arising hereunder shall be construed and enforced in accordance with and governed by the internal laws of the State of Colorado without regard to the conflicts of laws principles thereof.

13.           Public Company Obligations.  Executive acknowledges that the Company is a public company whose common stock has been registered under the US Securities Act of 1933, as amended (the “Securities Act”), and registered under the Exchange Act, and that this Agreement may be subject to the public filing requirements of the Exchange Act.  Executive acknowledges and agrees that the applicable insider trading rules, transaction reporting rules, limitations on disclosure of non-public information and other requirements set forth in the Securities Act, the Exchange Act and rules and regulations promulgated by the SEC may apply to this Agreement and Executive’s employment with the Company.  Executive (on behalf of himself, as well as the Executive’s executors, heirs, administrators and assigns), absolutely and unconditionally agrees to indemnify and hold harmless the Company and all of its past, present and future affiliates, executors, heirs, administrators, shareholders, employees, officers, directors, attorneys, accountants, agents, representatives, predecessors, successors and assigns from any and all claims, debts, demands, accounts, judgments, causes of action, equitable relief, damages, costs, charges, complaints, obligations, controversies, actions, suits, proceedings, expenses, responsibilities and liabilities of every kind and character whatsoever (including, but not limited to, reasonable attorneys’ fees and costs) in the event of Executive’s breach of any obligation of Executive under the Securities Act, the Exchange Act, any rules promulgated by the SEC and any other applicable federal, state or foreign laws, rules, regulations or orders.

14.           Entire Agreement.  This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and thereof and supersedes and cancels (i) any and all previous agreements, written and oral, regarding the subject matter hereof between the parties hereto.  This Agreement shall not be changed, altered, modified or amended, except by a written agreement signed by both parties hereto.

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15.           Notices.  All notices, requests, demands and other communications called for or contemplated hereunder shall be in writing and shall be deemed to have been given when delivered to the party to whom addressed or when sent by telecopy (if promptly confirmed by registered or certified mail, return receipt requested, prepaid and addressed) to the parties, their successors in interest, or their assignees at the following addresses, or at such other addresses as the parties may designate by written notice in the manner aforesaid:

(a)           to the Company at:

Eastern Resources, Inc.

1610 Wynkoop Street, Suite 400

Denver, CO 80202

Phone: (303) 893-2334

Fax: (303) 957-5536

Attn: Patrick Imeson

with a copy to:

Gottbetter & Partners, LLP

488 Madison Avenue

New York, NY 10022-5718

Attn: Adam S. Gottbetter

Fax: (212) 400-6901

(b)           to the Executive at:

Address listed on Schedule A attached hereto.

All such notices, requests and other communications will (i) if delivered personally to the address as provided in this Section, be deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided for in this Section, be deemed given upon facsimile confirmation, (iii) if delivered by mail in the manner described above to the address as provided for in this Section, be deemed given on the earlier of the third business day following mailing or upon receipt and (iv) if delivered by overnight courier to the address as provided in this Section, be deemed given on the earlier of the first business day following the date sent by such overnight courier or upon receipt (in each case regardless of whether such notice, request or other communication is received by any other person to whom a copy of such notice is to be delivered pursuant to this Section).  Either party may, by notice given to the other party in accordance with this Section, designate another address or person for receipt of notices hereunder.

16.           Severability.  If any term or provision of this Agreement, or the application thereof to any person or under any circumstance, shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such terms to the persons or under circumstances other than those as to which it is invalid or unenforceable, shall be considered severable and shall not be affected thereby, and each term of this Agreement shall be valid and enforceable to the fullest extent permitted by law.  The invalid or unenforceable provisions shall, to the extent permitted by law, be deemed amended and given such interpretation as to achieve the economic intent of this Agreement.

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17.           Waiver.  The failure of any party to insist in any one instance or more upon strict performance of any of the terms and conditions hereof, or to exercise any right or privilege herein conferred, shall not be construed as a waiver of such terms, conditions, rights or privileges, but same shall continue to remain in full force and effect.  Any waiver by any party of any violation of, breach of or default under any provision of this Agreement by the other party shall not be construed as, or constitute, a continuing waiver of such provision, or waiver of any other violation of, breach of or default under any other provision of this Agreement.

18.           Successors and Assigns.  This Agreement shall be binding upon the Company and any successors and assigns of the Company.  Neither this Agreement nor any right or obligation hereunder may be assigned by the Executive.  The Company may assign this Agreement and its right and obligations hereunder, in whole or in part.

19.           Counterparts.  This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.

20.           Headings.  Headings in this Agreement are for reference purposes only and shall not be deemed to have any substantive effect.

21.           Opportunity to Seek Advice.  The Executive acknowledges and confirms that he has had the opportunity to seek such legal, financial and other advice and representation as he has deemed appropriate in connection with this Agreement, that the Executive is fully aware of its legal effect, and that Executive has entered into it freely based on the Executive’s judgment and not on any representations or promises other than those contained in this Agreement.

22.           Withholding and Payroll Practices.  All salary, severance payments, bonuses or benefits payments made by the Company under this Agreement shall be net of any tax or other amounts required to be withheld by the Company under applicable law and shall be paid in the ordinary course pursuant to the Company’s then existing payroll practices.

[The next page is the signature page]

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

EXECUTIVE:
/s/ Eric Altman
Eric Altman
EASTERN RESOURCES, INC.
By:	/s/ Patrick Imeson
	Name: Patrick Imeson
	Title: Chief Executive Officer

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Schedule A

1. Employment Period:  36 calendar months.

2. Employment

a. Title: Vice-President Finance, Chief Financial Officer and Treasurer

b. Executive Duties:  

The CFO supervises the finance unit and is the chief financial spokesperson for the organization. The CFO reports directly to the President/Chief Executive Officer (CEO) and directly assists the Chief Operating Officer (COO) on all strategic and tactical matters as they relate to budget management, cost benefit analysis, forecasting needs and the securing of new funding.

DUTIES AND RESPONSIBILITIES

· Assist in performing all tasks necessary to achieve the organization’s mission and help execute staff succession and growth plans.

· Train the Finance Unit and other staff on raising awareness and knowledge of financial management matters.

· Work with the President/CEO on the strategic vision including fostering and cultivating stakeholder relationships on city, state, and national levels, as well as assisting in the development and negotiation of contracts.

· Participate in developing new business, specifically: assist the CEO and COO in identifying new funding opportunities, the drafting of prospective programmatic budgets, and determining cost effectiveness of prospective service delivery.

· Assess the benefits of all prospective contracts and advise the Executive Team on programmatic design and implementation matters.

· Ensure adequate controls are installed and that substantiating documentation is approved and available such that all purchases may pass independent and governmental audits.

· Provide the COO with an operating budget. Work with the COO to ensure programmatic success through cost analysis support, and compliance with all contractual and programmatic requirements. This includes: 1) interpreting legislative and programmatic rules and regulations to ensure compliance with all federal, state, local and contractual guidelines, 2) ensuring that all government regulations and requirements are disseminated to appropriate personnel, and 3) monitoring compliance.

· Oversee the management and coordination of all fiscal reporting activities for the organization including: organizational revenue/expense and balance sheet reports, reports to funding agencies, development and monitoring of organizational and contract/grant budgets.

· Oversee all purchasing and payroll activity for staff and participants.

· Develop and maintain systems of internal controls to safeguard financial assets of the organization and oversee federal awards and programs. Oversee the coordination and activities of independent auditors ensuring all A-133 audit issues are resolved, and all 403(b) compliance issues are met, and the preparation of the annual financial statements is in accordance with U.S. GAAP and federal, state and other required supplementary schedules and information.

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· Attend Board and Subcommittee meetings; including being the lead staff on the Audit/Finance Committee.

· Monitor banking activities of the organization.

· Ensure adequate cash flow to meet the organization’s needs.

· Oversee the production of monthly reports including reconciliations with funders and pension plan requirements, as well as financial statements and cash flow projections for use by Executive management, as well as the Audit/Finance Committee and Board of Directors.

· Assist in the design, implementation, and timely calculations of wage incentives, commissions, and salaries for the staff.

The Company recognizes that Smith also holds the position of Chief Financial Officer for Black Diamond Financial Groups and several of its managed funds and holdings including but not limited to Transnetyx Holdings Inc. and will be splitting his time and attention to approximately one third for ESRI and one third Transnetyx Holdings Inc. and one third Black Diamond Financial Group.  This arrangement is contingent that this activity does not conflict with the interests of the Company or impairs his employment performance.

3. Base Salary:  $60,000 per year.

5(a). Initial Stock Option Grant:  500,000

These options are intended to be issued as incentive stock options under IRC requirements.

a. Should the Company terminate the Executive without Cause pursuant to Section 6(a)(ii) of the Agreement, any unvested stock options shall automatically vest upon the Executive’s termination without Cause.

5(c). Vacation:  To accrue at 1.67 days per month for a total of 20 days per annum

6(e). Severance Period:  Twelve (12) Months

15(b).	Executive Contact Information:	Eric Altman
		1800 15th Street #200
		Denver, CO 80202

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EX-10.20

EMPLOYMENT SERVICES AGREEMENT

This Employment Services Agreement (the “Agreement”) is entered into as of the 6^th day of April 2012, by and between EASTERN RESOURCES, INC., a Delaware corporation, with a business address of 1610 Wynkoop Street, Suite 400, Denver, CO 80202 (the “Company”), and Timothy G. Smith, an individual residing at 8953 Jackpine Drive, Helena, MT 59602 (the “Executive”).

INTRODUCTION

WHEREAS, the Company desires to employ the Executive under the title and capacity set forth on Schedule A hereto and the Executive desires to be employed by the Company in such capacity, subject to the terms of this Agreement;

AGREEMENT

NOW, THEREFORE, in consideration of the premises and mutual promises herein below set forth, the parties hereby agree as follows:

1.          Employment Period. The term of the Executive’s employment by the Company (directly or through its subsidiary Montana Tunnels, Inc.) pursuant to this Agreement (the “Employment Period”) shall commence upon the date hereof (the “Effective Date”) and shall continue for that period of calendar months from the Effective Date set forth on Schedule A hereto. Thereafter, the Employment Period shall automatically renew for successive periods of one (1) year each, unless either party shall have given to the other at least thirty (30) days’ prior written notice of their intention not to renew the Executive’s employment prior to the end of the Employment Period or the then applicable renewal term, as the case may be. In any event, the Employment Period may be terminated as provided herein.

2.          Employment; Duties.

(a)          General.         Subject to the terms and conditions set forth herein, the Company shall employ the Executive to act for the Company during the Employment Period in the capacity set forth on Schedule A hereto, and the Executive hereby accepts such employment. The duties and responsibilities of the Executive shall include such duties and responsibilities appropriate to such office as the Company’s Board of Directors (the “Board”) may from time to time reasonably assign to the Executive, as initially specified on Schedule A attached hereto, with such authority and responsibilities, including Company-wide executive, administrative and finance functions as are normally associated with and appropriate for such position.

(b)          Executive recognizes that during the period of Executive’s employment hereunder, Executive owes an undivided duty of loyalty to the Company, and Executive will use Executive’s good faith efforts to promote and develop the business of the Company and its subsidiaries (the Company’s subsidiaries from time to time, together with any other affiliates of the Company, the “Affiliates”). Executive shall devote all of Executive’s business time, attention and skills to the performance of Executive’s services as an executive of the Company except as set forth in Schedule A. Recognizing and acknowledging that it is essential for the protection and enhancement of the name and business of the Company and the goodwill pertaining thereto, Executive shall perform the Executive’s duties under this Agreement professionally, in accordance with the applicable laws, rules and regulations and such standards, policies and procedures established by the Company and the industry from time to time.

(c)          However, the parties agree that: (i) Executive may devote a reasonable amount of his time to civic, community, or charitable activities and may serve as a director of other corporations (provided that any such other corporation is not a competitor of the Company, as determined by the Board) and to other types of business or public activities not expressly mentioned in this paragraph and (ii) Executive may participate as a non-employee director and/or investor in other companies and projects as described by Executive to the Board, so long as Executive’s responsibilities with respect thereto do not conflict or interfere with the faithful performance of his duties to the Company.

(d)          Place of Employment.          The Executive’s services shall be performed at the Company’s offices located at the Montana Tunnels Mine office near Jefferson City, Montana, any other locus where the Company now or hereafter has a business facility and at any other location where Executive’s presence is necessary to perform his duties. The parties acknowledge, however, that the Executive may be required to travel in connection with the performance of his duties hereunder.

3.          Base Salary. The Executive shall be entitled to receive a salary from the Company during the Employment Period at a rate per year indicated on Schedule A hereto (the “Base Salary”). Once the Board has established the Base Salary, such Base Salary may be increased on each anniversary of the Effective Date, at the Board’s sole discretion. The parties expressly agree that what the Executive receives now or in the future, in addition to the regular Base Salary, whether this be in the form of benefits or regular or occasional aid/assistance, such as recreation, club memberships, meals, education for his family, vehicle, lodging or clothing, occasional bonuses or anything else he receives, during the Employment Period and any renewals thereof, in cash or in kind, shall not be deemed as salary. However, because the Company is a public company subject to the reporting requirements of, inter alia, the US Securities and Exchange Commission (the “SEC”), both parties acknowledge that the Executive’s annual compensation (as determined by the rules of the SEC or any other regulatory body or exchange having jurisdiction), which may include some or all of the foregoing, may be required to be publicly disclosed.

4.          Bonus. (a) The Company may pay the Executive an annual bonus (the “Annual Bonus”), at such time and in such amount as may be determined by the Board in its sole discretion. The Board may or may not determine that all or any portion of the Annual Bonus shall be earned upon the achievement of operational, financial or other milestones (“Milestones”) established by the Board in consultation with the Executive and that all or any portion of any Annual Bonus shall be paid in cash, securities or other property.

(b) The Executive shall be eligible to participate in any other bonus or incentive program established by the Company for executives of the Company.

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5.          Other Benefits

(a)          Stock Option Grant.         The Executive shall be entitled to receive those stock options under the Company’s 2012 Equity Incentive Plan as specified in Schedule A hereto. Any additional option grants to the Executive shall be at the option of the Board.

(b)          Insurance and Other Benefits. During the Employment Period, the Executive and the Executive’s dependents shall be entitled to participate in the Company’s insurance programs and any ERISA benefit plans, as the same may be adopted and/or amended from time to time (the “Benefits”). The Executive shall be entitled to paid personal days on a basis consistent with the Company’s other senior executives, as determined by the Board. The Executive shall be bound by all of the policies and procedures established by the Company from time to time. However, in case any of those policies conflict with the terms of this Agreement, the terms of this Agreement shall control.

(c)          Vacation. During the Employment Period, the Executive shall be entitled to an annual vacation of at least that number of working days set forth on Schedule A hereto.

(d)          Expense Reimbursement. The Company shall reimburse the Executive for all reasonable business, promotional, travel and entertainment expenses incurred or paid by the Executive during the Employment Period in the performance of Executive’s services under this Agreement, provided that the Executive furnishes to the Company appropriate documentation required by the Internal Revenue Code in a timely fashion in connection with such expenses and shall furnish such other documentation and accounting as the Company may from time to time reasonably request.

6.          Termination; Compensation Due. The Executive’s employment hereunder may terminate, and the Executive’s right to compensation for periods after the date the Executive’s employment with the Company terminates shall be determined, in accordance with the provisions of paragraphs (a) through (e) below:

(a)          Voluntary Resignation; Termination without Cause.

(i) Voluntary Resignation.         The Executive may terminate his employment at any time upon thirty (30) days prior written notice to the Company. In the event of the Executive’s voluntary termination of his employment other than for Good Reason (as defined below), the Company shall have no obligation to make payments to the Executive in accordance with the provisions of Sections 3 or 4 above, except as otherwise required by this Agreement or by applicable law, or to provide the benefits described in Section 5 above, for periods after the date on which the Executive’s employment with the Company terminates due to the Executive’s voluntary termination, except for the payment of the Base Salary accrued through the date of such resignation.

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(ii)Termination without Cause. The Company may terminate the Executive’s employment with the Company at any time with or without cause, by delivery to the Executive of a written notice of termination from the Chief Executive Officer of the Company.

(A)    If the Executive’s employment is terminated by the Company without Cause (as defined below): (1) the Company shall (x) continue to pay the Executive the Base Salary (at the rate in effect on the date the Executive’s employment is terminated) until the end of the Severance Period (as defined in Section 6(e) below), (y) with respect to the Annual Bonus, to the extent the Milestones are achieved, pay the Executive a pro rata portion of the Annual Bonus for the year of the Employment Period on the date such Annual Bonus would have been payable to the Executive had the Executive remained employed by the Company, and (z) pay any other accrued compensation and Benefits; and (2) any of the Executive’s unvested stock options as outlined on Schedule A attached hereto shall automatically vest upon the Executive’s termination without Cause. TheExecutive shall not have any further rights under this Agreement or otherwise to receive any other compensation or benefits after such termination of employment.

(B)    If, following a termination of employment without Cause, the Executive breaches the provisions of Sections 7, 8 or 9 hereof, the Executive shall not be eligible, as of the date of such breach, for the payments and benefits described in Section 6 (a)(ii)(A) above, and any and all obligations and agreements of the Company with respect to such payments shall thereupon cease.

(b)          Discharge for Cause. Upon written notice to the Executive, the Company may terminate the Executive’s employment for “Cause” if any of the following events shall occur:

(i)          any act or omission that constitutes a material breach by the Executive of any of his obligations under this Agreement;

(ii)         the willful and continued failure or refusal of the Executive to satisfactorily perform the duties reasonably required of him as an employee of the Company;

(iii)        the Executive’s conviction of, or plea of nolo contendere to, (i) any felony or (ii) a crime involving dishonesty or moral turpitude or which could reflect negatively upon the Company or otherwise impair or impede its operations;

(iv)        the Executive’s engaging in any misconduct, negligence, act of dishonesty (including, without limitation, theft or embezzlement), violence, threat of violence or any activity that could result in any violation of federal securities laws, in each case, that is injurious to the Company or any of its Affiliates;

(v)         the Executive’s material breach of a written policy of the Company or the rules of any governmental or regulatory body applicable to the Company;

(vi)        the Executive’s refusal to follow the directions of the Board;

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(vii)       any other willful misconduct by the Executive which is materially injurious to the financial condition or business reputation of the Company or any of its Affiliates, or

(viii)      the Executive’s breach of his obligations under Section 7, 8 or 9 of this Agreement.

In the event the Executive is terminated for Cause, the Company shall have no obligation to make payments to the Executive in accordance with the provisions of Sections 3 or 4 above, or, except as otherwise required by law, to provide the benefits described in Section 5 above, for periods after the Executive’s employment with the Company is terminated on account of the Executive’s discharge for Cause except for the then applicable Base Salary accrued through the date of such termination.

(c)          Disability. The Company shall have the right, but shall not be obligated to terminate the Executive’s employment hereunder in the event the Executive becomes disabled such that he is unable to discharge his duties to the Company for a period of ninety (90) consecutive days or one hundred twenty (120) days in any one hundred eighty (180) consecutive day period, provided longer periods are not required under applicable local labor regulations (a “Permanent Disability”). In the event of a termination of employment due to a Permanent Disability, the Company shall be obligated to continue to make payments to the Executive in an amount equal to the then applicable Base Salary for the Severance Period (as defined below) after the Executive’s employment with the Company is terminated due to a Permanent Disability. A determination of a Permanent Disability shall be made by a physician satisfactory to both the Executive and the Company; provided, however, that if the Executive and the Company do not agree on a physician, the Executive and the Company shall each select a physician and those two physicians together shall select a third physician, whose determination as to a Permanent Disability shall be binding on all parties.

(d)          Death. The Executive’s employment hereunder shall terminate upon the death of the Executive. The Company shall have no obligation to make payments to the Executive in accordance with the provisions of Sections 3 or 4 above, or, except as otherwise required by law or the terms of any applicable benefit plan, to provide the benefits described in Section 5 above, for periods after the date of the Executive’s death except for then applicable Base Salary earned and accrued through the date of death, payable to the Executive or his successor.

(e)          Termination for Good Reason. The Executive may terminate this Agreement at any time for Good Reason. In the event of termination under this Section 6(e), the Company shall pay to the Executive severance in an amount equal to the then applicable Base Salary for a period equal to the number of months set forth on Schedule A hereto (the “Severance Period”), subject to the Executive’s continued compliance with Sections 7, 8 and 9 of this Agreement for the applicable Severance Period following the Executive’s termination, and subject to the Company’s regular payroll practices and required withholdings. Such severance shall be reduced by any cash remuneration paid to the Executive because of the Executive’s employment or self-employment during the Severance Period. The Executive shall continue to receive all Benefits during the Severance Period. The Executive shall not have any further rights under this Agreement or otherwise to receive any other compensation or benefits after such resignation. For the purposes of this Agreement, “Good Reason” shall mean any of the following (without Executive’s express written consent):

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(i) the assignment to the Executive of duties that are significantly different from, and that result in a substantial diminution of, the duties that he assumed on the Effective Date;

(ii) removal of the Executive from his position as indicated on Schedule A hereto, or the assignment to the Executive of duties that are significantly different from, and that result in a substantial diminution of, the duties that he assumed under this Agreement, within twelve (12) months after a Change of Control (as defined below);

(iii) a reduction by the Company in the then applicable Base Salary or other compensation, unless said reduction is pari passu with other senior executives of the Company;

(iv) the taking of any action by the Company that would, directly or indirectly, materially reduce the Executive’s benefits, unless said reductions are pari passu with other senior executives of the Company; or

(v) a breach by the Company of any material term of this Agreement that is not cured by the Company within 30 days following receipt by the Company of written notice thereof.

For purposes of this Agreement, “Change of Control” shall mean the occurrence of any one or more of the following: (i) the accumulation, whether directly, indirectly, beneficially or of record, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of 50% or more of the shares of the outstanding equity securities of the Company, (ii) a merger or consolidation of the Company in which the Company does not survive as an independent company or upon the consummation of which the holders of the Company’s outstanding equity securities prior to such merger or consolidation own less than 50% of the outstanding equity securities of the Company after such merger or consolidation, or (iii) a sale of all or substantially all of the assets of the Company; provided, however, that the following acquisitions shall not constitute a Change of Control for the purposes of this Agreement: (A) any acquisitions of common stock or securities convertible into common stock directly from the Company, or (B) any acquisition of common stock or securities convertible into common stock by any employee benefit plan (or related trust) sponsored by or maintained by the Company.

(f)    Notice of Termination.    Any termination of employment by the Company or the Executive shall be communicated by a written ‘‘Notice of Termination’’ to the other party hereto given in accordance with Section 15 of this Agreement. In the event of a termination by the Company for Cause, the Notice of Termination shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (iii) specify the date of termination, which date shall be the date of such notice. The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

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(g)    Resignation from Directorships and Officerships.    The termination of the Executive’s employment for any reason will constitute the Executive’s resignation from (i) any director, officer or employee position the Executive has with the Company or any of its Affiliates, and (ii) all fiduciary positions (including as a trustee) the Executive holds with respect to any employee benefit plans or trusts established by the Company. The Executive agrees that this Agreement shall serve as written notice of resignation in this circumstance, unless otherwise required by any plan or applicable law.

7.          Non-Competition; Non-Solicitation.

(a)          For the duration of the Employment Period and, unless the Company terminates the Executive’s employment without Cause, during the Severance Period (the “Non-compete Period”), the Executive shall not, directly or indirectly, except as specifically provided in the last sentence of Section 2(c) hereof, engage or invest in, own, manage, operate, finance, control or participate in the ownership, management, operation, financing, or control of, be employed by, associated with, or in any manner connected with, lend any credit to, or render services or advice to, any business, firm, corporation, partnership, association, joint venture or other entity that engages or conducts any business the same as or substantially similar to the business of the Company or any other business engaged in or proposed to be engaged in or conducted by the Company and/or any of its Affiliates during the Employment Period, or then included in the future strategic plan of the Company and/or any of its Affiliates, anywhere within the states in which the Company or any of its Affiliates at that time is operating; provided, however, that the Executive may own less than 5% in the aggregate of the outstanding shares of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise) including those engaged in the mining business, other than any such enterprise with which the Company competes or is currently engaged in a joint venture, if such securities are listed on any national or regional securities exchange or have been registered under Section 12(b) or (g) of the Exchange Act. Notwithstanding the foregoing, if the Executive shall present to the Board any opportunity within the scope of the prohibited activities described above, and the Company shall not elect to pursue such opportunity within a reasonable time, then the Executive shall be permitted to pursue such opportunity, subject to the requirements of Section 2(c) hereof.

(b)          During the Employment Period and for a period of twelve (12) months following termination of the Executive’s employment with the Company, the Executive shall not:

(i) persuade, solicit or hire, or attempt to recruit, persuade, solicit or hire, any employee, or independent contractor of, or consultant to, the Company, or its Affiliates, to leave the employment (or independent contractor relationship) thereof, whether or not any such employee or independent contractor is party to an employment agreement; or

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(ii) attempt in any manner to solicit or accept from any customer or client of the Company or any of its Affiliates, with whom the Company or any of its Affiliates had significant contact during the term of this Agreement, business of the kind or competitive with the business done by the Company or any of its Affiliates with such customer or to persuade or attempt to persuade any such customer to cease to do business or to reduce the amount of business which such customer has customarily done or is reasonably expected to do with the Company or any of its Affiliates or if any such customer elects to move its business to a person other than the Company or any of its Affiliates, provide any services (of the kind or competitive with the Business of the Company or any of its Affiliates) for such customer, or have any discussions regarding any such service with such customer, on behalf of such other person.

The Executive recognizes and agrees that because a violation by the Executive of his obligations under this Section 7 will cause irreparable harm to the Company that would be difficult to quantify and for which money damages would be inadequate, the Company shall have the right to injunctive relief to prevent or restrain any such violation, without the necessity of posting a bond. The Non-compete Period will be extended by the duration of any violation by the Executive of any of his obligations under this Section 7.

