EARN IN/OPTION AGREEMENT
Page 1 of 18
THIS AGREEMENT is dated
September __________, 2006 (the “Effective Date”)
AMONG:
DynaResource de Mexico, S.A. de
C.V., a corporation duly incorporated under the laws of
Mexico
(“DynaMexico”)
AND:
DynaResource, Inc., a Delaware
corporation
(“DynaUSA”)
AND:
Goldgroup Resources Inc., a
British Columbia corporation
(“Goldgroup”)
WHEREAS:
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(A)
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DynaMexico
is the owner of certain mining concessions, equipment, mill, camp
facilities, permits, rights and related assets comprising the San ▇▇▇▇ ▇▇
▇▇▇▇▇▇ Property, located in the State of Sinaloa, Mexico (the “Existing
Property”) as set forth in the legal opinion issued by ▇▇▇▇▇ ▇▇▇▇▇▇ y
Associados, S. C. dated July 13, 2006 attached hereto as
Schedule A (the “Title Opinion”);
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(B)
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An
additional mining concession (the “Additional Mining Concession”) in the
Area of Interest surrounding the Existing Property has been applied for
and claimed by Goldgroup on behalf of DynaMexico . The
Additional Mining Concession are more particularly described in Schedule B
hereto. Goldgroup has agreed to cause the transfer of these
Additional Mining Concession to DynaMexico forthwith upon execution of
this Agreement. The Additional Mining Concession together with
the Existing Property and all associated rights and assets located in the
Township of San ▇▇▇▇ ▇▇ ▇▇▇▇▇▇, Municipality of Sinaloa ▇▇ ▇▇▇▇▇, Sinaloa
are referred to collectively in this Agreement as the “SJG
Property”;
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(C)
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DynaMexico
has agreed to grant an exclusive right and option (the “Option”) to
Goldgroup to earn up to a 50% equity interest in DynaMexico in four phases
and as set forth below such ownership interest in DynaMexico may be
converted to ownership interest in DynaUSA with the stock certificates in
either DynaMexco or DynaUSA earned by, issued to and held by Goldgroup
being referred to herein as the “Shares”;
and
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(D)
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The
parties wish to cooperate in the exploration and development of the SJG
Property , on the terms and conditions hereinafter set
forth.
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Page
2 of 18
NOW, THEREFORE, in
consideration of the premises, the respective representations, warranties,
covenants and agreements contained in this Agreement, and other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the Parties agree as
follows:
ARTICLE 1
OPTION TO EARN AN INTEREST
IN DYNAMEXICO
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1.1
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DynaMexico
hereby grants Goldgroup the sole and exclusive right and option (the
“Option”) to earn up to a 50% equity interest in the form of common shares
of DynaMexico in accordance with the terms, provisions and
conditions set forth below.
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1.2
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The
Option shall be exercised in four phases (each a “Phase” and together, the
“Phases”) by Goldgroup timely funding the amounts set forth in the chart
below through DynaMexico for Expenditures (defined below) on the SJG
Property as follows:
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Phase
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On
or before
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Amount
of Funds to be deposited into the Segregated Account (For
Expenditures)
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Interest
Earned by Goldgroup in DynaMexico
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Cumulative
Interest earned by Goldgroup in DynaMexico
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1.
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June
15, 2007
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$1,000,000
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0%
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0%
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2.
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March
15, 2008
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$2,000,000
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15%
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15%
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3.
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September
15, 2009
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$3,000,000
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10%
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25%
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4.
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March
15, 2011
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$12,000,000
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25%
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50%
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1.3
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In
the event that Goldgroup funds, in any of the above Phases, less than the
specified sum, it may pay to DynaMexico the difference between the amount
it actually funded and the specified sum (the “Shortfall”) before the
expiry of that Phase in full satisfaction of the Expenditures to be
funded, provided that the Shortfall shall not exceed 25% of the total
amount to be funded in any given Phase that a Shortfall
exists. In the event that Goldgroup funds, in any Phase, more
than the specified sum, the excess shall be carried forward and credited
to the funding in the next succeeding
Phase.
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1.4
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“Expenditures”
means the sum of all costs of maintenance and operation of the SJG
Property (including without limitation all maintenance of concessions and
rights/interests in the SJG Property), all expenditures on the exploration
and development of the SJG Property, and all other costs and expenses of
whatsoever kind or nature, including without limitation the Ejido
agreement, those of a capital nature, incurred or chargeable with respect
to the exploration of the SJG Property, and the placing of the SJG
Property into commercial
production.
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1.5
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Within
30 days of the execution of this Agreement, DynaMexico shall
cause and do such acts as necessary to approve and issue and deliver to
the Escrow Agent (defined below) three (3) share certificates in the name
of Goldgroup each representing the percentage of the Shares to be earned
by Goldgroup in DynaMexico upon completion of Phases 2,
3
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Page 3 of 18
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and
4 set forth above. Goldgroup will have no rights whatsoever in
and to the Shares, including the right to vote the Shares, unless and
until such time and under such conditions as all the terms of Goldgroup’s
funding requirements have been timely complied with and the Escrow Agent
has released the Shares from Escrow in accordance with the escrow
agreement (the “Escrow Agreement”) attached as Schedule D
hereto. The Escrow Agent shall hold such share certificates in escrow and
release and deliver them to Goldgroup only in accordance with the Escrow
Agreement.
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1.6
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Goldgroup
may from time to time accelerate its completion of a Phase or combine
Phases by depositing the full funding requirements in the Segregated
Account for the next Phase or
Phases.
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ARTICLE
2
TERMINATION OF OPTION/ NON
EARN IN
2.1 Notwithstanding
anything set forth in Article I above, if Goldgroup does not elect to exercise
its option to timely and fully fund any Phase in accordance with the funding
schedule set forth above, then, (i) Goldgroup shall not earn the interest
applicable to any Phase not timely funded; and (ii) the right of Goldgroup to
fund any subsequent Phases and acquire additional shares of DynaMexico shall
cease and the rights and interests of Goldgroup under the terms
and provisions of this Agreement, subject to the conversion rights of
Goldgroup pursuant to Article 2.4, shall automatically terminate and
shall thereupon be of no further force or effect.
