RIGHT OF FIRST REFUSAL AGREEMENT
THIS RIGHT OF FIRST REFUSAL AGREEMENT ("Agreement") is entered into this
____ day of March, 1999, by and between Arngre, Inc., a Florida corporation
("Arngre"), and Xxxx X. Xxxxxx, an individual ("Xxxxxx").
RECITALS
A. Arngre and Zacualpan Minerals, LLC, a Colorado limited liability company
("Zacualpan"), are parties to a Joint Venture and Subscription Agreement (the
"Joint Venture Agreement") of even date herewith.
X. Xxxxxx is a principal member of Zacualpan.
C. In consideration of Arngre entering into the Joint Venture Agreement, and in
consideration of Arngre advancing $131,250 to or for the account of Zacualpan to
permit Zacualpan to acquire stock in International Capri Resources, S.A. de C.V,
a Mexican corporation, Xxxxxx wishes to grant Arngre a right of first refusal
with respect to certain mineral projects in which Xxxxxx may be involved.
AGREEMENT
1. General.
a. Subject to the provisions and limitations of this Agreement, Arngre
shall have a right of first refusal, on the terms set forth herein, on all
mining and natural resource related opportunities that are located in Mexico or
the United States, excluding garnet projects, and in which Xxxxxx, or an entity
controlled by Xxxxxx, acquires, or intends to acquire, a direct or indirect
ownership interest, including, but not limited to, an indirect ownership
interest by formation of a joint venture, partnership, corporation or other
entity (a "Project"). For purposes of this Section 1, Xxxxxx shall be deemed to
control an entity if Xxxxxx has the legal power, directly or indirectly, to
direct or cause the direction of the management and policies of such entity. Any
such controlled entity shall be included in the term "Xxxxxx" for purposes of
the remainder of this Agreement.
x. Xxxxxx shall not offer any mining and natural resource related
opportunities that are located in Mexico or the United States, excluding garnet
projects, to any entity in which Xxxxxx owns a beneficial interest, either
directly or indirectly, without first offering such opportunity to Arngre.
c. Capitalized terms used but not otherwise defined herein shall have the
meaning ascribed to them in the Joint Venture Agreement.
2. Information. In the event that Xxxxxx acquires, or intends to acquire, a
direct or indirect ownership interest in a Project, Xxxxxx will promptly deliver
to Arngre, the following information (the "Notice Information") regarding the
Project to the extent that Xxxxxx has such information or can reasonably obtain
such information:
a. A Project description;
b. A title opinion;
c. A Report of Tax Status;
d. Proof of Works (Comprobacion de Obras);
e. A letter of intent with the owner or owners of the Project;
f. A preliminary budget; and
g. Written notice of the twenty-one (21) day period in which Xxxxx
Xxxxxxxxx or a reasonable substitute is available to accompany Arngre or its
Representatives to the Project site for purposes of examining the site and
obtaining mineral samples.
3. Acceptance Period. Arngre shall have thirty (30) days from the date that the
Notice Information is given to Arngre (the "Acceptance Period") to deliver
written notice to Xxxxxx that it wishes to accept its right of first refusal
with respect to the Project in question (the "Acceptance Notice"). If Arngre
should fail to deliver such notice within such thirty (30) day period, it shall
have no further rights with respect to the Project. If Arngre delivers a timely
Acceptance Notice, and if any Arngre Representative makes a bona fide visit to
the Project for the purpose of obtaining mineral samples, the Acceptance Period
shall be extended so that it ends forty-two (42) days after the date that the
Notice Information is given to Arngre.
