2013-06-24_REPORT - P2009018 - Laserfiche WebLink

Home Browse Search

15. The facts which justify the ex parte appointment of a receiver for the Red Arrow Collateral in this matter are as follows: (a) The Red Arrow Note is in default for reasons including, without limitation: • Section 2.12 of the Amended Red Arrow Loan Agreement was breached on December 20, 2012, as cash relating to gold sales by Defendants was not deposited into a "lockbox" account as required, but rather was diverted to a corporate account at Wells Fargo Bank. Lender was unaware of this action at the time the Forbearance Agreement was entered into. • Section 5.11 of the Amended Red Arrow Loan Agreement was breached following the execution of the Forbearance Agreement as Defendants have failed to maintain a core sample from the mine at a defined location as required, but rather the sample has been moved to various locations. The core sample has substantial value to Lender. • Section 6.5 of the Amended Red Arrow Loan Agreement was breached following the execution of the Forbearance Agreement as, according to a March 4, 2013 technical memorandum from Lender's consultant SRK Consulting (US) Inc., Defendants have created an environmental liability by not properly disposing of tailings and handling of mercury involved in the amalgamation process. • Defendants have failed to make scheduled loan payments, including a payment of interest and commitment fees in the amount of $196,434.52, which was due April 1, 2013. • Lender has reason to believe based on filings in the litigation American Patriot Gold, LLC v. Liukko, Case No. 12 -cv -03725 (S.D. Texas), which was commenced December 26, 2012, that there have been additional misappropriations of funds from gold sales by one or more of Defendants and their principals. As of the date of this Order, Defendants have failed to cure any such defaults. (b) Under the Red Arrow Deed of Trust, in the event of a default by Defendants, Lender may, in its sole discretion, exercise the rights and remedies set forth in Paragraph 6.2 of the Red Arrow Deed of Trust. (c) With respect to the appointment of a receiver, Paragraph 6.2(d) of the Red Arrow Deed of Trust specifically provides that upon the occurrence of an Event of Default, Lender shall at once become entitled to the possession, use and enjoyment of the Collateral and the rents, issues and profits thereof, from the date of such occurrence and continuing during the pendency of any proceedings for sale by the public trustee or foreclosure proceedings, and the period of redemption, if any. [Lender] shall be entitled to a receiver for the Collateral, and of the rents, issues and profits thereof, after any such default, including, without limitation, 9 HRODEN \1646830 1