2.2 This
Agreement may be terminated by Goldgroup with 60 days written notice to
DynaMexico.
2.3 If
this Agreement terminates, for any reason, Goldgroup shall provide for a
reasonable and orderly transfer of the management of the day to day operations
of the SJG Property to DynaMexico and Goldgroup shall leave the SJG Property
including all concessions in good standing for at least 12 months following the
termination. Goldgroup shall also deliver, at no cost to DynaMexico, upon
termination of the Agreement, all documents of any nature relating to the SJG
Property, including, without limitation all drill core, reports, maps, assay
results and other technical, exploration, operational or mining data obtained
during the existence of the Agreement.
2.4 If
this Agreement terminates pursuant to Article 2.1 or Article 2.2, then any
ownership interests then held by Goldgroup in DynaMexico immediately prior to
such termination shall be converted to like percentage in DynaUSA such that
Goldgroup shall no longer own any interest or shares in DynaMexico but will then
own the same percentage in DynaUSA. For example, if by September 15,
2009, Goldgroup has completed Phase 1 and 2 and has been issued 15% of the
issued and outstanding shares of DynaMexico, Goldgroup does not make the Phase 3
funding ($3,000,000) by September 15, 2009, then (i) Goldgroup’s rights and
interests in this Agreement shall terminate and it shall have no further right
to earn any additional interest in DynaMexico; and (ii) Goldgroup’s 15%
ownership interest in DynaMexico shall be converted to a 15% interest in DynaUSA
and the parties hereto agree to authorize and perform such acts and actions to
accomplish such conversion (e.g. Goldgroup relinquishing such share certificate
representing its 15% ownership and cancel of same and DynaUSA issuing such new
common shares of DynaUSA to Goldgroup representing a 15% ownership interest in
DynaUSA.
2.5 Possible
Dilutions; Goldgroup Options to Maintain Percentage of
Ownership. The Parties acknowledge and agree that once
Goldgroup has converted its ownership in DynaMexico to ownership in DynaUSA and
is issued the corresponding number of shares of DynaUSA's Common Stock,
Goldgroup
Page 4 of 18
will have
the option (the "Dilution
Option") to maintain Goldgroup's then existing ownership percentage of
DynaUSA, in the event of the dilution of Goldgroup's ownership interest in
DynaUSA. Dilution of Goldgroup's interest may occur through
either: (i) exercise of any of the outstanding stock options; or (ii)
a decision by DynaUSA's Board to issue additional Common Stock or otherwise
effect a dilution of Goldgroup's ownership interest (collectively, a "Dilution
Event"). Upon the occurrence of a Dilution Event, Goldgroup
shall have the right to maintain its percentage ownership in DynaUSA, on terms
equal to the terms of any transaction(s) which led to the Dilution Event.
Goldgroup's right to maintain its ownership percentage will be granted through
the Dilution Option, as follows:
If a Dilution Event occurs then DynaUSA
shall provide Goldgroup written notice and Goldgroup shall: (i) have
the option to purchase such Common Stock as necessary to maintain the percentage
ownership interest it would have held had the Dilution Event not occurred at a
price equal to the price that caused the Dilution Event (the "Dilution
Price"); and (ii) shall have thirty (30) days to deliver to DynaUSA the
Dilution Price, in certified funds. Within five (5) business days of
DynaUSA receiving written notice of such delivery, DynaUSA shall cause to be
issued and delivered to Goldgroup one (1) or more certificates representing the
number of shares of Common Stock to be issued to Goldgroup as a result of the
exercise of such Dilution Option.
By way of example only, if Goldgroup
owns fifteen percent (15%) of DynaUSA's outstanding Common Stock, and 500,000 of
Stock Options (with a strike price of $2.50 and termination date of November 15,
2007) are exercised, then Goldgroup shall have the right, as set forth above, to
purchase such shares of the Common Stock for $2.50 per share (the Dilution
Price) to maintain its fifteen percent (15%) interest and shall pay the Dilution
Price to DynaUSA.
ARTICLE
3
REPRESENTATIONS AND
WARRANTIES OF GOLDGROUP
Goldgroup
represents and warrants to DynaMexico and DynaUSA that, as of the Effective Date
and at the completion of each Phase, as follows:
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(a)
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Goldgroup
is a corporation duly organized and in good standing in its jurisdiction
of incorporation and is qualified to do business and is in good standing
in those jurisdictions where necessary in order to carry out the purposes
of this Agreement;
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(b)
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Goldgroup
has the capacity to enter into and perform this Agreement and all
transactions contemplated herein and that all corporate, board of
directors, shareholder, surface and mineral rights owner, lessor, lessee
and other actions required to authorize it to enter into an perform this
Agreement have been properly taken;
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(c)
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Goldgroup
will not breach any other agreement or arrangement by entering into or
performing this Agreement;
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(d)
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Goldgroup
is not subject to any governmental order, judgment, decree, debarment,
sanction or laws that would preclude the permitting or implementation of
operations under this Agreement;
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(e)
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this
Agreement has been duly executed and delivered by Goldgroup and is valid
and binding upon it in accordance with its
terms;
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(f)
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Ability
to Evaluate Risks of Investment. Goldgroup
has such knowledge and experience in financial and business matters that
Goldgroup is capable of evaluating the merits and risks of
an
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Page 5 of 18
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investment
in DynaMexico. Goldgroup represents that by reason of
Goldgroup's business and financial experience and the business and
financial experience of those persons, if any, Goldgroup has retained to
advise Goldgroup with respect to Goldgroup's investment in DynaMexico,
Goldgroup has acquired the capacity to protect Goldgroup's own interest in
investments of this nature. In reaching the conclusion that
Goldgroup desires to acquire the Shares, Goldgroup has carefully evaluated
Goldgroup's financial resources and investment position and the risks
associated with this investment (including without limitation the loss of
its investment) and acknowledges that Goldgroup is able to bear the
economic risks of the investment and voluntarily assumes such
risks
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(g)
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Financial
Condition of Goldgroup. Goldgroup
has a financial condition such that Goldgroup has adequate means of
providing for contingencies, and Goldgroup has no need, and anticipates no
need in the foreseeable future, to dispose of any portion of the Shares to
satisfy any existing or contemplated undertaking or
indebtedness. Goldgroup is able to bear the economic risk of an
investment in the Shares, and, consequently, without limiting the
generality of the foregoing, Goldgroup is able to hold the Shares for an
indefinite period of time and has a sufficient net worth to sustain a loss
of part or all of Goldgroup's investment if such loss should
occur;
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(h)
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Purchase
for Investment. The Shares
(whether in DynaMexico or DynaUSA )are being acquired by Goldgroup for
investment purposes only, for Goldgroup's own account, and not with a view
toward resale or other distribution thereof, and Goldgroup is not
participating, directly or indirectly, in any underwriting or other such
undertaking in connection therewith. The Shares will not be
sold or transferred by Goldgroup in violation of the Securities Act or any
state, federal or Mexican securities law. Goldgroup has no
present or contemplated agreement or commitment providing for or which is
likely to compel the disposition of the Shares. Goldgroup
represents and warrants that Goldgroup is not acquiring the Shares as
nominee, trustee, agent or representative for any other
person.
