UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS
ISSUERS UNDER SECTION 12(B) OR (G) OF THE SECURITIES
EXCHANGE ACT OF 1934
Can-Cal Resources, Ltd.
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(Name of Small Business Issuer in its charter)
Nevada 88-0336988
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1505 Blackcombe St., Bldg. 2, Unit #203, Las Vegas, NV 89128
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, ( 702 ) 240 - 6565
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Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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Securities to be registered under Section 12(g) of the Act:
Common stock, par value $.001,
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(Title of class)
Preferred stock, par value $.001, non-voting, 5% cumulative
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(Title of class)
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ITEM 1. DESCRIPTION OF BUSINESS
(a) Business Development
(a)(1) Form and Year of Organization
Can-Cal Resources, Ltd., a Nevada corporation ("the Company"), was
originally incorporated in the state of Nevada on March 22, 1995 under the name
of British Pubs USA, Inc. as a wholly owned subsidiary of 305856 B.C., Ltd. dba
N.W. Electric Carriage Company ("NWE"), a Company formed under the laws of
British Columbia, Canada ("NWE"). On April 12, 1995, NWE exchanged shares of
British Pubs USA, Inc. for shares of NWE held by its existing shareholders, on a
share for share basis. Its name was changed to Can-Cal Resources, Ltd. on July
2, 1996. This transaction is believed to have been exempt pursuant to Section
3(a)(9) of the Securities Act of 1933.
(a)(2) Any Bankruptcy, Receivership or Similar Proceeding
None.
(a)(3) Any Material Reclassification, Merger, Consolidation, or Purchase or
Sale of a Significant Amount of Assets not in the Ordinary Course of Business
On December 3, 1997, the shareholders of Can-Cal approved the
acquisition of the assets of Aurum LLC ("Aurum"), a California limited liability
company, which consisted of the Volcanic Cinders property at Pisgah, California,
and the cancellation of indebtedness to Aurum, in exchange for 2,181,752
restricted shares of its common stock (see Item 7, Certain Relationship and
Related Transactions).
On January 29, 1999, the Company sold its Canadian subsidiary, Scotmar
Industries, Inc. (See Item 7, Certain Relationships and Related Transactions).
(b) Business of Issuer
The Company is a mining company in the exploration stage. Since about
May 1996, the Company has been devoting its resources to examining various
mineral properties prospective for precious metals and minerals and acquiring
those which it deems promising. It has determined that its focus is to attempt
to locate and acquire properties prospective for precious metals and minerals in
the southwestern United States, principally in the states of California,
Arizona, and Nevada. The Company owns leases or has an interest in five
properties. All properties which the Company has reviewed, and those which it
has acquired, are "grass roots" properties, in that they are not known to
contain any proven or probable reserves of precious metals or minerals. The
Company also has been using the Tyro Mill (near Bullhead City, Arizona), but
does not own the property or the equipment located on the property.
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However, the Company has done an extensive amount of preliminary testing
and assaying on four of its properties which indicate the existence of precious
metals on those properties. The Company has performed in excess of 700
"in-house" assays on mineral samples from those properties and has caused a
significant number of assays to be performed by independent assayers, which has
principally consisted of performing fire assays. The Company's policy is to
acquire those properties which its assaying, or assaying by others, indicate the
presence of precious metals. The Company contracts with persons who are
experienced in performing assays, but are not independent assayers, to conduct
"in-house" assays using equipment provided by the Company, on material from
properties it is considering acquiring or which it has acquired. It may also
send samples of materials on which it obtains the most promising assays to
outside independent assayers for assays. However, even if assays indicate the
existence of precious metals, a very substantial amount of additional testing
and drilling is necessary to determine whether a property contains a sufficient
amount of precious metals to constitute "reserves," and whether any such
reserves are capable of economic production.
On April 12 1999, the Company hired Terry Rice as its Vice-President -
Operations. Mr. Rice is a metallurgical engineer and has 24 years of experience
in the mining industry. Mr. Rice is in charge of all the Company's mining and
mineral operations. None of the Company's other officers or directors has had
any prior experience in mining. Until Mr. Rice was hired, the Company had been
relying upon consultants and other persons experienced in mining with whom the
Company had contracted with respect to the identity of properties to be
investigated, reviewed and tested for possible acquisition, in the actual
testing of the properties, and in the attempted production from mineralized
material and ores obtained from others. The Company will continue to use
consultants to aid in all phases of its evaluation of properties.
Ronald D. Sloan, the Company's President, has worked for the Company on
a full time basis since May 1996.
