SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 27, 1995
VANDERBILT GOLD CORPORATION
DELAWARE 1-9904 88-0244117
- ------------------------------ ------------------ ------------------------
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification Number)
4625 Wynn Rd., Suite 103
Las Vegas, Nevada 89103
- ------------------------------ ------------------------
(Address of Executive Offices) (Zip Code)
Registrants telephone number including area code. (702) 362-3152
Not Applicable
----------------------------------------------------------------------
Former name or former address, if changed since last report)
ITEM 1 & 2 SIGNIFICANT TRANSACTION
Vanderbilt Gold Corporation entered into a purchase agreement on the La Sierra
concession of approximately 32,000 acres located in Durango, Mexico, on
September 27, 1995. The entire Agreement is attached which is between Rosarence
S.A. de C.V. and Vanderbilt Gold Corporation.
Vanderbilt Gold Corporation entered into a joint venture Agreement on the Las
Coloradas Property consisting of approximately 12,000 acres located in Durango,
Mexico, on December 22, 1995. The entire Agreement is attached which is between
Compania Minera Cosalteca, S.A. de C.V., Vanderbilt Gold Corporation, Guardian
Enterprises, Ltd. and Consolidated Viscount Resources, Ltd.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly
Date: January 10, 1996
VANDERBILT GOLD CORPORATION
---------------------------------------
Keith W. Fegert, President and Chief
Executive Officer
AGREEMENT
THIS AGREEMENT is made as of Sept. 27, 1995 (the "Effective Date") by and
between VANDERBILT GOLD CORPORATION, a Delaware Corporation, ("VANDERBILT")
whose address is 7625 Wynn Road, Las Vegas, Nevada 89103, facsimile telephone
number 702-362-8313, and Compania Minera Rosarence S.A. de C.V. ("ROSARENCE"), a
Mexican Corporation of Culiacan, Sinaloa, Mexico, whose address is Carratera
Culiacan-Eldorado KM 0.600 Interior 3, Culiacan, Sinaloa, Mexico, facsimile
telephone number 011-52-696-50306.
RECITALS
ROSARENCE is the owner of a certain mineral exploration concession known as
the La Sierra Concession located in Durango, Mexico, which is more particularly
described in the attached Exhibit "A" (the "CONCESSION").
The parties desire to enter into an agreement which will supersede any
earlier agreements and whereby VANDERBILT purchases the CONCESSION and all of
the shares of ROSARENCE.
This agreement is intended to be legally binding but the parties recognize
that they may be required under Mexican law to enter into a more formal
agreement to give full effect to the rights and obligations of both parties.
1. PURCHASE OF CONCESSION. ROSARENCE hereby grants to VANDERBILT an
exclusive and irrevocable right to purchase the CONCESSION described in Exhibit
"A", attached hereto. ROSARENCE further grants VANDERBILT the right to purchase
all of the shares of ROSARENCE as part of the same purchase and for no
additional consideration. The purchase of ROSARENCE shall solely be the shell
corporation and the CONCESSION.
2. CONSIDERATION. The consideration for the purchase of the CONCESSION
is as follows:
A. VANDERBILT shall pay to ROSARENCE the sum of $120,000.00.
Payments shall be as follows: $30,000 within 10 days of the execution of this
Agreement. If this initial payment is not made by Vanderbilt, this Agreement
may be canceled, at the option of ROSARENCE, without further obligation on the
part of either party. Three additional payments of $30,000 shall be paid on a
quarterly basis following the first payment.
B. VANDERBILT shall provide all sums necessary to keep the
CONCESSION in force with the government of Mexico until the final closing of the
purchase of the CONCESSION by VANDERBILT.
C. Within 30 days of the execution of this Agreement, VANDERBILT
will issue to ROSARENCE the amount of 1,800,000 (One Million Eight Hundred
Thousand) shares of VANDERBILT restricted shares of common stock to ROSARENCE,
which shall be deemed a private placement, however, said shares shall be freely
transferable within 45 days from the date of issuance pursuant to Regulation S.
Until the purchase price is paid in full, title to the CONCESSION
shall be held in trust and released to VANDERBILT upon its completion of payment
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of the purchase price or to ROSARENCE if VANDERBILT does not complete the
payment of the purchase price pursuant to the terms and conditions of this
Agreement.
3. REPRESENTATIONS OF ROSARENCE. ROSARENCE represents that to the best
of its knowledge and belief:
A. There is no condition or impediment that legally prevents it from
entering into this agreement.
B. There are no liens or encumbrances against the CONCESSION.
C. There are no environmental problems, no reclamation problems, no
existing labor disputes nor any labor contracts nor any other legal or
governmental matters that would significantly impair the ability of ROSARENCE or
VANDERBILT to explore, develop, process minerals and produce minerals from the
CONCESSION.
D. ROSARENCE has clear title to the CONCESSION and that it may
legally transfer the CONCESSION to VANDERBILT upon the exercise by VANDERBILT of
its option hereunder.
4. VANDERBILT'S DUE DILIGENCE. VANDERBILT has been previously provided
with information concerning title to the CONCESSION. VANDERBILT may continue,
at its own expense, to conduct whatever investigations and inquiries it deems
necessary related to their examination of title and other legal matters during a
period not to exceed thirty (30) days from and after the execution of this
Agreement. If VANDERBILT identifies any legal defects that would impair the
security of its investment or the ability to mine and process ore from the
CONCESSION, it shall notify ROSARENCE of same. If ROSARENCE cannot cure such
defect or defects within fifteen (15) days of notification of same, then
VANDERBILT shall have the option to cancel the Agreement without further
obligation.
5. GEOLOGICAL INFORMATION. ROSARENCE has previously delivered or
communicated to VANDERBILT certain geological and engineering information
including reserve ore calculations regarding the CONCESSION. ROSARENCE makes no
representations as to the validity of accuracy of such information, calculation
or any conclusions that might be inferred therefrom and shall not be responsible
for any loss or damage suffered by VANDERBILT in reliance upon such information.
VANDERBILT acknowledges that such information was supplied as a courtesy by
ROSARENCE and at the request of VANDERBILT and that the decision of VANDERBILT
to enter into this Agreement was not based upon the information supplied by
ROSARENCE or any statements made by employees, consultants, or other
representatives for or on behalf of ROSARENCE, but solely upon the
investigations and testing conducted by VANDERBILT.
6. EFFECT OF AGREEMENT. Upon execution of this Agreement, it shall be
binding upon the parties unless and until the parties agree to a more formal
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agreement if the same is deemed advisable by Mexican legal counsel to accomplish
the intention of the parties under the laws of Mexico. This Agreement
supersedes all prior agreement or understandings between the parties.
7. GENERAL PROVISIONS.
A. The rights of VANDERBILT in this Agreement shall not be assigned
without having first obtained the written consent of ROSARENCE which consent
shall not be unreasonably withheld. ROSARENCE may freely assign its interest in
this Agreement at any time.
B. Any notice or communication required or permitted hereunder shall
be effective when personally delivered or deposited, postage prepaid, with
Federal Express or DHL (or any other courier as the parties may agree on in
advance) to the addressed specified above. Any such notice shall be effective
three (3) days after deposit with such a courier. Any party may, by notice
given to the other as given aforesaid, change its mailing address for future
notices.
C. All references to payment of money in this Agreement shall be in
UNITED STATES DOLLARS.
8. FURTHER ASSURANCES. The parties intend that this Agreement be a
binding and enforceable contract, but they further understand that it may be
necessary to enter into other further agreements to memorialize or otherwise
give legal effect to the terms and conditions of this Agreement and agreed to do
so. If any provision of this Agreement is in violation of the laws of Mexico,
such invalidity shall not effect the remainder of this Agreement and such
remaining portions of this Agreement shall be interpreted to give the maximum
possible effect to the intention of the parties to sell the CONCESSION while
maintaining for the parties the economic benefit expressed herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
dates indicated below, effective as of the Effective Date.
VANDERBILT GOLD CORPORATION
Dated: Sept. 25, 1995 ------------------------------
By: KEITH R. FEGERT
President
ROSARENCE
Dated: October 2, 1995 ------------------------------
By: ALEJANDRO CANELOS
President
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ADDENDUM TO AGREEMENT
This Addendum to Agreement is made on October 4, 1995 by and between
Vanderbilt Gold Corporation, ("VANDERBILT"), a Delaware Corporation and Compania
Minera Rosarence, S.A. de C.V. ("ROSARENCE"), a Mexican corporation of Culiacan,
Sinaloa, Mexico.
This Addendum modifies that certain Agreement dated September 27, 1995
relating to the La Sierra Concession in Durango, Mexico. The agreement is
modified relative to Paragraph 2c. and the issuance of 1,800,000 (one million
eight hundred thousand) shares of VANDERBILT restricted common stock which shall
be deemed a private placement, however, said shares shall be freely transferable
within 45 days from the date of issuance as long as Regulation S is satisfied
and the transfer is to a Mexican corporation.
