EXHIBIT 10.22
MEMORANDUM OF AGREEMENT
AMONG
AURORA METALS(BVI)LIMITED
GOLDEN PHOENIX RESOURCES ASIA LTD.
PENGLAI CITY HEXI GOLD MINE CO., LTD.
AND
XX. XXXX XXX XXXXX
FEBRUARY 20, 2006
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MEMORANDUM OF AGREEMENT made February 20, 2006 among AURORA METALS(BVI) LIMITED,
a corporation ("AM"), GOLDEN PHOENIX RESOURCES ASIA LTD., a British Virgin
Islands company ("GPA"), PENGLAI CITY HEXI GOLD MINE CO., LTD, a PRC company
("Hexi"), and XX. XXXX ZHI QIANG of Xxxx Xxx City, Shandong Province Province,
People's Republic of China ("Wang"), collectively the "Parties".
RECITALS
Hexi is owned as to 90% by Wang and as to 10% by Li Shou Hong. Hexi owns a
56.5297 square kilometre property and a pledge of one license held by Yantai Xxx
Xxx Investment Ltd. in Penglai City, Shandong Province, People's Republic of
China, for which it holds rights to explore for and produce gold and on which it
operates an underground gold mine which currently produces about 30,000 ounces
of gold a year. AM and Wang wish to develop the property owned by Hexi by (a)
performing such technical and other work as shall be necessary to support an
initial public offering of the shares of a company to be called Xxxx Xxx Gold
Ltd., (b) making a public offering of Xxxx Xxx Gold's shares, (c) listing the
shares of Xxxx Xxx Gold on the Toronto stock exchange, and (d) entering into a
joint venture agreement with respect to the ownership and operation of the gold
mining assets owned and to be acquired by Hexi. GPA will perform certain
services in relation to these activities for which it will receive an interest
in Xxxx Xxx Gold Ltd. The parties are entering into this Memorandum of
Agreement to provide for the terms on which these activities will be carried
out.
WITNESSETH that the parties have agreed as follows:
1. DEFINITIONS
As used in this agreement:
"ADDITIONAL ASSETS" means leases and other interests in gold mining
properties in Penglai City, Shandong Province which are acquired by Hexi
after the date of this Agreement and prior to the Public Listing.
"AM SUB" means a corporation which is a wholly-owned subsidiary of AM,
which will be a 90% shareholder in JVCO.
"PRC REQUIREMENTS" means all approvals and consents of governmental
authorities in the PRC and registration requirements required for the
purpose of completing the transactions provided for in this Agreement as
set out in Schedule A.
"EFFECTIVE DATE" means the date as of which (a) this Agreement shall have
been executed, and (b) all PRC Requirements shall have been satisfied as
evidenced by an Opinion of Counsel.
"EXCHANGE" means the TSX-Venture Exchange.
"EXPLORATION PROGRAM" means an exploration program conducted on the Hexi
Assets, at a cost of US $1.5 million, or as otherwise agreed to by the
Parties over a period of
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approximately 18 months, with the objective of proving up sufficient
mineral resources to justify the Public Listing.
"43.101 REPORT" means a report complying with the requirements of Canada's
National Instrument No. 43.101 and being otherwise acceptable for the
purpose of a Public Listing.
"HEXI ASSETS" means the gold mining plant(s), equipment and leases owned by
Hexi plus the Additional Assets.
"JVA" means a joint venture agreement to be entered into governing the
ownership and operation of JVCO.
"JVCO" means either Hexi, on the basis that its shareholders will be AM Sub
as to 90% and Wangco PRC as to 10%, or a newly incorporated entity of which
the owners will be AM Sub as to 90% and Wangco PRC as to 10%.
"OPINION OF COUNSEL" means an opinion of legal counsel to the effect that
all Chinese Requirements have been satisfied and that this Agreement is a
binding obligation of Hexi and Wang enforceable in accordance with its
terms.
"PG" means Xxxx Xxx Gold Limited, being AM renamed and continued from its
present jurisdiction of incorporation to incorporation under the laws of
the Province of Ontario where it shall have its shares listed on the
Exchange.
"PRC" means the People's Republic of China.
"PUBLIC LISTING" means a listing of PG shares on the Exchange.
"VALUATION" means a valuation complying with the requirements of Schedule
B.