The Executive expressly agrees that the character, duration and scope of the covenant not to compete are reasonable in light of the circumstances as they exist at the date upon which this Agreement has been executed. However, should a determination nonetheless be made by a court of competent jurisdiction at a later date that the character, duration or geographical scope of the covenant not to compete is unreasonable in light of the circumstances as they then exist, then it is the intention of the Executive, on the one hand, and the Company, on the other, that the covenant not to compete shall be construed by the court in such a manner as to impose only those restrictions on the conduct of the Executive which are reasonable in light of the circumstances as they then exist and necessary to assure the Company of the intended benefit of the covenant not to compete.

8.          Inventions and Patents. The Executive acknowledges that all inventions, innovations, improvements, know-how, plans, development, methods, designs, analyses, specifications, software, drawings, reports and all similar or related information (whether or not patentable or reduced to practice) which related to any of the Company’s actual or proposed business activities and which are created, designed or conceived, developed or made by the Executive during the Executive’s past or future employment by the Company or any Affiliates, or any predecessor thereof (“Work Product”), belong to the Company, or its Affiliates, as applicable. Any copyrightable work falling within the definition of Work Product shall be deemed a “work made for hire” and ownership of all right title and interest shall rest in the Company. The Executive hereby irrevocably assigns, transfers and conveys, to the full extent permitted by law, all right, title and interest in the Work Product, on a worldwide basis, to the Company to the extent ownership of any such rights does not automatically vest in the Company under applicable law. The Executive will promptly disclose any such Work Product to the Company and perform all actions requested by the Company (whether during or after employment) to establish and confirm ownership of such Work Product by the Company (including, without limitation, assignments, consents, powers of attorney and other instruments).

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9.          Confidentiality Covenants.

(a)          The Executive understands that the Company and/or its Affiliates, from time to time, may impart to the Executive confidential information, whether such information is written, oral or graphic.

For purposes of this Agreement, “Confidential Information” means information, which is used in the business of the Company or its Affiliates and (i) is proprietary to, about or created by the Company or its Affiliates, (ii) gives the Company or its Affiliates some competitive business advantage or the opportunity of obtaining such advantage or the disclosure of which could be detrimental to the interests of the Company or its Affiliates, (iii) is designated as Confidential Information by the Company or its Affiliates, is known by the Executive to be considered confidential by the Company or its Affiliates, or from all the relevant circumstances should reasonably be assumed by the Executive to be confidential and proprietary to the Company or its Affiliates, or (iv) is not generally known by non-Company personnel. Such Confidential Information includes, without limitation, the following types of information and other information of a similar nature (whether or not reduced to writing or designated as confidential):

(i) Internal personnel and financial information of the Company or its Affiliates, vendor information (including vendor characteristics, services, prices, lists and agreements), purchasing and internal cost information, internal service and operational manuals, and the manner and methods of conducting the business of the Company or its Affiliates;

(ii) Marketing and development plans, price and cost data, price and fee amounts, pricing and billing policies, bidding, quoting procedures, marketing techniques, forecasts and forecast assumptions and volumes, and future plans and potential strategies (including, without limitation, all information relating to any acquisition prospect and the identity of any key contact within the organization of any acquisition prospect) of the Company or its Affiliates which have been or are being discussed;

(iii) Names of customers and their representatives, contracts (including their contents and parties), customer services, and the type, quantity, specifications and content of products and services purchased, leased, licensed or received by customers of the Company or its Affiliates; and

(iv) Confidential and proprietary information provided to the Company or its Affiliates by any actual or potential customer, government agency or other third party (including businesses, consultants and other entities and individuals).

The Executive hereby acknowledges the Company’s exclusive ownership of such Confidential Information.

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(b)          The Executive agrees as follows: (1) only to use the Confidential Information to provide services to the Company and its Affiliates; (2) only to communicate the Confidential Information to fellow employees, agents and representatives on a need-to-know basis; and (3) not to otherwise disclose or use any Confidential Information, except as may be required by law or otherwise authorized by the Board. Upon demand by the Company or upon termination of the Executive’s employment, the Executive will deliver to the Company all manuals, photographs, recordings and any other instrument or device by which, through which or on which Confidential Information has been recorded and/or preserved, which are in the Executive’s possession, custody or control.

10.         Representation. The Executive hereby represents that the Executive’s entry into this Agreement and performance of the services hereunder will not violate the terms or conditions of any other agreement to which the Executive is a party.

11.         Arbitration. In the event of any breach arising from the performance of this Agreement, either party may request arbitration. In such event, the parties will submit to arbitration by a qualified arbitrator with the definition and laws of the State of Colorado. Such arbitration shall be final and binding on both parties.

12.         Governing Law/Jurisdiction. This Agreement and any disputes or controversies arising hereunder shall be construed and enforced in accordance with and governed by the internal laws of the State of Colorado without regard to the conflicts of laws principles thereof.

13.         Public Company Obligations. Executive acknowledges that the Company is a public company whose common stock has been registered under the US Securities Act of 1933, as amended (the “Securities Act”), and registered under the Exchange Act, and that this Agreement may be subject to the public filing requirements of the Exchange Act. Executive acknowledges and agrees that the applicable insider trading rules, transaction reporting rules, limitations on disclosure of non-public information and other requirements set forth in the Securities Act, the Exchange Act and rules and regulations promulgated by the SEC may apply to this Agreement and Executive’s employment with the Company. Executive (on behalf of himself, as well as the Executive’s executors, heirs, administrators and assigns), absolutely and unconditionally agrees to indemnify and hold harmless the Company and all of its past, present and future affiliates, executors, heirs, administrators, shareholders, employees, officers, directors, attorneys, accountants, agents, representatives, predecessors, successors and assigns from any and all claims, debts, demands, accounts, judgments, causes of action, equitable relief, damages, costs, charges, complaints, obligations, controversies, actions, suits, proceedings, expenses, responsibilities and liabilities of every kind and character whatsoever (including, but not limited to, reasonable attorneys’ fees and costs) in the event of Executive’s breach of any obligation of Executive under the Securities Act, the Exchange Act, any rules promulgated by the SEC and any other applicable federal, state or foreign laws, rules, regulations or orders.

14.         Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and thereof and supersedes and cancels (i) any and all previous agreements, written and oral, regarding the subject matter hereof between the parties hereto and (ii) that certain employment agreement dated as of April 26, 2011 by and between the Executive and Elkhorn Goldfields LLC and Montana Tunnels Mining, Inc. This Agreement shall not be changed, altered, modified or amended, except by a written agreement signed by both parties hereto.

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15.         Notices. All notices, requests, demands and other communications called for or contemplated hereunder shall be in writing and shall be deemed to have been given when delivered to the party to whom addressed or when sent by telecopy (if promptly confirmed by registered or certified mail, return receipt requested, prepaid and addressed) to the parties, their successors in interest, or their assignees at the following addresses, or at such other addresses as the parties may designate by written notice in the manner aforesaid:

(a) to the Company at:

Eastern Resources, Inc.

1610 Wynkoop Street, Suite 400

Denver, CO 80202

Phone: (303) 893-2334

Fax: (303) 957-5536

Attn: Eric Altman

with a copy to:

Gottbetter & Partners, LLP

488 Madison Avenue

New York, NY 10022-5718

Attn: Adam S. Gottbetter

Fax: (212) 400-6901

(b) to the Executive at:

Address listed on Schedule A attached hereto.

All such notices, requests and other communications will (i) if delivered personally to the address as provided in this Section, be deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided for in this Section, be deemed given upon facsimile confirmation, (iii) if delivered by mail in the manner described above to the address as provided for in this Section, be deemed given on the earlier of the third business day following mailing or upon receipt and (iv) if delivered by overnight courier to the address as provided in this Section, be deemed given on the earlier of the first business day following the date sent by such overnight courier or upon receipt (in each case regardless of whether such notice, request or other communication is received by any other person to whom a copy of such notice is to be delivered pursuant to this Section). Either party may, by notice given to the other party in accordance with this Section, designate another address or person for receipt of notices hereunder.

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16.         Severability. If any term or provision of this Agreement, or the application thereof to any person or under any circumstance, shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such terms to the persons or under circumstances other than those as to which it is invalid or unenforceable, shall be considered severable and shall not be affected thereby, and each term of this Agreement shall be valid and enforceable to the fullest extent permitted by law. The invalid or unenforceable provisions shall, to the extent permitted by law, be deemed amended and given such interpretation as to achieve the economic intent of this Agreement.

17.         Waiver. The failure of any party to insist in any one instance or more upon strict performance of any of the terms and conditions hereof, or to exercise any right or privilege herein conferred, shall not be construed as a waiver of such terms, conditions, rights or privileges, but same shall continue to remain in full force and effect. Any waiver by any party of any violation of, breach of or default under any provision of this Agreement by the other party shall not be construed as, or constitute, a continuing waiver of such provision, or waiver of any other violation of, breach of or default under any other provision of this Agreement.

18.         Successors and Assigns. This Agreement shall be binding upon the Company and any successors and assigns of the Company. Neither this Agreement nor any right or obligation hereunder may be assigned by the Executive. The Company may assign this Agreement and its right and obligations hereunder, in whole or in part.

19.         Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.Additionally, a facsimile counterpart of this Agreement shall have the same effect as an originally executed counterpart.

20.         Headings. Headings in this Agreement are for reference purposes only and shall not be deemed to have any substantive effect.

21.         Opportunity to Seek Advice. The Executive acknowledges and confirms that he has had the opportunity to seek such legal, financial and other advice and representation as he has deemed appropriate in connection with this Agreement, that the Executive is fully aware of its legal effect, and that Executive has entered into it freely based on the Executive’s judgment and not on any representations or promises other than those contained in this Agreement.

22.         Withholding and Payroll Practices. All salary, severance payments, bonuses or benefits payments made by the Company under this Agreement shall be net of any tax or other amounts required to be withheld by the Company under applicable law and shall be paid in the ordinary course pursuant to the Company’s then existing payroll practices.

[The next page is the signature page]

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IN WITNESS WHEREOF, the parties have executed this Employment Services Agreement as of the date first written above.

EXECUTIVE:
/s/ Timothy G. Smith
Timothy G. Smith
EASTERN RESOURCES, INC.
By:	/s/ Patrick Imeson
	Name: Patrick Imeson
	Title: Chief Executive Officer

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Schedule A

1. Employment Period: 36 calendar months.

2. Employment

a. Title: Vice President of Operations and General Manager of Montana Tunnels Mine

b. Executive Duties:

To provide overall direction and guidance to the operational activities of the organization with the objective of maximizing growth and profitability with employee and environmental safety a priority as well as day-to-day leadership and management to all company operations functions

Primary Duties and Responsibilities:

i. Manages organization operations by directing and coordinating activities consistent with established goals, objectives, and policies.

ii. Implements programs to ensure attainment of business plan for growth and profit.

iii. Provides direction and structure for operating units.

iv. Implements improved processes and management methods to generate higher productivity and workflow optimization.

v. Develop and create strategies and policies aligned with organizational goals.

vi. Provide mentoring and guidance to subordinates and other employees.

vii. Follows directives set by Chief Executive Officer, Chief Operating Officer, President and Board of Directors.

Supervision Exercised:

The Vice President of Operations directly supervises General Managers. He is responsible for overall management to achieve safe targeted production of all operations. He must interpret policies, purposes, and goals of the organization for subordinates. Responsible for subordinate employees’ performance reviews

Reports to the President and Chief Operating Officer of ESRI

The Company recognizes that Smith also holds the position of VP Operation for Fire River Gold Corporation and will be splitting his time and attention to approximately one third for ESRI and two thirds Fire River Gold Corp. This arrangement is contingent that this activity does not conflict with the interests of the Company or impairs his employment performance.

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3. Base Salary: $100,000 per year.

5(a). Initial Stock Option Grant: 500,000. These options are intended to be issued as incentive stock options under IRC requirements.

a. Should the Company terminate the Executive without Cause pursuant to Section 6(a)(ii) of the Agreement, any unvested stock options shall automatically vest upon the Executive’s termination without Cause.

5(c). Vacation: To accrue at 1.67 days per month for a total of 20 days per annum

6(e). Severance Period: Twenty-four (24) Months

15(b).	Executive Contact Information:	Timothy G. Smith
		8953 Jackpine Drive
		Helena, MT 59602

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EX-10.21

MANAGEMENT SERVICES AGREEMENT

THIS AGREEMENT is made and entered into April 6, 2012 by and between BLACK DIAMOND FINANCIAL GROUP, LLC, a limited liability company (“BDFG”), and EASTERN RESOURCES, INC, a Delaware corporation (“ESRI” or the “Company”).

RECITALS

WHEREAS, ESRI has requested BDFG provide (i) management, financial and accounting services and (ii) certain office space.

WHEREAS, ESRI has requested BDFG and certain of its principals to serve as executives of the Company; and

WHEREAS, BDFG is willing to perform such services on the terms and conditions specified herein,

NOW, THEREFORE in consideration of the foregoing and the mutual terms and provisions contained in this Agreement, the parties hereto agree as follows:

1.           Engagement.

The Company hereby engages BDFG and certain of its principals to serve as various Senior Executives and provide Management, Financial and Accounting Services. BDFG shall also provide office space, utilities, and telecommunications services to ESRI at no cost. BDFG accepts the engagement on the basis specified herein.

2.           Term.

(a)          The initial term of this Agreement (“Initial Term”) shall commence on the date hereof and end on April _____, 2015, unless sooner terminated in accordance with Section 2(b) below. Thereafter, this Agreement shall be extended for successive one year terms (each a “Renewal Term” and, together with the Initial Term, the “Term”), unless either party provides written notice to the other party at least thirty (30) days prior to the end of the then-current Term of its election to terminate this Agreement.

(b)          Neither party (“Non-Breaching Party”) may terminate this Agreement prior to the end of the then-current Term unless the other party (“Breaching Party”) commits a material breach of this Agreement, the Non-Breaching Party provides the Breaching Party detailed, written notice of the material breach, and: (i) the material breach remains uncured thirty (30) days after the Breaching Party receives the written notice; or (ii) if the material breach is not capable of being cured within thirty (30) days, if the Breaching Party fails to commence efforts to cure the material breach within such thirty (30) day period or fails to diligently continue such efforts to completion.

(c)          Notwithstanding Section 2(b) above, Company may terminate this Agreement for its convenience prior to the end of the then-current Term; provided, however, that if Company elects to terminate this Agreement for its convenience, the Company shall pay to BDFG on the termination date an amount equal to $15,000 multiplied by the number of months (including the month of termination) remaining in the then-current Term.

1

3.           Services.

(a)          In consideration for the performance by the Company of its obligations and the other agreements of the Company hereunder, BDFG agrees to perform the services specified in this Section 3 (collectively, the “Services”).

(b)          The Services shall consist of normal financial advisory services to be rendered to a start-up company in need of a broad array of financial advice, as well as certain specific services, including without limitation the following:

(i)          providing access to certain of BDFG’s principals, for the purpose of furnishing leadership and advisory services to the Company in such manner and capacity as the Company and BDFG mutually determine.

(ii)         assisting the Company in the development and maintenance of its financial plan, including budgeting, financial management and planning, resource allocation, accounting, reporting and other similar matters.

(iii)        assisting the Company in the development, structuring and implementation of its capital access strategies, including without limitation all bank and  third party financings, which involve the raising of capital for the Company, whether equity, debt, convertible securities or otherwise.

(c)          BDFG agrees to keep confidential all information received by it from the Company during the Term which is either identified by the Company or which may otherwise reasonably be considered proprietary or confidential in nature, except to the extent (i) such information is disclosed by BDFG in the performance of Services at the request or with the consent of the Company; (ii) such information is in the public domain or is otherwise disclosed by or on behalf of someone other than BDFG (other than as a result of a breach of this Agreement by BDFG or its directors, managers, officers, employees and agents); or (iii) BDFG is otherwise required to disclose such information by a court or administrative agency of appropriate jurisdiction.

(d)          BDFG shall in the performance of this Agreement comply with all applicable laws, rules, regulations and orders.

4.           Office Space.

During the Term, BDFG shall provide sufficient office space, utilities and telecommunications services to ESRI executives at BDFG’s facility on 1610 Wynkoop Street, Suite 400, Denver, Colorado 80202 at no cost.

5.           Representations and Warranties of the Company.

(a)          The Company represents and warrants that it has the full power and authority to execute, deliver and perform this Agreement, that its execution, delivery and performance has been duly authorized by all necessary action and that this Agreement is the valid and binding agreement of the Company, enforceable against it in accordance with its terms.

(b)          All representations, warranties and other information provided by the Company to BDFG hereunder, shall be true and correct as of the date given or made in all material respects and shall not contain any untrue fact or fail to state a material fact required to be given or stated therein or necessary to make the information so given or stated not misleading

2

6.           Agreements of the Company.

(a)          The Company agrees to provide BDFG and its authorized representatives with full access at all reasonable times and upon reasonable prior notice to the Company’s books and accounts, records, personnel, facilities, properties and assets so as to enable BDFG to gain the knowledge regarding the Company necessary for the performance of Services.

(b)          Upon the reasonable request of BDFG, the Company will provide it with all such information, data, compilations, summaries, descriptions and other materials that BDFG deems reasonable and appropriate in connection with the performance of Services.

(c)          The Company agrees to provide BDFG with reasonable prior notice of, and the right to attend, all meetings of its shareholders and board of directors.

(d)          The Company agrees to indemnify and hold BDFG, its directors, managers, officers, employees and agents and each person, if any, who controls BDFG harmless from and against any and all claims, losses, liabilities, damages, demand suits, judgments, or causes of action, which may result from or grow or arise in any manner out of the services performed pursuant to this Agreement, other than those caused by the gross negligence, dishonesty or fraud by any such person.

7.           Compensation.

(a)          In consideration of the agreement of BDFG to perform Services hereunder, the Company covenants and agrees to pay BDFG a financial advisory retainer fee equal to $15,000 a month and payable on the 1^th day of each month. If, in any month, BDFG renders Services in excess of 125 hours, BDFG shall be entitled to further compensation at a rate equal to $200 per each additional hours of Services rendered in the applicable month. The Company shall be entitled to a reasonable accounting by BDFG for the Services rendered each month, but BDFG shall be entitled to its monthly retainer fee regardless of the number of hours rendered by it during the particular month.

(b)          In addition to the fee payable pursuant to (a) above, ESRI will issue certain principals and employees of BDFG options under the Company’s 2012 Equity Incentive Plan to purchase an aggregate of 100,000 shares of ESRI common stock to employees of BDFG as designated by BDFG.

(c)          In addition to the foregoing, the Company agrees to pay or reimburse BDFG, its principals or employees promptly upon invoice for its reasonable expenses paid or incurred by it in the performance of Services.

8.           Entire Agreement and Amendments.

This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof, and replaces, cancels and supercedes (i) any prior agreements of the parties and (ii) that certain Financial Advisory Agreement dated as of November 1, 2010, as amended as of January 12, 2011, by and between BDFG and Elkhorn Goldfields LLC. This Agreement shall not be changed, altered, modified or amended, except by a written agreement signed by both parties hereto. No amendment, supplement, waiver or modification to this Agreement shall be effective unless it is in writing and signed by the Company and BDFG.

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9.           Notices.

All notices, requests and demands to or upon the respective parties hereto shall be effective and shall be deemed to have been duly given or made, unless otherwise expressly provided herein, when deposited in the mail, postage prepaid, or when made by hand delivery or recognized commercial overnight delivery service and addressed:

If to ESRI:	Eastern Resources Inc.
	1610 Wynkoop Street, #400
	Denver, CO 80202
	Attention: Robert Trenaman
If to BDFG:	Black Diamond Financial Group LLC
	1610 Wynkoop Street, #400
	Denver, CO 80202
	Attention: Patrick Imeson
with a copy to:	Steve Levine
	Messner & Reeves
	1430 Wynkoop Street, Suite 300
	Denver, CO 80202

Addresses to which notices shall be sent may be changed by providing each party with notice of the change in address in the method provided above.

9.           Survival of Representation and Warranties.

All representations and warranties made by the Company in this Agreement and in any statement delivered pursuant hereto shall survive the execution and delivery of this Agreement.

10.         Successors and Assigns.

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Neither this Agreement nor any right or obligation hereunder may be assigned by BDFG, without the consent of the Company. The Company may assign this Agreement and its right and obligations hereunder, in whole or in part, to any parent or affiliate that expressly assumes and agrees to perform this Agreement in the same manner and to the same extent that the Company would have been required to in the absence of such assignment.

11.         Counterparts.

This Agreement may be executed by the parties to this Agreement on any number of separate counterparts; and all of the counterparts taken together shall be deemed to constitute one and the same instrument. Additionally, a facsimile counterpart of this Agreement shall have the same effect as an originally executed counterpart.

12.         Governing Law.

This Agreement, and the rights and obligations of the parties under this Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Colorado (without reference to the choice of law provisions of state law) except with respect to matters of law concerning the internal corporate affairs of any corporate entity which is a party to or the subject of this Agreement, and as to those matters the law of the jurisdiction under which the respective entity derives its powers shall govern.

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13.         Severability.

If any section, clause or provision of this Agreement is ruled invalid or unenforceable by a court of competent jurisdiction, the invalidity or unenforceability thereof shall not affect any of the remaining sections, clauses or provisions hereof or thereof, and this Agreement shall continue in full force and effect as if such invalid or unenforceable provision had not been contained therein.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties hereto have caused this Management Services Agreement to be duly executed and delivered as of the date and year specified above.

EASTERN RESOURCES, INC.
By:	/s/ Robert Trenaman
Name: Robert Trenaman,
Title:   Chief Operating Officer
BLACK DIAMOND FINANCIAL GROUP LLC
By:	/s/ Patrick Imeson
Name: Patrick Imeson
Title:   Managing Director

6

EX-10.22

Subscription Booklet

for Effecting Purchases of

$5,000,000 in 8% Series A Bonds

in

Elkhorn Goldfields Inc.

a Montana Corporation

July 1, 2010

Elkhorn Goldfields Inc

Elkhorn Goldfields Inc.

INSTRUCTIONS

Persons desiring to purchase 8% Series A Bonds (“Bonds”) in Elkhorn Goldfields Inc, a Montana Corporation (the “Company”) formed for the purpose of pursuing a strategy of acquiring mineral assets in resource-rich locales like the State of Montana that has secure land ownership rules, stable government and permitting and operating regulations that are fair and enforceable.. This subscription agreement has been developed pursuant to the Company’s Confidential Private Offering Memorandum dated July 1, 2010 (the “Memorandum”). Unless otherwise defined or the context otherwise requires, capitalized terms used in this Subscription Booklet shall have the meanings assigned them in the Memorandum. THE COMPANY MAY ACCEPT OR REJECT ANY SUBSCRIPTION IN ITS SOLE DISCRETION.

Investors must complete, date and/or sign the following forms, as appropriate.

PLEASE PRINT OR TYPE ALL INFORMATION IN INK

1.           Potential Investor Questionnaire: All investors complete the information on pages 2-5 and sign page 6. If the investing entity is a partnership, all partners must complete and sign. Signature instructions for Corporations, Partnerships and Trusts are set forth in Instruction No. 4, below.

2.           Subscription Agreement - Powers of Attorney: All investors must sign and complete page 6 and sign page S-4. The signature on page S-4 must be acknowledged by a Notary Public.

3.           Check: Make your check in an amount equal to the full subscription price for the amount of Bonds subscribed for, or US $50,000 per Bond (the “Subscription Payment”). Make all checks payable to Elkhorn Goldfields, Inc

4.           Signature Instructions for Corporations, Partnerships and Trusts:

a.           Corporations sign in the following style:

(Name of Corporation)

By:                  (Signature)           ,    (Title)

b.           Partnerships sign in the following style:

(Name of Partnership)

By:                 (Signature)             , Partner

By:                (Signature)              , Partner

Each partner of a general partnership and each general partner of a limited partnership must sign.

c.           Trusts sign in the following style:

(Name and Date of Trust)

By:                (Signature)          , Trustee

By:                (Signature)          , Trustee

Elkhorn Goldfields Inc

POTENTIAL INVESTOR QUESTIONNAIRE

Elkhorn Goldfields Inc

The following information is required in order that Elkhorn Goldfields Inc (the “Company”) may determine whether: (i) the subscription of Bonds issued by the Company (“Bonds”) to an investor is permissible under applicable federal and state securities laws; and (ii) the investor has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the investment. Individual investors and partners, members, shareholders or other individual owners of interests in entities that do not establish eligibility as an “accredited investor,” within the meaning of Rule 501(a) under the Securities Act of 1933, as amended (the “Securities Act”), must complete Part A below. Investors that are partnerships, trusts, corporations, limited liability companies or some other form of entity must complete Part B.

PART A - INDIVIDUAL INVESTORS

(1)
	(Complete Name)
(2)
	(Residence Address)	(Residence Phone)
	(City)	(State)                         (Zip Code)
	I        (own) or        (rent) the above residence.

