Motion To Sell-Nevada - Mining Interests

Case 10-50215-gwz Doc 232 Entered 11/12/10 13:11:11 Page 1 of 44
1 Edmond “Buddy” Miller E-filed: 11/12/2010

The Law Office of Edmond “Buddy” Miller
2 1610 Montclair Avenue, Suite C
Reno, NV 89509
3 Telephone: (775) 828-9898
Facsimile: (775) 828-9893
4 bmiller@buddymillerlaw.com
5 Special Counsel for Firstgold Corp., Debtor-In-Possession
6
UNITED STATES BANKRUPTCY COURT
7
DISTRICT OF NEVADA
8
9
In re Case No. BK-N-10-50215- GWZ
10
FIRSTGOLD CORP., Chapter 11
11
Debtor. MOTION BY FIRSTGOLD CORP. FOR
12 ORDER AUTHORIZING AND
APPROVING: (1) SALE OF REAL AND
13 PERSONAL PROPERTY ASSETS
PURSUANT TO 11 U.S.C. § 363 FREE
14 AND CLEAR OF LIENS, CLAIMS, AND
INTERESTS; (2) ASSUMPTION AND
15 ASSIGNMENT OF EXECUTORY
CONTRACTS AND UNEXPIRED
16 LEASES UNDER 11 U.S.C. § 365; AND
(3) RELATED RELIEF;
17 MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT HEREOF
18
Hearing
19 Date: December 6, 2010
Time: 2:00 p.m.
20 Place: Ctrm. 3
21
22
Debtor and debtor-in-possession Firstgold Corp. (the “Debtor”) hereby moves the
23
Court for an order (a) authorizing the Debtor to sell some or all of the Debtor’s tangible and
24
intangible assets used in the Debtor’s business operations (the “Property”) free and clear of
25
liens, interests and encumbrances under 11 U.S.C. § 363(f) to a successful bidder for some or
26
all of the Property in accordance with sale procedures approved by order of the Court (each or
27
together, the “Purchaser”) entered on November 8, 2010, which Property is set forth on
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1 Exhibit “A” to the concurrently filed Declaration of Eric Klepfer (the “Klepfer Sale
2 Declaration”); (b) approving the form of such Purchase Agreement as may be presented by the
3 Debtor and the Purchaser at or before the hearing on this Motion; (c) authorizing the Debtor to
4 assume and assign executory contracts and unexpired leases as designated by the Purchaser
5 pursuant to 11 U.S.C. § 365 (d) approving the cure amounts for the executory contracts and
6 unexpired leases (each a “Contract”) to be assumed and assigned by the Debtor to the
7 Purchaser set forth on Exhibit “B” to the Klepfer Sale Declaration, and deeming the failure of
8 a counter-party to a particular Contract to object to the proposed cure amount and assumption
9 and assignment to be a waiver of such objection; (e) finding that Purchaser is a good faith
10 buyer under 11 U.S.C. § 363(m); (f) waiving the 14-day stay period provided in Federal Rule
11 of Bankruptcy Procedure 6004(h) and 6006(d); (g) authorizing the Debtor to take such other
12 actions and execute such documents as necessary to consummate the Purchase Agreement; (h)
13 finding that notice of this Motion was proper, and (i) granting such other relief as appropriate
14 in the best interests of the estate.
15 This Motion is based on the annexed Memorandum of Points and Authorities, 11
16 U.S.C. §§ 105, 363 and 365 and Federal Rules of Bankruptcy Procedure 2002, 6004 and 6006,
17 the concurrently filed Klepfer Sale Declaration and exhibits thereto, the previously filed
18 declarations of Eric Klepfer and Mark Mueller and exhibits thereto, Docket Nos. 185 and 178,
19 respectively, the record in this case, and such other pleadings, judicial notice of which is
20 requested pursuant to Federal Rule of Evidence 201, and all arguments and evidence to be
21 submitted in support of the relief requested herein.
22 Dated this 12th day of November, 2010.
23
/s/ Edmond Buddy Miller
24 Edmond Buddy Miller
Special Counsel for Firstgold Corp.,
25 Debtor-In-Possession
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2
1 MEMORANDUM OF POINTS AND AUTHORITIES

2 I. INTRODUCTION
3 By the annexed Motion, debtor in possession Firstgold Corp. (the “Debtor”) seeks an
4 order from (a) authorizing the Debtor to sell some or all of the Debtor’s tangible and intangible
5 assets used in the Debtor’s business operations (the “Property”) free and clear of liens, interests
6 and encumbrances under 11 U.S.C. § 363(f) to a successful bidder for some or all of the Property
7 in accordance with sale procedures approved by order of the Court (each or together, the
8 “Purchaser”) entered on November 8, 2010, which Property is set forth on Exhibit “A” to the
9 concurrently filed Declaration of Eric Klepfer (the “Klepfer Sale Declaration”); (b) approving the
10 form of such Purchase Agreement as may be presented by the Debtor and the Purchaser at or
11 before the hearing on this Motion; (c) authorizing the Debtor to assume and assign executory
12 contracts and unexpired leases as designated by the Purchaser pursuant to 11 U.S.C. § 365; (d)
13 approving the cure amounts for the executory contracts and unexpired leases (each a “Contract”)
14 to be assumed and assigned by the Debtor to the Purchaser set forth on Exhibit “B” to the
15 Klepfer Sale Declaration, and deeming the failure of a counter-party to a particular Contract to
16 object to the proposed cure amount and assumption and assignment to be a waiver of such
17 objection; (e) finding that Purchaser is a good faith buyer under 11 U.S.C. § 363(m); (f) waiving
18 the 14-day stay period provided in Federal Rule of Bankruptcy Procedure 6004(h) and 6006(d);
19 (g) authorizing the Debtor to take such other actions and execute such documents as necessary to
20 consummate the Purchase Agreement; (h) finding that notice of this Motion was proper, and (i)
21 granting such other relief as appropriate in the best interests of the estate.
22 II. STATEMENT OF FACTS.
23 Unless otherwise indicated, the facts set forth in this Section II are based on the
24 Declarations of Eric Klepfer and Mark Mueller, Docket Nos. 185 and 178 respectively, which are
25 incorporated herein, and which were previously filed with the Court in connection with the
26 Debtor’s Motion By Firstgold Corp. For Order Approving Sale Procedures with Respect To The:
27 (1) Sale Of Real And Personal Property Assets Pursuant To 11 U.S.C. § 363 Free And Clear Of
28 Liens, Claims, And Interests; (2) Assumption And Assignment Of Executory Contracts And
3
1 Unexpired Leases Under 11 U.S.C. § 365; And (3) Related Relief; Memorandum Of Points And
2 Authorities (the “Sale Procedures Motion”), Docket No. 177.
3 A. Background.
4 1. On January 27, 2010 (the “Petition Date”), Debtor filed a voluntary petition for
5 relief with this Court under chapter 11 of title 11 of the United States Code (the “Bankruptcy
6 Code”). Since the Petition Date, Debtor has operated its business and managed its property as a
7 debtor-in-possession pursuant to Bankruptcy Code Sections 1107 and 1108.
8 2. Previously, the Debtor conducted gold and silver mining operations. The Debtor
9 maintains a business office in Lovelock, Nevada. The Debtor’s mining operations were
10 principally conducted at the Relief Canyon Mine. The Debtor’s mining operations are currently
11 shut down and Relief Canyon Mine is in care and maintenance status.
12 3. Pursuant to that certain “Note and Warrant Purchase Agreement” between the
13 Platinum Long Term Growth LLC and Lakewood Group, LLC (the “Lenders”) and the Debtor
14 dated August 7, 2008 and documents related thereto (the “Loan Documents”),1 Lenders were
15 owed as of the Petition Date no less that $15,510,496 and $3,847,466.17, respectively in
16 principal, interest, charges and fees, and in the aggregate $19,357,961.72 (the “Loan
17 Indebtedness”). Interest, fees and costs continue to accrue on the Loan Indebtedness in
18 accordance with the Loan Documents. The Loan Indebtedness does not include as yet certain
19 unliquidated, accrued and unpaid fees, charges, interest or penalties, some of which continue to
20 accrue.
21 4. As security for the payment of all amounts due under the Loan Documents, the
22 Debtor granted to the Lenders, inter alia, a security interest in all tangible real and personal
23 property assets and intangible assets of the Debtor (the “Lender Collateral”), subject only to prior
24
25
26
1
Certain of the Loan Documents are annexed as Exhibits “G” through “J” to the Declaration Of Mark
27 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
28 the Court’s docket in this case.
4
1 valid and perfected liens existing as of August 7, 2008, if any (the “Pre-Existing Liens”), as a
2 matter of applicable non-bankruptcy law (the “Lenders’ Lien”).
3 5. On March 25, 2010, the Lenders filed the Motion By Platinum Long Term Growth
4 LLC And The Lakewood Group, LLC To Convert Case To Chapter 7, Or Alternatively, For Relief
5 From The Automatic Stay and supporting declarations (the “Relief From Stay Motion”). The
6 hearing on the Relief From Stay Motion was held on April 20, 2010 in the above-entitled Court
7 (the “Stay Hearing”). Among other things, the Lenders sought relief from the automatic stay
8 under 11 U.S.C. § 362(d).
9 6. The Stay Motion was resolved by way of that certain First Amended Stipulation
10 and Order Regarding Termination of the Automatic Stay, entered by this Court on June 22, 2010
11 as Docket No. 156 (the “Relief from Stay Stipulation”). According to its terms, the Relief from
12 Stay Stipulation was a binding determination of (x) of the amount of the Loan Indebtedness as
13 stated above, (y) that the Lenders’ claims were allowed secured claims in the amount of the Loan
14 Indebtedness plus such other post-petition interest, fees and charges under 11 U.S.C. § 502, and
15 (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
16
challenge under Bankruptcy Code Sections 506(a), 506(c) and 552(b).
17
7. Further, under the terms of the Relief From Stay Stipulation, Mr. Eric Klepfer was
18
appointed as “Operations Manager” of the Debtor vested with, among other things, sole
19
management authority over the Debtor’s operations and the authority to bind the Debtor with
20
respect to a sale of the Operating Assets, and to take such actions as are necessary to conduct a
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sale or other disposition of the Operating Assets.
22
8. The Operations Manager has determined that there is no ability for the Debtor to
23
recommence mining operations due to the inability to obtain debt or equity financing in light of
24
the Loan Indebtedness and other debt burdening the Debtor’s assets. Therefore, the Operations
25
Manager, in the exercise of his business judgment on behalf of the Debtor and this bankruptcy
26
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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1 9. The Court entered an order approving the Sale Procedures Motion by its order
2 entered November 8, 2010 (the “Sales Procedures Order”), docket number 225.
3 B. Marketing of the Assets.
4 10. The Lenders have made significant efforts to market and facilitate the sale of the
5 Property for several months. The Lenders are highly motivated to maximize the purchase price of
6 the Property.
7 11. Since in or about February 2010, the Lenders have been in contact with in excess
8 of 60 different individuals and entities with respect to the sale of the Property. The Lenders have
9 maintained a list of these parties, and can provide such upon request of the Court. Out of respect
10 for the privacy of these parties (although confidentiality has not been formally requested), the
11 Lenders have decided to not attach the list of these parties to this declaration.
12 12. In addition, since in or about February 2010, the Lenders are informed that in
13 excess of 70 different individuals and entities have visited the Debtor’s offices to conduct a due
14 diligence review of the Debtor’s documents and business records with respect to the potential
15 purchase of the Property.
16 13. The Debtor will make the relevant documents reasonably available to those that
17 wish to conduct due diligence.
18 14. In addition, the Lenders established a website at www.reliefcanyon.com,
19 specifically relating to the sale of the Property, the primary aspect of which is the Relief Canyon
20 Mine. Excerpts from this website are annexed to the previously filed Declaration of Mark
21 Mueller, docket number 178 in this case filed October 13, 2010, as Exhibit “A”. The Lenders
22 also marketed the Property for a number of months by advertising on a website devoted to mining
23 businesses conducted by InfoMine Inc. at www.InfoMine.com.
24 15. Also, the Sales Procedures Order setting forth all information pertaining to the
25 procedure that potential bidders must follow to bid on the Property has been served and
26 distributed as required by that Order and has also been posted on the aforementioned
27 www.reliefcanyon.com website.
28 ///
6
1 C. Liens Against the Property.