"WANGCO BVI" means a British Virgin Islands company to be owned
beneficially as to 100% by Wang.
"WANGCO PRC" means a PRC company to be owned beneficially as to 100% by
Wang.
2. TRANSACTIONS
For the purposes of implementing the transaction:
(a) AM will finance and conduct the Exploration Program.
(b) AM and GPA will be entitled at any time during the conduct of the
Exploration Program to terminate this Agreement on the basis that
either (i) the progress being achieved is not acceptable in their
judgment having regard to the requirements for the Public Listing, or
(ii) the results achieved are not acceptable having regard to the
requirements for the Public Listing, following which the parties shall
have no further obligations to each other with respect to the subject
matter of this Agreement.
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(c) Following completion of the Exploration Program, the Valuation shall
be performed as the basis for determining the respective interests of
AM, GPA and Wang in JVCO and issuing shares in AM in accordance with
the following requirements:
(i) Wang's interest shall be represented by a combination of shares
in JVCO and AM shares such that he will beneficially own through
Wangco PRC not less than 10% of JVCO in accordance with PRC
requirements for gold mining entities, with the balance of his
interest being held through AM shares issued to Wangco BVI; and
(ii) For its services, GPA shall be entitled to AM shares having a
value equal to 20% of Wang's total entitlement as determined in
accordance with Schedule B.
(d) Wang will cause Hexi to contribute to JVCO the Additional Assets whose
value will be included for Valuation purposes.
(e) Following the issue of AM shares in accordance with clause (c), AM
will begin taking all required steps to achieve the Public Listing,
including the preparation of the 43-101 Report.
(f) The parties agree that, with effect from completion of the Public
Listing:
(i) AM will have a board of six directors, of whom two shall be
nominees of Wangco BVI, three shall be independent directors and
one shall be the President and CEO; and
(ii) AM will be the managing partner of JVCO, with the sole right to
make all decisions except those which, as a matter of PRC law,
require unanimity and, for this purpose, Wangco PRC will not
unreasonably withhold its consent on any matter requiring
unanimity.
(g) Wang will cause Hexi to provide unrestricted access to the Hexi Assets
and the Additional Assets and, when so required, to take at its sole
expense all actions and required remedial assurances to upgrade the
Hexi Assets to ensure safe access at all times.
(h) Immediately following the Effective Date, AM will initiate, supervise
and pay for the technical and other work required to enable PG to
complete the Public Offering.
(i) AM will take all required steps to be continued under the laws of
Ontario, to change its name and otherwise to satisfy the Public
Listing requirements.
3. PUBLIC LISTING
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Following completion of the 43-101 Report, the parties shall determine
whether or not to proceed with the Public Offering. If the determination is
to proceed, the parties will select financial, legal and other advisors
and, with their help, shall begin preparation of the prospectus and other
required documents, including an underwriting agreement with the investment
bankers who will purchase the shares to be offered by the prospectus.
4. WANG AND HEXI REPRESENTATION
To induce AM and GPA to enter into this Agreement and to make the Option
Payment, Wang and Hexi represent and warrant to GPA that:
(a) Wang owns 90% of the shares of Hexi and Li Shou Hong owns the
remaining 10% of the shares of Hexi, in each case with a good and
marketable title free of encumbrances;
(b) Hexi is a validly subsisting enterprise under PRC law and has all
requisite power and authority to produce, process and sell gold as it
is currently doing and to execute, deliver and perform this Agreement
and any documents to which it is or is to be a party;
(c) the execution, delivery and performance by Hexi of this Agreement has
been duly authorized by all necessary corporate action and does not
require any consents or approvals other than those which have already
been obtained;
(d) this Agreement has been duly executed and delivered by Hexi and Wang
and constitutes their legal, valid and binding obligation, enforceable
against both of them in accordance with its terms;
(e) the execution and delivery by Hexi and Wang of this Agreement and the
performance by both of them of their obligations hereunder do not,
except for PRC Requirements, require any authorization under any PRC
law or approvals, consents or waivers of third parties and are not
inconsistent with and do not contravene any provision of or constitute
a default under:
(i) their constituent documents or by-laws, as applicable;
(ii) any judgment, injunction, decree or order applicable to it or any
of their properties;
(iii) any PRC law or authorization applicable to it or any of its
properties; or
(iv) any indenture, mortgage, contract or other instrument to which it
is a party or by which it may be bound or affected;
(f) there is no action, suit, investigation or proceeding pending (or, to
their knowledge, threatened) against Hexi or Wang before any
governmental authority which, individually or in the aggregate, if
determined adversely to their interests,
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could reasonably be expected to adversely affect the consummation of
the transactions contemplated hereby;
(g) no person has any agreement or option or any right or privilege
capable of becoming an agreement or option for the purchase of any
Hexi shares; and
(h) until completion of the transactions provided for in this Agreement or
termination as provided in Section 9, Wang will cause Hexi to continue
to carry on its gold mining business in the same manner as that in
which it is being carried on.