(3)	I am registered to vote in
		(County)            (State)

(4) I have a valid driver’s license issued by the State of Number

(5)
	(Employer)

(Employer’s Address)	(Business Phone)
(City)	(State)	(Zip Code)

(6)
	(Occupation)
(7)
	(Position or Title)
(8)
	(Prior Occupations or Duties during the Past Ten Years)

(9)	Age: _______________________________	Year of Anticipated Retirement: _____________________
(10)	Social Security No.: ___________________
(11)	Marital Status: _______________________	Number of Dependents: ___________________________
		Ages of Dependents: _____________________________

(12)	If married: _____________________________
	(Spouse’s Name)	(Spouse’s Age)
	_____________________________
	(Years Married)	(Spouse’s Occupation)
	_____________________________
	(Spouse’s Employer)

2 Elkhorn Goldfields Inc

(13) Individual and joint income¹ for the last three four? (should 2010 be included?) years:

		2007
Individual			Joint
£ under $50,000	£ $50,000 - $100,000		£ under $50,000	£ $50,000 - $100,000
£ $100,000 - $200,000	£ over $200,000		£ $100,000 - $300,000	£ over $300,000
		2008
Individual			Joint
£ under $50,000	£ $50,000 - $100,000		£ under $50,000	£ $50,000 - $100,000
£ $100,000 - $200,000	£ over $200,000		£ $100,000 - $300,000	£ over $300,000
		2009
Individual			Joint
£ under $50,000	£ $50,000 - $100,000		£ under $50,000	£ $50,000 - $100,000
£ $100,000 - $200,000	£ over $200,000		£ $100,000 - $300,000	£ over $300,000

(14) Estimated individual and joint income for the current year:

		2010
Individual			Joint
£ under $50,000	£ $50,000 - $100,000		£ under $50,000	£ $50,000 - $100,000
£ $100,000 - $200,000	£ over $200,000		£ $100,000 - $300,000	£ over $300,000

(15) (a) Current net worth² of investor and spouse (including home, home furnishings and personal automobiles):

¨ $1,000,000 or less              ¨ over $1,000,000

(b)	If the answer to 15(a) is $1,000,000 or less, please state current net worth of investor and spouse (including, net of debt, home, home furnishings and personal automobiles):
	$  _____________________________.

(16) Educational Background (specify colleges attended and degrees attained, if applicable):

¹Income should be distinguished from revenues. For example, in a sole proprietorship, income would equal revenues less operating expenses. Income may, but need not, be determined by adding together the following amounts: (i) individual adjusted gross income reported on a U.S. federal income tax return; (ii) any depletion deduction; (iii) any interest exclusion; (iv) any allocated partnership losses; and (v) any amounts contributed to an IRA or Keogh plan.

²Net worth means the excess of total assets at current values over total liabilities.

3 Elkhorn Goldfields Inc

(17)	List any professional licenses or registrations, including bar admissions, accounting certification, real estate brokerage licenses, and SEC or state broker-dealer registrations held:
(18)	Investment Experience

I have made investments, or been involved in activities, of the type indicated below (recognizing that the types of investments listed are not mutually exclusive and certain investments may fall into two or more of the categories listed below).  Check all of the following that apply to you:

¨ Direct ownership or participation in corporations, limited partnerships or other entities engaged in the general securities or investment banking business.

¨ Investment in equity securities of corporations, real estate limited or general partnerships, joint Bridges and other syndicates.

¨ Tax-oriented investments (such as oil and gas, equipment leasing, research and development, agriculture or commodities syndications).

Please describe any of the activities marked above:

(19) I personally have such knowledge and experience in financial and business matters that I am capable of evaluating the merits and risks of an investment in Bonds of the Company and of making an informed investment decision and that I make my own ultimate decisions on my investments.

¨ Yes          ¨ No

(20) My proposed investment in Bonds of the Company will not exceed the following percentage³ of my current net worth:

¨ 25%	¨ 15%	¨ 5%
¨ 20%	¨ 10%	¨ 1% or less

(21) I have a close business association, friendship or family ties with the Company, its Officers or Directors.

¨ Yes          ¨ No

If yes, please describe the nature of the association:

(22) I am in a financial position to assume, and bear indefinitely, the risks involved in an investment in Bonds of the Company, including the risk of a total loss of the investment.  I have adequate means of providing for my current needs and possible personal contingencies and have no current or foreseeable future need to sell Bonds of the Company.

¨ Yes          ¨ No

³Describe the highest estimated net worth percentage applicable to your proposed investment in Notes.

4 Elkhorn Goldfields Inc

(23) Please describe below any additional information you would like to review or questions you have about the Company or the proposed offering.

5 Elkhorn Goldfields Inc

PART B - INVESTING ENTITIES

(1)
	(Complete Name of Entity)
(2)
	(Primary Business Address)	(Phone)               (Facsimile Phone)
	(City)	(State)                         (Zip Code)
(3)
	(Legal Form of Entity)	(Jurisdiction of Organization)

(4) Is the Entity one of the following:

¨ a Bank	¨ a Registered Broker/Dealer	¨ an Insurance Company
¨ a Savings and Loan Association	¨ a Registered Investment Company	¨ an ERISA Plan
¨ a Business Development Company	¨ a Licensed SBIC	¨ an Employee Benefit Plan
¨ a 501(c)(3) Organization	¨ a Partnership, Corporation or Other	¨ a Trust
	type of Association or Entity

(5) Was the Entity organized for the purpose of purchasing Bonds or otherwise investing in the Company?

¨ Yes          ¨ No

(6) Total assets of the Entity:

(7) States or Countries where the Entity maintains an office:

(8) Number of employees:

(9) Provide any further information which might assist the Company in determining whether the Entity constitutes an “accredited investor,” within the meaning of Rule 501(a) under the Securities Act: _____________________

6 Elkhorn Goldfields Inc

By signing below the undersigned also hereby:

1. Represents that the information provided above is true and correct and acknowledges such investor’s awareness that the Company is relying upon the accuracy of such information to ensure that the sale of any securities by the Company to such investor is in compliance with applicable federal and state securities laws;

2. Acknowledges receipt of copy number       of the Memorandum;

3. Agrees to limit the distribution of the Memorandum by myself and not to permit the duplication of any part of the Memorandum;

4. Upon request, agrees to return the Memorandum to Eric Altman, Elkhorn Goldfields Inc P.O. Box 370657, Denver, CO 80237.

5. Acknowledges that the undersigned has direct, material and continuing involvement in the creation, development and organization of the investment, the Company and its plan of business, history, property, books, records and financial statements. The Investor further acknowledges that it has control of or access to all information regarding the investment and the Company that the Investor deems material and has otherwise has the opportunity to obtain all information it deems necessary and to ask questions of and receive satisfactory answers from the Company or any person or persons acting on its behalf, concerning the terms and conditions of the investment, the Company, the plan of business and history of the Company and its property, books, records and financial statements, and that due to the undersigns direct and material involvement in the Company all requests for information will be fulfilled and questions answered to the full satisfaction of the Investor.

5. Acknowledges that before the undersigned will be asked to make an investment decision with respect to Bonds or other securities of the Company, the undersigned will read and review carefully the Memorandum with respect to any securities that may be offered thereby and will have the opportunity obtain all information and to ask questions of, and to receive answers from the Company concerning the terms and conditions of any such offering and to obtain any additional information which the Company might then possess or could then acquire without unreasonable effort or expense that would be necessary or material to the investment to verify the accuracy of the information contained in the Memorandum.

EXECUTION OF THIS DOCUMENT DOES NOT INDICATE ANY INTENT TO SUBSCRIBE FOR ANY SECURITIES DESCRIBED IN THE MEMORANDUM.

PLEASE COMPLETE THIS QUESTIONNAIRE AND FORWARD IT TO ELKHORN GOLDFIELDS INC, ATTN: ERIC ALTMAN, P.O. BOX 370657, DENVER, COLORADO 80237. IF YOU HAVE ANY QUESTIONS ABOUT THIS QUESTIONNAIRE OR THE PROPOSED OFFERING, PLEASE CALL MR. ALTMAN AT (970) 648-1503.

IN WITNESS WHEREOF the undersigned investor has executed this Questionnaire this       day of                , 2010.

(Signature)	(Address)
(Printed Name of Proposed Investor)	(Address)
(Title of Signatory-if-applicable)	(Telephone number, including area code)

7 Elkhorn Goldfields Inc

SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY

ELKHORN GOLDFIELDS INC

P.O. Box 370657

Denver, Colorado 80237

Dear Sir or Madam:

Elkhorn Goldfields Inc, a Montana Corporation (the “Company”), is currently in the process of accepting subscriptions for 8% Series A Bonds due July 31, 2012 (“Bonds”). The Bonds in the Company are being issued (the “Offering”) pursuant to the Confidential Private Offering Memorandum dated July 1^st, 2010 (the “Memorandum”), all as more particularly described in the Memorandum. The Bonds are being offered at a subscription price of US $50,000 per Bond. The Bonds include a Bonus Payment feature and Warrants to purchase Membership Units into Elkhorn Goldfields LLC as detailed in the Memorandum. Unless otherwise waived by the Company, persons subscribing for Bonds must purchase at least three for an aggregate purchase price of US $150,000. The Company was incorporated in July 2, 1998 in the State of Montana. The By Laws and Articles of Organization of the Company are attached hereto to the Memorandum as Exhibit “A” and Exhibit “B” respectively (collectively, the “Governing Documents”). The Company was formed for the purposes specified in the Memorandum.

1.         Subscription and Capital Contributions. Subject to the terms and conditions hereof and the provisions of the Memorandum, the undersigned investor (the “Investor”) hereby irrevocably subscribes for the purchase of _____ Bonds, and agrees to contribute an aggregate of $_________________________ in the manner hereinafter set forth to the Company in respect of such Bonds. Concurrently with the execution and delivery of this Subscription Agreement, the Investor shall deliver its deposit by check made payable to Elkhorn Goldfields Inc in an amount equal to the full subscription price of $50,000 per Bond (the “Subscription Payment”). The Investor understands that it must subscribe to a minimum of three Bonds for an aggregate Subscription Payment of at least US $150,000 unless the Company otherwise agrees in its sole and absolute discretion.

2.          Acceptance of Subscription. It is understood and agreed that the Company shall have the right to accept or reject this Subscription, in whole or in part, and that the same shall be deemed to be accepted only when it is signed by an officer of the Company. If accepted, the subscription tendered by the Investor will be applied in accordance with the terms of the Memorandum. If rejected, this Subscription Agreement will be null and void and the Investor’s Subscription Payment and this Subscription Agreement will be returned to the Investor, without interest or deduction.

3.          Representations and Warranties of the Investor. The Investor hereby represents and warrants to the Company and agrees as follows:

(a)          It is an “accredited investor,” within the meaning of Rule 501(a) under the Securities Act of 1933, as amended (the “Securities Act”).

(b)          The Investor has adequate means of providing for its current needs and possible personal contingencies, and it has no need now, and anticipates no need in the foreseeable future, to sell the Bonds for which the Investor hereby subscribes; its overall commitment to investments which are not readily marketable is not excessive in relation to its net worth and financial circumstances and the subscription of Bonds will not cause such commitment to become excessive. The Investor recognizes the speculative nature of the investment, is able to bear the economic risks of this investment, and consequently, without limiting the generality of the foregoing, it is able to hold its Bonds for an indefinite period of time and has a sufficient net worth to sustain a loss of its entire investment in the Company in the event that such loss should occur.

(c)          All information furnished to the Company in connection with the Offering including the information contained in the other parts of this Subscription Booklet is true, correct and complete and there have been no material changes in such information and in the event of any change the Investor will promptly notify the Manager or the Company.

Σ-1 Elkhorn Goldfields Inc

(d)          The Investor has such knowledge and experience (based on actual participation) in financial, securities, investments and business matters that it is capable of evaluating the merits and risks of an investment in the Bonds.

(e)          The Investor has received and read the Memorandum, including the exhibits annexed thereto and any supplements to or amendments thereof, and the Investor confirms that it has been provided access to and/or copies of all documents, records and books pertaining to its proposed investment in the Securities which it deems necessary to evaluate the accuracy of the above described information or to evaluate the investment in Securities in general.

(f)          The Investor has had an opportunity to ask questions of and receive satisfactory answers from the Company, it’s Officers or any person or persons acting on their behalf, concerning the terms and conditions of the Offering, the Company, if Officers, the plan of business and history of the Company, and their respective histories, operations, properties, books, records and financial statements and all such questions have been answered to the full satisfaction of the Investor. .

(g)          The Investor has waived and hereby waives the receipt of an offering memorandum or any other documentation or information relating to the offering and any other disclosure documentation concerning the terms and conditions of this investment, the Company, the plan of business and history of the Company and its property, books, records and financial statements.

(h)          The Securities for which the Investor hereby subscribes will be acquired for its own account for investment and not with a view toward resale or redistribution, and it does not presently have any reason to anticipate any change in its circumstances or other particular occasion or event which would cause the Investor to sell its Bonds.

(i)          The Investor represents that (i) it has been called to its attention, both in the Memorandum (including the sections entitled “Risk Factors”) and by those individuals with whom it has dealt in connection with its investment in the Company, that its investment in the Company involves a high degree of risk and potential conflicts of interest; (ii) it understands that there are certain tax consequences associated with the investment; and (iii) no assurances are or have been made that existing tax laws and regulations will not be modified in the future, thus altering tax consequences associated with this investment in the Securities.

(j)          The Investor has not received representations or warranties from the Company, the Manager or their respective managers, directors, shareholders, members, officers, employees or agents, other than those contained in the Memorandum, and it has not relied upon any representations or warranties from the Company, the Manager or their respective managers, directors, shareholders, members, officers, employees or agents, other than those contained in the Memorandum.

(k)          The Investor acknowledges that the Company has made available to it or its personal advisors the opportunity to obtain additional information to verify the accuracy of the information contained in the Memorandum and to evaluate the merits and risks of an Investment in the Securities, including without limitation the income tax consequences of the purchase, holding, sale and transfer of the Bonds. The Investor represents that by reason of its business and financial experience and of the business and financial experience of those persons it has retained to advise the Investor with respect to its investment in the Company, it has or has acquired the capacity to protect its own interest in investments of this nature. In reaching the conclusion that it desires to acquire the Securities, the Investor has carefully evaluated its financial resources and investment position, and the risks associated with this investment in the Bonds and acknowledges that it is able to bear the economic risks of its investment.

Σ-2 Elkhorn Goldfields Inc

(l)          The Investor recognizes that any financial statements and projections contained in the Memorandum are based on estimates, assumptions and projections based on the best judgment of the Company in light of present circumstances and that the projected results could be significantly affected if actual events and transactions vary significantly as to occurrence, time of occurrence or amounts from the assumed events and transactions and by changes in federal income tax laws or regulations. The Investor understands that the Memorandum and other information furnished by the Company do not constitute investment, accounting, legal or tax advice. The Investor acknowledges that it must rely on its own advisers for such advice.

4.          Indemnification. The Investor acknowledges that it understands the meaning and legal consequences of the representations and warranties in Section 3 above, and further acknowledges that it understands that the Company has relied upon the truth and accuracy of such representations as a material condition to the extension of an offer to and acceptance of a subscription from the Investor. The Investor hereby agrees to indemnify and hold harmless the Company, each Member, the Manager and the Company’s and the Manager’s respective controlling persons, managers, agents and employees, from and against any and all loss, damage or liability due to or arising out of a breach of any such representation or warranty. Notwithstanding the foregoing, however, no representation, warranty, acknowledgment or agreement made herein by the Investor shall in any manner be deemed to constitute a waiver of any rights granted to the Investor under federal or state securities laws.

5.          Limitation on Transfer. The Investor acknowledges that it is aware that there are substantial restrictions on the transferability of the Bonds. Because none of the Securities will be, and the Investor has no right to require that they be, registered under the Securities Act or any state securities act, the Bonds may not be, and the Investor agrees that they shall not be, offered or sold unless such offer or sale is exempt from such registration under the Securities Act or any state securities acts and such offer or sale complies with the provisions of the Securities Act and any other provisions or conditions that the Manager may reasonably impose, including the requirement that the Manager be furnished a satisfactory opinion of counsel to the effect that such offer or sale is exempt. The Investor is aware that, because of the above-described restrictions on transfer and the lack of a trading market for the Bonds, it may not readily liquidate its investment and must not subscribe to the Bonds unless it has sufficient liquid assets that such purchase will cause the Investor no undue financial difficulties. The Investor also acknowledges that it shall be responsible for compliance with all conditions on transfer imposed by any state securities law administrator and for any expenses incurred by the Company for legal or accounting services in connection with reviewing such a proposed transfer.

6.          Financial and Other Information. The Investor agrees to furnish to the Company such financial and other information regarding the Investor as the Manager or the Company may reasonably request in order to verify the accuracy of any representation contained herein or that may be required by any governmental authority having jurisdiction with respect to the subscription of Bonds.

7.          Confidentiality. The Investor agrees to keep confidential, except as the Company may otherwise consent in writing, and not disclose, or make any use of except for the benefit of the Company at any time either during or subsequent to its investment in the Company, any trade secrets, confidential information, knowledge, data, documents or other information of the Company relating to products, processes, know-how, designs, equipment, operating manuals, tests, customer lists, supplier lists, business plans, marketing plans, marketing strategies, pricing strategies, investments or other subject matter pertaining to any business of the Company or the Manager or any of their respective customers, suppliers, consultants or affiliates (all of which are referred to herein as “Trade Secrets”), which the Investor may obtain or otherwise acquire during the course of its investment. The Investor further agrees not to deliver, reproduce or in any way allow any Trade Secrets to be delivered or used by any third parties without specific direction or consent of a duly authorized representative of the Company.

8.          Delivery of Bonds. Upon acceptance of this Subscription Agreement, the Company will execute and deliver to the Investor Bonds for which the Investor had subscribed, registered in the name of the Investor provided on page S-5

Σ-3 Elkhorn Goldfields Inc

9.          Power of Attorney. By its execution hereof, the Investor hereby gives to any authorized officer of the Company a power-of-attorney to execute on the Investor’s behalf an execution page to the Company Agreement to reflect the Investor’s becoming a member and its agreement to the terms and provisions of the Company Agreement, and to further authorize the Company cause such execution page to be attached to a counterpart of the Company Agreement for all applicable purposes.

[Remainder of Page Intentionally Left Blank]

Σ-4 Elkhorn Goldfields Inc

IN WITNESS WHEREOF, the Investor has executed this Subscription as of the       day of          ___, 2010.

Print Name(s) of Investor(s):

Signature(s) of Investor(s):

ACKNOWLEDGMENT

State of	)
	)
County of	)

On this       day of                , 2010, before me, the undersigned Notary Public, personally appeared                          , known to me to be the person whose name is subscribed to the instrument within, and acknowledged that he/she executed the same for the purposes therein contained.

My commission expires:

Notary Public

The foregoing subscription is hereby accepted this       day of                , 2010.

Elkhorn Goldfields Inc.
a Montana Corporation
By:
	Robert Trenaman, President

THE BONDS EVIDENCED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE LAWS OF ANY STATE. THE BONDS MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE BONDS UNDER THE SECURITIES ACT AND SUCH STATE LAWS AS MAY BE APPLICABLE. ADDITIONAL RESTRICTIONS ARE SET FORTH IN THIS SUBSCRIPTION AGREEMENT.

Σ-5 Elkhorn Goldfields Inc

EX-10.23

MINERAL PRODUCT RECEIVABLES PURCHASE AGREEMENT

This MINERAL PRODUCT RECEIVABLES PURCHASE AGREEMENT dated as of the 15th day of April, 2011 by and among ELKHORN GOLDFIELDS, INC. (“EGI”), a Montana corporation, and a wholly owned subsidiary of Elkhorn Goldfields, LLC (“EGLLC”) and BLACK DIAMOND HOLDINGS LLC, a Colorado limited liability company (“BDH”).

RECITALS

WHEREAS EGI is the owner of the Golden Dream Mine, a gold-copper underground mine, located at 2725-A Elkhorn Road, Boulder, Montana;

WHEREAS EGI is in the process of arranging financing to construct and operate the Golden Dream Mine;

WHEREAS EGI desires to sell and BDH desires to purchase the Payable Au and this Agreement constitutes such definitive purchase agreement;

WHEREAS certain of the payments to be made by BDH to EGI hereunder shall be used to complete the construction of the Golden Dream Mine;

WHEREAS EGI has agreed to grant a security interest to BDH to secure its obligations under this Agreement by executing and delivering the Security Agreement to BDH;

WHEREAS the Parties are therefore desirous of executing and delivering this Agreement, all on and subject to the terms and conditions contained herein;

NOW THEREFORE in consideration of the premises recited above which form part of this agreement, the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each of the Parties, the Parties mutually agree as follows:

AGREEMENT

1. Definitions

“Act of God or Force Majeure” has the meaning set forth in section 27(a).

“Annual Report” means a written report, in relation to any calendar year, detailing: (i) the number of ounces of Au produced and recovered from the Golden Dream Mine and delivered to an Offtaker in the applicable calendar year; (ii) the names and addresses of each Offtaker to which the Au referred to in subsection (i) was delivered; (iii) the number of ounces of Payable Au which have resulted or which are estimated to result from the Au deliveries to Offtakers referred to in subsection (i); (iv) if necessary, a reconciliation between the number of ounces of Payable Au provisionally identified in an Annual Report for a preceding calendar year and the final number of ounces of Payable Au actually realized for the applicable calendar year; (v) the Au price assumptions used by EGI and its affiliates for short term and long term planning purposes with respect to the Golden Dream Mine; and (vi) the remaining Uncredited Balance and a summary explanation or calculation of the extent to which the Uncredited Balance was reduced during the applicable calendar year.

“Au” means gold.

“Balance Payment Funding Conditions” means the conditions applicable when and if BDH, in its sole discretion, shall desire to make Balance Payments requested by EGI which, when applicable, shall require (i) EGI’s provision to BDH of evidence reasonably substantiating that EGI has expended all funds previously advanced, including without limitation, the Pre-Closing Payment (but excluding specifically the Balance Payments) and that the Balance Payments requested are funds (other than contingency funds) that are required by EGI to meet development, construction, completion and commissioning cost requirements of the Golden Dream Mine in accordance with the Mine Plan (as delivered pursuant to section 5(a) from time to time); and (B) that after receipt of the Upfront Cash Payment, EGI shall have sufficient funds, including without limitation, contingency amounts and working capital, to construct and operate the Golden Dream Mine up to and including the date of Commencement of Commercial Production.

“Balance Payments” means an aggregate of up to $9,675,000 million to be paid by BDH in its sole discretion in accordance with section 3(a).

“BDH Audit” has the meaning set forth in section 6(e).

“BDH Default Fee” has the meaning set forth in section 12(d).

“Business Day” means any day other than a Saturday or Sunday or a day that is a federal holiday in the United States of America.

“Closing” has the meaning set forth in section 2.

“Closing Date” has the meaning set forth in section 7.

“Closing Time” has the meaning set forth in section 7.

“Commencement of Commercial Production” means: A. If a processing plant is located on the Golden Dream Mine, the first day of the month following the first period of 60 consecutive days during which Minerals have been processed through such plant at an average rate of not less than 80% of the initial rated capacity of such plant; or B. If no plant is located on the Golden Dream Mine, the first day of the month following the first period of 60 consecutive days during which Minerals have been shipped from the Golden Dream Mine no less frequently than three times a week for the purpose of generating commercial revenue.

“Concentrate” means the product created by the beneficiation of Minerals derived from the Golden Dream Mine.

“Deductions” means any and all charges withheld from proceeds to cover refining, treatment, processing and other charges, penalties, adjustments, shipping expenses and/or expenses pertaining to and/or in respect of Au sales and deliveries and charged by an Offtaker (excluding any adjustments made by the Offtaker based on the Offtaker’s analysis of the assays of Au contained in the Minerals or Concentrate), charged or imposed in respect of delivery costs to the final customer of BDH or charged to or burdening the net interest of EGI as and by way of royalty payments, as the case may be.

“Demanding Party” has the meaning set forth in section 21(b).

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“Dispute Notice” has the meaning set forth in section 6(c)(i).

“Encumbrances” means any and all liens, charges, mortgages, encumbrances, pledges, security interests, royalties, proxies and third party rights or any other encumbrances of any nature whatsoever, whether registered or unregistered.

“Event of Default” has the meaning set forth in section 12(a).

“Extended Term” has the meaning set forth in section 4(b).

“Golden Dream Mine” - means the mineral claims and crown granted claims owned or leased by EGI, as more fully described in Schedule “A”.

“Hedging Arrangement” means any arrangement proposed to be entered into by EGI or BDH or its or their respective affiliates with respect to their respective interests in properties from which Au is sold or in Payable Au pursuant to which the risk of the future price fluctuations of Au is controlled or limited pursuant to contractual arrangements entered into with third parties, including without limitation, as and by way of netting and collateral arrangements under International Swaps and Derivatives Association, Inc. protocols and mandates.

“In kind” means Refined Au, which may be payable by the applicable Offtaker to EGI or BDH, as the case may be, on account of Payable Au pursuant to the provisions of the applicable Offtake Agreement.

“Inflation Accelerator” means an annual (compounded) inflation accelerator equal to 1.01.

“Losses” means any and all damages, claims, losses, liabilities, fines, injuries, costs, penalties and expenses (including reasonable legal fees).

“Lot” means the applicable quantity of Minerals delivered to and accepted by the Offtaker that is separately sampled and assayed so that EGI and the Offtaker can agree upon or verify the content of Au and other metals therein, all as set forth in the applicable Offtake Agreement.

“Material Adverse Change” means any one or more changes, events or occurrences which, in either case, either individually or in the aggregate are material and adverse to the relevant business operation or party hereto, other than any change, effect, event or occurrence: (i) relating to the global economy or securities markets in general; (ii) affecting the worldwide copper and gold mining industry in general and which does not have a materially disproportionate effect on EGI on a consolidated basis, or (iii) resulting from changes in the price of copper and gold in recognized markets; which general changes and market developments and amounts attributable thereto shall not be deemed to be relevant for the purpose of determining whether a "Material Adverse Change" has occurred or for purposes of any other determination of materiality for purposes of this agreement.

“Mine Plan” EGI has projected that a probable underground mineral reserve of 1.17 million tons of gold (approximately 258,000 ounces) and 8.3 million pounds of copper is commercially exploitable from the Golden Dream Mine and has designed a “Mine Plan” aligned with this probable mineral reserve estimate relating to the construction required for the Golden Dream Mine.

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“Minerals” means any and all economic, marketable Au metal bearing material, in whatever form or state, that are mined, extracted, removed, produced or otherwise recovered from the Golden Dream Mine, including any such material derived from any processing or reprocessing of any tailings originally derived from the Golden Dream Mine.