2 16. The liens and interests against the Property are set forth in Exhibit “C” to the
3 Declaration of Eric Klepfer.
4 D. Proposed Treatment of Liens and Interests Against the Property.
5 17. The Debtor proposes to sell the Property free and clear of liens and interests to the
6 maximum extent under 11 U.S.C. § 363(f), with allowed amounts of the liens to attach to
7 proceeds from the sale.
8 E. Buyer is Purchase in Good Faith.
9 18. For purposes of 11 U.S.C. § 363(m), a good faith purchaser is one who buys the
10 property of the estate in good faith and for value. Ewell v. Diebert (In re Ewell), 958 F. 2d 276,
11 281 (9th Cir. 1992). The term “good faith” is not defined in the Bankruptcy Code, but courts have
12 provided some guidance. See e.g., id. (lack of good faith generally shown by fraud, collusion
13 between purchaser and other bidders or the trustee, or an attempt to take grossly unfair advantage
14 of other bidders); In re Pine Coast Enters., Ltd., 147 B.R. 30, 33 (Bankr. N.D. Ill. 1992)(“The
15 requirement that a purchaser act in good faith speaks to the integrity of its conduct in the course
16 of the sale proceeding.”)
17 19. At this point, the identity of ultimate buyer of the Property is not known, but will
18 be determined at the auction sale to be conducted by this Court on December 6, 2010.
19 20. The Debtor and/or the Purchaser(s) of the Property shall present such evidence as
20 necessary and appropriate at the Sale Hearing to establish that the Purchaser is seeking to
21 purchase the Property in good faith within the meaning of, and for the purposes of, 11 U.S.C. §§
22 363(m) and 363(n).
23 F. Proposed Assumption and Assignment of Certain Executory Contracts and
24 Unexpired Leases.
25 21. As part of the proposed transaction, the Debtor anticipates that it will be assuming
26 and assigning to the Purchaser certain executory contracts and unexpired leases under 11 U.S.C. §
27 365. In connection with the proposed sale, the Debtor requests authority to assume and assign
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7
1 those executory contracts and unexpired leases designated by the Purchaser pursuant to the terms
2 of the Purchase Agreement.
3 22. A schedule of all contracts or leases relating to the Property known to the
4 Operations Manager and which the Debtor believes are executory contracts or unexpired leases
5 under 11 U.S.C. § 365 is annexed to the Declaration of Eric Klepfer as Exhibit “B” (the
6 “Contracts”).
7 III. DISCUSSION
8 A. Debtor Should Be Authorized To Sell The Property Free And Clear Of Liens,
9 Claims, Interests And Encumbrances Pursuant To 11 U.S.C. § 363 And The Terms
10 Of The Purchase Agreement.
11 1. Debtor Should be Authorized to Sell the Property under 11 U.S.C. § 363(b).
12 Pursuant to Sections 363(b)(1) and 1107(a), a debtor in possession, “after notice and a
13 hearing, may . . . sell . . . other than in the ordinary course of business, property of the estate . . . .”
14 11 U.S.C. § 363(b)(1). As a general matter, a Court determining a Section 363(b) motion to sell
15 property of the estate should determine, based on the evidence presented, that there is a “good
16 business reason” to grant such motion. In re Lionel Corp., 722 F.2d 1063, 1071 (2d Cir. 1983).
17 In addition, the court must further find it is in the best interest of the estate. To make this
18 determination, the Court should consider whether:
19
(1) the sale is fair and reasonable, i.e., the price to be paid is
20 adequate;
21 (2) the property has been given adequate marketing;
(3) the sale is in good faith, i.e., there is an absence of any
22 lucrative deals with insiders; and
(4) adequate notice has been provided to creditors.
23
24
In re Wilde Horse Enterprises, Inc., 136 B.R. 830, 841-42 (Bankr. C.D. Cal. 1991); In re The
25
Landing, 156 B.R. 246, 249 (Bankr. E.D. Mo. 1993); In re Mama’s Original Foods, Inc., 234
26
B.R. 500, 502-505 (C.D. Cal. 1999). As described in detail below, the Debtor’s proposed sale of
27
the Property, subject to overbid, is appropriate and should be approved by the Court.
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8
1 a. Sound Business Purpose.