4. Creation of Trust Account. In order for Arngre to have any rights hereunder
with respect to a Project, it shall be obligated to deposit with a banking
institution identified by Xxxxxx the lesser of (a) $750,000 U.S. or (b) an
amount equal to the total amount of the expenditures budgeted with respect to
the Project for the next ninety (90) days as set forth in the preliminary budget
delivered with the Notice Information or any modification or successor thereto
prepared by Xxxxxx and delivered to Arngre (the "Project Budget"). The lesser
amount of (a) or (b) in the preceding sentence (the "Initial Deposit") shall be
deposited no later than ten (10) days following the last day of the Acceptance
Period, provided, however, that if Xxxxxx delivers a modified or successor
Project Budget to Arngre (as referenced in the previous sentence), Arngre shall
have at least thirty (30) days to deposit any additional amount of funds
required by such modified or successor Project Budget over the previous Project
Budget tendered to Arngre. The amount deposited by Arngre shall be held in a
separate trust account (the "Trust Account"). In addition, for Arngre to
continue to have any rights hereunder with respect to a Project, Arngre shall
further be obligated, at the end of each thirty (30) day period commencing on
the date on which the Initial Deposit is made, to deposit in the Trust Account
2
such additional sum as may be necessary, if any, to make the balance in the
Trust Account equal the amount of expenditures described in the Project Budget
for the next ninety (90) days following the expiration of such thirty (30) day
period, provided, however, that in no event shall Arngre be required to make
total deposits to the Trust Account in excess of $750,000 U.S. pursuant to this
Section 4.
For example, assume the Project Budget for the first ninety (90) days is
$150,000, or $50,000 per thirty (30) day period, and that $150,000 is deposited
by Arngre in the Trust Account. At the end of the first thirty (30) days, only
$30,000 of that amount has been spent, leaving a balance of $120,000. Assume
that the Project Budget from day thirty one (31) through day one hundred twenty
is $130,000, consisting of $50,000 for each of the first two thirty (30) day
periods and $30,000 for the final thirty (30) day period. Under these
assumptions Arngre would be required to contribute an additional $10,000 to the
Trust Account at the end of the first thirty (30) day period.
5. Expenditure of Trust Account Funds. The funds held in the Trust Account shall
be expended in such manner as Xxxxxx and Arngre shall reasonably agree for
expenditures that are contemplated by the Project Budget. In order for Arngre to
retain its rights in the Project, at least $200,000 U.S. must be expended, or
irrevocably committed to be expended, from the Trust Account within twenty (20)
weeks of the date that funds are first deposited in the Trust Account, and at
least $750,000 U.S. must be expended, or irrevocably committed to be expended,
from the Trust Account within forty-five (45) weeks of the date that funds are
first deposited in the Trust Account, provided, however, that the expenditure of
such amounts within such time limits shall not be required if (a) expenditure of
such amounts is not required under the Project Budget, (b) expenditure of such
amounts is required under the Project Budget but Xxxxxx unreasonably fails to
agree to the expenditure of such amounts, or (c) expenditure of such amounts
would be impossible or clearly commercially unreasonable under the circumstances
and such expenditures are made as promptly thereafter as possible and
commercially reasonable.
6. Termination of the Trust Account. In the event that (a) Arngre gives notice
to Xxxxxx that it is no longer interested in the Project, (b) Arngre fails to
make a timely deposit of funds in the Trust Account as required by Section 4, or
(c) the required amount of funds are not expended or irrevocably committed to be
expended from the Trust Account within the specified time limits as set forth in
Section 5, Arngre's rights hereunder in the Project shall immediately be
terminated and Arngre shall be paid the remaining balance in the Trust Account,
less any amount that Xxxxxx and Arngre reasonably determine is necessary to pay
any expenses to which Xxxxxx or Arngre are irrevocably committed with respect to
the Project. In the event of such termination, Arngre shall have no right to be
reimbursed any amounts expended from the Trust Account.
7. Formation of a Joint Venture. In the event that $750,000 U.S. is deposited in
the Trust Account and either (a) such amount is spent or committed to be
expended within the time limits set forth in Section 5 or (b) such amount is not
spent within forty-five (45) weeks of the date that funds are first deposited in
the Trust Account because expenditure of such funds is not required under the
provisions of Section 5, then Arngre and Xxxxxx (or entities controlled by them)
3
shall enter into a joint venture with respect to the Project based on the Rocky
Mountain Mineral Law Foundation's Form 5 (Model Mining Joint Venture Agreement)
(the "Form 5 Joint Venture" and "Form 5") or, if formation of the Form 5 Joint
Venture is impossible under applicable law, Arngre and Xxxxxx shall enter into
another legal arrangement structured so that it has business and economic
consequences approximating as closely as possible those that would exist under
the Form 5 Joint Venture. The Form 5 Joint Venture shall contain the provisions
and modifications set forth below. All capitalized terms not otherwise defined
herein shall have the meanings given them in Form 5.