Within one year of the time of such issuance of the shares, the shares
shall have an average value of $1.00 (U.S.) for a 15 day cycle during the one
year period as determined by the bid/ask price on the electronic bulletin board
trading system in the United States. If during the one year period the average
value of each share does not reach $1.00, ROSARENCE may elect to receive the
difference between the highest average value for a 15 day cycle and the $1.00 as
the remainder of the purchase price in cash or by additional shares of
VANDERBILT stock. If ROSARENCE elects to receive the remainder of the purchase
price in cash, such funds shall be paid to ROSARENCE in equal monthly
installments beginning 15 months from signing of this agreement and paid in
equal payments over the following 12 month period.
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An additional paragraph is added to the Agreement as follows:
In the event of default by VANDERBILT under the terms of the Agreement,
ROSARENCE shall give written notice of the nature of said default by registered
mail to VANDERBILT'S corporate office. VANDERBILT shall have 20 business days
from the receipt of said notice to cure the default. If the default is not
cured within the 20 business day time period, this Agreement shall terminate
without further action on the part of ROSARENCE.
VANDERBILT
Dated: October 4, 1995 By:
------------------------------
Keith W. Fegert
President
ROSARENCE
Dated: October 4, 1995 By:
------------------------------
Alejandro Canelos
President
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LAS COLORADAS JOINT VENTURE AGREEMENT
THIS AGREEMENT made as of December 22, 1995 between VANDERBILT GOLD
CORPORATION, a Delaware Corporation, ("Vanderbilt"), GUARDIAN ENTERPRISES, LTD.,
CONSOLIDATED VISCOUNT RESOURCES, LTD. both of which are British Columbia, Canada
Corporations (hereinafter collectively referred to as "Guardian") and COMPANIA
MINERA COSALTECA, S.A. DE C.V. ("Cosalteca"), a Mexican Corporation of Culiacan,
Sinaloa, Mexico.
A. Cosalteca is the owner of a certain mineral exploration concessions
located in Durango, Mexico, which are more particularly described in the
attached Exhibit "A" (referred to collectively as the "Concession").
B. Guardian and Vanderbilt desire to participate with Cosalteca in the
mining of mineral resources within the said properties pursuant to the terms of
this Agreement, and Cosalteca is willing to grant such right to Guardian and
Vanderbilt.
C. It is the intention of Cosalteca, Guardian and Vanderbilt that this
Agreement will govern the development and mining of the Concession.
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein, Guardian, Vanderbilt and Cosalteca agree as follows:
ARTICLE I
DEFINITIONS
1.1 "ACCOUNTING PROCEDURE" means the procedures set forth in Exhibit
"B".
1.2 "AFFILIATE" means any person, partnership, joint venture,
corporation or other form of enterprise which directly or indirectly controls,
is controlled by, or is under common control with a Participant. For purposes
of the preceding sentence, "control" means possession, directly or indirectly,
of the power to direct or cause direction of management and policies through
ownership of voting securities, contract, voting trust of otherwise.
1.3 "AGREEMENT" means this Joint Venture Agreement, including all
amendments an modifications thereof, and all schedules and exhibits, which are
incorporated herein by this reference.
1.4 (DELETED)
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1.5 "AREA OF INTEREST" means the entire area lying within the outermost
boundaries of the Properties as particularly described in Part 1 of Exhibit "A".
1.6 "ASSETS" means the Properties, products and all other real and
personal property, tangible and intangible, held for the benefit of the
Participants hereunder.
1.7 "BUDGET" means a detailed estimate of all costs to be incurred by
the Participants with respect to a Program and a schedule of cash advances to be
made by the Participants.
1.8 "CHAIRMAN" means the person elected to head the Management Committee
pursuant to Section 7.1.
1.9 "COST OVERRUN" means that cost overrun provided for in Section 5.3.
1.10 "INITIAL CONTRIBUTION" means that contribution each Participant has
made or agrees to make pursuant to Section 5.1.
1.11 "MANAGEMENT COMMITTEE" means the committee established under Article
VII.
1.12 "OPERATING PARTICIPANT" means the person or entity appointed under
Article VIII to manage Operations, or any successor Operating Participant.
1.13 "MINE AREA" means the area described in Exhibit "A" that constitutes
the present Concession.
1.14 "MINING" means the mining, extracting, producing, handling, milling
or other processing of Products.
1.15 "OPERATIONS" means the activities carried out under this Agreement.
1.16 "PARTICIPANT" and "PARTICIPANTS" mean the persons or entities that
from time to time have Participating Interests.
1.17 "PARTICIPATING INTEREST" means the interest in the profits and
losses of the partnership that each Participant holds, as such interest may from
time to time be adjusted hereunder. Participating Interests shall be calculated
to three decimal places and rounded to two (e.g., 1.519% rounded to 1.52%).
Decimals of .005 or more shall be rounded up to .01, decimals of less than .005
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shall be rounded down. The initial Participating Interests of the Participants
are set forth in Section 6.1.
1.18 "PRIME RATE" means the interest rate quoted as "Prime" by the
Norwest Bank, at its head office, as said rate may change from day to day (which
quoted rate may not be the lowest rate at which the Bank loans funds).
1.19 "PRODUCTS" means all dore bullion, ores, minerals and mineral
resources produced from the Properties under this Agreement.
1.20 "PROGRAM" means a description in reasonable detail of Operations to
be conducted and objectives to be accomplished by the Operating Participant for
a year or any longer period.
1.21 "PROPERTIES" means those interests in real property described in
Part 1 of Exhibit "A", which are acquired and held subject to this Agreement.
1.22 "TRANSFER" means to directly or indirectly sell, grant, assign,
encumber, pledge or otherwise commit or dispose of whether voluntarily or
involuntarily.
1.23 "VENTURE" or "PARTNERSHIP" means the business arrangement of the
Participants under this Agreement.
ARTICLE II
REPRESENTATIONS; TITLE TO ASSETS
2.1 CAPACITY OF PARTICIPANTS. Each of the Participants represents as
follows:
(a) that it is a corporation duly incorporated and in good
standing in its state or province and country of incorporation and that it is
qualified to do business and is in good standing in those states and provinces
where necessary in order to carry out the purposes of this Agreement;
(b) that it has the capacity to enter into and perform this
Agreement and all transactions contemplated herein and that all corporate and
other actions required to authorize it to enter into and perform this Agreement
have been properly taken;
(c) that it will not breach any other agreement or arrangement
by entering into or performing this Agreement; and
(d) that this Agreement has been duly executed and delivered by
it and is valid and binding upon it in accordance with its terms.
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2.2 REPRESENTATIONS. Cosalteca makes the following representations
effective the date hereof:
(a) With respect to those Properties Cosalteca owns in fee
simple, if any, Cosalteca is in exclusive possession of and owns such Properties
free and clear of all defects, liens and encumbrances except those specifically
identified on Exhibit "A";
(b) With respect to those Properties in which Cosalteca holds an
interest under leases or other contracts: (i) Cosalteca is in exclusive
possession of such Properties; (ii) Cosalteca has not received any notice of
default of any of the terms or provisions of such contracts; (iii) Cosalteca has
the authority under such contracts to perform fully its obligations under this
Agreement; (iv) to the best of Cosalteca's knowledge and belief, such contracts
are valid and are in good standing; and (v) to the best of Cosalteca's knowledge
and belief, the properties covered thereby are free and clear of all defects,
liens and encumbrances except for those specifically identified on Exhibit "A"
or in such contracts. Cosalteca has delivered to Vanderbilt and Guardian all
information concerning title to the Properties in Cosalteca's possession or
control, including, but not limited to, true and correct copies of all leases or
other contracts relating to the Properties of which Cosalteca has knowledge;
(c) With respect to mining claims pursuant to the Concession
with the government of Mexico: (i) all assessment work and rental fees required
to hold the Concession has been performed through the current assessment year;
(ii) all such proofs of such assessment work and other filings required to
maintain the Concession in good standing have been properly and timely recorded
or filed with appropriate governmental agencies; (iii) the claims are free and
clear of defects, liens and encumbrances arising by, through or under Cosalteca,
except those matters disclosed on Part 1 of Exhibit "A"; and (iv) Cosalteca has
no knowledge of conflicting claims; and
(d) With respect to the Properties, there are no pending or
threatened actions, suits, claims or proceedings, except as already disclosed by
Cosalteca.
The representations set forth above are made to the best of
Cosalteca's knowledge and belief and shall survive the execution and delivery of
any documents of Transfer provided under this Agreement.