2 In Walter v. Sunwest Bank (In re Walter), 83 B.R. 14, 19 (9th Cir. BAP 1988), the Ninth
3 Circuit Bankruptcy Appellate Panel adopted a flexible case-by-case test to determine whether the
4 business purpose for a proposed sale justifies disposition of property of the estate under Section
5 363(b). The facts pertaining to the proposed sale of the Property amply substantiate the Debtor’s
6 business decision that proceeding with such sale is in the best interest of this estate and merits the
7 approval of this Court.
8 As stated above, the Debtor’s mine assets are in a care and maintenance program and
9 there are no ongoing mining operations. In addition, due to the Relief From Stay Stipulation
10 granting the Lenders the ability to foreclose on the Property and the liens securing Loan
11 Indebtedness and other liens, there is no realistic possibility that the Debtor can obtain financing
12 to make progress toward a successful reorganization. Therefore, there is no real choice of the
13 Debtor in this bankruptcy case other than conducting a sale of the Property or risk foreclosure on
14 the Property.
15 b. Fair and Reasonable Price.
16 In order for a sale to be approved under Section 363(b), the purchase price must be fair
17 and reasonable. See generally, In re Canyon Partnership, 55 B.R. 520 (Bankr. S.D. Cal. 1985).
18 The trustee (or debtor in possession) is given substantial discretion in this regard. Id. In addition,
19 courts have broad discretion with respect to matters under section 363(b). See Big Shanty Land
20 Corp. v. Comer Properties, Inc., 61 B.R. 272, 278 (Bankr. N.D. Ga. 1985). In any sale of estate
21 assets, the ultimate purpose is to obtain the highest price for the property sold. Wilde Horse
22 Enterprises, Inc., 136 B.R. at 841 (citing In re Chung King, Inc., 753 F.2d 547 (7th Cir. 1985)), In
23 re Alpha Industries, Inc., 84 B.R. 703, 705 (Bankr. Mont. 1988).
24 As set forth above in the previously filed Mueller Declaration, docket number 178, the
25 Property has been marketed for several months prior to the filing of this Motion. In addition, the
26 Property will be subjected to a fair and reasonable bidding process so that those parties have
27 expressed bona fide interest in the Property will have the opportunity to participate in a sale
28
9
1 process designed to attract a buyer with the financial wherewithal to consummate a purchase of
2 the Property. Therefore, the Debtor submits that a fair and reasonable price will be obtained.
3 c. Accurate and Reasonable Notice.
4 Pursuant to Fed.R.Bankr.P 2002(a)(2), (c)(1), (i) and (k), 6004, and 6006, and applicable
5 local bankruptcy rules, the Debtor (1) served the Sale Motion on the Office of the United States
6 Trustee, parties on the Notice of Electronic Filing List, and parties requesting special notice by
7 regular mail or Notice of Electronic Filing, as applicable, (2) served the Sale Motion on parties
8 asserting liens, encumbrances, or other interests against the Property, and all federal, state, and
9 local taxing authorities, return receipt requested and other parties to the Contracts, and (3) served
10 its notice of the date, time, and place of the Sale Motion summarizing the proposed terms of the
11 sale and the assumption and assignment of the Contracts (the “Sale Notice”) on all of the
12 foregoing parties pursuant to the methods discusses above, and on all other creditors and parties
13 in interest in the Debtor’s bankruptcy case by regular mail. The Debtor believes that the
14 foregoing notice procedure satisfies the requirements of Fed.R.Bankr.P 2002(a)(2), (c)(1), (i) and
15 (k), 6004, and 6006, applicable local bankruptcy rules, and demonstrates that there was adequate
16 and reasonable notice of the Sale Motion.
17 d. Good Faith.
18 When a bankruptcy court authorizes a sale of assets pursuant to Section 363(b)(1), it is
19 required to make a finding with respect to the “good faith” of the purchaser. In re Abbotts Dairies
20 of Pennsylvania, Inc., 788 F.2d 143, 149 (3rd Cir. 1986). Such a procedure ensures that Section
21 363(b)(1) will not be employed to circumvent the creditor protections of Chapter 11, and, as such,
22 it mirrors the requirement of Section 1129 that the Bankruptcy Court independently scrutinizes
23 the proposed sale and makes a finding that it has been proposed in good faith. Id. at 150.
24 “Good faith” encompasses fair value, and further speaks to the integrity of the transaction.
25 Wilde Horse, 136 B.R. at 842. With respect to the debtor’s conduct in conjunction with the sale,
26 the good faith requirement “focuses principally on the element of special treatment of the debtor’s
27 insiders in the sale transaction.” See In re Industrial Valley Refrigeration and Air Conditioning
28 Supplies, Inc., 77 B.R. 15, 17 (Bankr. E.D. Pa. 1987). With respect to the buyer’s conduct, this
10
1 Court should consider whether there is any evidence of “fraud, collusion between the purchaser
2 and other bidders or the [debtor], or an attempt to take grossly unfair advantage of other bidders.”
3 Abbotts Dairies, 788 F.2d at 147, In re Rock Indus. Mach. Corp., 572 F.2d 1195, 1198 (7th Cir.
4 1978); see Wilde Horse, 136 B.R. at 842; In re Alpha Industries, Inc., 84 B.R. 703, 706 (Bankr.
5 D. Mont. 1988). In short, “[l]ack of good faith is generally determined by fraudulent conduct
6 during the sale proceedings.” In re Apex Oil Co., 92 B.R. 847, 869 (Bankr. E.D.Mo. 1988) (citing
7 In re Exennium, Inc., 715 F.2d 1401, 1404-05 (9th Cir. 1983)).
8 The Debtor submits that the proposed sale of the Property has been, and will be,
9 conducted in good faith. As set forth herein and in the Debtor’s Sale Procedures Motion, the
10 Property has been marketed and will be continued to be marketed is the best interests of
11 maximizing the value to the Debtor’s estate. Further, the Debtor does not contemplate that the
12 Property will be sold to an insider as that term is defined by Section 101(31)(B). Accordingly,
13 the Debtor submits that the successful bidder for the Property will be entitled to a good faith
14 finding pursuant to Section 363(m).
15 Based on all of the foregoing, the Debtor submits that all of the requirements for a sale
16 under Section 363(b) have been satisfied.
17 2. The Debtor Should Be Authorized to Sell the Property Free and Clear of
18 Liens, Claims, Interests, and Encumbrances.
19 Section 363(f) provides, in relevant part, as follows:
20 The [debtor in possession] may sell property under subsection (b) . . . of this
21 section free and clear of any interest in such property of an entity other than the
estate, only if—
22
(1) applicable non-bankruptcy law permits the sale of such
23 property free and clear of such interest;
(2) such entity consents;
24
(3) such interest is a lien and the price at which such
25 property is to be sold is greater than the aggregate value
of all liens on such property;
26 (4) such interest is in bona fide dispute; or
(5) such entity could be compelled, in a legal or equitable
27 proceeding, to accept a money satisfaction of such
interest.
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11
1
11 U.S.C. §363(f).
2
3 Section 363(f) was drafted in the disjunctive. Therefore, the Debtor needs to satisfy only
4 one of the five subsections of Section 363(f) in order for the auction sale to be free and clear of all
5 interests. In this case, Sections 363(f)(3), 363(f)(4), and 363(f)(5) is satisfied with respect to
6 creditors asserting an alleged lien, claim, interest, or encumbrance against any of the Property.
7 3. The Property can be sold free and clear if any interest of pursuant to Section
8 363(f)(3).
9 A line of cases establishes that the meaning of “value” under Section 363(f)(3) has the
10 same meaning as in Section 506(a), which deals with the valuation of secured interests. These
11 Courts have held that a valuation of liens conducted under Section 506(a) may be used to
12 determine the “aggregate value of all liens” under 11 U.S.C. Sec. 363(f)(3). In other words, a sale
13 should be approved where the proposed sales price exceeds the actual value of the liens as
14 measured under Section 506(a), and not the face amount of the secured debt. In re Collins, 180
15 B.R. 447 (Bankr. E.D. Va. 1995); In re Milford Group, Inc., 150 B.R. 904, 906 (Bankr. M.D. Pa.
16 1992); In re Terrace Gardens Park Partnership, 96 B.R. 707 (Bankr. W.D. Tex. 1989); In re Beker
17 Industries Corp., 63 B.R. 474 (Bankr. S.D.N.Y. 1986); Matter of Rouse, 54 B.R. 31
18 (Bankr.W.D.Mo.1985); In re Hatfield Homes, Inc., 30 B.R. 353 (Bankr. E.D. Pa. 1983). All of
19 these cases held that the measure of the value of liens under Section 363(f)(3) must be measured
20 in the context of Section 506(a).
21 First, the term “value” has been interpreted by the United States Supreme Court to have
22 the same meaning in Bankruptcy Code Sections 361(1) and (2) - relating to adequate protection -
23 as in Section 506(a).2 The concept of adequate protection pervades the sale provisions of Section
24 363(f). As stated by one court:
25
26
27
2
United Savings Assoc. of Texas v. Timbers of Inwood Forest Assocs., 484 U.S. 365, 108 S.Ct. 626, 630,
28 98 L.Ed.2d 740 (1988).
12
1 “Sections 361 - 364 all address the treatment of secured claims in a bankruptcy
2 context. All four sections employ the common concept of adequate protection as
3 the touchstone for whether a Debtor’s proposed action should be approved.
4 Adequate protection in turn focuses on the value of the collateral securing the
5 claim. So long as a creditor’s interest is adequately protected, the debtor is
6 permitted to sell property of the estate. 11 U.S.C. § 363(e). It makes no sense to
7 read into Section 363(f)(3) a restriction inconsistent with the adequate protection
8 scheme which pervades both Section 363 and the rest of the Code, just because the
9 sale is free of liens, especially as the commonly accepted method of adequately
10 protecting a secured creditor when a sale is authorized under Section 363(f) is to
11 order the liens to attached to the proceeds of the sale.”
12 In re Terrace Gardens Park Partnership, 96 B.R. at 713 (footnotes omitted).
13 Second, a secured creditor who disagrees with the proposed sale has recourse to Section
14 363(k), which permits such creditor to bid in its lien to block a sale. Id. Permitting a sale where
15 the secured creditors are adequately protected avoids the unfair situation where a creditor refuses
16 to consent to a sale which is otherwise beneficial to the estate. As stated in the Beker decision:
17 “[I]f a secured creditor does not desire to take the property for itself and yet
18 refuses to consent to a sale at less than the amount of its lien, it is effectively
19 insisting that others, including the debtor at the expense of its own cash flow and
20 of its general creditors, continue to fund the property without a firm prospect for
21 return.”
22 Beker, 63 B.R. at 478.
23 When determining the value of a lien under § 506(a), value is determined in light of the
24 valuation's purpose, and the proposed disposition of the property. § 506(a) states in pertinent
25 part:
26 "An allowed claim of a creditor secured by a lien on property in which the estate
27 has an interest ... is a secured claim to the extent of the value of such creditor's
28 interest in the estate's interest in such property. . . . Such value shall be determined
13
1 in light of the purpose of the valuation and of the proposed disposition or use of
2 such property. . . . Where there is an actual sale, such "is conclusive evidence of
3 the property's value."3
4 As stated by Collier on Bankruptcy:
5 "If an actual sale (or equivalent disposition) is to occur, the value of the collateral
6 should be based on the consideration to be received by the estate in connection
7 with the sale, provided that the terms of the sale are fair and were arrived at on an
8 arm's-length basis."4
9 In this case, the Debtors are seeking approval of a bona fide sale pursuant to sale
10 procedures that are fair and designed to attract a bid that is equal to the fair value of the Property.
11 The Property has been marketed and has already been subjected to competitive market forces as
12 described above. In addition, the approved sale procedures provide further assurances of fair
13 value being received by the estate. For these reasons, purchase price obtained by way of the
14 competitive sales process conclusively determines the value of the Property for purposes of 11
15 U.S.C. § 506(a).
16 Because the purchase price to be obtained equals or exceeds the aggregate value of the
17 liens in the Property after application of the principles states above, the Debtors respectfully
18 request that the Court approve the Sale pursuant to 11 U.S.C. § 363(f)(3).
19 4. The unpatented mining claims of the Debtor can be sold free and clear of the
20 purported interests of Royal Gold, Inc. pursuant to 11 U.S.C. § 363(f)(4).
21 a. The Unpatented Mining Claims in Which Royal Gold Asserts A Royalty or
22 Other Interest Have Been Extinguished.
23
24
3
In re Alpine Group, 151 B.R. 931, 935 (9th Cir. BAP 1993); see also, Associates Commercial
25 Corp. v. Rash, 520 U.S. 953, 960, 138 L.Ed.2d 148, 117 S.Ct. 1879, 1883 (1997) (amount of
26 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,
27 35 F.3d 860, 870 (4th Cir. 1994)(actual sales price determinative of value under § 506).
28 4
4 L. King, Collier on Bankruptcy, ¶ 506.03[6][b] at 506-40.
14
1 Royal Gold, Inc. (“RGI”) filed a proof of claim in this bankruptcy case on March 5, 2010
2 (the “RGI Proof of Claim”).5 On the first page of the RGI Proof of Claim, RGI alleges that it has
3 an unliquidated claim in an unknown amount purportedly secured by a lien in real estate owned
4 by the Debtor. Exhibit “A” to the RGI Proof of Claim alleges that RGI claims a mineral royalty
5 interest in certain unpatented mining claims purportedly owned by the Debtor as set forth in two
6 agreements: (1) Net Smelter Return Royalty, dated October 3, 1996 between Newgold, Inc. and
7 Repadre International Corporation (the “1996 Royalty Agreement”); and (2) Net Smelter Return
8 Royalty Agreement, dated June 13, 1997 between Newgold, Inc. and Repadre International
9 Corporation (the “1997 Royalty Agreement”, and together with the 1996 Royalty Agreement, the
10 “Royalty Agreements”). (The Debtor reserves the right to dispute that RGI is the successor entity
11 to Repadre International Corporation.) Newgold, Inc. (“Newgold”) changed its name to Firstgold
12 Corp., the Debtor herein, in 2006.
13 Annexed to the RGI Proof of Claim are a number of Schedules (Schedules A-1 and A-2)
14 (the “Original Claim Schedules”). The Original Claim Schedules set forth the mining claims that
15 at one time related to the Relief Canyon Mine, as individually identified by their unique “Bureau
16 of Land Management Nevada Mining Claim” serial number (“BLM NMC”). The Debtor
17 disputes that RGI has an ongoing royalty interest in the unpatented mining claims that are being
18 sold pursuant to this Motion described in Exhibit “A” hereto (the “Claims For Sale”), and that
19 such is a “bona fide” dispute pursuant to 11 U.S.C. § 363(f)(4).
20 Of overriding importance, the Original Claims no longer exist. The Original Claims were
21 extinguished when the Original Claims were deemed forfeited as a matter of law several years
22 prior to the Petition Date.
23 Based on an extensive review of the Debtor’s documents and the records so far reviewed
24 from the Bureau of Land Management (the “BLM”), the Debtor has concluded that Newgold
25 failed to pay the annual maintenance fees associated with the Original Claims, resulting in their
26
27
5
The RGI Proof of Claim is annexed to the Klepfer Sale Declaration as Exhibit “D”, of which this Court is
28 requested to take judicial notice as claim number 75-1.
15
1 forfeiture as a matter of law. Federal mining statutes that became effective in 1995 specify that
2 the “failure to pay” the maintenance fee by the deadline “conclusively constitute[ed] a forfeiture”
3 of the claim. 30 U.S.C. §§ 28f, 28i.6 Subsequent to the forfeiture of the Original Claims,
4 Newgold staked new unpatented mining claims, generating each time new BLM NMC serial
5 numbers. This forfeiture and extinguishment of the Old Claims as a matter of law is
6 demonstrated by the chart and other documents obtained from the BLM website annexed to the
7 Klepfer Sale Declaration as Exhibits “G” and “H”, which show that all of the Original Claims
8 with the original BLM NMC serial numbers are closed and inactive. The Original Claims are all
9 indicated with an “NSR” on Exhibit “G”. Exhibit “H” shows all Claims for Sale (marked as
10 “CFS”) with current BLM NMC serial numbers as being active. See list of current BLM NMC
11 serial numbers at Section 1.1, entitled “Mineral Claims (Mining Lode and Mill Site Claims) –
12
13
14 6
30 U.S.C. section 28f provides for the payment of claim maintenance fees for each assessment year:
15 “(a) Claim maintenance fee
16 “*****
17 “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
18 Interior, on or before September 1 of each ** year * * * a claim maintenance fee of $100 per claim or
site. * * *
19
“(b) Time of payment
20
“*****
21
“The claim maintenance fee payable pursuant to subsection (a) of this section for any assessment year
22 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
23 location notice is recorded with the [BLM].”
24 11 U.S.C.§ 28i. Failure to pay
25 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
26 claimant and the claim shall be deemed null and void by operation of law.
[Emphasis added].
27
28
16
1 Real Property,” in the Debtor’s “List of Assets for Sale”, which is Exhibit “A” to the Klepfer
2 Declaration in support of this Motion. As demonstrated by Exhibit “G”, the Original Claims
3 were forfeited for failure to pay the annual maintenance fees, most of which occurred in 2004.
4 Based on the BLM information, a few other Original Claims were forfeited in 1998, presumably
5 for the same reason.
6 The legal effect of the forfeiture of the Original Claims can be best understood by
7 reviewing the nature of Newgold’s interest in the Original Claims. Newgold held an exclusive
8 possessory interest in the Original Claims. Under The 1872 Mining Law, codified at 30 U.S.C. §
9 22 et seq., United States citizens may go on unappropriated, unreserved public lands to prospect,
10 explore and develop locatable minerals. Such a location constitutes a discovery and gives the
11 claimant a right of exclusive possession against other claimants for mining purposes.7 The
12 claimant may continue to possess an unpatented claim, extract and sell minerals without payment
13 of any royalty to the United States. See 30 U.S.C. §28. In contrast to the unpatented Original
14 Claims, the holder of a claim who, after application to the United States Secretary of the Interior,
15 obtains a patent for a mining claim acquires fee title in the underlying real property.
16 Independence Min. Co. v. Babbitt, 105 F.3d 502, 506 (9th Cir.1997). Here, however, the Debtor
17 never patented its mining claims nor acquired a fee interest in the land underlying the Original
18 Claims.
19 Lacking a fee interest in the federal public lands, Newgold’s possessory interest in the
20 unpatented mining claims was at all times defeasible by operation of federal law.8 The United
21 States Supreme Court explained this in United States v. Locke, 471 U.S. 84 (1985), when it
22 examined the nature of a mining claimant’s interest in unpatented mining claims. In Locke,
23
24 7
30 U.S.C. § 26 further provides that “[t]he locators of all mining locations...so long as they comply with
25 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.”
26
8
30 U.S.C. § 22 provides: “all valuable mineral deposits in lands belonging to the United States...shall be
27 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
28 States' regulatory powers. Manning v. United States, 146 F.3d 808, 813-15 (10th Cir.1998).
17
1 mining claims were extinguished for failing to timely file required notices under the Federal Land
2 Policy Management Act (“FLPMA”). The FLPMA requires claimants who file every year with
3 state and BLM officials a notice of intention to hold the claim along with an affidavit of
4 assessment work on December 30 of each year. 43 U.S.C. § 1744(a). In Locke, the claimants
5 missed this deadline by one day and filed their notice of intention to hold the claim on December
6 31. Consequently, the BLM promptly extinguished their mining claims. See 43 U.S.C. §1744(c)
7 (failure to file as required by subsections (a) and (b) shall be deemed conclusively to constitute an
8 abandonment of the mining claim or mill site). The BLM’s abandonment was upheld in the
9 Locke decision.
10 The Supreme Court recognized that an unpatented mining claim is a “possessory” interest
11 only and therefore a "unique form of property.” 471 U.S. at 104. The Court cautioned that “no
12 right arises from an invalid claim of any kind,” 471 U.S. at 105, because the undisputed intent of
13 Congress was to make “void” those claims for which proper filings were not timely made, and for
14 extinguishment of abandoned claims. 471 U.S. at 98, 99. Therefore, failure to comply with the
15 statutory requirements resulted in a forfeiture of the claims, and the Court upheld the FLPMA’s
16 constitutionality. Notably, the legislative history indicates that a claim which is “deemed
17 abandoned” by the BLM is “extinguished.” H.R.Rep.No.94-1724, 94th Cong., 2nd Sess. 62,
18 reprinted in (1976) U.S.Code Cong. & Ad.News 6175, 6233. See Western Mining Counsel v.
19 Watt, 643 F.2d 618, 628 (9th Cir. 1981)(citing legislative history).
20 While the deemed abandonment may seem harsh, Courts in the Ninth Circuit have strictly
21 followed Locke’s holding that violation of BLM filing requirements are strictly enforced by the
22 courts. In Red Top Mercury Mines, Inc. v. United States, 887 F.2d 198 (9th Cir. 1989), the Ninth
23 Circuit stated:
24 Thus, plaintiff has no right to any notice from the BLM stating that there has
25 been a violation of the filing requirement. In effect, a miner could do
26 everything right but - due to misfiling, a filing lost in the mail, or various
27 other problems - could be in violation of the filing requirement, and years
28 later be told that his claim is deemed abandoned. A logical outcome is that a
18
1 miner may very well have put additional money into his claim during the
2 intervening years without knowing his claim is abandoned. While this strikes
3 the court as unfair, to remedy the situation would rewrite the Secretary's
4 regulation and be contrary to the Supreme Court's holding in Locke.
5 Id. at 204 – 205.
6 Once the Original Claims ceased to exist, RGI’s claim to a royalty interest in the
7 unpatented claims directly conflicts with the foregoing binding case law and statutory authority
8 extinguishing stale claims so that subsequent claimants may enjoy a right of unfettered exclusive
9 possession of the mining claims. An argument that RGI retains a continuing royalty or other
10 interests in the Claims For Sale is contrary to the forfeiture statutes and federal policy
11 encouraging exploration and development of mineral resources as explained in Locke.
12 Locke’s progeny show that the Supreme Court’s ruling leave little doubt that unpatented
13 mining claims are lost and not enforceable against subsequent parties who stake claims in the
14 same mining area if the proper filings are not made with the BLM. In Crummett v. Miller, 53
15 Cal.App.4th 897, 62 Cal.Rptr.2d 113 (1997), the California Court of Appeals, following Locke,
16 held that a previously recorded unpatented claim was extinguished for failure to follow the
17 recordation provisions of the Federal Land Policy and Management Act of 1976 (43 U.S.C. §
18 1701 et seq., especially § 1744 (FLPMA)). Due to failure to make the required filings, the
19 unpatented mining claims were extinguished. The Crummett court held that a subsequent party
20 that staked certain unpatented claims held title free and clear of the interest of the prior claim
21 holder whose unpatented claim was forfeited.
22 The Crummett court stated:
23 With respect to mineral lands, federal law provides “[e]xcept as otherwise
24 provided, all valuable mineral deposits in lands belonging to the United States,
25 both surveyed and unsurveyed, shall be free and open to exploration and
26 purchase, and the lands in which they are found to occupation and purchase....”
27 (30 U.S.C. § 22.) By this provision Congress has declared that, unless
28 withdrawn or subject to valid existing mining claims, all mineral land owned by
19
1 the United States is free and open to exploration, occupation and purchase.
2 Id. at 907, 62 Cal.Rptr.2d 119. See also, e.g., Jordan v. Jordan, 168 Or. App. 683, 8 P.3d
3 229 (2000)(because the corporation made no payment for the 1996-97 assessment year, its claims
4 were forfeited at the end of the prior assessment year - in other words, at noon on September 1,
5 1996. Therefore, the trial court correctly concluded that the disputed mining rights were open to
6 appropriation when plaintiff located his claims after noon on September 1, 1996. Because his
7 claims were valid when filed, the trial court did not err in quieting title in favor of the subsequent
8 locator of claim.)
9 The decision in Locke was presaged by the Nevada Supreme Court decision, Pine Grove
10 Nevada Gold Mining Co. v. Freeman et al., 63 Nev. 357 (1946). In Pine Grove, a locator of
11 unpatented mining claims was required, under applicable federal law, to put forth $100 worth of
12 work or improvements into the unpatented claims or file a notice of suspension with the county.
13 For one year, the locator failed to file such notice because its attorney was ill. After the failure to
14 file, another party relocated (i.e., staked) new unpatented claims “while the ground was open for
15 relocation”. Id. at 383. The Nevada Supreme Court concluded that the illness of the attorney did
16 not excuse the locator from filing the mandatory notice and that there was a period of time when
17 the locator's unpatented claims were subject to relocation. The Court agreed that the subsequent
18 relocators had successfully relocated the unpatented mining claims. Id. at 383 – 384. In finding
19 that the original locator’s claims had been forfeited, the Court rejected the original claim holders’
20 arguments based on the excusable neglect and similar doctrines to excuse the failure to comply
21 with federal filing requirements. Id. at 376.
22 b. Any Claim of RGI in the Claims For Sale Is Subject To Bona Fide Dispute.
23 The foregoing facts and authorities demonstrate that any interest asserted in the Claims for
24 Sale by RGI are subject to bona fide dispute under 11 U.S.C. § 363(f)(4). The phrase “bona fide
25 dispute” is not defined in the Bankruptcy Code. Courts interpreting § 363(f)(4) generally look to
26 “whether there is an objective basis for either a factual or legal dispute as to the validity of the
27 asserted interest.” In re NJ Affordable Homes Corp., No. 05-60442, 2006 WL 2128624, *10
28 (Bankr. D.N.J. June 29, 2006). See also In re Gaylord Grain L.L.C., 306 B.R. 624, 627 (8th Cir.
20
1 BAP 2004); In re Durango Georgia Paper Co., 336 B.R. 594, 596 (Bankr. S.D. Ga. 2005); In re
2 Gulf States Steel, Inc. of Ala., 285 B.R. 497, 507 (Bankr. N.D. Ala. 2002); In re Taylor, 198 B.R.
3 142, 162 (Bankr. D.S.C. 1996). The court does not have to resolve the dispute prior to the sale; it
4 need only determine that such a dispute exists. Gaylord Grain L.L.C., 306 B.R. at 627. The goal
5 of 11 U.S.C. § 363(d)(4) is to “allow[ ] the sale of property subject to dispute ‘so that liquidation
6 of the estate's assets need not be delayed while such disputes are being litigated.’” Durango
7 Georgia Paper Co., 336 B.R. at 597 (quoting In re Gulf States Steel, Inc., 285 B.R. at 507).
8 To establish a bona fide dispute, it is not necessary for the Debtor to have commenced an
9 adversary proceeding prior to seeking to sell assets free and clear of liens under 11 U.S.C. §
10 364(d)(4). See e.g., Gaylord Grain L.L.C., supra, 306 B.R. 624 (8th Cir. BAP 2004)(validity and
11 enforceability of creditor's security interest in bankrupt farmer's tractor and trailer did not have to
12 be the subject of any immediate or concurrent adversary proceeding brought by chapter 7 trustee,
13 in order for bankruptcy court to authorize trustee to sell tractor and trailer free and clear of
14 creditor's liens, on theory that creditor's liens were in “bona fide dispute”; sale could proceed free
15 and clear of creditor's liens if trustee could show some objective basis for avoiding liens, thus
16 establishing a bona fide dispute); see also In re Collins, 180 B.R. 447, 452 & n. 7 (Bankr. E.D.
17 Va. 1995); In re Octagon Roofing, 123 B.R. 583, 590-92 (Bankr.N.D.Ill.1991); In re Oneida Lake
18 Development, Inc., 114 B.R. 352, 357-58 (Bankr. N.D.N.Y. 1990); and In re Millerburg, 61 B.R.
19 125, 127, 128 (Bankr. E.D.N.C. 1986).
20 In addition, a bona fide dispute can arise from the challenge of a lien or interest under the
21 “strong arm” powers vested in a trustee or debtor in possession under 11 U.S.C. § 544(a). See In
22 re Bedford Square Associates, L.P., 247 B.R. 140 (Bankr. E.D. Penn. 2000)(“bona fide dispute”
23 under 11 U.S.C. 544(a)(3) regarding enforceability of unrecorded provision in shopping mall
24 lease although no adversary proceeding had yet been commenced).
25 c. The Claims For Sale Can Be Sold Free and Clear of RGI’s Claims, if any,
26 under the Royalty Agreements.
27 Standing in the shoes of a subsequent bona fide purchaser of real property that is deemed
28 to have perfected its purchase by recording the Claims For Sale being sold with the BLM, the
21
1 Debtor can avoid any alleged interest of RGI under 11 U.S.C. § 544(a)(3) in the Claims for Sale.9
2 By the terms of the Royalty Agreements, RGI has no continuing interest in the Claims For Sale.
3 In the 1996 Royalty Agreement, the “Property” in which RGI claims an interest is composed of
4 “Current Property” and “Additional Property”. Current Property is defined only as the mining
5 claims that are described in Schedule A to the Agreement, which are exactly those that are listed
6 on the RGI Proof of Claim. 1996 Royalty Agreement, pg. 2, ¶ 1(d). As established above, those
7 claims no longer exist and were forfeited or otherwise extinguished as a matter of law. In
8 addition, the Additional Property is a geographical reference to the Current Property that
9 encompasses mining claims and other property rights that lie “within ten miles of any boundary
10 of the Current Property.” Because the Current Property has been extinguished, there can be no
11 Additional Property because its existence is defined by an alleged interest in property (the
12 “Current Property”) that no longer exists. In addition, the Debtor is unaware of any unpatented
13 mining claims that were ever staked by Newgold that would constitute Additional Property.
14 Similarly, under the 1997 Royalty Agreement, reference is made to Relief Canyon Claims
15 that are defined as the identical claims as annexed to the RGI Proof of Claim. 1997 Royalty
16 Agreement, pg. 4, ¶ 1(p). The purported royalties are calculated based on 1% of the “Net Smelter
17 Returns”, which are “Gross Proceeds” less “Expenses” for a particular period. Id. at ¶¶ 1(k) and
18 2(a). “Gross Proceeds” are based on the sale of “Minerals” and “Tailings”, both of which are
19
20
9
11 U.S.C. § 544(a)(3), which provides in pertinent part as follows, comes into play:
21
§ 544. Trustee as lien creditor and as successor to certain creditors and purchasers
22
(a) The Trustee [or debtor in possession in his stead, pursuant to 11 U.S.C. § 1107(a),] shall have, as
23 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
24 by the debtor that is voidable by-
25 ...
26 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
27 perfected such transfer at the time of the commencement of the case, whether or not such a purchaser
exists.
28
22
1 based solely on the “Existing Properties”, which include the Relief Canyon Claims, Id. at ¶¶ 1(h),
2 (i), (s), and (f), respectively. Because the Relief Canyon Claims – which are the sole basis of
3 RGI’s Proof of Claim – no longer exist, then there can never be royalties due and owing with
4 respect to the Claims for Sale under the 1997 Royalty Agreement.
5 In addition, due to the broad application of Section 363(f), the sale of the Claims for Sale
6 should be ordered free and clear of all other contractual provisions in the Royalty Agreements
7 arising from or relating to the Original Claims. For example, the Third Circuit In re Trans World
8 Airlines, Inc., 322 F.3d 283 (3d Cir. 2003) court authorized the sale of substantially all assets free
9 and clear of (1) employment discrimination claims and (2) a voucher program awarded to flight
10 attendants in settlement of a class action, both of which the TWA court held constituted
11 “interests” in property for purposes of § 363(f). The Third Circuit stated that “[w]hile the
12 interests of the [plaintiffs] in the assets of TWA's bankruptcy estate are not interests in property in
13 the sense that they are not in rem interests, ... they are interests in property within the meaning of
14 section 363(f) in the sense that they arise from the property being sold.” Id. at 290. The TWA
15 court reasoned that ‘interests in property’ under 11 U.S.C. § 363(f) ‘encompasses other
16 obligations that may flow from ownership of the property.’ ” Id. at 289 (citations omitted). See
17 also, e.g., Precision Indus., Inc. v. Qualitech Steel SBQ, LLC, 327 F.3d 537, 545 (7th Cir.2003)
18 (“The Bankruptcy Code does not define ‘any interest,’ and in the course of applying 11 U.S.C. §
19 363(f) to a wide variety of rights and obligations related to estate property, courts have been
20 unable to formulate a precise definition.” Sale of debtor's property was free and clear of lessee's
21 possessory interest despite protections for lessee’s interest under 11 U.S.C. § 365(h)); Myers v.
22 United States, 297 B.R. 774, 781-82 (S.D. Cal. 2003) (plaintiff's “claim for personal injury does
23 arise from the property being sold, i.e. the contracts to transport toxic materials.”); C.H.E.G., Inc.
24 v. Millenium Bank, 99 Cal.App.4th 505, 121 Cal.Rptr.2d 443, 448 (2002)(holding that
25 contractual right to commission in event of sale of property leased from debtor is an “interest” in
26 estate property that may be extinguished pursuant to section 363(f)).
27 Due to the foregoing, the Royalty Agreements do not and cannot relate to the Claims for
28 Sale as a matter of law. Consequently, the Debtor, which stands in the shoes of a bona fide
23
1 purchaser under 11 U.S.C. § 544(a) (3), would purchase the Claims for Sale free and clear of any
2 claim of interest by RGI under the Royalty Agreements. Due to the foregoing, a “bona fide
3 dispute” exists under 11 U.S.C. § 363(f)(4), and the Claims for Sale can be sold free and clear of
4 RGI’s claims under the Royalty Agreements.
5 5. The Property can be sold free and clear of any liens or interests pursuant to
6 Section 363(f)(5).
7 The Bankruptcy Appellate Panel for the Ninth Circuit recently scrutinized section
8 363(f)(5) in the context of the sale of real property. See Clear Channel Outdoor, Inc. v. Knupfer
9 (In re PW, LLC), 391 B.R. 25 (9th Cir. BAP 2008). In Clear Channel, the senior secured creditor
10 attempted to purchase the debtor’s real property by way of a credit bid, free and clear of the
11 interest of a nonconsenting junior lienholder outside of a plan of reorganization. The Bankruptcy
12 Court approved the sale to the senior lender under section 363(f)(5) of the Bankruptcy Code,
13 finding that section 363(f)(5) permits a sale free and clear of the creditor’s interest in property
14 “whenever a claim can be paid with money.” Clear Channel, 391 B.R. at 42.
15 Clear Channel, however is neither binding on this Court, nor would it dictate a different
16 result. First, the Ninth Circuit has rejected the idea that decisions of Bankruptcy Appellate Panels
17 bind all bankruptcy courts within the Ninth Circuit. Bank of Maui v. Estate Analysis, Inc., 904
18 F.2d 470, 472 (9th Cir.1990). In addition, even if this Court were to view the Clear Channel
19 decision as persuasive authority, the proposed sale should be approved even under the dictates of
20 that decision.
21 In In re Jolan, Inc., 2009 WL 1163928 (Bankr. W.D. Wash. 2009) the court provided an
22 analysis of the Bankruptcy Appellate Panel’s decision in Clear Channel and suggested that the
23 scope of the Bankruptcy Appellate Panel’s ruling in Clear Channel should be narrowly construed.
24 The court in Jolan noted that the trustee who sought to approval of the sale free and clear of liens
25 in Clear Channel never argued that there were any qualifying “legal or equitable proceedings”
26 beyond cramdown under Section 1129 and that the Bankruptcy Appellate Panel, in turn, exercised
27 its prerogative to limit its ruling to the arguments presented by the parties. Id. at 3. Accordingly,
28 the Bankruptcy Appellate Panel in Clear Channel did not address whether any non-contractual
24
1 mechanisms exist whereby a lienholder might get less than full payment yet lose its lien. Id. at 3.
2 The court in Jolan, however, concluded that there are a number of legal and equitable proceedings
3 available in Washington in which a junior lienholder could be compelled to accept a money
4 satisfaction including, without limitation, “a senior secured party’s disposition of collateral under
5 the default remedies provided in part VI of Article 9” of Washington’s Uniform Commercial
6 Code (specifically, RCW 62A.9A-617) and the disposition of real property through “judicial and
7 nonjudicial foreclosures, which operate to clear junior lienholders’ interests, with their liens
8 attaching to proceeds in excess of the costs of sale and the obligation or judgment foreclosed.”
9 Id. at 3 - 4.
10 Similarly here, legal and equitable proceedings are available in Nevada which parallel
11 those Washington statutes and proceedings discussed by the court in Jolan satisfy 11 U.S.C. §
12 365(f)(5). 10
13
14
10
Specifically, a junior lienholder in Nevada could be compelled to accept a money satisfaction upon a
15 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
16 regarding collateral.
1. A secured party’s disposition of collateral after default:
17 (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
18
(c) Discharges any subordinate security interest or other subordinate lien.
19 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.
20 3. If a transferee does not take free of the rights and interests described in subsection 1, the transferee
takes the collateral subject to:
21 (a) The debtor’s rights in the collateral;
(b) The security interest or agricultural lien under which the disposition is made; and
22 (c) Any other security interest or other lien.
(Added to NRS by 1999, 355)
23
Or upon the judicial or nonjudicial foreclosure of real property under applicable Nevada law, including:
24
NRS 40.440 Disposition of surplus money. If there is surplus money remaining after payment of
25 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.
26 [1911 CPA § 560; RL § 5502; NCL § 9049]—(NRS A 1989, 888, 1769)
27 NRS 40.462 Distribution of proceeds of foreclosure sale.
1. Except as otherwise provided by specific statute, this section governs the distribution of the
28 proceeds of a foreclosure sale. The provisions of NRS 40.455, 40.457 and 40.459 do not affect the right to
25
1 Based on the foregoing, the Debtor respectfully submits that any party who asserts a lien against
2 the Property that the Debtor proposes to sell, could be compelled, in a legal or equitable
3 proceeding, to accept a money satisfaction of its interest. Accordingly, the Debtor can sell the
4 Property free and clear of any interests of liens in the Property pursuant to Section 363(f)(5).
5 B. THE DEBTOR SHOULD BE AUTHORIZED TO ASSUME AND ASSIGN
6 THE CONTRACTS.
7 Barring exceptions not herein relevant, Section 365(a) authorizes a debtor in possession,
8 “subject to the court’s approval, ... [to] assume or reject any executory contract or unexpired lease
9 of the debtor.” If there has been a default on any executory contract or unexpired lease, the
10
11
receive those proceeds, which vests at the time of the foreclosure sale. The purchase of any interest in the
12 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
13 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:
14 (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
15 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
16 creditor and the person conducting the foreclosure sale.
(b) Satisfaction of the obligation being enforced by the foreclosure sale.
17 (c) Satisfaction of obligations secured by any junior mortgages or liens on the property, in their order
of priority.
18 (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
19
sale is not required to distribute that portion of the proceeds until the validity of the conflicting claims is
20 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)
21 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
22 (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.
23 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
24 required proof within 15 days after the effective date of the demand waives the claimant’s right to receive
those proceeds.
25 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
26 to NRS 107.080.
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1 debtor cannot assume such contract or lease, unless the debtor (1) cures, or provides adequate
2 assurance that the debtor will promptly cure, such default; (2) compensates, or provides adequate
3 assurance that the debtor will promptly compensate a party for any actual pecuniary loss to such
4 party resulting from such default; and (3) provides adequate assurance of future performance
5 under such contract or lease. 11 U.S.C. § 365(b)(2).
6 A debtor in possession may assume or reject executory contracts for the benefit of the
7 estate. In re Klein Sleep Products, Inc., 78 F.3d 18, 25 (2d. Cir. 1996); In re Central Fla. Metal
8 Fabrication, Inc., 190 B.R. 119, 124 (Bankr. N.D. Fla. 1995); In re Gucci, 193 B.R. 411, 415
9 (S.D.N.Y. 1996). In reviewing a debtor in possession’s decision to assume or reject an executory
10 contract, a bankruptcy court should apply the “business judgment test” to determine whether it
11 would be beneficial to the estate to assume it. In re Continental Country Club, Inc., 114 B.R. 763,
12 767 (Bankr. M.D. Fla. 1990); see also In re Gucci, supra, 193 B.R. at 415. The business
13 judgment standard requires that the court follow the business judgment of the debtor unless that
14 judgment is the product of bad faith, whim, or caprice. In re Prime Motors Inns, 124 B.R. 378,
15 381 (Bankr. S.D. Fla. 1991), citing Lubrizol Enterprises v. Richmond Metal Finishers, 756 F.2d
16 1043, 1047 (4th Cir. 1985), cert. denied, 475 U.S. 1057, 106 S.Ct. 1285, 89 L.Ed.2d 592 (1986).
17 In this case, all of the foregoing requirements have been or will be met. As discussed
18 above, only the Contracts designated by the successful accepted bidder will be assumed and
19 assigned. The Contracts will only be assumed and assigned to facilitate the proposed sale, which,
20 as discussed, the Debtor believes is in the best interests of the estate. Therefore, the Debtor
21 submits that the “business judgment test” has been satisfied.
22 In addition, the successful accepted bidder will be required pay the Cure Amounts so as to
23 allow the Debtor to assume and assign such Contracts. Further, the order approving the sale of
24 the Property will provide that assumption and assignment of each of the Contracts will not be
25 effective until the respective Cure Amounts are paid. This will ensure that the Cure Amounts will
26 be paid to the other parties to the Contracts before any assignment of their respective Contracts
27 will occur. To the extent required by any party to a Contract, Bank or any successful accepted
28 bidder will provide adequate assurance of future performance under such Contract. Based on the
27
1 foregoing, the Debtor submits that the requirements of Section 365(b) have been, or will be,
2 satisfied.
3 If any counterparty to a contract objects to the Cure Amounts as set forth in Exhibit “B” to
4 the Klepfer Sale Declaration, either: (1) the Debtor will negotiate with such counterparty and
5 reach a consensual resolution; (2) the counterparty will prosecute its objection and the amount of
6 the cure shall be resolved at the hearing on this Motion or such other time as may be set by the
7 Court; or (3) the Purchaser may not designate such Contract for assumption and assignment under
8 the Purchase Agreement. However, if any counterparty fails to timely object to the Cure
9 Amounts set forth on Exhibit “B” to the Klepfer Sale Declaration, then such failure to timely
10 object shall cause the Cure Amount to be conclusive and binding on such counterparty without
11 leave for further consideration before this Court.
12 IV. CONCLUSION.
13 For the foregoing reasons, the Debtor respectfully requests that the Court enter an order
14 (a) authorizing the Debtor to sell the Property free and clear of liens, interests and encumbrances
15 under 11 U.S.C. § 363(f) to a successful bidder for some or all of the Property in accordance with
16 Sales Procedures Order; (b) approving the form of such Purchase Agreement as may be presented
17 by the Debtor and the Purchaser at or before the hearing on this Motion; (c) authorizing the
18 Debtor to assume and assign executory contracts and unexpired leases as designated by the
19 Purchaser pursuant to 11 U.S.C. § 365; (d) approving the cure amounts for the Contracts to be
20 assumed and assigned by the Debtor to the Purchaser set forth on Exhibit “B” to the Klepfer Sale
21 Declaration, and deeming the failure of a counter-party to a particular Contract to object to the
22 proposed cure amount and assumption and assignment to be a waiver of such objection; (e)
23 finding that Purchaser is a good faith buyer under 11 U.S.C. § 363(m); (f) waiving the 14-day
24 stay period provided in Federal Rule of Bankruptcy Procedure 6004(h) and 6006(d); (g)
25 authorizing the Debtor to take such other actions and execute such documents as necessary to
26 consummate the Purchase Agreement; (h) that notice of this Motion was proper, and (i) granting
27 such other relief as appropriate in the best interests of the estate. A proposed Order Authorizing
28 And Approving: (1) Sale Of Real Property And Certain Personal Property Assets Pursuant To 11
28
1 U.S.C. § 363 Free And Clear Of Liens, Claims, And Interests; And (2) Assumption And
2 Assignment Of Lease Under 11 U.S.C. § 365 is annexed hereto as Exhibit “1”. Said proposed
3 order will be subject to revision based on the bids received for the Property.
4 Dated this 12th day of November, 2010.
5
/s/ Edmond Buddy Miller
6 Edmond Buddy Miller
Special Counsel for Firstgold Corp.,
7 Debtor-In-Possession
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EXHIBIT 1
EXHIBIT 1
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8 Edmond “Buddy” Miller Submitted on: 12/ /2010
The Law Office of Edmond “Buddy” Miller
9 1610 Montclair Avenue, Suite C
Reno, NV 89509
10 Telephone: (775) 828-9898
Facsimile: (775) 828-9893
11 bmiller@buddymillerlaw.com
12 Special Counsel for Firstgold Corp., debtor in possession
13
UNITED STATES BANKRUPTCY COURT
14
DISTRICT OF NEVADA
15
16
In re Case No. BK-N-10-50215- GWZ
17
FIRSTGOLD CORP., Chapter 11
18
Debtor.
19
ORDER AUTHORIZING AND
20 APPROVING: (1) SALE OF REAL
PROPERTY AND CERTAIN
21
PERSONAL PROPERTY ASSETS
22 PURSUANT TO 11 U.S.C. § 363 FREE
AND CLEAR OF LIENS, CLAIMS, AND
23 INTERESTS; AND (2) ASSUMPTION
AND ASSIGNMENT OF LEASE UNDER
24 11 U.S.C. § 365
25
Hearing
26 Date: December 6, 2010
Time: 2:00 p.m.
27 Place: Ctrm. 3
28
1
1 On December 6, 2010 on the 2:00 p.m. calendar, the Court held a hearing on the
2 “Motion By Firstgold Corp. For Order Authorizing And Approving: (1) Sale of Real and
3 Personal Property Assets Pursuant to 11 U.S.C. § 363 Free and Clear Of Liens, Claims, and
4 Interests; (2) Assumption and Assignment Of Executory Contracts and Unexpired Leases
5 under 11 U.S.C. § 365; and (3) Related Relief” (the “Sale Motion”). Appearances at the
6 hearing were as set forth on the record.
7 IT IS HEREBY FOUND AND CONCLUDED, pursuant to Bankruptcy Rules
8 7052 and 9014, that:

9 A. This Court has jurisdiction over the Sale Motion pursuant to 28 U.S.C. §§ 157
10 and 1334, and this matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (N) and
11 (O). Venue of this case and the Sale Motion in this district is proper under 28 U.S.C. §§ 1408
12 and 1409. This order constitutes a final and appealable order within the meaning of 28 U.S.C.
13 § 158(a).
14 B. The Debtor has followed the procedures set forth in the Order Approving Sale
15 Procedures with Respect To The: (1) Sale Of Real And Personal Property Assets Pursuant To
16 11 U.S.C. § 363 Free And Clear Of Liens, Claims, And Interests; (2) Assumption And
17 Assignment Of Executory Contracts And Unexpired Leases Under 11 U.S.C. § 365; And (3)
18 Related Relief entered by this Court on November 8, 2010 (the “Sale Procedures Order”) for
19 giving notice of the Sale Motion and the Sale Hearing and the assumption and assignment of
20 the Contracts.
21 C. The bidding procedures established by the Sale Procedures Order (the
22 “Bidding Procedures”) have been fully complied with in all material respects.
23 D. Proper, timely, adequate and sufficient notice of the Sale Motion, the Sale
24 Hearing, the sale of the Property and the assumption and assignment of the Contracts has been
25 provided in accordance with sections 102(l), 105(a), 363 and 365 of the Bankruptcy Code and
26 Rules 2002, 6004 and 9014 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy
27 Rules”) and in compliance with the Bidding Procedures, such notice was good and sufficient,
28 and appropriate under the particular circumstances, and no other or further notice of the Sale
2
1 Motion, the Sale Hearing, the Sale and the assumption and assignment of the Contracts or the
2 entry of this Sale Order is required.
3 E. A reasonable opportunity to object or be heard with respect to the Sale Motion
4 and the relief requested therein has been afforded to all interested persons and entities.
5 F. Creditors, parties-in-interest and other entities have been afforded a reasonable
6 opportunity to bid for the Property under the Bidding Procedures. The Property was marketed
7 and the sale process was conducted in compliance with the Bidding Procedures, the orders of
8 this Court and the requirements of applicable law.
9 G. [The Purchaser was the only party that submitted a Qualified Bid for the
10 Property. No other person or entity submitted a Qualified Alternative Bid by the deadline
11 established in the Sale Procedures Order, and, except for the Purchaser, no person or entity
12 has submitted a bid of any sort since such deadline. As a result, pursuant to the terms of the
13 Sale Procedures Order, the Debtor was not required to conduct the Auction, and the bid
14 submitted by the Purchaser as reflected in the Asset Purchase Agreement is the highest and
15 best offer for the Property.]
16 H. The Asset Purchase Agreement reflects the exercise of the Debtor’s sound
17 business judgment.
18 I. The Debtor has full corporate power and authority to execute the Asset
19 Purchase Agreement and all other documents contemplated thereby, and the sale of the
20 Property has been duly and validly authorized by all necessary corporate action of the Debtor.
21 The Debtor has all the corporate power and authority necessary to consummate the
22 transactions contemplated by the Asset Purchase Agreement.
23 J. Approval at this time of the Asset Purchase Agreement and consummation of
24 the Sale, including, without limitation, the assumption and assignment of the Contracts, is in
25 the best interests of the Debtor and its creditors and bankruptcy estate.
26 K. The Debtor has demonstrated good, sufficient and sound business purpose and
27 justification for the Sale. The Debtor has also demonstrated compelling circumstances for the
28 Sale and the assumption and assignment of the Contracts, without the filing and confirmation
3
1 of a plan of reorganization or liquidation in these cases, including, without limitation, the