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(i)
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Access
to Information and Counsel. Goldgroup
acknowledges that DynaUSA and DynaMexico have made available every
document in its possession and that neither DynaMexico nor DynaUSA have
denied Goldgroup access to any documents or information requested by
Goldgroup. Goldgroup has received copies of, read, understood
and is familiar with DynaUSA and DynaMexico's (i) articles of
incorporation, as amended (ii) bylaws, (iii) the minute book and corporate
records, (iv) business plan, (v) the Financial Statements (vi)
the Title Opinions, and (vii) reserve and engineering
reports. In deciding to acquire the Shares, Goldgroup has been
represented, or has had the opportunity to be represented, by such legal
and tax counsel and others, each of whom has been personally selected by
Goldgroup, and such representation has included an examination of all
documents deemed necessary or advisable by Goldgroup, including the
documents enumerated above in this paragraph, and an analysis of all tax,
financial, corporate and securities law aspects that Goldgroup or
Goldgroup's advisers deemed pertinent. Goldgroup makes and
enters into this Agreement with full knowledge and understanding of the
information and the terms and conditions contained herein and is relying
on Goldgroup's own due diligence and investigation in entering into this
Agreement and the express representations and warranties of DynaMexico and
DynaUSA, herein.
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(j)
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Goldgroup
has had access during the course of the transaction and prior to the
purchase of the Shares to such information relating to DynaMexico and its
subsidiaries as Goldgroup has desired, and has been given the opportunity
to (1) visit the offices of DynaMexico and examine all books and records,
(2) ask questions of, and receive answers from, DynaMexico and its
officers, directors and representatives concerning DynaMexico and the
terms and conditions of the sale of
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Page 6 of 18
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the
Shares, and (3) obtain any additional information about the business and
financial condition of DynaMexico which is necessary to verify the
accuracy of the information contained in this Agreement and which
DynaMexico possesses or can reasonably obtain without the expenditure of
undue time or expense, which additional information has been timely and
satisfactorily received. In making the decision to purchase the
Shares and to become a shareholder of DynaMexico, Goldgroup has relied
upon Goldgroup's review of the above enumerated documents and related
information, independent investigations made by Goldgroup and the advice
of Goldgroup's advisers and the express representations and warranties of
DynaMexico and DynaUSA herein.
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(k)
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Restrictions
on Marketability of Shares. Goldgroup
is aware that the Shares have not been registered under the Securities Act
or any other securities law, that the law may require the Shares to be
held indefinitely unless they are subsequently registered or an exemption
from such registration is available and that neither DynaMexico nor
DynaUSA are under any obligation to register the Shares under
the Securities Act or any applicable state, federal or Mexican securities
law.
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(l)
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Restrictions
on Transfer of Shares. Goldgroup
acknowledges that Goldgroup will not sell, pledge or otherwise dispose of
any of the Shares otherwise than in strict accordance with the law and
with this Agreement. In addition, Goldgroup acknowledges that Goldgroup
will not sell, pledge or otherwise dispose of any of such Goldgroup's
Shares without first complying with the right of first refusal provisions
set forth below.
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(m)
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No
Fairness Determination. Goldgroup
understands that neither the SEC nor the securities administrator of any
state or Mexico has made any finding or determination relating to the
fairness of an investment in the Shares, and that neither the SEC nor an
administrator of any state has recommended or endorsed the Shares being
acquired by Goldgroup.
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(n)
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No
Other Representations. Goldgroup
further acknowledges that, except as expressly set forth herein, no
representations or warranties have been made to Goldgroup, or to
Goldgroup's purchaser representative (if any), by DynaUSA or DynaMexico or
by any person acting on behalf of DynaMexico with respect to the
transactions contemplated herein, including without limitation the
proposed business and profitability of DynaMexico, the financial condition
of DynaMexico, and/or the economic, tax or other aspects or consequences
resulting from the acquiring of any
Shares.
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(o)
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Legends
on Certificates. Goldgroup
agrees that the certificates evidencing its ownership of the Shares shall
be stamped or otherwise imprinted with a conspicuous restrictive legend to
restrict the sale and transfer in accordance with this Agreement and the
constating documents of DynaMexico or DynaUSA, as the case may
be.
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(p)
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Regulation
S Representations (in relation to DynaUSA Shares).
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The
following representations and warranties are made by Goldgroup upon
conversion of its Shares under Article 2.4 and relate only to its
acquisition of Shares thereunder:
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A. Goldgroup
is not a U.S. Person (as such terms is defined in Regulation S ("Regulation
S") promulgated under the Securities Act) and is not acquiring the Shares
for the account or benefit of, directly or indirectly, any U.S.
Person.
B. Goldgroup
is outside the United States when receiving the shares in connection with any
conversion rights.
