motion to sell-nevada--mining interests

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Edmond “Buddy” Miller E-filed: 11/12/2010 The Law Office of Edmond “Buddy” Miller 1610 Montclair Avenue, Suite C Reno, NV 89509 Telephone: (775) 828-9898 Facsimile: (775) 828-9893 [email protected]

Special Counsel for Firstgold Corp., Debtor-In-Possession

UNITED STATES BANKRUPTCY COURT

DISTRICT OF NEVADA

In re

FIRSTGOLD CORP.,

Debtor.

Case No. BK-N-10-50215- GWZ

Chapter 11

MOTION BY FIRSTGOLD CORP. FOR ORDER AUTHORIZING AND APPROVING: (1) SALE OF REAL AND PERSONAL PROPERTY ASSETS PURSUANT TO 11 U.S.C. § 363 FREE AND CLEAR OF LIENS, CLAIMS, AND INTERESTS; (2) ASSUMPTION AND ASSIGNMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES UNDER 11 U.S.C. § 365; AND (3) RELATED RELIEF; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT HEREOF

HearingDate: December 6, 2010 Time: 2:00 p.m. Place: Ctrm. 3

Debtor and debtor-in-possession Firstgold Corp. (the “Debtor”) hereby moves the

Court for an order (a) authorizing the Debtor to sell some or all of the Debtor’s tangible and

intangible assets used in the Debtor’s business operations (the “Property”) free and clear of

liens, interests and encumbrances under 11 U.S.C. § 363(f) to a successful bidder for some or

all of the Property in accordance with sale procedures approved by order of the Court (each or

together, the “Purchaser”) entered on November 8, 2010, which Property is set forth on

Case 10-50215-gwz Doc 232 Entered 11/12/10 13:11:11 of 44

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Exhibit “A” to the concurrently filed Declaration of Eric Klepfer (the “Klepfer Sale

Declaration”); (b) approving the form of such Purchase Agreement as may be presented by the

Debtor and the Purchaser at or before the hearing on this Motion; (c) authorizing the Debtor to

assume and assign executory contracts and unexpired leases as designated by the Purchaser

pursuant to 11 U.S.C. § 365 (d) approving the cure amounts for the executory contracts and

unexpired leases (each a “Contract”) to be assumed and assigned by the Debtor to the

Purchaser set forth on Exhibit “B” to the Klepfer Sale Declaration, and deeming the failure of

a counter-party to a particular Contract to object to the proposed cure amount and assumption

and assignment to be a waiver of such objection; (e) finding that Purchaser is a good faith

buyer under 11 U.S.C. § 363(m); (f) waiving the 14-day stay period provided in Federal Rule

of Bankruptcy Procedure 6004(h) and 6006(d); (g) authorizing the Debtor to take such other

actions and execute such documents as necessary to consummate the Purchase Agreement; (h)

finding that notice of this Motion was proper, and (i) granting such other relief as appropriate

in the best interests of the estate.

This Motion is based on the annexed Memorandum of Points and Authorities, 11

U.S.C. §§ 105, 363 and 365 and Federal Rules of Bankruptcy Procedure 2002, 6004 and 6006,

the concurrently filed Klepfer Sale Declaration and exhibits thereto, the previously filed

declarations of Eric Klepfer and Mark Mueller and exhibits thereto, Docket Nos. 185 and 178,

respectively, the record in this case, and such other pleadings, judicial notice of which is

requested pursuant to Federal Rule of Evidence 201, and all arguments and evidence to be

submitted in support of the relief requested herein.

Dated this 12th day of November, 2010.

/s/ Edmond Buddy Miller Edmond Buddy Miller



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MEMORANDUM OF POINTS AND AUTHORITIES

I. INTRODUCTION

By the annexed Motion, debtor in possession Firstgold Corp. (the “Debtor”) seeks an

order from (a) authorizing the Debtor to sell some or all of the Debtor’s tangible and intangible

assets used in the Debtor’s business operations (the “Property”) free and clear of liens, interests

and encumbrances under 11 U.S.C. § 363(f) to a successful bidder for some or all of the Property

in accordance with sale procedures approved by order of the Court (each or together, the

“Purchaser”) entered on November 8, 2010, which Property is set forth on Exhibit “A” to the

concurrently filed Declaration of Eric Klepfer (the “Klepfer Sale Declaration”); (b) approving the

form of such Purchase Agreement as may be presented by the Debtor and the Purchaser at or

before the hearing on this Motion; (c) authorizing the Debtor to assume and assign executory

contracts and unexpired leases as designated by the Purchaser pursuant to 11 U.S.C. § 365; (d)

approving the cure amounts for the executory contracts and unexpired leases (each a “Contract”)

to be assumed and assigned by the Debtor to the Purchaser set forth on Exhibit “B” to the

Klepfer Sale Declaration, and deeming the failure of a counter-party to a particular Contract to

object to the proposed cure amount and assumption and assignment to be a waiver of such

objection; (e) finding that Purchaser is a good faith buyer under 11 U.S.C. § 363(m); (f) waiving

the 14-day stay period provided in Federal Rule of Bankruptcy Procedure 6004(h) and 6006(d);

(g) authorizing the Debtor to take such other actions and execute such documents as necessary to

consummate the Purchase Agreement; (h) finding that notice of this Motion was proper, and (i)

granting such other relief as appropriate in the best interests of the estate.

II. STATEMENT OF FACTS.

Unless otherwise indicated, the facts set forth in this Section II are based on the

Declarations of Eric Klepfer and Mark Mueller, Docket Nos. 185 and 178 respectively, which are

incorporated herein, and which were previously filed with the Court in connection with the

Debtor’s Motion By Firstgold Corp. For Order Approving Sale Procedures with Respect To The:

(1) Sale Of Real And Personal Property Assets Pursuant To 11 U.S.C. § 363 Free And Clear Of

Liens, Claims, And Interests; (2) Assumption And Assignment Of Executory Contracts And


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Unexpired Leases Under 11 U.S.C. § 365; And (3) Related Relief; Memorandum Of Points And

Authorities (the “Sale Procedures Motion”), Docket No. 177.

A. Background.

1. On January 27, 2010 (the “Petition Date”), Debtor filed a voluntary petition for

relief with this Court under chapter 11 of title 11 of the United States Code (the “Bankruptcy

Code”). Since the Petition Date, Debtor has operated its business and managed its property as a

debtor-in-possession pursuant to Bankruptcy Code Sections 1107 and 1108.

2. Previously, the Debtor conducted gold and silver mining operations. The Debtor

maintains a business office in Lovelock, Nevada. The Debtor’s mining operations were

principally conducted at the Relief Canyon Mine. The Debtor’s mining operations are currently

shut down and Relief Canyon Mine is in care and maintenance status.

3. Pursuant to that certain “Note and Warrant Purchase Agreement” between the

Platinum Long Term Growth LLC and Lakewood Group, LLC (the “Lenders”) and the Debtor

dated August 7, 2008 and documents related thereto (the “Loan Documents”),1 Lenders were

owed as of the Petition Date no less that $15,510,496 and $3,847,466.17, respectively in

principal, interest, charges and fees, and in the aggregate $19,357,961.72 (the “Loan

Indebtedness”). Interest, fees and costs continue to accrue on the Loan Indebtedness in

accordance with the Loan Documents. The Loan Indebtedness does not include as yet certain

unliquidated, accrued and unpaid fees, charges, interest or penalties, some of which continue to

accrue.

4. As security for the payment of all amounts due under the Loan Documents, the

Debtor granted to the Lenders, inter alia, a security interest in all tangible real and personal

property assets and intangible assets of the Debtor (the “Lender Collateral”), subject only to prior

1 Certain of the Loan Documents are annexed as Exhibits “G” through “J” to the Declaration Of Mark Mueller In Support Of Motion By Platinum Long Term Growth LLC And The Lakewood Group, LLC To Convert Case To Chapter 7, Or Alternatively, For Relief From The Automatic Stay, docket number __ on the Court’s docket in this case.


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valid and perfected liens existing as of August 7, 2008, if any (the “Pre-Existing Liens”), as a

matter of applicable non-bankruptcy law (the “Lenders’ Lien”).

5. On March 25, 2010, the Lenders filed the Motion By Platinum Long Term Growth

LLC And The Lakewood Group, LLC To Convert Case To Chapter 7, Or Alternatively, For Relief

From The Automatic Stay and supporting declarations (the “Relief From Stay Motion”). The

hearing on the Relief From Stay Motion was held on April 20, 2010 in the above-entitled Court

(the “Stay Hearing”). Among other things, the Lenders sought relief from the automatic stay

under 11 U.S.C. § 362(d).

6. The Stay Motion was resolved by way of that certain First Amended Stipulation

and Order Regarding Termination of the Automatic Stay, entered by this Court on June 22, 2010

as Docket No. 156 (the “Relief from Stay Stipulation”). According to its terms, the Relief from

Stay Stipulation was a binding determination of (x) of the amount of the Loan Indebtedness as

stated above, (y) that the Lenders’ claims were allowed secured claims in the amount of the Loan

Indebtedness plus such other post-petition interest, fees and charges under 11 U.S.C. § 502, and

(z) the Lenders’ liens are duly perfected and is in all respects valid and enforceable first priority

security interests and liens, subject only to the Pre-Existing liens, and not subject to any claim or

challenge under Bankruptcy Code Sections 506(a), 506(c) and 552(b).

7. Further, under the terms of the Relief From Stay Stipulation, Mr. Eric Klepfer was

appointed as “Operations Manager” of the Debtor vested with, among other things, sole

management authority over the Debtor’s operations and the authority to bind the Debtor with

respect to a sale of the Operating Assets, and to take such actions as are necessary to conduct a

sale or other disposition of the Operating Assets.

8. The Operations Manager has determined that there is no ability for the Debtor to

recommence mining operations due to the inability to obtain debt or equity financing in light of

the Loan Indebtedness and other debt burdening the Debtor’s assets. Therefore, the Operations

Manager, in the exercise of his business judgment on behalf of the Debtor and this bankruptcy

estate, has determined that it is in the best interests of the estate to sell some or all of the Property.


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9. The Court entered an order approving the Sale Procedures Motion by its order

entered November 8, 2010 (the “Sales Procedures Order”), docket number 225.

B. Marketing of the Assets.

10. The Lenders have made significant efforts to market and facilitate the sale of the

Property for several months. The Lenders are highly motivated to maximize the purchase price of

the Property.

11. Since in or about February 2010, the Lenders have been in contact with in excess

of 60 different individuals and entities with respect to the sale of the Property. The Lenders have

maintained a list of these parties, and can provide such upon request of the Court. Out of respect

for the privacy of these parties (although confidentiality has not been formally requested), the

Lenders have decided to not attach the list of these parties to this declaration.