2 Debtor has insufficient financing to continue its on-going business operations and, as a result,
3 the value of the Property is likely to depreciate rapidly in the absence of the Sale.
4 L. The Asset Purchase Agreement was negotiated, proposed and entered into by
5 the Debtor and the Purchaser without collusion, in good faith, and from arm's-length
6 bargaining positions. None of the Debtor or the Purchaser has engaged in any conduct that
7 would cause or permit the Asset Purchase Agreement or the Sale to be avoided under section
8 363(n) of the Bankruptcy Code. The Purchaser is not an insider of the Debtor as that term is
9 defined in section 101(31) of the Bankruptcy Code.
10 M. The Purchaser is a good faith purchaser within the meaning of section 363(m)
11 of the Bankruptcy Code and, as such, is entitled to all of the protections afforded thereby. The
12 Purchaser will be acting in good faith within the meaning of section 363(m) of the Bankruptcy
13 Code in closing the transactions contemplated by the Asset Purchase Agreement. The Asset
14 Purchase Agreement was not entered into for the purpose of hindering, delaying car
15 defrauding creditors under the Bankruptcy Code or under the laws of the United States or any
16 state, territory, possession, or district thereof.
17 N. The terms and conditions of the Asset Purchase Agreement and the purchase
18 price thereunder (i) are fair and reasonable, (ii) represent the highest and best offer for the
19 Property, (iii) will provide a greater recovery for the Debtor’s creditors than would be
20 provided by any other practical alternative and (iv) constitute fair consideration.
21 O. The Debtor may sell the Property free and clear of all liens, claims,
22 encumbrances and interests of any kind or nature whatsoever except the Permitted Liens,
23 described in Section __ of the Asset Purchase Agreement, in each case, one or more of the
24 requirements set forth in section 363(f) of the Bankruptcy Code has been satisfied. The
25 interests of non-debtor parties with security interests, liens, claims, encumbrances and other
26 interests of any kind or nature whatsoever in the Property are adequately protected, because
27 such security interests, liens, claims, encumbrances and other interests shall attach to the
28 proceeds of the sale of the Property to the same extent (and in the same priority and subject to
4
1 the same limitations) as such security interests, liens, claims, encumbrances and other
2 interests were attached to the Property immediately before the sale. Those non-debtor parties
3 with liens, claims, encumbrances and interests of any kind or nature whatsoever in the
4 Property who did not object, or who withdrew their objections, to the Sale and the assumption
5 and assignment of the Contracts are deemed to have consented pursuant to sections 363(f)(2)
6 and 365 of the Bankruptcy Code. Those non-debtor parties with liens, claims, encumbrances
7 and interests of any kind or nature whatsoever in the Property who did object fall within one
8 or more of the other subsections of sections 363(f) and 365.
9 P. The transfer of the Property to the Purchaser will vest the Purchaser with good
10 and marketable title to the Property.