2.3 DISCLOSURES. Each of the Participants represents and warrants that
it is unaware of any material facts or circumstances which have not been
disclosed in this Agreement, which should be disclosed to the other Participant
in order to prevent the representations in this Article II from being materially
misleading.
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2.4 RECORD TITLE. Title to the Assets, when contributed, may be
conveyed to and thereafter held by the Venture in its name. However, the
parties may agree to hold the title of the Assets in the name of one or both of
the Participants or such other agreed nominee for the benefit of the Venture. No
Participant shall have any separate right, or ownership in the Assets. Any
costs incurred curing pre-existing title defects shall be charged to Cosalteca.
2.5 JOINT LOSS OF TITLES. Any failure or loss of title to the Assets,
and all costs of defending title, shall be charged to the Joint Account, except
that all costs and losses arising out of or resulting from breach of the
representations of Cosalteca shall be charged to Cosalteca.
ARTICLE III
NAME, PURPOSES AND TERM
3.1 GENERAL. Cosalteca, Guardian and Vanderbilt hereby enter into this
Agreement for the purposes hereinafter stated, and they agree that all of their
rights and all of the Operations on or in connection with the Properties or the
Area of Interest shall be subject to and governed by this Agreement.
3.2 NAME. The name of this Venture shall be the Las Coloradas Venture.
The Operating Participant shall accomplish any registration required by
applicable assumed or fictitious name statutes and similar statutes.
3.3 PURPOSES. This Agreement is entered into for the following purposes
and for no others, and shall serve as the exclusive means by which the
Participants, or either of them, accomplish such purposes:
(a) to engage in Exploration, Mining and Milling Operations on
the Properties;
(b) to engage in marketing Products, to the extent permitted by
Article XI; and
(c) to perform any other activity necessary, appropriate, or
incidental to any of the foregoing.
3.4 LIMITATION AND OPTION. Unless the Participants otherwise agree in
writing, the Operations shall be limited to the purposes described in Section
3.3, and nothing in this Agreement shall be construed to enlarge such purposes.
3.5 EFFECTIVE DATE. The effective date of this Agreement shall be the
date first recited above.
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ARTICLE IV
RELATIONSHIP OF THE PARTICIPANTS
4.1 PARTNERSHIP.
(a) The Participants herein intend by this Agreement to form a
new corporation (to be agreed by the parties after execution of this agreement)
pursuant to the laws of Mexico, which shall be the entity for the joint venture
and shall be operated as a partnership. All Participants agree to execute and
deliver any and all documents necessary to form and operate said corporation.
Each Participant will be issued shares in said corporation in the same
percentage as its interest in the venture pursuant to paragraph 6.1 of this
Agreement.
(b) Each Participant shall indemnify, defend and hold harmless
the other Participant, its directors, officers, employees, agents and attorneys
from and against any and all losses, claims, damages and liabilities arising out
of any act or any assumption of liability by the indemnifying Participant, or
any of its directors, officers, employees, agents and attorneys done or
undertaken, or apparently done or undertaken, on behalf of the other
Participant, except pursuant to the authority expressly granted herein or as
otherwise agreed in writing between the Participants.
4.2 DELETED.
4.3 DELETED.
4.4 TAX RETURN. Cosalteca shall prepare and shall file, after approval
of the Management Committee, any tax returns or other tax forms required to
comply with Mexican laws on behalf of the Venture.
4.5 OTHER BUSINESS OPPORTUNITIES.
(a) Except as expressly provided in this Agreement, each
Participant shall have the right independently to engage in and receive full
benefits from business activities, whether or not competitive with the
Operations, without consulting the other. The doctrines of "corporate
opportunity" or "business opportunity" shall not be applied to any other
activity, venture, or operation of either Participant, and, except as otherwise
provided in Section 12.6, neither Participant shall have any obligation to the
other with respect to any opportunity to acquire any property outside the Area
of Interest at any time, or within the Area of Interest after the termination of
this Agreement. Unless otherwise agreed in writing, no Participant shall have
any obligation to mill, beneficiate or otherwise treat any Products or any other
Participant's share of Products in any facility owned or controlled by such
Participant.
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(b) ADDITIONAL CONCESSIONS IN SURROUNDING VICINITY. The
Participants agree that any additional concession obtained by any of the
Participants to this Agreement or their affiliated companies in the vicinity of
Las Coloradas, that is within 10 kilometers distance of the Los Coloradas
concession, with the exception of any properties within or adjacent to the La
Sierra Concession or any other concessions staked previously by Cosalteca or its
affiliated companies, will become subject to the terms and conditions of this
Agreement unless the Participants agree otherwise.
4.6 WAIVER OF RIGHT TO PARTITION. The Participants hereby waive and
release all rights of partition, or of sale in lieu thereof, or other division
of Assets, including any such rights provided by statute.
4.7 TRANSFER OR TERMINATION OF RIGHTS TO PROPERTIES. Except as
otherwise provided in this Agreement, no Participant shall transfer all or any
part of its interest in the Assets or this Agreement or otherwise permit or
cause such interests to terminate without the written consent of the other
Participants, which consent shall not be unreasonably withheld. However, this
paragraph 4.7 shall not apply to the transfer of all right, title and interest
in this Agreement from Vanderbilt to its wholly owned subsidiary Star Mining
Corp., a Nevada corporation. Cosalteca and Guardian acknowledge and agree to
the assignment of Vanderbilt's rights under this Agreement to Star Mining Corp.,
which assignment shall be made at the option of Vanderbilt.
4.8 IMPLIED COVENANTS. There are no implied covenants contained in this
Agreement other than those of good faith and fair dealing.
ARTICLE V
CONTRIBUTIONS BY PARTICIPANTS
5.1 PARTICIPANTS, INITIAL CONTRIBUTIONS. Cosalteca, as its Initial
Contribution, hereby contributes the Properties and the use of Cosalteca's
personal property located at the mine site to the Venture. Guardian, as its
Initial Contribution, shall contribute the first seven hundred fifty thousand
dollars ($750,000.00) in cash hereunder, which sum shall be used to fund
Programs and Budgets approved pursuant to Article IX. These payments shall be
made in accordance with the attached schedule of payments.
5.1.1 PAYMENTS TO COSALTECA. Immediately following the execution of this
Agreement Vanderbilt shall issue and deliver to Cosalteca 700,000 Shares (the
"Shares") of Vanderbilt common stock to be issued pursuant to Regulation S
("Regulation S") under the Securities Act of 1933, as amended (the "Act"). The
shares shall be freely transferable outside the United States and to non-U.S.
persons (as that term is defined in Regulation S) for a period
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of forty-one days following the issuance of the Shares. In addition, the Shares
may be transferred at any time and shall only be transferred by Cosalteca in
compliance with Regulation S, pursuant to a registration statement under the Act
or pursuant to an exemption from registration under the Act approved by counsel
to Vanderbilt.
In order to induce Vanderbilt to issue the Shares to Cosalteca,
Cosalteca warrants and represents as follows: (i) Cosalteca is not a "U.S.
person" as that tern is defined in Rule 902(o) of Regulation S; (ii) no offer
to acquire the Shares has been made in the United States and at the time of
execution of this Agreement, Cosalteca was outside the United States; (iii)
Cosalteca is acquiring the Shares for its own account and not on behalf of any
U.S. person and the resale of the Shares has bit been prearranged with any buyer
in the United States; (iv) Cosalteca agrees that all offers and sales of the
Shares prior to the expiration of a period of forty-one days after their
issuance shall not be made to U.S. persons or for the account or benefit of U.S.
persons and shall otherwise be made in compliance with the provisions of
Regulation S; and (v) the transfer agent for Vanderbilt shall place a "stop
transfer" order against the Shares in order to assure compliance with the above
provisions. Cosalteca has had the opportunity to obtain counsel with respect
to the provisions of Regulation S and has done so to its satisfaction.
Vanderbilt warrants and represents that it has a class of securities
registered under Section 12(g) of the Securities Exchange Act of 1934, that it
is current in all such filings under such Act and that accordingly, it is a
"reporting issuer" as defined in Rule 902(l) of Regulation S. Vanderbilt also
warrants and represents that it has not conducted any "directed selling efforts"
as that term is defined in Rule 902 of Regulation S.
Within one year of the time of such issuance of the shares, the
shares shall have an average value of one dollar ($1.00) each (U.S.) for a 15
day cycle during a 14 month period following execution of this Agreement as
determined by the median of the bid/ask price on the electronic bulletin board
trading system in the United States. Vanderbilt may elect at any time during the
14 months period to offer to Cosalteca the difference between the share value of
each share and one dollar in full in cash providing the value of each share
shall not drop below the value at the time of such election for an additional 15
days, such election by Vanderbilt shall not take place until the shares held by
Cosalteca are freely tradeable. If during the one year period the average value
of each share as determined above does not reach one dollar ($1.00), Cosalteca
may elect to receive the difference between the share price and one dollar
($1.00) as the remainder of the purchase price in cash or by additional shares
of Vanderbilt stock. If Cosalteca elects to receive the remainder of the
purchase price in cash, such funds shall be paid to Cosalteca in equal monthly
installments beginning 15 months from signing of this agreement and paid in
equal payments over the following 12 month period. If Vanderbilt fails to make
such payments, Guardian shall have the right to
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make up such payments and shall take over the proportional share of Vanderbilt
based upon the amount contributed.