On March 2, 1999, the Company purchased a reverse circulation drill rig
capable of drilling to a depth of approximately 150 feet and began a drilling
program on the Owl Canyon properties. The Company is currently utilizing that
rig to drill exploratory holes on its properties, beginning with the Owl Canyon
properties owned and operated by the S & S Joint Venture, in which the Company
owns a 50% interest. The Joint Venture has also acquired a core drill rig and is
currently engaged in drilling exploratory holes in the Owl Canyon properties.
The Joint Venture, as of May 25, 1999, had drilled 58 holes and is engaged in
assaying samples and analyzing results of the drilling. The Company has also
conducted blasting operations on the Owl Canyon properties. It is anticipated
that the drilling program will continue into July 1999. See the "S & S Joint
Venture." Following completion of the drilling program of the Owl Canyon
properties, the Company intends to conduct a drilling program on its Cerbat
property.
On March 16, 1999, the Company purchased a newly developed
"concentrator" from its Canadian inventor which produces concentrates from loose
material on placer claims. The concentrator is capable of concentrating
approximately 50 tons of material per hour. The Company
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also purchased a truck which it utilized to transport the concentrator from
Washington state to its properties, and will use in its operations. The Company
intends to attempt to produce precious metals from placer material on its
properties and from placer material or properties belonging to others. The
Company is in the initial phases of concentrating placer material, utilizing the
concentrator.
In the event that drilling and/or testing by the Company indicates the
presence of precious metals or minerals on a property which may be able to be
produced on an economic basis, and the cost of doing so and/or the expertise
needed is beyond the Company's capabilities, the Company intends to attempt to
form a joint venture with a larger mining company to develop and operate the
property, where the larger mining company would pay the exploratory and, if
warranted, development costs. Alternatively, the Company may attempt to sell a
portion, or possibly all, of that property to a larger mining company. There is
no assurance that the Company will be able to enter into any such arrangement.
The Company has been attempting to produce precious metals utilizing the
facilities of the Tyro Mill near Bullhead City, Arizona. In March 1999, after
several months of testing and processing various materials, the Company produced
16.8 ounces of gold from concentrates obtained from a third party and received
$3,654.88 after paying refining costs and fees. The Company does not consider
the production of precious metals from those concentrates economic, but is
continuing to attempt to produce precious metals on a testing basis utilizing
other materials.
Through Scotmar Industries, Inc., a Canadian subsidiary, the Company was
also engaged in the business of purchasing damaged trucks from insurance
companies and dismantling the vehicles for the sale of guaranteed truck parts to
others. This business was not profitable.
(b)(1) On January 29, 1999, the Company sold Scotmar Industries, Inc., its
Canadian subsidiary, which was engaged in the business of purchasing damaged
trucks from insurance companies and dismantling the vehicles for the sale of
guaranteed truck parts for repair shops, collision repair shops, and the retail
public.
(b)(2) The Company has shipped two dore bars to a California refinery to
separate into precious metals for sale. The Company received $3,654.88 from the
sale of the 16.8 ounces of gold produced.
(b)(3) The Company has not publicly announced any new product(s) or service(s).
(b)(4) The evaluation and acquisition of precious metals, mining properties and
mineral properties is very highly competitive. There are numerous companies
involved in the mining and minerals business, virtually all of which are larger,
better capitalized, and have more experienced personnel than the Company.
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Exploration for and production of minerals is highly speculative and
involves greater risks than exist in many other industries. Many exploration
programs do not result in the discovery of mineralization and any mineralization
discovered may not be of a sufficient quantity or quality to be profitably
mined. Also, because of the uncertainties in determining metallurgical
amenability of any minerals discovered, the mere discovery of mineralization may
not warrant the mining of the minerals on the basis of available technology.
The Company's decision as to whether any of the mineral properties it
now holds, or which it may acquire in the future, contain commercially mineable
deposits, and whether such properties should be brought into production, will
depend upon the results of the exploration programs and/or feasibility analysis
and the recommendation of engineers and geologists. The decision will involve
the consideration and evaluation of a number of significant factors, including,
but not limited to: 1. the ability to obtain all required permits; 2. costs of
bringing the property into production, including exploration and development or
preparation of feasibility studies and construction of production facilities; 3.
availability and costs of financing; 4. ongoing costs of production; 5. market
prices for the metals to be produced; and 6. the existence of reserves or
mineralization with economic grades of metals or minerals. No assurance can be
given that any of the properties the Company owns, leases or acquires contain
(or will contain) commercially mineable mineral deposits, and no assurance can
be given that the Company will ever generate a positive cash flow from
production operations on such properties.
Although many companies and individuals are engaged in the mining
business, including large, established mining companies, there is a limited
supply of minerals land available for claim staking, lease or other acquisition
in the southwestern United States, where the Company conducts its activities.
The Company may be at a competitive disadvantage in acquiring suitable mining
properties, since it must compete with these other individuals and companies,
virtually all of which have greater financial resources and larger staffs than
the Company.