11 Q. Consummation of the Sale, including, without limitation, the transfer of the
12 Property to the Purchaser will not subject the Purchaser to any debts, liabilities, obligations,
13 commitments, responsibilities or claims of any kind or nature whatsoever, whether known or
14 unknown, contingent or otherwise, existing as of the date hereof or hereafter arising, of or
15 against the Debtor, any affiliate of the Debtor, or any other person by reason of such transfers
16 and assignments, including, without limitation, based on any theory of antitrust or successor
17 or transferee liability, except that the Purchaser shall only be liable for payment of the
18 liabilities assumed in Section__ of the Asset Purchase Agreement. Other than as expressly set
19 forth in the Asset Purchase Agreement or any liability under Contracts assumed by Purchaser
20 pursuant to 11 U.S.C. § 365, Purchaser will have no successor or vicarious liabilities of any
21 kind or character and will under no circumstances be deemed Debtor’s successor.
22 R. The Purchaser will not consummate the Sale, the assumption and assignment
23 of the Contracts and other transactions contemplated thereby if the Sale of the Property to the
24 Purchaser is not free and clear of all liens, claims, encumbrances and interests of any kind or
25 nature whatsoever, except those expressly assumed by the Purchaser in Section ___ of the
26 Asset Purchase Agreement or if the Purchaser would, or in the future could, be liable for any
27 liens, claims, encumbrances and interests of any kind or nature whatsoever, except those
28 expressly assumed by the Purchaser in Section __ of the Asset Purchase Agreement.
5
1 S. Under Section 365 of the Bankruptcy Code, the only amounts (including,
2 without limitation, cure costs) that must be paid in order for the Debtor to assume and assign
3 the Contracts to the Purchaser are set forth on Exhibit “B” to the Sale Motion (the “Cure
4 Amounts”).
5 T. Each of the Debtor and/or Purchaser, as applicable in accordance with the
6 Asset Purchase Agreement, has (i) cured, or provided adequate assurance of curing, any
7 default existing prior to the date hereof under each of the assigned Contracts, within the
8 meaning of Section 365(b)(1)(A) of the Bankruptcy Code, (ii) provided compensation or
9 adequate assurance of compensation to any party for any actual pecuniary loss to such party
10 resulting from a default prior to the date hereof under any of the assigned Contracts, within
11 the meaning of section 365(b)(1)(B) of the Bankruptcy Code, and (iii) provided adequate
12 assurance of Purchaser's future performance under the assigned Contracts, within the meaning
13 of sections 365(b)(1)(C) and 365(f)(2)(B) of the Bankruptcy Code.
14 U. Purchaser's undertaking to fulfill all future performance obligations under the
15 Contracts, upon the assumption and assignment to Purchaser thereof, is hereby found to be
16 adequate assurance of future performance under section 365(f)(2)(B) of the Bankruptcy Code.
17 V. No defaults exist in the Debtor’s performance under the Assigned Contracts or
18 the Assigned Leases as of the date of this Sale Order other than the failure to pay amounts
19 equal to the Cure Amounts set forth in Exhibit B to the Sale Motion or defaults that are not
20 required to be cured as contemplated in section 365(b)(1)(A) of the Bankruptcy Code.
21 W. There is no legal or equitable reason to delay the Sale. Cause exists not to
22 apply the automatic ten (10) day stay imposed by Bankruptcy Rules 6004(g) and 6006(d). To
23 the extent any of the foregoing findings of fact constitute conclusions of law, they are adopted
24 as such.
25 Having considered the Sale Motion, the evidence filed in support thereof, the other
26 pleadings and filings in this bankruptcy case, having found notice to have been adequate
27 and appropriate under the circumstances, and based on the findings and for the reasons set
28 forth on the record,
6
1 THE COURT HEREBY ORDERS as follows:
2 1. The Sale Motion is granted in all respects. All objections to the Sale Motion
3 and entry of this Sale Order, if any, that have not been withdrawn, waived or settled are
4 hereby overruled on the merits. All persons and entities given notice of the Sale Motion
5 that failed to timely object thereto are deemed to consent to the relief sought therein
6 including without limitation all nondebtor parties to the Contracts.
7 2. The Asset Purchase Agreement and the transactions contemplated thereby
8 are hereby approved in all respects. The transfer of the Property by Debtor to the Purchaser
9 shall be a legal, valid and effective transfer of the Property. The Closing of the Sale and the
10 other transactions contemplated thereby are hereby approved and authorized under Section
11 363(b) of the Bankruptcy Code.
12 3. Pursuant to Section 365 of the Bankruptcy Code, effective as of the
13 Closing, the Debtor shall (i) assume and assign to Purchaser the Contracts identified on
14 Exhibit __ to the Asset Purchase Agreement free and clear of all liens and claims unless
15 otherwise provided by Section ___ of the Asset Purchase Agreement and (ii) execute and
16 deliver to the Purchaser such documents or other instruments as may be necessary to
17 assign and transfer such Assigned Contracts and Assigned Leases to the Purchaser as
18 contemplated by the Asset Purchase Agreement. Purchaser may, in its sole discretion at
19 any time prior to the Closing, remove any Contract or lease from Exhibit __ to the Asset
20 Purchase Agreement, in which case such Contract or lease shall not be, as applicable, an
21 Assigned Contract or an Assigned Lease, but rather shall be an Excluded Asset.
22 4. Upon assumption and assignment to Purchaser of the Contracts, the Debtor
23 is relieved from any and all liability for any breach of any assigned Contract occurring
24 after such assignment as provided for under Section 365(k) of the Bankruptcy Code.
25 5. Pursuant to sections 363(b) and (f) of the Bankruptcy Code, the Debtor is
26 authorized to and shall sell, and Purchaser shall buy, the Property on the terms and
27 conditions set forth in the Asset Purchase Agreement free and clear of all mortgages, deeds
28 of trust, security interests, pledges, liens, judgments, demands, encumbrances, easements,
7
1 restrictions or charges, rights-of-way, covenants, encroachments, building, use, voting or

