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EXHIBIT 2.01
EXPLORATION AND PURCHASE OPTION AGREEMENT
BETWEEN
L.B. MINING CO.,
an Idaho general partnership,
AND
GRANGES INC.,
a British Columbia corporation
Effective June 7, 1996
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TABLE OF CONTENTS
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1 -
ARTICLE I THE OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2 -
1.1 Grant of Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2 -
X. Xxxxx and Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2 -
B. Negotiation of Joint Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 7 -
C. Option Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 8 -
1.2 Exercise of Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 9 -
1.3 Failure to Exercise Option; Data to be
Provided to L.B. Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 9 -
ARTICLE II GRANGES' RIGHTS AND OBLIGATIONS DURING THE
OPTION PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 10 -
2.1 Granges' Right of Exploration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 10 -
2.2 Work Commitment During Option Period;
Break-off Fee; L.B. Mining's Access to Data . . . . . . . . . . . . . . . . . . . . . . . . . . - 11 -
2.3 Maintenance of Venezuelan Subsidiaries and
Clear Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 13 -
2.4 Area of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 14 -
2.5 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 15 -
2.6 Reclamation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 15 -
2.7 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 16 -
2.8 Purchase of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 17 -
ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 18 -
3.1 L.B. Mining's Representations, Warranties
and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 18 -
A. Vein and Occupancy Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 18 -
B. Control of Actions of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . - 18 -
X. Xxxxxxx Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 18 -
D. Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 19 -
E. Authority; No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 19 -
F. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 22 -
G. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 22 -
H. Title to Properties; Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 24 -
I. No Other Assets or Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 26 -
J. Compliance with Legal Requirements;
Governmental Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 27 -
K. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 28 -
L. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 28 -
M. Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 29 -
N. L.B. Mining's Assistance to Granges . . . . . . . . . . . . . . . . . . . . . . . . . . . - 29 -
O. Certain Proceedings; Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 30 -
P. Removal of Special Advantages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 31 -
Q. Seccion Numero 9 De El Triunfo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 31 -
R. Pre-Closing Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 32 -
S. Assignment of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 33 -
T. Further Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . - 33 -
3.2 Granges' Representations, Warranties
and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 37 -
A.Organization and Good Standing- 37 -
B. Authority; No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 37 -
C. Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 38 -
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D. Certain Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 38 -
E. Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 38 -
F. Ownership of Venezuelan Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . - 39 -
G. Issuer Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 39 -
H. Material Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 39 -
I. Authority to Issue Special Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . - 39 -
J. Issuance of Special Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 40 -
K. Securities Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 40 -
3.3 Mutual Covenants by Granges and L.B. Mining . . . . . . . . . . . . . . . . . . . . . . . . . . - 40 -
3.4 Survival; Effect of Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 41 -
ARTICLE IV GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 43 -
4.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 43 -
4.2 Press Releases and Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 43 -
4.3 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 43 -
4.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 45 -
4.5 Jurisdiction; Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 45 -
4.6 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 46 -
4.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 46 -
4.8 Entire Agreement and Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 47 -
4.9 Assignments, Successors, and No
Third-party Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 47 -
4.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 48 -
4.11 Section Headings, Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 48 -
4.12 Dollars and $ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 48 -
4.13 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 48 -
4.14 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 49 -
4.15 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 49 -
4.16 Rule Against Perpetuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 49 -
4.17 Date of Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 49 -
EXHIBITS
A - L.B. Mining's Venezuelan Subsidiaries
B - Properties
C - Special Warrant Indenture
D - Stock Purchase Agreement
E - Essential Terms of Consulting Agreements
F - Necessary Costs and Expenses
of Venezuelan Subsidiaries
G - Confidentiality Agreement
H - Xxxxxxx Agreement
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EXPLORATION AND PURCHASE OPTION AGREEMENT
THIS EXPLORATION AND PURCHASE OPTION AGREEMENT ("Agreement") is made
and entered into effective as of June 7, 1996, regardless of the dates upon
which it actually is executed by the parties hereto, by and between L.B. MINING
CO., an Idaho general partnership ("L.B. Mining") , and GRANGES INC., a British
Columbia corporation ("Granges").
RECITALS
A. L.B. Mining owns all of the stock of certain Venezuelan
corporations described in Exhibit A hereto (collectively, "Venezuelan
Subsidiaries").
B. The Venezuelan Subsidiaries own certain mining concessions in
the Bolivar State, Venezuela, collectively described herein as the "Guariche
Project". The mining concessions owned by each of the Venezuelan Subsidiaries
are described on Exhibit B hereto (collectively, "Properties"). As used in this
Agreement, the term "mining concessions" means all of the right, title and
interest of the concessionaire, as set forth in the official Mining Title
thereto, or, as to concessions for which no official Mining Title has yet been
issued, all of the right, title and interest of the applicant for such
concessions.
C. L.B. Mining is desirous of granting to Granges, and Granges is
desirous of obtaining from L.B. Mining, the exclusive right to explore the
Properties and the exclusive option to purchase the Venezuelan Subsidiaries,
subject to the reconveyance
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to L.B. Mining of certain rights and further subject to all of the terms and
conditions of this Agreement.
NOW THEREFORE, in consideration of the payments described herein and
the following mutual covenants and agreements, L.B. Mining and Granges hereby
agree as follows:
ARTICLE I
THE OPTION
1.1 Grant of Option.
X. Xxxxx and Consideration: Subject to the other terms and
conditions of this Agreement, L.B. Mining does hereby grant to Granges the
exclusive right and option to purchase from L.B. Mining (the "Option") all of
the issued and outstanding stock in the Venezuelan Subsidiaries (the "Stock") ,
all of which is owned by L.B. Mining. The consideration for the Option is the
following:
(i) Granges shall pay L.B. Mining the sum of Two Hundred
Seventy-Five Thousand Dollars ($275,000) ("Option Payment") , payable as
follows:
(a) One Hundred Twenty-Five Thousand Dollars ($125,000)
("Initial Payment"), which shall be paid within two
(2) business days after L.B. Mining has provided
Granges with documentation reasonably satisfactory to
Granges that L.B. Mining or one or both of its
Venezuelan Subsidiaries has obtained from the
appropriate governmental agencies validly issued and
fully and immediately effective exploitation
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concessions granting and covering rights to mine all
gold mineralization within all vein and lode
structures within all of the ground encompassed
within the Seccion Numero Uno De El Triunfo and
Seccion Numero Dos De El Triunfo alluvial concessions
described on Exhibit B hereto (the Triunfo I-1, I-2,
I- II, II-I and II-2 vein concessions, hereinafter
collectively described as the "Vein Concessions") and
validly issued and fully and immediately effective
permits to occupy the Vein Concessions; and
(b) One Hundred Fifty Thousand Dollars ($150,000) ("Second
Payment") , which shall be paid within two (2)
business days after L.B. Mining has provided Granges
with documentation reasonably satisfactory to Granges
that L.B. Mining or one or both of its Venezuelan
Subsidiaries has: (i) obtained from the appropriate
governmental agencies validly issued and fully and
immediately effective permits to affect natural
resources to conduct exploration drilling and related
activities on the vein and lode structures contained
within the Vein Concessions (provided that Granges
shall consult with L.B. Mining promptly after the date
of execution of this Agreement as to the
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nature of the exploration activities Granges desires
to have undertaken during the Option Period, and L.B.
Mining's obligation to obtain permits hereunder shall
not be deemed to extend to activities significantly
different than or in excess of those originally
contemplated by Granges, as communicated to L.B.
Mining during the Option Period) , and (ii) obtained
final, conclusive, valid and binding action by the
appropriate governmental agencies removing from the
Vein Concessions the Special Advantage that provides
that the concessionaire shall transfer to an entity
designated by the Venezuelan Ministry of Energy and
Mines up to twenty percent (20%) of the shares of the
company that develops or produces minerals from the
Vein Concessions; provided, however, that the Second
Payment in no event shall be payable earlier than
thirty (30) days after Granges has been provided with
the documentation described in subsection 1.1.A(i)
(a).
(c) Granges shall receive as a credit against the Option
Payment and Second Payment the sum of Fifty Thousand
Dollars ($50,000) , which sum represents the
amount advanced to L.B. Mining by Granges and
evidenced by the Promissory
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Note dated June 7, 1996 (the "Note"). The Note shall
be deemed canceled and paid in full upon execution of
this Agreement, subject to the possible refund
obligations of L.B. Mining set forth in Sections
1.1.A(i) (d) ,1.3, and 3.4 below.
(d) Granges and L.B. Mining hereby agree that: (x) if the
documentation described in subsection 1.1.A(i) (a) has
not been provided to Granges by June 15, 1996, Granges
may, at its sole and exclusive option, elect either to
extend that date by thirty (30) days or to terminate
this Agreement, in which latter event L.B. Mining
shall refund to Granges the sum of Fifty Thousand
Dollars ($50,000) advanced to L.B. Mining (evidenced
by the Note) and Granges shall have no Option Payment
obligations or any other obligations under this
Agreement, including without limitation the break-off
fee set forth in Section 2.2, other than those
obligations set forth in the last three sentences of
Section 1.3 and those set forth in Sections 2.6 and
2.7; or (y) if the documentation described in
subsection 1.1.A(i) (b) has not been provided to
Granges by July 15, 1996, Granges may, at its sole and
exclusive option, elect either to
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extend that date by thirty (30) days or to terminate
this Agreement, in which latter event L.B.
Mining promptly shall refund to Granges both the
Initial Payment and the sum of Fifty Thousand Dollars
($50,000) advanced to L.B. Mining (evidenced by the
Note) , and Granges shall have no Second Payment
obligation or any other obligations under this
Agreement, including without limitation the break-off
fee set forth in Section 2.2, other than those
obligations set forth in the last three sentences of
Section 1.3 and those set forth in Sections 2.6 and
2.7. In the event that Granges elects to extend a date
by thirty (30) days pursuant to clause (x) or (y) of
the preceding sentence, and L.B. Mining fails to
provide the required documentation to Granges within
such thirty (30) day period, Granges shall, at the end
of such thirty (30) day period, have the right to
elect to extend the date for an additional thirty (30)
day period or to terminate the Agreement in accordance
with the provisions and with the consequences set
forth in clause (x) or (y) ; Granges shall have the
repeated right, at the end of each such thirty (30)
day period, to elect to extend the date an additional
thirty (30) days
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or to terminate the Agreement, provided that,
subject to force majeure, in no event shall Granges
so extend the date beyond December 15, 1996. The
Option Payment shall not constitute a down payment
toward or otherwise be applied against the purchase
price to be paid under the Purchase Agreement, if
Granges exercises its Option pursuant to Section 1.2
below.
(ii) Granges shall issue to L.B. Mining special
warrants ("Special Warrants") to acquire stock of Granges, such Special
Warrants to be substantially in the form described in the Special Warrant
Indenture ("Indenture") attached as Exhibit C hereto.
B. Negotiation of Joint Venture: Granges and L.B. Mining covenant
in good faith to negotiate a joint venture agreement to allow L.B. Mining to
conduct dredge mining operations for alluvial gold on the Santa Xxxx river, and
possibly on the Guarachito River, within the alluvial concessions constituting
part of the Properties, provided that: (i) L.B. Mining shall have obtained all
permits and governmental consents and approvals required to enter into and
perform such joint venture and operations; (ii) such a joint venture
arrangement is permitted and fully legal under all applicable laws and
regulations; (iii) in Granges' discretion, reasonably exercised, such joint
venture arrangements and dredge operations will not jeopardize or adversely
affect Granges' or the Companies' interests in the Properties or operations
with respect thereto; and (iv) L.B. Mining shall indemnify and hold harmless
Granges from all losses, costs, expenses, liabilities, obligations,
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claims, actions and demands arising as a result of such joint venture
arrangements or dredge operations; and (v) Granges shall have no obligation to
contribute any funding to such joint venture or dredge operations. In the event
that L.B. Mining has not commenced dredging operations pursuant to such a
joint venture within two years after the effective date of this Agreement, or
ceases or discontinues such operations thereafter, Granges shall have the
right, but not the obligation, to conduct such dredging operations. L.B. Mining
shall also have right, but not the obligation, to apply for governmental
concessions covering minerals other than gold and not covered by the
concessions constituting the Properties and situated within the land covered by
the Properties ("Other Concessions") and Granges agrees, upon request by L.B.
Mining, to waive its preferential right to such Other Concessions and not to
oppose L.B. Mining's efforts to obtain same. Notwithstanding any provision
hereof to the contrary, L.B. Mining shall not take any action with respect to
the Other Concessions or with respect to the joint venture and alluvial
dredging operations referenced in this Section 1.1.B., which might interfere in
any manner with any of Granges' current or future operations under this
Agreement, and if Granges exercises its Option, with any of the then current or
future operations of Granges, the Venezuelan Subsidiaries, or any of their
respective affiliates within the Area of Interest described in Section 2.4
below.
C. Option Period: The term of the Option ("Option Period") shall
commence on the effective date of this Agreement and shall terminate at
Midnight, Mountain Daylight Time, of the one hundred
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fiftieth (150th) day after Granges has made the Second Payment described in
subsection 1.1.A(i) (b) above; provided, however, that, subject to force
majeure, in no event shall the Option Period terminate later than December 15,
1996.
1.2 Exercise of Option. The Option may be exercised by Granges at any time
during the Option Period by providing written notice of that exercise to L.B.
Mining pursuant to the procedures set forth in Section 4.4 below. Within ten
(10) days after the date of Granges' exercise notice, Granges and L.B. Mining
shall execute a Stock Purchase Agreement in the form of Exhibit D hereto. The
effective date of the Stock Purchase Agreement shall be the calendar day
immediately after the date of Granges' exercise of the Option.
1.3 Failure to Exercise Option; Data to be Provided to L.B. Mining. If
Granges does not exercise the Option during the Option Period, this Agreement
shall terminate upon expiration of the Option Period, and the Option Payment
made by Granges pursuant to Section 1.1.A above shall be retained in full by
L.B. Mining, unless the refund provisions of subsection 1.1.A(i) (d) or Section
3.4 apply. Within thirty (30) calendar days after such termination, Granges
shall provide L.B. Mining with copies of all data, study documents, records and
reports (other than materials subject to the attorney-client or attorney work
product privilege) regarding the Guariche Project. These materials shall be
provided by Granges at its sole cost and expense and without any express or
implied representations or warranties regarding the accuracy or correctness of
the data or conclusions therein. Any use of or
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reliance upon those materials by L.B. Mining shall be at its sole risk and
expense.
ARTICLE II
GRANGES' RIGHTS AND OBLIGATIONS DURING THE OPTION PERIOD
2.1 Granges' Right of Exploration. The parties acknowledge and agree that
all activities on the Properties during the Option Period shall be directed and
paid for by Granges but actually carried out through the Venezuelan
Subsidiaries, subject to the representations and warranties set forth in
Section 3.1.B. Consistent with the foregoing, at all times during the Option
Period, L.B. Mining shall grant to Granges and cause its Venezuelan
Subsidiaries to grant to Granges, the sole and exclusive right to:
A. Enter upon the Properties;
B. Carry out through instruction to the appropriate Venezuelan
Subsidiaries, exploration, drilling, trenching, sampling, testing and any other
studies on the Properties as Granges in its sole discretion may determine
pursuant to this Agreement;
C. Through the appropriate Venezuelan Subsidiaries and in
accordance with the terms of applicable permits, bring and install on the
Properties and remove from time-to-time such roads, machinery, equipment,
tools, appliances and supplies as Granges may deem necessary;
D. Utilize for operations pursuant to this Agreement any water to
which the Venezuelan Subsidiaries have rights; and
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E. In accordance with the terms of applicable law and permits,
remove from the Properties reasonable quantities of rocks, ores, minerals,
metals and other materials and transport same for the purpose of sampling
(including bulk sampling) , testing and assaying, provided that Granges shall
not request that the Venezuelan Subsidiaries conduct commercial mining
operations on its behalf during the term of this Agreement.
2.2 Work Commitment During Option Period; Break-off Fee; L.B. Mining's
Access to Data: Granges agrees to expend during the Option Period at least
Three Hundred Fifty Thousand Dollars ($350,000) ("Work Commitment") for
drilling, trenching, exploration, testing, sampling, technical studies and
other pre-feasibility work with respect to the Guariche Project. Such work
shall include at least six thousand (6,000) meters of drilling on the
Properties at locations and to depths selected solely by Granges. Granges shall
be entitled to include and credit against this amount all out-of-pocket costs
it incurs with respect to such work, including without limitation costs of
travel, meals and lodging and a reasonable allocation of salaries and benefits
for its employees engaged in such work, fees and costs of consultants, and
costs and expenses incurred by Granges in maintaining the Venezuelan
Subsidiaries and Properties pursuant to Section 2.3 below. Granges shall enter
into Consulting Agreements, with Messrs. Xxxxx X. Xxxxxxxx and Xxxxx X. Xxxxxx,
containing the essential terms described in Exhibit E hereto, which shall
remain in effect during the Option Period and such additional periods, if any,
as may be selected by Granges. Costs and expenses paid by
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Granges pursuant to these Consulting Agreements shall be credited against its
Work Commitment. During the Option Period, L.B. Mining shall have full access
on a daily basis to geological and exploration data, budget information,
drilling reports, core samples (which shall be stored at the Properties, to the
extent not removed for assaying, metallurgical, geotechnical or other related
testing) , laboratory assays and any other information pertaining to operations,
studies, permits, applications, titles, concessions, assets or liabilities of
the Venezuelan Subsidiaries or on or for the benefit of the Properties. During
the Option Period, representatives of Granges will meet weekly with
representatives of L.B. Mining on site on the Properties or, with not less than
ten (10) days prior written notice, at another convenient location mutually
agreeable to both parties, to discuss matters relating to Granges' current and
future operations, including but not limited to geological, exploration and
budget information, drilling reports, laboratory assays and the pre-feasibility
study. At such meetings, Granges shall provide to representatives of L.B.
Mining assay, drilling, trenching and sampling reports relating to the previous
week's activities. The parties covenant to endeavor to cooperate and
communicate regarding proposed changes to operations to allow the Venezuelan
Subsidiaries sufficient time to obtain necessary approvals, modifications to
existing permits or new permits; provided, however, that nothing in this
sentence shall be construed as rendering one party liable to the other or as
modifying, altering or amending any consequences or remedies set forth in any
other provision of this Agreement, in the event of any
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delay in obtaining, or inability to obtain any permit or approval. All
information supplied by Granges to L.B. Mining pursuant to this Section 2.2
shall be provided by Granges without any express or implied representations or
warranties regarding the accuracy or correctness of the data or conclusions
therein. Any use of or reliance upon those materials by L.B. Mining shall be at
its sole risk and expense. Amounts spent by Granges in excess of Three
Hundred-Fifty Thousand Dollars ($350,000) will be credited against subsequent
work requirements under the Purchase Agreement if Granges exercises the Option.
Subject to the provisions of Section 1.1(A) (i) (d) and 3.4 of this Agreement,
if Granges terminates its activities pursuant to this Section 2.2 before
completion of the Work Commitment, it shall pay L.B. Mining a break- off fee in
the amount of Five Hundred Thousand Dollars ($500,000) within sixty (60) days
after such termination. Subject to performance by the Venezuelan Subsidiaries
of work consistent with the standards set forth in Section 3.1 B, Granges shall
conduct its work under this Agreement in a good and workmanlike manner in
accordance with generally accepted exploration practices. Subject to the
obligation to conduct at least six thousand (6,000) meters of drilling, all
exploration work and other work to be performed by Granges in satisfaction of
its Work Commitment shall be of a type, method, extent and duration and at the
locations determined by Granges, in its sole discretion.
2.3 Maintenance of Venezuelan Subsidiaries and Clear Title to Properties.
Granges agrees to pay all costs and expenses that arise while this Agreement is
in effect and that also are necessary
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17
to keep the Venezuelan Subsidiaries and the Properties in good standing while
this Agreement is in effect, as such costs are outlined on the attached Exhibit
F, but in no event shall Granges be obligated to expend more than the amounts
set forth on Exhibit F. Granges also agrees that, while this Agreement is in
effect, it shall: (i) keep the Properties free and clear of all liens, charges,
security interests, encumbrances and adverse claims resulting from any actions
by Granges or from any failures by Granges to take actions required under this
Agreement (which failures are not caused or contributed to by L.B. Mining or
the Venezuelan Subsidiaries) ; and (ii) take such actions within its control as
it reasonably understands are required in order to keep the Properties in as
good standing as the Properties were upon the effective date of this Agreement,
provided that Granges shall not be obligated to incur any cost or expense not
outlined in Exhibit F.
2.4 Area of Interest. In the event that Granges, L.B. Mining, any of the
Venezuelan Subsidiaries or any other person or entity that is under common
control of or with any of those entities acquires any right, title or interest
in any property or other rights related to exploration, development or mining
within a five-mile distance from the exterior boundaries of any of the
Properties, then such rights shall, at L.B. Mining's election (in the event of
an acquisition by Granges or its affiliates) or at Granges' election (in the
event of an acquisition by L.B. Mining or its affiliates) , be subject to and
governed by this Agreement; and the
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18
acquiring person or entities shall execute such instruments as are required to
accomplish that objective.
2.5 Contracts. Granges and L.B. Mining agree to use good faith efforts to
cooperate in causing the Venezuelan Subsidiaries to carry out the activities
Granges desires to have undertaken on or for the benefit of the Properties
during the Option Period. All contracts necessary for the implementation of
activities Granges desires to undertake during the Option Period shall be
entered into in the name of one of the Venezuelan Subsidiaries, and shall be
subject to the approval of L.B. Mining, which approval shall not unreasonably
be withheld. Prior to holding any discussions relative to the Properties, the
Venezuelan Subsidiaries or the Guariche Project with any agent or
representative of the Venezuelan government during the Option Period, Granges
will advise L.B. Mining of its desire to hold such discussions and the subjects
that Granges wishes to discuss. A representative of L.B. Mining will attend
such discussions along with Granges and the discussions will be scheduled for a
time and date reasonably convenient to both Granges and L.B. Mining.
2.6 Reclamation. During the Option Period and in accordance with the
existing practices of the Venezuelan Subsidiaries and applicable laws,
regulations and permits, Granges shall arrange for the reclamation of
disturbances to the Properties caused by its operations. If it does not
exercise the Option, Granges shall arrange and pay for the reclamation of
disturbances to the Properties caused by Granges' operations during the Option
Period in accordance with applicable permits as well as applicable
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19
governmental laws, rules and regulations and shall, within a reasonable time
period after the completion of such reclamation, assist the appropriate
Venezuelan Subsidiaries in obtaining written approval from the appropriate
governmental agency that such completion is satisfactory. For a reasonable
period of time (which in no event shall be less than 90 days) following the
earlier of the end of the Option Period or an election by Granges not to
exercise the Option, L.B. Mining shall cause the Venezuelan Subsidiaries to
grant Granges or its designated agents reasonable access to the Properties as
necessary for assistance in the performance of such required reclamation.
Granges shall arrange for the completion of all such reclamation as
expeditiously as reasonably practicable. In the event that L.B. Mining desires
that Granges not reclaim any particular areas, roads, facilities or
infrastructure, L.B. Mining shall so notify Granges in writing and thereafter
Granges shall have no liability, obligation or responsibility whatsoever for
such reclamation.
2.7 Indemnity. Granges agrees to indemnify, defend and hold L.B. Mining
and the Venezuelan Subsidiaries harmless from and against any loss, liability,
expense or damage (collectively "Losses") they may incur to third persons,
corporations, or governmental entities for injury to or death of persons or
damage to property which arise out of or result from any operations undertaken
on the Properties at the express written direction of Granges during the Option
Period, except to the extent such Losses arise out of the negligence or
misconduct of L.B. Mining or of one of the Venezuelan Subsidiaries or out of
the failure of the Venezuelan Subsidiaries
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to perform work in accordance with the standards set forth in Section 3.1.B.