Guardian shall pay directly to Cosalteca, as additional
consideration for Guardian's share of the joint venture, the sum of one hundred
fifty thousand dollars ($150,000.00). This sum shall be payable in six monthly
payments of twenty five thousand dollars ($25,000.00) beginning February 1,
1996.
5.2 ADDITIONAL CASH CONTRIBUTIONS. At such time as Guardian and
Vanderbilt have contributed the full amount of their Initial Contribution, the
Participants, subject to any elections permitted by Sections 5.3 and 6.3 shall
be obligated to contribute funds to adopted Programs in proportion to their
respective Participating Interests at the time of the demand for additional cash
contribution.
5.3 FAILURE TO MAKE INITIAL CONTRIBUTION. Guardian or Vanderbilt's
failure to timely make their Initial Contribution in accordance with the
provisions of Article V shall be deemed to be a withdrawal of Guardian and
Vanderbilt from this Agreement and the termination of their Participating
Interest hereunder. Upon such event, such shall have no further right, title or
interest in the Assets. Guardian and Vanderbilt's withdrawal shall relieve
Guardian and Vanderbilt from any other obligation to make contributions
hereunder and relieve Cosalteca from any obligations under this Agreement to
Vanderbilt or Guardian.
ARTICLE VI
INTERESTS OF PARTICIPANTS
6.1 INITIAL PARTICIPATING INTERESTS. The Participants shall have the
following initial Participating Interests:
Cosalteca 51%
Guardian 15.925%
Consolidated Viscount 15.925%
Vanderbilt 17.15%
However, profits of the venture shall be split between the
Participants on the following basis: 50% to Cosalteca and 50% to Guardian,
Consolidated Viscount and Vanderbilt collectively.
6.2 CHANGES IN PARTICIPATING INTERESTS. A Participant's Participating
Interest shall be changed as follows:
(a) As provided in Section 5.3 or 6.3; or
(b) Upon an election by a Participant pursuant to Section 6.3 to
contribute less to an adopted Program and Budget than the percentage reflected
by its Participating Interest; or
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(c) Transfer by a Participant of less than all its Participating
Interest in accordance with Article XV; or
(d) Acquisition of less than all of the Participating Interest
of the other Participant, however arising.
(e) It is agreed between the Participants that Cosalteca's
interest shall not be diluted in this Agreement without its consent. In the
event of a deadlock regarding projects, the remedy for the other participants
shall be to purchase Cosalteca's interest.
6.3 VOLUNTARY REDUCTION IN PARTICIPATION. Except with respect to a
Participant's obligation to make its Initial Contribution, as to which no
election is permitted, a Participant may elect, as provided in Section 9.5, to
limit its contributions to an adopted Program and Budget as follows:
(1) To some lesser amount than its respective Participating
Interest; or
(2) Not at all.
If a Participant elects to contribute to an adopted Program
and Budget some lesser amount than its respective Participating Interest, or not
at all, the Participating Interest of that Participant shall be recalculated at
the time of election by dividing:
(i) the sum of (a) the agreed value of the Participant's
Initial Contribution, (b) the amount, if any, the Participant elects to
contribute to the adopted Programs and Budget; by
(ii) the sum of (a), and (b) above for all Participants; and
then multiplying the result by one hundred. The Participating Interest of the
other Participant shall thereupon become the difference between 100% and the
recalculated Participating Interest.
(iii) in the case of Cosalteca, Section 6.2(e) above
shall apply to this Section.
6.4 DELETED
6.5 CONTINUING LIABILITIES UPON ADJUSTMENTS OF PARTICIPATING INTERESTS.
Any reduction of a Participant's Participating Interest under this Article VI
shall not relieve such Participant of its share of any liability, whether it
accrues before or after such reduction, arising out of Operations conducted
prior to such reduction. For purposes of this Article VI, such Participant's
share of such liability shall be equal to its Participating Interest at the time
such liability was incurred. The increased Participating Interest accruing to a
Participant as a result of the reduction of the other Participant's
Participating Interest shall be free of royalties, liens or other encumbrances
10
arising by, through or under such other Participant, other than those existing
at the time the Properties were acquired or those to which both Participants
have given their written consent. An adjustment to a Participating Interest
need not be evidenced during the term of this Agreement by the execution and
recording of appropriate instruments, but each Participant's Participating
Interest shall be shown in the books of the Operating Participant. However,
either Participant, at any time upon the request of the other Participant, shall
execute and acknowledge instruments necessary to evidence such adjustment in
form sufficient for recording in the jurisdiction where the Properties are
located.
ARTICLE VII
MANAGEMENT COMMITTEE
7.1 ORGANIZATION AND COMPOSITION. The Participants hereby establish a
Management Committee to determine overall policies, objectives, procedures,
methods and actions under this Agreement. The Management Committee shall
consist of two members appointed by Cosalteca and one member each appointed by
Guardian and Vanderbilt. Each Participant may appoint one or more alternates to
act in the absence of a regular member. Any alternate so acting shall be deemed
a member. One member of the Management Committee, who shall be selected by
Cosalteca, shall be elected Chairman and shall have the right to cast the
deciding vote in accordance with the provisions of Section 7.2. Appointments
shall be made or changed by notice to the other Participants.
7.2 DECISIONS. Cosalteca, acting through its appointed members, shall
have two votes on the Management Committee. Guardian and Vanderbilt, acting
through their appointed members, shall each have one vote on the Management
Committee. In matters involving long-term planning and objectives, major capital
expenditures (defined as in excess of $100,000) or pledging of Assets, a
seventy-five percent (75%) favorable vote is required and deadlocks shall be
broken in accordance with Section 9.6.
7.3 MEETINGS. The Management Committee shall hold regular meetings at
least monthly at a location to be agreed by the members. The Chairman or the
Operating Participant shall give ten (10) working days, notice to the
Participants of such regular meetings. Additionally, either Participant may
call a special meeting upon similar notice to the Operating Participant and the
other Participant. In case of emergency, reasonable notice of a special meeting
shall suffice, notice of a meeting shall include an itemized agenda prepared by
the Chairman or Operating Participant in the case of a regular meeting, or by
the Participant calling the meeting in the case of a special meeting, but any
matters may be considered with the consent of all Participants. The Chairman
shall prepare minutes of all meetings and shall
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distribute copies of such minutes to the Participants within ten (10) working
days after the meeting. The minutes, when signed by all Participants, shall be
the official record of the decisions made by the Management Committee and shall
be binding on the Operating Participant and the Participants. Upon agreement of
the Management Committee once profits are obtained, reasonable costs incurred in
connection with attendance at Management Committee meetings shall be a Venture
cost.
7.4 ACTION WITHOUT MEETING. In lieu of meetings, the Management
Committee may hold telephone conferences, so long as all decisions are
confirmed in writing by the Participants within a reasonable time after the
conference.
7.5 MATTERS REQUIRING APPROVAL. Except as otherwise delegated to the
Operating Participant in Section 8.2, the Management Committee shall have
exclusive authority to determine all management matters related to this
Agreement.
ARTICLE VIII
OPERATING PARTICIPANT
8.1 APPOINTMENT. The Participants hereby appoint Cosalteca as the
Operating Participant and Cosalteca accepts this appointment until it resigns as
provided in Section 8.4. The Operating Participant will have overall management
responsibility for Operations. Cosalteca will make Eckhardt M. Koppen available
to personally have overall management responsibility for the Operating
Participant and on behalf of the Venture for at least two years from the date of
this Agreement.
8.2 POWERS AND DUTIES OF OPERATING PARTICIPANT. Subject to the terms
and provisions of this Agreement and subject to the Management Committee
reserving the right to not delegate certain of these powers, authorities and
duties to the Operating Participant, the Operating Participant shall have the
following powers, authorities and duties which shall be discharged in accordance
with adopted Programs and Budgets:
(a) The Operating Participant shall manage, direct and control
Operations.
(b) The Operating Participant shall implement the decisions of
the Management Committee, shall make all expenditures necessary to carry out
adopted Programs, and shall promptly advise the Management Committee if it lacks
sufficient funds to carry out its responsibilities under this Agreement.