5. AM AND GPA REPRESENTATIONS
To induce Hexi and Wang to enter into this Agreement and to grant the
Option, AM and GPA represent and warrant to Hexi and Wang as follows:
(a) each of them is a validly subsisting corporation under the laws of its
jurisdiction of incorporation and has all requisite power and
authority to execute, deliver and perform this Agreement and any
documents to which it is or is to be a party;
(b) the execution, delivery and performance by each of them of this
Agreement has been duly authorized by all necessary corporate action
and does not require any consents or approvals other than those which
have already been obtained;
(c) this Agreement has been duly executed and delivered by each of them
and constitutes their legal, valid and binding obligation, enforceable
against it in accordance with its terms;
(d) the execution and delivery by each of them of this Agreement and the
performance by them of their obligations hereunder do not require any
authorization under any Chinese law or approvals, consents or waivers
of third parties and are not inconsistent with and do not contravene
any provision of or constitute a default under:
(i) its constituent documents or by-laws, as applicable;
(ii) any judgment, injunction, decree or order applicable to it or any
of its properties;
(iii) any law or authorization applicable to it or any of its
properties; or,
(iv) any indenture, mortgage, contract or other instrument to which it
is a party or by which it may be bound or affected; and,
(e) there is no action, suit, investigation or proceeding pending (or to
its knowledge, threatened) against AM or GPA before any governmental
authority which, individually or in the aggregate, if determined
adversely to its interests, could reasonably be expected to adversely
affect the consummation of the transactions contemplated hereby.
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6. TERMINATION
(a) If AM or GPA:
(i) is in material breach of its obligations under this Agreement and
such breach continues for 30 days after notice to AM and GPA
requiring it or them to cease such breach;
(ii) becomes bankrupt or insolvent or takes the benefit of any law
providing for protection against creditors.
Hexi and Wang shall be entitled to terminate this Agreement. Following any
such termination, AM and GPA shall have no further rights in this
Agreement.
(b) AM and GPA shall be entitled jointly to terminate this Agreement:
(i) if Hexi or Wang is in material breach of its obligations under
this Agreement (and for this purpose failure to provide all
required access to the Property and information required to
perform the Valuation shall constitute material breach) and such
breach continues for 30 days after notice to Hexi and Wang
requiring them to cease such breach.
(ii) Hexi or Wang becomes bankrupt or insolvent or takes the benefit
of any law providing for protection against creditors.
Following any such termination, Hexi and Wang shall have no further rights
under this Agreement.
(c) In the event that:
(i) the Effective Date shall not have occurred by 07 May,2006; or
(ii) filing of the Prospectus for the Public Offering as provided for
in Section 6 shall not have occurred by 31 August,2007;
either AM and GPA or Wang and Hexi shall be entitled to terminate this
Agreement by notice to the other, following which none of the parties shall
have any further obligations to the others with respect to the subject
matter of this Agreement.
7. REGISTRATION
Following its execution by the parties, this Agreement shall be registered
in accordance with the requirements set out in Schedule A.
8. NOTICES
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(a) All notices, consents, requests, and other communications
(collectively "Notices") authorized or required to be giving or made
pursuant to this Agreement by a Party, shall be given or made in
writing signed by an authorized representative of such Party,
delivered or mailed by registered or certified mail or sent by telex
or facsimile transmission addressed as follows:
For AM: X.X. Xxx 00000
Xxxxxx, Xxxxxxxx 0000, XXX
Phone: (x0) 000-000-0000
Facsimile: (x0) 000-000-0000
E-mail: xxxxxxxx@xxxxxxx.xxx
--------------------
For GPA: No.l8, 0000 Xxxxxx Xxxxxx
Xxxxxx Xxxxxxxx 00000 XXX.