2.8 Purchase of Equipment. In the event that Granges purchases the Stock
of the Venezuelan Subsidiaries, Granges shall, as an integral part of such
purchase and at the closing thereof, receive from L.B. Mining, the Venezuelan
Subsidiaries and Arrendadora 5000, C.A. (a Venezuelan corporation wholly owned
by L.B. Mining) title to certain on-site equipment, vehicles, parts and mining
camp associated with the Guariche Project (the "Equipment"). At the closing of
the Stock Purchase Agreement, and as part of the consideration for the
conveyance of the Stock to Granges, Granges shall pay to L.B. Mining an amount
equal to the then fair market value of the Equipment, as established either by
the mutual agreement of L.B. Mining and Granges or by the appraisal of a
professional appraiser mutually acceptable to both L.B. Mining and Granges,
and L.B. Mining shall deliver to Granges bills of sale or other appropriate
instruments (executed by L.B. Mining, the Venezuelan Subsidiaries and/or
Arrendadora 5000, C.A., as appropriate) , in form and substance reasonably
satisfactory to Granges, selling, conveying and transferring ownership of the
Equipment, free and clear of all liens, encumbrances, claims and demands to
Granges, or to the Venezuelan Subsidiary or other entity designated by Granges
in writing. Such sale and transfer shall include, without limitation, all
right, title and interest of Arrendadora 5000 in and to the Equipment. Promptly
after execution of this Agreement, Granges and L.B. Mining shall enter into an
agreement setting forth the foregoing understandings and agreements
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21
with respect to the sale and purchase of the Equipment and identifying the
Equipment in detail.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1 L.B. Mining's Representations, Warranties and Covenants. L.B. Mining
hereby represents, warrants and covenants to Granges that, as of the effective
date of this Agreement and at all times during the Option Period, the following
is and shall be true and correct in all respects:
A. Vein and Occupancy Rights: L.B. Mining or one or more of its
Venezuelan Subsidiaries has duly and properly applied for exploitation
concessions (i.e., the Vein Concessions) granting and covering rights to mine
all gold mineralization within all vein and lode structures within, and permits
to occupy, all ground within the Seccion Numero Uno De El Triunfo and Seccion
Numero Dos De El Triunfo concessions described on Exhibit A hereto.
B. Control of Actions of Subsidiaries: L.B. Mining shall take all
actions necessary to cause its Venezuelan Subsidiaries to fulfill the
agreements, commitments, covenants, representations and warranties made by L.B.
Mining under this Agreement, and L.B. Mining shall not permit its Venezuelan
Subsidiaries to take any actions inconsistent with the provisions or objectives
of this Agreement. In carrying out activities on the Properties during the
Option Period on behalf of Granges, the Venezuelan Subsidiaries shall perform
in a good and workmanlike manner, in accordance with generally accepted
industry standards and in compliance with all applicable laws, regulations,
decrees, permits and authorizations.
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22
X. Xxxxxxx Agreement: A true, correct and complete copy of the
agreement (the "Xxxxxxx Agreement") pursuant to which L.B. Mining acquired the
last of the outstanding Stock from Xxxxxxx Xxxxxxx Xxxxxxx is appended as
Exhibit H to this Agreement, together with an accurate English language
translation of same.
D. Organization and Good Standing:
(i) L.B. Mining is a partnership, and each of the
Venezuelan Subsidiaries is a corporation, duly organized, validly existing, and
in good standing under the laws of its jurisdiction of organization and
incorporation, with full corporate or partnership power and authority to
conduct its business as it is now being conducted, to own or use (in the case
of the Venezuelan Subsidiaries) the concessions constituting the Properties and
the Equipment, and to execute and enter into and to perform all its obligations
under this Agreement and the Purchase Agreement. Each such partnership and
corporation is duly qualified to do business as a foreign entity and
corporation and is in good standing under the laws of each jurisdiction in
which either the ownership or use it is making of the concessions constituting
the Properties and the Equipment requires such qualification.
(ii) L.B. Mining has delivered or specifically
identified and made available to Granges true and complete copies of the
organizational documents of L.B. Mining and the Venezuelan Subsidiaries, as
currently in effect.
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23
E. Authority; No Conflict:
(i) This Agreement constitutes the legal, valid, and
binding obligation of L.B. Mining, enforceable against L.B. Mining in
accordance with its terms. Upon the execution and delivery by L.B. Mining of
this Agreement and the Purchase Agreement (if Granges exercises the Option) ,
such Agreements will constitute legal, valid, and binding obligations of L.B.
Mining, enforceable against L.B. Mining in accordance with their respective
terms (except as such enforceability may be limited by bankruptcy, insolvency
and other similar laws affecting creditors' rights generally or by general
equitable principles). L.B. Mining has the absolute and unrestricted right,
power, authority, and capacity to execute and deliver this Agreement and the
Purchase Agreement (if Granges exercises the Option) and to perform its
obligations under this Agreement and the Purchase Agreement.
(ii) Neither the execution and delivery of this
Agreement nor the consummation or performance of any of the transactions
contemplated hereby will, directly or indirectly (with or without notice or
lapse of time) :
(a) contravene, conflict with, or result in a violation
of (A) any provision of the organizational documents
of L.B. Mining or the Venezuelan Subsidiaries, or
(B) any resolution adopted by the partners, board of
directors or the stockholders of L.B. Mining or the
Venezuelan Subsidiaries;
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24
(b) to the knowledge of L.B. Mining, contravene, conflict
with, or result in a violation of, or give any
governmental body or other person the right to challenge
any of the contemplated transactions or to exercise any
remedy or obtain any relief under, any existing legal
requirement, contract or undertaking to which L.B.
Mining or either of the Venezuelan Subsidiaries, or any
of the Properties, may be subject. Representations and
warranties provided in this Agreement to the knowledge
of L.B. Mining mean that neither Mr. Xxxxx Xxxxxx, Xx.
Xxxxx X. Xxxxxx nor Mr. Xxxx Xxxxxxxx actually knows or
knew of facts indicating that the matter represented
might not be true and correct in all respects;
(c) to the knowledge of L.B. Mining, contravene, conflict
with, or result in a violation of any of the terms or
requirements of, or give any governmental body the right
to revoke, withdraw, suspend, cancel, terminate, or
modify, any existing governmental authorization or any
Properties held by either of the Venezuelan
Subsidiaries;
(d) cause Granges or either of the Venezuelan Subsidiaries to
become subject to, or to become liable for the payment
of, any existing
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25
tax, assessment or fee as a direct consequence of
purchasing the Stock or the Equipment;
(e) to the knowledge of L.B. Mining, cause any of the
assets owned by any Venezuelan Subsidiary to be
reassessed or revalued by any taxing authority or
other governmental body; or
(f) result in the imposition or creation of any lien or
encumbrance upon or with respect to any of the
Properties.
(iii) Except as set forth on Schedule 3.1.E.(iii) , to
L.B. Mining's knowledge, neither L.B. Mining nor either of the Venezuelan
Subsidiaries is or will be required to give any notice to or obtain any consent
from any person in connection with the execution and delivery of this Agreement
or the consummation or performance of any of the transactions contemplated by
this Agreement or the Purchase Agreement.
F. Capitalization: The authorized equity securities of Cominac
and Aerominas (the Venezuelan Subsidiaries) consist of 640,000 and 4,000 shares
of common stock, par value 1,000 Bolivars and 1,000 Bolivars per share, of
which 640,000 and 4,000 shares are issued and outstanding, respectively, and
collectively constitute all of the Stock. L.B. Mining is and will be on the
Closing under the Purchase Agreement the record and beneficial owner and holder
of all of the Stock, free and clear of all liens, encumbrances, claims and
demands. All of the Stock has been duly authorized and validly issued and are
fully paid and nonassessable. There are no contracts or obligations relating to
the issuance, sale, or
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26
transfer of any of the Stock. To L.B. Mining's knowledge, none of the Stock was
issued in violation of any securities laws or any other legal requirement.
G. Books and Records: The existing books of account, minute
books, financial statements (including financial statements as of June 30, 1994
prepared by Xxxxx Xxxxxxxx) , stock record books, tax returns and other records
of L.B. Mining (to the extent that such records exist) and the Venezuelan
Subsidiaries, shall have been made available to Granges within thirty (30)
calendar days after the effective date of this Agreement, and shall be complete
and correct and have been maintained in accordance with sound business
practices, including the maintenance of an adequate system of internal
controls. Within one hundred twenty (120) calendar days after the effective
date of this Agreement, L.B. Mining shall cause to be prepared and provided to
Granges, updated financial statements, covering the period from the most recent
financial statements of June 30, 1994 through March 31, 1996, for each of the
Venezuelan Subsidiaries, including without limitation updated balance sheets,
statements of operating costs, accounts payable, assets and inventory lists and
descriptions of liabilities and obligations, all of which shall be complete and
correct and prepared in accordance with sound business practices. Such updated
financial statements shall be prepared by a well established and reputable firm
of Venezuelan certified public accountants in accordance with accounting
standards and principles generally applied in Venezuela. Prior to the closing
under the Purchase Agreement, the Venezuelan Subsidiaries shall not enter into
any
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27
transaction outside the ordinary course of business and there shall be no
change to any item set forth in the updated financial statements except for
changes and transactions approved in writing and in advance by Granges. The
minute books of the Venezuelan Subsidiaries contain accurate and complete
records of all meetings held of, and corporate action taken by, the
stockholders, the board of directors, and committees of the boards of directors
of the Venezuelan Subsidiaries, and no meeting of any such stockholders, board
of directors, or committee has been held for which minutes have not been
prepared and are not contained in such minute books. The Venezuelan
Subsidiaries have no liabilities or obligations other than: (i) as set forth in
its governmental permits and concession titles, copies of which have been
provided to Granges prior to execution of this Agreement; (ii) unaccrued
obligations imposed by laws or regulations of general application; (iii) the
Xxxxxxx Debt, as described in Section 3.1 C; (iv) obligations for taxes and
payroll not yet due and payable; (v) obligations for rental of equipment not
yet due and payable to Arrendadora 5000; and (vi) such other miscellaneous
liabilities and obligations as would not, individually or in the aggregate,
cause a Material Adverse Effect (as defined in Section 3.1 J.(i) ). To the
extent that they relate to the Venezuelan Subsidiaries and to time periods
prior to January 22, 1993, the representations and warranties set forth in this
Section 3.1.G. are provided to the knowledge of L.B. Mining.
H. Title to Properties; Encumbrances: Prior to the effective date
of this Agreement, L.B. Mining has delivered or made
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28
available to Granges copies of all instruments by which the Venezuelan
Subsidiaries acquired and hold the Properties, and copies of all title
opinions, and other title information in the possession or under the control of
L.B. Mining or the Venezuelan Subsidiaries relating to the Properties. The
Venezuelan Subsidiaries (or the Estate of Xxxxxxx Xxxxxxx Xxxxxxxx with respect
to the Seccion Numero 9 De El Triunfo concession only) own the concessions
constituting the Properties as described in Exhibit B hereto, free and clear of
all liens, encumbrances, claims, demands or interests of any third parties
arising by, through or under L.B. Mining or the Venezuelan Subsidiaries, and,
to the knowledge of L.B. Mining, free and clear of all liens, encumbrances,
claims, demands or interests arising by, through or under any other person or
entity, other than as described in Section 3.1.C above or as set forth in the
official concession titles. All of the concessions constituting the Properties
are valid, in full force and effect and in good standing, no defaults have been
alleged thereunder, and all obligations, taxes, payments, filings, studies and
Special Advantages required to have been paid, made or performed thereunder
from and after January 22, 1993 have been fully paid, made and performed and,
to the knowledge of L.B. Mining, all obligations, taxes, payments, filings,
studies and Special Advantages required to have been paid, made or performed
thereunder prior to that date have been fully paid, made and performed. The
Venezuelan Subsidiaries have sufficient rights to use water and for access to
conduct the operations that have been conducted by them on the Properties.
Neither L.B. Mining nor the
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29
Venezuelan Subsidiaries have any debt, liability or obligation whatsoever to
Xx. Xxxxxxx Xxxxxxxx and, within 60 days after the effective date of this
Agreement, L.B. Mining will: (i) ensure that all actions are taken and filings
made to evidence and establish the release and/or invalidity and
ineffectiveness of the mortgage in favor of Xx. Xxxxxxxx that purports to
encumber certain of the Properties; and (ii) provide to Granges a
certification, issued by the Subregistry Office of the Xxxxx District of the
State of Bolivar, Republic of Venezuela, certifying that the Properties are
free and clear of all liens, mortgages or encumbrances.
I. No Other Assets or Liabilities: If Granges exercises the
Option, then, notwithstanding any provision of this Agreement to the contrary,
L.B. Mining shall take all steps necessary to cause its Venezuelan
Subsidiaries, prior to the Closing under the Purchase Agreement, to have no
assets, debts or liabilities other than the Properties, the Equipment, and the
contracts listed on Schedule 3.1.I, unless Granges otherwise requests in
writing. Without limiting the foregoing, L.B. Mining agrees that it will cause
its Cominac subsidiary to spin off or otherwise divest itself of the Las Xxxxxx
F-6 and Las Xxxxxx F-7 concessions before such Closing or within a reasonable
period of time following such Closing, provided that in the event the Las
Xxxxxx F-6 and Las Xxxxxx F-7 concessions have not been conveyed out of the
Venezuelan Subsidiaries by the Closing, L.B. Mining agrees to indemnify and
hold Granges harmless from and against any and all costs, liabilities, losses
or damages incurred by Granges as a result of the Venezuelan Subsidiaries'
continuing ownership or operation of
- 26 -
30
these concessions after the closing. Subsequent to the Closing under the
Purchase Agreement, neither Granges nor the Venezuelan Subsidiaries shall have
any obligation whatsoever to maintain the Las Xxxxxx concessions or to make,
pay or perform any taxes, special advantages or other actions or obligations
with respect thereto.
J. Compliance with Legal Requirements; Governmental
Authorizations:
(i) each of the Venezuelan Subsidiaries is, and at all
times since its formation, has been, in full compliance with each legal
requirement (which for purposes of this Agreement shall in all instances
include but not be limited to environmental laws and regulations) that is or
was applicable to it or to the conduct or operation of its business or the
ownership or use of any of its assets, provided that as to time periods prior
to January 22, 1993, such representation and warranty is provided only to the
knowledge of L.B. Mining, and provided further that such representation and
warranty is provided only to the extent that a breach thereof could cause a
Material Adverse Effect. As used in this Agreement, a "Material Adverse
Effect" is an effect which could: (i) adversely impact Granges' or the
Venezuelan Subsidiaries' rights or ability to explore for minerals, develop or
mine the Properties; (ii) adversely impact the title to the Properties; (iii)
result in a liability or obligation on the part of Granges or the Venezuelan
Subsidiaries in excess of Fifty Thousand Dollars ($50,000) ; or (iv) diminish
the value of the Properties or the assets of the
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31
Venezuelan Subsidiaries by an amount in excess of Fifty Thousand Dollars
($50,000) ;
(ii) to the knowledge of L.B. Mining, no event has
occurred or circumstance exists that (with or without notice or lapse of time)
(A) may constitute or result in a violation by either of the Venezuelan
Subsidiaries of, or a failure on the part of either of the Venezuelan
Subsidiaries to comply with, any legal requirement, which failure or violation
could result in a Material Adverse Effect, or (B) may give rise to any
obligation on the part of either of the Venezuelan Subsidiaries to undertake,
or to bear all or any portion of the cost of, any remedial action of any
nature;
(iii) neither Venezuelan Subsidiary has received any
notice or other communication (whether written, or, to L.B. Mining's knowledge,
oral) from any governmental body or any other person regarding (A) any actual,
alleged, possible, or potential violation of, or failure to comply with, any
legal requirement, or (B) any actual, alleged, possible, or potential
obligation on the part of either of the Venezuelan Subsidiaries to undertake,
or to bear all or any portion of the cost of, any remedial action of any
nature; and
(iv) each of the Venezuelan Subsidiaries is, and at
all times has been, in full compliance with all of the terms and requirements
of each of the concessions owned by it as listed on Exhibit B hereto, provided
that, as to periods prior to January 22, 1993, such representation and warranty
is provided to the knowledge of L.B. Mining.
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32
K. Employees: If Granges exercises the Option, L.B. Mining shall
cause its Venezuelan Subsidiaries to terminate such of their employees as
Granges may request prior to the Closing under the Purchase Agreement. L.B.
Mining shall not be required to bear any costs or expenses relating to or
caused by such employee terminations.
L. Disclosure:
(i) No representation or warranty of L.B. Mining in this
Agreement fails to state or omits a material fact necessary to make the
statements herein or therein, in light of the circumstances in which they were
made, not misleading.
(ii) There is no fact known to L.B. Mining as of the
effective date of this Agreement that has specific application to either L.B.
Mining or either of its Venezuelan Subsidiaries or the Properties (other than
general economic or industry conditions) and that could cause a Material
Adverse Effect that has not been set forth in this Agreement or in materials
provided to Granges as described in this Agreement.
M. Brokers or Finders: L.B. Mining and its Venezuelan
Subsidiaries have incurred no obligation or liability, contingent or otherwise,
for brokerage or finders' fees or agents' commissions or other similar payment
in connection with this Agreement.
N. L.B. Mining's Assistance to Granges: While this Agreement is
in effect, and at the request and subject to the direction of Granges, L.B.
Mining agrees that it will use its best efforts to ensure that infrastructure
and equipment (including camp and supplies) associated with the Guariche
Project are in good
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33
working condition and available for Granges' use, that stocks and supplies
sufficient for operations on the Properties as contemplated by Granges during
the Option Period are available at the Properties, and that its personnel and
the personnel of its Venezuelan Subsidiaries are fully available so that
Granges can arrange for the commencement of drilling and other operations on
the Properties immediately upon receipt of the permit referred to in Section
1.1.A(i) (b). L.B. Mining also shall provide advisory services and assistance as
reasonably requested by Granges and shall cause its Venezuelan Subsidiaries to
provide such services and assistance as reasonably requested by Granges,
including but not limited to assistance in obtaining permits and
authorizations. Such services, assistance, infrastructure, equipment, stocks
and supplies shall be paid for by Granges' during the Option Period at their
cost to the Venezuelan Subsidiaries (or in accordance with other provisions of
this Agreement or the terms and conditions of consulting agreements entered
into pursuant to this Agreement) , and all amounts so expended by Granges shall
be credited towards its satisfaction of the Work Commitment.
O. Certain Proceedings; Fees: Except as set forth on Schedule
3.1.O, there are no pending or, to L.B. Mining's knowledge, threatened
lawsuits, actions or proceedings involving or affecting L.B. Mining, the
Venezuelan Subsidiaries or the Properties, including without limitation any
such lawsuit, action or proceeding that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
transactions contemplated hereby. All costs and
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34
expenses incurred in connection with the matters set forth on Schedule 3.1.O,
including without limitation attorneys' fees, and all costs, expenses, losses,
liabilities and obligations resulting from or arising out of such matters shall
be borne exclusively by L.B. Mining. All fees, costs and expenses associated
with the negotiation of this Agreement and of the Exhibits hereto on behalf of
L.B. Mining, including without limitation L.B. Mining's attorneys' fees, and
all fees, costs and expenses associated with the generation of financial
statements required to be produced in connection with this transaction,
including without limitation the fees and expenses of accountants, shall be
borne exclusively by L.B. Mining.
P. Removal of Special Advantages. L.B. Mining shall use good
faith efforts to diligently take all steps necessary to remove from the Vein
Concessions, as promptly as possible after execution of this Agreement, the
Special Advantage referenced in Section 1.1.A(i) (b) (ii) of this Agreement.
Q. Seccion Numero 9 De El Triunfo. The Estate of Xxxxxxx Xxxxxxx
Xxxxxxxx owns the Seccion Numero 9 De El Triunfo concession. Minera River Gold,
C.A., a wholly owned subsidiary of L.B. Mining, has a valid and enforceable
contractual right to purchase the concession, such right being free and clear
of all liens, encumbrances, claims and demands of third parties. The ability to
purchase that concession is subject to: (i) the payment by the Estate of
Xxxxxxx Xxxxxxx Xxxxxxxx of applicable estate taxes; (ii) proper notification
to the Ministry of Energy and Mines that the concession is now owned by the
Estate of Xxxxxxx Xxxxxxx
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35
Xxxxxxxx; and (iii) proper application to and approval by the Ministry of
Energy and Mines of the transfer of the concession from the Estate of Xxxxxxx
Xxxxxxx Xxxxxxxx to Minera River Gold, C.A., or to the Venezuelan Subsidiary
designated by Granges in accordance with Section 4.6. The contractual right to
purchase the concession shall be transferred, without charge, from Minera River
Gold, C.A., to one of the Venezuelan Subsidiaries (to be selected and
designated by Granges) in accordance with Section 4.6 of this Agreement.
Following such transfer to the Venezuelan Subsidiary designated by Granges,
Granges shall fund such actions within its control as it reasonably understands
are required in order to maintain the Seccion Numero 9 De El Triunfo
concession, provided that Granges shall not be obligated to incur any cost or
expense not outlined on Exhibit F. The entire purchase price for the purchase
of the concession from Xxxxxxx Xxxxxxx Xxxxxxxx has already been paid. To the
extent that other representations and warranties set forth in this Agreement
concerning the Seccion Numero 9 De El Triunfo concession conflict with the
representations and warranties set forth in this Section 3.1.Q., they shall be
deemed revised so as to be consistent with this provision.
R. Pre-Closing Actions: L.B. Mining shall take or cause to be
taken the following actions prior to the closing of the Purchase Agreement: (i)
provide to Granges a duly executed resolution of the shareholders of Cominac
evidencing the increase in the capital of that company to 640 million Bolivars,
(ii) provide to Granges evidence that the resolution of the shareholders of
Cominac described immediately above has been duly filed with the Mercantile
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36
Registry and properly published; and (iii) provide to Granges evidence that
L.B. Mining has formally notified the Office of Foreign Investment
Registration, Republic of Venezuela, of the change of ownership of the Stock
from Sr. Xxxxxxx Xxxxxxx Xxxxxxx to L.B. Mining and requested registration of
L.B. Mining's foreign investment in the Venezuelan Subsidiaries.
S. Assignment of Warranties: In the event that Granges exercises
the Option, at the closing of the Purchase Agreement L.B. Mining shall assign
and convey to Granges all rights, interests, privileges, benefits and
protections of the representations and warranties provided originally by
Xxxxxxx Xxxxxxx Xxxxxxx to L.B. Mining pursuant to that certain agreement
between such parties, a copy of which is appended to this Agreement as Exhibit
H (the "Xxxxxxx Agreement") , including without limitation rights to take,
institute and prosecute actions to enforce such representations and warranties
or to seek relief or remedies as a result of the breach of any such
representations and warranties. Upon the request and subject to the direction
of Granges, L.B. Mining shall cooperate in all ways in any such action,
including without limitation by bringing an action in its own name for Granges'
benefit.
T. Further Representations and Warranties: L.B. Mining further
represents and warrants to Granges as follows:
(i) It understands that the Special Warrants and the
common share purchase warrants issuable upon the exercise thereof (the
"Warrants") and the Common Shares of Granges issuable upon the exercise of the
Warrants (the "Warrant Shares", and collectively with the Warrants and Special
Warrants, the "Securities") have not
- 33 -
37
been and will not be registered under the U.S. Securities Act of 1933, as
amended (the "1933 Act") , and that the issuance of the Securities is being made
in reliance upon a private placement exemption from registration under the 1933
Act and under the securities laws of certain states or other appropriate
exemptions.
(ii) It is an "accredited investor" as defined in Rule
501 of Regulation D under the 1933 Act, and it is acquiring Securities for its
own account and not with a view to any resale, distribution or other
disposition of the Securities in violation of the United States securities law.
(iii) It agrees that if it decides to offer, sell or
otherwise transfer any of the Warrant Shares, it will not offer, sell or
otherwise transfer any of such Warrant Shares, directly or indirectly, unless:
(a) the sale is to Granges Inc.; or
(b) the sale is made outside the United States in
compliance with the requirements of Rule 904 of the
Regulation S under the 1933 Act and in
compliance with applicable local laws and
regulations; or
(c) the Warrant Shares are sold in a transaction
that does not require registration under the 1933
Act or any applicable United States state laws and
regulations governing the offer and sale of
securities, and the Vendor has provided to Granges
an opinion of counsel, in form and substance
reasonably satisfactory to
- 34 -
38
Granges, opining that such sale is exempt from
registration under all applicable laws and regulations.
(iv) It understands and acknowledges that the original
issuance of the Special Warrants and Warrants, and until such time as is no
longer required under applicable requirements of the 1933 Act or applicable
state laws, all certificates representing the Special Warrants and the Warrants
and all certificates exchanged therefor or in substitution thereof, shall bear,
on the face of such certificates, the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED. THE HOLDER HEREOF, BY PURCHASING
SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED.