Page 7 of 18
C. Goldgroup
understands and agrees that none of the Shares have been or will, except as set
forth in this Agreement, be registered under the Securities Act, or under any
state securities or "blue sky" laws of any states of the United States, and,
unless so registered, may not be offered or sold in the United States or,
directly or indirectly, to U.S. Persons, as that term is defined in Regulation
S, except in accordance with the Law, including provisions of Regulation S,
pursuant to an effective registration statement under the Securities Act, or
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and in each case only in
accordance with applicable state and federal securities laws.
D. Goldgroup
understands and agrees that offers and sales of any of the Shares prior to the
expiration of a period of one (1) year after the date of original issuance of
the Shares (the one (1)-year period hereinafter referred to as the "Distribution
Compliance Period") shall only be made in compliance with the safe harbor
provisions set forth in Regulation S, pursuant to the registration provisions of
the Securities Act or an exemption therefrom, and that all offers and sales
after the Distribution Compliance Period shall be made only in compliance with
the registration provisions of the Securities Act or an exemption therefrom and
in each case only in accordance with applicable state and federal securities
laws.
E. Goldgroup
acknowledges that it has not acquired the Shares as a result of, and will not
itself engage in, any "directed selling efforts" (as defined in Regulation S) in
the United States in respect of any of the Shares which would include any
activities undertaken for the purpose of, or that could reasonably be expected
to have the effect of, conditioning the market in the United States for the
resale of any of the Shares; provided, however, that Goldgroup may sell or
otherwise dispose of any of the Shares pursuant to registration of any of the
Shares pursuant to the Securities Act and any applicable state or federal
securities laws or under an exemption from such registration requirements and as
otherwise provided herein.
F. Goldgroup
understands and agrees not to engage in any hedging transactions involving any
of the Shares unless such transactions are in compliance with the provisions of
the Securities Act and in each case only in accordance with applicable state,
federal or Mexican securities laws and all Parties hereto agree, in writing,
prior thereto.
G. Goldgroup
understands and agrees that DynaUSA will refuse to register any transfer of the
Shares not made in accordance with the provisions of applicable state and
federal securities laws, including Regulation S, pursuant to an effective
registration statement under the Securities Act or pursuant to an available
exemption from the registration requirements of the Securities Act.
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(q)
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Arbitrary
Valuation of Shares. Goldgroup
acknowledges that (i) the price at which the Shares are being acquired to
Goldgroup hereunder was determined by negotiations between DynaMexico,
DynaUSA and Goldgroup and bears no direct relationship to the assets, book
values, earnings or net worth of DynaMexico or DynaUSA, (ii) no
independent appraisal has been prepared by or on behalf of DynaMexico or
DynaUSA evaluating the Shares being sold hereunder or the net worth of
DynaMexico or DynaUSA, and DynaMexico and DynaUSA do not intend to obtain
any such appraisal, (iii) the option price for the Shares being acquired
hereunder should not be considered an indication of the actual value of
DynaMexico or DynaUSA, and (iv) no assurance is given that such Shares, if
transferable by DynaMexico or DynaUSA or Goldgroup, could be sold for the
purchase price of the Shares.
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Page 8 of 18
ARTICLE
4
REPRESENTATIONS AND
WARRANTIES OF DYNAMEXICO AND DYNAUSA
DynaMexico
and DynaUSA jointly and severally represent and warrant to Goldgroup that, as of
the Effective Date of this Agreement,
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(a)
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Each
is a corporation duly organized and in good standing in its jurisdiction
of incorporation and is qualified to do business and is in good standing
in those jurisdictions where necessary in order to carry out the purposes
of this Agreement;
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(b)
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Each
has the capacity to enter into and perform this Agreement and all
transactions contemplated herein and that all corporate, board of
directors, shareholder, surface and mineral rights owner, lessor, lessee
and other actions required to authorize it to enter into an perform this
Agreement have been properly taken or will be
taken;
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(c)
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They
will not breach any other agreement or arrangement by entering into or
performing this Agreement;
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(d)
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Except
as otherwise disclosed to Goldgroup and to the best knowledge of both,
they, individually or together, are not subject to any known governmental
order, judgment, decree, debarment, sanction or laws that would preclude
the permitting or implementation of operations under this
Agreement;
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(e)
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This
Agreement has been duly executed and delivered by each of them and is
valid and binding upon each of them in accordance with its
terms;
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(f)
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DynaMexico's
current authorized capital consists of an unlimited shares of common
stock, 500 pesos par value per share, of which there are 100 shares issued
and outstanding. When released from the Escrow Agent
to Goldgroup, the Shares will be duly authorized and validly issued, fully
paid, and non-assessable. DynaMexico does not have any other
outstanding options, warrants, or exchangeable or convertible
securities;
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(g)
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DynaUSA’s
audited consolidated financial statements for the years ended 2004 and
2005, and interim statements for the period June 30,2006 and for the 6
months ended June 30,2006 (together, the "Financial Statements") are
attached hereto and incorporated herein as Schedule E. The
Financial Statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis
throughout the periods covered thereby, present fairly DynaUSA’s financial
condition as of such dates and DynaUSA’s results of operations and cash
flow for such periods and are correct, complete and consistent with
DynaUSA’s books and records;
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(h)
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To
their knowledge, the Title Opinion is true and correct in all material
respects, and, to their knowledge, except as stated in the
Title Opinion, the Existing Property are in good standing with respect to
all filings, fees, taxes, assessments, work commitments or other
conditions on the date thereof and until the dates set out in the Title
Opinion.
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(i)
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DynaMexico
owns the Existing Property as stated in the Title Opinion and has not
transferred or conveyed or encumbered the Existing
Property;
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Page 9 of 18
(j) To
the knowledge of DynaUSA and DynaMexico, DynaMexico has complied with all known
laws, regulations and orders properly applicable to its business and affairs
and, except as otherwise disclosed or made available to Goldgroup in connection
with its due diligence, DynaMexico has not received written notice that the
present or past uses by DynaMexico of its properties and the conduct by
DynaMexico of its business violate any known laws, regulations or
orders.