“Monthly Report” means a written report, in relation to a calendar month, detailing: (i) the number of ounces of Au produced and recovered from the Golden Dream Mine and delivered to an Offtaker in the applicable calendar month; (ii) the names and addresses of each Offtaker to which the Au referred to in clause (i) above was delivered; (iii) the number of ounces of Payable Au which have resulted or which are estimated to result from the Au referred to in clause (i) above; (iv) a reconciliation between any provisional number of ounces of Payable Au specified in a Monthly Report pursuant to clause (iii) above for a preceding calendar month and the final number of ounces of Payable Au for the applicable calendar month; and (v) the Au prices assumed by EGI and its affiliates for short term and long term planning purposes with respect to the Golden Dream Mine.

“Offer” has the meaning set forth in section 17(a).

“Offer Notice” has the meaning set forth in section 17(a).

“Offer Notice Acceptance” has the meaning set forth in section 17(a).

“Offered Interest” has the meaning set forth in section 17(a).

“Offtaker” means the counterparty to an Offtake Agreement.

“Offtake Agreement” means any refining, smelter, Concentrate purchase, Minerals purchase or processing agreement entered into by EGI with respect to Minerals.

“Offtake Payments” means cash or “in kind” payments in respect of Payable Au to be made by the Offtaker under the Offtake Agreements.

“Parties” means the parties to this Agreement and “Party” means any one of the

Parties.

“Payable Au” means, subject to any Payable Au Adjustments, (i) 80% of the Au mined, extracted, removed, produced or otherwise recovered from the Golden Dream Mine, less the number of ounces of Au deducted on account of the processing of such Au into Refined Au, for which net number of ounces EGI receives payment or Refined Au from an Offtaker pursuant to and in accordance with any Offtake Agreement for the first 41,700 aggregate ounces of Payable Au sold by EGI to BDH hereunder, and (ii) 6.5% of the Au mined, extracted, removed, produced or otherwise recovered from the Golden Dream Mine, less the number of ounces of Au deducted on account of the processing of such Au into Refined Au, for which net number of ounces EGI, as the case may be, receives payment or Refined Au from an Offtaker pursuant to and in accordance with any Offtake Agreement with respect to each ounce of Payable Au sold by the EGI to BDH hereunder in excess of 250,000 aggregate ounces of Refined Au from the Golden Dream Mine.

“Payable Au Adjustments” means if any or all Balance Payments are not paid by BDH, in its sole discretion, Payable Au shall be proportionally reduce to correspond with the reduction of Upfront Cash Payment on a pro-rata basis.

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“Payment Invoice” has the meaning set forth in section 10(e).

“Person” means and includes individuals, corporations, bodies corporate, limited or general partnerships, joint stock companies, limited liability corporations, joint ventures, associations, companies, trusts, banks, trust companies, governments or any other type of organization, whether or not a legal entity.

“Port of Loading” means the port of loading the Minerals or Concentrate, as shall be specified in the applicable Offtake Agreement.

“Pre-Closing Payments” means an aggregate of $425,000 which consists of $175,000 contributed on February 17, 2011, $150,000 contributed on March 4, 2011 and $100,000 on March 25, 2011, in accordance with the provisions of section 3(a).

“Purchase Price” means, subject to any Purchase Price Adjustments, (i) with respect to the first 41,700 aggregate ounces of Payable Au sold by EGI to BDH hereunder, the lesser of $500 per ounce or the latest Comex spot gold price, subject to the Inflation Accelerator and (ii) with respect to each ounce of Payable Au sold by EGI to BDH hereunder in excess of 250,000 aggregate ounces, the lesser of $600 per ounce or the latest Comex spot gold price, subject to the Inflation Accelerator. For the avoidance of doubt, the Purchase Price includes any and all Upfront Cash Payments.

“Reference Price” means the market price used to determine the price for Refined Au in connection with a sale of Minerals under an Offtake Agreement.  For greater certainty, “Reference Price” does not include Refining Adjustments.

“Refining Adjustments” means any refining charges, treatment charges, penalties, insurance charges, transportation charges, settlement charges, financing charges or price participation charges, or other similar charges or deductions, regardless of whether such charges or deductions are expressed as a specific metal deduction, separate and apart from the recovery rate pursuant to the terms of the applicable Offtake Agreement.

“Refined Au” means marketable metal bearing material in the form of Au that is refined to standards meeting or exceeding commercial standards for the sale of refined Au.

“Responding Party” has the meaning set forth in section 21(b).

“Security Holder” means Gordon Synder, acting as Agent to the senior secure lenders of EGI.

“Term” has the meaning set forth in section 4(a).

“Termination Notice” has the meaning set forth in section 4(b).

“Transfer” when used as a verb, means to sell, grant, assign, encumber, pledge or otherwise dispose of or commit to dispose of, directly or indirectly, including through mergers, consolidations or asset purchases. When used as a noun, “Transfer” means a sale, grant, assignment, pledge or disposal or the commitment to do any of the foregoing, directly or indirectly, including through mergers, consolidation or asset purchase.

“Upfront Cash Payment” means an upfront cash payment of up to $10 million, being comprised of the Pre-Closing Payments and the Balance Payments, if any.

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2. Agreement of Purchase and Sale

Subject to the terms and conditions of this Agreement, from and after closing of the transaction contemplated herein (the “Closing”), EGI shall sell to BDH and BDH shall purchase from EGI for resale on terms and conditions contained in BDH-approved purchase contracts with Offtakers, the Payable Au, free and clear of any and all liens or Encumbrances other than the rights of Offtakers to receive product conforming to specifications, in consideration of those payments set forth in section 3. EGI’s obligation under this Agreement shall be to sell and deliver the Payable Au in a manner consistent with the terms of this Agreement.

3. Purchase and Payment

(a) In consideration of the delivery and sale of the Payable Au, BDH shall: (i) pay the Pre-Closing Payment to EGI, in cash by wire transfer on Closing; and (ii) pay the Balance Payments to EGI, provided that the Balance Payment Funding Conditions have been and remain satisfied, in cash by wire transfer, in installments in amounts, as requested by EGI pursuant to the terms and conditions of scheduled cash flow requirements up to and including the Commencement of Commercial Production. For the avoidance of doubt, the Balance Payments shall only be made in the sole discretion of BDH and do not constitute an on-going obligation (except as otherwise provided herein).

(b) During the Term, BDH shall make ongoing payments to EGI in cash or by wire transfer for each ounce of Payable Au sold and delivered by EGI to BDH under this Agreement pursuant to the provisions of section 10, at a price per ounce of Payable Au equal to the Purchase Price.

(c) Commencing on the third year anniversary of the Closing Date, the Purchase Price shall be increased by multiplying the then applicable Purchase Price by the Inflation Accelerator.

In the event of any dispute between the Parties with respect to this section 3(b), either Party shall have the right to elect to have the matter settled in accordance with the dispute resolution procedures set forth in section 21.

4. Term

(a) The term of this Agreement shall commence on the Closing Date and subject to section 12, shall continue for the life of the Golden Dream Mine after the Closing Date (the “Term”).

(b) BDH may terminate the Term by providing to EGI, prior to the end of such Term, written notice of its intention to terminate the Term.

(c) Notwithstanding the foregoing, if the Balance Payment Funding Conditions have not been satisfied on or before the date of any Balance Payment request, BDH may terminate this Agreement upon giving five Business Days prior notice of termination to EGI and, for the avoidance of doubt shall have no subsequent obligation whatsoever to advance any or all further Balance Payments that might otherwise be applicable hereunder. If this Agreement is terminated pursuant to this section 4(c) prior to BDH funding $5,000,000, the Pre-Closing Payment (if advanced) shall be refunded by EGI to BDH and until such refund is made, the amount advanced shall bear interest at the Wall Street Journal Prime Rate plus 2% per annum. This repayment obligation shall survive notwithstanding the said termination of this Agreement.

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5. Positive Covenants of EGI

EGI covenants and agrees to and in favour of BDH as follows and acknowledges and agrees that BDH is relying on such covenants in executing and delivering this Agreement:

(a) EGI shall only use the Upfront Cash Payment to (i) payoff certain creditors of EGI and EGLLC, the list of creditors and the amounts to be received being set forth in Schedule “B” attached hereto, and (ii) fund capital expenditures which are required to construct and develop the Golden Dream Mine and for general and administrative costs associated therewith, all in a manner consistent with the Mine Plan.

(b) EGI shall limit spending on other properties to minimum levels as agreed upon between EGI and BDH and described in the Mine Plan, until the Commencement of Commercial Production at the Golden Dream Mine in accordance with the Mine Plan, such agreed expenditures to be an approved use of the Upfront Cash Payment.

(c) EGI shall notify BDH, on a timely basis (and in any event within one Business Day after ascertainment by EGI) of any material departure from the Mine Plan, including cost overruns (if any), as well as any negative material impact on Au to be produced from the Golden Dream Mine, either in amount or timing, together with the plans to rectify the situation.

(d) Until the Commencement of Commercial Production at the Golden Dream Mine, the Monthly Reports shall include information as to budgets and permitting status as well as monthly and annual operating reports and proposed budgets, which shall include Au production from the Golden Dream Mine.

6. Monthly Reports and Annual Reports

(a) During the Term, after the first calendar month during which Au is mined, extracted, removed, produced or otherwise recovered from the Golden Dream Mine, being after the Commencement of Commercial Production, EGI shall deliver to BDH a Monthly Report on or before the tenth Business Day after the last day of each calendar month.

(b) During the Term, EGI shall deliver to BDH, an Annual Report, on or before 45 days after the last day of each calendar year.

(c) BDH shall have the right to dispute an Annual Report in accordance with the provisions of this section 6. If BDH disputes an Annual Report: (i) BDH shall notify EGI in writing within 90 days from the date of delivery of the applicable Annual Report that it disputes the accuracy of that Annual Report (or any part thereof) (the “Dispute Notice”); (ii) BDH and EGI shall have 30 days from the date the Dispute Notice is delivered by BDH to resolve the dispute. If BDH and EGI have not resolved the dispute within the 30 day period, BDH shall have the right to require EGI to cause the firm of certified public accountants engaged by EGI to audit or review the Annual Report to examine or re-examine the records relied upon with respect to the actual number of ounces of Payable Au and to determine the extent of any variance between such actual amount and the number of ounces of Payable Au as set out in the Annual Report. If the amount so determined varies by five per cent or less from the number of ounces of Payable Au set out in the Annual Report, then the cost of the Auditor’s review and determination shall be for the account of BDH; (iv) if the Auditor’s review and determination concludes that the number of ounces of Payable Au varies by more than five per cent from the number of ounces of Payable Au set out in the Annual Report, then the cost of the Auditor’s Report shall be for the account of EGI; and (v) if either BDH or EGI disputes the Auditor’s Report and such dispute is not resolved between the Parties within ten days after the date of delivery of the Auditor’s Report, then such dispute shall be resolved by the dispute mechanism procedures set forth in section 21.

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(d) If BDH has made an overpayment to EGI in accordance with the provisions of section 3(b), as determined in accordance with this section 6, EGI shall forthwith refund to BDH, without setoff, deduction or defalcation, the amount of any such overpayment and until paid, such refund shall bear interest at a rate of Prime plus 2% per annum. If BDH has underpaid EGI in accordance with the provisions of section 3(b), as determined in accordance with this section 6, BDH shall forthwith pay to EGI, without setoff, deduction or defalcation, the amount of any such underpayment and until paid, shall bear interest at a rate of Prime plus 2% per annum.

(e) If EGI does not deliver a Monthly Report or an Annual Report as required pursuant to this section, after the time specified therefor and after two weeks of making a written request therefor, BDH shall have the right to perform or to cause its representatives or agents to perform an audit of EGI's books and records relevant to the production and delivery of Payable Au produced during the calendar month or calendar year in question (the "BDH Audit"). EGI shall grant BDH or its representatives or agents access to all such books and records on a timely basis. In order to exercise this right, BDH must provide not less than seven days’ written notice to EGI of its intention to conduct the BDH Audit. If within seven days of receipt of such notice, EGI delivers the applicable Monthly Report or Annual Report, as the case may be, then BDH shall have no right to perform the BDH Audit. If EGI delivers the applicable Monthly Report or Annual Report, as the case may be, before the delivery of the BDH Audit, the applicable Monthly Report or Annual Report, as the case may be, shall be taken as final and conclusive, subject to the rights of BDH as set forth in section 6(c). Otherwise, absent any manifest or gross error in the auditor's report, the BDH Audit shall be final and conclusive and EGI shall not have the right todispute its findings.

7. Closing Date

Closing shall take place at the offices of Messner & Reeves, LLC, 1430 Wynkoop Street, Suite 300, Denver, Colorado, 80202, at 11:00 a.m. (the “Closing Time”) (Denver time) on April 12, 2011 (the “Closing Date”) or on such earlier or later date or other time as the Parties may mutually agree, provided that all of the conditions set out in sections 8 and 9 have been satisfied. At the Closing Time, provided the closing conditions for the benefit of BDH and EGI have been satisfied or waived, as the case may be, BDH shall deliver to EGI the Pre-Closing Payment.

8. Closing Conditions for the Benefit of BDH

BDH shall not be obligated to complete the transactions contemplated in this Agreement unless, at or before the Closing Time, each of the conditions listed below has been satisfied, it being understood that the said conditions are included for the exclusive benefit of BDH. EGI shall take all such actions, steps and proceedings as are reasonably within their respective control as may be necessary to ensure that the conditions listed below are fulfilled at or before the Closing Time.

(a) The representations and warranties of EGI contained in section 23 shall be true and correct, in all material respects, at the Closing Time.

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(b) Each of EGI and BDH shall have received any and all required consents or approvals, including without limitation, third Person consents and all governmental or regulatory consents in any applicable jurisdiction.

(c) BDH shall have received all such other assurances, consents, agreements, documents and instruments as may be reasonably required by BDH to complete the transactions contemplated by this Agreement, all of which shall be in form and substance satisfactory to BDH, acting reasonably.

(d) EGI shall have executed, to and in favor of BDH, the Security Agreement in substantially the form attached as Schedule “C” (the “Security Agreement”), as security for the performance of its obligations to BDH under this Agreement, the executed Security Agreement, which Security Agreement shall have been registered, filed or recorded in all offices, and all actions shall have been taken, that may be prudent or necessary to preserve, protect or perfect the security interest of Elkhorn Streaming under the Security Agreement.

If any condition contained in this section 8 has not been fulfilled at or before the Closing Time or if any such condition is or becomes impossible to satisfy, other than as a result of the failure of EGI to act in good faith, using reasonable commercial efforts to procure the satisfaction of any such unfulfilled condition, then if BDH is unwilling to waive the fulfillment of any such condition, this Agreement shall be terminated and each of the Parties shall be released from all of their obligations hereunder save and except as provided in sections 20, 21 and 28.

9. Closing Conditions for the Benefit of EGI

EGI shall not be obligated to complete the transaction contemplated in this Agreement unless, at or before the Closing Time, each of the conditions listed below has been satisfied, it being understood that the said conditions are included for the exclusive benefit of EGI. BDH shall take all such actions, steps and proceedings as are reasonably within its control as may be necessary to ensure that the conditions listed below are fulfilled at or before the Closing Time.

(a) The representations and warranties of BDH contained in section 22 shall be true and correct, in all material respects, at the Closing.

(b) Each of EGI and BDH shall have received any and all required consents or approvals, including without limitation, third Person consents and all governmental or regulatory consents in any applicable jurisdiction.

(c) EGI shall have received all such other assurances, consents, agreements, documents and instruments as may be reasonably required by EGI to complete the transactions contemplated by this Agreement, all of which shall be in form and substance satisfactory to EGI, acting reasonably.

(d) BDH shall make the Pre-Closing Payment.

If any condition contained in this section 9 has not been fulfilled at or before the Closing Time or if any such condition is or becomes impossible to satisfy, other than as a result of the failure of BDH to act in good faith, using reasonable commercial efforts to procure the satisfaction of any such unfulfilled condition, then if EGI is unwilling to waive the fulfillment of any such condition, this Agreement shall be terminated and each of the Parties shall be released from all of their obligations hereunder save and except as provided in sections 20, 21 and 28.

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10. Delivery of Minerals, Payments and Invoicing

(a) During the Term, EGI shall be a party to the Offtake Agreements and EGI shall be responsible for delivering all Minerals or Concentrate to each Offtaker, in such quantity, quality, description and amounts and at such times and places as required under and in accordance with each Offtake Agreement. EGI shall promptly deliver to BDH once available and/or prepared, copies of all documents, certificates and instruments pertaining to each Lot, including without limitation, all invoices, credit notes, bills of lading, certificates indicating EGI’s provisional shipped moisture content and provisional shipped assays and any and all documentation prepared or produced by the Offtaker in respect of the Au, including without limitation, all analyses and assays.

(b) All Deductions relating to the delivery of each Lot shall be borne by EGI.

(c) All deliveries of Minerals or Concentrate, in accordance with section 10(a), shall be made subject to withholding or deduction from the gross amount received as payment from the Offtaker for, or on account of any present or future production severance, taxes, duties, assessments, sales and excise taxes, tariffs or governmental charges of whatsoever nature imposed or levied on such delivery by or on behalf of any governmental authority having power and jurisdiction to tax and for which EGI is required by law to withhold, collect, deduct and remit to such governmental authority.

(d) EGI shall issue to BDH a Statement of Account (the “EGI Statement”) within 10 Business Days of the month following the month in which the Lot or Lots were received by the Offtaker. The EGI Statement shall describe the quantity of Payable Au ounces, the price received per ounce of Au and allowable Deductions. The EGI Statement shall also include the net amount payable to BDH as calculated as:

For the first 41,700 ounces of Payable Au sold from the Golden Dream Mine;

Net amount due to BDH = Payable Au ounces sold multiplied by 80% multiplied by the price per ounce of Au received less the Purchase Price per ounce of Au less allowable Deductions. In equation form the calculation is:

Net amount due BDH = ((Payable Au ounces sold x 80% x (price per ounce Au received - the Purchase Price)) - allowable Deductions.

For Payable Au ounces sold from the Golden Dream Mine exceeding 250,000 Au ounces:

Net amount due to BDH = Payable Au ounces sold multiplied by 6.5% multiplied by the price per ounce of Au received less the Purchase Price per ounce of Au less allowable Deductions. In equation form the calculation is:

Net amount due BDH = ((Payable Au ounces sold x 6.5% x (price per ounce Au received - the Purchase Price)) - allowable Deductions.

(e) EGI shall pay by wire or Automated Clearing House the net amount due as determined in (d) to BDH within 3 business days of EGI receiving an Offtake Payment..

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11. Title, Risk of Loss and Insurance

(a) EGI shall retain title to all Au contained in each Lot of Minerals or Concentrate until title is passed to an Offtaker in accordance with the terms of the applicable Offtake Agreement, including without limitation, on the making of provisional payments and/or advance payments by the Offtaker to EGI.

(b) Risk of loss or damage to all Au contained in each Lot of Minerals or Concentrate shall at all times remain with EGI until risk of loss or damage with respect to such Lot of Minerals or Concentrate passes to the applicable Offtaker or to a transporter in accordance with the terms of the Offtake Agreement to which such Offtaker is a party.

(c) Insurance in respect of each Lot of Minerals or Concentrate shall be procured and maintained by EGI at its cost against risk of loss, theft or product damage up until the time that risk of loss or damage passes to the applicable Offtaker or transporter in accordance with the terms of the applicable Offtake Agreement. EGI shall acquire and maintain adequate insurance for and in respect of each Lot of Minerals or Concentrate in accordance with the terms of the Offtake Agreements (and normal industry standards and practice) during the Term and shall deliver proof of such insurance to BDH (including insurance obtained by each Offtaker) as well as at the Commencement of Commercial Production and thereafter upon the written request of BDH. Insurance in respect of each Lot of Minerals or Concentrate shall be covered by and shall be the responsibility of the applicable Offtaker at the time that risk of loss or damage passes to such Offtaker.

(d) In the event of a partial or total loss of a shipment of Minerals or Concentrate before or after title to Au has passed from EGI to the Offtaker and prior to receipt of payment in cash or “in kind” for the Payable Au, BDH shall be entitled to receive from: (i) EGI for the Payable Au contained in the shipment of Minerals or Concentrate: (1) final payment (for total loss) in accordance with Bill of Lading weight, along with moisture and assays determined from samples taken at the time of loading or immediately prior to loading, with the cargo being deemed to have arrived 30 days after the Bill of Lading date; and (2) final payment (for partial loss), with net dry weight based on Bill of Lading weight adjusted for moisture on the safely delivered Minerals or Concentrate and assays determined from samples taken from the safely delivered Minerals or Concentrate; in each case as if the Payable Au had been sold and delivered pursuant to this Agreement on the date of loss; and (ii) from the Offtaker, the insurance proceeds for the Payable Au contained in the shipment of Minerals or Concentrate, with respect to the payment for partial or total loss of the Minerals or Concentrate as provided in the applicable Offtake Agreement, as if the Payable Au had been sold and delivered pursuant to this Agreement on the date of loss. If EGI shall receive any such payment from the Offtaker in error, EGI shall forthwith deliver the same to BDH (and in any event within one Business Day thereafter) without deduction or set-off. EGI covenants to enforce any and all title rights as are contained in the Offtake Agreements if there shall be loss or damage to the Minerals or Concentrate after title has passed from EGI to BDH to the Offtaker.

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12. Early Termination

(a) The Parties (EGI acting as one Party for the purposes of this section) may terminate this Agreement at any time by mutual written consent. In addition, each Party shall have the right to terminate this Agreement effective upon ten days’ prior written notice to the other Party, if any of the following shall occur (each, an “Event of Default”): (i) the other Party defaults in any material respect in the performance of any of its covenants or obligations contained in this Agreement and such default is not remedied to the reasonable satisfaction of the non-defaulting Party within 30 days after written notice to the other Party (provided that no notice of a default given under the Section 12 shall be deemed to establish the existence of a default unless it has in fact occurred),, or if such default is not capable of rectification within 30 days, the other Party has not promptly commenced to rectify the default within such 30 day period, and thereafter proceeds diligently to rectify same; or (ii) the other Party makes an assignment for the benefit of creditors or is the voluntary or involuntary subject of any proceedings under any bankruptcy or insolvency law which proceedings remain undischarged for a period of 60 days, or if a receiver or receiver/manager is appointed for all or any substantial part of its property and business and such receiver or receiver/manager remains undischarged for a period of 60 days, or if the corporate existence of the other Party is terminated by voluntary or involuntary dissolution or winding-up (other than by way of amalgamation or reorganization).

(b) Notwithstanding any other provision of this Agreement, EGI shall have no right to terminate this Agreement if BDH has made all of the Balance Payments.

(c) Notwithstanding the termination of this Agreement in accordance with the terms hereof, the Parties agree to fulfill and perform all of their respective covenants and obligations that arise prior to the date of termination.

(d) If an Event of Default as set forth in section 12(a) occurs and is continuing: (i) if the non-defaulting Party is BDH, BDH shall have the right, upon written notice to EGI, at its option, to demand repayment of the Upfront Cash Payment (the “EGI Default Fee”), without interest, at the time of the occurrence of the applicable Event of Default; and (ii) if the non-defaulting Party is EGI, EGI shall have the right, upon written notice to BDH, at their option, to retain the Purchase Price received to such date (the “BDH Default Fee”).

Upon demand from BDH which demand shall include a calculation of the EGI Default Fee, EGI shall promptly pay the EGI Default Fee in cash by wire transfer, in immediately available funds, to a bank account designated by BDH.

(e) The Parties hereby acknowledge that: (i) each Party will be damaged by an Event of Default; (ii) it would be impracticable or extremely difficult to fix the actual damages resulting from the Event of Default; (iii) any sums payable or retainable pursuant to the EGI Default Fee or the BDH Default Fee, as the case may be, are in the nature of liquidated damages, not a penalty and are fair and reasonable; and (iv) any payment made or retained pursuant to the EGI Default Fee or the BDH Default Fee, as the case may be, with respect to an Event of Default Represents fair compensation for the Losses that may reasonably be anticipated from such Event of Default in full and final satisfaction of all amounts owed in respect of such Event of Default.

13. Offtake Agreements

(a) EGI shall notify BDH in writing when it commences negotiations to enter into an Offtake Agreement or Offtake Agreements, from time to time. EGI shall negotiate the Offtake Agreements in accordance with the terms of section 10. For greater certainty and without limitation, the Offtake Agreements shall clarify that title to the Minerals or Concentrate shall pass to such Offtaker upon the making of advance and/or provisional payments by such Offtaker. EGI shall provide BDH with the proposed terms and conditions of any Offtake Agreement and/or subsequent amendments to the material terms and conditions of any Offtake Agreement prior to concluding a binding agreement or amendment. Each Offtake Agreement shall be on arm’s length commercial terms, consistent with normal industry standards and practice. EGI shall not enter into any Offtake Agreement nor amend or modify any Offtake Agreement if BDH has notified EGI after receipt of the proposed terms and conditions of any such Offtake Agreement pertaining to the sale and purchase of Au or any amendment thereto that in BDH’s reasonable opinion, the subject agreement or amendment would disadvantage BDH in material respects, including without limitation, by reason of an increase in the number of ounces of Au deducted on account of Au content. In the event of EGI’s receipt of such notice from BDH, EGI shall confer with BDH to determine acceptable terms and conditions for the Offtake Agreement and/or Offtake Agreement amendment prior to the execution and delivery thereof.