12. In addition, since in or about February 2010, the Lenders are informed that in

excess of 70 different individuals and entities have visited the Debtor’s offices to conduct a due

diligence review of the Debtor’s documents and business records with respect to the potential

purchase of the Property.

13. The Debtor will make the relevant documents reasonably available to those that

wish to conduct due diligence.

14. In addition, the Lenders established a website at www.reliefcanyon.com,

specifically relating to the sale of the Property, the primary aspect of which is the Relief Canyon

Mine. Excerpts from this website are annexed to the previously filed Declaration of Mark

Mueller, docket number 178 in this case filed October 13, 2010, as Exhibit “A”. The Lenders

also marketed the Property for a number of months by advertising on a website devoted to mining

businesses conducted by InfoMine Inc. at www.InfoMine.com.

15. Also, the Sales Procedures Order setting forth all information pertaining to the

procedure that potential bidders must follow to bid on the Property has been served and

distributed as required by that Order and has also been posted on the aforementioned

www.reliefcanyon.com website.

/ / /


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C. Liens Against the Property.

16. The liens and interests against the Property are set forth in Exhibit “C” to the

Declaration of Eric Klepfer.

D. Proposed Treatment of Liens and Interests Against the Property.

17. The Debtor proposes to sell the Property free and clear of liens and interests to the

maximum extent under 11 U.S.C. § 363(f), with allowed amounts of the liens to attach to

proceeds from the sale.

E. Buyer is Purchase in Good Faith.

18. For purposes of 11 U.S.C. § 363(m), a good faith purchaser is one who buys the

property of the estate in good faith and for value. Ewell v. Diebert (In re Ewell), 958 F. 2d 276,

281 (9th Cir. 1992). The term “good faith” is not defined in the Bankruptcy Code, but courts have

provided some guidance. See e.g., id. (lack of good faith generally shown by fraud, collusion

between purchaser and other bidders or the trustee, or an attempt to take grossly unfair advantage

of other bidders); In re Pine Coast Enters., Ltd., 147 B.R. 30, 33 (Bankr. N.D. Ill. 1992)(“The

requirement that a purchaser act in good faith speaks to the integrity of its conduct in the course

of the sale proceeding.”)

19. At this point, the identity of ultimate buyer of the Property is not known, but will

be determined at the auction sale to be conducted by this Court on December 6, 2010.

20. The Debtor and/or the Purchaser(s) of the Property shall present such evidence as

necessary and appropriate at the Sale Hearing to establish that the Purchaser is seeking to

purchase the Property in good faith within the meaning of, and for the purposes of, 11 U.S.C. §§

363(m) and 363(n).

F. Proposed Assumption and Assignment of Certain Executory Contracts and

Unexpired Leases.

21. As part of the proposed transaction, the Debtor anticipates that it will be assuming

and assigning to the Purchaser certain executory contracts and unexpired leases under 11 U.S.C. §

365. In connection with the proposed sale, the Debtor requests authority to assume and assign


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those executory contracts and unexpired leases designated by the Purchaser pursuant to the terms

of the Purchase Agreement.

22. A schedule of all contracts or leases relating to the Property known to the

Operations Manager and which the Debtor believes are executory contracts or unexpired leases

under 11 U.S.C. § 365 is annexed to the Declaration of Eric Klepfer as Exhibit “B” (the

“Contracts”).

III. DISCUSSION

A. Debtor Should Be Authorized To Sell The Property Free And Clear Of Liens,

Claims, Interests And Encumbrances Pursuant To 11 U.S.C. § 363 And The Terms

Of The Purchase Agreement.

1. Debtor Should be Authorized to Sell the Property under 11 U.S.C. § 363(b).

Pursuant to Sections 363(b)(1) and 1107(a), a debtor in possession, “after notice and a

hearing, may . . . sell . . . other than in the ordinary course of business, property of the estate . . . .”

11 U.S.C. § 363(b)(1). As a general matter, a Court determining a Section 363(b) motion to sell

property of the estate should determine, based on the evidence presented, that there is a “good

business reason” to grant such motion. In re Lionel Corp., 722 F.2d 1063, 1071 (2d Cir. 1983).

In addition, the court must further find it is in the best interest of the estate. To make this

determination, the Court should consider whether:

(1) the sale is fair and reasonable, i.e., the price to be paid is adequate;

(2) the property has been given adequate marketing; (3) the sale is in good faith, i.e., there is an absence of any

lucrative deals with insiders; and (4) adequate notice has been provided to creditors.

In re Wilde Horse Enterprises, Inc., 136 B.R. 830, 841-42 (Bankr. C.D. Cal. 1991); In re The

Landing, 156 B.R. 246, 249 (Bankr. E.D. Mo. 1993); In re Mama’s Original Foods, Inc., 234

B.R. 500, 502-505 (C.D. Cal. 1999). As described in detail below, the Debtor’s proposed sale of

the Property, subject to overbid, is appropriate and should be approved by the Court.


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a. Sound Business Purpose.

In Walter v. Sunwest Bank (In re Walter), 83 B.R. 14, 19 (9th Cir. BAP 1988), the Ninth

Circuit Bankruptcy Appellate Panel adopted a flexible case-by-case test to determine whether the

business purpose for a proposed sale justifies disposition of property of the estate under Section

363(b). The facts pertaining to the proposed sale of the Property amply substantiate the Debtor’s

business decision that proceeding with such sale is in the best interest of this estate and merits the

approval of this Court.

As stated above, the Debtor’s mine assets are in a care and maintenance program and

there are no ongoing mining operations. In addition, due to the Relief From Stay Stipulation

granting the Lenders the ability to foreclose on the Property and the liens securing Loan

Indebtedness and other liens, there is no realistic possibility that the Debtor can obtain financing

to make progress toward a successful reorganization. Therefore, there is no real choice of the

Debtor in this bankruptcy case other than conducting a sale of the Property or risk foreclosure on

the Property.

b. Fair and Reasonable Price.

In order for a sale to be approved under Section 363(b), the purchase price must be fair

and reasonable. See generally, In re Canyon Partnership, 55 B.R. 520 (Bankr. S.D. Cal. 1985).

The trustee (or debtor in possession) is given substantial discretion in this regard. Id. In addition,

courts have broad discretion with respect to matters under section 363(b). See Big Shanty Land

Corp. v. Comer Properties, Inc., 61 B.R. 272, 278 (Bankr. N.D. Ga. 1985). In any sale of estate

assets, the ultimate purpose is to obtain the highest price for the property sold. Wilde Horse

Enterprises, Inc., 136 B.R. at 841 (citing In re Chung King, Inc., 753 F.2d 547 (7th Cir. 1985)), In

re Alpha Industries, Inc., 84 B.R. 703, 705 (Bankr. Mont. 1988).

As set forth above in the previously filed Mueller Declaration, docket number 178, the

Property has been marketed for several months prior to the filing of this Motion. In addition, the

Property will be subjected to a fair and reasonable bidding process so that those parties have

expressed bona fide interest in the Property will have the opportunity to participate in a sale


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process designed to attract a buyer with the financial wherewithal to consummate a purchase of

the Property. Therefore, the Debtor submits that a fair and reasonable price will be obtained.

c. Accurate and Reasonable Notice.

Pursuant to Fed.R.Bankr.P 2002(a)(2), (c)(1), (i) and (k), 6004, and 6006, and applicable

local bankruptcy rules, the Debtor (1) served the Sale Motion on the Office of the United States

Trustee, parties on the Notice of Electronic Filing List, and parties requesting special notice by

regular mail or Notice of Electronic Filing, as applicable, (2) served the Sale Motion on parties

asserting liens, encumbrances, or other interests against the Property, and all federal, state, and

local taxing authorities, return receipt requested and other parties to the Contracts, and (3) served

its notice of the date, time, and place of the Sale Motion summarizing the proposed terms of the

sale and the assumption and assignment of the Contracts (the “Sale Notice”) on all of the

foregoing parties pursuant to the methods discusses above, and on all other creditors and parties

in interest in the Debtor’s bankruptcy case by regular mail. The Debtor believes that the

foregoing notice procedure satisfies the requirements of Fed.R.Bankr.P 2002(a)(2), (c)(1), (i) and

(k), 6004, and 6006, applicable local bankruptcy rules, and demonstrates that there was adequate

and reasonable notice of the Sale Motion.

d. Good Faith.

When a bankruptcy court authorizes a sale of assets pursuant to Section 363(b)(1), it is

required to make a finding with respect to the “good faith” of the purchaser. In re Abbotts Dairies

of Pennsylvania, Inc., 788 F.2d 143, 149 (3rd Cir. 1986). Such a procedure ensures that Section

363(b)(1) will not be employed to circumvent the creditor protections of Chapter 11, and, as such,

it mirrors the requirement of Section 1129 that the Bankruptcy Court independently scrutinizes

the proposed sale and makes a finding that it has been proposed in good faith. Id. at 150.

“Good faith” encompasses fair value, and further speaks to the integrity of the transaction.

Wilde Horse, 136 B.R. at 842. With respect to the debtor’s conduct in conjunction with the sale,

the good faith requirement “focuses principally on the element of special treatment of the debtor’s

insiders in the sale transaction.” See In re Industrial Valley Refrigeration and Air Conditioning

Supplies, Inc., 77 B.R. 15, 17 (Bankr. E.D. Pa. 1987). With respect to the buyer’s conduct, this


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Court should consider whether there is any evidence of “fraud, collusion between the purchaser

and other bidders or the [debtor], or an attempt to take grossly unfair advantage of other bidders.”

Abbotts Dairies, 788 F.2d at 147, In re Rock Indus. Mach. Corp., 572 F.2d 1195, 1198 (7th Cir.

1978); see Wilde Horse, 136 B.R. at 842; In re Alpha Industries, Inc., 84 B.R. 703, 706 (Bankr.

D. Mont. 1988). In short, “[l]ack of good faith is generally determined by fraudulent conduct

during the sale proceedings.” In re Apex Oil Co., 92 B.R. 847, 869 (Bankr. E.D.Mo. 1988) (citing

In re Exennium, Inc., 715 F.2d 1401, 1404-05 (9th Cir. 1983)).

The Debtor submits that the proposed sale of the Property has been, and will be,

conducted in good faith. As set forth herein and in the Debtor’s Sale Procedures Motion, the

Property has been marketed and will be continued to be marketed is the best interests of

maximizing the value to the Debtor’s estate. Further, the Debtor does not contemplate that the

Property will be sold to an insider as that term is defined by Section 101(31)(B). Accordingly,

the Debtor submits that the successful bidder for the Property will be entitled to a good faith

finding pursuant to Section 363(m).

Based on all of the foregoing, the Debtor submits that all of the requirements for a sale

under Section 363(b) have been satisfied.

2. The Debtor Should Be Authorized to Sell the Property Free and Clear of

Liens, Claims, Interests, and Encumbrances.