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(k)
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Except
as disclosed to Goldgroup in connection with its due diligence, DynaMexico
has not received inquiry from or notice of a pending investigation from
any governmental agency or of any administrative or judicial proceeding
concerning the violation of any known
laws;
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(l)
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Except
as otherwise disclosed to Goldgroup in connection with its due diligence,
there is no action or proceeding pending or, to the knowledge of
DynaMexico or DynaUSA, threatened against DynaMexico or any of the
Existing Property before any governmental authority commission; and except
as otherwise disclosed to Goldgroup in connection with its due diligence,
no such proceeding is pending or, to the knowledge of DynaMexico or
DynaUSA, threatened, in arbitration or before any administrative agency
and DynaMexico is not subject to any judgments, writs, injunctions or
orders by any governmental
authority;
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(m)
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The
books and records of DynaMexico and its subsidiaries, including but not
limited to its stock and minute books, are complete and correct and have
been maintained in accordance with good business practices and contain a
true record of meetings or proceedings of its board of directors and
shareholders;
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(n)
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To
DynaMexico's knowledge, all tax returns and reports of DynaMexico required
by law to be filed have been duly filed, and all taxes, assessments, fees
and other governmental charges due or reasonably anticipated to become due
in respect of DynaMexico, or any assets, income or franchises of
DynaMexico, that if not paid could have a material adverse effect on
DynaMexico or the subsidiaries, have been duly paid or have been
adequately provided for on the books of
DynaMexico.
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(o)
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Goldgroup
has had full and complete access to all documents, reports or other
written information pertaining to DynaUSA, DynaMexico and the Existing
Property and the documents are originals or true and correct copies of the
originals and do not contain any intentional material misstatement of fact
or intentionally omit to state a material fact necessary to make the
statements contained therein not materially misleading. The
opinions, estimates, forecasts and projections in the application and the
assumptions on which they were based were given in good
faith. There are no documents known to DynaMexico or DynaUSA
that have not been made available to Goldgroup, the existence of which
could have a material adverse
effect.
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(p)
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DynaMexico
has no outstanding loans;
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(q)
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Except
as otherwise disclosed to Goldgroup in connection with its due diligence,
DynaMexico is not knowingly in material breach or default of any term or
condition of, and is not subject to any challenge to or threatened
termination of, any license or
permit;
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(r)
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Except
as otherwise disclosed to Goldgroup in connection with its due diligence
and to DynaMexico's and DynaUSA’s knowledge, DynaMexico has
been operating in accordance with applicable environmental
laws. To DynaMexico's knowledge, and except as disclosed to
Goldgroup in connection with its due diligence, no condition exists or
event has occurred
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Page 10 of 18
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which,
with or without notice or the passage of time or both, would constitute,
individually or together, a material violation of or give rise to material
liability under any applicable environmental
laws.
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ARTICLE
5
FURTHER ASSURANCES
5.1 Further
Action. If any time any
further action is reasonably necessary or desirable to carry out this
Agreement's purposes and effectuate its terms, each party will take such
reasonable further action (including executing and delivering any further
instruments and documents, obtaining any permits and consents and providing any
reasonably requested information) as any other party may reasonably request, all
at the requesting party's sole cost and expense.
ARTICLE 6
INDEMNIFICATION
6.1 Survival
of Representations, Warranties and Covenants. The
representations and warranties set forth above shall survive the execution and
delivery of any documents or certificates representing the Shares, and
termination of this Agreement, for 1 year. For a representation and
warranty made to a party’s “knowledge”, the term “knowledge” shall mean actual
knowledge on the part of ▇.▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ for DynaUSA and
DynaMexico and ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇ on the part of Goldgroup.
6.2 Indemnification
Provisions for Goldgroup's Benefit. For purposes of
this Article 6, “Damages” shall mean all demands, claims, actions, suits,
proceedings, assessments, judgments, costs, losses, damages, obligations,
liabilities, recoveries, deficiencies and expenses, whether to person
or property, including without limitation accident, injury or death
and all reasonable fees and expenses of attorneys. Subject to the terms and
conditions of this Article 5, DynaMexico and DynaUSA will jointly and severally
indemnify and hold Goldgroup and its affiliates, and their respective officers,
directors, and managers, harmless from and pay any and all Damages directly or
indirectly resulting from, relating to, arising out of or attributable to (a)
any breach of any representation or warranty DynaMexico or DynaUSA has made in
this Agreement, or (b) any breach, violation or default by DynaMexico or DynaUSA
of any covenant, agreement or obligation of DynaMexico or DynaUSA in this
Agreement.
6.3 Indemnification
Provisions for DynaMexico's Benefit. Subject to the
terms and conditions of this Article 6, Goldgroup
will indemnify and hold DynaMexico and DynaUSA and their affiliates, and their
respective officers, directors, agents, representatives and managers harmless
from and pay any and all Damages directly or indirectly, resulting from,
relating to, arising out of or attributable to any of the
following: (a) any breach of any representation or warranty Goldgroup
has made in this Agreement; b) any breach, violation or default by Goldgroup of
any covenant, agreement or obligation of Goldgroup in this Agreement; (c) the
activities or operations of Goldgroup, Goldgroup’s related or affiliated
entities and each of their officers, directors, employees, agents,
representatives, vendors, contractors, suppliers, workers, invitees, or other
personnel, in on or around the SJG Property; or (d) violation of any
laws.
6.4. Survival. The
indemnification obligations of the Article 6 shall survive closing of the
transactions contemplated hereby and/or termination of the
Agreement.
Page 11 of 18
ARTICLE 7
GOVERNANCE
PROVISIONS
7.1 Segregated
Funds. DynaMexico shall
open a separate bank account (the “Segregated Account”) into which Goldgroup
will make the fundings set forth in Article 1 and through which Goldgroup will
fund Expenditures of DynaMexico. Goldgroup shall be the signatory of
the Segregated Account and may not be changed without the the approval of
DynaUSA and Goldgroup.
7.2 Additional
Mining Concession. Goldgroup
covenants to forthwith upon execution of this Agreement cause the transfer of
the Additional Mining Concession to DynaMexico.