2 other restrictions, conditional sale or other title retention agreements and interests (as
3 defined in section 363(l) of the Bankruptcy Code) of any kind or nature, whether incurred
4 voluntarily or arising by operation of law, and including, without limitation, any rights,
5 claims, licenses, grants or interests of any kind or nature of any person or entity other than
6 the Debtor under the contracts, licenses and agreements set forth on Schedule __ to the
7 Asset Purchase Agreement (the foregoing are collectively referred to as "Liens" herein),
8 and all debts arising in any way in connection with any acts of the Debtor, claims (as that
9 term is defined in the Bankruptcy Code), obligations, liabilities, demands, guaranties,
10 options, rights, contractual commitments, restrictions, interests and matters of any kind and
11 nature, arising prior to the Closing Date or relating to acts occurring prior to the Closing
12 Date, whether imposed by agreement, understanding, law, equity or otherwise and whether
13 known or unknown, disclosed or undisclosed, absolute, contingent, inchoate, fixed or
14 otherwise (the foregoing are collectively referred to as "Claims" herein), other than the
15 Permitted Liens and and any other liabilities set forth in Section __ of the Asset Purchase
16 Agreement which are expressly assumed by Purchaser (the “Claims”). Other than the
17 Permitted Liens, any liens or interests that encumber or are found to encumber or purport
18 to encumber the Property, shall be transferred to and attach to the net proceeds of the Sale
19 under the Asset Purchase Agreement (after the payments specified herein) to the same
20 extent and in the same priority that they encumbered the Property prior to the Closing
21 Date.
22 6. In furtherance of the foregoing and except for Claims that Purchaser is
23 expressly assuming in Section ___ of the Asset Purchase Agreement, Purchaser is not
24 assuming nor shall it in any way whatsoever be liable or responsible, as a successor or
25 otherwise, for any liens or claims of the Debtor or liens or claims in any way whatsoever
26 relating to or arising from the Property or the Debtor’s operations or use of the Property,
27 including, without limitation, the Contracts, on or prior to the Closing Date or any liens or
28 claims that in any way whatsoever relate to periods on or prior to the Closing Date or are
8
1 to be observed, paid, discharged or performed on or prior to the Closing Date (in each case,
2 including any liens or claims that result from, relate to or arise out of tort or other product
3 liability claims), or any liens or claims calculable by reference to the Debtor or its assets or
4 operations, or relating to continuing conditions existing on or prior to the Closing Date (the
5 “Pre-Closing Liens and Claims”), which Pre-Closing Liens and Claims are hereby
6 extinguished for all purposes as to Purchaser, without regard to whether the claimant
7 asserting any such Pre-Closing Liens and Claims has delivered to Purchaser a release
8 thereof. Without limiting the generality of the foregoing, except as provided in this Sale
9 Order or the Asset Purchase Agreement, Purchaser shall not be liable or responsible, as a
10 successor or otherwise, for Pre-Closing Liens and Claims, whether calculable by reference
11 to the Debtor or its operations, or under or in connection with (i) any employment or labor
12 agreements, consulting agreements, severance arrangements, change-in-control agreements
13 or other similar agreements to which the Debtor is a party, (ii) any pension, welfare,
14 compensation or other employee benefit plans, agreements, practices and programs,
15 including, without limitation, any pension plan of the Debtor, (iii) the cessation of either of
16 the Debtor’s operations, dismissal of employees, or termination of employment or labor
17 agreements or pension, welfare, compensation or other employee benefit plans,
18 agreements, practices and programs, obligations that might otherwise arise from or
19 pursuant to the Employee Retirement Income Security Act of 1974, as amended, the Fair
20 Labor Standard Act, Title VII of the Civil Rights Act of 1964, the Age Discrimination and
21 Employment Act of 1967, the Federal Rehabilitation Act of 1973, the National Labor
22 Relations Act, the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), or
23 the Worker Adjustment and Retraining Notification Act, (iv) workmen's compensation,
24 occupational disease or unemployment or temporary disability insurance claims, (v)
25 environmental liabilities, debts, claims or obligations arising from conditions first existing
26 on or prior to the Closing Date (including, without limitation, the presence of hazardous,
27 toxic, polluting, or contamination substances or wastes), which may be asserted on any
28 basis, including, without limitation, under the Comprehensive Environmental Response,
9
1 Compensation and Liability Act, 42 U.S.C. § 9601 et seq., (vi) any bulk sales or similar
2 law, (vii) any liabilities, debts, any commitments or obligations of, or required to be paid
3 by, the Debtor for taxes of any kind for any period, (viii) any liabilities, debts,
4 commitments or obligations for any taxes relating to the operations or Property for or
5 applicable to any pre-Closing tax period, including any property taxes, (ix) any liabilities,
6 debts, commitments or obligations for any transfer or similar taxes, (x) any cure amounts
7 payable pursuant to Section 365(b)(1)(A), (B) or (C) of the Bankruptcy Code in order to
8 effectuate, pursuant to the Bankruptcy Code, the assumption by the Debtor and assignment
9 to Purchaser of the Assigned Contracts and Assigned Leases, except to the extent that
10 Purchaser has assumed such liabilities under the Asset Purchase Agreement, (xi) any
11 liabilities, debts, commitments or obligations of any kind under any contract or lease that is
12 not an assigned Contract, (xii) any litigation, and (xiii) any products liability or similar
13 claims, whether pursuant to any federal laws or otherwise.
14 7. In the absence of a stay pending appeal, if the Purchaser and the Debtor
15 elect to close under the Asset Purchase Agreement at any time after entry of this Order,
16 then, with respect to the Sale, the Purchaser, as a purchaser in good faith, shall be entitled
17 to the protections of section 363(m) of the Bankruptcy Code if this Sale Order or any
18 authorization.
19 8. The Debtor is authorized to execute, acknowledge and deliver such
20 corporate name change certificates, deeds, assignments, conveyances, and other