Section 363(f) provides, in relevant part, as follows:

The [debtor in possession] may sell property under subsection (b) . . . of this section free and clear of any interest in such property of an entity other than the estate, only if—

(1) applicable non-bankruptcy law permits the sale of such property free and clear of such interest;

(2) such entity consents; (3) such interest is a lien and the price at which such

property is to be sold is greater than the aggregate value of all liens on such property;

(4) such interest is in bona fide dispute; or (5) such entity could be compelled, in a legal or equitable

proceeding, to accept a money satisfaction of such interest.


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11 U.S.C. §363(f).

Section 363(f) was drafted in the disjunctive. Therefore, the Debtor needs to satisfy only

one of the five subsections of Section 363(f) in order for the auction sale to be free and clear of all

interests. In this case, Sections 363(f)(3), 363(f)(4), and 363(f)(5) is satisfied with respect to

creditors asserting an alleged lien, claim, interest, or encumbrance against any of the Property.

3. The Property can be sold free and clear if any interest of pursuant to Section

363(f)(3).

A line of cases establishes that the meaning of “value” under Section 363(f)(3) has the

same meaning as in Section 506(a), which deals with the valuation of secured interests. These

Courts have held that a valuation of liens conducted under Section 506(a) may be used to

determine the “aggregate value of all liens” under 11 U.S.C. Sec. 363(f)(3). In other words, a sale

should be approved where the proposed sales price exceeds the actual value of the liens as

measured under Section 506(a), and not the face amount of the secured debt. In re Collins, 180

B.R. 447 (Bankr. E.D. Va. 1995); In re Milford Group, Inc., 150 B.R. 904, 906 (Bankr. M.D. Pa.

1992); In re Terrace Gardens Park Partnership, 96 B.R. 707 (Bankr. W.D. Tex. 1989); In re Beker

Industries Corp., 63 B.R. 474 (Bankr. S.D.N.Y. 1986); Matter of Rouse, 54 B.R. 31

(Bankr.W.D.Mo.1985); In re Hatfield Homes, Inc., 30 B.R. 353 (Bankr. E.D. Pa. 1983). All of

these cases held that the measure of the value of liens under Section 363(f)(3) must be measured

in the context of Section 506(a).

First, the term “value” has been interpreted by the United States Supreme Court to have

the same meaning in Bankruptcy Code Sections 361(1) and (2) - relating to adequate protection -

as in Section 506(a).2 The concept of adequate protection pervades the sale provisions of Section

363(f). As stated by one court:

2 United Savings Assoc. of Texas v. Timbers of Inwood Forest Assocs., 484 U.S. 365, 108 S.Ct. 626, 630, 98 L.Ed.2d 740 (1988).


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“Sections 361 - 364 all address the treatment of secured claims in a bankruptcy

context. All four sections employ the common concept of adequate protection as

the touchstone for whether a Debtor’s proposed action should be approved.

Adequate protection in turn focuses on the value of the collateral securing the

claim. So long as a creditor’s interest is adequately protected, the debtor is

permitted to sell property of the estate. 11 U.S.C. § 363(e). It makes no sense to

read into Section 363(f)(3) a restriction inconsistent with the adequate protection

scheme which pervades both Section 363 and the rest of the Code, just because the

sale is free of liens, especially as the commonly accepted method of adequately

protecting a secured creditor when a sale is authorized under Section 363(f) is to

order the liens to attached to the proceeds of the sale.”

In re Terrace Gardens Park Partnership, 96 B.R. at 713 (footnotes omitted).

Second, a secured creditor who disagrees with the proposed sale has recourse to Section

363(k), which permits such creditor to bid in its lien to block a sale. Id. Permitting a sale where

the secured creditors are adequately protected avoids the unfair situation where a creditor refuses

to consent to a sale which is otherwise beneficial to the estate. As stated in the Beker decision:

“[I]f a secured creditor does not desire to take the property for itself and yet

refuses to consent to a sale at less than the amount of its lien, it is effectively

insisting that others, including the debtor at the expense of its own cash flow and

of its general creditors, continue to fund the property without a firm prospect for

return.”

Beker, 63 B.R. at 478.

When determining the value of a lien under § 506(a), value is determined in light of the

valuation's purpose, and the proposed disposition of the property. § 506(a) states in pertinent

part:

"An allowed claim of a creditor secured by a lien on property in which the estate

has an interest ... is a secured claim to the extent of the value of such creditor's

interest in the estate's interest in such property. . . . Such value shall be determined


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in light of the purpose of the valuation and of the proposed disposition or use of

such property. . . . Where there is an actual sale, such "is conclusive evidence of

the property's value."3

As stated by Collier on Bankruptcy:

"If an actual sale (or equivalent disposition) is to occur, the value of the collateral

should be based on the consideration to be received by the estate in connection

with the sale, provided that the terms of the sale are fair and were arrived at on an

arm's-length basis."4

In this case, the Debtors are seeking approval of a bona fide sale pursuant to sale

procedures that are fair and designed to attract a bid that is equal to the fair value of the Property.

The Property has been marketed and has already been subjected to competitive market forces as

described above. In addition, the approved sale procedures provide further assurances of fair

value being received by the estate. For these reasons, purchase price obtained by way of the

competitive sales process conclusively determines the value of the Property for purposes of 11

U.S.C. § 506(a).

Because the purchase price to be obtained equals or exceeds the aggregate value of the

liens in the Property after application of the principles states above, the Debtors respectfully

request that the Court approve the Sale pursuant to 11 U.S.C. § 363(f)(3).

4. The unpatented mining claims of the Debtor can be sold free and clear of the

purported interests of Royal Gold, Inc. pursuant to 11 U.S.C. § 363(f)(4).

a. The Unpatented Mining Claims in Which Royal Gold Asserts A Royalty or

Other Interest Have Been Extinguished.

3 In re Alpine Group, 151 B.R. 931, 935 (9th Cir. BAP 1993); see also, Associates Commercial Corp. v. Rash, 520 U.S. 953, 960, 138 L.Ed.2d 148, 117 S.Ct. 1879, 1883 (1997) (amount of secured claim under § 506(a) "is the price a willing buyer in the Debtors’ trade, business, or situation would pay to obtain like property from a willing seller"); Ford Motor Credit v. Dobbins,35 F.3d 860, 870 (4th Cir. 1994)(actual sales price determinative of value under § 506).

4 4 L. King, Collier on Bankruptcy, ¶ 506.03[6][b] at 506-40.


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Royal Gold, Inc. (“RGI”) filed a proof of claim in this bankruptcy case on March 5, 2010

(the “RGI Proof of Claim”).5 On the first page of the RGI Proof of Claim, RGI alleges that it has

an unliquidated claim in an unknown amount purportedly secured by a lien in real estate owned

by the Debtor. Exhibit “A” to the RGI Proof of Claim alleges that RGI claims a mineral royalty

interest in certain unpatented mining claims purportedly owned by the Debtor as set forth in two

agreements: (1) Net Smelter Return Royalty, dated October 3, 1996 between Newgold, Inc. and

Repadre International Corporation (the “1996 Royalty Agreement”); and (2) Net Smelter Return

Royalty Agreement, dated June 13, 1997 between Newgold, Inc. and Repadre International

Corporation (the “1997 Royalty Agreement”, and together with the 1996 Royalty Agreement, the

“Royalty Agreements”). (The Debtor reserves the right to dispute that RGI is the successor entity

to Repadre International Corporation.) Newgold, Inc. (“Newgold”) changed its name to Firstgold

Corp., the Debtor herein, in 2006.

Annexed to the RGI Proof of Claim are a number of Schedules (Schedules A-1 and A-2)

(the “Original Claim Schedules”). The Original Claim Schedules set forth the mining claims that

at one time related to the Relief Canyon Mine, as individually identified by their unique “Bureau

of Land Management Nevada Mining Claim” serial number (“BLM NMC”). The Debtor

disputes that RGI has an ongoing royalty interest in the unpatented mining claims that are being

sold pursuant to this Motion described in Exhibit “A” hereto (the “Claims For Sale”), and that

such is a “bona fide” dispute pursuant to 11 U.S.C. § 363(f)(4).

Of overriding importance, the Original Claims no longer exist. The Original Claims were

extinguished when the Original Claims were deemed forfeited as a matter of law several years

prior to the Petition Date.

Based on an extensive review of the Debtor’s documents and the records so far reviewed

from the Bureau of Land Management (the “BLM”), the Debtor has concluded that Newgold

failed to pay the annual maintenance fees associated with the Original Claims, resulting in their

5 The RGI Proof of Claim is annexed to the Klepfer Sale Declaration as Exhibit “D”, of which this Court is requested to take judicial notice as claim number 75-1.


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forfeiture as a matter of law. Federal mining statutes that became effective in 1995 specify that

the “failure to pay” the maintenance fee by the deadline “conclusively constitute[ed] a forfeiture”

of the claim. 30 U.S.C. §§ 28f, 28i.6 Subsequent to the forfeiture of the Original Claims,

Newgold staked new unpatented mining claims, generating each time new BLM NMC serial

numbers. This forfeiture and extinguishment of the Old Claims as a matter of law is

demonstrated by the chart and other documents obtained from the BLM website annexed to the

Klepfer Sale Declaration as Exhibits “G” and “H”, which show that all of the Original Claims

with the original BLM NMC serial numbers are closed and inactive. The Original Claims are all

indicated with an “NSR” on Exhibit “G”. Exhibit “H” shows all Claims for Sale (marked as

“CFS”) with current BLM NMC serial numbers as being active. See list of current BLM NMC

serial numbers at Section 1.1, entitled “Mineral Claims (Mining Lode and Mill Site Claims) –

6 30 U.S.C. section 28f provides for the payment of claim maintenance fees for each assessment year:

“(a) Claim maintenance fee

“ * * * * *

“The holder of each unpatented mining claim, mill, or tunnel site, located pursuant to the mining laws of the United States, whether located before or after October 21, 1998, shall pay to the Secretary of the Interior, on or before September 1 of each ** year * * * a claim maintenance fee of $100 per claim or site. * * *

“(b) Time of payment

“ * * * * *

“The claim maintenance fee payable pursuant to subsection (a) of this section for any assessment year shall be paid before the commencement of the assessment year, except that for the initial assessment year in which the location is made, the locator shall pay the claim maintenance fee at the time the location notice is recorded with the [BLM].”

11 U.S.C.§ 28i. Failure to pay

Failure to pay the claim maintenance fee or the location fee as required by sections 28f to 28l of this title shall conclusively constitute a forfeiture of the unpatented mining claim, mill or tunnel site by the claimant and the claim shall be deemed null and void by operation of law. [Emphasis added].


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Real Property,” in the Debtor’s “List of Assets for Sale”, which is Exhibit “A” to the Klepfer

Declaration in support of this Motion. As demonstrated by Exhibit “G”, the Original Claims

were forfeited for failure to pay the annual maintenance fees, most of which occurred in 2004.