Phone: (x0) 000 000 0000
Facsimile: (x0) 000 000 0000
E-mail: xxxxxxxxxxx@xxxxxxx.xxx
-----------------------
For Hexi or Wang Huluxian Village, Daliuhang Town,
Xxxx Xxx City, Shandong Province, China
P.C. 265621
Phone: (x00) 000-0000000
Facsimile: (x00) 000-0000000
E-mail: xxxxxxxxxxxx@xxxxxxxx.xx
------------------------
and any such notice shall be deemed to have been properly served and
received by the intended recipient:
(i) in the case of service by delivery or registered or certified
mail - upon delivery;
(ii) in the case of service by telex - upon the sender receiving the
intended recipient's answerback code;
(iii) in the case of service by facsimile transmission - upon the
sender receiving from the intended recipient acknowledgement of
legible receipt.
(b) Any Party may change its address for the receipt of Notices at any
time by giving written notice of such change to all other Parties to
this Agreement in accordance with the provisions of this Article 9.
9. MISCELLANEOUS
(a) The failure of a Party to insist on strict performance of any
provisions of this Agreement or to exercise any right, power or remedy
upon a breach hereof shall
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not constitute a waiver of any provision of this Agreement or limit
the Parties' rights thereafter to enforce any provision or exercise
any right, power or remedy;
(b) No amendments to this Agreement shall be valid unless such amendment
is in writing, duly executed by the Parties, and shall not take effect
until it has been approved and consented to by the appropriate
authorities;
(c) This Agreement has been prepared in both the Chinese and English
language and both texts shall be equally authentic provided that if
there is a dispute and the documents are inconsistent the English
version shall be used for interpretation;
(d) This Agreement contains the entire understanding of the Parties and
supersedes all prior agreements and understandings between the Parties
relating to the subject matter thereof;
(e) This Agreement shall be governed and construed in accordance with the
laws of the Province of Ontario and of Canada applicable therein;
(f) Nothing contained in this Agreement shall be deemed to constitute
either Party the partner of any other, or, except as expressly
provided, to constitute either Party the agent or legal representative
of any other;
(g) This Agreement shall be binding upon the successors and permitted
assignees of the Parties;
(h) This Contract is made in eight (8) copies each in English and Chinese.
Each Party keeps four (4) copies of equal value; and,
(i) The Parties must each take their own responsibility to pay applicable
taxes which may be payable to any appropriate authority or determined
to be payable in connection with the execution, delivery, performance
or enforcement of this Agreement under Chinese law. Each Party will
indemnify and keep indemnified the other Party against any loss or
liability incurred or suffered by it as a result of the delay or
failure by the other party to pay such taxes.
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10. EXECUTION
Executed as a deed on February 20, 2006
Signed for and on behalf of:
AURORA METALS (BVI) LIMITED
X.X.X. Xxxxx
-------------------------------------
Director
-------------------------------------
(Witness)
/s/ X.X.X. Xxxxx
-------------------------------------
Signed for and on behalf of:
GOLDEN PHOENIX RESOURCES ASIA LTD.
-------------------------------------
Director
-------------------------------------
(Witness)
-------------------------------------
Signed for and on behalf of:
HEXI GOLD MINE CO., LTD.
Name (print)
/s/ Xxxx Xxx Qiang
------------------------------------- -------------------------------------
(Witness)
-------------------------------------
XXXX XXX QIANG
-------------------------------------
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SCHEDULE A
PRC REQUIREMENTS
[TO BE COMPLETED AS PER XXX XX LAW OFFICES MEMORANDUM]
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SCHEDULE B
VALUATION
1. The gold resources identified by the exploration program will be valued at
US $20 per ounce.
2. The physical assets, including plant and equipment, will be valued by an
independent third party selected by AM/GPA and acceptable to Wang acting
reasonably. From this amount there will be deducted the estimated costs of
upgrading plant and installations to meet internationally accepted
structural, environmental and operating standards. AM's costs of performing
the work, including the fees and expenses of the valuator, will also be
deducted in arriving at the net value.
3. Wang's interest will be the sum of the amounts determined under 1 and 2.