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(c) The Operating Participant shall: (i) purchase, lease, rent
or otherwise acquire all material, supplies, equipment, water, utility and
transportation services required for Operations on behalf of the Venture, such
purchases and acquisitions to be made on the best terms available, taking into
account all of the circumstances; (ii) obtain such customary warranties and
guarantees as are available in connection with such purchases and acquisitions;
and (iii) keep the Assets free and clear of all liens and encumbrances, except
for those existing at the time of, or created concurrent with, the acquisition
of such Assets, or mechanic's or material men's liens which shall be released or
discharged in a diligent matter, or liens and encumbrances specifically approved
by the Management Committee.
(d) The Operating Participant shall conduct such title
examinations and cure such title defects as may be advisable in the reasonable
judgment of the Operating Participant.
(e) The Operating Participant shall: (i) make or arrange for all
payments required by the Concession, any leases, licenses, permits, contracts
and other agreements related to the Assets; (ii) pay all taxes, assessments and
like charges on Operations and Assets except income or franchise taxes
determined or measured by Participant's separate net income. If authorized by
the Management Committee, the Operating Participant shall have the right to
contest in the courts or otherwise, the validity or amount of any taxes,
assessments or charges if the Operating Participant deems them to be unlawful,
unjust, unequal or excessive, or to undertake such other steps or proceedings as
the Operating Participant may deem reasonably necessary to secure a
cancellation, reduction, readjustment or equalization thereof before the
Operating Participant shall be required to pay them, but in no event shall the
Operating Participant permit or allow title to the assets to be lost as the
result of the non-payment of any taxes, assessments or like charges; and (iii)
shall do all other acts reasonably necessary to maintain the Assets.
(f) The Operating Participant shall: (i) apply for and maintain
all necessary permits, licenses and approvals; (ii) comply with applicable
federal, state and local laws and regulations; (iii) notify promptly the
Management Committee of any allegations of substantial violation thereof; and
(iv) prepare and file all reports or notices required for Operations. The
Operating Participant shall not be in breach of this provision if a violation
has occurred in spite of the Operating Participant's good faith efforts to
comply, and the Operating Participant has timely cured or disposed of such
violation through performance, or payment of fines and penalties.
(g) The Operating Participant shall prosecute and defend, but
shall not initiate without consent of the Management Committee, all litigation
or administrative proceedings arising out of Operations. The non-managing
Participant shall have the right to participate, at its own expense, in
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such litigation or administrative proceedings. The non-managing Participant
shall approve in advance any settlement involving payments, commitments or
obligations in excess of $10,000 in cash or value.
(h) The Operating Participant shall obtain on behalf of the
venture, insurance adequate to protect the interest of the Participants for the
benefit of the Participants.
(i) The Operating Participant may dispose of Assets, whether by
abandonment, surrender or Transfer in the ordinary course of business, except
that Properties may be abandoned or surrendered only as provided in Article XIV.
However, without prior authorization from the Management Committee, the
Operating Participant shall not: (i) dispose of Assets in any one transaction
having a value in excess of $5,000; (ii) enter into any sales contracts or
commitments for Product, except as permitted in Section 11.2; (iii) begin a
liquidation of the Venture; or (iv) dispose of all or a substantial part of the
Assets necessary to achieve the purposes of the Venture.
(j) The Operating Participant shall have the right to carry out
its responsibilities hereunder through agents, Affiliates or independent
contractors approved by the Management Committee.
(k) The Operating Participant shall perform or cause to be
performed during the term of this Agreement all assessment and other work
required by law in order to maintain the unpatented mining claims included
within the Properties. The Operating Participant shall have the right to
perform the assessment work required hereunder pursuant to a common plan of
exploration and continued actual occupancy of such claims and sites shall not be
required. The Operating Participant shall not be liable on account of any
determination by any court or governmental agency that the work performed by
Operating Participant does not constitute the required annual work or occupancy
for the purposes of preserving or maintaining ownership of the Concession,
provided that the work done is in accordance with the adopted Program and
Budget. The Operating Participant shall timely record with the appropriate
governmental entity any required documents attesting to the performance of
assessment or other work in at least the minimum amount required by law to
maintain the Concession. The Operating Participant shall also make all annual
payments necessary to maintain said Concession on behalf of the Venture.
(l) The Operating Participant shall keep and maintain all
required accounting and financial records pursuant to the Accounting Procedure
and in accordance with customary cost accounting practices in the mining
industry. All Participants shall have access to these accounting records during
normal business hours and the Tax Matters Partner as designated in
14
Exhibit "C" will be consulted in all matters relating to the establishment and
maintenance of the accounting and financial systems.
(m) The Operating Participant shall keep the Management
Committee advised of all Operations by submitting in writing to the Management
Committee: (i) monthly progress reports which include statements of expenditures
and comparisons of such expenditures to the adopted Budget; (ii) periodic
summaries of data acquired; (iii) copies of reports concerning Operations; (iv)
a detailed final report within thirty (30) days after completion of each Program
and Budget, which shall include comparisons between actual and budgeted
expenditures and comparisons between the objectives and results of Programs; and
(v) such other reports as the Management Committee may reasonably request. At
all reasonable times the Operating Participant shall provide the Management
Committee or the representative of any Participant, upon the request of any
member of the Management Committee, access to, and the right to inspect and copy
all maps, drill logs, core tests, reports, surveys, assays, analyses, production
reports, operations, technical, accounting and financial records, and other
information acquired in Operations. In addition, the Operating Participant
shall allow the non-managing Participant, at the latter's sole risk and expense,
and subject to reasonable safety regulations, to inspect the Assets and
Operations at all reasonable times, so long as the inspecting Participant does
not unreasonably interfere with Operations.
(n) The Operating Participant shall have the authority to
endorse and deposit checks, drafts and warrants to the Venture's bank accounts.
(o) The Operating Participant shall undertake all other
activities reasonably necessary to fulfill the foregoing.
The Operating Participant shall not be in default of any duty under
this Section 8.2 if its failure to perform results from the failure of the non-
operating Participant to perform acts or to contribute amounts required of it by
this agreement.
8.3 STANDARD OF CARE. The Operating Participant shall conduct all
Operations in a good, workmanlike and efficient manner, in accordance with sound
mining .and other applicable industry standards and practices, and in accordance
with the terms and provisions of leases, licenses, permits, contracts and other
agreements pertaining to Assets. The Operating Participant shall not be liable
to the non-managing Participants for any act or omission resulting in damage or
loss except to the extent caused by or attributable to the Operating
Participant's willful misconduct or gross negligence.
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8.4 RESIGNATION; DEEMED OFFER TO RESIGN. The Operating Participant may
resign upon one month's prior written notice to the other Participant, in which
case the other Participant may elect to become the new Operating Participant by
giving written notice to the resigning Participant within ten (10) working days
after the notice of resignation. If any of the following shall occur, the
Operating Participant shall be deemed to have offered to resign, which offer
shall be accepted by the other Participant, if at all, within 90 days following
such deemed offer:
(a) The Operating Participant fails to perform a material
obligation imposed upon it under this Agreement and such failure continues for a
period of 60 days after notice from the other Participant demanding performance;
or
(b) The Operating Participant fails to pay or contest in good
faith its bills within 60 days after they are due; or
(c) A receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for a substantial part of its assets is
appointed and such appointment is neither made ineffective nor discharged within
60 days after the making thereof, or such appointment is consented to, requested
by, or acquiesced in by the Operating Participant; or
(d) The Operating Participant commences a voluntary case under
any applicable bankruptcy, insolvency or similar law now or hereafter in effect;
or consents to the entry of an order for relief in an involuntary case under any
such law or to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or other similar official
of any substantial part of its assets; or makes a general assignment for the
benefit of creditors; or fails generally to pay its or Venture debts as such
debts become due; or takes corporate or other action in furtherance of any of
the foregoing; or
(e) Entry is made against the Operating Participant of a
judgment, decree or order for relief affecting a substantial part of its assets
by a court of competent jurisdiction in an involuntary bankruptcy case.
8.5 TRANSACTIONS WITH AFFILIATES. If the Operating Participant engages
Affiliates to provide services hereunder, it shall do so on terms no less
favorable than would be the case with unrelated persons in arm's-length
transactions.
8.6 ACTIVITIES DURING DEADLOCK. If the Management Committee for any
reason fails to adopt a Program and Budget, subject to the contrary direction of
the Management Committee and to the receipt of necessary funds, the Operating
Participant shall continue Operations at levels comparable with
16
the last adopted Program and Budget until the deadlock is resolved in accordance
with Article XVI. For purposes of determining the required contributions of the
Participants and their respective Participating Interests, the last adopted
Program and Budget shall be deemed extended.
ARTICLE IX
PROGRAMS AND BUDGETS
9.1 INITIAL PROGRAM AND BUDGET. The initial Program and Budget, will be
agreed upon and adopted by the Participants within 30 days of the date of this
Agreement.