21 assurances, documents, and instruments of transfer and take such other action that may be
22 reasonably necessary to perform the terms and provisions of the Asset Purchase
23 Agreement, and shall take any other action for purposes of assigning, transferring,
24 granting, conveying, and confirming to the Purchaser, or reducing to possession, any or all
25 of the Property and to execute such nonmaterial amendments to the Asset Purchase
26 Agreement and related agreements as may be required to effectuate the letter and intent of
27 the Asset Purchase Agreement and the consummation of the Sale to the extent
28 contemplated by the Asset Purchase Agreement.
10
1 9. At or after the Closing, the Debtor is authorized to pay any expenses or
2 costs that are required to be paid in order to consummate the Sale or perform their
3 obligations under the Asset Purchase Agreement.
4 10. The Contracts listed on Exhibit __ to the Asset Purchase Agreement shall,
5 upon assignment to the Purchaser, be deemed to be valid and binding and in full force and
6 effect and enforceable in accordance with their respective terms, except as otherwise
7 specifically determined by the Court, notwithstanding any provision in any such assigned
8 Contract (including those of the type described in sections 365(b)(2) and (f) of the
9 Bankruptcy Code) that prohibits, restricts, or conditions such assignment or transfer.
10 11. Each non-debtor party to an assigned Contract is hereby forever barred,
11 estopped, and permanently enjoined from asserting against the Debtor or the Purchaser, or
12 the property of any of them, any default existing as of the date of the Sale Hearing, or any
13 counterclaim, defense, setoff or any other claim asserted or assertable against the Debtor.
14 12. Other than the Contracts, Purchaser assumes none of the Debtor’s other
15 leases and contracts and shall have no liability whatsoever thereunder.

16 13. Subject to the provisions, this Court retains jurisdiction to (i) enforce and
17 implement the terms and provisions of the Asset Purchase Agreement, all amendments
18 thereto, any waivers and consents thereunder, and each of the agreements executed in
19 connection therewith, (ii) compel delivery of the Property to the Purchaser, (iii) compel
20 delivery of the purchase price and all adjustments to the purchase price under the Asset
21 Purchase Agreement, (iv) resolve any disputes, controversies or claims arising out of or
22 relating to the Asset Purchase Agreement, (v) interpret, implement and enforce the
23 provisions of this Sale Order and (vi) protect the Purchaser against any claims, causes of
24 action or other liabilities of whatever nature that it did not expressly assume under the
25 Asset Purchase Agreement.
26 14. The provisions of this Sale Order authorizing the Debtor to enter into the
27 Asset Purchase Agreement and authorizing the transactions contemplated thereby shall be
28 self-executing, and neither the Debtor nor the Purchaser shall be required to execute or file
11
1 any releases, termination statements, assignments, consents, or other instruments in order

2 to effectuate consummation to implement the foregoing provisions hereof except as
3 expressly provided in the Asset Purchase Agreement. Notwithstanding the foregoing, the
4 Debtor, Purchaser and all other parties are authorized and directed to take any and all
5 actions necessary and appropriate to effectuate, consummate and implement fully the Asset
6 Purchase Agreement consistent with their obligations under the Asset Purchase
7 Agreement.
8 15. This Order is binding upon and inures to the benefit of any successors or
9 assigns of the Debtor or the Purchaser, including any trustee appointed in any subsequent
10 case of the Debtor under Chapter 7 of the Bankruptcy Code.
11 16. This Sale Order is and shall be (i) effective as a determination that, on the
12 Closing Date and after consummation of the Closing and payment of the Purchase Price as
13 provided for herein, all Liens And Claims existing as to the Property prior to the Closing
14 have been unconditionally released, discharged and terminated as charges against the
15 Property and/or the Purchaser (but not as against any other person or entity or the proceeds
16 of the Sale, to which the Liens attach as previously provided, or as against the Debtor’s
17 estates, to which Claims remain assertable), and that the conveyance of the Property
18 described herein have been effected, and (ii) binding upon and shall govern the acts of all
19 entities, including, without limitation, all filing agents, filing officers, title agents, title
20 companies, recorders of mortgages, recorders of deeds, registrars of deeds, registrars of
21 patents, trademarks or other intellectual property, administrative agencies, governmental
22 departments, secretaries of state, federal, state, and local officials, and all other persons and
23 entities who may be required by operation of law, the duties of their office, or contract, to
24 accept, file, register or otherwise record or release any documents or instruments, or who
25 may be required to report or insure any title or state of title in or to any of the Property.
26 17. No claim of any kind asserted by the Debtor at any time against any party to
27 any one of the Assigned Contracts or the Assigned Leases shall entitle such party to assert,
28 as against the Purchaser, any claim, counterclaim, defense or offset, or affect or impair in
12
1 any respect the obligations of such party to the Purchaser under any one of the Assigned
2 Contracts or the Assigned Leases.
3 18. The Court hereby orders that the ten-day stays provided for in Bankruptcy
4 Rules 6004(g) and 6006(d) shall not be in effect with respect to the Sale and the other
5 transactions contemplated in the Asset Purchase Agreement (including, without limitation,
6 the assumption and assignment to the Purchaser of the Contracts), and thus this Sale Order
7 shall be effective and enforceable immediately upon entry. Any party objecting to this
8 Order must exercise due diligence in filing an appeal and pursuing a stay or risk its appeal
9 being foreclosed as moot in the event that the Purchaser and the Debtor elect to close prior
10 to this Order becoming a final, non-appealable order.
11 19. The provisions of this Sale Order and the Asset Purchase Agreement are
12 non- severable and mutually dependent.

13 20. Nothing contained in any plan of reorganization or liquidation confirmed in
14 these Cases or any Order of this Court confirming such plan or any other order entered in
15 these Cases shall conflict with or derogate from the provisions of the Asset Purchase
16 Agreement or the terms of this Sale Order.
17 21. The findings of fact set forth above and conclusions of law stated herein and
18 made on the record at the hearing on the Sale Motion shall constitute this Court’s findings
19 of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052,
20 made applicable to this proceeding pursuant to Federal Rule of Bankruptcy Procedure
21 9014.
22 Prepared and Submitted by:
23 THE LAW OFFICE OF EDMOND “BUDDY” MILLER
24 /s/ Edmond “Buddy” Miller
25 Edmond “Buddy” Miller, Esq.
Special Counsel for Firstgold Corp., debtor in possession
26
27 ###
28
13
1 In accordance with LR 9021, counsel submitting this document certifies as follows
2 (check one):
3 ___ The court has waived the requirement of approval under LR 9021.
4 This is a chapter 7 or 13 case, and either with the motion, or at the hearing, I have
5 delivered a copy of this proposed order to all counsel who appeared at the hearing, any
6 unrepresented parties who appeared at the hearing, and each has approved or disapproved the
7 order, or failed to respond, as indicated below [list each party and whether the party has
8 approved, disapproved, or failed to respond to the document]:
9 X This is a chapter 9, 11, or 15 case, and I have delivered a copy of this proposed
10 order to all counsel who appeared at the hearing, any unrepresented parties who appeared at
11 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
12
to the document]:
13
14
15
___ I certify that I have served a copy of this order with the motion, and no parties
16
appeared or filed written objections.
17
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Motion To Sell-Nevada - Mining Interests

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Case 10-50215-gwz Doc 232 Entered 11/12/10 13:11:11 Page 1 of 44

1 Edmond “Buddy” Miller E-filed: 11/12/2010

1 MEMORANDUM OF POINTS AND AUTHORITIES

1 C. Liens Against the Property.

1 a. Sound Business Purpose.

7 approval of this Court.

15 b. Fair and Reasonable Price.

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

15 “(a) Claim maintenance fee

24 11 U.S.C.§ 28i. Failure to pay

8 7052 and 9014, that:

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

10 and marketable title to the Property.

1 THE COURT HEREBY ORDERS as follows:

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

20 corporate name change certificates, deeds, assignments, conveyances, and other

1 9. At or after the Closing, the Debtor is authorized to pay any expenses or

15 leases and contracts and shall have no liability whatsoever thereunder.

1 any releases, termination statements, assignments, consents, or other instruments in order

12 non- severable and mutually dependent.

1 In accordance with LR 9021, counsel submitting this document certifies as follows

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