Exhibit 10.44
GRC Canyon Exploration Agreement
AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into effective as of July 28,
2003, regardless of the dates upon which it actually is executed by the parties
hereto, by and between GOLD RESOURCE CORPORATION, a Colorado corporation ("Gold
Resource"), and CANYON RESOURCES CORPORATION, a Delaware corporation ("Canyon").
RECITALS
A. Gold Resource owns the controlling shareholder interest in Don Xxxxx Xxxx,
S.A. de C.V., a mining corporation incorporated under the laws of the
Mexican Republic ("Don David");
B. Don David has entered into an Exploration and Exploitation Agreement, dated
October 14, 2002 (the "Exploitation Agreement") with Xx. Xxxx Xxxxx Xxxxxxx
("Concessionaire"), with respect to certain mining concessions (the
"Concessions") that are owned by Concessionaire and that exist over the
following lots (collectively, the "Lots"), situated in the Municipality of
San Xxxxx Totolapan, State of Oaxaca, within the jurisdiction of the Mining
Agency of Oaxaca, Oaxaca;
Name of the Lot Title N(0) HS. Type Of Concession
--------------- ---------- --- ------------------
XX XXXXXXX 000000 925 Exploration
EL XXXXXX 206772 899.6 Exploration
El AIRE 158272 72 Exploitation
EL CHACAL 629627 375 Exploration
C. Gold Resource and Canyon wish to enter into this Agreement to provide a
means whereby, upon providing certain funding, Canyon shall have the right
to acquire an interest in a Sociedad de Responsabilidad Limitada (the "New
SRL"), a limited liability corporation that would be organized under the
laws of the Mexican Republic and jointly owned or controlled by Gold
Resource and Canyon and to which Gold Resource would cause Don David to
transfer its rights to the Concessions and the Exploitation Agreement, all
as provided in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises made and benefits to be
enjoyed by the parties hereto, Gold Resource and Canyon hereby agree as follows:
1. Canyon Loans to Gold Resource. As a precondition to acquiring an
ownership interest in New SRL, Canyon shall loan Gold Resource a total
of $500,000 to be provided in two installments, the first of which
("Installment 1") shall be optional in the amount of $200,000, and the
second of which ("Installment 2") shall be optional in the amount of
$300,000, and both of which shall be conditions precedent to Canyon's
acquisition of an ownership interest in New SRL. The Installments
shall be funded by Canyon by means of wire transfers to an account
specified in writing by Gold Resource or by other means agreed upon by
the parties.
A. Installment 1: The $200,000 for Installment 1 shall be advanced
by Canyon to Gold Resource in the following three
sub-installments, the second two of which are optional. If Canyon
fails to fund those two installments in their entirety, then
Canyon shall not be entitled to any repayments of cash or to any
stock of Gold Resource, and the Installment 1 loans shall be
forgiven:
(i) Upon execution of this Agreement -- $50,000;
(ii) On or before August 8, 2003 -- $50,000; and
(iii) On or before September 8, 2003 -- $100,000.
B. Installment 2: Within 45 days after Canyon's receipt of all
assays from the drilling performed during the exploration work
that is funded by the Installment 1 loan, Canyon shall notify
Gold Resource in writing whether Canyon elects to provide the
Installment 2 loan. If Canyon does not so elect, it shall cancel
the Installment 1 loan, in consideration for which Gold Resource
shall issue to Canyon four hundred thousand (400,000) shares of
the common stock of Gold Resource, and this Agreement shall
terminate, except as to the provisions of paragraph 4 below with
respect to those shares. If Canyon elects to provide the
Installment 2 loan, the $300,000 shall be advanced as follows:
(i) Upon Canyon's notice of election -- $100,000;
(ii) On or before 30 days after Canyon's notice of Election --
$100,000; and
(iii) On or before 60 days after Canyon's notice of Election --
$100,000.
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C. Use of Loan Proceeds: The Installment 1 loan proceeds shall be
used to fund an exploration program as described more
specifically on Exhibit A hereto. The Installment 2 loan proceeds
shall be used to fund a program mutually approved in writing by
Gold Resource and Canyon, which shall include continued drilling
on the Lots and engineering pre-feasibility work.
2. Canyon Election to Fund Additional $3,000,000. Within 90 days after
completion of the drilling and engineering pre-feasibility work that
is funded by the Installment to loan pursuant to paragraph 1.B. above,
Canyon shall notify Gold Resource in writing whether Canyon elects to
fund the next $3,000,000 in exploration and development costs with
respect to the Lots and to incorporate New SRL, as provided in
paragraph 3 below. If Canyon so elects, it shall enclose with its
notice of election an initial payment of $100,000, which shall be
retained by New SRL as a working capital deposit, which shall be in
addition to funds to be provided by Canyon to meet quarterly cash
calls for New SRL's programs and budgets, until Canyon has met its
$3,000,000 funding condition. At that time, the $100,000 deposit, plus
accrued interest thereon, shall be returned to Canyon; provided,
however, that New SRL shall be entitled to draw upon the deposit to
meet any funding shortfalls by Canyon while it is meeting its
$3,000,000 funding condition. If Canyon does not so elect, it shall
cancel both the Installment 1 and Installment 2 loans, in
consideration for which Gold Resource shall issue to Canyon six
hundred thousand (600,000) shares of the common stock of Gold
Resource, and this Agreement shall terminate, except as to the
provisions of paragraph 4 below with respect to those shares.