(v) It understands and acknowledges that upon the
original issuance of the Warrant Shares, and until such time as is no longer
required under applicable requirements of the 1933 Act or applicable state
laws, all certificates representing the Warrant Shares, and all certificates
issued in exchange therefor or in substitution thereof, shall bear, on the face
of such certificates, the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE
HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE
COMPANY THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
ONLY
- 00 -
00
(X) XX XXX XXXXXXX, (X) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE
904 OF REGULATION S UNDER THE SECURITIES ACT OR (C) PURSUANT TO ANOTHER
APPLICABLE EXEMPTION UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS AND GRANGES HAS BEEN PROVIDED WITH AN OPINION OF COUNSEL,
IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO GRANGES, OPINING THAT THE
SALE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER APPLICABLE LAWS AND
REGULATIONS. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD
DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA. A NEW
CERTIFICATE BEARING NO LEGEND, DELIVERY OF WHICH WILL CONSTITUTE "GOOD
DELIVERY" MAY BE OBTAINED FROM THE MONTREAL TRUST COMPANY OF CANADA UPON
DELIVERY OF THE CERTIFICATE AND A DULY EXECUTED DECLARATION, IN A FORM
SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT THE SALE OF THE SECURITIES
REPRESENTED HEREBY IS BEING MADE IN COMPLIANCE WITH RULE 904 OF REGULATION
S UNDER THE SECURITIES ACT;
provided, that if the Warrant Shares are being sold under paragraph (iii) (b)
above, the legend may be removed by providing a declaration to Montreal Trust
Company of Canada, as registrar and transfer agent for the Warrant Shares, to
the following effect (or as Granges may prescribe from time to time) :
The undersigned (A) acknowledges that the sale of the ______________
Warrant Shares, represented by certificate numbers ________, to which this
declaration relates is being made in reliance of Rule 904 of Regulation S
under the United States Securities Act of 1933, as amended (the "1933
Act") ,
- 36 -
40
and (B) certifies that (1) it is not an "affiliate" (as defined in
Rule 405 under the 0000 Xxx) of Granges Inc., (2) the offer of such
Securities was not made to a person in the United States and either (a)
at the time the buy order was originated, the buyer was outside the
United States, or the seller and any person acting on its behalf
reasonably believe that the buyer was outside the United States or
(b) the transaction was executed on or through the facilities of The
Toronto Stock Exchange and neither the seller nor any person acting
on its behalf knows that the transaction has been prearranged with a
buyer in the United States and (3) neither the seller nor any person
acting on its behalf engaged in any direct selling efforts in
connection with the offer and sale of such Securities. Terms used
herein have the meanings given to them by Regulation S.
3.2 Granges' Representations, Warranties and Covenants. Granges hereby
represents, warrants and covenants to L. B. Mining as follows:
A. Organization and Good Standing: Granges is a corporation duly
organized, validly existing, and in good standing under the laws of the
Province of British Columbia.
B. Authority; No Conflict:
(i) This Agreement constitutes the legal, valid, and
binding obligation of Granges, enforceable against Granges in accordance with
its terms (except as such enforceability may be limited by bankruptcy,
insolvency, or other similar laws affecting creditors' rights generally or by
general equitable principles).
- 37 -
41
Granges has the absolute and unrestricted right, power, and authority to
execute and deliver this Agreement and the Purchase Agreement and to perform
its obligations under this Agreement and the Purchase Agreement.
(ii) Neither the execution and delivery of this
Agreement nor the consummation or performance of any of the transactions
contemplated hereby will give any person the right to prevent, delay, or
otherwise interfere with any of those transactions pursuant to:
(a) any provision of Granges' organizational documents;
(b) any resolution adopted by the Board of Directors or
the stockholders of Granges;
(c) any legal requirement or order to which Granges may
be subject; or
(d) any contract to which Granges is a party or by which
Granges may be bound.
Granges is not and will not be required to obtain any consent from any person
in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the transactions contemplated hereby.
C. Investment Intent: Granges is acquiring the Stock for its own
account and not with a view to its distribution within the meaning of United
States securities laws.
D. Certain Proceedings: There is no pending proceeding that has
been commenced against Granges and that challenges, or may have
- 38 -
42
the effect of preventing, delaying, making illegal, or otherwise interfering
with, any of the transactions contemplated hereby.
E. Brokers or Finders: Granges has incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
F. Ownership of Venezuelan Subsidiaries: During the Option Period,
Granges agrees that it will not represent to the Venezuelan Government or the
general public that it owns the Venezuelan Subsidiaries.
G. Issuer Status: Granges will at the time of issuance of the Special
Warrants be a reporting issuer in good standing under the securities laws of
British Columbia and Ontario.
H. Material Changes: Since March 31, 1996, being the date of the last
financial statements of Granges, and as of the effective date of this
Agreement, there has been no material change relating to Granges with respect
to which a material change report has not been filed under applicable
securities laws and no disclosure with respect to a material change has been
made on a confidential basis.
I. Authority to Issue Special Warrants: Granges has the full corporate
power and authority to issue the Special Warrants and the various securities
issuable upon exercise of the Special Warrants and upon issuance these Special
Warrants will be duly and validly created authorized and issued and the A
warrants and B warrants upon exercise in accordance with the terms of the
Special Warrant Indenture will be duly authorized, created and issued and
- 39 -
43
the A warrant shares and B warrant shares will be duly and validly authorized
and allotted for issuance upon exercise and will, upon exercise of the A
warrants and B warrants in accordance with the terms of the Warrant Indenture,
be issued as fully paid and non-assessable shares.
J. Issuance of Special Warrants: Granges is not in default or in breach
of, and the execution and delivery of each of this Agreement, the Stock
Purchase Agreement, the Special Warrant Indenture and the Warrant Indenture and
the performance of the transactions contemplated thereby will not result in a
breach of, and did not create a state of facts which, after notice or lapse of
time or both, will result in a breach of, and do not and will not conflict
with, any of the terms, conditions or provisions of the constating documents or
resolutions of Granges or any indenture, contract, agreement, instrument, lease
or other documents to which Granges is a party or by which Granges is or will
be contractually bound as of the date of issuance of the Special Warrants.
K. Securities Trading: To the knowledge of Granges, no order ceasing or
suspending trading in securities of Granges or prohibiting the sale of
securities by Granges has been issued and no proceedings for this purpose have
been instituted, are pending, contemplated or threatened.
3.3 Mutual Covenants by Granges and L.B. Mining. Between the date of this
Agreement and the Closing under the Purchase Agreement, Granges and L.B. Mining
will not, and L.B. Mining will cause each of its Venezuelan Subsidiaries not
to, without the prior consent of Granges, take any affirmative action, or fail
to take any
- 40 -
44
reasonable action within their or its control, which would cause any of the
representations, warranties or covenants described in Section 3.1 and 3.2 not
to be true, accurate and performed as provided in this Agreement and the
Purchase Agreement. L.B. Mining further agrees that it shall not permit the
Venezuelan Subsidiaries to enter into any transactions outside the ordinary
course of business or undertake any material obligations without Granges' prior
written consent.
3.4 Survival; Effect of Breach: All representations, warranties and
covenants in Section 3.1 and 3.2 shall survive termination of this Agreement
(whether by Granges' exercise of the Option or otherwise) , and the execution
and delivery of any further documents or instruments contemplated hereunder;
provided, however, that more than five years after termination of the Option
Period, neither party shall pursue a claim for breach of such representations,
warranties and covenants except as a setoff against amounts otherwise owing or
to be payable to the breaching party, whether pursuant to this Agreement, the
Purchase Agreement or otherwise. If L.B. Mining breaches any of its
representations, warranties or covenants contained in Section 3.1 X, X, X, X,
X, X, X, X, X, X xx X, (x) such breach could have a Material Adverse Effect,
and (c) L.B. Mining is notified of such breach by Granges and fails, within
twenty (20) calendar days thereafter, to cure such breach or to establish to
Granges' reasonable satisfaction either that such a breach has not in fact
occurred or that L.B. Mining has diligently commenced to cure such breach and
that such breach will be fully cured within a reasonable period of time not to
exceed sixty days,
- 41 -
45
then, without limiting any other remedies or relief otherwise available to
Granges, Granges shall have the right to terminate this Agreement, in which
case Granges shall be relieved of all of its obligations under this Agreement
(including but not limited to the Work Commitment and break-off fee under
Section 2.2) , except as set forth in the last three sentences of Section 1.3 or
in Sections 2.6 and 2.7, and L.B. Mining shall be obligated to refund to
Granges, within fifteen (15) calendar days after termination of this Agreement,
the Option Payment and the Fifty Thousand Dollars ($50,000) advanced by Granges
to L.B. Mining. Further, in the event of any such breach by L.B. Mining,
Granges shall have the right and option to extend the Option Period for such
time as may be reasonably necessary to remedy such breach; provided, however,
that if Granges so exercises its rights to extend the Option Period, Granges
shall not be relieved of any of its obligations under this Agreement, unless
L.B. Mining fails, within twenty (20) calendar days after receipt of notice
from Granges of the existence of a breach, either to cure the breach or to
establish to Granges' reasonable satisfaction either that such a breach did not
in fact occur or that L.B. Mining has diligently commenced to cure such breach
and that such breach will be fully cured within a reasonable period of time not
to exceed sixty days. Nothing in this Section 3.4 shall be construed as
limiting any remedy or relief otherwise available to Granges at law or in
equity, or provided for under any other provision of this Agreement.
- 42 -
46
ARTICLE IV
GENERAL PROVISIONS
4.1 Expenses. Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement,
including all fees and expenses of agents, representatives, counsel, and
accountants.
4.2 Press Releases and Public Announcements. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
other party, which approval shall not unreasonably be withheld; provided,
however, that any party may make any public disclosure it believes in good
faith is required by applicable law or regulation or stock exchange rule (in
which case the disclosing party will use its best efforts to advise the other
party prior to making the disclosure).
4.3 Confidentiality. The Confidentiality Agreement dated January 15, 1996
(the "Confidentiality Agreement") by and between Cominac, Granges and L.B.
Mining, a copy of which is appended as Exhibit G to this Agreement, shall
remain in full force and effect throughout the Option Period, provided that:
(i) if Granges does not exercise the Option, the Confidentiality Agreement
shall expire and terminate on January 15, 1999 (as provided therein) ; (ii) if
Granges does exercise the Option, the Confidentiality Agreement shall expire
and terminate upon closing of the Purchase Agreement; (iii) Granges may
disclose Proprietary Information (as defined in the Confidentiality Agreement)
to third party consultants and
- 43 -
47
agents conducting work on the Guariche Project during the Option Period,
subject to their obligation to maintain the confidentiality thereof in
accordance with the terms of the Confidentiality Agreement; (iv) L.B. Mining
and the Venezuelan Subsidiaries and their respective officers, directors,
shareholders, employees and agents shall be bound by the Confidentiality
Agreement to the same extent as Granges; (v) nothing in the Confidentiality
Agreement shall preclude, limit or qualify the right of any party to make any
disclosure that is necessary or appropriate in connection with legal
proceedings or other applicable requirements of law or applicable stock
exchange; (vi) nothing in the Confidentiality Agreement shall preclude, limit
or qualify the right of any party to make any disclosure that is necessary or
appropriate in making any filing or obtaining any consent or approval required
for the consummation of the transactions, work or undertakings contemplated by
this Agreement; (vii) notwithstanding anything in the Confidentiality Agreement
to the contrary, Granges, unless it does not exercise the Option, shall have
the right to retain copies of all Proprietary Information, including without
limitation information relating to work conducted or funded by it during the
Option Period; (viii) nothing in the Confidentiality Agreement shall be
construed as limiting, modifying or abrogating in any way any representation,
warranty or covenant set forth in this Agreement; (ix) notwithstanding anything
in the Confidentiality Agreement to the contrary, the Confidentiality Agreement
shall be governed by and construed in accordance with the laws of the State of
Colorado, without regard to principles of conflict or choice of
- 44 -
48
law; (x) the Confidentiality Agreement shall be subject to the other provisions
of this Agreement, including without limitation those pertaining to enforcement
of rights and resolution of disputes; and (xi) the Confidentiality Agreement
shall be and is hereby deemed amended by the foregoing provisions of this
Section 4.3.
4.4 Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt) , (b)
sent by telecopier (with written confirmation of receipt) , provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested) , in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties) :
L.B. Mining: L.B. Mining Co.
0000 Xxxxxxxxx Xxxxx
X.X. Xxx 0000
Xxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Facsimile No.: 000-000-0000
Granges: Granges Inc.
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx, President and CEO
Facsimile No.: 000-000-0000
4.5 Jurisdiction; Service of Process. Any action or proceeding seeking to
enforce any provision of, or based on any right arising out of, this Agreement
may be brought against any of the parties in
- 45 -
49
the courts of the State of Colorado, City and County of Denver, or, if it has
or can acquire jurisdiction, in the United States District Court for the
District of Colorado, and each of the parties consents to the jurisdiction of
such courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any
action or proceeding referred to in the preceding sentence may be served on any
party anywhere in the world.
4.6 Further Assurances. The parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the
other party may reasonably request for the purpose of carrying out the intent
of this Agreement and the documents referred to in this Agreement. Without in
any way limiting the foregoing, upon the request and subject to the direction
of Granges, L.B. Mining shall cause its wholly owned subsidiary Minera River
Gold, C.A., to transfer and convey to one of the Venezuelan Subsidiaries (to be
selected and designated by Granges) , without charge, all of its right, title
and interest, including without limitation its contractual rights of purchase,
in and to the Seccion Numero 9 De El Triunfo concession.
4.7 Waiver. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
- 46 -
50
power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege.
4.8 Entire Agreement and Modification. This Agreement, together with all
of the Exhibits attached hereto, supersedes all prior agreements between the
parties with respect to its subject matter (including the Letter of Intent
between Granges and L.B. Mining dated February 29, 1996 and all prior drafts of
this Agreement) and constitutes (along with the Exhibits attached hereto) a
complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may not be amended
except by a written agreement executed by the party to be charged with the
amendment.
4.9 Assignments, Successors, and No Third-party Rights. Neither party may
assign any of its rights under this Agreement without the prior consent of the
other party, which will not be unreasonably withheld. No such consent shall be
required to an assignment by Granges to an affiliate under common control of or
with Granges. Subject to the preceding sentence, this Agreement will apply to,
be binding in all respects upon, and inure to the benefit of the successors and
permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any person other than the parties to this
Agreement any legal or equitable right, remedy, or claim under or with respect
to this Agreement or any provision of this Agreement. This Agreement and all of
its provisions and conditions are for the sole and exclusive
- 47 -
51
benefit of the parties to this Agreement and their successors and assigns.
4.10 Severability. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions
of this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
4.11 Section Headings, Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or "Sections" refer
to the corresponding Section or Sections of this Agreement. All words used in
this Agreement will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
4.12 Dollars and $. All references in this Agreement to "Dollars" and
"$" shall mean and refer to United States dollars.
4.13 Force Majeure. For purposes of this Agreement, "Force Majeure"
shall mean an event beyond the reasonable control of Granges that prevents or
delays it from conducting the activities contemplated by this Agreement. Such
events shall include but not be limited to acts of God, war, insurrections,
action or inaction of governmental agencies, inability to obtain any
environmental, operating or other permits or approvals, authorizations or
consents, inclement weather conditions, and lack of personnel or equipment,
including but not limited to the bridge necessary for
- 48 -
52
access to the Properties. In the event of a Force Majeure, Granges shall
exercise diligent efforts to remove or avoid the Force Majeure, but for so long
as Granges is so prevented or delayed, the running of the Option Period shall
be delayed, suspended and extended. If the Force Majeure remains in effect for
three months, Granges may elect in writing to terminate this Agreement, in
which event Granges shall be relieved from all of its obligations hereunder,
including without limitation payment of the break-off fee referred to in
Section 2.2.
4.14 Governing Law. This Agreement will be governed by the laws of the
State of Colorado without regard to conflicts of laws principles.
4.15 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement. Evidence of execution of this Agreement may be
provided by facsimile transmission and this Agreement shall be valid and in
full force and effect upon the provision of evidence of execution hereof by all
parties.
4.16 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.
4.17 Date of Laws. Notwithstanding any provision of this Agreement to
the contrary, all representations, warranties and opinions of counsel set forth
herein or contemplated hereunder shall be given
- 49 -
53
with the assumption that the applicable governmental laws and regulations and
rules of stock exchanges as of dates subsequent to June 7, 1996 shall be the
same as existed on June 7, 1996.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
GRANGES INC.
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
L.B. MINING CO.
By: _______________________________________
Xxxxx X. Xxxxxx, General Partner
By: _______________________________________
Xxxxx X. Xxxxxx, General Partner
By: _______________________________________
Xxxxx X. Xxxxxxxx, General Partner
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54
EXHIBIT A
TO
EXPLORATION AND PURCHASE OPTION AGREEMENT
BETWEEN
L.B. MINING CO., an Idaho general partnership,
AND
GRANGES INC., a British Columbia corporation
Effective June 7, 1996
L.B. MINING'S VENEZUELAN SUBSIDIARIES
Corporacion Minera Nacional, C.A. ("Cominac")
Aerominas, C.A. ("Aerominas")
A-1
55
EXHIBIT B
TO
EXPLORATION AND PURCHASE OPTION AGREEMENT
BETWEEN
L.B. MINING CO., an Idaho general partnership,
AND
GRANGES INC., a British Columbia corporation
Effective June 7, 1996
PROPERTIES
PROPERTY OWNED BY
-------- --------
Seccion Numero Uno De El Triunfo Cominac
Seccion Numero Dos De El Triunfo Cominac
Triunfo I-1, Triunfo I-2, Triunfo II-1, Cominac
Triunfo II-2, Triunfo I-II
Seccion Numero 5 De El Triunfo Aerominas
Seccion Numero 6 De El Triunfo Aerominas
Seccion Numero 7 De El Triunfo Aerominas
Seccion Numero 9 De El Triunfo The Estate of
Xxxxxxx Xxxxxxx Xxxxxxxx
B-1
56
EXHIBIT C
TO THAT CERTAIN
EXPLORATION AND PURCHASE OPTION AGREEMENT
BY AND BETWEEN
L.B. MINING CO.
AND
GRANGES INC.
57
EXHIBIT D
TO
EXPLORATION AND PURCHASE OPTION AGREEMENT
DATED EFFECTIVE JUNE 7, 1996
BETWEEN
L.B. MINING CO. AND GRANGES INC.
STOCK PURCHASE AGREEMENT
DATED___________________, 199___
BETWEEN
L.B. MINING CO. ("SELLER")
AND
GRANGES INC. ("BUYER")
B-3
58
TABLE OF CONTENTS
1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Sale of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 Date and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Actions by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Actions by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4. Post-Closing Obligations of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.1 Exploration Expenditure Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2 Semi-Annual and Annual Reserve Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.3 Additional Payments Based on Semi-Annual Studies; Determination of Base and Excess Ounces . . . . . 12
4.4 Additional Payments or Royalty Based on Annual Studies . . . . . . . . . . . . . . . . . . . . . . . 15
4.5 Premium Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.6 Production Royalty on Copper and Silver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.7 Xxxxxxx Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.8 Covenants in Connection with Special Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5. Seller's and Buyer's Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1 Representations and Warranties from Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 Additional Representations, Warranties and Covenants of Buyer . . . . . . . . . . . . . . . . . . . 18
5.3 Additional Representations and Warranties by Seller . . . . . . . . . . . . . . . . . . . . . . . . 23
6. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.1 Conditions to Seller's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.2 Conditions to Buyer's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.1 Indemnification by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.2 Indemnification by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3 Indemnification Against Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.2 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.3 Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.5 Entire Agreement; Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.6 Binding Effect; Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.7 Headings and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.10 Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.11 Third Parties; Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.12 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.13 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.14 Access to Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.1 5Area of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.16 Assignment; First Offer Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.17 Contracts Pertaining to the Guariche Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.18 Date of Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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EXHIBITS
Schedule 1 Royalty Provisions
Schedule 2 Opinion of Buyer's Counsel
Schedule 3 Opinion of Seller's Counsel
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into effective
as of ____________________, 199__, by and between L.B. MINING CO., an Idaho
general partnership ("Seller") , and GRANGES INC., a company incorporated under
the laws of the Province of British Columbia ("Buyer") , regardless of when it
actually is executed by the parties hereto.
RECITALS
A. Seller owns all of the stock of two corporations duly organized under
the laws of Venezuela, known as Corporacion Minera Nacional, C.A. and
Aerominas, C.A., which companies have been granted title to certain mining
concessions in the Bolivar State, Venezuela.
B. Buyer was granted certain rights pursuant to an Exploration and
Purchase Option Agreement, dated effective June 5, 1996 (the "Option
Agreement") to explore those properties and to purchase from Seller all of the
issued and outstanding stock of those companies.
C. Pursuant to the Option Agreement, Buyer has exercised that option.
AGREEMENTS
In consideration of the mutual promises and covenants contained herein,
Seller and Buyer agree as follows:
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1. Certain Definitions.
As used in this Agreement, the following terms (whether used in singular or
plural forms) shall have the following meanings:
"Aerominas" means Aerominas, C.A., a corporation organized under the laws of
Venezuela.
"Affiliate" means, with respect to any Person, a Person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with such Person.
"Annual Study" means a Reserve study as described in Section 4.2.
"A Warrants" and "A Warrant Shares" mean, respectively, the A Warrants and
the shares to be issued by Granges upon exercise of the A Warrants, as provided
in the Indenture.
"Base Ounces" shall have the meaning set forth in Section 4.3.
"B Warrants" and "B Warrant Shares" mean, respectively, the B Warrants and
the shares to be issued by Granges upon exercise of the B Warrants, as provided
in the Indenture, the number of which shares shall be equal to Five Million
Dollars ($5,000,000) divided by the closing price of Buyer's shares on the
Toronto Stock Exchange on June 5, 1996.
"Closing" has the meaning given in Section 3.1.
"Companies" means, collectively, Aerominas and Cominac.
"Contract" means any written contract, mortgage, deed of trust, bond,
indenture, lease, license, note, franchise, certificate, option, warrant,
right, or other instrument, document or agreement, and any oral obligation,
right or agreement.
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"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person
whether through the ownership of voting securities, by Contract, or otherwise.
"Date of Production" with respect to gold means the date that refined gold,
which is of a purity that equals or exceeds the purity standards for refined
gold for which spot prices are quoted on the London Metals Exchange, is
available for delivery from or pick up at the refinery or other processing
facility.
"Dollars" and "$" means United States dollars.
"Excess Ounces" has the meaning given in Section 4.3.
"Exchange" means The Toronto Stock Exchange.
"Exploration Expenditures" shall mean all costs and expenses paid or
incurred by Buyer in exploring and prospecting for gold on and within the
Properties and in determining the amount and extent of Reserves within the
Properties; including but not limited to drilling, trenching, tunneling, bulk
sampling, testing, sampling, assaying, technical studies, and pre-feasibility
studies and Feasibility Studies. Buyer shall be entitled to include in such
costs and expenses all out-of-pocket costs it pays or becomes obligated to pay
with respect to such work, including but not limited to costs of travel, meals
and lodging and a reasonable allocation of salaries and benefits for its
employees engaged in such work and fees and costs of consultants engaged in
such work.
"Feasibility Study" means a study and report that evaluates the economic
feasibility of developing a mine that produces gold from the Properties. The
study and report may, at Buyer's
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election, be prepared either by Buyer, an Affiliate of Buyer, or a third party
and shall be of a standard used by mining companies for making investment
decisions, provided that such report and study shall be based upon a Reserves
study prepared by an independent consultant pursuant to Section 4.2.
"Governmental Authority" means (i) the United States of America, any state,
commonwealth, territory or possession thereof and any political subdivision or
quasi-governmental authority of any of the same, including but not limited to
courts, tribunals, departments, commissions, boards, bureaus, agencies,
counties, municipalities, provinces, parishes, and other instrumentalities, and
(ii) Venezuela, the Bolivar State and any state, province, commonwealth,
territory or possession thereof, and any political subdivision,
quasi-governmental authority or instrumentality of any of the same.
"Indenture" means the Special Warrant Indenture, dated as of June * ,
1996, between Granges and Montreal Trust Company of Canada,
including Schedules A through E thereto. The Indenture is attached as Exhibit
C to the Option Agreement.
"Judgment" means any judgment, writ, order, injunction, award or decree of
any court, judge, justice or magistrate, including any bankruptcy court or
judge, and any order of or by any Governmental Authority.
"Knowledge" of Seller of or with respect to any matter means that any of
Xxxxx X. Xxxxxx, Xxxxx X. Xxxxxx or Xxxxx X. Xxxxxxxx has actual awareness or
knowledge of such matter, and "knowledge"
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of Buyer of or with respect to any matter means that any of the executive
officers, directors or senior managers of Buyer has actual awareness or
knowledge of such matter.