9.2 OPERATIONS PURSUANT TO PROGRAMS AND BUDGETS. Except as otherwise
provided in Section 9.8 and Article XIII, Operations shall be conducted,
expenses shall be incurred, and Assets shall be acquired only pursuant to
approved Programs and Budgets.
9.3 PRESENTATION OF PROGRAMS AND BUDGETS. Proposed Programs and Budgets
shall be prepared by the Operating Participant for a period of one year or some
lesser period. Each adopted Program and Budget, regardless of length, shall be
reviewed by the Management Committee. During the period encompassed by any
Program and Budget, and at least two months prior to its expiration, a proposed
Program and Budget for the succeeding period shall be prepared by the Operating
Participant and submitted to the Participants.
9.4 REVIEW AND APPROVAL OF PROPOSED PROGRAMS AND BUDGETS. Within thirty
(30) days after submission of a proposed Program and Budget, each Participant
shall submit to the Management Committee:
(a) Notice that the Participant approves the proposed Program
and Budget; or
(b) Proposed modifications of the proposed Program and Budget;
or
(c) Notice that the Participant rejects the proposed Program and
Budget.
If a Participant fails to give any of the foregoing responses within
the allotted time, the failure shall be deemed to be an approval by the
Participant of the Operating Participant's proposed Program and Budget. If a
Participant makes a timely submission to the Management Committee pursuant to
Section 9.4 (b) or 9.4 (c), then the Management Committee shall seek to develop
a Program and Budget acceptable to the Participants.
9.5 ELECTION TO PARTICIPATE. By notice to the Management Committee
within 20 days after the final vote adopting a Program and Budget, a
17
Participant may elect to contribute to such Program and Budget in some lesser
amount than its respective Participating Interest, or not at all, in which cases
its Participating Interest shall be recalculated as provided in Article VI. If
a Participant fails to so notify the Management Committee, the Participant shall
be deemed to have elected to contribute to such Program and Budget in proportion
to its respective Participating Interest as of the beginning of the period
covered by the Program and Budget. The rights of Cosalteca under this section
shall be subject to Section 6.2 and 6.3.
9.6 DEADLOCK ON PROPOSED PROGRAMS AND BUDGETS. If the Management
Committee fails to approve a Program and Budget by the beginning of the period
to which the proposed Program and Budget applies, the provisions of Sections 8.6
and 12.2 shall apply and the deadlock will be resolved pursuant to Article XVI.
9.7 COST OVERRUNS; PROGRAM CHANGES. The Operating Participant shall
notify, within a reasonable time, the Management Committee of any material
departure from an adopted Program and Budget.
9.8 EMERGENCY OR UNEXPECTED EXPENDITURES. In case of emergency, the
Operating Participant may take any reasonable action it deems necessary to
protect life, limb or property, to protect the Assets or to comply with law or
government regulation. The Operating Participant may make reasonable
expenditures for unexpected events which are beyond its reasonable control and
which do not result from a breach by it of its standard of care. The Operating
Participant shall promptly notify the Participants of the emergency or
unexpected expenditure, and the Operating Participant shall be reimbursed for
all resulting costs by the Participants in proportion to their respective
Participating Interests at the time the emergency or unexpected expenditures are
incurred.
ARTICLE X
ACCOUNTS AND SETTLEMENTS
10.1 MONTHLY STATEMENTS. The Operating Participant shall, within a
reasonable time, submit to the Management Committee monthly statements of
account reflecting in reasonable detail the charges and credits to the Joint
Account during the preceding month.
10.2 AUDITS. Upon request made by any Participant or the Management
Committee within 3 months following the end of any calendar year (or, if the
Management Committee has adopted an accounting period other than the calendar
year, within 3 months after the end of such period), the Operating Participant
shall order an audit of the accounting and financial records for such calendar
year (or other accounting period). All written
18
exceptions to and claims upon the Operating Participant for discrepancies
disclosed by such audit shall be made not more than 3 months after receipt of
the audit report. Failure to make any such exception or claim within the 3
month period shall mean the audit is correct and binding upon the Participants.
The audits shall be conducted by a firm of certified public accountants selected
by the Management Committee.
ARTICLE XI
PURCHASE OF COSALTECA INTEREST
11.1 PURCHASE OF INTEREST OF COSALTECA. Guardian and Vanderbilt are
granted the exclusive right to purchase the Participating Interest of Cosalteca
for the sum of three million dollars ($3,000,000.00) cash and the grant of a
royalty to Cosalteca of two percent of the Net Smelter Revenues of the
Concession for a period of two years. However, Guardian and Vanderbilt may at
their option, agree to a sale by Cosalteca of its Participating interest during
the two year period. This right of purchase of Guardian and Vanderbilt shall
apply only to the Concession. Guardian and Vanderbilt shall have the right to
buy the royalty of Cosalteca for the sum of one million dollars ($1,000,000.00).
This right of purchase by Guardian and Vanderbilt of Cosalteca's interest shall
not apply as to any party who purchases the interest of Cosalteca. After the two
year exclusive period, Cosalteca's interest shall be transferable subject to the
other Participants' rights as set forth in Paragraph 15.3 and following, at a
price acceptable to Cosalteca.
ARTICLE XII
WITHDRAWAL AND TERMINATION
12.1 TERMINATION BY EXPIRATION OR AGREEMENT. This Agreement shall
terminate as expressly provided in this Agreement, unless earlier terminated by
written agreement.
12.2 TERMINATION BY DEADLOCK. If the Management Committee fails to adopt
a Program and Budget for two (2) months after the expiration of the latest
adopted Program and Budget, either Participant may elect to terminate this
Agreement by giving notice of termination to the other Participant.
12.3 WITHDRAWAL. A Participant may elect to withdraw as a Participant
from this Agreement by giving notice to the other Participants of the effective
date of withdrawal, which shall be the later of the end of the then current
Program and Budget or at least 90 days after the date of the notice. Upon such
withdrawal, the withdrawing Participant shall be deemed to have transferred to
the remaining Participants in equal percentages, without cost and free and clear
of royalties, liens or other encumbrances arising by, through or under
19
such withdrawing Participant, except those exceptions to title described in
Exhibit "A" and those to which both Participants have given their written
consent after the date of this Agreement, all of its Participating Interest in
the Assets and in this Agreement.
12.4 CONTINUING OBLIGATIONS. On termination of this Agreement under
Section 12.1, 12.2 or 12.3, the Participants shall remain liable for continuing
obligations hereunder until final settlement of all accounts and for any
liability, whether it accrues before or after termination, if it arises out of
Operations during the term of that Participants' interest the Agreement.
12.5 DISPOSITION OF ASSETS ON TERMINATION. Promptly after termination
under Section 12.1, 12.2 or 12.3, the Operating Participant shall take all
action necessary to wind up the activities of the Venture, and all costs and
expenses incurred in connection with the termination of the Venture shall be
expenses chargeable to the Venture. In accordance with Exhibit "C", any
Participant that has a negative Capital Account balance when the Venture is
terminated for any reason shall contribute to the Assets of the Venture an
amount sufficient to raise such balance to zero. The Assets shall first be
paid, applied, or distributed in satisfaction of all liabilities of the Venture
to third parties and then to satisfy any debts, obligations, or liabilities owed
to the Participants. Before distributing any funds or Assets to Participants,
the Operating Participant shall have the right to segregate amounts which, in
the Operating Participant's reasonable judgment, are necessary to discharge
continuing obligations or to purchase for the account of Participants, bonds or
other securities for the performance of such obligations. The foregoing shall
not be construed to include the repayment of any Participant's capital
contributions or Capital Account balance. Thereafter, any remaining cash and
all other Assets shall be distributed (in undivided interests unless otherwise
agreed) to the Participants, first in the ratio and to the extent of their
respective Capital Accounts and then in proportion to their respective
Participating Interests, subject to any dilution, reduction or termination of
such Participating Interests as may have occurred pursuant to the terms of this
Agreement. No participant shall receive a distribution of any interest in
Products or proceeds from the sale thereof if such Participant's Participating
Interest therein has been terminated pursuant to this Agreement.
12.6 NON-COMPETE COVENANTS. A Participant that withdraws pursuant to
Section 12.3, or is deemed to have withdrawn pursuant to Section 5.2 or 6.4,
shall not directly or indirectly acquire any interest in property within the
Area of Interest for 12 months after the effective date of withdrawal. If a
withdrawing Participant, or the Affiliate of a withdrawing Participant, breaches
this Section 12.6, such Participant or Affiliate shall be obligated to offer to
convey to the non-withdrawing Participant, without cost, any such property or
interest so acquired. Such offer shall be made in writing and can
20
be accepted by the non-withdrawing Participant at any time within 45 days after
it is received by such non-withdrawing Participant.
