NOTE 17 - COMMITMENTS AND CONTINGENCIES

Compliance with Environmental Regulations

The Company's activities are subject to laws and regulations controlling not only the exploration and mining of mineral properties, but also the effect of such activities on the environment. Compliance with such laws and regulations may necessitate additional capital outlays; affect the economics of a project, and cause changes or delays in the Company's activities.

Employment Agreements

Effective September 2, 2011, the Company entered into an amended and restated employment agreement with Mr. Edgar that revised the change in control provision. The amended and restated employment agreement provides that Mr. Edgar is entitled to written notice of termination for 12 months if Mr. Edgar is terminated without cause. Further upon a change of control (which is defined in the amended and restated employment agreement), Mr. Edgar is entitled to receive a severance payment equal to 12 months of his base salary ($CDN 7,500 per month) plus the previous year bonus, if Mr. Edgar terminates his employment within three months of such change in control.

On September 2, 2011 (although effective June 1, 2011), the Company entered into an amended and restated employment agreement with Mr. Barry, that provides for base compensation of $CDN 18,000 per month (or $CDN 216,000 annually) and a potential bonus of $CDN 30,000 if certain performance targets are met. The amended and restated employment agreement provides that Mr. Barry is entitled to written notice of termination for up to 12 months if Mr. Barry meets certain employment terms and is terminated without cause. Further upon a change of control (which is defined in the amended and restated employment agreement), Mr. Barry is entitled to receive a severance payment of up to 18 months of his base salary plus the previous year bonus, if Mr. Barry terminates his employment within three months of such change in control.

On June 6, 2012, the Company entered into an amended and restated employment agreement with Sean Fallis that provides for an annual base salary effective May 1, 2012 of $CDN 165,000. The amended and restated employment agreement provides that Mr. Fallis is entitled to written notice of termination for up to six months if Mr. Fallis meets certain employment terms and is terminated without cause. Further upon a change of control (which is defined in the amended and restated employment agreement), Mr. Fallis is entitled to receive a severance payment of equal to 12 months of his base salary plus the previous year bonus, if Mr. Fallis terminates his employment within three months of such change in control.

On August 4, 2011, the Company entered into an amended and restated independent contractor agreement with Jason Cunliffe, as the newly appointed Vice President of Exploration. Pursuant to the agreement Mr. Cunliffe will receive a base consulting rate of $700 per day for each day worked and a potential annual bonus of $20,000 if certain performance targets are met. The amended and restated independent contractor agreement continues on a month-to-month basis and can be terminated by either party with 30 days advance notice. Further upon a change of control (which is defined in the amended and restated independent contractor agreement), Mr. Cunliffe is entitled to receive a severance payment of up to 240 days of his base consulting rate, if Mr. Cunliffe terminates his contract within three months of such change in control. On May 15, 2012, the independent contractor agreement between the Company and Mr. Cunliffe was terminated, effective as of July 4, 2012. Following that date, Mr. Cunliffe will cease serving as the Company's Vice President of Exploration.

Property Concessions Mexico

To properly maintain property concessions in Mexico, the Company is required to pay a semi-annual fee to the Mexican government and complete annual assessment work.

In addition thirteen of the concessions in the Sierra Mojada project are subject to options to purchase from existing third party concession owners. The agreements are considered option purchase agreements and give the Company the option, but not the obligation, to acquire the concessions at established prices. Pursuant to the option purchase agreements, the Company is required to make certain payments over the terms of these contracts. The payments required to obtain full ownership of these concessions are set forth in the table below:

Olympia (1 concession)

 

Maravillas, Ampl. Sierra Mojada and Sierra Mojada (3 concessions)

 

Nuevo Dulces Nombres (Centenario) and Yolanda III (2 concessions)

 

(1) 48 months after the initial payment date, Silver Bull has the option of acquiring Nuevo Dulces Nombres (100% interest) for $4 million and Yolanda III (100% interest) for $2 million.

(2) Initial payment less advances is expected to be paid in the third quarter of the 2012 fiscal year.

Poder de Dios, Anexas a Poder de Dios, and Ampliacion a Poder de Dios (3 concessions)

 

(1) Payments shown in the second column are required to maintain the option. Payments shown in the third column reflect the purchase price at that point in time for the acquisition of 100% of the concessions. Upon payment of the option purchase price, no subsequent payments are required.

(2) After April 2015, Silver Bull must pay $300,000 every 6 months in order to maintain the option-purchase agreement. During this period, Silver Bull has the option of acquiring Poder de Dios, Anexas a Poder de Dios, and Ampliacion a Poder de Dios (100% interest) for $7 million.

Veta Rica o La Inglesa (1 concession)

 

La Perla, La India, and La India Dos (3 concessions)

 

(1) Payments shown in the second column are required to maintain the option. Payments shown in the third column reflect the purchase price at that point in time for the acquisition of 100% of the concessions. Upon payment of the option purchase price, no subsequent payments are required.

Property Concessions Gabon

The Company holds title to several property concessions in Gabon, Africa that require the Company to spend minimal amounts each term to renew the licenses. Each license is renewable twice with each renewal lasting for three years. The Company must spend 200,000,000 $CFA in order to renew each exploration license for a second term of three years and 400,000,000 $CFA in order to renew the license for a third term of three years. The Company must spend 800,000,000 $CFA in the third term. The Company may apply for a mining license at any time during these periods. The initial term of these exploration licenses expired on September 18, 2011. The Company applied for renewal in June of 2011 as it had met the necessary expenditure requirements and expects to receive the renewal approval in 2012. As of April 30, 2012, one U.S. dollar approximates $CFA 505.

Drilling Agreement

The Company entered into drilling agreements with two companies for a minimum of 25,000 meters of drilling at the Sierra Mojada Property. The remaining drilling commitment under these agreements was equal to $573,000 at April 30, 2012.

Office Lease Commitment

The Company entered into a five-year office lease agreement from April 1, 2012 to March 31, 2017 for the Company's corporate office in Vancouver, Canada. The monthly lease payment is $CDN 7,506 until March 31, 2014, increasing to $CDN 7,743 on April 1, 2014 with a further increase to $CDN 7,981 on April 1, 2016. As of April 30, 2012, one U.S. dollar approximates $CDN 0.99.