"Legal Requirements" means applicable common law and any statute,
ordinance, code or other law, rule, regulation, order, technical or other
standard, requirement or procedure enacted, adopted, promulgated, applied or
followed by any Governmental Authority, including Judgments.
"Lien" means any security agreement, financing statement filed with any
Governmental Authority, conditional sale or other title retention agreement,
any lease, consignment or bailment given for purposes of security, any lien,
mortgage, indenture, pledge, option, encumbrance, adverse interest,
constructive trust or other trust, claim, attachment, exception to or defect in
title or other ownership interest (including but not limited to reservations,
rights of entry, possibilities of reverter, encroachments, easement,
rights-of-way, restrictive covenants leases and licenses) of any kind, which
otherwise constitutes an interest in or claim against property, whether arising
pursuant to any Legal Requirement, Contract or otherwise.
"Litigation" means any claim, action, suit, proceeding, arbitration,
investigation, hearing, or other activity or procedure that could result in a
Judgment.
"Net Smelter Returns" means proceeds actually received by Buyer in an
arm's-length sale of gold, silver or copper after deductions for smelting and
refining charges and penalties, costs of transporting product to the refinery
or smelter, costs of
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insuring product in transit, and the costs of any royalties and production and
severance taxes payable to governmental entities.
"Option Agreement" means the Exploration and Purchase Option Agreement,
dated effective June 7, 1996, between Seller and Buyer.
"Person" means any natural person, Governmental Authority, corporation,
general or limited partnership, joint venture, trust, association, or
unincorporated entity of any kind.
"Properties" means all lands and interests in real property (including but
not limited to mineral concessions and rights to acquire same) owned by either
or both of the Companies as of the effective date of this Agreement, other than
the Las Xxxxxx F-6 and Las Xxxxxx F-7 concessions described in Section 3.1.I of
the Option Agreement.
"Purchase Price" has the meaning given in Section 2.2.
"Xxxxxxx Agreement" means the contract pursuant to which Seller acquired
the last outstanding Shares from Xxxxxxx Xxxxxxx Xxxxxxx, copies of which
contract and an accurate English translation thereof are appended collectively
as Exhibit H to the Option Agreement.
"Reserves" shall mean proven and probable minable reserves of gold within
the Properties, employing the definitions of such reserves used by the United
States Securities and Exchange Commission, provided that, in determining
whether the mineral deposit can be economically extracted or produced,
consideration shall be given to all exploration, development, and other
pre-production costs incurred or to be incurred by Buyer, including without
limitation all payments made by Buyer to Seller or to other
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persons or entities pursuant to the Option Agreement or this Agreement.
"Semi-Annual Study" means a Reserve study as described in Section 4.2.
"Shares" means all of the issued and outstanding shares of stock of the
Companies.
"Spot Price" means the average P.M. Fixing on the London Metal Exchange on
the Date of Production of the gold, or if the date of production is not a
business day, on the first business day thereafter.
"Taxes" means all levies and assessments of any kind or nature imposed by
any Governmental Authority, including but not limited to all income, sales,
use, ad valorem, value added, franchise, severance, net or gross proceeds,
withholding, payroll, employment, excise or property taxes, together with any
interest thereon and any penalties, additions to tax or additional amounts
applicable thereto.
"Transaction Documents" means the Option Agreement and all instruments and
documents executed and delivered by Buyer or Seller or any officer, director,
or Affiliate of either of them in connection with this Agreement or the
transactions contemplated hereby.
2. Sale of Shares.
2.1 Transfer of Shares. Subject to the terms and conditions of
this Agreement, Seller shall sell and transfer to Buyer, and Buyer shall
purchase from Seller, free and clear of all Liens (other than: (a) those
contained in the concessions included
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in the Properties, (b) the obligations under the Xxxxxxx Agreement assumed by
Buyer pursuant to Section 4.7 of this Agreement, and (c) those created by or
under the direction of Buyer or its Affiliates) , all of the Shares.
2.2 Purchase Price. The purchase price ("Purchase Price") for the
Shares is Fifteen Million Dollars ($15,000,000) payable as follows:
(a) Five Million Dollars ($5,000,000) , payable at the Closing
as provided in Section 3.3; and
(b) an entitlement under the Indenture to receive 2,047,938 A
Warrant Shares (which number represents the number of such shares, with a
collective value of Five Million Dollars ($5,000,000) , based upon the closing
price for Buyer's common stock on February 29, 1996) , to be delivered at the
Closing as provided in Section 3.3; and
(c) if the value of the A Warrant Shares to which Seller is
entitled at Closing, calculated on the basis of the average trading price of
the common shares of Buyer on the Exchange for the five (5) business days
immediately preceding the Closing, is less than Five Million Dollars
($5,000,000) , a sum of money equal to that difference, payable at the Closing
as provided in Section 3.3; and
(d) Five Million Dollars ($5,000,000) , payable by wire or
interbank transfer of immediately available funds, as directed by Seller, upon
the earlier of:
(i) six months after the effective date of this Agreement; or
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(ii) Buyer having confirmed by drilling the existence
of Reserves containing at least five hundred thousand (500,000) ounces of
recoverable gold, it being understood and agreed by the parties that, if Buyer
has achieved such confirmation prior to the Closing, the amount described in
this Section 2.2(d) shall be paid to Seller at Closing.
3. Closing.
3.1 Date and Place. The closing of the transactions contemplated
by this Agreement ("Closing") shall take place at 10:00 a.m. (MDT) on the tenth
(10th) calendar day after the effective date of this Agreement, at the offices
of Parcel, Mauro, Xxxxxx & Xxxxxxxxx, P.C., 0000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000,
Xxxxxx, Xxxxxxxx.
3.2 Actions by Seller. At Closing, Seller shall deliver, or cause
to be delivered, to Buyer the following:
(a) the certificates representing the Shares, duly endorsed in
blank or with separate stock powers endorsed in blank, with signatures
guaranteed and all requisite stock transfer stamps attached, with documentation
reasonably satisfactory to Buyer that the Shares have been transferred on the
Stockholder Registry Books for the Companies; and
(b) the officer's certificate described in Section 6.2(c) ; and
(c) the opinion of counsel described in Section 6.2(e) ; and
(d) copies of the written resignations of such of the officers and
directors of the Companies as Buyer shall have
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requested by notice to Seller not later than five (5) days prior to Closing;
and
(e) a copy of the actions of the minutes of a partnership meeting
of Seller authorizing the execution, delivery and performance by Seller
of this Agreement, certified by each of the general partners of Seller, as of
the date of Closing as being duly adopted, unmodified and in full force and
effect; and
(f) an assignment from Seller to Buyer and the Companies, in a form
reasonably acceptable to Buyer, of all representations, warranties, covenants
and other benefits and rights to which Seller or its Affiliates are entitled
pursuant to the Xxxxxxx Agreement, subject to the provisions of Section 4.7
of this Agreement.
3.3 Actions by Buyer. At Closing, Buyer shall deliver, or cause to
be delivered, to Seller the following:
(a) the cash portion of the Purchase Price, adjusted if necessary
as provided in Sections 2.2(c) or 2.2(d) (ii) , by wire or interbank transfer
of immediately-available funds at the direction of Seller; and
(b) the Indenture, duly executed by the parties thereto; and
(c) the officer's certificate described in Section 6.1(c) ; and
(d) the opinion of counsel described in Section 6.1(e) ; and
(e) documentation reasonably satisfactory to Seller that Buyer has
given written notice to the Trustee pursuant to terms of
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the Indenture that the A Warrants shall be deemed to be exercised on the Class
A Warrant Exercise Date, as provided in the Indenture; and
(f) a copy of the actions of the board of directors of Buyer
authorizing the execution, delivery and performance by Buyer of this Agreement,
certified by a secretary or assistant secretary of Seller as of the date of
Closing, as being duly adopted, unmodified and in full force and effect.
3.4 Further Assurances. At or after Closing, Seller, at the
request of Buyer, shall promptly execute and deliver, or cause to be executed
and delivered, to Buyer all such documents and instruments, in addition to
those otherwise required by this Agreement, in form and substance satisfactory
to Buyer, as Buyer reasonably may request in order to carry out or evidence the
terms of this Agreement.
4. Post-Closing Obligations of Buyer. After Closing, Buyer shall perform, or
shall cause the Companies to perform, the obligations set forth in this Section
4.
4.1 Exploration Expenditure Commitment. During the first two (2)
years after the effective date of this Agreement, Buyer and its Affiliates
collectively shall incur at least Two Million Dollars ($2,000,000) in
Exploration Expenditures, at least One Million Dollars ($1,000,000) of which
shall be incurred in the first year. All decisions regarding the nature,
location and timing of Exploration Expenditures (except as required by this
Section 4.1) and the activities pursuant thereto shall be determined
exclusively by Buyer, in its sole judgment and
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discretion; provided, however, that Buyer and its Affiliates shall conduct
their activities in connection with those Exploration Expenditures in a good
and workmanlike manner; and Buyer and its Affiliates shall conduct a drilling
program on the Properties at an activity level that, in Buyer's sole judgment,
reasonably exercised, is commensurate with the geological opportunity to
increase Reserves. For a period of five (5) years from and after the Closing,
Buyer and Seller shall meet annually for purposes of reviewing and discussing
operations contemplated for the Guariche Project (as defined in the Option
Agreement) , provided that Buyer shall not be obligated to implement Seller's
comments or suggestions. Buyer shall not be subject to any implied covenants
with respect to its operations, including but not limited to implied covenants
of exploration or development. The parties hereby agree that the provisions of
this Section 4.1 shall be deemed to run with the Properties.
4.2 Semi-Annual and Annual Reserve Studies. By the end of each of
the first four six-month periods after the effective date of this Agreement and
at least annually thereafter, Buyer shall retain an independent consultant to
prepare a report, known as the "Semi-Annual Study" or "Annual Study", as
applicable, setting forth the total number of ounces of recoverable gold
contained in the Reserves. The independent consultant shall be a person or
company with mining industry experience in calculating such recoverable ounces
and Reserves. The first Semi-Annual Study shall be supplemented by or included
as part of a Feasibility Study.
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4.3 Additional Payments Based on Semi-Annual Studies;
Determination of Base and Excess Ounces. If the first Semi-Annual Study and
Feasibility Study determine that Reserves contain less than 500,000 ounces of
recoverable gold, then the amount of the shortfall, measured in ounces, shall
be added to 500,000 ounces, and the resulting sum shall be equal to the "Base
Ounces". If the first Semi-Annual Study and Feasibility Study determine that
Reserves contain at least 500,000 ounces of recoverable gold, Base Ounces shall
be equal to 500,000 ounces. If the first Semi-Annual Study and Feasibility
Study or any other Semi-Annual Study determines that Reserves contain more
ounces of recoverable gold than the Base Ounces, that excess amount shall be
the "Excess Ounces". It is the intention of the parties that Buyer shall pay
Seller Thirty Dollars ($30.00) per ounce for all Excess Ounces determined to
exist by the Semi-Annual Studies, and that if the Semi-Annual Studies determine
the existence of a total of more than 500,000 Excess Ounces (meaning that Buyer
would owe Seller a total of $15,000,000 for all such Excess Ounces) , Seller
shall have the right to exercise all, but not less than all, of the B Warrants,
within fifteen (15) days after Seller's receipt of the Semi-Annual Study that
determines the existence of more than 500,000 ounces of Excess Reserves. If
Seller exercises the B Warrants, the total amount payable by Buyer to Seller
for Excess Ounces shall be reduced by Five Million Dollars ($5,000,000). If
Seller does not exercise the B Warrants, Buyer shall pay Seller for all Excess
Ounces for which Buyer had not previously paid within fifteen (15) days after
notification from Seller that it has elected not to
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exercise the B Warrants or after the fifteen (15) day exercise period has
expired without Seller having exercised the B Warrants.
The parties recognize that it is possible that one of the first three
Semi-Annual Studies may determine the existence of a total of more than 333,333
Excess Ounces but less than 500,001 Excess Ounces, in which event they will not
know at that time whether the B Warrants will be exercisable by Seller.
Accordingly, within twenty (20) days after receipt of a Semi-Annual Study that
identifies more than 333,333 Excess Ounces but less than 500,001 Excess Ounces,
Seller shall notify Buyer in writing whether:
(i) Seller wishes to be paid at that time for only the
first 333,333 Excess Ounces, in which event Buyer shall withhold all payments
for additional Excess Ounces until it has been determined by Semi-Annual
Studies whether more than 500,000 Excess Ounces exist. If any Semi-Annual Study
determines that more than 500,000 Excess Ounces exist, Seller shall have the
right to exercise the B Warrants as provided above in this Section 4.3. If
Seller so exercises the B Warrants, the withheld payments shall be released to
and retained permanently by Buyer for its own account. If Seller does not so
exercise the B Warrants, the withheld payments shall be released and paid to
Seller. If more than 500,000 Excess Ounces have not been determined to exist by
any of the Semi-Annual Studies, the withheld payments shall be released and
paid to Seller within ten (10) days after Buyer receives the fourth (4th)
Semi-Annual Study, and the B Warrants shall terminate and be of no force or
effect.
OR
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(ii) Seller wishes to be paid immediately for all Excess
Ounces, in which event Buyer shall pay Seller for same within ten (10) days
after receipt of Seller's notice, Seller shall surrender and release to
Buyer all of Seller's rights in and to the B Warrants, and Seller shall be
deemed conclusively to have elected not to exercise the B Warrants.
Except as provided otherwise in this Section 4.3, all payments due
from Buyer to Seller for Excess Ounces shall be made within thirty (30) days
after Buyer's receipt of any Semi-Annual Report that determines the amount of
such Excess Ounces. In no event shall Buyer pay Seller, in cash or credits
through Seller's exercise of the B Warrants, more than once for any Excess
Ounce.
4.4 Additional Payments or Royalty Based on Annual Studies.
(a) Payments in the Event of 500,000 or More Excess Ounces in
Addition to Those Established by Semi- Annual Studies: If any of the first
three (3) Annual Studies (the first of which shall be prepared during the
annual period commencing two years after the effective date of this Agreement)
determines that there are 500,000 or more Excess Ounces in addition to the
Excess Ounces established by the Semi-Annual Studies and previously paid for
("additional Excess Ounces") , then within thirty (30) days after completion of
such Annual Study, Buyer shall pay Seller Thirty Dollars ($30.00) for each such
additional Excess Ounce; provided, however, that Buyer shall not be required to
pay for any Excess Ounce for which it previously paid.
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(b) Royalty if Less than 500,000 Additional Excess Ounces: If at
least 500,000 additional Excess Ounces have not been determined to exist by
completion of the third Annual Study, Buyer shall cause the Companies to pay
Seller a production royalty of 7.5% of Net Smelter Returns on all such
additional Excess Ounces: (x) for which it has not previously made a payment
pursuant to Section 4.3; and (y) when and if such additional Excess Ounces are
actually produced and sold. The production royalty on such Excess Ounces shall
be subject to and governed by the applicable provisions of Schedule 1 hereto.
(c) Royalty After Third Annual Study: Buyer shall pay the
production royalty as described in Section 4.4(b) above on all additional
Excess Ounces established after the third Annual Study, to the extent that it
has not previously paid for same by payment or royalty.
4.5 Premium Payments. Buyer shall pay Seller a premium for each
Excess Ounce if, on the Date of Production of that Excess Ounce, the Spot Price
for that ounce is $450.00 or more. The premium shall be paid within ten (10)
days after the Date of Production for that Excess Ounce, calculated as follows:
Spot Price per Ounce Premium Per Ounce
-------------------- -----------------
$450.00 to $499.99 $3.00
$500.00 to $549.99 $5.00
$550.00 to $599.99 $7.00
And for each similar increase of $50.00 in the Spot Price over $599.99, Buyer
shall pay Seller an increase in the above $7.00 premium of $2.00 per ounce.
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4.6 Production Royalty on Copper and Silver. Buyer shall
cause the Companies to pay Seller a production royalty of five percent (5%) of
Net Smelter Returns on all copper and silver produced and sold from the
Properties by Buyer or the Companies for its or their benefit. This production
royalty shall be subject to and governed by the applicable provisions of
Schedule 1 hereto.
4.7 Xxxxxxx Agreement. Buyer agrees to comply, or to cause the
Companies to comply, with the requirements of Seller set forth in Article
Third, paragraphs (iv) , (iv) (a) and (iv) (b) of the Xxxxxxx Agreement. Seller
and Buyer agree that Buyer's willingness to enter into the Option Agreement was
based in part upon its understanding that, in order to comply with said
requirements of the Xxxxxxx Agreement, payments of Four Dollars ($4.00) per
ounce of gold would be payable only for gold established as Reserves from the
Properties in excess of 500,000 ounces, up to a maximum of Three Million
Dollars ($3,000,000). If Buyer or the Companies, in order to comply with said
requirements of the Xxxxxxx Agreement, are required to make any payments sooner
or in excess of those that Buyer understood would be due, as described above,
Seller agrees to reimburse Buyer for such payments within fifteen (15) days
after receipt from Buyer of a written request for same. If Buyer subsequently
is relieved of a payment to Sr. Xxxxxxx that Buyer understood would be due, as
described above, by reason of an earlier payment for which it was reimbursed by
Seller, Buyer shall remit that relieved payment to Seller. Seller's
reimbursement obligations to Buyer under this Section 4.7 shall be guaranteed
personally and unconditionally in writing by Xxxxx X. Xxxxxx, Xxxxx
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X. Xxxxxx and Xxxxx X. Xxxxxxxx. Delivery of all such guarantees to Buyer, in
form and substance satisfactory to Buyer, is an express precondition to Buyer's
agreement to perform its obligations as set forth in this Section 4.7. One-half
(1/2) of the payments otherwise due Sr. Xxxxxxx pursuant to the Xxxxxxx
Agreement shall be made by Buyer to Seller in payment of the debt owed by Sr.
Xxxxxxx to Xx. Xxxxxx until that debt has been paid in full; provided and on
the condition that Seller shall have provided to Buyer an instrument executed
by Sr. Xxxxxxx, in form and substance reasonably satisfactory to Buyer,
confirming that such payments are to be so made to Seller. Seller represents
that, as of June 1, 1996, the balance of that debt was $607,457 ($446,657 in
principal and $160,000 in accrued interest). All such payments to Seller by
Buyer shall be credited against the payments due Sr. Xxxxxxx under the Xxxxxxx
Agreement. Buyer shall not assume any obligations under the Xxxxxxx Agreement,
other than as expressly set forth in this Section 4.7.
4.8 Covenants in Connection with Special Warrants.
(a) Buyer will use its reasonable best efforts to obtain all
necessary regulatory consents to the issuance of the A Warrants and the B
Warrants.
(b) Buyer will use its reasonable best efforts duly,
punctually and faithfully to fulfill all legal requirements for the creation
and issuance of the A Warrants and the B Warrants, including without limitation
the compliance with all applicable securities legislation to enable these
warrants to be issued in accordance with this Agreement.
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(c) Buyer will use its reasonable best efforts to obtain on or
before July 24, 1996 a receipt from the British Columbia and Ontario Securities
Commissions for the final version of a prospectus relating to the distribution
of the Warrants issuable upon exercise of the Special Warrants and the
distribution of the common shares of Granges Inc. upon exercise of the
Warrants.
(d) Buyer will use its reasonable best efforts duly and
punctually to perform all obligations pertaining to the Special Warrants to be
performed by it under this Agreement and the Indenture.
5. Seller's and Buyer's Representations and Warranties.
5.1 Representations and Warranties from Option Agreement. All
representations and warranties of Buyer and Seller in the Option Agreement are
incorporated herein by reference.
5.2 Additional Representations, Warranties and Covenants of Buyer.
(a) Buyer's Stock. On the date of this Agreement, the authorized
capital stock of Buyer consists of __________ shares of common stock,
__________ shares of which are issued and outstanding, none of which are held
in Buyer's treasury. All of the A Warrant Shares and the B Warrant Shares have
been duly authorized for issuance and reserved therefore and, when issued,
shall be validly issued, fully paid and nonassessable shares of capital stock
of Buyer, free and clear of all liens, charges and encumbrances. There does not
exist any preemptive right in favor of any person with respect to any of such
shares, and no Person has any agreement or any option, right or privilege
capable of becoming
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an agreement, for the purchase, subscription of issuance of any of the A
Warrant Shares or the B Warrant Shares or any securities convertible or
exchangeable for such shares.
(b) Financial Statements and Reports. Buyer has provided to
Seller the audited financial statements (or balance sheets) of Buyer as of
December 31, 1995 and December 31, 1994, and the related statements of income
and retained earnings and statement of cash flow for the fiscal years then
ended as well as the unaudited financial statement of Buyer as of March 31,
1996. Such financial statements the notes thereto were prepared in accordance
with the books and records of Buyer and fairly and accurately present the
financial condition and results of the operations of Buyer at the date and for
the periods covered thereby all in accordance with generally accepted
accounting principles consistently applied. None of those financial statements
contained, as of its date, giving effect to any amendments, any untrue
statement of a material fact or any omission to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. Each of
the balance sheets included in such financial statements (including any related
notes) presents fairly and accurately in all material respects the financial
position of the Buyer as of its date and the financial statements (including
any related notes) present fairly and accurately in all material respects the
results of operations, changes in financial position, cash flows and changes in
stockholders' equity, as the case may be, of Buyer for the periods
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therein set forth, subject, in the base of unaudited financial statements, to
normal year-end audit adjustments, in each case in accordance with generally
accepted accounting principles consistently applied during the periods involved
(except as otherwise stated therein or in the report of Buyer's independent
auditors with respect to such audited financial statements).
(c) Absence of Material Changes. Since December 31, 1995,
there has not been (except to the extent previously disclosed by Buyer to
Seller) :
(i) any material adverse change, however caused, in the
business, assets, liabilities (actual or contingent) , results of operations,
prospects, financial or other condition or operations of Buyer;
(ii) any change in Buyer's authorized or actual equity
capitalization;
(iii) any damage, destruction or casualty loss, materially
and adversely affecting the business, assets, liabilities (actual or
contingent) , results of operations, prospects, or financial or other condition
or operations of Buyer, whether or not insured;
(iv) any incurrence by Buyer of long-term debt or any other
material liability or obligation, actual or contingent, other than current
liabilities incurred in the ordinary and usual course of business of Buyer
consistent with past practices;
(v) entry into, or agreement or commitment to enter into,
any agreement, commitment or transaction by Buyer (including, without
limitation any borrowing, capital expenditure or financing
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or any amendment, modification or termination of any existing agreement,
commitment or transaction) other than in the ordinary and usual course of
business of Buyer consistent with past practices;
(vi) acquisition or disposition of, or entry into any
agreement by Buyer with respect to the acquisition or disposition of a
significant amount of its assets; or
(vii) any agreement with respect to any of the foregoing.
(d) Buyer's Conduct of Operations. Buyer shall exercise
diligent efforts to see that the activities and operations performed by Buyer
while it or any Affiliate holds or owns the Properties are performed in a good
and workmanlike manner and in accordance with sound mining and engineering
practices. In carrying out any such activities and operations, Buyer shall
exercise diligent efforts to comply with all Legal Requirements pertaining
thereto and to the Properties. Buyer agrees that, so long as it or any
Affiliate holds or owns the Properties, Buyer shall exercise diligent efforts
to take all reasonable actions within its control that are necessary to
maintain the concessions in good standing, and shall exercise diligent efforts
to not take any action with respect to the Companies that will have any adverse
impact on title to the concessions or the ability to conduct operations on the
Properties. Unless otherwise required by the concessions, Buyer shall not be
required to mine, preserve, or protect in its mining operations any ores,
leachates, precipitates, concentrates or other products containing ores,
minerals or metals
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which, under good mining practices, cannot be mined or shipped at a reasonable
profit (as determined by Buyer in its sole and exclusive discretion, reasonably
exercised) to Buyer at the time encountered. Any decision as to the manner and
form in which ores or other products containing minerals or metals are to be
sold shall be made by Buyer in its sole discretion.
(e) Commingling of Ores. Buyer shall have the right of mixing
or commingling, either underground, at the surface, or at processing plants or
other treatment facilities, any material containing ores, minerals or metals
mined or extracted from the Properties with any similar substances derived from
other lands or properties, provided that the commingling is accomplished only
after the material has been fairly and accurately weighed and sampled.