(b)(5) The Company has processed ores and mineralized materials and produced a
limited amount of precious metals on a testing basis. Those materials have come
from various sources, none of which is material to the Company.
(b)(6) The Company is not dependent upon one or a few major customers.
(b)(7) The Company holds no patents, trademarks, licenses, franchises,
concessions, or royalty agreements, and has no labor contracts.
(b)(8) Mining operations are subject to statutory and agency requirements which
address various issues, including: (i) environmental permitting and ongoing
compliance, including plans of operations which are supervised by the Bureau of
Land Management ("BLM"), the Environmental Protection Agency ("EPA") and state
and county regulatory authorities and agencies (e.g., state departments of
environmental quality) for water and air quality, hazardous waste, etc.; (ii)
mine safety and OSHA generally; and (iii) wildlife (Department of Interior for
migratory fowl, if
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attractive standing water is involved in operations). See (b)(11) below. Certain
permits issued by San Bernardino County and agencies relating to the Company's
Volcanic Cinders property in Pisgah, California, are presently in the process of
being transferred from the name of its licensee to the joint names of its
licensee and the Company, thereby effectively adding the Company's name to the
permits. The transfer of these permits is being done pursuant to the provision
of the mining lease agreement. The Company anticipates that those transfers will
be allowed in due course, without objection. See Item 3, Description of
Properties - Volcanic Cinders Property - Mining Lease Agreement with Twin
Mountain Rock Venture.
(b)(9) Because any mining operations of the Company would be subject to the
permitting requirements of one or more agencies, the commencement of any such
operations could be delayed, pending agency approval (or a determination that
approval is not required because of size, etc.), or the project might even be
abandoned due to prohibitive costs (for example, water treatment facilities for
mine water discharge might be too expensive to build).
Generally, the effect of governmental regulations on the Company cannot
be determined until a specific project is undertaken by the Company.
(b)(10) The Company has not expended funds on research and development
activities. The Company does not consider testing or assaying of material or
processing of material as research and development activities.
(b)(11) Federal, state and local provisions regulating the discharge of material
into the environment, or otherwise relating to the protection of the
environment, such as the Clean Air Act, Clean Water Act, the Resource
Conservation and Recovery Act, and the Comprehensive Environmental Response
Liability Act ("Superfund") affect mineral operations. For mining operations,
applicable environmental regulation includes a permitting process for mining
operations, an abandoned mine reclamation program and a permitting program for
industrial development and siting. Other non-environmental regulations can
impact mining operations and indirectly affect compliance with environmental
regulations. For example, a state highway department may have to approve a new
access road to make a project accessible at lower costs, but the new road itself
may raise environmental issues. Compliance with these laws, and any regulations
adopted thereunder, can make the development of mining claims prohibitively
expensive, thereby frustrating the sale or lease of properties, or curtailing
profits or royalties which might have been received therefrom. In 1997, the S &
S Joint Venture spent approximately $32,000 to clean up areas of the Owl Canyon
properties as requested by the BLM. This work has been completed. The Company
cannot anticipate what the further costs and/or effects of compliance with any
environmental laws might be.
(b)(12) The Company's President, Ronald D. Sloan, and Terry Rice, its
Vice-President Operations, are the Company's only full-time employees. The
Company contracts with other persons to perform services as independent
contractors. At the present time, independent contractors are performing a
variety of duties for the Company and the S & S Joint Venture, such
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as drilling, building roads, assaying, and refabricating the Tyro Mill. The
Company has no computer operations that it believes will be affected by the year
2000 issue.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(a) Plan of Operation
The Company's plan of operation through July 2000 includes completing
the drilling program at the S & S Joint Venture's properties, in which it owns a
50% interest (see Item 3. below), determining whether those properties contain
precious metals, and if so, determining whether the property contains a
sufficient amount of precious metal which can be mined at a profit so as to
constitute "reserves" and, if so, the amount of those reserves. If the property
contains "reserves" in an amount sufficient to justify development, the Company
intends to attempt to joint venture or sell an interest in the property to a
larger mining company, on the condition that the larger mining company will
develop the property.
Following completion of the drilling program at the Owl Canyon
properties, the Company intends to conduct a drilling program on its Cerbat
properties, which it leases with an option to purchase (see Item 3), to
determine the nature and extent of mineralization existing on the property.
Since the Company has not performed any drilling operations on that property, it
is as yet unable to state the nature and extent or cost of the drilling it will
undertake. This drilling program is expected to begin in the latter part of
1999.