Based on the BLM information, a few other Original Claims were forfeited in 1998, presumably

for the same reason.

The legal effect of the forfeiture of the Original Claims can be best understood by

reviewing the nature of Newgold’s interest in the Original Claims. Newgold held an exclusive

possessory interest in the Original Claims. Under The 1872 Mining Law, codified at 30 U.S.C. §

22 et seq., United States citizens may go on unappropriated, unreserved public lands to prospect,

explore and develop locatable minerals. Such a location constitutes a discovery and gives the

claimant a right of exclusive possession against other claimants for mining purposes.7 The

claimant may continue to possess an unpatented claim, extract and sell minerals without payment

of any royalty to the United States. See 30 U.S.C. §28. In contrast to the unpatented Original

Claims, the holder of a claim who, after application to the United States Secretary of the Interior,

obtains a patent for a mining claim acquires fee title in the underlying real property.

Independence Min. Co. v. Babbitt, 105 F.3d 502, 506 (9th Cir.1997). Here, however, the Debtor

never patented its mining claims nor acquired a fee interest in the land underlying the Original

Claims.

Lacking a fee interest in the federal public lands, Newgold’s possessory interest in the

unpatented mining claims was at all times defeasible by operation of federal law.8 The United

States Supreme Court explained this in United States v. Locke, 471 U.S. 84 (1985), when it

examined the nature of a mining claimant’s interest in unpatented mining claims. In Locke,

7 30 U.S.C. § 26 further provides that “[t]he locators of all mining locations...so long as they comply with the laws of the United States...shall have exclusive right of possession and enjoyment of all the surface included within the lines of their locations, and of all veins, lodes and ledges through the entire depth.”

8 30 U.S.C. § 22 provides: “all valuable mineral deposits in lands belonging to the United States...shall be free and open to exploration...and the lands in which they are found to occupation and purchase...under such regulations prescribed by law...” Owners of unpatented mining claims are subject to the United States' regulatory powers. Manning v. United States, 146 F.3d 808, 813-15 (10th Cir.1998).


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mining claims were extinguished for failing to timely file required notices under the Federal Land

Policy Management Act (“FLPMA”). The FLPMA requires claimants who file every year with

state and BLM officials a notice of intention to hold the claim along with an affidavit of

assessment work on December 30 of each year. 43 U.S.C. § 1744(a). In Locke, the claimants

missed this deadline by one day and filed their notice of intention to hold the claim on December

31. Consequently, the BLM promptly extinguished their mining claims. See 43 U.S.C. §1744(c)

(failure to file as required by subsections (a) and (b) shall be deemed conclusively to constitute an

abandonment of the mining claim or mill site). The BLM’s abandonment was upheld in the

Locke decision.

The Supreme Court recognized that an unpatented mining claim is a “possessory” interest

only and therefore a "unique form of property.” 471 U.S. at 104. The Court cautioned that “no

right arises from an invalid claim of any kind,” 471 U.S. at 105, because the undisputed intent of

Congress was to make “void” those claims for which proper filings were not timely made, and for

extinguishment of abandoned claims. 471 U.S. at 98, 99. Therefore, failure to comply with the

statutory requirements resulted in a forfeiture of the claims, and the Court upheld the FLPMA’s

constitutionality. Notably, the legislative history indicates that a claim which is “deemed

abandoned” by the BLM is “extinguished.” H.R.Rep.No.94-1724, 94th Cong., 2nd Sess. 62,

reprinted in (1976) U.S.Code Cong. & Ad.News 6175, 6233. See Western Mining Counsel v.

Watt, 643 F.2d 618, 628 (9th Cir. 1981)(citing legislative history).

While the deemed abandonment may seem harsh, Courts in the Ninth Circuit have strictly

followed Locke’s holding that violation of BLM filing requirements are strictly enforced by the

courts. In Red Top Mercury Mines, Inc. v. United States, 887 F.2d 198 (9th Cir. 1989), the Ninth

Circuit stated:

Thus, plaintiff has no right to any notice from the BLM stating that there has

been a violation of the filing requirement. In effect, a miner could do

everything right but - due to misfiling, a filing lost in the mail, or various

other problems - could be in violation of the filing requirement, and years

later be told that his claim is deemed abandoned. A logical outcome is that a


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miner may very well have put additional money into his claim during the

intervening years without knowing his claim is abandoned. While this strikes

the court as unfair, to remedy the situation would rewrite the Secretary's

regulation and be contrary to the Supreme Court's holding in Locke.

Id. at 204 – 205.

Once the Original Claims ceased to exist, RGI’s claim to a royalty interest in the

unpatented claims directly conflicts with the foregoing binding case law and statutory authority

extinguishing stale claims so that subsequent claimants may enjoy a right of unfettered exclusive

possession of the mining claims. An argument that RGI retains a continuing royalty or other

interests in the Claims For Sale is contrary to the forfeiture statutes and federal policy

encouraging exploration and development of mineral resources as explained in Locke.

Locke’s progeny show that the Supreme Court’s ruling leave little doubt that unpatented

mining claims are lost and not enforceable against subsequent parties who stake claims in the

same mining area if the proper filings are not made with the BLM. In Crummett v. Miller, 53

Cal.App.4th 897, 62 Cal.Rptr.2d 113 (1997), the California Court of Appeals, following Locke,

held that a previously recorded unpatented claim was extinguished for failure to follow the

recordation provisions of the Federal Land Policy and Management Act of 1976 (43 U.S.C. §

1701 et seq., especially § 1744 (FLPMA)). Due to failure to make the required filings, the

unpatented mining claims were extinguished. The Crummett court held that a subsequent party

that staked certain unpatented claims held title free and clear of the interest of the prior claim

holder whose unpatented claim was forfeited.

The Crummett court stated:

With respect to mineral lands, federal law provides “[e]xcept as otherwise

provided, all valuable mineral deposits in lands belonging to the United States,

both surveyed and unsurveyed, shall be free and open to exploration and

purchase, and the lands in which they are found to occupation and purchase....”

(30 U.S.C. § 22.) By this provision Congress has declared that, unless

withdrawn or subject to valid existing mining claims, all mineral land owned by


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the United States is free and open to exploration, occupation and purchase.

Id. at 907, 62 Cal.Rptr.2d 119. See also, e.g., Jordan v. Jordan, 168 Or. App. 683, 8 P.3d

229 (2000)(because the corporation made no payment for the 1996-97 assessment year, its claims

were forfeited at the end of the prior assessment year - in other words, at noon on September 1,

1996. Therefore, the trial court correctly concluded that the disputed mining rights were open to

appropriation when plaintiff located his claims after noon on September 1, 1996. Because his

claims were valid when filed, the trial court did not err in quieting title in favor of the subsequent

locator of claim.)

The decision in Locke was presaged by the Nevada Supreme Court decision, Pine Grove

Nevada Gold Mining Co. v. Freeman et al., 63 Nev. 357 (1946). In Pine Grove, a locator of

unpatented mining claims was required, under applicable federal law, to put forth $100 worth of

work or improvements into the unpatented claims or file a notice of suspension with the county.

For one year, the locator failed to file such notice because its attorney was ill. After the failure to

file, another party relocated (i.e., staked) new unpatented claims “while the ground was open for

relocation”. Id. at 383. The Nevada Supreme Court concluded that the illness of the attorney did

not excuse the locator from filing the mandatory notice and that there was a period of time when

the locator's unpatented claims were subject to relocation. The Court agreed that the subsequent

relocators had successfully relocated the unpatented mining claims. Id. at 383 – 384. In finding

that the original locator’s claims had been forfeited, the Court rejected the original claim holders’

arguments based on the excusable neglect and similar doctrines to excuse the failure to comply

with federal filing requirements. Id. at 376.

b. Any Claim of RGI in the Claims For Sale Is Subject To Bona Fide Dispute.

The foregoing facts and authorities demonstrate that any interest asserted in the Claims for

Sale by RGI are subject to bona fide dispute under 11 U.S.C. § 363(f)(4). The phrase “bona fide

dispute” is not defined in the Bankruptcy Code. Courts interpreting § 363(f)(4) generally look to

“whether there is an objective basis for either a factual or legal dispute as to the validity of the

asserted interest.” In re NJ Affordable Homes Corp., No. 05-60442, 2006 WL 2128624, *10

(Bankr. D.N.J. June 29, 2006). See also In re Gaylord Grain L.L.C., 306 B.R. 624, 627 (8th Cir.


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BAP 2004); In re Durango Georgia Paper Co., 336 B.R. 594, 596 (Bankr. S.D. Ga. 2005); In re

Gulf States Steel, Inc. of Ala., 285 B.R. 497, 507 (Bankr. N.D. Ala. 2002); In re Taylor, 198 B.R.

142, 162 (Bankr. D.S.C. 1996). The court does not have to resolve the dispute prior to the sale; it

need only determine that such a dispute exists. Gaylord Grain L.L.C., 306 B.R. at 627. The goal

of 11 U.S.C. § 363(d)(4) is to “allow[ ] the sale of property subject to dispute ‘so that liquidation

of the estate's assets need not be delayed while such disputes are being litigated.’” Durango

Georgia Paper Co., 336 B.R. at 597 (quoting In re Gulf States Steel, Inc., 285 B.R. at 507).

To establish a bona fide dispute, it is not necessary for the Debtor to have commenced an

adversary proceeding prior to seeking to sell assets free and clear of liens under 11 U.S.C. §

364(d)(4). See e.g., Gaylord Grain L.L.C., supra, 306 B.R. 624 (8th Cir. BAP 2004)(validity and

enforceability of creditor's security interest in bankrupt farmer's tractor and trailer did not have to

be the subject of any immediate or concurrent adversary proceeding brought by chapter 7 trustee,

in order for bankruptcy court to authorize trustee to sell tractor and trailer free and clear of

creditor's liens, on theory that creditor's liens were in “bona fide dispute”; sale could proceed free

and clear of creditor's liens if trustee could show some objective basis for avoiding liens, thus

establishing a bona fide dispute); see also In re Collins, 180 B.R. 447, 452 & n. 7 (Bankr. E.D.

Va. 1995); In re Octagon Roofing, 123 B.R. 583, 590-92 (Bankr.N.D.Ill.1991); In re Oneida Lake

Development, Inc., 114 B.R. 352, 357-58 (Bankr. N.D.N.Y. 1990); and In re Millerburg, 61 B.R.

125, 127, 128 (Bankr. E.D.N.C. 1986).