a. If the Project is not owned or controlled by Polo Y Xxx Minerales S.A.
de C.V. ("Polo Y Xxx") the parties shall have the following initial
Participating Interests in the Form 5 Joint Venture:
Arngre 80%
Xxxxxx 20%
b. If Project is owned or controlled by Polo Y Xxx the parties shall have
the following initial Participating Interests in the Form 5 Joint Venture:
Polo Y Xxx 25%
Arngre 60%
Xxxxxx 15%
c. No party shall make any representations and warranties regarding the
Properties.
d. Section 4.5 (regarding other business opportunities) of Form 5 shall be
modified to reference this right of first refusal.
e. Arngre shall be credited with $750,000 U.S. as its Initial Contribution.
Xxxxxx shall be credited with an Initial Contribution that bears the same
relationship to the total Initial Contribution of Arngre as Isaac's
Participating Interest bears to the Participating Interest of Arngre.
f. Section 6.4(b)(1) of Form 5 shall provide for 200% penalty dilution and
Section 6.3 of Form 5 shall provide for 150% penalty dilution, both in the
manner described in the Joint Venture Agreement.
g. Section 6.4(b)(2) of Form 5 shall provide for payment out of 10% of Net
Proceeds.
h. A Participant's Participating Interest shall be eliminated pursuant to
Section 6.5 of Form 5 upon reduction below 1%.
4
i. The Management Committee shall consist of one member from each
Participant, and the vote of Participants having more than a 50% aggregate
Participating Interest shall determine decisions of the Management Committee.
x. Xxxxxx shall be the Manager unless (i) Isaac's Participating Interest
should fall below 5% in which case Arngre shall have the right to immediately
terminate him as Manager, or (ii) for reasons otherwise set forth in Form 5 not
having to do with Isaac's Participating Interest.
k. Termination by deadlock, as described in Section 12.2 of Form 5, shall
occur after two (2) months following expiration of the latest adopted Program
and Budget.
l. The Area on Interest shall not extend beyond a 5 km radius from the
Project boundaries.
m. Arngre shall not have the right to transfer its interest in the Project
without the consent of Xxxxxx, which may be given or withheld in the absolute
exercise of Isaac's discretion.
Any options in Form 5 not addressed or limited by the foregoing provisions shall
be subject to negotiation by the parties.
8. Disputes. In the event of any dispute hereunder, such dispute shall be
submitted to binding arbitration in Denver, Colorado in accordance with the
commercial arbitration rules of the American Arbitration Association as then in
effect. The arbitrator shall have the authority, in connection with such
arbitration, to compel reasonable but limited discovery including testimony by
depositions and written discovery through interrogatories. The arbitrator shall
further have the authority to award the cost of arbitration including reasonable
attorney's fees in favor of the prevailing party. In the event of a dispute
regarding the form of a Form 5 Joint Venture or other entity created pursuant to
Section 7 above, the parties shall each submit a form of joint venture or other
entity to the arbitrators and the arbitrators shall select the submission that
most closely reflects the provisions and intent of Section 7 and that is
permissible under applicable law.
9. No Assignment; Lapse. The conditional rights granted to Arngre under this
Agreement shall not be assignable by Arngre, provided, however, that Arngre may
assign its conditional right to participate in a specific Project to
International Capri Resources, Inc., a British Columbian company ("ICR") without
obtaining the prior written approval of Xxxxxx, and, in the event of such
assignment, ICR shall not have the right to reassign such conditional right of
participation. Arngre's rights hereunder shall lapse upon the earlier of (a) the
third anniversary of this Agreement or (b) ten business days after Xxxxxx gives
notice to Arngre of his intention to terminate in the event that the
"Shareholder Base" (as such term is defined below) does not hold in the
aggregate 25% or more of the outstanding shares of Arngre's common voting stock.