(f) Sampling, Assay, and Analysis. Any determination of
weight, volume, moisture content, amenability, or pay metal or mineral content,
and any sampling and analysis by Buyer, shall be binding upon Seller if made in
accordance with sound mining and metallurgical practices and standard sampling
and analysis procedures prevailing in the mining and milling industry.
(g) Ore Processing. All determinations with respect to: (I)
whether ore will be beneficiated, processed or milled by Buyer or sold in a raw
state, (ii) the methods of beneficiating, processing or milling any such ore,
(iii) the constituents to be recovered therefrom, and (iv) the purchasers to
whom any ore, minerals or mineral substances may be sold, shall be made by
Buyer in its sole and absolute discretion.
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(h) Operations by Affiliates. Buyer hereby agrees that all of
the obligations pertaining to the activities or operations of Buyer referred to
herein will ably and be binding whether such operations and activities are
engaged in by Buyer or any Affiliate (including without limitation either of
the Companies).
5.3 Additional Representations and Warranties by Seller.
(a) Financial Statements and Reports. Seller has provided to
Buyer the audited financial statements (or balance sheets) of Seller and of the
Companies as of June 30, 1994 and March 31, 1996, and the related statements of
income and retained earnings and statement of cash flow for the fiscal years
then ended, as more particularly described in Section 3.1.G of the Option
Agreement. Such financial statements and the notes thereto were prepared in
accordance with the books and records of Seller and of the Companies and fairly
and accurately present the financial condition and results of the operations of
Seller and of the Companies at the date and for the periods covered thereby all
in accordance with generally accepted accounting principles consistently
applied. None of those financial statements contained, as of its date, giving
effect to any amendments, any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Each of the balance sheets included in such
financial statements (including any related notes) presents fairly and
accurately in all material respects the financial position of the Seller and of
the Companies as of its
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date and the financial statements (including any related notes) present fairly
and accurately in all material respects the results of operations, changes in
financial position, cash flows and changes in stockholders' equity, as the case
may be, of Seller and of the Companies for the periods therein set forth,
subject, in the base of unaudited financial statements, to normal year-end
audit adjustments, in each case in accordance with generally accepted
accounting principles consistently applied during the periods involved (except
as otherwise stated therein or in the report of Seller's independent auditors
with respect to such audited financial statements). As used with respect to the
Companies, the term "generally accepted accounting principles" means those
accounting principles generally applied by certified public accountants in
Venezuela.
(b) Absence of Material Changes. Since March 31, 1996, there
has not been (except to the extent previously disclosed by Seller to Buyer) :
(i) any material adverse change, however caused, in the
business, assets, liabilities (actual or contingent) , results of operations,
prospects, financial or other condition or operations of the Companies;
(ii) any change in the Companies' authorized or actual
equity capitalization;
(iii) any damage, destruction or casualty loss, materially
and adversely affecting the business, assets, liabilities (actual or
contingent) , results of operations,
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prospects, or financial or other condition or operations of the Companies,
whether or not insured;
(iv) any incurrence by the Companies of long-term debt or
any other material liability or obligation, actual or contingent, other than
current liabilities incurred in the ordinary and usual course of business of
the Companies consistent with past practices;
(v) entry into, or agreement or commitment to enter into,
any agreement, commitment or transaction by the Companies (including, without
limitation any borrowing, capital expenditure or financing or any amendment,
modification or termination of any existing agreement, commitment or
transaction) other than in the ordinary and usual course of business of the
Companies consistent with past practices;
(vi) acquisition or disposition of, or entry into any
agreement by the Companies with respect to the acquisition or disposition of a
significant amount of its assets; or
(vii) any agreement with respect to any of the foregoing.
6. Conditions Precedent.
6.1 Conditions to Seller's Obligations. The obligations of
Seller to consummate the transactions contemplated by this Agreement are
subject to the following conditions:
(a) Accuracy of Representations. The representations of Buyer in
this Agreement or in any Transaction Document shall be true and accurate at and
as of Closing with the same effect as if
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made at and as of Closing, except as affected by the transactions contemplated
hereby.
(b) Performance of Agreements. Buyer shall have performed all
obligations and agreements and complied with all covenants in this Agreement or
in any Transaction Document to which it is a party to be performed and complied
with by it at or before Closing.
(c) Officer's Certificate. Seller shall have received a
certificate executed by an executive officer of Buyer, dated as of Closing,
reasonably satisfactory in form and substance to Seller certifying that the
conditions stated in Sections 5.1(a) and 5.1(b) have been satisfied.
(d) Legal Proceedings. There shall be no Legal Requirement,
and no Judgement shall have been entered and not vacated by any Governmental
Authority of competent jurisdiction in any Litigation or arising therefrom,
which enjoins, restrains, makes illegal or prohibits consummation of the
transactions contemplated hereby or by any Transaction Document.
(e) Opinion of Buyer's Counsel. Seller shall have received the
opinions of Xxxxxx Downs, Vancouver, British Columbia, counsel to Buyer, dated
as of Closing, in the form of Schedules 2A and 2B.
6.2 Conditions to Buyer's Obligations. The obligations of
Buyer to consummate the transactions contemplated by this Agreement are subject
to the following conditions:
(a) Accuracy of Representations. The representations of Seller
in this Agreement or in any Transaction Document shall be
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true and accurate at and as of Closing with the same effect as if they were
made at and as of Closing, except as affected by the transactions contemplated
hereby.
(b) Performance Of Agreements. Seller shall have performed all
obligations and agreements and complied with all covenants in this Agreement or
in any Transaction Document to which it is a party to be performed and complied
with by it at or before Closing.
(c) Officer's Certificate. Buyer shall have received a
certificate executed by an executive officer of Seller, dated as of Closing,
reasonably satisfactory in form and substance to Buyer, certifying that the
conditions stated in Sections 5.2(a) and 5.2(b) have been satisfied.
(d) Legal Proceedings. There shall be no Legal Requirement,
and no Judgment shall have been entered and not vacated by any Governmental
Authority of competent jurisdiction in any Litigation or arising therefrom,
which (i) enjoins, restrains, makes illegal or prohibits consummation of the
transactions contemplated hereby or by any Transaction Document, (ii) requires
separation of all or any of the Company, or of a significant portion of the
assets or properties of the Company after Closing, or (iii) could have a
material adverse effect upon the operations or financial condition of the
Company. There shall be no Litigation pending before any Governmental Authority
of competent jurisdiction, or threatened, seeking, or which if successful would
have the effect of, any of the foregoing.
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(e) Opinion of Seller's Counsel. Buyer shall have received the
opinion of Xxxxx, Xxxxxx & Xxxxxx LLP, counsel to Seller, dated as of Closing,
in the form of Schedule 3.
7. Indemnification.
7.1 Indemnification by Seller. Subject to the limitations set
forth at the end of this Section 7.1, Seller shall indemnify and hold harmless
Buyer, its Affiliates, their respective officers and directors, employees,
agents and representatives and any Person claiming by or through any of them,
from and against any and all Losses arising out of or resulting from:
(i) any representations and warranties of Seller in this
Agreement or in any Transaction Document not being true and accurate when made
or when required by this Agreement or any Transaction Document to be true and
accurate, the result of which has a Material Adverse Effect (as defined in the
Option Agreement) upon Buyer; or
(ii) any failure by Seller to perform any of its covenants,
agreements or obligations in this Agreement or in any Transaction Document; or
(iii) all liabilities or obligations of or arising out of the
activities of Seller and its Affiliates, whether prior or subsequent to
Closing, except only liabilities and obligations of the Companies relating to,
or arising out of their activities during, periods subsequent to Closing.
Provided, however, that more than five (5) years from and after the
Closing, Buyer shall not pursue a claim against Seller for indemnification
hereunder except as a setoff against amounts
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otherwise owing or to be payable to Seller, whether pursuant to this Agreement,
the Option Agreement or otherwise; and provided further that Buyer shall not
pursue a claim against Seller for indemnification unless, at the time that the
Losses at issue occur, Buyer holds a direct or indirect interest in the
Properties (whether through ownership of an interest in the Companies or
otherwise).
7.2 Indemnification by Buyer. From and after Closing, Buyer shall
indemnify and hold harmless Seller, its Affiliates, officers and directors,
agents and representatives and any Person claiming by or through any of them,
as the case may be, from and against any and all Losses arising out of or
resulting from:
(i) any representations and warranties of Buyer in this
Agreement or in any Transaction Document not being true and accurate when made
or when required by this Agreement or any Transaction Document to be true and
accurate, the result of which has a material adverse effect upon Seller; or
(ii) any failure by Buyer to perform any of its covenants,
agreements or obligations in this Agreement or in any Transaction Document; or
(iii) all liabilities and obligations of the Companies relating
to, or arising out of their activities during, periods subsequent to Closing,
except to the extent that such liabilities or obligations relate to or arise
out of a breach by Seller of any representation, warranty or covenant under
this Agreement or any Transaction Document.
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7.3 Indemnification Against Third Party Claims. Promptly after
receipt by a Person entitled to indemnification hereunder (the "Indemnitee") of
written notice of the assertion or the commencement of any Litigation with
respect to any matter referred to in Sections 7.1 or 7.2, the Indemnitee shall
give written notice thereof to the party from whom indemnification is sought
pursuant hereto (the "Indemnitor") and thereafter shall keep the Indemnitor
reasonably informed with respect thereto, provided that failure of the
Indemnitee to give the Indemnitor notice as provided herein shall not relieve
the Indemnitor of its obligations hereunder. In case any Litigation is brought
against any Indemnitee, the Indemnitor shall be entitled to participate in (and
at the request of the Indemnitee shall assume) the defense thereof with counsel
satisfactory to the Indemnitee at the Indemnitor's expense. If the Indemnitor,
at the Indemnitee's request, shall assume the defense of any Litigation, it
shall not settle the Litigation unless the settlement shall include as an
unconditional term thereof the giving by the claimant or the plaintiff of a
release of the Indemnitee, satisfactory to the Indemnitee, from all liability
with respect to the such Litigation.
8. Miscellaneous.
8.1 Expenses. Each of the parties shall pay its own expenses and
the fees and expenses of its counsel, accountants and other experts; provided,
however, that if any Litigation between Seller and Buyer with respect to this
Agreement or the transaction contemplated hereby shall be resolved or
adjudicated by a Judgment of any Court, the party prevailing under such
Judgment shall be
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entitled, as part of such Judgment, to recover from the other party its
reasonable attorneys' fees and costs and expenses of litigation.
8.2 Waivers. No action taken pursuant to this Agreement, including
any investigation by or on behalf of any party hereto, shall be deemed to
constitute a waiver by the party taking the action of compliance with any
representation, warranty, covenant or agreement herein or in any Transaction
Document. The waiver by any party hereto of any condition or of a breach of
another provision of this Agreement or any Transaction Document shall not
operate or be construed as a waiver of any other condition or subsequent
breach. The waiver by any party of any of the conditions precedent to its
obligations under this Agreement shall not preclude it from seeking redress for
breach of this Agreement other than with respect to the condition so waived.
8.3 Finders. Buyer and Seller shall each indemnify and hold the
other harmless from and against any and all Losses arising from any employment
by it of, or services rendered to it by, any finder, broker, agency or other
intermediary in connection with the transactions contemplated hereby or any
allegation of any such employment or services.
8.4 Notices. All notices and other communications under this
Agreement shall be in writing and shall be given to the appropriate party at
its address or facsimile number given below (or at such other address or
facsimile number for such party as shall have been specified by notice given in
compliance with this section) , by any of the following methods: (i) personal
delivery;
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(ii) facsimile transmission (with a contemporaneous mailing as provided in this
Section, which shall not alter the effectiveness or timing of the notice or
communication by facsimile transmission) ; (iii) registered or certified mail,
postage prepaid, return receipt requested; or (iv) overnight delivery service.
If to Seller:
L.B. Mining Co.
0000 Xxxxxxxxx Xxxxx
X.X. Xxx 0000
Xxxxx, XX 00000
Telecopy: (000) 000-0000
With a copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxx, Xxxxxx & Xxxxxx LLP
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000-0000
Telecopy: (000) 000-0000
and
Xxxxx X. Xxxxx, Esq.
Xxxxx, Xxxxxx
Hong Kong Bank of Canada Building
000-000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxx X0X 0X0
Telecopy: (000) 000-0000
If to Buyer:
Granges Inc.
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Telecopy: (000) 000-0000
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With copies to:
Xxxxx X. Parcel, Esq.
Parcel, Mauro, Xxxxxx & Xxxxxxxxx, P.C.
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Telecopy: (000) 000-0000
and
Xxxx Xxxxxx, Esq.
Xxxxxx Xxxxx
0000 Xxxxxxxxxx Xxxxxx
000 Xxxxxxx Xxxxxx
X. X. Xxx 00000
Xxxxxxxxx, Xxxxxx X0X 0X0
Telecopy: (000) 000-0000
Each notice or communication shall be effective (i) upon actual receipt thereof
by the addressee, or (ii) upon actual delivery thereof to the appropriate
address, or (iii) in the case of facsimile transmission, upon transmission
thereof by the sender and issuance by the transmitting machine of a
confirmation slip confirming that the number of pages constituting the notice
or communication have been transmitted without error.
8.5 Entire Agreement; Amendments. This Agreement and Transaction
Documents embody the entire agreement between the parties hereto with respect
to the subject matter hereof and supersedes all prior agreements and
understandings, oral or written, with respect thereto. This Agreement may not
be modified orally, but only by an agreement in writing signed by the party or
parties against whom any waiver, change, amendment, modification or discharge
may be sought to be enforced.
8.6 Binding Effect; Benefits. This Agreement shall inure to the
benefit of and will be binding upon the parties hereto
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and their respective heirs, legal representatives, successors and permitted
assigns subject to Section 8.16 below.
8.7 Headings and Exhibits. The section and other headings in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement. References to Schedules shall, unless
otherwise indicated, refer to the Schedules attached to this Agreement, which
shall be incorporated in and constitute a part of this Agreement by such
reference.
8.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together will be deemed to be one and the same Agreement. 8.9
Governing Law. The validity, performance and enforcement of this Agreement and
all transaction documents, unless expressly provided to the contrary, shall be
governed by the laws of the State of Colorado, without giving effect to the
principles of conflicts of law of such state.
8.10 Jurisdiction. Any action or proceeding against Buyer or
Seller relating in any way to this Agreement or any transaction documents or
the obligations of any party arising from any of the transactions contemplated
herein shall be brought and enforced only in the courts of the State of
Colorado or of the United States for the District of Colorado, and Buyer and
Seller each irrevocably submit to the jurisdiction of each such court in
respect of any such action or proceeding.
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(a) Seller and Buyer each irrevocably waives, to the fullest
extent permitted by applicable law, any objection that it may now or hereafter
have to the laying of venue of any such action or proceeding in the Court of
Plenary Civil Jurisdiction of the State of Colorado or the United States
District Court for the District of Colorado, and any claim that any such action
or proceeding brought in any such court has been brought in an inconvenient
forum.
(b) To the extent that the Agreements contained in Sections
8.10(a) and 8.10(b) are determined by final judgment of any court to be
unenforceable, each party agrees that any suit or action against any other
party arising from any of the transactions contemplated herein or any of the
other transaction documents shall be filed and may proceed only in a state in
which the principal office of another party is located unless filed as a
counterclaim in a suit or action commenced by another party.
8.11 Third Parties; Joint Ventures. This Agreement constitutes
an agreement solely among the parties hereto and, except as otherwise provided
herein, is not intended to and will not confer any rights, remedies,
obligations or liabilities, legal or equitable, including any right of
employment, on any person (including but not limited to any Company employee or
former employee) other than the parties hereto and their respective heirs,
legal representatives, successors or assigns, or otherwise constitute any
person a third party beneficiary under or by reason of this Agreement. Nothing
in this Agreement, expressed or
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implied, is intended to or shall constitute the parties hereto partners or
participants in a joint venture.
8.12 Construction. This Agreement has been negotiated by Buyer
and Seller and their respective legal counsel, and legal or equitable
principles that might require the construction of this Agreement or any
provision hereof against the party drafting this Agreement shall not apply in
any construction or interpretation of this Agreement.
8.13 Force Majeure. For purposes of this Agreement, "Force
Majeure" shall mean an event beyond the reasonable control of Buyer that
prevents or delays it from conducting the activities contemplated by this
Agreement, including but not limited to activities pursuant to Exploration
Expenditures. Such events shall include but not be limited to acts of God, war,
insurrections, action or inaction of governmental agencies, inability to obtain
any environmental, operating or other permits or approvals, authorizations or
consents, inclement weather conditions, and lack of personnel or equipment,
including but not limited to the bridge necessary for access to the Properties.
In the event of a Force Majeure, Buyer shall exercise diligent efforts to
remove or avoid the Force Majeure, but for so long as Buyer is so prevented or
delayed, the running of the periods for the Exploration Expenditure commitment,
Semi-Annual and Annual Studies under Sections 4.1 through 4.4 shall be delayed,
suspended and extended; provided, however, that in no event shall total
accumulated delays, suspensions and extensions exceed one (1) year.
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8.14 Access to Data. For a period of two (2) years following
the Closing, Seller shall have full access on a daily basis to geological and
exploration data, budget information, drilling reports, core samples,
laboratory assays and any other information pertaining to operations, studies,
permits applications, titles, concessions, assets or liabilities of the
Companies or on or for the benefit of the Properties. Following such two-year
period, so long as Buyer or any Affiliate of Buyer holds or own the Properties,
representatives of Buyer will meet with representatives of Seller on site on
the Properties (or with not less than ten (10) days prior written notice, at
another convenient location mutually agreeable to the parties) , not more
frequently than monthly, to discuss matters relating to Buyer's current and
future operations, including but not limited to geological, exploration and
budget information, drilling reports, laboratory assays and any feasibility
studies. At such meetings, Seller shall provide to representatives of Seller
assay, drilling, trenching and sampling reports relating to the previous
month's activities.
8.15 Area of Interest. In the event that Buyer, Seller, either
of the Companies or any other Person that is an Affiliate of any of those
entities acquires any right, title or interest in any property or other rights
related to exploration, development or mining within a five-mile distance from
the exterior boundaries of any of the Properties, then such rights shall become
subject to and governed by this Agreement; and the acquiring person or entities
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shall execute such instruments as are required to accomplish that objective.
8.16 Assignment; First Offer Right.
(a) Consent Required. Except for the transfers set forth in
Section 8.16(c) , Buyer may not sell or otherwise convey any portion of the
Properties or any controlling interest in the stock of the Companies without
the prior written consent of the Seller, which consent shall not be
unreasonably withheld. Any such sale or conveyance shall be made subject to all
of the terms and conditions of this Agreement.
(b) First Offer Right. Except as otherwise provided in Section
8.16(c) , if Buyer desires to sell or otherwise convey any portion of the
Properties or any controlling interest in the stock of the Companies, Seller
shall have a first right of offer as described in this Section 8.16(b).
(i) If Buyer desires to sell or otherwise convey ("Transfer")
any portion of the Properties or any controlling interest in the stock of the
Companies, Buyer shall promptly notify Seller of its intentions. Within ten
(10) days after receipt of that notice, Seller shall notify Buyer whether
Seller wishes to purchase that interest and, if so, the price and all other
pertinent terms and conditions of a Transfer that would be acceptable to
Seller. If Seller fails to send such notice, Buyer shall be free to sell the
interest whenever and on whatever terms it wishes. If Seller sends such a
notice, Buyer shall have ten (10) days from the date such notice is delivered
to notify Seller whether it elects to sell the interest to Seller at the same
price
39
99
and on the same terms and conditions as set forth in Seller's notice. If it
does so elect, the Transfer shall be consummated promptly after Buyer's notice
of such election is delivered to Seller.
(ii) If Buyer fails to so elect within the period provided
for in Section 8.16(b) (i) , Buyer shall have ninety (90) days following the
expiration of such period to consummate the Transfer to a third party at a
price and on terms no less favorable than those offered to Buyer by Seller in
the notice described in Section 8.16(b) (i).
(iii) If Buyer fails to consummate the Transfer to a third
party within the period set forth in section 8.16(b) (ii) , the first offer
right of Seller in such offered interest shall be deemed to be revived. Any
subsequent proposal by Buyer to Transfer such interest shall be conducted in
accordance with all of the procedures set forth in this Section 8.16.
(c) Exceptions to Preemptive Right. Sections 8.16(a) and
8.16(b) shall not apply to the following:
(i) Transfer by Buyer of any portion of the Properties or
any controlling interest in the stock of the Companies to an Affiliate;
(ii) Any corporate merger, consolidation, amalgamation or
reorganization of Buyer 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 Buyer
hereunder; or
40
100
(iii) The grant by Buyer of a security interest in the
Properties or the stock of the Companies.
8.17 Contracts Pertaining to the Guariche Project. For a period
of one (1) year from and after the Closing, all contracts necessary for the
implementation of activities Buyer desires to have undertaken in connection
with the Properties shall be first discussed with one or more representatives
of Seller, but no approval or consent of Seller shall be required in connection
with such contracts.
8.18 Date of Laws. Notwithstanding any provision of this Agreement
to the contrary, all representations, warranties and opinions of counsel set
forth herein or contemplated hereunder shall be given with the assumption that
the applicable governmental laws and regulations and rules of stock exchanges
as of dates subsequent to June 7, 1996 shall be the same as existed on June 7,
1996.
WHEREFORE, Buyer and Seller, by their duly authorized officers, have
executed and delivered this Agreement effective as of the date first above
written.
SELLER:
L.B. MINING CO.
By:______________________________________
Xxxxx X. Xxxxxx, General Partner
By:______________________________________
Xxxxx X. Xxxxxx, General Partner
By:______________________________________
41
101
Xxxxx X. Xxxxxxxx, General Partner
BUYER:
GRANGES INC.
By:______________________________________
Name:____________________________________
Title:___________________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
42
102
SCHEDULE 1
TO
STOCK PURCHASE AGREEMENT
DATED EFFECTIVE ____________, 199___
BETWEEN
L.B. MINING CO. AND GRANGES INC.
Royalty Provisions
Unless specified otherwise below, these royalty provisions shall apply
to the Net Smelter Returns production royalties on gold, pursuant to Section
4.4(b) of the above-described Stock Purchase Agreement ("Agreement") , and on
copper and silver, pursuant to Section 4.6 of the Agreement. All capitalized
terms in this Schedule 1 shall have the same meanings specified in the
Agreement.
1. Net Smelter Returns royalties are passive, non-participating
interests in severed minerals only and include no interests in minerals in
place. These royalties include no executive or management rights to minerals in
place. Other than as expressly set forth in the Agreement, Buyer shall not be
subject to any obligations or covenants to explore, develop or mine the
properties, and all decisions regarding such activities, including without
limitation the timing, extent, method and location of such activities (if any) ,
shall be in the sole and exclusive judgment of Buyer.
2. Production royalty payments shall be paid by Buyer to Seller
on a calendar quarterly basis on or before the twentieth (20th) day following
the quarterly period during which each such payment is accrued to Buyer's
account. Except to the extent that the provisions of paragraph 4 below apply,
production royalties shall accrue to Buyer's account upon final settlement and
final payment by the smelter, refinery or other ore buyer to Buyer for the
minerals sold and for which a production royalty is payable. All royalty
payments shall be by Buyer's check. All production royalty payments shall be
accompanied by a statement and settlement sheet showing the quantities and
grades of metals, ores, minerals, or materials mined and sold from the
Property, proceeds of sale, costs, assays and analyses, and other pertinent
information in sufficient detail to explain the calculation of the production
royalty payment.
3. Seller, at its sole election and expense, shall have the
right, not more frequently than once annually following the close
SCH 1-1
103
of each calendar year, to engage a certified public accountant or other
representative selected by Seller to conduct an audit of Buyer's accounts
relating to payment of the production royalties under the Agreement. Any such
audit shall be for a reasonable length of time during regular business hours at
the offices where the pertinent records are normally maintained, at a mutually
convenient time, upon reasonable notice by Seller. All royalty payments made in
any calendar year shall be considered final and in full satisfaction of all
obligations of Buyer with respect thereto, unless Seller gives written notice
signed by Seller describing and setting forth a specific objection to the
calculation thereof within six (6) months following the close of that calendar
year. Buyer shall account for any agreed upon deficit or excess in the payment
made to Seller by adjusting the next quarterly statement following completion
of such audit to account for such deficit or excess.
4. In the event Buyer elects not to sell any portion of any gold
derived from the Properties, but instead elects to have the final product of
any such gold credited to or held for its account with any smelter, refiner or
broker, such gold shall be deemed to have been sold at the Spot Price on the
Date of Production.