In addition, a bona fide dispute can arise from the challenge of a lien or interest under the

“strong arm” powers vested in a trustee or debtor in possession under 11 U.S.C. § 544(a). See In

re Bedford Square Associates, L.P., 247 B.R. 140 (Bankr. E.D. Penn. 2000)(“bona fide dispute”

under 11 U.S.C. 544(a)(3) regarding enforceability of unrecorded provision in shopping mall

lease although no adversary proceeding had yet been commenced).

c. The Claims For Sale Can Be Sold Free and Clear of RGI’s Claims, if any,

under the Royalty Agreements.

Standing in the shoes of a subsequent bona fide purchaser of real property that is deemed

to have perfected its purchase by recording the Claims For Sale being sold with the BLM, the


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Debtor can avoid any alleged interest of RGI under 11 U.S.C. § 544(a)(3) in the Claims for Sale.9

By the terms of the Royalty Agreements, RGI has no continuing interest in the Claims For Sale.

In the 1996 Royalty Agreement, the “Property” in which RGI claims an interest is composed of

“Current Property” and “Additional Property”. Current Property is defined only as the mining

claims that are described in Schedule A to the Agreement, which are exactly those that are listed

on the RGI Proof of Claim. 1996 Royalty Agreement, pg. 2, ¶ 1(d). As established above, those

claims no longer exist and were forfeited or otherwise extinguished as a matter of law. In

addition, the Additional Property is a geographical reference to the Current Property that

encompasses mining claims and other property rights that lie “within ten miles of any boundary

of the Current Property.” Because the Current Property has been extinguished, there can be no

Additional Property because its existence is defined by an alleged interest in property (the

“Current Property”) that no longer exists. In addition, the Debtor is unaware of any unpatented

mining claims that were ever staked by Newgold that would constitute Additional Property.

Similarly, under the 1997 Royalty Agreement, reference is made to Relief Canyon Claims

that are defined as the identical claims as annexed to the RGI Proof of Claim. 1997 Royalty

Agreement, pg. 4, ¶ 1(p). The purported royalties are calculated based on 1% of the “Net Smelter

Returns”, which are “Gross Proceeds” less “Expenses” for a particular period. Id. at ¶¶ 1(k) and

2(a). “Gross Proceeds” are based on the sale of “Minerals” and “Tailings”, both of which are

9 11 U.S.C. § 544(a)(3), which provides in pertinent part as follows, comes into play:

§ 544. Trustee as lien creditor and as successor to certain creditors and purchasers

(a) The Trustee [or debtor in possession in his stead, pursuant to 11 U.S.C. § 1107(a),] shall have, as of the commencement of the case, and without regard to any knowledge of the trustee or of any creditor, the rights and powers of, or may avoid any transfer of property of the debtor or any obligation incurred by the debtor that is voidable by-

...

a bona fide purchaser of real property, other than fixtures, from the debtor, against whom applicable law permits such transfer to be perfected, that obtains the status of a bona fide purchaser and has perfected such transfer at the time of the commencement of the case, whether or not such a purchaser exists.


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based solely on the “Existing Properties”, which include the Relief Canyon Claims, Id. at ¶¶ 1(h),

(i), (s), and (f), respectively. Because the Relief Canyon Claims – which are the sole basis of

RGI’s Proof of Claim – no longer exist, then there can never be royalties due and owing with

respect to the Claims for Sale under the 1997 Royalty Agreement.

In addition, due to the broad application of Section 363(f), the sale of the Claims for Sale

should be ordered free and clear of all other contractual provisions in the Royalty Agreements

arising from or relating to the Original Claims. For example, the Third Circuit In re Trans World

Airlines, Inc., 322 F.3d 283 (3d Cir. 2003) court authorized the sale of substantially all assets free

and clear of (1) employment discrimination claims and (2) a voucher program awarded to flight

attendants in settlement of a class action, both of which the TWA court held constituted

“interests” in property for purposes of § 363(f). The Third Circuit stated that “[w]hile the

interests of the [plaintiffs] in the assets of TWA's bankruptcy estate are not interests in property in

the sense that they are not in rem interests, ... they are interests in property within the meaning of

section 363(f) in the sense that they arise from the property being sold.” Id. at 290. The TWA

court reasoned that ‘interests in property’ under 11 U.S.C. § 363(f) ‘encompasses other

obligations that may flow from ownership of the property.’ ” Id. at 289 (citations omitted). See

also, e.g., Precision Indus., Inc. v. Qualitech Steel SBQ, LLC, 327 F.3d 537, 545 (7th Cir.2003)

(“The Bankruptcy Code does not define ‘any interest,’ and in the course of applying 11 U.S.C. §

363(f) to a wide variety of rights and obligations related to estate property, courts have been

unable to formulate a precise definition.” Sale of debtor's property was free and clear of lessee's

possessory interest despite protections for lessee’s interest under 11 U.S.C. § 365(h)); Myers v.

United States, 297 B.R. 774, 781-82 (S.D. Cal. 2003) (plaintiff's “claim for personal injury does

arise from the property being sold, i.e. the contracts to transport toxic materials.”); C.H.E.G., Inc.

v. Millenium Bank, 99 Cal.App.4th 505, 121 Cal.Rptr.2d 443, 448 (2002)(holding that

contractual right to commission in event of sale of property leased from debtor is an “interest” in

estate property that may be extinguished pursuant to section 363(f)).

Due to the foregoing, the Royalty Agreements do not and cannot relate to the Claims for

Sale as a matter of law. Consequently, the Debtor, which stands in the shoes of a bona fide


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purchaser under 11 U.S.C. § 544(a) (3), would purchase the Claims for Sale free and clear of any

claim of interest by RGI under the Royalty Agreements. Due to the foregoing, a “bona fide

dispute” exists under 11 U.S.C. § 363(f)(4), and the Claims for Sale can be sold free and clear of

RGI’s claims under the Royalty Agreements.

5. The Property can be sold free and clear of any liens or interests pursuant to

Section 363(f)(5).

The Bankruptcy Appellate Panel for the Ninth Circuit recently scrutinized section

363(f)(5) in the context of the sale of real property. See Clear Channel Outdoor, Inc. v. Knupfer

(In re PW, LLC), 391 B.R. 25 (9th Cir. BAP 2008). In Clear Channel, the senior secured creditor

attempted to purchase the debtor’s real property by way of a credit bid, free and clear of the

interest of a nonconsenting junior lienholder outside of a plan of reorganization. The Bankruptcy

Court approved the sale to the senior lender under section 363(f)(5) of the Bankruptcy Code,

finding that section 363(f)(5) permits a sale free and clear of the creditor’s interest in property

“whenever a claim can be paid with money.” Clear Channel, 391 B.R. at 42.

Clear Channel, however is neither binding on this Court, nor would it dictate a different

result. First, the Ninth Circuit has rejected the idea that decisions of Bankruptcy Appellate Panels

bind all bankruptcy courts within the Ninth Circuit. Bank of Maui v. Estate Analysis, Inc., 904

F.2d 470, 472 (9th Cir.1990). In addition, even if this Court were to view the Clear Channel

decision as persuasive authority, the proposed sale should be approved even under the dictates of

that decision.

In In re Jolan, Inc., 2009 WL 1163928 (Bankr. W.D. Wash. 2009) the court provided an

analysis of the Bankruptcy Appellate Panel’s decision in Clear Channel and suggested that the

scope of the Bankruptcy Appellate Panel’s ruling in Clear Channel should be narrowly construed.

The court in Jolan noted that the trustee who sought to approval of the sale free and clear of liens

in Clear Channel never argued that there were any qualifying “legal or equitable proceedings”

beyond cramdown under Section 1129 and that the Bankruptcy Appellate Panel, in turn, exercised

its prerogative to limit its ruling to the arguments presented by the parties. Id. at 3. Accordingly,

the Bankruptcy Appellate Panel in Clear Channel did not address whether any non-contractual


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mechanisms exist whereby a lienholder might get less than full payment yet lose its lien. Id. at 3.

The court in Jolan, however, concluded that there are a number of legal and equitable proceedings

available in Washington in which a junior lienholder could be compelled to accept a money

satisfaction including, without limitation, “a senior secured party’s disposition of collateral under

the default remedies provided in part VI of Article 9” of Washington’s Uniform Commercial

Code (specifically, RCW 62A.9A-617) and the disposition of real property through “judicial and

nonjudicial foreclosures, which operate to clear junior lienholders’ interests, with their liens

attaching to proceeds in excess of the costs of sale and the obligation or judgment foreclosed.”

Id. at 3 - 4.

Similarly here, legal and equitable proceedings are available in Nevada which parallel

those Washington statutes and proceedings discussed by the court in Jolan satisfy 11 U.S.C. §

365(f)(5). 10

10 Specifically, a junior lienholder in Nevada could be compelled to accept a money satisfaction upon a senior secured party’s disposition of collateral under the default remedies as provided in: NRS 104.9617 Effect of disposition of collateral by secured party after default; rights of transferee regarding collateral. 1. A secured party’s disposition of collateral after default: (a) Transfers to a transferee for value all of the debtor’s rights in the collateral; (b) Discharges the security interest under which the disposition is made; and (c) Discharges any subordinate security interest or other subordinate lien. 2. A transferee that acts in good faith takes free of the rights and interests described in subsection 1, even if the secured party fails to comply with this article or the requirements of any judicial proceeding. 3. If a transferee does not take free of the rights and interests described in subsection 1, the transferee takes the collateral subject to: (a) The debtor’s rights in the collateral; (b) The security interest or agricultural lien under which the disposition is made; and (c) Any other security interest or other lien. (Added to NRS by 1999, 355)

Or upon the judicial or nonjudicial foreclosure of real property under applicable Nevada law, including:

NRS 40.440 Disposition of surplus money. If there is surplus money remaining after payment of the amount due on the mortgage or other lien, with costs, the court may cause the same to be paid to the person entitled to it pursuant to NRS 40.462, and in the meantime may direct it to be deposited in court. [1911 CPA § 560; RL § 5502; NCL § 9049]—(NRS A 1989, 888, 1769)

NRS 40.462 Distribution of proceeds of foreclosure sale. 1. Except as otherwise provided by specific statute, this section governs the distribution of the proceeds of a foreclosure sale. The provisions of NRS 40.455, 40.457 and 40.459 do not affect the right to


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Based on the foregoing, the Debtor respectfully submits that any party who asserts a lien against

the Property that the Debtor proposes to sell, could be compelled, in a legal or equitable

proceeding, to accept a money satisfaction of its interest. Accordingly, the Debtor can sell the

Property free and clear of any interests of liens in the Property pursuant to Section 363(f)(5).

B. THE DEBTOR SHOULD BE AUTHORIZED TO ASSUME AND ASSIGN

THE CONTRACTS.