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(b) EGI hereby agrees to indemnify and hold BDH and its managers, officers and employees harmless from and against any and all Losses incurred or suffered by any of them arising out of or in connection with or related to any breach or default of the obligation to secure BDH’s approval of terms of an Offtake Agreement. The foregoing indemnity shall not apply to any reduced amount received as a result of any terms of a BDH-approved Offtake Agreement related to adjustments for quality or otherwise. This section 13(b) shall survive the termination of this Agreement

14. INTENTIONALLY DELETED

15. Books; Records; Inspections

EGI shall keep true, complete and accurate books and records of all of its operations and activities with respect to the Golden Dream Mine, including the mining of Minerals there from and the mining and transportation of Minerals including Au, prepared in accordance with GAAP, consistently applied. Subject to the Confidentiality provisions of this Agreement and in addition to the provisions of section 6(e), BDH and its authorized representatives shall be entitled to perform audits or other reviews and examinations of the books and records of EGI relevant to the delivery of Minerals including Au pursuant to this Agreement four times per calendar year to confirm compliance by EGI with the terms of this Agreement. BDH shall diligently complete any audit or other examination permitted hereunder. For greater certainty and without limitation, BDH shall have access to all documents provided by the Offtaker to EGI or by EGI to an Offtaker, as contemplated under the Offtake Agreements or which otherwise relate to the Minerals vis a vis the Offtaker and that are, in any manner, relevant to the calculation of Payable Au or the delivery and credit in respect thereof, in each instance. The expenses of any audit or other examination permitted in this section shall be paid by BDH, unless the results of such audit or other examination permitted in this section, disclose a discrepancy in calculations made by EGI of equal to or greater than five percent, in which event the reasonable costs of such audit or other examination shall be paid by EGI.

16. Conduct of Mining Operations, etc.

(a) Subject to section 16(e), all decisions concerning methods, the extent, times, procedures and techniques of any: (i) exploration, development and mining related to the Golden Dream Mine, including spending on capital expenditures; (ii) leaching, milling, processing or extraction or refining treatment; and (iii) materials to be introduced on or to the Golden Dream Mine shall be made by EGI in its sole and absolute discretion, subject to the provisions of sections 5 and 16(j). For greater certainty and without limitation, the foregoing shall in no way be in derogation of the rights of EGI, acting as a commercially and economically prudent mine operator, to curtail, suspend or terminate mining operations in respect of some or all of the Golden Dream Mine, subject to the provisions of section 16(i).

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(b) BDH has no contractual rights relating to the development or operation of any of EGI’s operations, including without limitation, the Golden Dream Mine or any of its properties and BDH shall not be required to contribute to any capital or exploration expenditures in respect of mining operations over and above the Balance Payments. Except as provided in this Agreement, BDH has no right, title or interest in and to the Golden Dream Mine.

(c) Save and except as provided in sections 3(d) and 3(f), BDH is not entitled to any form or type of compensation or payment from EGI if EGI does not meet forecasted mineral production targets with respect to the Golden Dream Mine in a specified period, if EGI discontinues or ceases operations from the Golden Dream Mine.

(d) This Agreement shall in no way be construed as containing any guarantee as to the delivery of any amount of Payable Au from the Golden Dream Mine on an annual basis or over the life of the Golden Dream Mine, subject to the provisions of section 3(f).

(e) EGI shall perform or cause to be performed all mining operations and activities in respect of the Golden Dream Mine in a commercially prudent manner and in accordance with good mining, processing, engineering and environmental practices. For greater certainty and without limitation, both short term and long term mine planning and operations shall be carried out with prices for Au that are consistent with industry practices (i.e. near spot prices for short term planning and operations and long-term expected prices for long-term planning).

(f) At reasonable times and with EGI’s prior consent (which shall not be unreasonably withheld or delayed), at the sole risk and expense of BDH, BDH shall have a right of access by its representatives to the Golden Dream Mine and any mill, smelter, concentrator or other processing facility owned or operated by EGI and/or its respective affiliates and that is to process Minerals including Au for the purpose of enabling BDH to monitor compliance by EGI with the terms of this Agreement and to prepare technical reports on the Golden Dream Mine.

(g) EGI will cooperate with and will allow BDH access to technical information pertaining to the Golden Dream Mine to permit BDH to prepare technical reports on the Golden Dream Mine or to comply with BDH’s disclosure obligations under applicable US securities laws and/or stock exchange rules and policies, provided that: (i) to the extent permitted by law, BDH will use the same report writer as EGI to prepare all technical reports that BDH is required to prepare and to use the same reports as EGI (readdressed to BDH); and (ii) if BDH is unable to use the same report writer as EGI to prepare a required technical report, it will choose a Person to write the technical report that is acceptable to EGI, acting reasonably, and BDH will not finalize the technical report until EGI has been provided with a reasonable opportunity to comment on the contents of the technical report and BDH will act in good faith and will use its best efforts to incorporate EGI’s comments into the technical report to the extent EGI’s comments are made to conform the technical report with EGI’s existing disclosure. EGI will promptly deliver to BDH any updated mineral reserve and mineral resource estimates produced that pertain to the Golden Dream Mine.

(h) EGI shall ensure that all Au produced from the Golden Dream Mine is processed in a prompt and timely manner. If EGI wishes to commingle the Minerals produced from the Golden Dream Mine with other Minerals, the same shall be subject to the prior written approval of BDH, acting reasonably, provided that BDH is satisfied that it shall not be disadvantaged as a result of such commingling and further provided that a method is agreed upon by BDH as one Party and EGI as a second Party to determine the quantum of Au produced from the Golden Dream Mine.

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(i) EGI shall at all times during the Term, do and cause to be done all things necessary to maintain their respective corporate existence. EGI shall at all times during the Term, as the case may be, do all things necessary to maintain the Golden Dream Mine in good standing including paying all taxes owing in respect thereof. EGI, shall not abandon any of the claims or leases forming a part of the Golden Dream Mine or allow or permit any of the claims or leases forming a part of the Golden Dream Mine to lapse unless EGI provides evidence satisfactory to BDH, acting reasonably, that it is not economical to mine Minerals from the claims or leases forming a part of the Golden Dream Mine that EGI proposes to abandon or let lapse.

17. INTENTIOANLLY DELETED

18. Restricted Transfer Rights of EGI

During the Term, EGI may not Transfer, in whole or in part: (i) the Golden Dream Mine; or (ii) its rights and obligations under this Agreement; in each case, unless the following conditions are satisfied and upon such conditions being satisfied in respect of such Transfer, EGI shall be released from its obligations under this section: (i) EGI shall provide BDH with at least ten Business Days prior written notice of its intent to Transfer; (ii) any purchaser, transferee or assignee shall have, in the opinion of BDH, acting reasonably, the financial, operational and technical capability to observe and perform the covenants, agreements and obligations of EGI under this Agreement; (iii) any purchaser, transferee or assignee agrees in writing in favour of BDH to be bound by the terms of this Agreement, including without limitation, this section; and (iv) any transferee that is a mortgagee, chargeholder or encumbrancer agrees in writing in favour of BDH to be bound by and subject to the terms of this Agreement in the event it takes possession of or forecloses on all or part of the Golden Dream Mine or any of the mining operations carried on by EGI on or in respect of the Golden Dream Mine and undertakes to obtain an agreement in writing in favour of BDH from any subsequent purchaser or transferee of such mortgagee, chargeholder or encumbrancer that such subsequent mortgagee, chargeholder or encumbrancer will be bound by the terms of this Agreement including without limitation, this section.

19. Transfer Rights of BDH

(a) During the Term, until the payment of all of the Upfront Cash Payment, BDH may not Transfer, in whole or in part, its rights and obligations under this Agreement, unless the following conditions are satisfied and upon such conditions being satisfied in respect of such Transfer, BDH shall be released from its obligations under this section: (i) BDH provides EGI with at least ten Business Days prior written notice of its intent to Transfer its rights and obligations under this Agreement; (ii) any purchaser, transferee or assignee shall have the financial, operational and technical capability to observe and perform the covenants, agreements and obligations of BDH under this Agreement; (iii) any purchaser, transferee or assignee agrees in writing in favour of EGI to be bound by the terms of this Agreement, including without limitation, this section; and (iv) any mortgagee, chargeholder or encumbrancer agrees in writing in favour of EGI to be bound by and subject to the terms of this Agreement, including without limitation, this section.

(b) During the Term, after payment of all of the Upfront Cash Payment, BDH shall have the right to Transfer, in whole or in part, its rights and obligations under this Agreement, upon the provision of ten Business Days prior written notice to EGI, whereupon BDH shall be released from its obligations under this Agreement.

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(c) Notwithstanding the foregoing, at all times throughout the Term, as the case may be, BDH shall have the right to assign its rights and obligations under this Agreement, to a wholly-owned subsidiary of BDH (so long as such company remains a wholly-owned subsidiary of BDH throughout the Term or the Extended Term, as the case may be, subject to the provisions of section 19(b)), on the provision of 30 Business Days’ prior written notice to EGI and on the delivery to EGI of an unlimited guarantee with respect to the compliance by such subsidiary of all of the obligations of BDH under this Agreement, which such subsidiary shall assume. The guarantee shall be in form and substance satisfactory to BDH and EGI.

20. Confidentiality

(a) Subject to section 20(b), neither BDH nor EGI, shall, without the express written consent of the other Party (which consent shall not be unreasonably withheld or delayed), disclose any non-public information in respect of the terms of this Agreement or otherwise received under or in conjunction with this Agreement, other than to its respective employees, agents, bankers and/or consultants for purposes related to the administration of this Agreement and/or requisite regulatory authorities in connection with the procurement of consents and approvals contemplated hereunder and neither Party shall issue any press releases concerning the terms of this Agreement without the consent of the other Party after the other Party has first reviewed the terms of such press release. Each Party agrees to reveal such information only to its respective employees, agents, bankers and/or consultants who need to know, who are informed of the confidential nature of the information and who agree to be bound by the terms of this section 20. In addition, neither Party shall use any such information for its own use or benefit except for the purpose of enforcing its rights under this Agreement.

(b) Notwithstanding the foregoing, each Party may disclose information obtained under this Agreement if required to do so for compliance with applicable laws, rules, regulations or orders of any governmental authority or stock exchange having jurisdiction over such Party or to allow a current or potential bona fide provider of finance to conduct due diligence provided that the other Party shall be given the right to review and object to the data or information to be disclosed prior to any public release subject to any reasonable changes proposed by such other Party.

21. Arbitration

(a) In the event of a dispute in relation to this Agreement, including without limitation, the existence, validity, performance, breach or termination thereof or any matter arising therefrom, including whether any matter is subject to arbitration, the Parties agree to negotiate diligently and in good faith in an attempt to resolve such dispute. Failing resolution satisfactory to either Party, either Party may request that the dispute be resolved by binding arbitration in Denver, Colorado. The American Arbitration Association - Large, Complex Commercial Disputes Procedures, as may be amended from time to time, shall apply to such proceedings.

(b) To demand arbitration either Party (the “Demanding Party”) shall give written notice (the “Dispute Notice”) to the other Party (the “Responding Party”), which Dispute Notice shall toll the running of any applicable limitations of actions by law or under this Agreement. The Dispute Notice shall specify the nature of the allegation and issues in dispute, the amount or value involved (if applicable) and the remedy requested. Within 15 Business Days of receipt of the Dispute Notice, the Responding Party shall answer the demand in writing, responding to the allegations and issues that are disputed.

(c) The Demanding Party and the Responding Party shall each select one qualified arbitrator within five Business Days of the Responding Party’s answer. Each of the arbitrators shall be a disinterested person qualified by experience to hear and determine the issues to be arbitrated. The arbitrators so chosen shall select a neutral arbitrator within five Business Days of their selection.

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(d) No later than 15 Business Days after hearing the representations and evidence of the Parties, the arbitrators shall make their majority determination in writing and shall deliver one copy to each of the Parties. The written decision of the arbitrators shall be final and binding upon the Parties in respect of all matters relating to the arbitration, the procedure, the conduct of the Parties during the proceedings and the final determination of the issues in the arbitration. There shall be no appeal from the determination of the arbitrators to any court. The decision rendered by the arbitrators may be entered into any court for enforcement purposes.

(e) The arbitrators may determine all questions of law and jurisdiction (including questions as to whether or not a dispute is arbitratable) and all matters of procedure relating to the arbitration.

(f) A dispute of the Parties shall not constitute an Act of God or Force Majeure.

(g) The arbitrators shall have the right to grant legal and equitable relief and to award costs (including legal fees and the costs of arbitration) and interest. The costs of any arbitration shall be borne by the Parties in the manner specified by the arbitrators in their majority determination. The arbitrators may make an interim order, including injunctive relief and other provisional, protective or conservatory measures, as well as orders seeking assistance from a court in taking or compelling evidence or preserving and producing documents regarding the subject matter of the dispute.

(h) All papers, notices or process pertaining to arbitration hereunder may be served on a Party as provided in this Agreement.

(i) The Parties agree to treat as confidential information, in accordance with the provisions of section 20, the following: the existence of the arbitral proceedings; written notices, pleadings and correspondence in relation to the arbitration; reports, summaries, witness statements and other documents prepared in respect of the arbitration; documents exchanged for the purposes of the arbitration; and the contents of any award or ruling made in respect of the arbitration. Notwithstanding the foregoing part of this section, a Party may disclose such confidential information in judicial proceedings to enforce, nullify, modify or correct an award or ruling and as permitted under section 20.

22. Representations and Warranties of BDH

BDH, acknowledging that EGI are entering into this Agreement in reliance thereon, hereby represents and warrants to EGI as follows:

(a) It is a limited liability company duly and validly existing under the laws of its governing jurisdiction and is up to date in respect of all filings required by law or by any governmental authority.

(b) It has the requisite corporate power and capacity to enter into this Agreement and to perform its obligations hereunder. BDH has received all requisite approvals with respect to the execution and delivery of this Agreement.

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(c) This Agreement has been duly and validly executed and delivered by BDH and constitutes a legal, valid and binding obligation of BDH enforceable against BDH in accordance with its terms.

(d) It has not made an assignment for the benefit of creditors nor is it the voluntary or involuntary subject of any proceedings under any bankruptcy or insolvency law, no receiver or receiver/manager has been appointed for all or any substantial part of its properties or business and its corporate existence has not been terminated by voluntary or involuntary dissolution or winding up (other than by way of amalgamation or reorganization) and it is not now aware of any circumstance which, with notice or the passage of time, or both, would give rise to any of the foregoing.

23. Representations and Warranties of EGI

EGI acknowledging that BDH is entering into this Agreement in reliance thereon, hereby jointly and severally represent and warrant to BDH as follows:

(a) EGI is a Montana corporation duly and validly existing under the laws of its governing jurisdiction and EGI is up to date in respect of all filings required by law or by any governmental authority.

(b) EGI is a wholly-owned subsidiary of Elkhorn Goldfields, LLC, a Delaware limited liability company.

(c) EGI has the requisite corporate power and capacity to enter into this Agreement and to perform its obligations hereunder. EGI has received all requisite board approvals with respect to the execution and delivery of this Agreement.

(d) This Agreement has been duly and validly executed and delivered by EGI and constitutes a legal, valid and binding obligation of EGI enforceable against EGI in accordance with its terms.

(d) EGI has not made an assignment for the benefit of creditors, subject to the Security Holder, nor is the voluntary or involuntary subject of any proceedings under any bankruptcy or insolvency law; no receiver or receiver/manager has been appointed for all or any substantial part of its respective properties or business and its respective corporate existence has not been terminated by voluntary or involuntary dissolution or winding up (other than by way of amalgamation or reorganization) and, to the knowledge of EGI, any circumstance which, with notice or the passage of time, or both, would give rise to any of the foregoing.

(e) EGI is not obligated, by virtue of a prepayment arrangement, a “take or pay” arrangement or any other arrangement to deliver Au mined from the Golden Dream Mine at some future time without then or thereafter receiving full payment therefore. No Person has any agreement, option, right of first refusal or right, title or interest or right capable of becoming an agreement, option, right of first refusal or right, title or interest, in or to the ownership, use or control of the Golden Dream Mine or any of the Au therein, thereon or thereunder or derived therefrom, subject to the Security Holder.

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(f) EGI has all necessary corporate power to own the surface rights forming a part of the Golden Dream Mine and EGI is in material compliance with all material applicable laws and licenses, registrations, permits, consents and qualifications to which the surface rights forming a part of the Golden Dream Mine and the exploitation concessions appertaining thereto are subject.

(g) EGI has sufficient right, title or interest in and to the Golden Dream Mine in order for EGI to perform its obligations and enter into and complete the transactions contemplated in this Agreement, subject to the terms and conditions contained in this Agreement.

(h) EGI has and will deliver to BDH with each shipment of Minerals including Au, the entire legal and beneficial ownership of the removed Minerals free and clear of any and all Encumbrances, except as created by the BDH-approved Offtaking Agreement.

(i) EGI has provided to BDH all information in its respective control or possession with respect to the Golden Dream Mine, as well as corporate matters pertaining to EGI, as requested by BDH.

24. BDH Security Interest in Payable Au

The BDH Security Interest in Payable Au shall be as set forth in the Security Agreement attached hereto as Schedule C.

25. Indemnity of BDH

BDH shall indemnify and save EGI, without duplication, and their respective managers, officers, employees and agents harmless from and against any and all actual Losses suffered or incurred by them that arise out of or relate to any failure of BDH to timely and fully perform or cause to be performed all of the covenants and obligations to be observed or performed by BDH pursuant to this Agreement.

26. Indemnity of EGI

EGI shall indemnify and save BDH and its managers, officers, employees and agents harmless from and against any and all actual Losses suffered or incurred by them, that arise out of or relate to any failure of EGI to timely and fully perform or cause to be performed all of the covenants and obligations to be observed or performed by EGI pursuant to this Agreement.

27. Force Majeure

(a) Neither of the Parties will be liable for a breach of its obligations under this Agreement because of an event out of its control, such as acts of god or force majeure (each of which is referred to as an “Act of God or Force Majeure”), including without limitation, fire, storm, flood, explosion, war, disturbance, strike, legal or illegal stoppages, difficulty accessing the Golden Dream Mine because the surface owners refuse or third Persons that claim rights to the surface area or any other situation for which the Person that has the right to the benefit of this section is not responsible for the impossibility of continuing as agreed in this Agreement. For greater certainty and without limitation, an event of force majeure under the Offtake Agreements, shall to the extent applicable, constitute an Act of God or Force Majeure under this Agreement.

(b) All provisions of this Agreement will be extended for a period equal to the delay caused by an event derived from an Act of God or Force Majeure under the terms of subsection 27(a), save and except that the Term and the time for the refund of the Uncredited Balance shall only be extended if the period of the delay caused by an event derived from an Act of God or Force Majeure extends beyond a six month period.

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(c) The Party in the position described in section 27(a) will take all measures necessary to eliminate the negative effects of any event caused by an Act of God or Force Majeure, and if possible, shall comply with its obligations appropriately. Notwithstanding the above, nothing herein implies that the Party must resolve a labor dispute hurriedly or that the Party is forced to challenge the validity of any rule, law, regulation or order from any government authority in order to comply with its obligations within the term established.

28. General Provisions

(a) Each Party shall execute all such further instruments and documents and shall take all such further actions as may be necessary to effectuate the transactions contemplated in this Agreement, in each case at the cost and expense of the Party requesting such further instrument, document or action, unless expressly indicated otherwise.

(b) Nothing herein shall be construed to create, expressly or by implication, a joint venture, mining partnership, commercial partnership or other partnership relationship between EGI as one Party and BDH as a second party.

(c) This Agreement shall be governed by, and construed in accordance with, the Laws of the State of Colorado without regard to the principles of conflicts of law thereof or any previous agreements to the contrary.

(d) Time is of the essence of this Agreement.

(e) INTENTIOANLLY DELETED.

(f) If any provision of this Agreement is wholly or partially invalid, this Agreement

shall be interpreted as if the invalid provision had not been a part hereof so that the invalidity shall not affect the validity of the remainder of this Agreement which shall be construed as if this Agreement had been executed without the invalid portion.

(g) Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be delivered by hand or transmitted by facsimile transmission addressed to:

If to EGI, to:

Elkhorn Goldfields, Inc.

Suite 1209 – 409 Granville Street

Vancouver, B.C., Canada, V6C 1T2

Attention: Robert Trenaman

Telecopier:    (604) 689-4960

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with a required copy to: 

Messner & Reeves LLC

1430 Wynkoop Street, Suite 300

Denver, Colorado 80202

Attention:      Mr. Steven Levine

Telecopier:    (303) 623-0552

If to BDH, to:

Black Diamond Holdings, LLC.

PO Box 370657

Denver, CO 80237 

Attention: Eric Altman

Telecopier:   (303) 957-5536

Attention: (303) 648-1503

Fax Number: (303) 957-5536

Any notice given in accordance with this section, if transmitted by facsimile transmission, shall be deemed to have been received on the next Business Day following transmission or, if delivered by hand, shall be deemed to have been received when delivered.

(h) The Schedules that are attached to this Agreement are incorporated into this Agreement by reference and are deemed to form part hereof.

(i) This Agreement may not be changed, amended or modified in any manner, except pursuant to an instrument in writing signed on behalf of each of the Parties. The failure by any Party to enforce at any time any of the provisions of this Agreement shall in no way be construed to be a waiver of any such provision unless such waiver is acknowledged in writing, nor shall such failure affect the validity of this Agreement or any part thereof or the right of a Party to enforce each and every provision. No waiver or breach of this Agreement shall be held to be a waiver of any other or subsequent breach.

(j) Following the execution and delivery of this Agreement, if there shall occur any change in tax laws or other circumstances, each of BDH and EGI will co-operate reasonably with the other Party in implementing any proposed adjustments to the structure of this Agreement to facilitate tax planning, provided that such adjustments have no material adverse impact on the non-proposing Party.

(k) This Agreement may be executed in one or more counterparts and by the Parties in separate counterparts, each of which when executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement.

(l) This Agreement shall enure to the benefit of and shall be binding on and shall be enforceable by the Parties and their respective, successors and permitted assigns.

(m) INTENTIONALLY DELETED

21

(n) This Agreement constitutes the entire agreement between the Parties pertaining to the subject matter hereof and supersedes all prior agreements, negotiations, discussions and understandings, written or oral, among the Parties.

(o) The Parties may agree to enter into other financial instruments or agreements to supplement the pricing in this Agreement.

*****signature page follows***** 

22

IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the date and year first above written.

ELKHORN GOLDFIELDS, LLC

/s/ Robert Trenaman

By: Robert Trenaman

Title: President

ELKHORN GOLDFIELDS, INC.

/s/ Robert Trenaman

By: Robert Trenaman

Title: President

BLACK DIAMOND HOLDINGS, LLC

BLACK DIAMOND FINANCIAL GROUP LLC, its manager

/s/ Patrick Imeson

By: Patrick Imeson

Title: Manager

SCHEDULE “A”

Description of Golden Dream Mine

Schedule C

Security Agreement

EX-10.24

MINING LEASE WITH OPTION TO PURCHASE

(Patented and Unpatented Mining Claims

located in Jefferson County, Montana)

BETWEEN:

MT. HEAGAN DEVELOPMENT, INC.

-and-

ELKHORN GOLDFIELDS, INC.

January 29, 2001

MINING LEASE WITH OPTION TO PURCHASE

(Patented and Unpatented Mining Claims, Jefferson County, Montana)

THIS CONTRACT IS SUBJECT TO ARBITRATION

This Agreement, effective as of the 29th day of January, 2001 (“Effective Date”), is between MT. HEAGAN DEVELOPMENT, INC. (“Owner”), whose address is 3819 Highway 93 South, Darby, Montana 59827, and ELKHORN GOLDFIELDS, INC., a Montana corporation (“EGI”), whose address is 7 Maple Ridge Place, St. Andrews, Manitoba, Canada R1A 2Y6.

Owner warrants and represents that it is the owner, free and clear without lien, encumbrance or third party interest, save and except a seven percent (7%) net smelter return royalty (the “Ray Interest”) [pursuant to that certain “Ray Agreement,” which was dated July 3, 1984 and filed of record on August 22, 1984, in Book 28 of Miscellaneous at Page 827 in the Clerk and Recorder’s office of Jefferson County, Montana, regarding the Dewey (M.S. #10017) patented lode mining claim set forth in Exhibit “A” hereto], of and is in sole possession of those certain eleven (11) patented mining claims (including one fee lot) and eight (8) unpatented mining claims (collectively, the “Mining Claims” or individually, the “Mining Claim”) in Jefferson County, Montana (collectively, the “Property” as more further described below), the Mining Claims being more particularly described in Exhibit “A,” attached to this Agreement and incorporated by reference in this Agreement.

Owner warrants and represents that it holds exclusive rights to explore, develop, mine and remove minerals from the Property.

EGI desires to obtain and Owner is willing to grant a mining lease of the Property, together with an exclusive option to purchase the Property.

NOW THEREFORE, in consideration of Two Thousand and No/100 Dollars ($2,000.00) paid to Owner, the receipt and sufficiency of the mutual covenants and conditions contained in this Agreement, the parties hereto agree as follows:

1.0          Lease. Owner leases the Property to EGI, with the exclusive rights to explore, develop, mine and remove minerals from the Property, which lease shall include all rights of access, ingress and egress over, to and from the Mining Claims; the mining, mineral and extralateral rights; mine-waste dumps and tailings (pursuant to Sections 6.0 and 15.0); fixtures and other appurtenances and water rights incident to the Property and all improvements and personal property on the Property.

2.0          Additional Property. (a) Owner represents that he has no interest in any mining property, fee lands, or water rights (except the Property) within the area described in Exhibit A. If it appears that Owner has any such interest, the interest shall, at EGI’s option, be deemed a part of the Property for the purposes of this Agreement. EGI’s option may be exercised during the initial or extended term, as described in Section 3.0 (collectively, “term”), of this Agreement.

(b)          If during the term of this Agreement, Owner locates or otherwise acquires an interest in any mining property, fee lands, or water rights within the area described in the foregoing subparagraph (a), the interest shall, at EGI’s option, be deemed a part of the Property for the purposes of this Agreement. This option of EGI shall be exercised during the initial term of this Agreement or within 21 years after the Effective Date by both parties, whichever period shall be the shorter.

3.0          Term. (a) The initial term of this Agreement shall be five (5) years from the Effective Date, unless extended, or sooner surrendered or otherwise terminated, or until the earlier exercise of the option granted by Section 23.0.

(b)          EGI may extend the initial term of this Agreement for additional period of five (5) years each by giving Owner notice of the extension not less than thirty (30) days prior to the expiration of the initial term or any extension.