SCH 1-2
104
SCHEDULE 2.A
TO
STOCK PURCHASE AGREEMENT
DATED EFFECTIVE ____________, 199___
BETWEEN
L.B. MINING CO. AND GRANGES INC.
OPINION OF BUYER'S COUNSEL
[Letterhead of Xxxxxx Downs]
________________, 1996
L.B. Mining Co.
0000 Xxxxxxxxx Xxxxx
X. X. Xxx 0000
Xxxxx, XX 00000
Re: Stock Purchase Agreement between L.B. Mining Co. and Granges
Inc.
Gentlemen:
We have acted as special counsel for Granges Inc., a Delaware
corporation ("Granges") in connection with the transactions contemplated by
that certain Stock Purchase Agreement (the "Agreement") dated
______________________, 199___, between L.B. Mining Co., an Idaho general
partnership, as "Seller" under that Agreement ("L.B. Mining") , and Granges, as
"Buyer" under that Agreement.
In rendering this Opinion, we have, subject to the limitations
described herein, examined and are familiar with the Agreement as well as the
Transaction Documents, as defined in the Agreement.
We also have examined such certificates of public officials,
certificates of officers of Granges, and copies and records of corporate
documents of Granges as we have deemed relevant and necessary as a basis for
our opinion hereinafter set forth. In addition, we have made such other factual
investigations as we deemed necessary to enable us to render this Opinion, but
we have not conducted investigations with respect to matters stated to our
knowledge below except as described below. Knowledge as used herein shall refer
to the actual knowledge of the lawyers in this firm who have had significant
involvement with the negotiation, execution or delivery of the Agreement and/or
of the Transaction Documents. In conducting such examination, we assume the
SCH 2.A-1
105
genuineness of all signatures, the accuracy of all documents submitted to us as
originals and the conformity to originals of all documents submitted to us as
certified or reproduced copies. We have also assumed the legal capacity of all
persons executing such documents. As to certain matters of fact, we have relied
on the certificates of officers of Granges attached hereto and have not made
any independent investigations of those facts.
Based upon the foregoing and subject to the limitations set forth
herein, it is our opinion that:
1. Granges is a corporation duly organized, validly existing, and
in good standing under the laws of the Province of British Columbia. Granges is
duly authorized to transact business in all jurisdictions where it is required
to do so. Granges has all requisite corporate power and authority to own and
operate its properties and to carry on its business as now conducted and to
enter into and perform the Agreement and other Transaction Documents to which
it is a party.
2. Granges has taken all necessary corporate action to duly
authorize the execution and delivery of the Agreement and the Transaction
Documents to which it is a party.
3. The Agreement and the other Transaction Documents to which
Granges is a party constitute legal, valid and binding obligations of Granges,
enforceable against Granges in accordance with their terms, except as
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium or other similar laws affecting the enforcement
of creditors' rights generally and (b) general principles of equity (regardless
of whether such enforceability is considered in equity or at law).
The execution and delivery by Granges of the Agreement and the
Transaction Documents and the performance of its obligations thereunder (a)
will not conflict with, result in a breach of, or constitute a default under,
any of the terms, conditions or provisions of the Charter, Certificate or
Articles of Incorporation, or By-laws of Granges, (b) will not conflict with
any present federal, provincial, state, or, to the best of our knowledge, any
local statute, rule or regulation known to us to be binding upon Granges, and
(c) to the best of our knowledge will not conflict with, or result in the
breach of the terms, conditions or provisions of, or constitute a default
under, or result in any violation of any agreement, instrument, order, judgment
or decree to which Granges is a party or otherwise subject.
4. To the best of our knowledge, no suit, arbitration, action or
other proceeding is pending or, to the best of our knowledge, threatened before
any court or governmental authority against Granges.
SCH 2.A-2
106
Our Opinion is subject to the following limitations and
qualifications:
A. We assume for purposes of this Opinion that L.B.
Mining is duly formed, validly existing and in good standing under its
jurisdiction of creation, that the Agreement and the Transaction Documents have
been duly authorized, executed, and delivered by L.B. Mining and constitutes
its legal, valid and binding obligations, and that it has the requisite power
and authority to perform its obligations thereunder.
B. The opinions expressed herein are limited in all
respects to the laws of the Province of British Columbia.
C. The Opinion is given as of the date hereof, and we
disclaim any undertaking or obligation to advise L.B. Mining of changes that
hereafter may be brought to our attention or to update information provided
herein. This Opinion is not to be used, circulated, quoted or otherwise
referred to for any other purpose, or relied on by any other person, without
our prior written consent.
Very truly yours,
________________________________
SCH 2.A-3
107
SCHEDULE 2.B.
TO
STOCK PURCHASE AGREEMENT
DATED EFFECTIVE ____________, 199___
BETWEEN
L.B. MINING CO. AND GRANGES INC.
OPINION OF BUYER'S COUNSEL
[Letterhead of Xxxxxx Xxxxx]
SCH 2.B-1
108
[LETTERHEAD OF XXXXXX DOWNS]
[Date]
L.B. Mining Co.
00000 X. Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, XX. 00000
X.X.X.
Dear Sirs/Mesdames:
Granges Inc. -
Issue of 2,047,938 Special Warrants
We have acted as counsel to Granges Inc. (the "Company") in
connection with the issue and sale by the Company of 2,047,938 special warrants
(the "Special Warrants") to L.B. Mining Co. ("LB") pursuant to the Exploration
Purchase Option Agreement (the "Option Agreement") dated as of June 7, 1996
between LB and the Company.
The Special Warrants are being issued under the provisions of
a special warrant indenture (the "Special Warrant Indenture") between the
Company and Montreal Trust Company of Canada (the "Trustee") dated as of June
7, 1996. Subject to adjustment in accordance with the terms of the Special
Warrant Indenture, each Special Warrant upon exercise thereof will entitle the
holder to receive, without additional payment, one class A common share warrant
(the "A Warrants") and a class B common purchase share warrants (the "B
Warrants") for each Special Warrant.
Each A Warrant will entitle the holder thereof to receive one
common share (an "A Warrant Share") in the capital of the company and each B
Warrant shall entitle the holder thereof to acquire one common share (a "B
Warrant Share" and, together with the A Warrant Shares, collectively the
"Underlying Shares") in the capital of the Company in accordance with the terms
of a warrant indenture (the "Warrant Indenture") dated as of June 7, 1996
between the Company and the Trustee, subject to adjustment in accordance with
the terms of the Warrant Indenture.
109
This opinion is delivered to you pursuant to section ___ of the
Option Agreement.
Unless otherwise provided for herein, the terms used herein
shall have the same meaning as specified in the Option Agreement.
We have examined:
(a) an executed copy of the Option Agreement;
(b) an executed copy of the Special Warrant Indenture;
(c) an executed copy of the Warrant Indenture;
(d) a specimen form of the certificate for the Special Warrants;
(e) an executed copy of certificate ___ registered in the name of
LB, evidencing and representing 2,047,938 Special Warrants;
and
(f) specimen forms of the certificates for the A Warrants and B
Warrants (collectively the "Warrants").
We have also examined originals or photostatic or certified
copies of such corporate records, contracts and instruments of the Company or
other corporations, of such certificates, permits, licenses or orders of public
officials, commissions, boards and governmental bodies and authorities, of such
certificates of officers or representatives of the Company, the Trustee or
other corporations and of such other records, contracts and instruments and we
have made such investigations and searches, all as we believe necessary and
relevant to enable us to give and as the basis for the opinions set forth
herein.
For the purposes of our opinion:
(a) whenever the phrase to "the best of our knowledge" appears in
our opinion it means that we have relied only upon the actual
knowledge of the members of our firm who have participated in
the creation and issuance of the Special Warrants and Warrants
and that we have not made any other inquiries within our firm
or otherwise;
(b) relating to matters governed by the laws of jurisdictions
other than British Columbia, we have relied upon the opinions
of counsel in those jurisdictions, copies of which have been
delivered to you today. Those opinions are satisfactory to us
in form and substance, and in our opinion you and we are
justified in relying thereon. We are solicitors qualified to
carry on the practice of law in the Province of British
Columbia only and, except to the extent that this opinion is
rendered in reliance on such opinions of counsel in other
jurisdictions, we express no opinion as to any laws, or
matters governed by any
-2-
110
laws, other than the laws of the Province of British of
Columbia or the federal laws of Canada applicable therein;
(c) in paragraph 4, we have relied upon a letter dated from
----
Montreal Trust Company of Canada, the registrar and transfer
agent of the common shares, indicating the number of common
shares that are issued and outstanding as at ;
------
(d) in paragraph 13, we have relied upon a certificate issued by
the British Columbia Securities Commission dated , 1996, as
---
to the status of the Company as a reporting issuer under the
Securities Act (British Columbia) and a certificate issued by
the Ontario Securities Commission dated , 1996 as to the
---
status of the Company as a reporting issuer under the
Securities Act (Ontario); and
(e) in paragraph 15 as to matters pertaining to The Toronto Stock
Exchange (the "Exchange"), we have relied upon letters from
the Exchange dated March 28, 1996 and June , 1996 (the
---
"Exchange Letter") relating to the issuance and sale of the
Special Warrants and the subsequent issuance of the Warrants
and Underlying Shares.
As to the questions of fact relevant to this opinion,
information with respect to which is in the possession of the Company or other
corporations, we have relied upon certificates, reports, opinions or
representations of or by an officer or officers of the Company or such other
corporations, as the case may be.
In our examinations we have assumed:
(a) the genuineness of all signatures and the authenticity of all
documents submitted to us as photostatic, certified or
facsimile copies and the authenticity of the originals of
photostatic or facsimile copies;
(b) for the purpose of the opinion expressed in paragraph 5, that
the Option Agreement has been duly authorized, executed and
delivered by LB;
(c) that all of the representations, warranties, covenants and
acknowledgements of LB as set out in the Option Agreement are
true and correct.
Based upon the foregoing, we are of the opinion that:
1. The Company has been duly amalgamated and validly exists as a company
under the laws of the Province of British Columbia and is in good
standing with respect to the filing of its annual returns with the
Registrar of Companies for the Province of British Columbia.
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111
2. The Company has the necessary corporate power and capacity to carry on
the business which it carries on and to own, lease and operate its
properties and assets.
3. The Company has the necessary corporate power and capacity to enter
into the Option Agreement, the Special Warrant Indenture and the
Warrant Indenture (collectively, the "Documents") and to observe and
perform its covenants and obligations thereunder, to create and issue
the Special Warrants, to create and issue the Warrants issuable upon
the exercise or deemed exercise of the Special Warrants and to issue
the Underlying Shares issuable upon the exercise of the Warrants.
4. The authorized capital of the Company consists of 1,500,000,000 shares
divided into 750,000,000 common shares without par value and
750,000,000 preferred shares without par value, of which a common
------
shares are issued and outstanding as of the close of business on as
----
fully paid and non-assessable shares and preferred shares are
----
issued and outstanding as at the close of business on .
------------
5. The Documents have each been duly authorized by all necessary
corporate action on the part of the Company, have been duly executed
and delivered by and on behalf of the Company, are each valid and
legally binding upon the Company and are each enforceable in
accordance with their respective terms, except as right to indemnity
and waiver of contribution thereunder may be limited under applicable
law, and subject to Bankruptcy, insolvency and other similar laws of
general application affecting the enforcement of creditors' rights and
to the availability of equitable remedies being in the discretion of a
court of competent jurisdiction.
6. The forms of certificates representing the Special Warrants and the
Warrants have been duly approved by the Company and comply with all
requirements of the Special Warrant Indenture and Warrant Indenture,
respectively.
7. The attributes and characteristics of the Special Warrants and the
Warrants conform in all material respects with the descriptions
thereof in the Option Agreement
8. The Special Warrants have been duly authorized and created by the
Company and validly issued in accordance with the provisions of the
Special Warrant Indenture and the Special Warrant Certificate
evidencing all of the Special Warrants delivered to LB today has been
duly executed by the Company and duly certified and delivered by the
Trustee in with such provisions, and the Special Warrants constitute
valid and legally binding direct obligations of the Company
enforceable against the Company, except as rights to indemnity and
waiver of contribution thereunder may be limited under applicable law,
and subject to bankruptcy, insolvency and other similar laws of
general application affecting the enforcement of creditors' rights and
to the availability of equitable remedies being in the discretion of a
court of competent jurisdiction, and entitle the holders thereof to
the benefits of the Special Warrant Indenture.
9. The Warrants issuable upon the exercise or deemed exercise of the
Special Warrants have been duly authorized and created by the Company
for issuance upon the
-4-
112
exercise or deemed exercise of the Special Warrants and such Warrants,
when issued pursuant to the Warrant Indenture upon the exercise or
deemed exercise of the Special Warrants in accordance with the terms
thereof, will be validly issued in accordance with the provisions of
the Warrant Indenture and the certificates evidencing such Warrants,
when duly executed and delivered by the Company and duly certified
and delivered by the Trustee in accordance with such provisions, will
constitute valid and binding direct obligations of the Company
enforceable against the Company, except as rights to indemnity and
waiver of contribution thereunder may be limited under applicable law,
and subject to bankruptcy, insolvency and other similar laws of
general application affecting the enforcement of creditors' rights and
to the availability of equitable remedies being in the discretion of a
court of competition jurisdiction, and will entitle the holders
thereof to the benefits of the Warrant Indenture.
10. The Underlying Shares issuable upon the exercise or deemed exercise of
the Warrants have been duly authorized and allotted for issuance upon
the exercise or deemed exercise of the Warrants and such Underlying
Shares, when Issued pursuant to the Warrant Indenture upon the
exercise or deemed exercise of the Warrants in accordance with the
terms thereof, will be validly issued and outstanding as fully paid
and non-assessable common shares in the capital of the Company.
11. Neither the execution and delivery of any of the Documents, nor the
fulfillment of or compliance with the terms of any of the Document nor
the creation and issue of the Special Warrants, nor the issue of the
Warrants upon the exercise or deemed exercise of the Special Warrants
in accordance with the terms of the Special Warrant Indenture, nor the
issue of the Underlying Shares upon the exercise of the Warrants in
accordance with the terms of the Warrant Indenture, in any material
respect conflicts or will conflict with or results or will result in a
breach of or a default under any of the of the Memorandum or Articles
of the Company or of any resolutions of the directors or shareholders
of the Company or, to the best of our knowledge, of any material
license or permit issued to the Company or any essential term of any
material agreement or instrument to which the Company is a party or by
which the Company is bound or to which any of its properties or assets
are subject.
12. Based on the representations and warranties of LB contained in the
Option Agreement, the issuance of the Special Warrants by the Company
to LB in accordance with the terms of the Option Agreement is exempt
from the prospectus requirements of the Securities Act (British
Columbia) and no prospectus, offering memorandum or other document is
required to be filed, no proceeding is required to be taken and no
approval, permit, consent or authorization is required to be obtained
by the Company under such securities laws in connection with such
issuance, except as specified in the Exchange Letter and except the
filing with the British Columbia Securities Commission within 10 days
of the date of the issuance of the Special Warrants, of a Form 20
prepared and executed in accordance with the Securities Act (British
Columbia) and the rules promulgated thereunder and payment of the
applicable fee;
-5-
113
13. Upon the delivery of a final prospectus qualifying the issuance of the
A Warrants and B Warrants upon exercise of the Special Warrants to the
holder of the Special Warrants in connection with the exercise or
deemed exercise of such Special Warrants in accordance with the terms
of the Special Warrant Indenture, the Underlying Shares issuable upon
the exercise of such Warrants in accordance with the terms of the
Warrant Indenture will not be subject to any statutory hold period
under the securities laws of the Provinces of British Columbia or
Ontario and no prospectus, offering memorandum or other document will
be required to be filed no proceeding will be required to be taken and
no approval, permit consent or authorization will be required to be
obtained by the holder of such Underlying Shares under such securities
laws in connection with the resale of such Underlying Shares by such
holder in such provinces through an investment dealer or broker who is
registered in the respective province under the Securities Act
(Ontario) or the Securities Act (British Columbia), as the case may be,
and who has complied with the relevant provisions thereof, provided
that:
(a) in British Columbia:
(i) such trade is not from the holdings of a
"control person" as defined in subsection
l(l) of the Securities Act (British
Columbia);
(ii) the holder of such Underlying Shares is not
an "insider" as defined in subsection l(l) of
the Securities Act (British Columbia) at the
time of the trade such that it would be
required to file reports under section 70 of
the Securities Act (British Columbia);
(iii) the holders of such Underlying Shares does
not have, at the time of the trade,
beneficial ownership of, or the power to
exercise control or direction over, or
securities convertible into common shares of
the Company (the "Shares") that would
constitute, 10% or more of the outstanding
Shares such that they would be required to
file reports under section 93 of the
Securities Act (British Columbia); and
(iv) at the time of such trade no order has been
issued under any of sections 73, 144(l)(b) or
146 of the Securities Act (British Columbia)
in respect of the Shares or Underlying Shares
or section 144(l)(c) of the Securities Act
(British Columbia) in respect of the Company;
and
-6-
114
(b) in Ontario:
(i) such trade is not a distribution as defined
in paragraph (c) of the definition of
"distribution" in subsection l(l) of the
Securities Act (Ontario);
(ii) in the case of a trade of such Underlying
Shares, no unusual effort is made to prepare
the market or to create a demand for such
Underlying Shares no extraordinary
consideration is paid respect of the trade
and, at the time of the trade the Company is
a reporting issuer under the Securities Act
(Ontario);
(iii) the holder of such Underlying Shares is not
an "Insider" of the Company as defined in
subsection l(l) of the Securities Act
(Ontario); such that it would be required to
file reports under section 107 of the
Securities Act (Ontario);
(iv) the holder of such Underlying Shares does not
have, at the time of the resale, beneficial
ownership of, or the power to exercise
control or direction over, or securities
convertible into Shares that would
constitute, 10% or more, of the outstanding
Shares of the Company such that it would be
required to file reports under section 101 of
the Securities Act (Ontario); and
(v) at the time of such trade, no order has been
issued under section 127 of the Securities
Act (Ontario) in respect of the Shares or
Underlying Shares under section 128 of the
Securities Act (Ontario) in respect of the
Company.
14. The Company is a reporting issuer under the Securities Act (British
Columbia) and is not in default of filing financial statements
required to be filed under such Act or the Regulation made thereunder.
The Company is also a reporting issuer under the Securities Act
(Ontario) and is not included in a list of defaulting reporting
issuers maintained under that Act.
15. To the best of our knowledge, there is no pending or threatened action
or proceeding against the Company before any court, governmental
agency or arbitrator that could have a materially adverse affect upon
the financial condition or operation of the company.
16. All documents required to be filed and proceedings required to be
taken by the Company prior to the date hereof have been filed and
taken in order for the Underlying Shares issuable upon the exercise or
deemed exercise of the Warrants to be listed and posted for trading an
The Toronto Stock Exchange upon the issuance thereof pursuant to the
Warrant Indenture.
-7-
115
This opinion is addressed to you solely for your benefit in
connection with the issue and delivery of the Special Warrants and the
transactions contemplated thereby and may not be transmitted to any other
person or relied upon for any other purpose by any other person.
Yours truly
-8-
116
SCHEDULE 3
TO
STOCK PURCHASE AGREEMENT
DATED EFFECTIVE ____________, 199___
BETWEEN
L.B. MINING CO. AND GRANGES INC.
OPINION OF SELLER'S COUNSEL
[Letterhead of Xxxxx, Xxxxxx & Xxxxxx, L.L.P.]
________________, 1996
Granges Inc.
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Re: Stock Purchase Agreement between L.B. Mining Co. and Granges
Inc.
Gentlemen:
We have acted as special counsel for L.B. Mining Co., an Idaho general
partnership ("L.B. Mining") in connection with the transactions contemplated by
that certain Stock Purchase Agreement (the "Agreement") dated
______________________, 199___, between L.B. Mining, as "Seller" under that
Agreement, and Granges Inc., a Delaware corporation, as "Buyer" under that
Agreement.
In rendering this Opinion, we have, subject to the limitations
described herein, examined and are familiar with the Agreement as well as the
Transaction Documents, as defined in the Agreement.
We also have examined such certificates of public officials,
certificates of the partners of L.B. Mining, and copies and records of
partnership documents of L.B. Mining as we have deemed relevant and necessary
as a basis for our opinion hereinafter set forth. In addition, we have made
such other factual investigations as we deemed necessary to enable us to render
this Opinion, but we have not conducted investigations with respect to matters
stated to our knowledge below except as described below. Knowledge as used
herein shall refer to the actual knowledge of the lawyers in this firm who have
had significant involvement with the negotiation, execution or delivery of the
Agreement and/or of the Transaction Documents. In conducting such examination,
we assume the
SCH 3-1
117
genuineness of all signatures, the accuracy of all documents submitted to us as
originals and the conformity to originals of all documents submitted to us as
certified or reproduced copies. We have also assumed the legal capacity of all
persons executing such documents. As to certain matters of fact, we have relied
on the certificates of partners of L.B. Mining attached hereto and have not
made any independent investigations of those facts.
Based upon the foregoing and subject to the limitations set forth
herein, it is our opinion that:
1. L.B. Mining is a general partnership duly organized, validly
existing, and in good standing under the laws of the State of Idaho. L.B.
Mining is duly authorized to transact business in all jurisdictions where it is
required to do so. L.B. Mining has all requisite partnership power and
authority to own and operate its properties and to carry on its business as now
conducted and to enter into and perform the Agreement and other Transaction
Documents to which it is a party.
2. L.B. Mining has taken all necessary partnership action to duly
authorize its execution and delivery of the Agreement and the Transaction
Documents to which it is a party.
3. The Agreement and the other Transaction Documents to which
L.B. Mining is a party constitute legal, valid and binding obligations of L.B.
Mining, enforceable against L.B. Mining in accordance with their terms, except
as enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium or other similar laws affecting the enforcement
of creditors' rights generally and (b) general principles of equity (regardless
of whether such enforceability is considered in equity or at law).
The execution and delivery by L.B. Mining of the Agreement and the
Transaction Documents and the performance of its obligations thereunder (a)
will not conflict with, result in a breach of, or constitute a default under,
any of the terms, conditions or provisions of the Articles of Partnership of
L.B. Mining (as amended and restated) , (b) will not conflict with any present
federal, state, or, to the best of our knowledge, any local statute, rule or
regulation known to us to be binding upon L.B. Mining, and (c) to the best of
our knowledge will not conflict with, or result in the breach of the terms,
conditions or provisions of, or constitute a default under, or result in any
violation of any agreement, instrument, order, judgment or decree to which L.B.
Mining is a party or otherwise subject.
4. To the best of our knowledge, no suit, arbitration, action or
other proceeding is pending or threatened before any court or governmental
authority against L.B. Mining.
SCH 3-2
118
Our Opinion is subject to the following limitations and
qualifications:
A. We assume for purposes of this Opinion that L.B.
Mining is duly formed, validly existing and in good standing under its
jurisdiction of creation, that the Agreement and the Transaction Documents have
been duly authorized, executed, and delivered by L.B. Mining and constitutes
its legal, valid and binding obligations, and that it has the requisite power
and authority to perform its obligations thereunder.
B. The opinions expressed herein are limited in all
respects to the laws of the State of Colorado, which for purposes of this
opinion we assume are substantially similar to the laws of the State of Idaho.
C. The Opinion is given as of the date hereof, and we
disclaim any undertaking or obligation to advise Granges of changes that
hereafter may be brought to our attention or to update information provided
herein. This Opinion is not to be used, circulated, quoted or otherwise
referred to for any other purpose, or relied on by any other person, without
our prior written consent.
Very truly yours,
________________________________
SCH 3-3
119
EXHIBIT E
TO
EXPLORATION AND PURCHASE OPTION AGREEMENT
BETWEEN
L.B. MINING CO., an Idaho general partnership,
AND
GRANGES INC., a British Columbia corporation
Effective June 7, 1996
ESSENTIAL TERMS OF CONSULTING AGREEMENTS
o During the Option Period, Xx. Xxxxx X. Xxxxxxxx and Xx. Xxxxx X.