Barring exceptions not herein relevant, Section 365(a) authorizes a debtor in possession,

“subject to the court’s approval, ... [to] assume or reject any executory contract or unexpired lease

of the debtor.” If there has been a default on any executory contract or unexpired lease, the

receive those proceeds, which vests at the time of the foreclosure sale. The purchase of any interest in the property at the foreclosure sale, and the subsequent disposition of the property, does not affect the right of the purchaser to the distribution of proceeds pursuant to paragraph (c) of subsection 2 of this section, or to obtain a deficiency judgment pursuant to NRS 40.455, 40.457 and 40.459. 2. The proceeds of a foreclosure sale must be distributed in the following order of priority: (a) Payment of the reasonable expenses of taking possession, maintaining, protecting and leasing the property, the costs and fees of the foreclosure sale, including reasonable trustee’s fees, applicable taxes and the cost of title insurance and, to the extent provided in the legally enforceable terms of the mortgage or lien, any advances, reasonable attorney’s fees and other legal expenses incurred by the foreclosing creditor and the person conducting the foreclosure sale. (b) Satisfaction of the obligation being enforced by the foreclosure sale. (c) Satisfaction of obligations secured by any junior mortgages or liens on the property, in their order of priority. (d) Payment of the balance of the proceeds, if any, to the debtor or the debtor’s successor in interest. If there are conflicting claims to any portion of the proceeds, the person conducting the foreclosure sale is not required to distribute that portion of the proceeds until the validity of the conflicting claims is determined through interpleader or otherwise to the person’s satisfaction. 3. A person who claims a right to receive the proceeds of a foreclosure sale pursuant to paragraph (c) of subsection 2 must, upon the written demand of the person conducting the foreclosure sale, provide: (a) Proof of the obligation upon which the claimant claims a right to the proceeds; and (b) Proof of the claimant’s interest in the mortgage or lien, unless that proof appears in the official records of a county in which the property is located. Such a demand is effective upon personal delivery or upon mailing by registered or certified mail, return receipt requested, to the last known address of the claimant. Failure of a claimant to provide the required proof within 15 days after the effective date of the demand waives the claimant’s right to receive those proceeds. 4. As used in this section, “foreclosure sale” means the sale of real property to enforce an obligation secured by a mortgage or lien on the property, including the exercise of a trustee’s power of sale pursuant to NRS 107.080.


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debtor cannot assume such contract or lease, unless the debtor (1) cures, or provides adequate

assurance that the debtor will promptly cure, such default; (2) compensates, or provides adequate

assurance that the debtor will promptly compensate a party for any actual pecuniary loss to such

party resulting from such default; and (3) provides adequate assurance of future performance

under such contract or lease. 11 U.S.C. § 365(b)(2).

A debtor in possession may assume or reject executory contracts for the benefit of the

estate. In re Klein Sleep Products, Inc., 78 F.3d 18, 25 (2d. Cir. 1996); In re Central Fla. Metal

Fabrication, Inc., 190 B.R. 119, 124 (Bankr. N.D. Fla. 1995); In re Gucci, 193 B.R. 411, 415

(S.D.N.Y. 1996). In reviewing a debtor in possession’s decision to assume or reject an executory

contract, a bankruptcy court should apply the “business judgment test” to determine whether it

would be beneficial to the estate to assume it. In re Continental Country Club, Inc., 114 B.R. 763,

767 (Bankr. M.D. Fla. 1990); see also In re Gucci, supra, 193 B.R. at 415. The business

judgment standard requires that the court follow the business judgment of the debtor unless that

judgment is the product of bad faith, whim, or caprice. In re Prime Motors Inns, 124 B.R. 378,

381 (Bankr. S.D. Fla. 1991), citing Lubrizol Enterprises v. Richmond Metal Finishers, 756 F.2d

1043, 1047 (4th Cir. 1985), cert. denied, 475 U.S. 1057, 106 S.Ct. 1285, 89 L.Ed.2d 592 (1986).

In this case, all of the foregoing requirements have been or will be met. As discussed

above, only the Contracts designated by the successful accepted bidder will be assumed and

assigned. The Contracts will only be assumed and assigned to facilitate the proposed sale, which,

as discussed, the Debtor believes is in the best interests of the estate. Therefore, the Debtor

submits that the “business judgment test” has been satisfied.

In addition, the successful accepted bidder will be required pay the Cure Amounts so as to

allow the Debtor to assume and assign such Contracts. Further, the order approving the sale of

the Property will provide that assumption and assignment of each of the Contracts will not be

effective until the respective Cure Amounts are paid. This will ensure that the Cure Amounts will

be paid to the other parties to the Contracts before any assignment of their respective Contracts

will occur. To the extent required by any party to a Contract, Bank or any successful accepted

bidder will provide adequate assurance of future performance under such Contract. Based on the


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foregoing, the Debtor submits that the requirements of Section 365(b) have been, or will be,

satisfied.

If any counterparty to a contract objects to the Cure Amounts as set forth in Exhibit “B” to

the Klepfer Sale Declaration, either: (1) the Debtor will negotiate with such counterparty and

reach a consensual resolution; (2) the counterparty will prosecute its objection and the amount of

the cure shall be resolved at the hearing on this Motion or such other time as may be set by the

Court; or (3) the Purchaser may not designate such Contract for assumption and assignment under

the Purchase Agreement. However, if any counterparty fails to timely object to the Cure

Amounts set forth on Exhibit “B” to the Klepfer Sale Declaration, then such failure to timely

object shall cause the Cure Amount to be conclusive and binding on such counterparty without

leave for further consideration before this Court.

IV. CONCLUSION.

For the foregoing reasons, the Debtor respectfully requests that the Court enter an order

(a) authorizing the Debtor to sell the Property free and clear of liens, interests and encumbrances

under 11 U.S.C. § 363(f) to a successful bidder for some or all of the Property in accordance with

Sales Procedures Order; (b) approving the form of such Purchase Agreement as may be presented

by the Debtor and the Purchaser at or before the hearing on this Motion; (c) authorizing the

Debtor to assume and assign executory contracts and unexpired leases as designated by the

Purchaser pursuant to 11 U.S.C. § 365; (d) approving the cure amounts for the Contracts to be

assumed and assigned by the Debtor to the Purchaser set forth on Exhibit “B” to the Klepfer Sale

Declaration, and deeming the failure of a counter-party to a particular Contract to object to the

proposed cure amount and assumption and assignment to be a waiver of such objection; (e)

finding that Purchaser is a good faith buyer under 11 U.S.C. § 363(m); (f) waiving the 14-day

stay period provided in Federal Rule of Bankruptcy Procedure 6004(h) and 6006(d); (g)

authorizing the Debtor to take such other actions and execute such documents as necessary to

consummate the Purchase Agreement; (h) that notice of this Motion was proper, and (i) granting

such other relief as appropriate in the best interests of the estate. A proposed Order Authorizing

And Approving: (1) Sale Of Real Property And Certain Personal Property Assets Pursuant To 11


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U.S.C. § 363 Free And Clear Of Liens, Claims, And Interests; And (2) Assumption And

Assignment Of Lease Under 11 U.S.C. § 365 is annexed hereto as Exhibit “1”. Said proposed

order will be subject to revision based on the bids received for the Property.

Dated this 12th day of November, 2010.

/s/ Edmond Buddy Miller Edmond Buddy Miller



EXHIBIT 1

EXHIBIT 1


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Edmond “Buddy” Miller Submitted on: 12/ /2010 The Law Office of Edmond “Buddy” Miller 1610 Montclair Avenue, Suite C Reno, NV 89509 Telephone: (775) 828-9898 Facsimile: (775) 828-9893 [email protected]

Special Counsel for Firstgold Corp., debtor in possession

UNITED STATES BANKRUPTCY COURT

DISTRICT OF NEVADA

In re

FIRSTGOLD CORP.,

Debtor.

Case No. BK-N-10-50215- GWZ

Chapter 11

ORDER AUTHORIZING AND APPROVING: (1) SALE OF REAL PROPERTY AND CERTAIN PERSONAL PROPERTY ASSETS PURSUANT TO 11 U.S.C. § 363 FREE AND CLEAR OF LIENS, CLAIMS, AND INTERESTS; AND (2) ASSUMPTION AND ASSIGNMENT OF LEASE UNDER 11 U.S.C. § 365

HearingDate: December 6, 2010 Time: 2:00 p.m. Place: Ctrm. 3


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On December 6, 2010 on the 2:00 p.m. calendar, the Court held a hearing on the

“Motion By Firstgold Corp. For Order Authorizing And Approving: (1) Sale of Real and

Personal Property Assets Pursuant to 11 U.S.C. § 363 Free and Clear Of Liens, Claims, and

Interests; (2) Assumption and Assignment Of Executory Contracts and Unexpired Leases

under 11 U.S.C. § 365; and (3) Related Relief” (the “Sale Motion”). Appearances at the

hearing were as set forth on the record.

IT IS HEREBY FOUND AND CONCLUDED, pursuant to Bankruptcy Rules

7052 and 9014, that:

A. This Court has jurisdiction over the Sale Motion pursuant to 28 U.S.C. §§ 157

and 1334, and this matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (N) and

(O). Venue of this case and the Sale Motion in this district is proper under 28 U.S.C. §§ 1408

and 1409. This order constitutes a final and appealable order within the meaning of 28 U.S.C.

§ 158(a).

B. The Debtor has followed the procedures set forth in the Order Approving Sale

Procedures with Respect To The: (1) Sale Of Real And Personal Property Assets Pursuant To

11 U.S.C. § 363 Free And Clear Of Liens, Claims, And Interests; (2) Assumption And

Assignment Of Executory Contracts And Unexpired Leases Under 11 U.S.C. § 365; And (3)

Related Relief entered by this Court on November 8, 2010 (the “Sale Procedures Order”) for

giving notice of the Sale Motion and the Sale Hearing and the assumption and assignment of

the Contracts.

C. The bidding procedures established by the Sale Procedures Order (the

“Bidding Procedures”) have been fully complied with in all material respects.

D. Proper, timely, adequate and sufficient notice of the Sale Motion, the Sale

Hearing, the sale of the Property and the assumption and assignment of the Contracts has been

provided in accordance with sections 102(l), 105(a), 363 and 365 of the Bankruptcy Code and

Rules 2002, 6004 and 9014 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy

Rules”) and in compliance with the Bidding Procedures, such notice was good and sufficient,

and appropriate under the particular circumstances, and no other or further notice of the Sale


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Motion, the Sale Hearing, the Sale and the assumption and assignment of the Contracts or the

entry of this Sale Order is required.

E. A reasonable opportunity to object or be heard with respect to the Sale Motion

and the relief requested therein has been afforded to all interested persons and entities.

F. Creditors, parties-in-interest and other entities have been afforded a reasonable

opportunity to bid for the Property under the Bidding Procedures. The Property was marketed

and the sale process was conducted in compliance with the Bidding Procedures, the orders of

this Court and the requirements of applicable law.