12.7 RIGHT TO DATA AFTER TERMINATION. After termination of this
Agreement pursuant to Sections 12.1 or 12.2, each Participant shall be entitled
to copies of all information acquired hereunder before the effective date of
termination not previously furnished to it, but a terminating or withdrawing
Participant shall not be entitled to any such copies after any other termination
or any withdrawal.
12.8 CONTINUING AUTHORITY. On termination of this Agreement under
Section 12.1 or 12.2 or the deemed withdrawal of a Participant pursuant to
Section 5.2 or the withdrawal of a Participant pursuant to Section 12.3, the
Operating Participant shall have the power and authority, subject to control of
the Management Committee, if any, to do all things on behalf of the Participants
which are reasonably necessary or convenient to: (a) wind up Operations and (b)
complete any transaction and satisfy any obligation, unfinished or unsatisfied,
at the time of such termination or withdrawal, if the transaction or obligation
arises out of Operations prior to such termination or withdrawal. The Operating
Participant shall have the power and authority to grant or receive extensions of
time or change the method of payment of an already existing liability or
obligation, prosecute and defend actions on behalf of the Participants and the
Venture, mortgage Assets, and take any other reasonable action in any matter
with respect to which the former Participants continue to have, or appear or are
alleged to have, a common interest or a common liability.
ARTICLE XIII
MARKETING OF PRODUCTS
13.1 MARKETING. The Venture shall market the products as agreed by the
Management Committee.
ARTICLE XIV
ABANDONMENT AND SURRENDER OF PROPERTIES
14.1 SURRENDER OR ABANDONMENT OF PROPERTY. The Management Committee may
authorize the Operating Participant to surrender or abandon part or all of the
Properties. If the Management Committee authorizes any such surrender or
abandonment over the objection of a Participant, the Participant that desires to
abandon or surrender shall assign to the objecting Participant, by special
warranty deed and without cost to the surrendering Participant, all of the
surrendering Participant's interest in the property to be
21
abandoned or surrendered, and the abandoned or surrendered property shall cease
to be part of the Properties.
14.2 REACQUISITION. If any Properties are abandoned or surrendered under
the provisions of this Article XIV, then, unless this Agreement is earlier
terminated, neither Participant nor any Affiliate thereof shall acquire any
interest in such Properties or a right to acquire such Properties for a period
of two (2) years following the date of such abandonment or surrender. If a
Participant reacquires any Properties in violation of this Section 14.2, the
other Participant may elect by notice to the reacquiring Participant within 45
days after it has actual notice of such reacquisition, to have such properties
made subject to the terms of this Agreement. In the event such an election is
made, the reacquired properties shall thereafter be treated as Properties, and
the costs of reacquisition shall be borne solely by the reacquiring Participant
and shall not be included for purposes of calculating the Participants,
respective Participating Interests.
ARTICLE XV
TRANSFER OF INTEREST
15.1 GENERAL. A Participant shall have the right to Transfer to any
third party all or any part of its interest in or to this Agreement, its
Participating Interest, or the Assets solely as provided in this Article XV.
15.2 LIMITATIONS ON FREE TRANSFERABILITY. The Transfer right of a
Participant in Section 15.1 shall be subject to the following terms and
conditions:
(a) No transferee of all or any part of the interest of a
Participant in this Agreement, any Participating Interest, or the Assets shall
have the rights of a Participant unless and until the transferring Participant
has provided to the other Participant notice of the Transfer, and except as
provided in Sections 15.2 (g) and 15.2 (h), the transferee, as of the effective
date of the Transfer, has committed in writing to be bound by this Agreement to
the same extent as the transferring Participant. However, it is understood and
agreed that this section shall not apply to a transfer (if Vanderbilt so elects
to transfer) from Vanderbilt to Star Mining Corp. of all or a portion of its
right, title and interest to the Venture and Cosalteca and Guardian specifically
agree to such a transfer.
(b) No Participant, without the consent of the other
Participants, shall make a Transfer which shall cause termination of the tax
partnership established by the provisions of Section 4.2;
22
(c) No Transfer permitted by this Article XV shall relieve the
transferring Participant of its share of any liability, whether accruing before
or after such Transfer, which arises out of Operations conducted prior to such
Transfer. As provided in Exhibit "C", Article IV, the transferring Participant
and the transferee shall bear all tax consequences of the Transfer;
(d) In the event of a Transfer of less than all of a
Participating Interest, the transferring Participant and its transferee shall
act and be treated as one Participant;
(e) No Participant shall Transfer any interest in this Agreement
or the Assets except by Transfer of part or all of its Participating Interest;
(f) If the Transfer is the grant of a security interest by
mortgage, deed of trust, pledge, lien or other encumbrance of any interest in
this Agreement, any Participating Interest or the Assets to secure a loan or
other indebtedness of a Participant in a bona fide transaction, such security
interest shall be subordinate to the terms of this Agreement and the rights and
interests of the other Participants hereunder. Upon any foreclosure or other
enforcement of rights in the security interest the acquiring third party shall
be deemed to have assumed the position of the encumbering Participant with
respect to this Agreement and the other Participants, and it shall comply with
and be bound by the terms and conditions of this Agreement;
(g) If a sale or other commitment or disposition of Products or
proceeds from the sale of Products by a Participant upon distribution to it
pursuant to Article XI creates in a third party a security interest in Products
or proceeds therefrom prior to such distribution, such sales, commitment or
disposition shall be subject to the terms and conditions of this Agreement;
(h) If, contrary to Section 15.2 (b), a Transfer is made which
causes termination of the tax partnership established by Section 4.2, the
transferring Participant shall indemnify, defend and hold harmless the other
Participants from and against any and all loss, cost, expense or damage arising
from such termination; and
(i) Only United States currency shall be used for Transfers for
consideration.
15.3 PREEMPTIVE RIGHT. Except as otherwise provided in Section 15.4, if
a Participant desires to Transfer all or any part of its interest in this
Agreement, any Participating Interest, or the Assets, the other Participants
shall have a preemptive right to acquire such interests as provided in this
Section 15.3
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(a) A Participant intending to Transfer all or any part of its
interest in this Agreement, any Participating Interest, or the Assets shall
promptly notify the other Participants of its intentions. The notice shall
state the price and all other pertinent terms and conditions of the intended
Transfer, and shall be accompanied by a copy of the offer or contract for sale.
The other Participants shall have fifteen (15) days from the date such notice is
delivered to notify the transferring Participant whether it elects to acquire
the offered interest at the same price and on the same terms and conditions as
set forth in the notice. If it does so elect, the Transfer shall be consummated
within 30 days after notice of such election is delivered to the transferring
Participant.
(b) If the transferring Participant fails to consummate the
Transfer to a third party within the period set forth in Section 15.3(b), the
preemptive right of the other Participants in such offered interest shall be
deemed to be revived. Any subsequent proposal to Transfer such interest shall
be conducted in accordance with all of the procedures set forth in this Section
15.3.
15.4 EXCEPTIONS TO PREEMPTIVE RIGHT. Section 15.3 shall not apply to the
following:
(a) Transfer by a Participant of all or any part of its interest
in this Agreement, any Participating Interest, or the Assets to an Affiliate;
(b) Incorporation of a Participant, or corporate merger,
consolidation, amalgamation or reorganization of a Participant by which the
surviving entity shall possess substantially all of the stock, or all of the
property rights and interests, and be subject to substantially all of the
liabilities and obligations of that participant;
(c) The grant by a Participant of a security interest in any
interest in this Agreement, any Participating Interest, or the Assets by
mortgage, deed of trust, pledge, lien or other encumbrance; or
(d) A sale or other commitment or disposition of Products or
proceeds from sale of Products by a Participant upon distribution to it pursuant
to Article XI.
ARTICLE XVI
DISPUTES
16.1 MEDIATION OF DISPUTES. All disputes between the Participants,
their successors and assigns, arising under this Agreement which the parties are
unable to resolve within twenty (20) days after the Management
24
Committee meeting in which the dispute arose, which arose while an Operator, or
the Chairman of the Management Committee acting as Operator, was serving
pursuant to Article VIII, and which concern the reasonableness of a Budget, or
the amount of the reimbursement for indirect cost provided for in Section 2.13
of Exhibit "B" or the appointment of an Operator or Mine Operating Participant,
shall be submitted to arbitration in accordance herewith. All disputes between
the Participants, their successors and assigns, arising under this Agreement
which the parties are unable to resolve within twenty (20) days after the
Management Committee meeting in which the dispute arose, and which arose while
no Operator or no Chairman acting as Operator, was serving pursuant to Article
VIII, shall be submitted to mediation in accordance herewith.
All disputes will be informally mediated by an individual mutually
agreeable to the Participants. If that person cannot be mutually agreed upon by
the Participants or a resolution of the dispute cannot be reached at the
mediation hearing, then the matter shall be resolved by a court procedure or
other procedure agreed upon by the parties at that time. The parties can submit
the matter to arbitration but are not required to unless both agree to
arbitration. Fees and expenses of the mediation shall be shared equally by the
Participants. Each Participant shall bear its own attorneys' fees.