Xxxxxx (the "Consultants") will provide consulting services to Granges
on the Guariche Project as independent contractors.
o During the Option Period, Xx. Xxxxxxxx will devote not less than 50%
of his time (i.e., not less than 80 hours a month) and Xx. Xxxxxx will
devote not less than 30% of his time (i.e., not less than 48 hours a
month) to the provision of consulting services on the Guariche
Project; provided that, in any event, the Consultants will devote
sufficient time to the Guariche Project to ensure the professional
supervision and administration of the Venezuelan Subsidiaries, the
full and proper performance by the Venezuelan Subsidiaries of their
obligations and work under the Option Agreement and the maintenance
and continuing good standing of the Properties.
o For each day during the Option Period that Xx. Xxxxxxxx or Xx. Xxxxxx
perform consulting services on the Guariche Project, they shall fill
out and provide to Granges a time sheet indicating the number of hours
worked and describing the tasks performed.
o Each of the consultants shall be paid $10,000 per month, based upon 22
"full days" of work each month. A "full day" of work is a day in which
the Consultant works not less than eight (8) hours. For days during a
month in which the Consultant works less than eight (8) hours, the
actual hours worked shall be added together and then divided by eight
(8) to establish "full days" of work. In the event that a Consultant
works more or less than 22 "full days" during a month, his
compensation will be proportionately increased or decreased from
$10,000.
o The services of the Consultant shall be provided as requested and
directed by Granges.
o Each of the consultants shall be reimbursed by Granges for
out-of-pocket expenses incurred by them in providing
SCH 3-1
120
consulting services hereunder upon submission to Granges of
documentation reasonably supporting those expenses.
E-2
121
EXHIBIT F
TO
EXPLORATION AND PURCHASE OPTION AGREEMENT
BETWEEN
L.B. MINING CO., an Idaho general partnership,
AND
GRANGES INC., a British Columbia corporation
Effective June 7, 1996
NECESSARY COSTS AND EXPENSES OF VENEZUELAN SUBSIDIARIES
F-1
122
[L.B. MINING CO. LETTERHEAD]
CORPORACION MINERA NACIONAL, C.A.
Monthly-Expenses
6 June through 15 December 1996
BS US$
---------- ----------
1. Office rent 100,000 $ 215
2. Telephone and telefax 650,000 1,398
3. Electricity - office 40,000 86
4. Siemens - telephone contract 16,297 35
5. DHL courier 27,000 58
6. Payroll - Guariche 3,962,000 8,520
7. Payroll - Ciudad Bolivar 2,074,750 4,462
5. Insurance 0 0
9. Food - Guariche 4,020,000 8,645
Labor force 2,280,000
Geologists and staff 1,200,000
Drilling team 540,000
10. Combustibles - Guariche 2,617,466 5,629
11. Parts and supplies - Guariche 1,600,244 3,441
12. Vehicle expenses - trucks 175,000 376
13. Office supplies 145,833 314
14. Office cleaning and maintenance 50,000 108
15. Geological supplies 93,000 200
16. Maps and reports 35,000 75
17. Concessions - taxes, special advantages 123,063 265
18. Travel 480,000 1,032
---------- -------
Total 16,209,653 $34,859
========== =======
BS 465 US$1
As of 6 June 1996
123
[L.B. MINING CO. LETTERHEAD]
CORPORACION MINERA NACIONAL, C.A.
Special Projects
6 June through 15 December 1996
BS US$
--------- ---------
1. Bridge construction-
for the Guarichito River and
a small bridge for the Llorona River 4,0009000 $8,602
2. Organizational-
formation of three limited
liability companies for contract
and service work 300,000 645
3. Legal-
preparation of contracts and duties 250,000 538
--------- ------
Total 4,550,000 $9,785
========= ======
BS 465 US$l
As of 6 June 1996
124
[L.B. MINING CO. LETTERHEAD]
CORPORACION MINERA NACIONAL, C.A.
Total Expenses
6 June through 15 December 1996
BS US$
----------- ------------
Monthly expenses, excluding items below 16,209,653 $ 34,859
Air transportation 15,863,475 34,115
Ground transportation 875,000 1,882
Geological department 2,557,500 5,500
Professional fees 650,000 1,398
----------- --------
Total monthly expenses 36,155,628 77,754
Times five months-in period x5 x5
----------- --------
Total monthly expenses for five month period 180,778,140 388,768
Special projects 4,550,000 9,785
----------- --------
Total expenses for five month period 185,328,140 $398,553
=========== ========
BS 465 US$l
As of 6 June 1996
125
EXHIBIT G
TO
EXPLORATION AND PURCHASE OPTION AGREEMENT
BETWEEN
L.B. MINING CO., an Idaho general partnership,
AND
GRANGES INC., a British Columbia corporation
Effective June 7, 1996
CONFIDENTIALITY AGREEMENT
G-1
126
January 15, 1996
M. B. Richings
President & CEO
Granges, Inc./(U.S. Inc.)
Attention: Xxxx Xxxxxxxx
Re: Confidentiality Agreement Relating to Certain Mining Interests in
Venezuela Held by Corporacion Minera Nacional, C.A. and/or L.B.
Mining Co.
Gentlemen:
This is in response to discussions concerning your interest in evaluating the
possible acquisition of one of more of the following projects (which are
hereinafter referred to as the "Projects"), or portions thereof:
1. Guariche Mine Area 3. Los Caribes I, II, IV, V
Triunfo #1,#2,#5,#6,#7,#9
4. Los Martillos
2. Las Xxxxxx #6,#7
5. Xxxxxxx I, II
To make possible this evaluation, Corporacion Minera Nacional, C.A.
(hereinafter referred to as "COMINAC") and/or L. B. Mining Co. (hereinafter
referred to as "LBM") shall make available to Granges Inc/(US) Inc. (including
its subsidiaries and affiliates, hereinafter called the "Company") certain
information necessary for review of the Projects, subject to the following
conditions:
1. Company agrees for itself, its affiliated entities and the employees
and agents thereof, to hold in confidence and not to disclose to any other
party, nor make beneficial use of, any knowledge, information, data, or other
material (hereinafter referred to collectively as "Proprietary Information")
which may be obtained by Company by reason of its discussions and association
with regard to the Projects. Said restriction on the use and disclosure of
Proprietary Information will apply regardless of the source of such
information, whether voluntarily or unintentionally furnished by COMINAC, LBM
or their employees or agents. Proprietary Information will be defined to
include, but is not limited to, any engineering studies, reserve studies,
financial analyses, location and nature of mineral holdings, and sales
agreements pertaining to COMINAC's operations as may be provided to Company in
the course of said discussions, as well as information relating to COMINAC's
policies, interests, and intentions.
127
Confidentiality Agreement
January 15, 1996
Page 2
However, this Confidentiality Agreement will not apply to information which
becomes available as a matter of public knowledge without any breach of this
Confidentiality Agreement by company, or is disclosed to Company by third party
who did not acquire that information from COMINAC, LBM or their employees or
agents under an obligation of confidentiality. This confidentiality
restriction will be limited to and for a period of three (3) years, provided
that the terms hereof shall be appropriately modified in the event of purchase
by Company of any portion of COMINAC's or LBM's interests in the Projects.
2. All Proprietary Information shall remain the property of COMINAC
and/or LBM. Upon COMINAC's or LBM's written request, the Company shall return
to COMINAC and/or LBM all such Proprietary Information, together with any
summaries of or extracts from such Proprietary Information and all copies
thereof, which the Company may have in its possession or control. The Company
shall also remove all such Proprietary Information from computer storage. The
Company shall send a copy of COMINAC's or LBM's request to all persons to whom
the Company has disclosed such information.
3. The Company will use the information solely for the purpose of
evaluating the possible acquisition by the Company of one or more of the
Projects, or portions thereof.
4. The Company shall not disclose such Proprietary Information to any
third party, except as may be authorized in writing by COMINAC or LBM. Prior to
the disclosure of Proprietary Information to an authorized third party, the
Company shall obtain, and retain, the written agreement of that person to be
bound by the terms of this Confidentiality Agreement, by having such person
sign an agreement as attached in Exhibit "A". The dissemination of such
Information within the Company's internal organization shall be limited to
those employees whose duties justify their need to know such information and
then only upon the basis of a clear understanding by such employees of their
obligation to maintain the confidentiality of such Proprietary Information and
to restrict the use thereof solely for the purpose of evaluation of the
Projects.
5. This Confidentiality Agreement shall also apply with respect to
Proprietary Information regarding or provided by any partner, co-venturer or
co-tenant (collectively referred to as "Participant") of COMINAC or LBM (or
their affiliates) and may be forced by such Participant to extent that such
entity may have an interest in a project with COMINAC or LBM (or their
affiliates) for which information is submitted hereunder.
6. COMINAC and LBM make no representations of the completeness or
accuracy of any of the Proprietary Information, other than that it does not
contain any known misstatements of fact, nor any statements or materials which
are intended by COMINAC or LBM to be deceptive or misleading. The Company shall
rely exclusively upon its own interpretations and evaluations In reaching its
conclusions concerning the Projects, and it shall have no recourse against
COMINAC or LBM concerning the Proprietary Information other than with regard to
known misstatements of fact, or statements or materials which are intended by
COMINAC or LBM to be deceptive or misleading.
128
Confidentiality Agreement
January 15, 1996
Page 3
7. This Confidentiality Agreement will be governed by the laws of the
State of Idaho.
If the Company is in agreement with the foregoing conditions, please so
indicate on a copy of this Confidentiality Agreement in the space
provided and return it to me.
Very truly yours,
CORPORACION MINERA NACIONAL, C.A.
By /s/ XXXXX X. XXXXXX
-----------------------------------
Title President
--------------------------------
L. B. MINING COMPANY
By /s/ XXXXX XXXXXXXX
-----------------------------------
Title Partner
--------------------------------
Accepted and Agreed to this
l5 day of January, 1996 .
----- ------- ----
GRANGES INC. /(U.S.) INC.
-----------------------------------
By /s/ M. B. RICHINGS
---------------------------------
Title President & CEO
-----------------------------
129
EXHIBIT "A"
CONFIDENTIALITY AGREEMENT
The undersigned hereby acknowledges that he/she has read the attached
Confidentiality Agreement between Corporacion Minera Nacional, C.A., L. B.
Mining Co. and and that he/she understands and
-------------------------------
agrees to be bound by the terms thereof.
The undersigned will not disclose Proprietary Information referred to
in the Confidentiality Agreement to anyone not authorized by Corporacion Minera
Nacional, C.A. or L. B. Mining Co.
Executed this day of 1994, at
------------ --------- ---------------------
State of .
---------------------------------
-----------------------------------
Signature
-----------------------------------
Print or Type Name
130
EXHIBIT H
TO
EXPLORATION AND PURCHASE OPTION AGREEMENT
BETWEEN
L.B. MINING CO., an Idaho general partnership,
AND
GRANGES INC., a British Columbia corporation
Effective June 7, 1996
XXXXXXX AGREEMENT
H-1
131
Between XXXXXXX XXXXXXX XXXXXXX, Venezuelan, of legal age, domiciled in the
City of Puerto La Xxxx, District of Sotillo, State of Anzoategui and bearer of
identity card No 2.061.890 (hereinafter referred to as "SELLER"), as party of
the first part and L.B. MINING, a corporation constituted and existing under
the laws of the State of Idaho, United States of America, with its principal
offices located at 0000 Xxxxxxxxx Xxxxx, Xxxxx, Xxxxx (hereinafter referred to
as "THE BUYER"), as party of the second part, represented in this act by
Messrs. XXXXX X. XXXXXX and XXXXX X. XXXXXXXX, United States citizens, of legal
age and bearers of passport Nos 000000000 and 000000000, respectively, it has
been agreed upon to celebrate a share purchase contract of the COMPANIES, as
they are defined below and which will be governed by the following clauses:
ARTICLE FIRST: DEFINITIONS
For the purposes of this contract, the following terms will have the meanings
indicated below:
(i) COMPANIES shall mean: (a) CORPORACION MINERA NACIONAL, C.A. (COMINAC),
commercial corporation domiciled in the City of Ciudad Bolivar and registered
with the First Court of First Instance in Civil and commercial matters of the
First Circuit of the Judicial Circumscription of the State of Bolivar on May
27, 1966, under No 234, Commercial Registry No 78; (b) INVERSIONES JAJOPIRE,
C.A., commercial corporation domiciled in the City of Caracas and registered
with the Commercial Registry Office of the Judicial Circumscription of the
Federal District and State of Miranda on December 8, 1982, under No 37, Volume
153-A Second; (c) AEROMINAS, COMPANIA ANONIMA, commercial corporation domiciled
in the City of Ciudad Bolivar and registered with the Court of First Instance
in Civil and Commercial Matters of the Judicial Circumscription of the State of
Bolivar, on December 16, 1979, under No 15, Commercial Registry No 155; (d)
MINERA RIVER GOLD, S.A., commercial corporation domiciled in the City of
Caracas and registered with the Commercial Registry Office of the Judicial
Circumscription of the Federal District and State of Miranda on January 6,
1990,
132
-2-
under No 22, Volume 30-A First; (e) ARRENDADORA 5.000, C.A., commercial
corporation domiciled in the City of Caracas and registered with the Commercial
registry Office of the Judicial Circumscription of the Federal District and
State of Miranda on June 22, 1989, under No 52, Volume 105-A Second; and (f)
MINERIA LOS FRIJOLES "MINERFRICA", C.A., commercial corporation domiciled in
the City of Caracas and registered with the Commercial registry Office of the
Judicial Circumscription of the Federal District and State of Miranda on April
17, 1989, under No 22, Volume 20-A First.
(ii) SHARES shall mean: (a) fifty one thousand (51,000) nominative shares
representing fifty one percent (51%) of the corporate stock of CORPORACION
MINERA NACIONAL, C.A. (COMINAC); (b) fifty seven thousand and five (57,005)
nominative shares representing sixty five percent (65%) of the corporate stock
of INVERSIONES JAJOPIRE, C,A.; two thousand forty (2,040) nominative shares
representing fifty one percent (51%) of the corporate stock of AEROMINAS,
COMPANIA ANONIMA; (d) twenty nine thousand nine hundred (29,900) nominative
shares representing sixty five percent (65%) of the corporate stock of MINERA
RIVER GOLD, C.A.; (e) sixteen thousand three hundred and twenty (16,320)
nominative shares representing fifty one percent (51%) of the corporate stock
of ARRENDADORA 5.000, C.A.; and (f) two thousand six hundred (2,600) nominative
shares representing forty percent (40%) of the corporate stock of MINERIA LOS
FRIJOLES "MINERFRICA", C.A.
(iii) CONCESSIONS shall mean the mining concessions granted to the COMPANIES
and to XXXXXXX XXXXXXX XXXXXXXX by the Ministry of Energy and Mines and which
are described in Schedule "1", annexed to this contract and forming an integral
part hereof.
(iv) CONTRACTS shall mean the contracts subscribed to with the CORPORACION
VENEZOLANA DE GUAYANA ("CVG"), which the COMPANIES are parties to and which are
described in Schedule "2", annexed to this contract and forming an integral
part hereof.
ARTICLE SECOND: PURCHASE OF SHARES
Subject to the terms and conditions of this contract, SELLER hereby sells,
assigns and transfers the SHARES to the BUYER and
133
-3-
the BUYER accepts them. SELLER assigns and transfers the SHARES through the
execution of the corresponding share transfer entries in the shareholder
registry books of the COMPANIES.
ARTICLE THIRD: PRICE
The sales price of the SHARES is the amount of FIVE MILLION DOLLARS OF THE
UNITED STATES OF AMERICA (US$ 5,000,000.00), which the BUYER will pay SELLER in
the following manner:
(i) The amount of ONE HUNDRED THOUSAND DOLLARS OF THE UNITED STATES OF
AMERICA (US$ 100,000.00), in the following manner, (a) FIFTY THOUSAND DOLLARS
OF THE UNITED STATES OF AMERICA (US$ 50,000.00), which have already been paid
to SELLER on January 14, 1993 and (b) FIFTY THOUSAND DOLLARS OF THE UNITED
STATES OF AMERICA (US$ 50,000.00), which will be paid to SELLER in this act by
means of cheque No 164 of the First Security Bank of Idaho.
(ii) The amount of FOUR HUNDRED THOUSAND DOLLARS OF THE UNITED STATES OF
AMERICA (US$ 400,000.00), which will be paid on February 22, 1993.
(iii) The amount of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS OF THE UNITED
STATES OF AMERICA (US$ 1,500,000.00), which will be paid an June 22, 1993.
(iv) The amount of THREE MILLION DOLLARS OF THE UNITED STATES OF AMERICA
(US$ 3,000,000.00). Said amount will be paid by the BUYER to SELLER if the
proven reserves that are suspected to exist in the rock deposits of the El
Triunfo Concessions: Section Number One of El Triunfo, Section Number Two of El
Triunfo, Triunfo I-1, Triunfo I-2, Triunfo II-1, Triunfo II-2, Triunfo I-II,
Section Number 5 of El Triunfo, Section Number 6 of El Triunfo, Section Number
7 of El Triunfo and Section Number 9 of El Triunfo, which are the property of
Corporacion Minera Nacional, C.A. (COMINAC), Aerominas, Compania Anonima and
Xxxxxxx Xxxxxxx Xxxxxxxx, should reach the amount of five hundred thousand
(500,000) net ounces of gold. If the proven reserves were to reach the
aforementioned net amount of gold, the BUYER shall pay SELLER the amount of
FOUR DOLLARS OF THE UNITED STATES OF AMERICA (US$ 4.00) for each net
134
-4-
ounce of gold of proven reserves, up to a maximum of THREE MILLION DOLLARS OF
THE UNITED STATES OF AMERICA (US$ 3,000,000.00). The payments corresponding
with this Paragraph (iv) will be made by the BUYER in the following manner:
(a) Twenty percent (20%) of the amount payable by BUYER three (3) months
as of the date of completion of the feasibility study, which feasibility study
shall be completed within a period of six (6) years as of the date of signing
of this contract. It is agreed that if at the end of the above mentioned six
(6) year period the feasibility study finds that the proven reserves do not
reach the amount of five hundred thousand (500,000) net ounces of gold, said
term shall be extended for an additional period of four (4) years, and if
during this additional period, based on a feasibility study, it is discovered
that the proven reserves reach the amount of five hundred thousand (500,000)
net ounces of gold, BUYER shall pay SELLER the amount indicated in this
Paragraph (iv), pursuant to the terms and conditions set forth herein.
(b) The remaining eighty percent (80%) twelve (12) months as of the date
of expiration of the above mentioned three (3) month period, or of the four (4)
year extension mentioned in subparagraph "(a)" above.
It is hereby understood that from the amount that the BUYER will pay to SELLER
pursuant to subparagraph "(a)" above, the BUYER will retain a sum equivalent
to fifty percent (50%) of said amount, to be imputed as partial payment of the
balance of capital plus interests owed by xxxxxxx to the BUYER by reason of the
Promissory Note mentioned in ARTICLE SIXTH of this contract. This same
procedure will be applied to the amount that the BUYER will pay to SELLER
pursuant to subparagraph "(b)" above.
The balances of the purchase price shall not accrue interests.
(v) For the purposes of this contract, the following referential prices to
be paid by BUYER to SELLER, have been established: SIX HUNDRED AND THIRTY SEVEN
THOUSAND FIVE HUNDRED DOLLARS OF THE UNITED STATES OF AMERICA (US$ 637,500.00)
by the shares of CORPORACION MINERA NACIONAL, C.A. (COMINAC); FIVE HUNDRED
THOUSAND DOLLARS OF THE UNITED STATES OF AMERICA (US$ 500,000.00) by the
135
-5-
shares of INVERSIONES JAJOPIRE, C.A.; TWENTY THOUSAND DOLLARS OF THE UNITED
STATES OF AMERICA (US$ 20,000.00) by the shares of AEROMINAS, COMPANIA ANONIMA;
TWO HUNDRED AND FIFTY THOUSAND DOLLARS OF THE UNITED STATES OF AMERICA
(US$ 250,000.00) by the shares of MINERA RIVER GOLD, C.A.; THREE HUNDRED AND
FIFTY THOUSAND DOLLARS OF THE UNITED STATES OF AMERICA (US$ 350,000.00) by the
shares of ARRENDADORA 5.000, C.A.; THIRTY FIVE THOUSAND DOLLARS OF THE UNITED
STATES OF AMERICA (US$ 35,000.00) by the shares of MINERIA LOS FRIJOLES
"MINERFRICA", C.A. It is furthermore expressly understood that the
aforementioned amount of FIVE MILLION DOLLARS OF THE UNITED STATES OF AMERICA
(US$ 5,000,000.00) includes (a) the amount of THREE MILLION ONE HUNDRED AND
FIFTY THREE THOUSAND ONE HUNDRED AND FIVE DOLLARS OF THE UNITED STATES OF
AMERICA WITH EIGHTY CENTS (US$ 3,153,105.80) as price for assignment of credits
that SELLER has against CORPORACION MINERA NACIONAL, C.A. (COMINAC) and which
it assigns on this same date to L.B. MINING, as is established in Schedule "3",
annexed to this contract and forming an integral part hereof; and (b) the
amount of FIFTY FOUR THOUSAND THREE HUNDRED AND NINETY FOUR DOLLARS OF THE
UNITED STATES OF AMERICA WITH TWENTY CENTS (US$ 54,394.20), which is the amount
for the assignment of concession Section Number 9 of El Triunfo, which Xxxxxxx
Xxxxxxx transfers and leases to L.B. MINING pursuant to what is established in
Schedule "6", annexed to this contract and forming an integral part hereof.
BUYER agrees with SELLER that the amount payable on June 22, 1993, pursuant to
what is established in Paragraph "(iii)" of ARTICLE THIRD of this contract,
will be available in a Venezuelan bank on the above date, be it in the form of
a cashier's cheque in dollars of the United States of America or in cash.
ARTICLE FOURTH: REPRESENTATIONS AND WARRANTIES
SELLER hereby declares that the following statements of fact and
representations and warranties are true and correct on the date of this
contract.
(i) SELLER is the legal proprietor of the SHARES, all of which are paid in
their entirety and are free of all pledges,
000
-0-
xxxxxxxxxxx, xxxxx, restraining and/or executive measures or rights of any
third parties and he has the absolute and unrestricted right to sell, transfer,
and assign the SHARES without there being any preferential rights or options to
purchase created by the Articles of Incorporation of the COMPANIES, which the
other shareholders have not waived, by shareholders agreements or by any
contract, agreement or other instrument to which SELLER is a party or under
which he may be obligated, which may affect the transferability or the voting
rights of the SHARES. The signing of this document and the transfer of the
SHARES in the respective stockholder registry books shall give the BUYER the
absolute and unconditional ownership of the SHARES, free of all priviledges,
claims, charges, liens, restrictions or rights of any party to be owner,
possess or vote the SHARES.
(ii) The COMPANIES are the only and exclusive owners of the CONCESSIONS.
The CONCESSIONS are free of all claims, pledges, liens, encumbrances, rents or
rights of third parties.
(iii) The CONCESSIONS were duly granted by the Ministry of Energy and Mines
and all the procedures provided for in the current Venezuelan legislation
applicable to matters of mining and the granting of mining concessions, have
been complied with in all their stages. With regards to concession Section
Number 7 of El Triunfo, the concession has already been granted, but the title
thereto has not yet been issued. Seller declares that there is no problem or
obstacle for the issuance of said title by the appropriate authorities, of
which he has knowledge at the date of signing of this document.
(iv) The CONCESSIONS are currently legally existing and valid and the
COMPANIES have timely and duly complied with all the obligations that the
legislation currently in force regarding mining concessions and the mining
titles of the CONCESSIONS impose upon them in their capacity of holders of the
CONCESSIONS. The COMPANIES have not received any notice or communication from
the Ministry indicating that the COMPANIES have not met any of the legal
requirements related to the CONCESSIONS. The COMPANIES have not waived their
rights to the CONCESSIONS and have presented all the reports provided for by
the Mining Law and other applicable legislation regarding mining matters.
137
-7-
(v) The COMPANIES have possession and the absolute and unrestricted right
to use and enjoy all the necessary licences, permits, registrations, approvals
and authorizations, that permit them to be owners of, possess and use the
CONCESSIONS and legally conduct business as they have until this date.
(vi) All the representations and guarantees set forth in this Article
include as well the CONTRACTS, whenever applicable.
(vii) SELLER declares that it is not the holder of any credit against the
COMPANIES, except for those assigned on this date by SELLER to the BUYER by
means of the transfer document presented in Schedule "3", annexed to this
contract and forming an integral part hereof and which is properly signed by
the parties.