4.0          Exclusive Possession. EGI shall have the exclusive possession of the Property during the term of this Agreement, save and except for the following (i) the right of Owner to enter the Property to complete Owner’s reclamation of logging operations (including but not limited to cleanup of logging debris and slash), and (ii) the right of a prior lessee to Owner, Newmont Mining Corporation or its former affiliate, to enter the Property to complete the reclamation of its prior activities on the Property, as required of either of these activities by Montana law, for a reasonable period of time. Owner warrants, represents, covenants and agrees to indemnify, save, protect, defend and hold harmless EGI, its agents, attorneys, officers, directors, contractors, invitees and employees, from and against any and all losses (as defined in Section 34.0) arising out of, resulting from or relating to its activities hereunder.

5.0          Title. (a) In addition to any other warranties and representations herein, Owner warrants that it has one hundred percent (100%) of the fee title, minerals and surface, to each of the Mining Claims and is in possession of the Property, that it has the right to enter into this Agreement, that it knows of no other person or entity asserting any interest in the Property or the ground covered thereby, except the United States Forest Service may have a legal right to, and may assert a right to, a right of way across a portion of the Property, and that the Property is free from all liens and encumbrances, except liens for property taxes not yet due and payable and the Ray Interest. Owner further warrants to EGI the quiet enjoyment of the Property and the right to explore, develop, and mine the same.

(b)          Owner warrants that the unpatented mining claims included in the Property have been properly located, all filings and recordings have been timely and properly made, and that for each assessment year assessment work has been performed (or other steps taken in accordance with law) for the benefit of the claims. Owner warrants and will defend title to all of the Property and the ground covered thereby against all persons whomsoever.

(c)          Owner represents that the Ray Agreement and any and all other option agreements to purchase the Mining Claims have been exercised, fully complied with, and except for the Ray Interest have no further force and effect.

(d)          Owner shall provide EGI with recording data with respect to deeds, easements, or other documents which bear upon Owner’s title to the Property, and shall provide EGI with copies of all such documents, together with all title opinions, in Owner’s possession or control. Owner shall, upon EGI’s request record any such document in Owner’s possession or control which has not been recorded. Owner shall deliver to EGI all abstracts in Owner’s possession or control. Upon the termination of this Agreement EGI shall return all such abstracts to Owner.

(e)          At EGI’s request, Owner shall take all action necessary (including judicial proceedings) to remove any cloud from or cure any defect in the title to the Property. If Owner fails or refuses to take any such action, EGI may take such action in Owner’s name. Owner shall cooperate with EGI in any such action taken. EGI may recover from Owner or from any payments thereafter to become due to Owner under this Agreement all costs and expenses (including attorneys’ fees) incurred by EGI in any such action.

(f)          If the United States or any third person attacks the validity of any of the Mining Claims included in the Property for any reason except EGI’s failure to comply with its obligation to perform assessment work or to record and file evidence thereof pursuant to this Agreement, EGI shall have no obligation to defend the validity of the Mining Claim.

(g)          To the best of Owner’s knowledge and belief, as of the Effective Date, there has been no violation by Owner or other operator regarding prior activities of any applicable federal, state, regional or county law, permit or regulation regarding zoning, land use, environmental protection or any other matter relating to the Property or “prior activities” (defined in Section 6.0) conducted thereon. “Environmental protection” laws, permits or regulations shall include but not be limited to those regarding all substances, wastes, pollutants, contaminants and materials regulated, or defined or designated as hazardous, extremely or imminently hazardous, dangerous, or toxic, under the following federal statutes and their state counterparts, as well as these statutes' implementing regulations: the Comprehensive Environmental Response , Compensation and Liability Act, 42 U.S.C. § § 9601 et seq., the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C, § § 136 et seq., the Atomic Energy Act, 42 U.S.C. § § 2011 et seq., and the Hazardous Materials Transportation Act, 42 U.S.C. § § 1801 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. § § 6901 et seq., the Toxic Substances Control Act, 15 U.S.C. § § 2601 et seq.; the Clean Water Act, 33 U.S.C, § § 1251 et seq., the Clean Air Act, 42 U.S.C. § § 7401 et seq., the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § § 11011 et seq., and the Safe Drinking Water Act, 33 U.S.C. § § 300f et seq.

6.0          Prior Activities. Owner shall be responsible for reclamation that may become required of any condition existing on the Property due to activities of Owner at any time during its ownership of the Property conducted under Owner’s Operating Permit, as amended (hereinbefore and hereinafter, “prior activities”), issued by the then-Montana Department of State Lands, predecessor to the Montana Department of Environmental Quality, including but not limited to those regarding the leach pad and ponds located on the Park patented lode mining claim (more particularly described in Exhibit A).

Owner shall defend, protect, indemnify, save and hold harmless EGI, its agents, attorneys, contractors, employees, officers, successors and assigns, from any and all causes of action, damages, fees (including reasonable attorneys’ fees), assessments, penalties, losses, liabilities and suits of every kind and character arising out of, relating to or resulting from, directly or indirectly, prior activities on the Property; under the statutes, laws and acts cited in Section 5(g); save and except any such causes of action or damages which may arise because EGI disturbs prior reclaimed portions of the Property and negligently or wilfully fails to reclaim said portions of the Property in conformance with then existing local, state or federal laws.

7.0          Lesser Interest. (a) If Owner’s title fails as to any part of the Property, no royalty shall be payable with respect to the part of the Property as to which title has failed and the purchase price payable under this Agreement shall be reduced proportionally (pro-rata on an acreage basis) with respect to that part of the property.

(b)          If Owner owns a lesser interest in any part of the Property than the entirety thereof (or such other interest as may be set forth in Exhibit A), then all royalties payable under this Agreement with respect to that part of the Property shall be reduced proportionally and the purchase price payable under this Agreement shall be reduced proportionally (pro-rata on an acreage basis) with respect to that part of the Property.

(c)          Subject to the provisions of the foregoing subparagraphs (a) and (b), if any part of the Property is subject to any royalties or other payments other than those specifically reserved to Owner in this Agreement, such royalties or other payments shall be deducted from any amounts payable to Owner under this Agreement.

8.0          Undivided Interests. If the interest claimed by Owner in any part of the lands described in Exhibit A is less than 100%, the interest claimed by Owner is set forth in Exhibit A. Any representation or warranty of title made by Owner shall apply only to the interest set forth in Exhibit A. The royalty provided for in Section 9.0 shall be reduced so as to be proportional to the interest set forth in Exhibit A with respect to each part of the Property. If Owner owns or hereafter acquires an interest in any part of the lands described in Exhibit A greater than that set forth in Exhibit A, such interest shall be deemed amended to include such interest, and the royalty payable under this Agreement with respect to that portion of the Property shall be increased proportionally.

9.0          Royalty. (a) EGI shall pay an advance minimum royalty to Owner on the dates and in the amounts as follows:

Amount	Due Date
$ 2,000.00	per month, the first payment upon execution of this Agreement by both parties, that being the initial consideration referenced above, and on or before the 29th day of each month thereafter until July 29, 2001;
$ 2,500.00	per month, beginning on or before July 29, 2001, and on or before the 29th day of each month thereafter until the first (1st) anniversary of the Effective Date;
$ 5,000.00	per month, beginning on or before January 29, 2002, and on or before the 29th day of each month thereafter, pursuant to Section 3.0(b).

These advance minimum royalty payments shall be creditable and recoupable, but not refundable, against any production royalty payments, under Section 9.0, or purchase payment, under Section 23.0, made pursuant to the Agreement.

These advance minimum royalty payments shall be in lieu of any obligation on the part of EGI, express or implied, to explore, develop, mine, or perform any work on or in connection with the Property, except as provided in Section 30.0.

(b)          Subject to the provisions of Sections 7.0 and 8.0, EGI shall pay to Owner a royalty of three percent (3%) of the “Net Returns” from all ores, minerals, or other products removed from the property and sold or processed by EGI. There shall be credited against the production royalty payments provided for in this subparagraph (b) all advance minimum royalties previously paid pursuant to the foregoing subparagraph (a).

(c)          “Net Returns” means–

(i)          in the case of ores, minerals, or other products which are sold by EGI in the crude state or as native material, the amount received by EGI from the purchaser of the ores, minerals, or other products, less Allowable Deductions;

(ii)         in the case of ores, minerals, or other products which are processed by or for the account of EGI to produce concentrates or other saleable intermediate products which are sold by EGI, the amount received by EGI from the purchase of the concentrates or other saleable intermediate products, less “Allowable Deductions;”

(iii)        in the case of ores, minerals, or other products which are processed by or for the account of EGI to produce concentrates or other saleable intermediate products which are smelted or otherwise further processed by or for the account of EGI, an amount equal to the market value of the concentrates or other saleable intermediate products f.o.b. (free on board) the plant producing the concentrates or other saleable intermediate products (which amount shall be deemed to have been received by EGI), less Allowable Deductions; and

(iv)         in all other cases, the amount received by EGI from the purchaser of the ores, minerals, or other products (or, if such ores, minerals, or other products are deemed to be sold, an amount equal to the market value thereof f.o.b. the plant producing the same (which amount shall be deemed to have been received by EGI)), less Allowable Deductions.

(d)          “Allowable Deductions” means, to the extent borne or to be borne by EGI, which relate only to the processing of ores, minerals or other products:

(i)          sales, severance, and other similar taxes;

(ii)         charges for and taxes on transportation from the mine or, if the ores are processed, the plant producing the concentrates or other saleable products, to the place of sale;

(iii)        insurance and security costs and charges;

(iv)        purchaser’s milling, smelting, refining, and other treatment charges or costs;

(v)         representation, assaying, and umpire costs and fees; and

(vi)        marketing costs and commissions.

If ores, minerals, or other products are deemed to have been sold, Allowable Deductions shall include amounts representing the items enumerated above to the extent that they would have been borne by EGI had the ores, minerals, or other products actually been sold.

10.0         Stockpiling. (a) EGI may stockpile any ores, minerals, or other products produced from the Property at such place or places as EGI may elect, either upon the Property or upon other property.

(b)          If EGI stockpiles or holds in inventory any ores, minerals, or other products produced from the Property upon other property for a period longer than six (6) months, such ores, minerals, or other products shall be deemed to have been sold, and EGI shall pay to Owner the royalty determined as provided in Section 9.0.

11.0         Commingling. EGI may commingle ores, minerals, or other products from the Property (“Subject Ore”) with ores, minerals, or other products from other property (“Other Ore”). Before commingling, EGI shall weigh and sample the Subject Ore and Other Ore in accordance with sound mining and metallurgical practice including, as determined necessary by EGI, for moisture and metal content and assay the samples to determine metal content. EGI shall keep records showing, as appropriate, weights or volumes, moisture, percent metal content, and gross metal content of the Subject Ore and Other Ore. Royalties shall be allocated between Subject Ore and Other Ore on the basis of gross metal content, with due regard being given to the difference, if any, between the royalty rate on the Subject Ore and the royalty rate on Other Ore.

12.0         Payment. (a) EGI shall make all payments due Owner under the Agreement by check which shall be transmitted to Owner as provided in Sections 24.0 and 32.0, except for the initial consideration.

(b)          All royalty payments shall be made on or before the 25^th day of the calendar month following the calendar quarter in which payment is received or deemed to have been received for such ores, minerals, or other products.

(c)          Royalty payments shall be accompanied by a statement indicating the amount of ores, minerals, or other products sold or processed and the computation of the royalty being paid. The statement shall be conclusively presumed true and correct after the expiration of ninety (90) days after the date furnished, unless within the ninety (90) day period Owner takes written exception, specifying with particularity the items excepted to and the ground for each exception. Owner shall be entitled to an independent audit of the matters covered by the statement, at Owner’s expense, provided that the audit is conducted by an accounting firm of recognized standing, at least one of whose members is a member of the American Institute of Certified Public Accountants.

(d)          If at any time during the term of this Agreement it appears that one or more third parties may have a claim of ownership in the Property, the minerals lying in or under the Property, or royalties or other payments with respect to the Property, EGI may withhold from any payments which would otherwise be due to Owner under the terms of this Agreement an amount sufficient to satisfy the claims. EGI shall deposit the amount withheld in escrow, giving notice of the deposit to Owner, the amount to remain in escrow until the controversy is resolved by decision of a court or arbitrators, or otherwise. Owner shall pay when due and before delinquent all taxes required by this Agreement to be paid by Owner and all mortgage and other payments required to preserve Owner’s interest in the Property. Owner shall furnish EGI with receipts or other evidence of such payments. If at any time during the term of this Agreement it appears that any one or more third parties may have a claim against the Property by reason of any tax, mortgage, or other lien, EGI may pay any past due payments and shall be subrogated to all rights of the holder against Owner. If EGI makes any payments to one or more third parties as a result of any claim of ownership, tax, mortgage, or lien, either by way of contract, settlement, compromise, pursuant to final judgment of any court of record, or otherwise, EGI may recover from Owner or from payments thereafter to become due to Owner under this Agreement the amount of any payment and all costs and expenses (including attorneys’ fees) incurred by EGI in connection with the claim of ownership, tax, mortgage, or lien.

13.0         Operations. (a) During the term of this Agreement, EGI shall have free and unrestricted access to the Property, and shall have the right (i) to explore, develop, and mine the Property and to extract, remove, and sell or otherwise dispose of for its own account any and all ores, minerals, or other products, (ii) to remove ores, air, water, waste, and materials from the Property or from other property by means of underground or surface operations on or in the Property or on or in other property, (iii) to deposit ores, water, waste, tailings, and materials from the Property or other property on or in the Property, and to use any part of the Property for waste dumps and tailings disposal areas, (iv) to conduct on or in the Property general mining, treatment, processing, and related operations respecting the property and other property, and to use any part of the Property for any purposes incident to such operations, and (v) to construct, use, and maintain on the Property such roads, improvements, structures, equipment, personal property, and fixtures as may be necessary or convenient for the conduct of EGI’s operations.

(b)          EGI shall conduct all operations on the Property in a good and workmanlike manner and in accordance with accepted mining practice. All decisions with respect to exploration, development, and mining of the Property and the selling of ores, minerals, concentrates, or other products from the Property, including all decisions regarding the commencement, suspension, resumption, or termination of any operations, shall be made by EGI in its sole discretion. EGI may sell ores, minerals, or other products, and may stockpile ores, minerals, or other products for any length of time before selling the same. There are no covenants or agreements regarding these matters other than those expressly set forth in this Agreement.

(c)          EGI may use any lawful mining method, whether or not the method is in general use at the time of the execution of this Agreement, including without limitation, underground mining (including methods, such as block caving, which result in the disturbance or subsidence of the surface), surface mining (including strip mining, open pit mining, and dredging), and in situ mining (including solution mining, leaching, gasification, and liquification).

(d)          EGI shall comply with all laws and regulations governing its operations on the Property, including all laws and regulations regarding reclamation of the Property. Owner is aware that if ores, minerals or other products are produced they may contain sulphide minerals which are susceptible to acid generation. EGI agrees to take those precautions necessary to prevent, contain, and neutralize any such acid formation or generation, as required by law. If this Agreement is inconsistent with or contrary to any law or regulation, the law or regulation shall control and this Agreement shall be deemed to be modified accordingly.

(e)          If EGI mines, produces and sells ores, minerals and other products from the Dewey (M.S. #10017) patented lode mining claim, one of the Mining Claims hereto, while the Ray Interest is in force and effect, EGI shall pay in a timely and proper manner all of the royalty payments that come due as a result of EGI’s activity on the Dewey (M.S. #10017) claim, so long as Owner provides EGI on or before the Effective Date with all documentation related to the Ray Interest, with an accounting and status of any payment obligations pursuant to the Ray Agreement and with an Estoppel Certificate evidencing the current force and effect of such obligation and any necessary consent to transfer of such obligation.

14.0         Easements. If requested by EGI from time to time during the term of this Agreement, Owner shall execute, acknowledge, and deliver to EGI, without further consideration, one or more instruments granting to EGI, without cost to EGI, easements upon, over, or through the Property or upon, over, or through other property owned by Owner, for the construction, maintenance, use, and removal of pipe lines, telephone lines, electrical power or transmission lines, roads, railroads, tramways, flumes, ditches, shafts, drifts, tunnels, and other facilities necessary or convenient for EGI’s operations on or in the Property or on or in other Property. Any such instruments granted to EGI by Owner shall be in force only so long as this Agreement is enforceable and in effect unless EGI exercises its option to purchase the Property (pursuant to Section 23.0) in which case such instruments shall not be so limited.

15.0         Dumps and Tailings. All dumps, tailings, or residue remaining after mining, milling, or subsequent processing of ores, minerals, or other products from the Property by EGI shall be the property of EGI (pursuant to Section 6.0), unless such dumps, tailings, or residue remain upon the Property after the period of time provided for in Section 26.0, and after EGI satisfies all of the State of Montana’s statutory and bonding requirements then in effect with regard to reclamation and remediation of such dumps, tailing or residue, in which case the dumps, tailings, or residue shall be the property of the Owner.

16.0         No Implied Covenants. No covenants or conditions relating to the exploration, development, mining, or related operations on or in connection with the Property, or the timing thereof, other than those expressly provided in this Agreement, shall be implied. After commencing any exploration, development, mining, or related operations on or in connection with the Property, EGI may in its sole discretion curtail or cease such operations so long as it continues to make any payments due Owner under this Agreement.

17.0         Protection from Liens and Damages. EGI shall keep the Property, with regard to its activities hereunder, free of liens for labor performed or materials or merchandise furnished for use on the Property under this Agreement, and shall hold Owner harmless from all costs, loss, or damage which may result from any work or operations of EGI or is possession or occupancy of the Property.

18.0         Taxes. Owner shall pay all taxes levied against the Property prior to the date of this Agreement. EGI shall pay all taxes levied against the Property during the term of this Agreement, so long as Owner provides EGI with prompt, timely notice and evidence of such pending tax obligations. In the case of taxes for the tax year in which this Agreement commences, and for the tax year in which this Agreement ends, there shall be an apportionment, EGI to bear the proportion of taxes upon the Property applicable to the part of the tax year included under this Agreement, and Owner to bear the balance of the taxes. EGI shall pay all taxes levied during the term of this Agreement against all improvements, structures, equipment, personal property, and fixtures placed upon the Property by EGI and all taxes levied against EGI as an employer of labor. All taxes shall be paid when due and before delinquent, but EGI shall be under no obligation to pay any tax so long as the tax is being contested in good faith and by appropriate legal proceedings and the nonpayment thereof does not adversely affect Owner or any right, title, or interest of Owner in or to the Property.

{Mining Lease with Option to Purchase - w Exhibit.1 /}

19.0         Insurance. EGI shall carry at all times during the term of this Agreement worker’s compensation and other insurance required by state laws and mining regulations, or EGI may self-insure as to such matters if it qualifies as a self-insurer under the appropriate laws and regulations. EGI shall also carry, and keep current, at all times during the term of this Agreement, a General Liability insurance policy on the Property in the amount of Five Hundred Thousand and No/ths Dollars ($500,000) and an Umbrella insurance policy on the Property in the amount of Five Million and No/ths Dollars ($5,000,000) with Owner named as co-insured on the policies.

20.0         Inspection. (a) Owner or Owner’s authorized representative may enter on the Property at any reasonable time for the purpose of inspection, but shall enter at Owner’s own risk and so as not to hinder unreasonably the operations of EGI. Owner shall indemnify and hold EGI, its agents, attorneys, contractors, employees and officers, harmless from any costs, loss, claims, causes of action or damage by reason of injury to or the presence of Owner or Owner’s representatives on the Property.

(b)          Owner or Owner’s authorized representative may, at any reasonable time, inspect any records pertinent and necessary for the purpose of substantiating the compliance of EGI with the provisions of this Agreement.

21.0         Data. (a) Upon the execution of this Agreement, Owner shall deliver to EGI all drill core, all geological, geophysical, and engineering data and maps, logs of drill holds, results of assaying and sampling, and similar data concerning the Property (or copies thereof) which are in Owner’s possession or control.

(b)          Upon the surrender or other termination of this Agreement (except by exercise of the option contained in Section 23.0), EGI shall, within sixty (60) days after termination, (i) return to owner all drill core and original data delivered by Owner to EGI which are then in EGI’s possession or control, and (ii) make available for inspection by Owner all factual geological and geophysical data and maps (not including interpretive data), logs of drill holes, and results of assaying and sampling pertaining to the Property which EGI has obtained as a result of its exploration work under this Agreement and which are then in EGI’s possession or control. Upon Owner’s request made within sixty (60) days after termination of this Agreement (except by exercise of the option contained in Section 23.0), EGI shall, at Owner’s expense, provide Owner with the drill core designated by Owner and with copies of any portion of the geological and geophysical data and maps (not including interpretive data), logs of drill holes, and results of assaying and sampling designated by Owner.

(c)          EGI makes no representation or warranty as to the accuracy, sufficiency or completeness of any such data or information, and shall not be liable on account of any use by Owner or any other person of any such data or information. EGI shall not be liable for the loss or destruction of any drill core. 

{Mining Lease with Option to Purchase - w Exhibit.1 /}

22.0         Confidentiality. All information obtained by Owner or Owner’s authorized representatives from EGI arising out of EGI’s activities on the Property pursuant to this Agreement shall be kept strictly confidential by Owner and shall not be released to any third person except upon the prior written consent of EGI.

23.0         Option. In further consideration of the benefits set forth herein, Owner grants to EGI during the term of this Agreement the sole and exclusive option to purchase the Property, together with and including all appurtenances and water rights incident thereto and all improvements and personal property thereon, as such Property is fully described in Section 1.0, free and clear of all liens and encumbrances, for a total “purchase price” of One Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00), payable in ten (10) equal payments, to be made over twenty-seven (27) months, with a payment due every three (3) months. The principal amount due Owner shall carry an interest rate of seven and one half percent (7.5%) per annum. The first such payment shall be due on the day EGI elects to exercise the Option. EGI shall be entitled to a credit against the purchase price for all amounts paid under the provisions of Section 9.0, and for all costs and expenses incurred under the provisions of Section 5.0 (collectiely, “Option Credits”), should it elect the option to purchase provided for herein. The following formula sets forth the manner by which the amount of these options payments shall be determined:

[$1,500,000.00 - Option Credits]  = whole number plus remainder

$150,000.00

Said whole number equals number of payments of $150,000 to be paid before final payment of amount remaining to total purchase price is paid.

EGI shall also have the option at its election to prepay any or all option payments provided for herein.

24.0         Escrow and Property Purchase.

(a)          Contemporaneously with the execution of this Agreement, Owner and EGI shall accomplish the following:

(i)          Owner shall have executed and acknowledged, and deliver to Helena Abstract & Title Company (“Escrow Agent”), 6^th and Fuller Streets, Helena, Montana 59601, 1-406-442-5080, a warranty deed conveying the Property to EGI, in substantially the form set forth in Exhibit”B,” attached hereto and incorporated herein by reference. Owner and EGI hereby appoint Escrow Agent, as their escrow agent to receive and distribute all payments hereunder and to hold the warranty deed and deliver it to the party entitled to receive it;

(ii)         The parties agree that the Escrow Agent shall act pursuant to Escrow Instruction executed contemporaneously with the execution of the Agreement; 

{Mining Lease with Option to Purchase - w Exhibit.1 /}

(ii)         The parties agree that any payments made to Owner by EGI hereunder, pursuant to Sections 9.0, 23.0, 24.0 or any other provisions herein, shall be made to Escrow Agent on behalf of Owner; and

(iii)        A conforming copy of this Agreement, the original Warranty Deed and an original Escrow Instructions document shall be delivered to the Escrow Agent.

(b)          At such time as the total costs and expenses incurred by EGI as set forth in Section 5.0 and the total payments made to Owner as set forth in Section 9.0 equal the total consideration due under Section 23.0, or EGI otherwise elects to exercise its option, EGI will notify the Escrow Agent in writing, with a copy to Owner, that the option to purchase the Mining Claims, as described in the notice, has been exercised. After that date, and immediately upon full payment of the purchase price as set forth in Section 23.0, the Escrow Agent will deliver to EGI the escrowed Warranty Deed conveying to EGI the Mining Claims. Upon receipt of the Warranty Deed, EGI will own the entire and undivided ownership interest in the Mining Claims described in the Warranty Deed, subject to the terms and conditions of this Agreement.

(c)          EGI, at its sole discretion, may appoint a successor to the Escrow Agent designated above. If a successor is appointed, EGI shall give written notice to Owner specifying the name and address of the successor, and within ten (10) days from the date of the notice, Owner and EGI shall execute and deliver instructions to the successor in the same form as executed with this Agreement, or as EGI shall otherwise reasonably designate.

In the event there is a reduction in the purchase price as provided in Section 23.0, within ten (10) days from the date of such reduction, the parties hereto shall execute and deliver to the Escrow Agent Amended Escrow Instructions specifying the revised purchase price. In addition EGI shall deliver to the Escrow Agent a recordable Deed or Deeds, if necessary, executed by Owner that conveys to EGI the remaining Mining Claims then comprising the Property.

(d)          All reasonable charges of the Escrow Agent and any successor escrow agent shall be paid by EGI.

25.0         Termination and Surrender. (a) If EGI fails to comply with the provisions of this Agreement, including Section 9.0, and if EGI does not initiate and diligently pursue steps to correct the default within thirty (30) days after notice has been given to it by Owner specifying with particularity the nature of the default, then upon the expiration of the thirty (30) day period, all rights, liabilities, and obligations of EGI under this Agreement shall terminate, except that (i) EGI shall have the rights provided in Sections 26.0 and 27.0, (ii) EGI shall have those liabilities existing on the date of termination, the obligations provided in Section 21.0, and liability for payments under Section 9.0 then due or, in the case of production royalties, then accrued, and (iii) any and all obligations and duties EGI may then have with regard to reclamation and remediation required by local, state or federal law. Any default claimed with respect to the payment of money may be cured by the deposit in escrow with Escrow Agent of the amount in controversy (not including interest or claimed consequential, special, exemplary, or punitive damages) and giving of notice of the deposit to Owner, the amount to remain in escrow until the controversy is resolved by decision of a court or arbitrators, or otherwise. If EGI by notice to Owner disputes the existence of a default, then this Agreement shall not terminate unless EGI does not initiate and diligently pursue steps to correct the default within thirty (30) days after the existence of a default has been determined by decision of a court or arbitrators, or otherwise. 