G. [The Purchaser was the only party that submitted a Qualified Bid for the

Property. No other person or entity submitted a Qualified Alternative Bid by the deadline

established in the Sale Procedures Order, and, except for the Purchaser, no person or entity

has submitted a bid of any sort since such deadline. As a result, pursuant to the terms of the

Sale Procedures Order, the Debtor was not required to conduct the Auction, and the bid

submitted by the Purchaser as reflected in the Asset Purchase Agreement is the highest and

best offer for the Property.]

H. The Asset Purchase Agreement reflects the exercise of the Debtor’s sound

business judgment.

I. The Debtor has full corporate power and authority to execute the Asset

Purchase Agreement and all other documents contemplated thereby, and the sale of the

Property has been duly and validly authorized by all necessary corporate action of the Debtor.

The Debtor has all the corporate power and authority necessary to consummate the

transactions contemplated by the Asset Purchase Agreement.

J. Approval at this time of the Asset Purchase Agreement and consummation of

the Sale, including, without limitation, the assumption and assignment of the Contracts, is in

the best interests of the Debtor and its creditors and bankruptcy estate.

K. The Debtor has demonstrated good, sufficient and sound business purpose and

justification for the Sale. The Debtor has also demonstrated compelling circumstances for the

Sale and the assumption and assignment of the Contracts, without the filing and confirmation


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of a plan of reorganization or liquidation in these cases, including, without limitation, the

Debtor has insufficient financing to continue its on-going business operations and, as a result,

the value of the Property is likely to depreciate rapidly in the absence of the Sale.

L. The Asset Purchase Agreement was negotiated, proposed and entered into by

the Debtor and the Purchaser without collusion, in good faith, and from arm's-length

bargaining positions. None of the Debtor or the Purchaser has engaged in any conduct that

would cause or permit the Asset Purchase Agreement or the Sale to be avoided under section

363(n) of the Bankruptcy Code. The Purchaser is not an insider of the Debtor as that term is

defined in section 101(31) of the Bankruptcy Code.

M. The Purchaser is a good faith purchaser within the meaning of section 363(m)

of the Bankruptcy Code and, as such, is entitled to all of the protections afforded thereby. The

Purchaser will be acting in good faith within the meaning of section 363(m) of the Bankruptcy

Code in closing the transactions contemplated by the Asset Purchase Agreement. The Asset

Purchase Agreement was not entered into for the purpose of hindering, delaying car

defrauding creditors under the Bankruptcy Code or under the laws of the United States or any

state, territory, possession, or district thereof.

N. The terms and conditions of the Asset Purchase Agreement and the purchase

price thereunder (i) are fair and reasonable, (ii) represent the highest and best offer for the

Property, (iii) will provide a greater recovery for the Debtor’s creditors than would be

provided by any other practical alternative and (iv) constitute fair consideration.

O. The Debtor may sell the Property free and clear of all liens, claims,

encumbrances and interests of any kind or nature whatsoever except the Permitted Liens,

described in Section __ of the Asset Purchase Agreement, in each case, one or more of the

requirements set forth in section 363(f) of the Bankruptcy Code has been satisfied. The

interests of non-debtor parties with security interests, liens, claims, encumbrances and other

interests of any kind or nature whatsoever in the Property are adequately protected, because

such security interests, liens, claims, encumbrances and other interests shall attach to the

proceeds of the sale of the Property to the same extent (and in the same priority and subject to


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the same limitations) as such security interests, liens, claims, encumbrances and other

interests were attached to the Property immediately before the sale. Those non-debtor parties

with liens, claims, encumbrances and interests of any kind or nature whatsoever in the

Property who did not object, or who withdrew their objections, to the Sale and the assumption

and assignment of the Contracts are deemed to have consented pursuant to sections 363(f)(2)

and 365 of the Bankruptcy Code. Those non-debtor parties with liens, claims, encumbrances

and interests of any kind or nature whatsoever in the Property who did object fall within one

or more of the other subsections of sections 363(f) and 365.

P. The transfer of the Property to the Purchaser will vest the Purchaser with good

and marketable title to the Property.

Q. Consummation of the Sale, including, without limitation, the transfer of the

Property to the Purchaser will not subject the Purchaser to any debts, liabilities, obligations,

commitments, responsibilities or claims of any kind or nature whatsoever, whether known or

unknown, contingent or otherwise, existing as of the date hereof or hereafter arising, of or

against the Debtor, any affiliate of the Debtor, or any other person by reason of such transfers

and assignments, including, without limitation, based on any theory of antitrust or successor

or transferee liability, except that the Purchaser shall only be liable for payment of the

liabilities assumed in Section__ of the Asset Purchase Agreement. Other than as expressly set

forth in the Asset Purchase Agreement or any liability under Contracts assumed by Purchaser

pursuant to 11 U.S.C. § 365, Purchaser will have no successor or vicarious liabilities of any

kind or character and will under no circumstances be deemed Debtor’s successor.

R. The Purchaser will not consummate the Sale, the assumption and assignment

of the Contracts and other transactions contemplated thereby if the Sale of the Property to the

Purchaser is not free and clear of all liens, claims, encumbrances and interests of any kind or

nature whatsoever, except those expressly assumed by the Purchaser in Section ___ of the

Asset Purchase Agreement or if the Purchaser would, or in the future could, be liable for any

liens, claims, encumbrances and interests of any kind or nature whatsoever, except those

expressly assumed by the Purchaser in Section __ of the Asset Purchase Agreement.


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S. Under Section 365 of the Bankruptcy Code, the only amounts (including,

without limitation, cure costs) that must be paid in order for the Debtor to assume and assign

the Contracts to the Purchaser are set forth on Exhibit “B” to the Sale Motion (the “Cure

Amounts”).

T. Each of the Debtor and/or Purchaser, as applicable in accordance with the

Asset Purchase Agreement, has (i) cured, or provided adequate assurance of curing, any

default existing prior to the date hereof under each of the assigned Contracts, within the

meaning of Section 365(b)(1)(A) of the Bankruptcy Code, (ii) provided compensation or

adequate assurance of compensation to any party for any actual pecuniary loss to such party

resulting from a default prior to the date hereof under any of the assigned Contracts, within

the meaning of section 365(b)(1)(B) of the Bankruptcy Code, and (iii) provided adequate

assurance of Purchaser's future performance under the assigned Contracts, within the meaning

of sections 365(b)(1)(C) and 365(f)(2)(B) of the Bankruptcy Code.

U. Purchaser's undertaking to fulfill all future performance obligations under the

Contracts, upon the assumption and assignment to Purchaser thereof, is hereby found to be

adequate assurance of future performance under section 365(f)(2)(B) of the Bankruptcy Code.

V. No defaults exist in the Debtor’s performance under the Assigned Contracts or

the Assigned Leases as of the date of this Sale Order other than the failure to pay amounts

equal to the Cure Amounts set forth in Exhibit B to the Sale Motion or defaults that are not

required to be cured as contemplated in section 365(b)(1)(A) of the Bankruptcy Code.

W. There is no legal or equitable reason to delay the Sale. Cause exists not to

apply the automatic ten (10) day stay imposed by Bankruptcy Rules 6004(g) and 6006(d). To

the extent any of the foregoing findings of fact constitute conclusions of law, they are adopted

as such.

Having considered the Sale Motion, the evidence filed in support thereof, the other

pleadings and filings in this bankruptcy case, having found notice to have been adequate

and appropriate under the circumstances, and based on the findings and for the reasons set

forth on the record,


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THE COURT HEREBY ORDERS as follows:

1. The Sale Motion is granted in all respects. All objections to the Sale Motion

and entry of this Sale Order, if any, that have not been withdrawn, waived or settled are

hereby overruled on the merits. All persons and entities given notice of the Sale Motion

that failed to timely object thereto are deemed to consent to the relief sought therein

including without limitation all nondebtor parties to the Contracts.

2. The Asset Purchase Agreement and the transactions contemplated thereby

are hereby approved in all respects. The transfer of the Property by Debtor to the Purchaser

shall be a legal, valid and effective transfer of the Property. The Closing of the Sale and the

other transactions contemplated thereby are hereby approved and authorized under Section

363(b) of the Bankruptcy Code.

3. Pursuant to Section 365 of the Bankruptcy Code, effective as of the

Closing, the Debtor shall (i) assume and assign to Purchaser the Contracts identified on

Exhibit __ to the Asset Purchase Agreement free and clear of all liens and claims unless

otherwise provided by Section ___ of the Asset Purchase Agreement and (ii) execute and

deliver to the Purchaser such documents or other instruments as may be necessary to

assign and transfer such Assigned Contracts and Assigned Leases to the Purchaser as

contemplated by the Asset Purchase Agreement. Purchaser may, in its sole discretion at

any time prior to the Closing, remove any Contract or lease from Exhibit __ to the Asset

Purchase Agreement, in which case such Contract or lease shall not be, as applicable, an

Assigned Contract or an Assigned Lease, but rather shall be an Excluded Asset.

4. Upon assumption and assignment to Purchaser of the Contracts, the Debtor

is relieved from any and all liability for any breach of any assigned Contract occurring

after such assignment as provided for under Section 365(k) of the Bankruptcy Code.

5. Pursuant to sections 363(b) and (f) of the Bankruptcy Code, the Debtor is

authorized to and shall sell, and Purchaser shall buy, the Property on the terms and

conditions set forth in the Asset Purchase Agreement free and clear of all mortgages, deeds

of trust, security interests, pledges, liens, judgments, demands, encumbrances, easements,


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restrictions or charges, rights-of-way, covenants, encroachments, building, use, voting or

other restrictions, conditional sale or other title retention agreements and interests (as

defined in section 363(l) of the Bankruptcy Code) of any kind or nature, whether incurred

voluntarily or arising by operation of law, and including, without limitation, any rights,

claims, licenses, grants or interests of any kind or nature of any person or entity other than

the Debtor under the contracts, licenses and agreements set forth on Schedule __ to the

Asset Purchase Agreement (the foregoing are collectively referred to as "Liens" herein),

and all debts arising in any way in connection with any acts of the Debtor, claims (as that

term is defined in the Bankruptcy Code), obligations, liabilities, demands, guaranties,

options, rights, contractual commitments, restrictions, interests and matters of any kind and

nature, arising prior to the Closing Date or relating to acts occurring prior to the Closing

Date, whether imposed by agreement, understanding, law, equity or otherwise and whether

known or unknown, disclosed or undisclosed, absolute, contingent, inchoate, fixed or

otherwise (the foregoing are collectively referred to as "Claims" herein), other than the

Permitted Liens and and any other liabilities set forth in Section __ of the Asset Purchase

Agreement which are expressly assumed by Purchaser (the “Claims”). Other than the

Permitted Liens, any liens or interests that encumber or are found to encumber or purport

to encumber the Property, shall be transferred to and attach to the net proceeds of the Sale

under the Asset Purchase Agreement (after the payments specified herein) to the same

extent and in the same priority that they encumbered the Property prior to the Closing

Date.