ARTICLE FIFTH: LEGAL AUDITING (DUE DILIGENCE)
Both parties agree that the BUYER shall execute a legal auditing of the
COMPANIES from the date of signing of this document until June 22, 1993. Both
parties undertake to cooperate and submit whatever necessary information, so
that said legal auditing may be carried out in the best possible manner and
within the time limits set forth by this contract. The BUYER shall execute said
legal auditing through its designated agents and attorneys, with the
understanding that said legal auditing will be carried out in two (2) stages:
The first stage will be carried out as of the date of signing of this contract
until February 22, 1993 and its goals will be: (i) the inspection and
actualization of the Stockholder Registry Books, Minutes of Shareholders
Meetings and Minutes of Board of Directors Meetings of the COMPANIES; and (ii)
the inspection and analysis of all the documents related to the CONCESSIONS and
the CONTRACTS, in order to confirm the compliance by SELLER with all the
representations and warranties that are set forth in ARTICLE FOURTH of this
contract, regarding the CONCESSIONS and the CONTRACTS.
The second stage will be carried out until June 22, 1993 and in said stage the
legal auditing shall be completed, so that the BUYER may have a clear and
complete understanding of the legal and financial situation of the COMPANIES,
including, for example, the
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obligations, liabilities and contingencies of any type that the COMPANIES may
have, the compliance by the COMPANIES with all the obligations and requirements
set forth by the different laws and rules of Venezuela and the confirmation of
the possession by the COMPANIES of the assets described in Schedule "4",
annexed to this contract and forming an integral part hereof. It is understood
that in case any of the assets are found to be in the name of natural or legal
persons other than the COMPANIES, SELLER undertakes to execute all the
necessary proceedings and sign all the legal documents required to transfer the
right of ownership of those assets to the COMPANIES that the BUYER shall
designate.
BUYER recognizes that it has been in charge of the management of Corporacion
Minera Nacional, C.A. (COMINAC), in the areas pointed out in the agreement
celebrated between BUYER and SELLER on October 12, 1991. For this reason, BUYER
is liable for the management conducted by its agents, Xxxxx X. Xxxxxx and Xxxxx
X. Xxxxxxxx as of said date.
ARTICLE SIXTH: COMPENSATION
SELLER recognizes and accepts that it owes the BUYER the amount of FIVE HUNDRED
THOUSAND DOLLARS OF THE UNITED STATES OF AMERICA (US$ 500,000.00), by reason of
the capital plus the interests accrued up to this date, by reason of a
Promissory Note issued by SELLER in favor of L.B. MINING CO. on October 11,
1991, copy of which is found in schedule "5", annexed to this contract and made
an integral part hereof. For purposes of cancellation of said Promissory Note,
SELLER accepts that the amount of ONE HUNDRED AND FIFTY THOUSAND DOLLARS OF THE
UNITED STATES OF AMERICA (US$ 150,000.00) be subtracted from the installment
payable on June 22, 1993, pursuant to the established in ARTICLE THIRD,
Paragraph (iii), and which shall be distributed in the following manner: the
amount of NINETY SIX THOUSAND SIX HUNDRED AND FIFTY SEVEN DOLLARS OF THE
UNITED STATES OF AMERICA WITH FIFTY THREE CENTS (US$ 96,657.53) by reason of
interest accrued by the Promissory Note from the date of issuance of same until
June 22, 1993, at the rate of twelve percent (12%) per annum and the amount of
FIFTY THREE THOUSAND THREE HUNDRED AND FORTY TWO DOLLARS OF THE UNITED STATES
OF AMERICA WITH FORTY SEVEN CENTS (US$ 53,342.47) by reason of
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amortization of capital. The balance of payable capital, that is, FOUR HUNDRED
AND FORTY SIX THOUSAND SIX HUNDRED AND FIFTY SEVEN DOLLARS OF THE UNITED STATES
OF AMERICA WITH FIFTY THREE CENTS (US$ 446,657.53), plus the interest accrued
until the final date of payment, which will be calculated at the rate of ten
percent (10%) per annum, SELLER agrees to have subtracted from the amounts set
forth in ARTICLE THIRD, Paragraph (iv), subparagraphs (a) and (b), in the
manner set forth therein.
It is agreed that when the amount of ONE HUNDRED AND FIFTY THOUSAND DOLLARS OF
THE UNITED STATES OF AMERICA (US$ 150,000.00) is paid by SELLER to BUYER on
June 22, 1993, in the manner set forth in this ARTICLE SIXTH, BUYER shall
cancel the above mentioned Promissory Note of October 11, 1991 and SELLER shall
issue a new Promissory Note similar to the above mentioned one in favor of
BUYER, stating the balance of capital owed by SELLER to BUYER, which is the
amount of FOUR HUNDRED AND FORTY SIX THOUSAND SIX HUNDRED AND FIFTY SEVEN
DOLLARS OF THE UNITED STATES OF AMERICA WITH FIFTY THREE CENTS (US$ 446,657.53)
plus interest at the rate of ten percent (10%) per annum and the date of
expiration, which shall be conditioned to the provisions of subparagraphs "(a)"
and "(b)" of Paragraph "(iv)" of ARTICLE THIRD of this contract.
ARTICLE SEVENTH: FEES AND EXPENSES
All the expenses incurred related to the negotiation, preparation and execution
of this contract, including but not limited to, the expenses and fees of legal
representatives and the signatures of public accountants, will be paid only by
the party incurring in them, unless otherwise provided for in this contract.
ARTICLE EIGHTH: PREVIOUS AGREEMENTS AND MODIFICATIONS
Regarding the acquisition of the SHARES of the COMPANIES by the BUYER; this
contract leaves without legal effect all previous negotiations, discussions and
agreements and it can not be modified except by means of a written document,
duly signed by the parties,
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All the notices regarding this contract shall be made in writing and shall be
personally delivered or shall be sent by cable or telegram. Notices to SELLER
and to the BUYER shall be sent to the following addresses:
SELLER: Centro Comercial Latinia
Piso 1 - Oficina No 0
Xxxxxxx Xxxxxxxxxxxx
Xxxxxx Xx Xxxx - Xxxxxx Anzoategui
Carbon Copy to: Consorcio de Abogados
XXXXXXX XXXXX Y ASOCIADOS
Apartado 64498
Caracas, Venezuela
Attention: Xx. Xxxxx Xxxxxxx Xxxxx
The BUYER: L.B. MINING CO.
0000 Xxxxxxxxx Xxxxx
Xxxxx, Xxxxx 00000
X.X.X.
Attention: President
Carbon Copy to: The Law Firm of
Xxxxx & XxXxxxxx
Edificio Aldemo
Avenida Venezuela, El Rosal
Caracas 106__ Venezuela
Attention: Mr. Xxxx Xxxxxx Vicentini
Any of the parties may designate a new address for the sending of notices,
information and requests of any type by means of a notice to the other parties.
Except where otherwise specified in this contract, all notices will be
considered effective upon delivery.
ARTICLE NINTH: GOVERNING LAW AND APPLICABLE JURISDICTION
This contract, including, but not limited to, its validity, interpretation,
fulfillment, effects, derivations and consequences, shall be governed by the
laws of the Republic of Venezuela and the parties elect as special and
exclusive domicile the City of Caracas, the jurisdiction of which courts they
expressly declare to submit themselves to.
ARTICLE TENTH: CONSENT
I, XXXXXXXX XXXXXXXX XX XXXXXXX, Venezuelan, of legal age,
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domiciled in the City of Puerto La Xxxx, State of Anzoategui and bearer of
identity card No 8.201.126, represented in this act by my husband, Xxxxxxx
Xxxxxxx Xxxxxxx, previously identified, representation which is evidenced by
power of attorney granted before the Subaltern Registry Office of the District
of Sotillo and State of Anzoategui on December 8, 1982 and which is registered
under No 21, Volumes 114-118, Third Protocol, do hereby declare that I agree
with all the transactions carried out by my husband in this contract.
ARTICLE ELEVENTH:
Both parties agree that the SHARES shall be placed in trust in a first class
bank domiciled in Caracas, within a term of ten (10) days as of the date of
signing of this contract. The SHARES shall remain in trust until June 22, 1993
as a means of guaranteeing SELLER payment of the amounts indicated in Paragrahs
(ii) and (iii) of ARTICLE THIRD of this contract, which shall be paid by the
BUYER to SELLER pursuant to the terms and conditions of this contract. For
purposes of this trust, the BUYER may substitute a bond, guarantee or letter of
irrevocable credit, issued by a first class bank for the SHARES, that shall
likewise guarantee SELLER fulfillment of the above mentioned obligations of the
BUYER pursuant to the terms and conditions of this contract.
Buyer is obligated hereunder to set forth in any option, sale, assignment,
alienation or guaranty of the SHARES, the COMPANIES and the CONCESSIONS, the
existence of this contract and its obligations.
Likewise, BUYER accepts and recognizes that the logo contained in Schedule "7"
annexed to this contract and forming an integral part hereof and which is
presently used by AEROMINAS, COMPANIA ANONIMA, is the property of SELLER and
will continue to be used by same or by the persons designated by SELLER.
ARTICLE TWELFTH: EQUIVALENTS
For the sole purposes of complying with what is set forth in
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Article 98 of the Law of the Central Bank of Venezuela, it is hereby
established that the dollar amounts mentioned in this contract have the
following equivalents, all of which are calculated at the exchange rate of Bs.
80.00 per U.S.$1.00:
a) U.S.$5,000,000.00 is equivalent to Bs. 400,000,000.00
b) U.S.$100,000.00 is equivalent to Bs. 8,000,000.00
c) U.S.$50,000.00 is equivalent to Bs. 4,000,000.00
d) U.S.$400,000.00 is equivalent to Bs. 32,000,000.00
e) U.S.$1,500,000.00 is equivalent to Bs.120,000,000.00
f) U.S.$3,000,000.00 is equivalent to Bs. 240,000,000.00
g) U.S.$637,500.00 is equivalent to Bs. 51,000,000.00
h) U.S.$500,000.00 is equivalent to Bs. 40,000,000.00
i) U.S.$20,000.00 is equivalent to Bs.1,600,000.00
j) U.S.$250,000.00 is equivalent to Bs. 20,000,000.00
k) U.S.$350,000.00 is equivalent to Bs. 28,000,000.00
l) U.S.$35,000.00 is equivalent to Bs. 2,800,000.00
m) U.S.$3,153,105.80 is equivalent to Bs. 252,248,462.00
n) U.S.$54,394.20 is equivalent to Bs. 4,351,536.00
o) U.S.$500,000.00 is equivalent to Bs. 40,000,000.00
p) U.S.$150,000.00 is equivalent to Bs.12,000,000.00
q) U.S.$96,657.53 is equivalent to Bs. 7,732,602.40
r) U.S.$53,342.47 is equivalent to Bs. 4,267,397.60
s) U.S.$446,657.53 is equivalent to Bs. 35,732,602.40
ARTICLE THIRTEENTH:
BUYER agrees that SELLER shall have the right to inspect, in the offices of
BUYER or of the COMPANIES, the information and data pertaining to the
exploration activities carried out by the COMPANIES, as well as the feasibility
studies ordered by the COMPANIES regarding this contract. It is expressly
understood that no photocopies or reproductions of any type shall be made of
the information and data to which SELLER shall have access pursuant to this
article. SELLER shall have the right to designate any of his sons or his legal
counsel, Xx. Xxxxx Xxxxxxx Xxxxx, to exercise the right provided for in this
article. SELLER, as well as the persons designated by him pursuant to the
above, are obligated hereunder to observe the same strict and absolute
confidentiality or secret regarding all the information,
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data and registrations to which they may have access pursuant to the
established herein.
IN WITNESS WHEREOF, the parties have signed two (2) originals of this contract
in Caracas, on ____________ ___ (_), 1993.
By: L.B. MINING CO.
------------------------------ -----------------------------------
XXXXXXX XXXXXXX XXXXXXX XXXXX X. XXXXXX
-----------------------------------
XXXXX X. XXXXXXXX
By: XX XXXXXXX
------------------------------
144
SCHEDULE 1
CONCESSIONS
A) OF CORPORACION MINERA NACIONAL, C.A. (COMINAC):
- SECTION NUMBER ONE OF EL TRIUNFO
- SECTION NUMBER TWO OF EL TRIUNFO
- TRIUNFO I-1
- TRIUNFO I-2
- TRIUNFO II-1
- TRIUNFO II-2
- TRIUNFO I-II
B) OF AEROMINAS COMPANIA ANONIMA:
- SECTION NUMBER 5 OF EL TRIUNFO
- SECTION NUMBER 6 OF EL TRIUNFO
- SECTION NUMBER 7 OF EL TRIUNFO
C) OF XXXXXXX XXXXXXX XXXXXXXX:
- SECTION NUMBER 9 OF EL TRIUNFO
D) OF MINERIA LOS FRIJOLES "MINERFRICA", C.A.:
- XXX XXXXXXXX 0
- XXX XXXXXXXX 0
- XXX XXXXXXXX 5
145
SCHEDULE 2
CVG CONTRACTS
A) WITH CORPORACION MINERA NACIONAL, C.A. (COMINAC):
- LEASE AGREEMENT LAS XXXXXX F-l
- LEASE AGREEMENT LAS XXXXXX F-2
- LEASE AGREEMENT LAS XXXXXX F-6
- LEASE AGREEMENT LAS XXXXXX F-7
B) WITH INVERSIONES JAJOPIRE, C.A.
CONTRACTS FOR THE EXPLORATION, DEVELOPMENT AND EXPLOITATION OF THE
MINERALS REFERRED TO IN DECREE No 1409:
- LOS CARIBES I
- LOS CARIBES II
- LOS CARIBES III
- LOS CARIBES IV
- LOS CARIBES V
146
DESPACHO DE ABOGADOS
Miembros de la Firma Internacional de Abogados
XXXXX & XxXXXXXX
Edf. Aldemo, Xx. Xxxxxxxxx, Xx Xxxxx
Xxxxxxx, Xxxxxxxxx
Telefonos 32.49.41 - 263.44.11
Telex 24227 - ABOGAVC
Facsimile No (00-0) 000.0000 - 261.3152
FACSIMILE TRANSMISSION
DATE: February 3, 1993
TO: Xxx Xxxxx - L. B. INDUSTRIES
FAX No: (000) 000.0000
CC:
FROM: Xxxx Xxxxxx Vicentini
RE:
TOTAL No OF PAGES (INCLUDING THIS ONE):
IF YOU DO NOT RECEIVE ALL THE PAGES, PLEASE
TELEPHONE OR TELEFAX IMMEDIATELY
--------------------------------------------------------------------------------
PRIVACY AND CONFIDENTIALITY NOTICE
--------------------------------------------------------------------------------
The information contained in this facsimile is intended for the named
recipients only. It may contain privileged and confidential information and if
you are not an intended recipient, you must not copy, distribute or take any
action in reliance on it. If you have received this facsimile in error, please
notify us by phone to 00-0-000000 and return the original to the sender by mail
as soon as possible.
MESSAGE
--------------------------------------------------------------------------------
Dear Xxx:
Enclosed is the English translation of the Trust Agreement prepared by Banco
Mercantil. Please call if you have any comments.
Best regards,
/s/ XXXX XXXXXX VICENTINI
Xxxx Xxxxxx Vicentini
147
Between the mercantile corporation L.B. MINING Co., a company organized and
existing in accordance with the laws of the State of Idaho, United States of
America, with its principal offices located at 0000 Xxxxxxxxx Xxxxx, Xxxxx,
Xxxxx, hereinafter referred to as "THE SETTLOR", as party of the first part,
represented herein by Messrs. XXXXX X. XXXXXX and XXXXX X. XXXXXXXX, United
States citizens, of legal age, bearers of passport Nos.000000000 and 000000000,
respectively, and BANCO MERCANTIL, C.A. S.A.C.A. S.A.I.C.A., domiciled in
Caracas, originally registered in the Commercial Registry kept by the former
commercial Court of the Federal District, on April 3, 1925, under No 123, the
Articles of Incorporation/By-laws of which were amended and reformulated, as is
evidenced by entry made in the Second Commercial Registry of the Judicial
Circuit of the Federal District and State of Miranda, on January 12, 1983,
under No 42, Volume 4-A Second. The Articles of Incorporation/By-laws were
amended again to adopt the status of a public issue corporation. Such amendment
was registered in the First Commercial Registry of the Judicial Circuit of the
Federal District and State of Miranda on March 12, 1990, under No 49, Volume
65-A First and on July 11, 1990, under No 16, Volume 16-A First, respectively,
as party of the second part, represented herein by XXXXX XXXXXXX XXXXX
XXXXXXXX, Venezuelan, of legal age, domiciled in Caracas, Federal District and
bearer of identity card No 6.141.128, which representation is evidenced by
power of attorney registered in the Subaltern Registry Office of the Fourth
Circuit of Public Registry of the Municipality of Libertador of the Federal
District, on July 27, 1990, under No 12, Volume 2 of the Third Protocol, Third
Quarter, hereinafter referred to as "THE TRUSTEE", it has been
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agreed upon to execute the present TRUST FUND, which shall be governed by the
following articles: PRECEDING: It results from the Share Purchase Agreement
executed on January 23, 1993, between Xx. XXXXXXX XXXXXXX XXXXXXX, bearer of
identity card No 2.061.890, in the capacity of SELLER and the company L.B.
MINING Co., identified above, acting as BUYER, by means of which SELLER sold,
assigned and transferred to BUYER the following shares: 51,000 nominative
shares of CORPORACION MINERA NACIONAL, C.A. (COMINAC); 57,005 nominative shares
of INVERSIONES JAJOPIRE, C.A.; 2,040 nominative shares of AEROMINAS, COMPANIA
ANONIMA; 29,900 nominative shares of MINERA RIVER GOLD, C.A.; 16,320
nominative shares of MINERIA LOS FRIJOLES "MINERFRICA", C.A. The sales price of
the above-mentioned shares is the amount of FIVE MILLION DOLLARS OF THE UNITED
STATES OF AMERICA (US$5,000,000.00), which BUYER promised to pay to SELLER,
according to the terms and conditions of the aforementioned Share Purchase
Agreement dated January 22, 1993. For the sole purpose of complying with what
is set forth in Article 90 of the Law of the Central Bank of Venezuela, said
amount is equivalent to FOUR HUNDRED MILLION BOLIVARS (Bs.400,000,000.00),
calculated at the exchange rate of EIGHTY BOLIVARS (Bs.80.00) per United States
dollar. Pursuant to what is set forth in the aforementioned Share Purchase
Agreement, the parties expressly agreed to execute the present TRUST FUND as a
means of guaranteeing the payment to Xx. XXXXXXX XXXXXXX XXXXXXX, already
identified, by L.B. MINING Co., also already identified, of the amounts
mentioned in ARTICLE THIRD, paragraphs (ii) and (iii) of the aforementioned
Share Purchase Agreement. FIRST: Definitions. For the purpose of providing a
clearer understanding of the terms used in the present agreement, the following
definitions are set forth: a) "THE SETTLOR": L.B.
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MINING Co, already identified; b) "THE TRUSTEE": BANCO MERCANTIL, C.A. S.A.C.A.
S.A.I.C.A., also already identified; c) "THE,BENEFICIARY": Xx. XXXXXXX XXXXXXX
XXXXXXX, Venezuelan, of legal age, domiciled in Puerto La Xxxx, State of
Anzoategui and bearer of identity card No 2.061.890; d) "THE SHARES": Those
stock certificates acquired by THE SETTLOR from THE BENEFICIARY, pursuant to
the agreement dated January 22, 1993, issued by the following companies in the
following amounts: 51,000 shares of CORPORACION MINERA NACIONAL, C.A.
(COMINAC); 57,005 shares of INVERSIONES JAJOPIRE, C.A.; 2,040 shares of
AEROMINAS, COMPANIA ANONIMA; 29,900 shares of MINERA RIVER GOLD, C.A.; 16,320
shares of ARRENDADORA 5,000, C.A. and 2,600 shares of MINERIA LOS FRIJOLES
"MINERFRICA", C.A.; e) "TRUST FUND": The number of shares transferred in this
act in trust to THE FIDUCIARY; f) "PURCHASE AGREEMENT": Is in reference to the
Share Purchase Agreement executed an January 22, 1993 between THE SETTLOR and
THE BENEFICIARY. SECOND: THE SETTLOR hereby assigns and transfers to THE
FIDUCIARY, so that they may be kept by the latter, pursuant to what is set
forth in the present agreement, THE SHARES which make up the TRUST FUND. At the
same time as the execution of this agreement, the parties subscribe the
transfer of THE SHARES in the corresponding Shareholder Registry Books,
pursuant to the established in Article 296 of the current Venezuelan Commercial
Code. THIRD: The purpose of the present trust is to guarantee to THE
BENEFICIARY the payment by the SETTLOR, of the amounts stated in paragraphs
(ii) and (iii) of ARTICLE THIRD of the PURCHASE AGREEMENT, that is, FOUR
HUNDRED THOUSAND DOLLARS OF THE UNITED STATES OF AMERICA (US$400,000.00), due
and payable on February 22, 1993 and ONE MILLION FIVE HUNDRED THOUSAND DOLLARS
OF THE UNITED STATES OF AMERICA (US$1,500,000.00), due and payable on
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June 22, 1993, respectively, all pursuant to the terms and conditions of the
PURCHASE AGREEMENT. FOURTH: The present TRUST FUND shall remain valid until
June 22, 1993, date on which the second of the amounts stated in the preceding
Article becomes due and payable, unless by mutual agreement between THE SETTLOR
and THE BENEFICIARY, they should decide to substitute it with a new trust fund,
guaranty, bond, letter of irrevocable credit or other guaranty granted by a
first class bank, so that it may warrant to THE BENEFICIARY the fulfillment of
the obligations of THE SETTLOR, deriving from the PURCHASE AGREEMENT, in its
ARTICLE THIRD, paragraphs (ii) and (iii), respectively. FIFTH: Should the term
of validity of this agreement expire and the obligations of THE SETTLOR be
fulfilled, THE BENEFICIARY shall so notify it in writing to THE FIDUCIARY, or
if THE BENEFICIARY shall fail to do so, then THE SETTLOR shall so notify THE
FIDUCIARY, demonstrating the fact of having paid to THE BENEFICIARY the amounts
stated in ARTICLE THIRD of this document; consequently, THE SETTLOR shall
instruct THE FIDUCIARY to release the TRUST FUND in favor of THE SETTLOR.
SIXTH: Should the term of validity of this agreement expire and the obligations
of THE SETTLOR not be fulfilled nor the guaranty contemplated in this contract
be substituted by another guaranty satisfactory to THE BENEFICIARY, the latter
shall proceed to execute the guaranty constituted in the present TRUST and
notify THE FIDUCIARY of such acts, who shall then release the TRUST FUND in
favor of THE BENEFICIARY on the first business day following the expiration of
the term of validity of the present contract. SEVENTH: During the term of
validity of the present contract; THE FIDUCIARY shall have custody and shall be
entitled to represent THE SHARES; in virtue of the above, THE FIDUCIARY shall
attend all the Shareholders Meetings held during such term,
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with the power to vote in the matters presented for the consideration of the
Shareholders Meeting, all this pursuant to the instructions given in writing by
THE SETTLOR to THE FIDUCIARY. EIGHTH: At the end of the term of validity of the
present TRUST FUND, pointed out in ARTICLE FOURTH of this agreement, THE
FIDUCIARY shall proceed to transfer the TRUST FUND to THE SETTLOR or to THE
BENEFICIARY, as the case may be. NINTH: In case during the term of the present
agreement, the companies having issued THE SHARES should declare dividends on
THE SHARES transferred in trust, THE FIDUCIARY shall proceed in the following
manner: a) dividends in shares: these shall be added to the TRUST FUND and b)
cash dividends: these shall be given to THE SETTLOR by THE FIDUCIARY. TENTH:
Pursuant to the Law of Trust Funds, THE FIDUCIARY shall keep the assets placed
in trust separate from other assets, as well as from other assets placed in
other trusts. ELEVENTH: THE FIDUCIARY shall receive in payment for the
handling and administration of the present agreement, zero point seven five
percent (0.75%) of the total amount of the guaranteed payment, such payment to
be made by THE SETTLOR in this act. TWELFTH: The expenses incurred in the
legalization and registration of this document, as well as any other expense
incurred in the execution of this agreement, shall be paid by THE SETTLOR.
THIRTEENTH: Everything not set forth in this agreement shall be governed by the
provisions set forth in the law regarding the subject matter and by other laws
that may be applicable. FOURTEENTH: For all the purposes of this agreement, the
City of Caracas is chosen as special and exclusive domicile and the parties
agree to subject themselves to the jurisdiction of its courts. Three (3)
originals of the same tenor and for the same purpose are executed.