3. Incorporation and Operation of New SRL. Promptly after Canyon's
election to fund the next $3,000,000 as provided in paragraph 2 above,
it and Gold Resource shall cooperate and, working with their
respective Mexican counsel, shall incorporate New SRL, which shall be
owned 50% each by Gold Resource and Canyon, or their respective
Mexican subsidiaries. Promptly after incorporation of New SRL, Gold
Resource shall cause Don David to transfer to New SRL all of Don
David's right, title and interest in and to the Lots, the Concessions,
the Exploitation Agreement and any other rights to property owned or
controlled by Gold Resource or Don David within three (3) kilometers
of the Lots. Gold Resource represents, warrants and covenants that,
when Don David makes those transfers, those property interests and
rights shall be free and clear of any liens or encumbrances (except
for existing royalties, governmental obligations and ejito surface
rights obligations), and shall be in good standing and in full force
and effect, with all rentals and similar payments due thereunder
current and paid in full. Canyon shall cancel the Installment 1 and
Installment 2 loans in consideration for the following: (i) the 50%
interest in New SRL; (ii) Don David's transfer of the above properties
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and rights to New SRL; and (iii) the written agreement, to be
incorporated into New SRL, providing that the sum of $170,000 shall be
paid to Canyon or its designee out of the first net after-tax cash
flow from any mining operations or sale of assets of New SRL.
Gold Resource and Canyon agree that the organizational and governance
documents of New SRL shall be prepared so as to accomplish the
following:
(a) The corporation shall be governed by a Board of Directors
comprised of four members, two each appointed by Gold Resource
and Canyon.
(b) The Board of Directors shall meet at least quarterly in Denver,
Colorado or other location mutually agreed upon by the parties.
(c) All expenditures shall be made only in accordance with programs
and budgets that have been approved by unanimous vote of the
Board of Directors. If the Board of Directors cannot agree upon a
program and budget within thirty (30) days after it has been
submitted by either party, then a third-party technical expert,
who shall reside or be based in Denver, Colorado, shall be
selected promptly by mutual agreement of Canyon and Gold Resource
and shall cast the tie-breaking vote.
(d) Regarding the establishment of the programs and budgets by the
Board of Directors, Canyon and Gold Resource agree that the
overriding purpose of New SRL is to put the Lots into commercial
production as soon as reasonably practicable, with the objective
of maximizing the parties' return on their collective investments
in the Lots, Concessions and Exploitation Agreement. It is also
understood and agreed to that in the determination of any and all
of the programs and budgets, such programs and budgets are to be
in no way influenced, impacted or delayed by either party's
inability or unwillingness to fund such budgets.
(e) Canyon or its Mexican subsidiary shall be allocated all allowable
tax deductions and credits attributable to expenditures of its
initial $3,000,000.
(f) If Canyon fails to fund any part of its $3,000,000 contribution
in accordance with an approved program and budget, and if such
failure is not cured within thirty (30) days after receipt of
written notice from Gold Resource, Canyon shall transfer or cause
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to be transferred to Gold Resource all shares of stock in New SRL
that is owned by Canyon or its Mexican subsidiary, free and clear
of any liens or encumbrances on those shares.
(g) After Canyon has provided its $3,000,000 contribution, all
subsequent expenditures shall be funded on a 50/50 basis by Gold
Resource and Canyon or their respective Mexican subsidiaries.
(h) If one party is unable or unwilling to fund its 50% share of
expenditures that are due after Canyon has provided its initial
$3,000,000 in funding, the other party shall have the right to
fund the non-funding party's requirements. The funds so advanced
on behalf of the other party shall be treated as a loan whose
principal amount shall be 125% of the funds so advanced (the
"Funding Loan") and shall be repaid, plus interest at 10% per
year accruing from the date of expenditures, to the funding
party, from 100% of cash flow that otherwise would be due to the
non-funding party from mine operations or sale of assets of New
SRL.
(i) If a party is unable or unwilling to fund its 50% of required
funds, and those funds are provided by the other (funding) party,
as provided in paragraph 3(g) above, then during any period
during which a Funding Loan or accrued interest thereon is
outstanding, the funding party shall be deemed to have a
controlling vote on decisions to be made by the Board of
Directors of New SRL and that party also shall have operatorship
of New SRL and its properties.
(j) If either Gold Resource or Canyon wishes to sell its ownership
interest in New SRL (or their respective Mexican subsidiaries
that own any interests in New SRL), it shall so notify the other
party in writing, and in that notice shall set forth a price,
expressed in United States dollars, for which it offers to sell
that interest. The other party shall have fourteen (14) days
after receipt of the notice to provide the notifying party in
writing of its election to accept the offer. If accepted, the
parties shall be obligated to close the transaction within ten
(10) days after that acceptance. If the other party does not
accept that offer, the party wishing to sell its interest may do
so to any party for that price or a higher price; but if it fails
to complete such a sale within six (6) months after expiration of
that 30-day period, the other party's first offer right shall be
reactivated.