6. In furtherance of the foregoing and except for Claims that Purchaser is

expressly assuming in Section ___ of the Asset Purchase Agreement, Purchaser is not

assuming nor shall it in any way whatsoever be liable or responsible, as a successor or

otherwise, for any liens or claims of the Debtor or liens or claims in any way whatsoever

relating to or arising from the Property or the Debtor’s operations or use of the Property,

including, without limitation, the Contracts, on or prior to the Closing Date or any liens or

claims that in any way whatsoever relate to periods on or prior to the Closing Date or are


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to be observed, paid, discharged or performed on or prior to the Closing Date (in each case,

including any liens or claims that result from, relate to or arise out of tort or other product

liability claims), or any liens or claims calculable by reference to the Debtor or its assets or

operations, or relating to continuing conditions existing on or prior to the Closing Date (the

“Pre-Closing Liens and Claims”), which Pre-Closing Liens and Claims are hereby

extinguished for all purposes as to Purchaser, without regard to whether the claimant

asserting any such Pre-Closing Liens and Claims has delivered to Purchaser a release

thereof. Without limiting the generality of the foregoing, except as provided in this Sale

Order or the Asset Purchase Agreement, Purchaser shall not be liable or responsible, as a

successor or otherwise, for Pre-Closing Liens and Claims, whether calculable by reference

to the Debtor or its operations, or under or in connection with (i) any employment or labor

agreements, consulting agreements, severance arrangements, change-in-control agreements

or other similar agreements to which the Debtor is a party, (ii) any pension, welfare,

compensation or other employee benefit plans, agreements, practices and programs,

including, without limitation, any pension plan of the Debtor, (iii) the cessation of either of

the Debtor’s operations, dismissal of employees, or termination of employment or labor

agreements or pension, welfare, compensation or other employee benefit plans,

agreements, practices and programs, obligations that might otherwise arise from or

pursuant to the Employee Retirement Income Security Act of 1974, as amended, the Fair

Labor Standard Act, Title VII of the Civil Rights Act of 1964, the Age Discrimination and

Employment Act of 1967, the Federal Rehabilitation Act of 1973, the National Labor

Relations Act, the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), or

the Worker Adjustment and Retraining Notification Act, (iv) workmen's compensation,

occupational disease or unemployment or temporary disability insurance claims, (v)

environmental liabilities, debts, claims or obligations arising from conditions first existing

on or prior to the Closing Date (including, without limitation, the presence of hazardous,

toxic, polluting, or contamination substances or wastes), which may be asserted on any

basis, including, without limitation, under the Comprehensive Environmental Response,


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Compensation and Liability Act, 42 U.S.C. § 9601 et seq., (vi) any bulk sales or similar

law, (vii) any liabilities, debts, any commitments or obligations of, or required to be paid

by, the Debtor for taxes of any kind for any period, (viii) any liabilities, debts,

commitments or obligations for any taxes relating to the operations or Property for or

applicable to any pre-Closing tax period, including any property taxes, (ix) any liabilities,

debts, commitments or obligations for any transfer or similar taxes, (x) any cure amounts

payable pursuant to Section 365(b)(1)(A), (B) or (C) of the Bankruptcy Code in order to

effectuate, pursuant to the Bankruptcy Code, the assumption by the Debtor and assignment

to Purchaser of the Assigned Contracts and Assigned Leases, except to the extent that

Purchaser has assumed such liabilities under the Asset Purchase Agreement, (xi) any

liabilities, debts, commitments or obligations of any kind under any contract or lease that is

not an assigned Contract, (xii) any litigation, and (xiii) any products liability or similar

claims, whether pursuant to any federal laws or otherwise.

7. In the absence of a stay pending appeal, if the Purchaser and the Debtor

elect to close under the Asset Purchase Agreement at any time after entry of this Order,

then, with respect to the Sale, the Purchaser, as a purchaser in good faith, shall be entitled

to the protections of section 363(m) of the Bankruptcy Code if this Sale Order or any

authorization.

8. The Debtor is authorized to execute, acknowledge and deliver such

corporate name change certificates, deeds, assignments, conveyances, and other

assurances, documents, and instruments of transfer and take such other action that may be

reasonably necessary to perform the terms and provisions of the Asset Purchase

Agreement, and shall take any other action for purposes of assigning, transferring,

granting, conveying, and confirming to the Purchaser, or reducing to possession, any or all

of the Property and to execute such nonmaterial amendments to the Asset Purchase

Agreement and related agreements as may be required to effectuate the letter and intent of

the Asset Purchase Agreement and the consummation of the Sale to the extent

contemplated by the Asset Purchase Agreement.


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9. At or after the Closing, the Debtor is authorized to pay any expenses or

costs that are required to be paid in order to consummate the Sale or perform their

obligations under the Asset Purchase Agreement.

10. The Contracts listed on Exhibit __ to the Asset Purchase Agreement shall,

upon assignment to the Purchaser, be deemed to be valid and binding and in full force and

effect and enforceable in accordance with their respective terms, except as otherwise

specifically determined by the Court, notwithstanding any provision in any such assigned

Contract (including those of the type described in sections 365(b)(2) and (f) of the

Bankruptcy Code) that prohibits, restricts, or conditions such assignment or transfer.

11. Each non-debtor party to an assigned Contract is hereby forever barred,

estopped, and permanently enjoined from asserting against the Debtor or the Purchaser, or

the property of any of them, any default existing as of the date of the Sale Hearing, or any

counterclaim, defense, setoff or any other claim asserted or assertable against the Debtor.

12. Other than the Contracts, Purchaser assumes none of the Debtor’s other

leases and contracts and shall have no liability whatsoever thereunder.

13. Subject to the provisions, this Court retains jurisdiction to (i) enforce and

implement the terms and provisions of the Asset Purchase Agreement, all amendments

thereto, any waivers and consents thereunder, and each of the agreements executed in

connection therewith, (ii) compel delivery of the Property to the Purchaser, (iii) compel

delivery of the purchase price and all adjustments to the purchase price under the Asset

Purchase Agreement, (iv) resolve any disputes, controversies or claims arising out of or

relating to the Asset Purchase Agreement, (v) interpret, implement and enforce the

provisions of this Sale Order and (vi) protect the Purchaser against any claims, causes of

action or other liabilities of whatever nature that it did not expressly assume under the

Asset Purchase Agreement.

14. The provisions of this Sale Order authorizing the Debtor to enter into the

Asset Purchase Agreement and authorizing the transactions contemplated thereby shall be

self-executing, and neither the Debtor nor the Purchaser shall be required to execute or file


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any releases, termination statements, assignments, consents, or other instruments in order

to effectuate consummation to implement the foregoing provisions hereof except as

expressly provided in the Asset Purchase Agreement. Notwithstanding the foregoing, the

Debtor, Purchaser and all other parties are authorized and directed to take any and all

actions necessary and appropriate to effectuate, consummate and implement fully the Asset

Purchase Agreement consistent with their obligations under the Asset Purchase

Agreement.

15. This Order is binding upon and inures to the benefit of any successors or

assigns of the Debtor or the Purchaser, including any trustee appointed in any subsequent

case of the Debtor under Chapter 7 of the Bankruptcy Code.

16. This Sale Order is and shall be (i) effective as a determination that, on the

Closing Date and after consummation of the Closing and payment of the Purchase Price as

provided for herein, all Liens And Claims existing as to the Property prior to the Closing

have been unconditionally released, discharged and terminated as charges against the

Property and/or the Purchaser (but not as against any other person or entity or the proceeds

of the Sale, to which the Liens attach as previously provided, or as against the Debtor’s

estates, to which Claims remain assertable), and that the conveyance of the Property

described herein have been effected, and (ii) binding upon and shall govern the acts of all

entities, including, without limitation, all filing agents, filing officers, title agents, title

companies, recorders of mortgages, recorders of deeds, registrars of deeds, registrars of

patents, trademarks or other intellectual property, administrative agencies, governmental

departments, secretaries of state, federal, state, and local officials, and all other persons and

entities who may be required by operation of law, the duties of their office, or contract, to

accept, file, register or otherwise record or release any documents or instruments, or who

may be required to report or insure any title or state of title in or to any of the Property.

17. No claim of any kind asserted by the Debtor at any time against any party to

any one of the Assigned Contracts or the Assigned Leases shall entitle such party to assert,

as against the Purchaser, any claim, counterclaim, defense or offset, or affect or impair in


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any respect the obligations of such party to the Purchaser under any one of the Assigned

Contracts or the Assigned Leases.

18. The Court hereby orders that the ten-day stays provided for in Bankruptcy

Rules 6004(g) and 6006(d) shall not be in effect with respect to the Sale and the other

transactions contemplated in the Asset Purchase Agreement (including, without limitation,

the assumption and assignment to the Purchaser of the Contracts), and thus this Sale Order

shall be effective and enforceable immediately upon entry. Any party objecting to this

Order must exercise due diligence in filing an appeal and pursuing a stay or risk its appeal

being foreclosed as moot in the event that the Purchaser and the Debtor elect to close prior

to this Order becoming a final, non-appealable order.

19. The provisions of this Sale Order and the Asset Purchase Agreement are

non- severable and mutually dependent.

20. Nothing contained in any plan of reorganization or liquidation confirmed in

these Cases or any Order of this Court confirming such plan or any other order entered in

these Cases shall conflict with or derogate from the provisions of the Asset Purchase

Agreement or the terms of this Sale Order.

21. The findings of fact set forth above and conclusions of law stated herein and

made on the record at the hearing on the Sale Motion shall constitute this Court’s findings

of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052,

made applicable to this proceeding pursuant to Federal Rule of Bankruptcy Procedure

9014.

Prepared and Submitted by:

THE LAW OFFICE OF EDMOND “BUDDY” MILLER

/s/ Edmond “Buddy” Miller Edmond “Buddy” Miller, Esq. Special Counsel for Firstgold Corp., debtor in possession

# # #


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In accordance with LR 9021, counsel submitting this document certifies as follows

(check one):

___ The court has waived the requirement of approval under LR 9021.

This is a chapter 7 or 13 case, and either with the motion, or at the hearing, I have

delivered a copy of this proposed order to all counsel who appeared at the hearing, any

unrepresented parties who appeared at the hearing, and each has approved or disapproved the

order, or failed to respond, as indicated below [list each party and whether the party has

approved, disapproved, or failed to respond to the document]:

X This is a chapter 9, 11, or 15 case, and I have delivered a copy of this proposed

order to all counsel who appeared at the hearing, any unrepresented parties who appeared at

the hearing, and each has approved or disapproved the order, or failed to respond, as indicated

below [list each party and whether the party has approved, disapproved, or failed to respond

to the document]:

___ I certify that I have served a copy of this order with the motion, and no parties

appeared or filed written objections.