7.3 DynaMexico’s
Board of Directors. As soon as
practicable after execution of this Agreement, , DynaUSA shall cause
DynaMexico’s board of directors to consist of three directors, two nominated by
DynaUSA and one nominated by Goldgroup, unless and until Goldgroup timely
completes Phase 4 of the Option, at which time the size of the board of
directors shall be increased to five and DynaUSA and Goldgroup shall each
appoint two directors and agree on a fifth member to be appointed.
7.4 Certain
Resignations or Removals. DynaMexico and
Goldgroup each covenant and agree to take all necessary actions to ensure that a
director shall immediately resign from the board if the board may so decide to
request the resignation or removal of the director so designated and elected,
with cause. If such director fails to resign from the board, the
board shall be entitled to either remove such director by written consent or to
call a special meeting of stockholders for the purpose of removing such director
from the board and the parties covenant and agree to take all necessary actions
to recommend that the stockholders vote all of their shares entitled to vote at
such meeting in favor of the removal of such director. A director
designated by Goldgroup may not be removed under this Article 7.4as long as such
director is also a director of Goldgroup.
7.5 Filling
Vacancies. In the event of a
director's resignation, death, removal or disqualification, other than the
removal of a director as provided above, the party who had the right to nominate
such director shall promptly nominate a new director and, after written notice
of the nomination has been given by such party to each of the parties hereto,
the board shall appoint such director, or, if required by applicable law or
DynaMexico's constating documents, DynaUSA and Goldgroup covenant and agree to
take all necessary actions to cause such nominee to be appointed to the board,
if necessary.
7.6 No
Liability for Election of Directors. Neither
DynaMexico, DynaUSA, Goldgroup, nor any officer, director, shareholder, partner,
member, employee or agent of such party, makes any representation or warranty as
to the fitness or competence of the nominee of any party hereunder to serve on
the board by virtue of such party's execution of this Agreement or by the act of
such party in voting for such designee pursuant to this Agreement.
7.7 No
Conflict/Area of Interest. The parties
hereto agree that the SJG Property (including, without limitation,
the concessions and properties identified in the Title Opinion and the
Additional Mining Concession transferred to DynaMexico by Goldgroup), is to be
the focus and beneficiary of the terms and provisions of this Agreement and that
DynaMexico is and shall be a single-purpose entity, namely to explore, develop,
operate and mine the minerals. DynaMexico shall be the owner of all concessions
making up the SJG Property and Goldgroup, DynaMexico and DynaUSA
covenant and agree to take all necessary actions to ensure: (i) that
DynaMexico maintains good and marketable title to the SJG Property; and (ii)
that DynaMexico shall have and maintain all right, title and interest to any
Additional Mining Concession or any other mining rights within twenty (20)
kilometers of the outlying boundries of the SJG Property (the "Area of
Interests"). It is the express intent of the parties hereto that any
interest in any lands, mines, minerals or concessions within the Area of
Interests shall belong to and be held exclusively for DynaMexico and be subject
to the terms and provisions of this Agreement. It shall be a material
breach of this Agreement for any party, or any officer, director, shareholder,
partner, member, agent, employee, representative of attorney of such party to
act contrary to this Section 7.7.
Page 12 of 18
7.8 Limitations. Until Goldgroup
completes Phase 4 of the Option or fails to complete a phase before the
specified date or this Agreement terminates, DynaMexico may not, and DynaMexico,
DynaUSA and Goldgroup covenant and agree to take all necessary actions to ensure
that DynaMexico does not, without prior written unanimous
agreement:
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(i)
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directly
or indirectly sell, lease, dispose of, pledge or encumber, or cause or
permit an affiliate to directly or indirectly sell, lease, dispose of,
pledge or encumber, all or parts of the SJG Property
;
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(ii)
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incorporate
a subsidiary;
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(iii)
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amend
its constating documents;
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(iv)
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engage
in any business or incur any material liability which does not relate to
keeping DynaMexico in good and proper
standing;
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(v)
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incur
debt outside of the ordinary course of
business;
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(vi)
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pay
dividends or distributions;
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7.9 Management. A
committee (the “Management Committee”) shall oversee the Expenditures and shall
be comprised of 3 persons, one designated by DynaUSA and two
designated by Goldgroup . The Board of DynaMexico shall oversee the
keeping of DynaMexicoin good standing and proper working order, and the
Management Committee shall oversee the Expenditures and matters not related to
keeping DynaMexico in good standing and proper working order. All Expenditures
shall be expended in accordance with a budget approved by the Management
Committee prior to such expenditure.
7.10 Right of
First Refusal. In the event
Goldgroup receives a bona fide offer for the purchase or other acquisition of
all or a portion of the Shares or if DynaMexico receives a bona fide offer for
the purchase or other acquisition of all or a portion of the shares of
DynaMexico, and if such party (the "Offering
Shareholder") desires to accept such offer, subject at all times to this
Agreement and compliance with and satisfaction of applicable securities laws and
related requirements, the Offering Shareholder shall first give written notice
(the "Notice")
by certified mail, return receipt requested to the Chairman of the Board of
DynaUSA or Goldgroup, as the case may be (the “Offeree Shareholder”), at the
home office of the Offeree Shareholder, setting forth the name of the proposed
transferee, the number of shares to be transferred, the proposed amount and form
of consideration and the terms and conditions of payment offered by such
proposed transferee and all other terms and conditions of the proposed
transfer. Any change of prospective transferee, or of the price,
number of shares or other terms of the proposed sale or other transfer shall
require a new Notice, and the time periods set forth herein shall begin to run
from the time such new Notice is given. The shares which are the
subject of the proposed sale or other transfer are hereinafter referred to as
the "Offered
Shares." Upon the giving of the Notice, the Offeree
Shareholder shall have the rights with respect to the Offered Shares set forth
below.
A. Offeree
Shareholder Option. On receipt of the
Notice with respect to such offer, the Offeree Shareholder shall have the
exclusive right and option, but not the obligation (the "ROFR Option"),
exercisable at any time during a period of fifteen (15) days from its receipt of
the Notice to purchase all, but not less than all, of the Offered Shares at the
same price and on the same terms and conditions of the offer as set out in the
Notice. If the Offeree
Page 13 of 18
Shareholder
elects to exercise its ROFR Option, it shall so notify the Offering Shareholder
in writing prior to the expiration of the fifteen (15)-day period stated above,
and the sale and purchase of the Offered Shares shall be closed within fifteen
(15) days thereafter.