ARTICLE XVII
CONFLDENTLALLTY
17.1 GENERAL. The financial terms of this Agreement and all information
obtained in connection with the performance of this Agreement shall be the
exclusive property of the Participants and, except as provided in Section 17.2,
shall not be disclosed to any third party or the public without the prior
written consent of the other Participant, which consent shall not be
unreasonably withheld, and which consent shall not be required if the
Participant seeking to make the disclosure represents that such disclosure is
required by law. However, even if such disclosure is required by law, in all
instances where the information is disclosed to governmental agencies, the
Participant making the disclosure will make all reasonable efforts to ensure
confidentiality and will mark all such documents confidential and/or secret.
17.2 EXCEPTIONS. The consent required by Section 17.1 shall not apply to
a disclosure:
(a) To an Affiliate, consultant, contractor or subcontractor
that has a bona fide need to be informed;
25
(b) To any third party to whom the disclosing Participant
contemplates a Transfer of all or any part of its interest in or to this
Agreement, its Participating Interest, or the Assets; or
(c) To a governmental agency or to the public which the
disclosing Participant believes in good faith is required by pertinent law or
regulation or the rules of any stock exchange;
In any case to which this Section 17.2 is applicable, the disclosing
Participant shall give notice to the other Participant concurrently with the
making of such disclosure. As to any disclosure pursuant to Section 17.2 (a) or
17.2 (b), only such confidential information as such third party shall have a
legitimate business need to know shall be disclosed and such third party shall
first agree in writing to protect the confidential information from further
disclosure to the same extent as the Participants are obligated under this
Article XVII.
17.3 DURATION OF CONFIDENTIALITY. The provisions of this Article XVII
shall apply during the term of this Agreement and for two years following
termination of this Agreement pursuant to Section 12.1 or 12.2, and shall
continue to apply to any Participant who withdraws, who is deemed to have
withdrawn, or who Transfers its Participating Interest, for two years following
the date of such occurrence.
ARTICLE XVIII
GENERAL PROVISIONS
18.1 NOTICES. All notices, payments and other required communications
("Notices") to the Participants shall be in writing, and shall be addressed
respectively as follows:
If to Cosalteca to:
------------------------------
------------------------------
------------------------------
------------------------------
If to Guardian, to:
Leonard Harris
The Marine Bldg., 830-355 Burrard Street
Vancouver, BC Canada V6C-2G8
26
If to Vanderbilt, to:
Vanderbilt Gold Corporation
4625 Wynn Rd, #103, Bldg. C
Las Vegas, NV 89103
Attn: Keith Fegert and Howard Urband
All Notices shall be given (i) by personal delivery to the
Participant, or (ii) by fax, with a confirmation of receipt; or (iii) by
registered or certified mail return receipt requested. All Notices shall be
effective and shall be deemed delivered (i) if by personal delivery on the date
of delivery if delivered during normal business hours, and, if not delivered
during normal business hours, on the next business day following delivery, (ii)
if by electronic communication on the next business day following receipt of the
electronic communication, and (iii) if solely by mail on the next business day
after actual receipt. A Participant may change its address by Notice to the
other Participants.
18.2 WAIVER. The failure of a Participant to insist on the strict
performance of any provision of this Agreement or to exercise any right, power
or remedy upon a breach hereof shall not constitute a waiver of any provision of
this Agreement or limit the Participant's right thereafter to enforce any
provision or exercise any right.
18.3 MODIFICATION. No modification of this Agreement shall be valid
unless made in writing and duly executed by the Participants.
18.4 FORCE MAJEURE. Except for the obligation to make payments when due
hereunder, the obligations of a Participant shall be suspended to the extent and
for the period that performance is prevented by any cause, whether foreseeable
or unforeseeable, beyond its reasonable control, including, without limitation,
labor disputes (however arising and whether or not employee demands are
reasonable or within the power of the participant to grant); acts of God; laws,
regulations, orders, proclamations, instructions or requests of any government
or governmental entity; judgments or orders of any court; inability to obtain on
reasonably acceptable terms any public or private license, permit or other
authorization; curtailment or suspension of activities to remedy or avoid an
actual or alleged, present or prospective violation of federal, state or local
environmental standards; acts of war or conditions arising out of or
attributable to war, whether declared or undeclared; riot, civil strife,
insurrection or rebellion; fire, explosion, earthquake, storm, flood, sink
holes, drought or other adverse weather condition; delay or failure by suppliers
or transporters of materials, parts, supplies, services or equipment or by
contractors, or subcontractors, shortage of, or inability to obtain, labor,
transportation, materials, machinery, equipment, supplies, utilities or
services; accidents; breakdown of equipment, machinery or facilities; or any
other cause whether similar or dissimilar to the foregoing. The affected
27
Participant shall promptly give notice to the other Participant of the
suspension of performance, stating therein the nature of the suspension, the
reasons therefor, and the expected duration thereof. The affected Participant
shall resume performance as soon as reasonably possible. The Participant's
performance which is affected by a governmental law, regulation or order need
not challenge the governmental pronouncement in order to invoke the benefits of
this section. During the period of suspension the obligations of the
Participants to advance funds pursuant to Section 10.2 shall be reduced to
levels consistent with Operations.
18.5 GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the Country of Mexico.
18.6 RULE AGAINST PERPETUITIES. Any right or option to acquire any
interest in real or personal property under this Agreement must be exercised, if
at all, so as to vest such interest in the acquirer within 21 years after the
effective date of this Agreement.
18.7 FURTHER ASSURANCES. Each of the Participants to take from time to
time such actions and execute such additional instruments as may be reasonably
necessary or convenient to implement and carry out the intent and purpose of
this Agreement.
18.8 SURVIVAL OF TERMS AND CONDITIONS. The following Sections shall
survive the termination of this Agreement to the full extent necessary for their
enforcement and the protection of the Participant in whose favor they run:
Sections 2.2, 4.5, 6.5, 12.3, 12.4, 12.5, 12.6, 12.7 and 12.8.
18.9 ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS. This Agreement contains
the entire understanding of the Participants and supersedes all prior agreements
and understandings between the Participants relating to the subject matter
hereof. This Agreement shall be binding upon and inure to the benefit of the
respective successors and permitted assigns of the Participants. In the event
of any conflict between this Agreement and any Exhibit attached hereto, the
terms of this Agreement shall be controlling.
18.10 MEMORANDUM. At the request of either Participant, a Memorandum or
short form of this Agreement, as appropriate, which shall not disclose financial
information contained herein, shall be prepared and recorded by Operating
Participant. This Agreement shall not be recorded.
18.11 SEVERABILITY. Should any provisions or portions of this Agreement
be held unenforceable or invalid for any reason, including the Exhibits hereto,
the remaining provisions and portions of this Agreement shall be unaffected by
that holding.
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18.12. DUE DILIGENCE. Guardian and Vanderbilt have been provided with
information concerning title to the Concession. Guardian acknowledges that it is
relying on its own due diligence relating to title and geological matters and
not upon the representations of Cosalteca in entering into this agreement.
18.13. GEOLOGICAL INFORMATION. Cosalteca has previously delivered or
communicated to Guardian and Vanderbilt certain geological and engineering
information. Cosalteca makes no representations as to the validity or accuracy
of such information or any conclusions that might be inferred therefrom and
shall not be responsible for any loss or damage suffered by Guardian and/or
Vanderbilt in reliance upon such information.
18.14. DEFAULT. In the event of default by any Participant under the
terms of this Agreement, the defaulting Participant shall be advised of such
default by written notice sent by the one or all of the other Participant(s) and
the defaulting Participant shall have ten days to cure such default after its
receipt of such written notice.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
VANDERBILT GOLD CORPORATION
-----------------------------------
By: KEITH FEGERT, President
GUARDIAN ENTERPRISES LTD.
-----------------------------------
By: LEONARD HARRIS, President
CONSOLIDATED VISCOUNT RESOURCES LTD
-----------------------------------
By: LEONARD HARRIS, President
COSALTECA
-----------------------------------
By: ALEJANDRO CANELOS, President
29
PAYMENT SCHEDULE
1. $100,000.00 shall be paid on signing of the Joint Venture Agreement.
This amount shall be applied to previous expenditures relating to the Los
Colorados concession, including taxes, labor, and materials, and shall be for
expenses incurred up to the first monthly payment which is due on February 15,
1996. Eckhart Koppen, on behalf of Cosalteca, shall provide a breakdown of
such expenses to the other Participants.
2. The additional payments shall begin no later than February 15, 1996
and shall be a minimum of $50,000.00 and a maximum of $100,000 per month in
accordance with the approval of the Management Committee.