{Mining Lease with Option to Purchase - w Exhibit.1 /}

(b)          Subject to the right of Owner to terminate this Agreement as provided in the foregoing subparagraph (a), controversy between the parties to this Agreement shall not interrupt operations under this Agreement. In the event of any controversy, EGI may continue operations under this Agreement and shall make the payments provided for in this Agreement notwithstanding the existence of the controversy. Upon the resolution of the controversy, such payments or restitutions shall be made as required by the terms of the decision of the court or arbitrators, or otherwise.

(c)          EGI may at any time terminate this Agreement as to all or any part of the Property by delivering to Owner or by filing for record in the appropriate office (with a copy to Owner) a recordable Surrender of this Agreement or a Partial Surrender describing that portion of the Property as to which this Agreement is surrendered. Upon mailing the Surrender or Partial Surrender to Owner or to the appropriate office, all rights, liabilities, and obligations of EGI under this Agreement with respect to the portion of the Property as to which this Agreement is terminated shall terminate, except that (i) EGI shall have the rights provided in Sections 26.0 and 27.0, and (ii) EGI shall have those liabilities existing on the date of termination, the obligations provided in Section 21.0, and liability for payments under Section 9.0 then due or, in the case of production royalties, then accrued.

26.0         Removal of Property. For a period of six (6) months after the termination of this Agreement EGI shall have the right (but not the obligation) to remove from the Property all broken or stockpiled ore, minerals, or other products (subject to the payment of royalties provided for in this Agreement), dumps, tailing, and residue, and all structures, equipment, personal property, and fixtures owned by EGI or erected or placed on or in the Property by EGI, except mine timbers in place. EGI may keep one or more watchmen on the Property during the above-mentioned period.

27.0         Access. For as long as necessary after termination of this Agreement, EGI shall have the right of access to and across the Property for reclamation purposes.

28.0         Amendments, Relocations, and Patents. During the term of this Agreement EGI shall have the right (but not the obligation) to amend or relocate any or all of the unpatented mining claims included in the Property, to locate placer claims on ground theretofore covered by lode claims and vice versa, to locate millsites on ground theretofore covered by mining claims and vice versa, and to locate any fractions existing on the date of this Agreement or resulting from the location, amendment, or relocation of mining claims or millsites. All such locations, amendments, or relocations shall be made in the name of Owner. At the request of EGI, Owner shall apply for patent, as such right becomes legally available, for any or all of the unpatented mining claims and millsites. All expenses authorized by EGI in connection with locating, amending, or relocating mining claims or millsites or prosecuting patent proceedings shall be borne by EGI. The right of EGI under this Agreement shall extend to all such locations, amended locations, relocations, and patented mining claims and millsites. 

{Mining Lease with Option to Purchase - w Exhibit.1 /}

29.0         Compliance with Federal Land Policy and Management Act. (a) Owner warrants that the location notices or location certificates for the unpatented mining claims included in the Property have been timely filed in the proper office of the Bureau of Land Management pursuant to § 314(b) of the Federal Land Policy and Management Act of 1976, 43 U.S.C. § 1744(b).

(b)          Owner warrants that evidence of assessment work or notices of intention to hold for the unpatented mining claims included in the Property have been timely recorded in the proper county (or recording district) office and timely filed in the property office of the Bureau of Land Management pursuant to § 314(a) of the Federal Land Policy and Management Act of 1976, 43 U.S.C. § 1744(a), for each assessment year for which such recording and filing was required and including the assessment year ending September 1, 2001.

30.0         Assessment Work. (a) Owner warrants that the annual assessment work required to hold the Property has been performed for the assessment year ending September 1, 2001, or that it has otherwise complied with the requirements of Sections 82-2-101 et seq. of the Montana Code Annotated regarding, among other requirements, locating claims, recording certificates of location, maintaining claims and recording affidavits of assessment work; and with all federal laws, including those set forth in 43 C.F.R. Sections 3831 and 3833, regarding the aforementioned requirements and the payment of claim maintenance or other fees, as applicable. EGI shall perform the assessment work for the benefit of the Property for the assessment year ending September 1, 2002, and for every year thereafter in which EGI continues this Agreement beyond the 1^st day of September of that assessment year. If any court or governmental agency decides that the work performed by EGI does not constitute the kind of work required by federal or state law, EGI shall nevertheless be deemed to have complied with the terms of this Agreement if the work done by EGI is of the kind generally accepted in the mining industry as assessment work under existing law.

(b)          Owner represents that the Property is one contiguous group of mining claims, except for the Golden Curry Placer claim (more particularly described in Exhibit A).

31.0         Change in Federal Mining Law. If the United States establishes a leasing system or other system of tenure for lands or minerals now subject to location under the mining laws prior to purchase of the Property (pursuant to Section 23.0), EGI may make the election to first attempt a re-negotiation of the Agreement with Owner, solely with regard to the unpatented claims set forth in Exhibit A. If the re-negotiation does not resolve the concerns of EGI, EGI and Owner will immediately seek resolution of this matter pursuant to Section 41.0, and this Agreement will remain in full force and effect without default thereof during this dispute resolution period. 

{Mining Lease with Option to Purchase - w Exhibit.1 /}

32.0         Notices. All notices and other communications to either party shall be in writing and shall be sufficiently given if (i) delivered in person, (ii) sent by electronic communication, with confirmation sent by registered or certified mail, return receipt required, or (iii) sent by registered or certified mail, return receipt required. All notices shall be effective and shall be deemed delivered (i) if by personal delivery, on the date of delivery, (ii) if by electronic communication, on the date of receipt of the electronic communication, and (iii) if by mail, on the date of mailing. Until a change of address is communicated as indicated above, all notices to Owner shall be addressed:

Mr. C.A. Dickey

Mt. Heagan Development, Inc.

Highway 93 South

Darby, MT 59827

and all notices to EGI shall be addressed:

Mr. Ian Berzins

Elkhorn Goldfields, Inc.

7 Maple Ridge Place

St. Andrews, Manitoba Canada R1A 2Y6

33.0         Assignment. (a) The rights of either party under this Agreement may be assigned only in the Agreement’s entirety, subject to the provisions set forth below.

(b)          No change or division in the ownership of the Property or the payments provided for in this Agreement, however, accomplished, shall enlarge the obligations or diminish the rights of EGI. Owner covenants that any change in ownership shall be accomplished in such a manner that EGI shall be required to make payments and to give notices to but one person, firm, or corporation, and upon breach of this covenant, EGI may retain all monies otherwise due to Owner until the breach has been cured. No change or division in ownership shall be binding on EGI until thirty (30) days after Owner has given EGI a certified copy of the recorded instrument evidencing the change or division.

(c)          EGI may assign its entire interest in this Agreement, subject to approval of the Owner, which approval shall not be unreasonably withheld. If such approval is withheld by Owner, EGI may immediately seek an expedited review by arbitration of Owner’s decision to withhold approval, pursuant to Section 41(b). If the arbitrator finds that the Owner is unreasonable in its decision, Owner shall pay all costs and expenses of EGI for this arbitration (including but not limited to reasonable attorney fees), contrary provisions in Section 41(b) notwithstanding. If EGI assigns the interest in this Agreement, liability for breach of any obligation under this Agreement shall rest exclusively upon the holder of this Agreement who commits the breach.

(d)          If Owner desires to sell or otherwise dispose of all or any part of his interest in the Property or in this Agreement, Owner shall first offer the interest to EGI stating the interest proposed to be sold or otherwise disposed of, the offering price (which may include deferred payments), and other terms and conditions of sale. EGI may accept the offer by notice to Owner given within sixty (60) days following the effective date of Owner’s offer. If EGI does not accept Owner’s offer, Owner may sell or otherwise dispose of the interest offered to EGI at a price and upon terms and conditions equal to or more favorable to Owner than those offered to EGI, provided that the sale or other disposition is effectuated within one hundred twenty (120) days from the effective date of Owner’s offer. 

{Mining Lease with Option to Purchase - w Exhibit.1 /}

34.0         Indemnification. In addition to any other indemnifications hereunder:

(a)          Indemnification by EGI. EGI warrants, represents, covenants and agrees to indemnify, save, protect, defend and hold harmless Owner, its agents, officers, directors, contractors, invitees and employees, from and against any and all liabilities, liens, claims, suits, adverse legal or administrative judgments, disputes, damages, losses, costs, expenses, penalties, fines, assessments and causes of action, including reasonable attorneys' fees and expenses (collectively, “losses”) arising out of, resulting from or relating to its activities on or involving the Property, or under the terms and conditions of this Agreement, or caused by the negligence, misconduct or fault of EGI, its agents, employees or contractors, (except for acts attributable to the negligence of Owner, its agents, employees, and invitees), and from its noncompliance or alleged noncompliance with all applicable laws, permits or regulations.

(b)          Indemnification by Owner. In addition to other indemnifications set forth herein, Owner warrants, represents, covenants and agrees to indemnify, save, protect, defend and hold harmless EGI, its agents, attorneys, officers, directors, contractors, invitees and employees, from and against any and all said losses arising out of, resulting from or relating to any prior activities existing on the Effective Date, its activities after the Effective Date on or involving the Property, or under the terms and conditions of this Agreement, or caused by the negligence, misconduct or fault of Owner, its agents, invitees, contractors, employees or contractors (except for acts attributable to the negligence of EGI, its agents, employees, and invitees).

(c)          In no event shall either party be liable to the other party pursuant to this Agreement for any consequential, punitive, special or incidental loss or damage.

35.0         Inurement. All covenants, conditions, limitations, and provisions contained in this Agreement apply to and are binding upon the parties to this Agreement, their heirs, representatives, successors, and assigns.

36.0         Short Form. Contemporaneously herewith EGI and Owner have executed and delivered a Short Form Memorandum of this Agreement, substantially in the form set forth in Exhibit”C,” attached hereto and incorporated herein by this reference. EGI may record the Short Form or this Agreement, or both, as it may elect.

37.0         Modification. No modification, variation, or amendment of this Agreement shall be effective unless it is in writing and is signed by all parties to this Agreement.

{Mining Lease with Option to Purchase - w Exhibit.1 /}

38.0         Entire Agreement. This Agreement sets forth the entire agreement of the parties and supersedes all previous and contemporaneous agreements, representations, warranties, and undertakings, written or oral.

39.0         Construction. (a) The paragraph headings are for convenience only, and shall not be used in the construction of this Agreement. The term “Owner” shall be deemed to be singular or plural, and shall be deemed to be masculine, feminine, or neuter, whenever the construction of this Agreement so requires.

(b)          The invalidity of any provision of this Agreement shall not affect the enforceability of any other provision of this Agreement.

40.0         Governing Law. The formation, interpretation, and performance of this Agreement shall be governed by the internal law (but not the conflicts of law rules) of the state of Montana.

41.0 Mediation and Arbitration. Any dispute arising out of or related to the negotiation, existence, performance, breach, default or termination of this Agreement, or the method of resolution thereof, shall be determined:

(a)           First, by mediation of the parties to be facilitated by a mediator acceptable to both parties. The exclusive place of mediation shall be Helena, Montana; and

(b)          Finally, if mediation does not resolve the dispute, by arbitration under the then Commercial Arbitration Rules of the American Arbitration Association. The exclusive place of arbitration shall be Helena, Montana. The arbitrators shall issue their award within ninety (90) days after submission of the dispute to arbitration. Costs of arbitration shall be borne equally. Judgment on any award may be entered in any court having jurisdiction over the person or property of the party against whom the award is entered. No punitive damages may be awarded hereby.

42.0         Cooperation and Additional Documents. Owner shall cooperate with EGI, when reasonably required, for EGI to obtain any permits or other documents so that EGI can exercise any and all of its rights hereunder. Owner shall provide EGI with such additional documents as may be necessary to carry out the purposes of this Agreement. If conditions change by reason of acquisitions, conveyances, assignments, or other matters relating to the title to or description of the Property, Owner and EGI shall execute amendments of this Agreement and the Short Form of this Agreement, and any other documents which may be necessary to reflect such changed conditions.

43.0         Homestead Waiver. Owner expressly waives and releases all rights, exemptions, and benefits under or by virtue of any homestead, homestead exemption, dower, courtesy, community property, or marital property laws now or hereafter in force in the state in which the Property is located.

{Mining Lease with Option to Purchase - w Exhibit.1 /}

44.0         Survival.. Any terms or agreements herein which by their nature may or must be performed or occur after termination of this Agreement shall survive such termination.

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

OWNER:	MT. HEAGAN DEVELOPMENT, INC.
	By:
		John C. Orser
		Title: Vice President
EGI:	ELKHORN GOLDFIELDS, INC.
	By:
		Ian Berzins
		Title: Managing Director

{Mining Lease with Option to Purchase - w Exhibit.1 /}

STATE OF MONTANA	)
	:  ss.
County of Lewis and Clark	)

On this 29th day of January, 2001, before me, the undersigned, a Notary Public in and for the state of Montana, personally appeared John C. Orser, known to me to be the Vice President of Mt. Heagan Development, Inc., and known to me to be the person whose name is subscribed to the foregoing instrument and acknowledged to me he executed the same on behalf of Mt. Heagan Development, Inc.

In witness whereof, I have hereunto set my hand and affixed my Notarial Seal on the day and year first-above written.

	Notary Public for the State of Montana
(Notarial Seal)	Residing at:
	My commission expires: .

STATE OF MONTANA	)
	:  ss.
County of Lewis and Clark	)

On this 29th day of January, 2001, before me, the undersigned, a Notary Public in and for the state of Montana, personally appeared Ian Berzins, known to me to be the Managing Director of Elkhorn Goldfields, Inc., and known to me to be the person whose name is subscribed to the foregoing instrument and acknowledged to me he executed the same on behalf of Mt. Heagan Development, Inc.

In witness whereof, I have hereunto set my hand and affixed my Notarial Seal on the day and year first-above written.

	Notary Public for the State of Montana
(Notarial Seal)	Residing at:
	My commission expires: .

{Mining Lease with Option to Purchase - w Exhibit.1 /}

EXHIBIT “A”

TO

MINING LEASE WITH OPTION TO PURCHASE (“AGREEMENT”)

BY AND BETWEEN

MT. HEAGAN DEVELOPMENT, INC. (OWNER”)

AND

ELKHORN GOLDFIELDS, INC. (“EGI”)

DATED JANUARY 29, 2001

Pursuant to the aforementioned Agreement, Owner leases to EGI all of its right, title and interest in and to the certain patented and unpatented mining and millsite claims and fee lots, and water right, situated in Jefferson County, Montana, and more particularly described as follows:

I.           Patented Mining Claims and Fee Lots

A.                       Claims

Claim Name	Mineral Survey No.	Township	Range	Section	Meridian
Golden Curry No. 1	7218	6N	3W	10	P.M.M.
Golden Curry No. 2	7219	6N	3W	10	P.M.M.
Golden Curry No. 3	7220	6N	3W	10	P.M.M.
Dewey	10017	6N	3W	11&14	P.M.M.
Gold Hill	10691	6N	3W	10&11	P.M.M.
Birds Eye	10691	6N	3W	11	P.M.M.
Montana	10691	6N	3W	11	P.M.M.
Heagan	10691	6N	3W	10&11	P.M.M.
Park	10691	6N	3W	10&11	P.M.M.
Erickmann	10725	6N	3W	10	P.M.M.

B.            Fee Lots

New Year Government Lots 6 and 9 6N 3W 11&14 P.M.M.

Page 1 of 2 – Exhibit “A”

{Mining Lease with Option to Purchase - w Exhibit.1 /}

II.          Unpatented Mining and Millsite Claims

				Jefferson
				County, MT
	BLM Serial	Location		Recordation
Claim Name	(MMC No.)	Date	Book	Page	Township	Range	Section	Meridian
South Golden Curry	33425	6/25/34	43	576	6N	3W	10&15	P.M.M.
	Amended at:
	47	09
Golden Curry Millsite	33426	2/28/35	Q	60	6N	3W	10	P.M.M.
Sourdough Fraction	33427	10/24/36	46	125	6N	3W	10	P.M.M.
South Sourdough	33428	10/24/36	46	124	6N	3W	10	P.M.M.
East Golden Curry	33429	7/16/36	45	81	6N	3W	10	P.M.M.
	Amended at:
	47	08
South Golden Curry No. 2	33430	6/24/34	45	32	6N	3W	10	P.M.M.
Golden Curry Placer
(Elkhorn Bar Placer)	33432	7/16/36	R	55	6N	3W	10	P.M.M.
New Year	40852	2/15/36	22 (lodes) 557  6N	3W	11&14  P.M.M.
			Amended at:
			35 (lodes) 534

III.           Water Right

Water Right filed with the State of Montana Department of Natural Resources and Conservation:

Water Right Number 41E-W-127803-00

Point of Diversion: Section 11, T. 6 N., R. 3 W., P.M.M., Jefferson County, Montana

Place of Use: Section 11, T. 6 N., R. 3 W., P.M.M., Jefferson County, Montana

Point of diversion and place of use are on Birds Eye, a/k/a Birdseye, patented mining claim M.S. No. 10691.

Initialed for Identification

Page 2 of 2 – Exhibit “A”

{Mining Lease with Option to Purchase - w Exhibit.1 /}

EXHIBIT "B"

TO

MINING LEASE WITH OPTION TO PURCHASE ("AGREEMENT")

BY AND BETWEEN

MT. HEAGAN DEVELOPMENT, INC. (OWNER")

AND

ELKHORN GOLDFIELDS, INC. ("EGI")

DATED JANUARY 29, 2001

[Warranty Deed attached]

____________________________________

Initiated for Identification

RECORDING REQUESTED BY

AND RETURN TO:

Elkhorn Goldfields, Inc.

7 Maple Ridge Place

St. Andrews, Manitobia

Canada RIA 2&6

WARRANTY DEED

MT. HEAGANDEVELOPMENT, INC. ("Mt. Heagan"), a Montana corporation ("Grantor"), whose address is 3819 Highway 93 South, Darby, Montana 59827, for and in consideration often and No/lOO Dollars ($10.00) and other valuable consideration paid to it by Mt. Heagan, the receipt of which is hereby acknowledged, hereby grants, gives, bargains, sells, and conveys to ELKHORN GOLDFIELDS, INC. ("Elkhorn Goldfields"), a Montana corporation ("Grantee"), whose address is 7 Maple Ridge Place, St. Andrews, Manitoba, Canada RIA 2Y6, all of Grantor's right, title and interest in and to that certain real property situated in Jefferson County, State of Montana, more particularly described in Exhibit "A," attached hereto (the "Property").

Grantor represents and warrants to Grantee, its successors and assigns:

(i)          That the Property is free and clear of a leases (including but not limited to Deed Ref: 31 Misc. 287-290, 42 Misc. 144-147), liens, encumbrances and outstanding adverse claims and interest.

(ii)         That Grantor shall warrant and defend its right, title and interest to the Property and Grantee's quiet and peaceful possession and enjoyment thereof against all persons or entities who may claim any interest in the Property, the ores, metals, minerals, tailings, concentrates, water rights, and minerals derived from the Property, or the proceeds therefrom together with all other tenements, hereditaments and appurtenances thereto.

TO HAVE AND TO HOLD the same unto Grantee, its successors and assigns forever.

IN WITNESS WHEREOF, Grantor has executed this Warranty Deed effective as of the 29^th day of January, 2001.

	MT. HEAGAN DEVELOPMENT, INC.
By:
	Name: John C. Orser
	Title: Vice President

STATE OF MONTANA	)
	:ss.
County of Lewis and Clark	)

On this 29th day of January, 2001, before me __________________________ a notary public, personally appeared John C. Orser, known to me to be the Vice President of Mt. Heagan Development, Inc., a Montana corporation, and acknowledged to me that such corporation executed the within instrument.

	______________________________________________
	NOTRARY PUBLIC FOR THE STATE OF MONTANA
(Notary Seal)	Residing At: ___________________________________
	My Commission Expires: ________________________

EXHIBIT "C"

TO

MINING LEASE WITH OPTION TO PURCHASE ("AGREEMENT")

BY AND BET\VEEN

MT. HEAGAN DEVELOPMENT, INC. (OWNER")

AND

ELKHORN GOLDFIELDS, INC. ("EGI")

DATED JANUARY 29, 2001

[Memorandum .of Agreement attached]

____________________________________

Initiated for Identification

RECORDING REQUESTED BY

AND RETURN TO:

Elkhorn Goldfields, Inc.

7 Maple Ridge Place

St. Andrews, Manitoba

Canada RIA 2Y6

MEMORANDUM OF MINERAL LEASE WITH OPTION TO

PURCHASE

THIS MEMORANDUMOF MINERAL LEASEWITH OPTIONTO PURCHASE effective this 29th day of January, 2001, is filed of record in accordance with the provisions contained in a MINERAL LEASE AND OPTION TO PURCHASE (hereinafter referred to as the "Agreement") of even date herewith, wherein Mt. Heagan Development, Inc., a Montana corporation, whose address is 3819 Highway 93 South, Darby, Montana 59827 (hereinafter referred to as "Lessor") granted to ELKHORN GOLDFIELDS, INC., a Montana corporation, whose address is 7 Maple Ridge Place, St. Andrews, Manitoba, Canada RIA 2Y6 (hereinafter referred to as "Lessee") an exclusive lease with an option to purchase certain patented lode mining claims, certain fee lots, a certain water right filed with the State of Montana and certain unpatented mining and mill site claims (collectively referred to as the "Property") located in Jefferson County, Montana, which are described more fully on Exhibit "A" attached hereto and incorporated herein by this reference, together with all rights of ingress and egress to and from the mining claims, all water and mining and extra lateral rights appurtenant thereto; and all mine-waste dumps, tailing, fixtures and improvements thereon (all of which are hereinafter collectively referred to as the "Property"). The Property is leased and optioned by Lessor to Lessee for the consideration and subject to all of the terms and conditions contained in the Agreement, which terms and conditions, include but are not limited to, the following:

1.           GRANT OF RIGHTS. Lessor granted to Lessee an exclusive lease and option to purchase the Property, including all ores, metals, minerals, tailings, concentrates and mineral products (hereinafter collectively referred to as "Minerals") and all mining, water and extra lateral rights appurtenant to the Property, together with the exclusive right to enter upon, possess, and to use the Property for exploration, development, mining, extraction and processing of all Minerals and for all such other purposes related to such operations on other properties adjacent to or in the vicinity of the Property.

2.           TERM. The Agreement is granted for an initial term of five (5) years and so long thereafter as Lessee is exercising the rights granted in the Agreement and continues to make the advance minimum payments (hereinafter referred to as "Advance Minimum Payments").

3 ADVANCE MINIMUM PAYMENTS AND PRODUCTION ROYALTY PAYMENTS.

A.           Lessee shall pay to Lessor Advance Minimum Payments in the amount set forth in the Agreement.

B.           Under the terms of the Agreement, Lessor shall receive a production royalty on the Minerals mined from said mining claims to the Property and produced and sold by Lessee.

4.           PURCHASE OPTION. Lessee has the exclusive and irrevocable right to purchase the Property during the term of the Agreement, at a purchase price as set forth in the Agreement.

5.           ASSIGNMENT. All of the terms and conditions of the Agreement shall be binding upon and inure to the benefit of the parties and their heirs, successors, and assigns, as set forth therein.

6.           INFORMATION REGARDING AGREEMENT. Information regarding the. Agreement may be obtained from Lessee's office and place of business at 7 Maple Ridge Place, St. Andrews, Manitoba, Canada RIA 2Y6.

IN WITNESS WHEREOF, the parties have executed this MEMORANDUMOF MINERAL LEASE AND OPTION TO PURCHASE effective as of the day and year first above written.

LESSOR:		LESSEE:
MT. HEAGAN DEVELOPMENT, INC		ELKHORN GOLDFIELDS, INC.
By		By
	John C. Orser, Vice President		Ian Berzins, Managing Director

December 19, 2005

Mr. C.A. Dickey

Mt. Heagan Development, Inc.

Highway 93 South

Darby, Mt

59827

Dear Mr, Dickey:

On behalf of Elkhorn Goldfields, Inc. (EGI) please accept this letter as written confirmation that, pursuant to the Mining Lease and Option to Purchase Agreement entered into between EGI and MT. Heagan Development, Inc. dated the 29 day of January, 2001, EGI wishes to extend the initial term of this Agreement for an additional period of five (5) years.

Also, any correspondence directed to Elkhorn Goldfields, Inc. should now be directed to the address noted above.

From the staff and employees at the Elkhorn Project, we want to wish you a happy holiday season and a prosperous 2006.

Sincerely,

Elkhorn

Robert Trenaman

Managing Director

cc:	Eric Lelacheur
	Bill McBride

Suite 1209

409 Granville Street

Vancouver, B.C.

V6C 1T2

November 23, 2010

Mr. C. A. Dickey
MT. Heagan Development	Via Certified Mail
P.O. Box 2269
Peachtree City, Georgia
30269

RE: Mining Lease with Option to Purchase agreement between EGI and MT Heagan

Dear Mr. Dickey:

On behalf of Elkhorn Goldfields, Inc. (EGI) please accept this letter as written confirmation that, pursuant to the Mining Lease and Option to Purchase Agreement entered into between EGI and MT. Heagan Development, Inc. dated the 29^th day of January, 2001 and extended for a five year period December 19^th, 2005, EGI wishes to extend the term of this Agreement for an additional period of five (5) years.

Please direct any correspondence with respect to this matter to the above noted address and, as always, please feel free to contact me at (604) 687-4450 if there are any items to discuss.

Regards,

Elkhorn Goldfields, Inc.