B. Sale to
Prospective Transferee. If the Offeree
Shareholder does not elect to purchase all of the Offered Shares, subject to
compliance with applicable securities laws, the Offering Shareholder may
transfer all of the Offered Shares to the prospective transferee during the
fifteen (15) day period following receipt of written notice by the Offering
Shareholder that the Offeree Shareholder does not desire to purchase the Offered
Shares, provided however, that the shares in the hands of the prospective
transferee shall remain subject to the provisions of this Agreement; and
provided further, that under no circumstances shall any such sale or other
disposition of any shares subject hereto be valid and effective until such
prospective transferee shall comply with and satisfy the provisions applicable
securities laws, including applicable exemptions there from, if any, and the
prospective transferee, if any, shall signify such party's consent (in writing)
to be bound by the terms of this Agreement and otherwise satisfying other
reasonable requirements of the Offeree Shareholder with respect
thereto.
ARTICLE
8
MISCELLANEOUS
8.1 Entire
Agreement. This Agreement
together with the schedules, exhibits, annexes or other attachments hereto, and
the certificates, documents, instruments and writings that are delivered
pursuant hereto or thereto, constitutes the entire agreement and understanding
of the Parties in respect of the subject matter hereof and supersedes all prior
understandings, agreements or representations.
8.2 Assignment;
Binding Effect. No Party may
assign this Agreement or any of its rights, interests or obligations hereunder
without the prior written approval of the other Parties, except that Goldgroup
may assign this Agreement to an affiliate of Goldgroup which has common
ownership and control, with prior written notice to DynaMexico. All
of the terms, agreements, covenants, representations, warranties and conditions
of this Agreement are binding upon, inure to the benefit of and are enforceable
by, the Parties and their respective successors and permitted
assigns.
8.3 Notices. All notices,
requests and other communications provided for or permitted to be given under
this Agreement must be in writing and must be given by personal delivery, by
certified or registered mail (postage prepaid, return receipt requested), by a
nationally recognized overnight delivery service for next day delivery, or by
facsimile transmission, to the intended recipient at the address set forth for
the recipient on the signature page (or to such other address as any party may
give in a notice given in accordance with the provisions hereof). All
notices, requests or other communications will be effective and deemed given
only as follows: (i) if given by personal delivery, upon such
personal delivery, (ii) if sent by certified or registered mail, on the fifth
business day after being deposited in the United States mail, (iii) if sent for
next day delivery by overnight delivery service, on the date of delivery as
confirmed by written confirmation of delivery or (iv) if sent by facsimile, upon
the transmitter's confirmation of receipt of such facsimile transmission, except
that if such confirmation is received after 5:00 p.m. (in the recipient's time
zone) on a business day, or is received on a day that is not a business day,
then such notice, request or communication will not be deemed effective or given
until the next succeeding business day. Notices, requests and other
communications sent in any other manner, including by electronic mail, will not
be effective.
Page 14 of 18
8.4 Headings. The article and
section headings contained in this Agreement are inserted for convenience only
and will not affect in any way the meaning or interpretation of this
Agreement.
8.5 Governing
Law/Jurisdiction. Subject to the
applicability of Mexican law in respect to the shares of DynaMexico and the
acquisition thereof, the venue and jurisdiction for any dispute related to this
Agreement shall be in Denver, Colorado.
8.6. Announcement. Except as
required by law or regulation, no public announcements may be made with respect
to this Agreement or the transactions contemplated hereby, without the prior
written approval of the other party, which shall not be unreasonably withheld,
delayed or conditioned. Prior to making or issuing any press release
concerning SJG, a party will notify and consult the other parties as to the
content and timing of the press release, and obtain the other parties written
approval.
8.7 Amendment;
Extensions; Waivers. No amendment,
modification, waiver, replacement, termination or cancellation of any provision
of this Agreement will be valid, unless the same is in writing and signed by the
party granting same. Each waiver of a right hereunder does not extend
beyond the specific event or circumstance giving rise to the
right. No waiver by any party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional or not, may be
deemed to extend to any prior or subsequent default, misrepresentation or breach
of warranty or covenant hereunder or affect in any way any rights arising
because of any prior or subsequent such occurrence. Neither the
failure nor any delay on the part of any party to exercise any right or remedy
under this Agreement will operate as a waiver thereof, nor does any single or
partial exercise of any right or remedy preclude any other or further exercise
of the same or of any other right or remedy.
8.8 Severability. The provisions of
this Agreement will be deemed severable and the invalidity or unenforceability
of any provision will not affect the validity or enforceability of the other
provisions hereof; provided, however, that if any provision of this Agreement,
as applied to any party or to any circumstance, is determined not to be
enforceable in accordance with its terms, the parties agree that the authority
making such determination may modify the provision in a manner consistent with
its objectives such that it is enforceable, and/or to delete specific words or
phrases, and in its modified form, such provision will then be enforceable and
will be enforced.
8.9 Expenses. Except as
otherwise expressly provided in this Agreement, each party will bear its own
costs and expenses incurred in connection with the preparation, execution and
performance of this Agreement and the transactions contemplated hereby,
including all fees and expenses of agents, representatives, financial advisors,
legal counsel and accountants.
8.10 Counterparts;
Effectiveness. This Agreement
may be executed in one or more counterparts (and may be delivered by fax
transmission), each of which will be deemed an original but all of which
together will constitute one and the same instrument. This Agreement
will become effective when one or more counterparts have been signed by each
party and delivered to the other parties.