For the purposes hereof, the term "Shareholder Base" shall mean (x) the
shareholders of Arngre as of the date of this Agreement plus, (y) the investors
5
who subscribe to shares of common stock of Arngre in not more than three private
placement offerings occurring within ninety (90) days of this Agreement.
10. Accuracy of Representation; Contributions. The rights granted to Arngre
under this Agreement are conditioned upon each representation and warranty of
Arngre made in the Joint Venture Agreement being accurate in all material
respects as of the date thereof and Arngre's acquiring shares in International
Capri Resources, S.A. de. C.V., a Mexican company, as set forth in Article II of
the Joint Venture Agreement.
11. Other Provisions.
a. Governing Law. This Agreement shall be governed in all respects by the
laws of the state of Colorado.
b. Entire Agreement. This Agreement sets forth the entire agreement of the
parties hereto with respect to the subject matter hereof and may not be amended
or modified except in writing executed by both parties.
c. Severability. This Agreement is intended to be enforceable in accordance
with the terms hereof. If nonetheless any court of competent jurisdiction or
arbitration panel should determine any provision of this Agreement to be
unenforceable by reason of illegality or for any other reason, such provision
should be modified to the extent necessary to cause it to be enforceable, or
stricken, and is so modified or stricken, the remainder of this Agreement shall
remain in full force and effect.
d. Pronouns. Masculine, feminine, and neutered pronouns shall be deemed to
include the masculine, feminine, and neutered case as the context may require.
e. Headings. The headings in this Agreement are inserted for convenience
only and are in no way intended to describe, interpret, define, or limit the
scope, extent, or intent of this Agreement or any provision in any way.
f. Assignment. Except for an assignment to ICR by Arngre in accordance with
Section 9 of this Agreement, this Agreement may not assigned by either of the
parties hereto without the prior written consent of the other party.
g. Equitable Remedies. The parties agree that any breach of this Agreement
by any party will result in immediate and irreparable harm to the other parties,
and the other parties shall be entitled to obtain an injunction and/or specific
performance as well as other legal or equitable remedy necessary in order to
compel compliance with the terms hereof.
6
h. Notices. All notices and other communications under or in connection
with this Agreement shall be in writing and shall be deemed to have been given
(a) if delivered personally (including by overnight express or messenger), upon
delivery, or (b) if delivered by registered or certified mail (return receipt
requested), upon the earlier of actual delivery or three days after being
mailed, in each case to the respective parties at their respective mail
addresses set forth below. A party may change its address by giving notice to
the party as set forth in this Section 11.
i. If to Arngre:
Arngre, Inc.
000 Xxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxxxx
With a Copy to:
Xxxxxxx X. Xxxxx, Esquire
Xxxxxxxx Xxxxxxxxx Professional Corporation
Eleven Xxxx Xxxxxx, 00xx Xxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
ii. If to Xxxxxx:
Xxxx X. Xxxxxx
3400 Avenue of the Arts
Xxxxx X000
Xxxxx Xxxx, XX 00000
With a Copy to:
Xxxx X. Xxxxxxxxxx III
Krendl Xxxxxxxx & Xxxxxx
000 Xxxxxxxxxxx Xx. Xxxxx 0000
Xxxxxx, Xxxxxxxx, 00000
i. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns; provided, however, that except with regard to a successor by
operation of law (including a successor who purchases substantially all of the
assets of any of the parties hereto or a party who merges with any of the
parties hereto), except as expressly set forth herein, no party hereto may
7
transfer or assign its rights hereunder in whole or in part to any other Person
without the prior written consent of the other parties hereto, except as
expressly set forth herein.
j. Currency Denominations. All currency amounts referenced in this
Agreement are U.S. dollars.
k. Counterparts; Facsimile Signatures. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all
such counterparts together shall constitute but one and the same Agreement.
Facsimile signatures to this Agreement shall, for all purposes, be as fully
effective as signed originals.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be signed as of the date first written above.
ARNGRE, INC.,
a Florida corporation
By: /s/ Xxxxxxx X. Xxxxxxxxxx
--------------------------------
Xxxxxxx X. Xxxxxxxxxx, President
/s/ Xxxx X. Xxxxxx
--------------------------------
Xxxx X. Xxxxxx
8