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4. Restrictions and Rights With Respect to Gold Resource Shares Owned by
Canyon. The Gold Resource shares received by Canyon pursuant to
paragraph 1.B or paragraph 2 shall be subject to the following
restrictions and rights:
(a) Those shares have not been registered for public sale, and Canyon
shall be subject to applicable restrictions under the United
States securities laws.
(b) If Gold Resource wishes to issue additional shares, Canyon shall
have a right of first offer, in accordance with the procedures
set forth in paragraph 3(j) above, with respect to some or all of
the those shares.
(c) If Gold Resource issues shares in an initial public offering,
then at that time, it shall cause all of the Golden Resource
shares owned by Canyon or its subsidiaries to be registered for
public sale.
5. Relationship with Mexican Subsidiaries. Gold Resource and Canyon
understand and agree that certain of the obligations set forth in this
Agreement may of necessity have to be performed by their respective
Mexican subsidiaries. By execution of this Agreement, Gold Resource
and Canyon agree and covenant to each other that they shall have
contractual responsibilities to perform those obligations, and they
further agree to cause their respective Mexican subsidiaries to
perform obligations undertaken by them in this Agreement, with the
result that a breach of an obligation by their respective Mexican
subsidiaries shall be deemed to be a breach by Gold Resource or
Canyon, as applicable.
6. Press Release: Gold Resource and Canyon each agree not to issue press
releases or public statements regarding this Agreement, the operations
contemplated hereby, or the results of those operations, without first
exercising reasonable efforts to provide the other party with a copy
of the proposed release or statement for its comments and suggestions
reasonably in advance of the proposed release or statement.
7. General Provisions.
(a) Notices: All notices that are required or permitted under this
Agreement shall be in writing, and shall be addressed
respectively as follows:
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If to Gold Resource: Gold Resource Corporation
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000-0000
Facsimile: (000) 000-0000
If to Canyon: Canyon Resources Corporation
00000 Xxxxxx Xxxx Xxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
All notices shall be given: (i) by personal delivery to the other
party, (ii) by electronic communication, capable of producing a
printed transmission, (iii) by registered or certified mail,
return receipt requested; or (iv) by overnight or other express
courier service. All notices shall be deemed to be effective on
the date of receipt at the address above if received during
normal business hours, and, if not received during normal
business hours, on the next business day following receipt.
Either party may change its address by notice to the other
participant pursuant to the procedures above.
(b) Headings: The subject headings of the paragraphs of this
Agreement are included for purposes of convenience only, and
shall not affect the construction or interpretation of any of its
provisions.
(c) Governing Law; Jurisdiction and Venue: Except for matters of
title related to the Lots, the Concessions or the Exploitation
Agreement or the formation or governance of New SRL, which shall
be governed by the law of the Mexican Republic, this Agreement
shall be governed by and interpreted in accordance with the laws
of the State of Colorado, without any conflict of laws or choice
of laws principles that would permit or require the application
of the laws of any other jurisdiction. In the event that any
judicial action is brought to enforce or interpret any provision
of this Agreement, jurisdiction and venue shall be in state or
federal court in Denver, Colorado.
(d) Modification: No modification of this Agreement shall be valid
unless made in writing and duly executed by both Gold Resource
and Canyon.
(e) Force Majeure: The obligations of a party hereto shall be
suspended to the extent and for the period that its performance
is prevented by any cause, whether foreseeable or other
unforeseeable, beyond its reasonable control (but not the
inability to fund). The affected party promptly shall give notice
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to the other party of the suspension of performance, stating
therein the nature of the suspension, the reasons therefor and
the expected duration thereof. The affected party shall resume
performance as soon as reasonably possible.
(f) Further Assurances: Each of the parties hereto shall take, from
time-to-time and without additional consideration, such further
actions and execute such additional instruments as may be
reasonably necessary or convenient to implement or carryout the
intents and purposes of this Agreement.
(g) Entire Agreement; Successors and Assigns: This Agreement contains
the entire understanding of the parties hereto and supersedes all
prior agreements and understandings between them relating to the
subject matter hereof. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of
the parties hereto.
(h) Counterparts: This Agreement may be executed in any number of
counterparts, and it shall not be necessary that the signatures
of both Gold Resource and Canyon be contained on any counterpart.
Each counterpart shall be deemed an original, but all
counterparts together shall constitute one-and-the-same
instrument.
IN WITNESS WHEREOF, Gold Resource and Canyon have executed this Agreement as of
the date first written above.
GOLD RESOURCE CORPORATION, a
Colorado corporation
By: /s/Xxxxxxx X. Xxxx
--------------------------------------
Name: Xxxxxxx X. Xxxx
Title: President
CANYON RESOURCES CORPORATION, a
Delaware corporation
By: /s/Xxxxxxx X. Xx Xxxx
--------------------------------------
Name: Xxxxxxx X. Xx Xxxx
Title: President
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