8.11 Construction. This Agreement
has been freely and fairly negotiated among the parties. If an
ambiguity or question of intent or interpretation arises, this Agreement will be
construed as if drafted jointly by the parties and no presumption or burden of
proof will arise favoring or disfavoring any party because of the authorship of
any provision of this Agreement. Any reference to any law will be
deemed also to refer to such law as amended and all rules and regulations
promulgated there under, unless the context requires otherwise. The
words "include," "includes," and "including" will be deemed to be followed by
"without limitation." The word "person" includes individuals,
entities and governmental bodies. Pronouns in masculine, feminine and
neuter genders will be construed to include any other gender, and words in the
singular form will be construed to include the plural and vice versa, unless
the
Page 15 of 18
context
otherwise requires. The words "this Agreement," "herein," "hereof,"
"hereby," "hereunder," and words of similar import refer to this Agreement as a
whole and not to any particular subdivision unless expressly so limited. The
parties intend that each representation, warranty and covenant contained herein
will have independent significance. If any party has breached any
representation, warranty or covenant contained herein in any respect, the fact
that there exists another representation, warranty or covenant relating to the
same subject matter (regardless of the relative levels of specificity) which the
party has not breached will not detract from or mitigate the fact that the party
is in breach of the first representation, warranty or covenant.
8.12 Schedules. The Schedules
attached hereto form part of this Agreement.
8.13 Confidentiality. Each of the parties
agree to treat this Agreement and all terms and conditions hereof, and all data,
reports, records, and other information, coming into its possession or that of
any of its affiliates or agents by virtue hereof, as confidential except if
disclosure is required by applicable law or by any government agency, or if the
information is already in the public domain. Such confidential information
shall not be otherwise disclosed to any person without the prior written consent
of each other party, which written consent shall not be unreasonably
withheld.
8.14 Relationship
of the Parties.
The rights, privileges, duties, obligations and liabilities, as between
the parties shall be separate and not joint or collective and nothing herein
contained shall be construed as creating a partnership, an association, agency
or, subject as herein specifically provided, a trust of any kind or as imposing
upon the parties any partnership duty, obligation or liability, including,
without limitation, any fiduciary duty or obligation. No party is liable
for the acts, covenants and agreements of any other party.
8.15 Force
Majeure. The affected
party shall promptly notify the other party in writing should any "Force
Majeure," as hereafter defined, occur that will materially delay the performance
of such affected party's obligations under this Agreement. A party’s
failure or inability to effect timely performance of any obligation required of
it under this Agreement, if caused by Force Majeure, shall not constitute a
breach or default hereunder or grounds for any liability to the other; provided
however, that the party so affected shall promptly notify the other party in
writing when such Force Majeure circumstance commences and, again, when it has
ceased to affect its ability to perform its obligations hereunder. As
used herein, the term "Force
Majeure" shall mean and include any act of God, nature or the public
enemy, explosion, accident not caused by the affected party, operation
malfunction or interruption to the extent it could not have been avoided by good
industry practice, fire, storm, earthquake, flood, drought, perils of the sea,
strikes, lockouts, labor disputes, riots, sabotage, embargo or war (whether or
not declared).
8.16 Dispute
Resolution.
All
questions or matters in dispute under this Agreement shall be submitted first to
mediation and then if no resolution to binding arbitration pursuant to the terms
hereof.
(a) Any
dispute shall first be submitted to a mediator, selected by the
parties, by agreement at a neutral location, agreed to by the
parties. All costs of the mediation shall be borne equally by the
parties to the dispute.
(a) It
shall be a condition precedent to the right of any party to submit any matter to
arbitration pursuant to the provisions hereof, that any party intending to refer
any matter to arbitration shall have given not less than 10 days’ prior notice
of its intention to do so to the other
Page 16 of 18
party,
together with particulars of the matter in dispute. On the expiration
of such 10 days, the party who gave such notice may proceed to refer the dispute
to arbitration as provided in paragraph (b).
(b) The
party desiring arbitration shall refer the dispute to binding arbitration in
Denver, Colorado under the Rules of American Arbitration Association (“AAA”) by
a single arbitrator selected by the parties. If the parties cannot
agree, an arbitrator from the Denver area shall be selected by the AAA office in
Denver. The arbitrator’s decision shall be final, binding and
non-appealable and may be enforced in any court. The parties shall
each pay a pro rata share of the arbitrator’s and AAA’s charges for the
arbitration. The arbitrator may, in his or her sole discretion, award
attorney fees and out-of-pocket expenses to that party which the arbitrator, in
its sole discretion, determines is the prevailing party.
(SIGNATURE
PAGE FOLLOWS ON NEXT PAGE)
Page 17 of 18
IN WITNESS WHEREOF, the
Parties have caused this Agreement to be executed and effective as of the date
("Effective
Date") stated in the introductory paragraph of this
Agreement.
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GOLDGROUP:
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GOLDGROUP
RESOURCES, INC.
Attention: ▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇
▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇.▇.
▇▇▇▇▇▇
▇▇▇▇▇▇
Tel:
▇▇▇-▇▇▇-▇▇▇▇ Fax: ▇▇▇-▇▇▇-▇▇▇▇
|
||
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By: /s/
▇▇▇▇▇ ▇▇▇▇▇▇▇
|
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Name: ▇▇▇▇▇
▇▇▇▇▇▇▇
|
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Title: CEO
|
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By: /s/
▇▇▇▇▇▇ ▇▇▇▇
|
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Name: ▇▇▇▇▇▇
▇▇▇▇
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Title: President
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DYNAMEXICO:
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DYNARESOURCE
DE MEXICO, S.A DE C.V
▇▇▇▇
▇▇▇▇▇ ▇’▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
Tel :
▇▇▇-▇▇▇-▇▇▇▇ Fax : ▇▇▇-▇▇▇-▇▇▇▇
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||
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By: /s/
▇.▇. ▇▇▇▇▇▇▇▇
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Name: ▇.▇.
▇▇▇▇▇▇▇▇
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Title: President
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By: /s/
▇▇▇▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇
▇▇▇▇▇
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Title: Secretary
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DYNAUSA:
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DYNARESOURCE,
INC.
▇▇▇▇
▇▇▇▇▇ ▇’▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
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||
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By: /s/
▇.▇. ▇▇▇▇▇▇▇▇
|
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Name: ▇.▇.
▇▇▇▇▇▇▇▇
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Title: Chairman/CEO
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By: /s/
▇▇▇▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇
▇▇▇▇▇
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Title: CFO
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Page 18 of 18
SCHEDULES