Robert Trenaman

Managing Director

Cc	Eric Altman
	Bill McBride

EX-10.25

SECURITY AGREEMENT

DEBTOR	SECURED PARTY
Elkhorn Goldfields, Inc.,	Black Diamond Holdings, LLC

THIS AGREEMENT made and entered into this 15th day of April 2011, by and between ELKHORN GOLDFIELDS, INC. whose address is Suite 1209 – 409 Granville Street, Vancouver, British Columbia, Canada, V6C 1T2, (referred to in this Agreement as “Debtor”) and BLACK DIAMOND HOLDINGS LLC, whose address is P.O. Box 370657, Denver, Colorado 80237, (referred to in this Agreement as “Creditor”).

For value received, and in consideration of the mutual promises and covenants set forth herein, Debtor and Creditor agree as follows:

1.           GRANT OF SECURITY INTEREST. Debtor grants to Creditor a continuing security interest in the "Collateral" described in Paragraph 2 below to secure the payment of Debtor’s obligations under that certain Mineral Product Receivables Purchase Agreement dated April 15, 2011 (the “MPRPA”), with all payments to be made to Creditor accordance with the terms of the MPRPA, and all obligations of any and every kind and nature heretofore, now or hereafter owing from Debtor to Creditor, however incurred or evidenced, whether primary, secondary, or otherwise, whether arising under this Agreement, under any other security agreements, mortgages, notes, leases, instruments, documents, contracts, or similar agreements heretofore, now or hereafter executed by Debtor and delivered to Creditor, or by oral agreement or created by operation of law (hereinafter collectively called "Liabilities") plus all interest, costs, expenses and reasonable attorney's fees, which may be made or incurred by Creditor in the disbursement, administration, and collection of said Liabilities, and in the protection, maintenance, and liquidation of the Collateral. This Agreement shall be and become effective when any Liabilities of Debtor to Creditor are outstanding and unpaid, and Debtor will not sell, assign, transfer, pledge, or otherwise dispose of or encumber any Collateral to any third party while any indebtedness remains unpaid, except upon the prior written consent of Creditor to be determined in its sole discretion for any reason whatsoever. Terms not otherwise defined herein shall have the meaning set forth in the MPRPA.

2.           COLLATERAL. The "Collateral" covered by this Agreement is all of Debtor's assets and property as described below, which Debtor now owns or shall hereafter acquire or create, immediately upon the acquisition or creation thereof, and includes, but is not limited to, any items listed on any schedule or list attached hereto:

Payable Au. Subject to any Payable Au Adjustments, (i) 80% of the Au mined, extracted, removed, produced or otherwise recovered from the Golden Dream Mine (located at 2725-A Elkhorn Road, Boulder, Montana and all patented and unpatented claims described on Schedule A), less the number of ounces of Au deducted on account of the processing of such Au into Refined Au, for which net number of ounces Debtor receives payment or Refined Au from an Offtaker pursuant to and in accordance with any Offtake Agreement for the first 41,700 aggregate ounces of Payable Au sold by EGI to BDH hereunder, and (ii) 6.5% of the Au mined, extracted, removed, produced or otherwise recovered from the Golden Dream Mine, less the number of ounces of Au deducted on account of the processing of such Au into Refined Au, for which net number of ounces EGI, as the case may be, receives payment or Refined Au from an Offtaker pursuant to and in accordance with any Offtake Agreement with respect to each ounce of Payable Au sold by the EGI to BDH hereunder in excess of 250,000 aggregate ounces of Refined Au from the Golden Dream Mine.

3.           PERFECTION OF SECURITY INTEREST. Debtor shall execute and deliver to Creditor, concurrently with Debtor's execution of this Agreement and at any time or times thereafter at the request of Creditor (and pay the cost of filing or recording same in all public offices deemed necessary by Creditor), all documents that Creditor may request, in a form satisfactory to Creditor, to perfect and maintain perfected Creditor's security interests in the Collateral, in order to fully consummate all of the transactions contemplated hereunder. This Agreement may be recorded in any fashion whatsoever to evidence perfection of the security interest granted herein.

4.          GENERAL WARRANTIES. Debtor warrants, represents and agrees that: (a) Debtor has or forthwith will acquire full title to the Collateral and is and will be the lawful owner of the Collateral with good right to subject same to the security interest hereunder; (b) except as specifically stated herein, Creditor's security interest in the Collateral is a first security interest in the Collateral, there are no financing statements covering any of the Collateral filed in any public office, and Debtor will defend same to Creditor against the claims and demands of all other persons; (c) all of the Collateral is located in the State of Montana, at the location shown on Schedule A attached hereto or in the possession of Creditor, and Debtor shall not remove said Collateral from such location without Creditor's prior written consent, and will not use or permit the Collateral to be used for any unlawful purpose whatsoever; (d) Debtor shall not conduct business under any other name than that given above, nor change or reorganize the type of business entity whereby it does business or open new business locations, except upon prior written approval of Creditor, and if such approval is granted, Debtor agrees that all documents, instruments, and agreements demanded by Creditor shall be prepared, filed and recorded at Debtor's expense, before such change occurs; (e) Debtor has the right and power and is duly authorized to enter into this Agreement, and the execution of this Agreement shall not constitute a breach of any provision contained in any agreement or instrument to which Debtor is or may become a party or by which Debtor is or may be bound or affected; (f) all financial statements and information relating to Debtor delivered to Creditor are true and correct, accurately reflect Debtor's financial condition, and were prepared in accordance with generally accepted accounting principals, and there has been no material adverse change in the financial condition of Debtor since the submission of any such information to Creditor; (g) Debtor has duly filed all federal, state, and other governmental tax returns which Debtor is required by law to file, and all such taxes required to be paid have been paid in full; (h) Debtor will not sell in bulk, dispose or liquidate its machinery, inventory or assets other than in the ordinary course of business; (i) Debtor will not lend money to or grant a security interest and/or encumber the assets pledged as security for this loan for the benefit of any other person or entity without the prior written consent of Creditor; and (j) Debtor will not guarantee the payment of or performance of any liability or obligation of any person or entity not directly for the benefit of Debtor.

5.          INSURANCE, TAXES, ETC. Debtor shall: (a) pay promptly all taxes, levies, assessments, judgments, and charges of any kind upon or relating to the Collateral, and to Debtor's ownership or use of any of its assets, income, or gross receipts and shall provide Creditor evidence of payment within fifteen (15) days after the same are due; (b) at its own expense, keep and maintain all of the Collateral fully insured against loss or damage by fire, theft, explosion and other risks in such amounts, with such companies, under such policies and in such form as shall be satisfactory to Creditor, which policies shall expressly provide that loss thereunder shall be payable to Creditor as its interest may appear (and Creditor shall have a security interest in the proceeds of such insurance and may apply any such proceeds which may be received by it toward payment of Debtor's Liabilities, whether or not due, in such order of application as Creditor may determine) and copies of such insurance policies shall be delivered to Creditor; (c) maintain at its own expense property damage insurance in such amounts, with such companies, under such policies and evidence of payment of premiums thereon. If Debtor at any time hereafter should fail to obtain or maintain any of the policies required above or pay any premium relating thereto, or shall fail to pay any such tax, assessment, levy, or charge or to discharge any such lien, claim or encumbrance, then Creditor, without waiving or releasing any obligation or default of Debtor hereunder, may at any time hereafter (but shall be under no obligation to do so) make such payment or obtain such discharge or obtain and maintain such policies of insurance and pay such premiums, and take such action with respect thereto as Creditor deems advisable. All sums so disbursed by Creditor, including reasonable attorney's fees, court costs, expenses, and other charges relating thereto, shall be part of Debtor's Liabilities, secured hereby, including interest thereon at the rate contracted for as secured hereby and shall be payable on demand.

6.          COLLECTIONS. At Creditor's option, at any time and at Debtor's expense, Creditor may notify account debtors of Debtor to pay it directly, and may collect, sue, compromise on terms it considers proper, endorse, sell or otherwise deal withhe proceeds of any Collateral either in its own name or that of Debtor. After deduction of any expense, including attorney's fees and court costs, all proceeds received by Creditor shall be applied to payment of the Liabilities, whether due or not, in such order as Creditor may choose.

7.          WARRANTIES OF ACCOUNTS. Except as otherwise provided in any assignment to Creditor or invoice enclosed therewith, Debtor warrants in connection with each specifically assigned Account that: (i) it has been due no more than thirty days; (ii) it is not evidenced by an instrument or chattel paper (except such instrument or chattel paper as has been endorsed and delivered to Creditor) and represents a bona fide completed transaction; (iii) the amount shown on Debtor's books and on any invoice or statement delivered to Creditor is owing to Debtor; (iv) no partial payment has been made by anyone; and (v) no set-off or counterclaim to it exists and no agreement has been made with any person under which a deduction or discount may be claimed except any regular discounts allowed for prompt payments. Debtor further warrants that in connection with each specifically assigned general intangible that: (i) it arises under an existing written contract between Debtor and another, (ii) is not evidenced by an instrument or chattel paper (except such instrument or chattel paper as has been endorsed and delivered to Creditor) and represents a bona fide transaction; (iii) no partial payment has been made by anyone; and (iv) no set-off or counterclaim to any money due under such contract exists as of the date of assignment and no agreement has been made with any person under which a deduction or discount may be claimed except as set forth in the contract. Debtor additionally warrants that in connection with each item of Chattel Paper specifically assigned or delivered to Creditor that: (i) it is enforceable according to its terms and no payment is past due; (ii) the amount shown on Debtor's books, and on any statement delivered to Creditor or noted on the item is owing to Debtor; (iii) no partial payment has been made by anyone; and (iv) no set-off or counterclaim to it exists and no agreement has been made under which a deduction or discount may be claimed except as set forth in the item.

8.          PROTECTION OF COLLATERAL. Debtor shall not permit the Collateral to be damaged, abused or unreasonably depreciated and shall use it with reasonable care, keeping it in good order and repair. Debtor shall not use it in violation of the terms of any insurance policy.

9.          INSPECTION. Debtor shall permit and make available to Creditor or its agents, upon reasonable request to have access to and to inspect at any time all the Collateral (and Debtor's other assets, if any) and shall allow Creditor from time to time to verify Accounts and to inspect, check, make copies of or extracts from the books, records and files of Debtor. In addition, Debtor shall promptly supply Creditor with financial and such other information concerning its affairs and assets as Creditor may request from time to time.

10.         DEFAULT AND REMEDIES.

A. Events of Default. Debtor shall be in default under this Agreement upon the happening of any of the following events:

1. If Debtor shall fail to timely and fully pay when due any of the Liabilities secured hereby; or

2. If Debtor shall fail to fully and timely perform or meet any covenants, conditions, agreements, or provisions contained or referred to in this Agreement or in any other agreement executed with reference hereto or in any instrument evidencing any of the Liabilities secured hereby; or

3. If Debtor be dissolved, terminate existence, merge or consolidate, suspend business, become insolvent, commit an act of bankruptcy or any act amounting to a business failure, make an assignment for the benefit of creditors, or if a petition be filed by or against Debtor under any Chapter of Bankruptcy Code, as amended, or for the appointment of a receiver of the property of Debtor, or if a tax lien or attachment, seizure, or levy should be filed against any of Debtor's property and be not promptly and effectively discharged, stayed or indemnified against to Creditor's satisfaction; or

4. If there is a sale, assignment or use except as authorized by this Agreement, loss, theft, substantial damage, destruction or encumbrance of or to any of the Collateral or the filing of suit for the purpose of or the making of any levy, seizure or attachment thereof or thereon; or

5. If at any time, in the opinion of the Creditor, the financial condition of the Debtor becomes impaired or the Collateral becomes insufficient or unsafe; or

6. If any representations, covenants, or warranties of Debtor in this Agreement, or otherwise made or given to Creditor, are untrue or incorrect.

B. Creditor's Remedies Upon Default. Upon the occurrence of an Event of Default, and at any time thereafter, Creditor may, without notice to Debtor, declare all or any part of the Liabilities immediately due and payable (and to the extent such Liabilities are unliquidated Creditor may estimate the remaining Liabilities to be paid to it during the Term of the MPRPA and such amount shall be conclusive evidence of the amount due to Creditor) and will have, in addition to all other rights and remedies, the rights and remedies of a secured party under the Uniform Commercial Code. Further, Creditor shall have the right to off-set against any Liabilities owed by Creditor to Debtor, and Debtor hereby irrevocably makes, constitutes and appoints any officer of Creditor its true and lawful attorney in fact to apply all or part, without advance notice to Debtor, of any funds or indebtedness in partial or total satisfaction of the Liabilities.

11.         GENERAL. Except as otherwise defined in this Agreement, all terms in this Agreement shall have the meaning provided by the Colorado Uniform Commercial Code. Any delay on the part of Creditor in exercising any power, privilege, or right hereunder, or under any other instrument executed by Debtor to Creditor in connection herewith shall not operate as a waiver thereof, and no single or partial exercise thereof, or the exercise of any other power, privilege, or right. The waiver by Creditor of any default by Debtor shall not constitute a waiver of any subsequent defaults. All rights, remedies and powers of Creditor hereunder are irrevocable and cumulative, and not alternative or exclusive, and shall be in addition to all rights, remedies, and powers given hereunder or in or by any other instrument or by the Colorado Uniform Commercial Code, or any laws now existing or hereafter enacted.

This Agreement shall be construed in accordance with the laws of the State of Colorado. Whenever 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 applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without validating the remainder of such provision or the remaining provisions of this Agreement. The rights and privileges of Creditor hereunder shall inure to the benefit of its successors and assigns and this Agreement shall be binding on all heirs, executors, administrators, and successors of Debtor.

The Debtor acknowledges that this is the entire Agreement between the parties except to the extent that writings signed by the party to be charged are specifically incorporated herein by reference either in this Security Agreement or in such writings, and acknowledges receipt of a true and correct copy of this Agreement.

All notices to be provided to the Creditor or Debtor hereunder shall be delivered in accordance with the notice requirements of the MPRPA.

[Signature Pages to Follow]

IN WITNESS WHEREOF, the parties hereto execute this Agreement on the date and year first written above.

CREDITOR:

BLACK DIAMOND HOLDINGS LLC

By: Black Diamond Financial Group, LLC, its manager

/s/ Patrick Imeson

By:  Patrick Imeson, its Manager

ADDRESS:

P.O. Box 370657

Denver, Colorado 80237

DEBTOR:

ELKHORN GOLDFIELDS, INC.

/s/ Robert Trenaman

By:  Robert Trenaman, its President

SCHEDULE A

Description of Golden Dream Mine

EX-10.26

EMPLOYEE LEASING AGREEMENT

This EMPLOYEE LEASING AGREEMENT (this "Agreement") is made and entered into as of August 1, 2011 (the "Effective Date") between Montana Tunnels Mining, Inc. ("Lessor") and Elkhorn Goldfields, Inc. ("Elkhorn"). Elkhorn and Lessor are referred to herein individually as a "Party" and collectively as the "Parties".

RECITAL

WHEREAS, , Elkhorn desires to retain the services of certain employees of Lessor, and Lessor desires to provide the services of such employees to Elkhorn, on the terms and subject to the conditions set forth in this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual agreements set forth in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Parties agree as follows:

1.           Term; Termination.

1.1           The term of this Agreement shall commence on the Effective Date of this Agreement and continue until it is terminated by either Party, as provided in this Agreement (the "Term").

1.2           Lessor or Elkhorn may terminate this Agreement at any time by providing written notice of such termination to the other Party at least ten (10) days prior to the effective date of the termination, unless such notice period is waived by the recipient.

2.           Services. On the terms and subject to the conditions set forth in this Agreement, Lessor agrees to lease the employees set forth on Exhibit A ("Employees") to Elkhorn to perform services for Elkhorn, with the allocation of time (i.e., the percentage) by such Employees between Lessor and Elkhorn to be determined by Elkhorn. Subject to Section 3 of this Agreement, Lessor will continue to be responsible for all wages, salary, compensation, employee benefits, insurance, workers' compensation coverage, unemployment compensation coverage, taxes, withholdings, contributions, expenses, employee-related reporting, filing and disclosure obligations, compliance with all employment laws, and all other employment-related liabilities for Employees that arise during the term of this Agreement.

3.           Compensation.

3.1           Elkhorn shall pay to Lessor, during the Term, the proportionate percentage (as set forth on Exhibit A) of the Lessor's wages and employee benefit costs associated with each Employee immediately prior to the entry into this Agreement (the "Compensation") for so long as such Employee performs services for Elkhorn. Lessor agrees that it shall not increase the amount of Compensation (including employee benefits) without the prior written consent of Elkhorn.

3.2           Lessor shall provide Elkhorn with an invoice within five (5) days following the end of each month setting forth the Compensation. Lessor shall promptly provide Elkhorn such additional information regarding the Compensation and the calculation thereof as Elkhorn may request. Elkhorn shall make the payments required under this Section 3 to Lessor on or before the last day of the month next following the month in which the Employee performs services for that Company pursuant to this Agreement.

4.           Supervision. During the Term, Lessor agrees that the Employees will perform services at Elkhorn’s Sourdough mine and such other services as may be mutually agreed upon by Lessor and Elkhorn. Elkhorn shall not act as an employer with respect to the Employees and shall have no responsibility, authority, or liability as such. Lessor reserves the right and authority, in its capacity as employer, to direct, supervise, and discipline (including hire, retain, and terminate) the Employees. Elkhorn, however, shall be permitted to reasonably request that Lessor replace any Employee, which request shall be promptly considered by Lessor. Elkhorn shall have the authority to designate tasks to be performed, and shall have the authority to instruct and oversee the Employees in the manner, means, and method of accomplishing such tasks for Elkhorn.

5.           Wage and Salaries. Lessor shall be responsible for the payment of all amounts to Employees. Subject to Section 3, all withholding and payroll taxes due with respect to such payments, as well as any other legally required contributions (such as in the nature of social security payments) shall be the sole responsibility of Lessor. Elkhorn shall not be obligated to pay any wage, salary, or compensation to the Employees directly, nor shall Elkhorn be responsible for any withholding taxes or contributions due with respect to such payments.

6.           Personnel Policies. Except as specified in this Agreement, all terms and conditions of employment or service applicable to the Employees shall be governed by Lessor's personnel policies and practices in effect at the execution of this Agreement, or as amended from time to time.

7.           Workers' Compensation. Lessor shall provide workers' compensation insurance for the Employees during the Term; provided, however, that Elkhorn shall reimburse Lessor for any and all claims and premiums associated with such coverage for each Employee who performs services for Elkhorn pursuant to this Agreement.

8.           Indemnification.

8.1           Lessor shall indemnify, defend and hold harmless Elkhorn, its agents, affiliates, and their respective officers, directors and employees from and against any and all losses, damages, injuries, claims, demands, liabilities, costs, and expenses (including reasonable attorneys' and other professionals' fees and expenses and in this Agreement collectively referred to as ("Losses") attributable to, arising from or caused by (i) any breach of this Agreement, (ii) by Lessor's willful misconduct or gross negligence in the performance of the services rendered by the Employees, (iii) any violation of any law in respect of the Employees, or (iv) any claims by the Employees against Elkhorn, except for Losses attributable to, arising from or caused by a material breach of this Agreement by Elkhorn or Elkhorn 's willful misconduct or gross negligence.

9.           Notification and Defense of Claim.

9.1           In the event of any claim or other assertion of liability by third parties with respect to which Elkhorn is entitled to indemnification pursuant to this Agreement, the Party seeking indemnification (the "Indemnified Party") shall notify the indemnifying Party (the "Indemnifying Party") in writing, promptly after the Indemnified Party receives notice of such claim, and in no event later than fifteen (15) days after receipt of a summons from or a complaint filed in any court or other governmental agency or body; provided, however, that failure to give such notice shall not affect the rights of the Indemnified Party hereunder except to the extent that such failure has materially prejudiced the Indemnifying Party's ability to defend such claim. The Indemnifying Party may use counsel of its own choosing, and the Indemnified Party shall reasonably cooperate with the Indemnifying Party in the defense of such claim, including the settlement of the matter on the basis stipulated by the Indemnifying Party (with the Indemnifying Party remaining responsible for all costs and expenses of such settlement). The Indemnifying Party shall keep the Indemnified Party reasonably advised of the progress of any proceedings related to such claim, and of any settlement discussions or proposals with respect thereto. If the Indemnifying Party fails to defend any such claim within a reasonable time after notice thereof or if counsel to the Indemnified Party advises the Indemnifying Party that a conflict of interest with respect to the joint defense exists, the Indemnified Party shall be entitled to undertake the defense, compromise or settlement of such claim at the expense of and for the account and risk of the Indemnifying Party.

9.2           If there is a reasonable probability that such claim may materially and adversely affect the Indemnified Party, other than as a result of money damages or other money payments totally covered by the Indemnifying Party, the Indemnified Party shall have the right, at its sole expense, to participate in the defense, compromise or settlement of such claim, and the Indemnifying Party shall not take any action materially affecting the defense, compromise or settlement of such claim without the consent of the Indemnified Party, which consent shall not be unreasonably withheld or delayed.

9.3           If the facts giving rise to indemnification hereunder shall involve a possible claim by the Indemnified Party against any third party, the Indemnified Party shall have the right, at its sole expense, to undertake the prosecution, compromise and settlement of such claim.

10.         Limitation of Liability. NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY OR ANY OTHER PERSONS FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOSSES (INCLUDING DAMAGES FOR LOSS OF BUSINESS, LOSS OF PROFITS, OR THE LIKE), WHETHER BASED ON BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), PRODUCT LIABILITY OR OTHERWISE, EVEN IF A PARTY OR ITS REPRESENTATIVES HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

11.         No Partnership. Nothing contained in this Agreement shall be construed to create a partnership or joint venture between Lessor and Elkhorn.

12.         No Third Party Beneficiaries. Lessor and Elkhorn acknowledge that this Agreement is solely for their benefit and, subject to provisions in this Agreement regarding assignment, that of their successors and assigns; and that no third party shall have any rights or claims arising hereunder nor is it intended that any third party shall be a third party beneficiary of any provisions hereof

13.         Force Majeure. Neither Party shall be deemed to be in default hereunder or have failed or delayed to perform any obligation hereunder if it is prevented from, or delayed in, performing any such obligation by reason of force majeure, act of God, labor strike, civil unrest or similar occurrence which is beyond the control of such Party. The Party affected by any of the foregoing shall advise the other Party as soon as possible about any threatened or existing circumstance that may result in a failure or delay in performance, and use such Party's commercially reasonable efforts to commence or resume performance as soon as possible.

14.         Notices. All notices, consents, approvals, instructions and other communications required or permitted under this Agreement (collectively, "Notice") shall be effective only if given in writing and shall be considered to have been duly given when (i) delivered by hand, (ii) sent by telecopier (with receipt confirmed), provided that a copy is mailed (on the same date) by certified or registered mail, return receipt requested, postage prepaid, or (iii) received by the addressee, if sent by Express Mail, Federal Express or other reputable express delivery service (receipt requested), or by first class certified or registered mail, return receipt requested, postage prepaid. Notice shall be sent in each case to the appropriate addresses or telecopier numbers set forth below (or to such other addresses and telecopier numbers as a Party may from time to time designate as to itself by notice similarly given to the other Parties in accordance herewith, which shall not be deemed given until received by the addressee). Notice shall be given:

(a)          to Elkhorn at:

Elkhorn Goldfields, Inc.

1610 Wynkoop, STE #400

Denver, CO 80202

Attn: Eric Altman

Facsimile: (303) 957-5536

(b)          to Lessor at:

Montana Tunnels Mining, Inc.

260 Montana Tunnels Rd.

Jefferson City, MT 59638

Attn: Rob Trenaman 

Facsimile: (406) 933-8373

15.        Compliance with Laws. Employment related statutes, laws; Each Party shall comply with and abide by all rules, regulations, requirements, orders, notices, for determinations, and ordinances of any federal, state, county, or municipal government and appropriate departments, commissions or boards.

16.         Assignment. Neither Party to this Agreement may assign its rights hereunder without the prior written consent of the other Party.

17.         No Waiver. The failure of a Party to insist on strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of, or deprive that Party of the right thereafter to insist upon strict adherence to, that term or any other term of this Agreement. Any waiver must be in writing signed by the Party against which such waiver may be asserted. No waiver or consent to any action on anyone occasion shall be deemed to be or imply a waiver or consent to other actions or similar actions not specifically waived or consented to.

18.         Amendments in Writing. Amendments to or modifications of this Agreement shall only be valid if made in writing and signed by the Parties to this Agreement.

19.         Headings. The headings in this Agreement are intended solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement.

20.         Severability. In the event that any provision of this Agreement shall be unenforceable, in whole or in part, such provision shall be limited to the extent necessary to render the same valid, or shall be excised from this Agreement, as circumstances require to effectuate the intent of the Parties in entering into this Agreement, and this Agreement shall be construed as if said provision had been incorporated in this Agreement as so limited, or as if said provision had not been included in this Agreement, as the case may be.

21.         Entire Agreement. This Agreement constitutes the entire agreement of the Parties to this Agreement with respect to the subject matter of this Agreement and supersedes all prior agreements and undertakings, both written and oral.

22.         Governing Law and Venue. This Agreement is made under and shall be governed by and construed in accordance with the laws of the State of Colorado without giving effect to principles of conflicts of laws of that state. The Parties hereby submit to the exclusive jurisdiction and venue of the courts of the State of Colorado for purposes of any legal action.

[Signature Pages Follow.]

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

LESSOR:		ELKHORN
MONTANA TUNNELS MINING, INC.		ELKHORN GOLDFIELDS, INC.
By:	/s/ Robert Trenaman	By:	/s/ Eric Altman
Name:	Robert Trenaman	Name:	Eric Altman
Title:	President	Title:	CFO

Exhibit A

Leased Employees

(As of August 31, 2011)

Gretchen Garwood

Jerry Frohreich

Jerry Koon

Joe Wickens

Becky Quick

John Schaefer

EX-21.1

EXHIBIT 21.1

SUBSIDIARIES

Elkhorn Goldfields, Inc., a Montana corporation

Montana Tunnels Mining, Inc., a Delaware corporation