The Company also intends to concentrate various placer material
available to it using its newly acquired "concentrator." The Company has
conducted a significant number of "in-house" assays on various placer materials
available to it and, based upon those assays, believes that the placer material
contains precious metals which the Company believes may exist in sufficient
amounts to be mined commercially. If the testing continues to be promising, the
Company may seek to claim other placer properties. However, since its
concentrating activities have only recently been initiated, there is no
assurance that precious metals exist in the placer material in commercial
quantities, or that the Company can produce it at a profit.
In addition, the Company intends to continue testing Volcanic Cinders
from its property at Pisgah, California.
It is not anticipated that the Company will purchase (or sell) any
significant amount of equipment or other assets, or experience any significant
change in the number of personnel who work for the Company, during the 12 months
ending July 2000.
The Company believes it has sufficient funds to satisfy its cash
requirements through July 2000. Should it be necessary for the Company to obtain
additional funds, the Company may attempt to sell an interest in one or more of
its properties or otherwise obtain funds from outside sources.
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The Company believes that it may be possible for it to borrow additional funds,
using its Volcanic Cinders property as collateral, but there are no loan
facilities in place to date.
(b) Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
The following discussion and analysis should be read in conjunction with
the consolidated financial statements of the Company and the notes thereto,
included elsewhere in this Form 10-SB.
Can-Cal Resources, Ltd. (the "Company") holds an interest in four mining
properties in the southwestern United States. None of these properties have any
proven or probable reserves and none of these properties is in production.
Consequently, the Company has no current operating income or cash flow from its
mining operation other than the receipt of $3,654.88 that it received in May
1999 from the sale of gold obtained from processing ore obtained from others.
December 31, 1998 Compared with December 31, 1997
All the Company sales, cost of goods sold, gross profit, operating and
general administrative expenses, and loss from operations for 1998 resulted from
Scotmar Industries, Inc. The Company capitalized all expenses related to its
mineral operations. For 1997, all of the Company's "sales" were from Scotmar.
Scotmar's results for 1997 and 1998 were as follows:
1998 1997
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Sales $ 97,720 $ 79,258
Cost of good sold 74,783 51,323
Gross profit 22,987 27,935
Net loss for the year (100,344) (90,130)
In addition, the Company loaned Scotmar, as of December 31, 1998,
$83,400.00. Since Scotmar was sold after December 31, 1998, the Company will be
devoting all its resources toward its mining activities.
The Company's historical capital needs have been met by equity
subscriptions and loans from related parties (see Item 7. Certain Relationships
and Related Transactions and Notes 7 and 8 to the Financial Statements). The
Company believes it has sufficient working capital to fund its ongoing
exploration program and to meet its administrative and overhead expenses
anticipated over the next year. However, the Company will require additional
financing to fund further exploration. The amount of such additional funding is
not determinable as of this date. The Company does not expect to receive any
revenue from any of its properties in the foreseeable future. Debt financing may
be feasible using the Volcanic Cinders property as collateral, but no loan
facilities have been established to date, and such debt financing may not be
feasible.
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The Company's financial success will be dependent upon the extent to
which it can discover mineralization, and the economic viability of developing
its mineral properties. Such development may take years to complete and the
amount of resulting income, if any, cannot be determined with any certainty.
The Company has no material commitments for capital expenditures.
ITEM 3. DESCRIPTION OF PROPERTIES
The Company owns or has an interest in five properties, one which it
owns in fee (the Volcanic Cinders property) and one which it leases with an
option to purchase (the Cerbat property). The remaining properties are
unpatented mining claims acquired through filings with the BLM. Each placer
claim covers 160 acres. Each lode claim covers 20 acres. The Company is
obligated to pay a holding fee or spend $100.00 in work per claim each year in
order to maintain the claims.
Unpatented claims are located upon federal public land pursuant to
procedure established by the General Mining Law. Requirements for the location
of a valid mining claim on public land depend on the type of claim being staked,
but generally include posting thereon of a location notice, marking the
boundaries of the claim with monuments, and filing a certificate of location
with the county in which the claim is located and with the BLM. If the statutes
and regulations for the location of a mining claim are complied with, the
locator obtains a valid possessory right to the contained minerals. To preserve
an otherwise valid claim, a claimant must also annually pay certain rental fees
to the federal government (currently $100 per claim) and make certain additional
filings with the county and the BLM. Failure to pay such fees or make the
required filings may render the mining claim void or voidable. Because mining
claims are self-initiated and self-maintained, they possess some unique
vulnerabilities not associated with other types of property interests. It is
impossible to ascertain the validity of unpatented mining claims solely from
public real estate records and it can be difficult or impossible to confirm that
all of the requisite steps have been followed for location and maintenance of a
claim. If the validity of an unpatented mining claim is challenged by the
government, the claimant has the burden of proving the present economic
feasibility of mining minerals located thereon. Thus, it is conceivable that
during times of falling metal prices, claims which were valid when located could
become invalid if challenged. Disputes can also arise with adjoining property
owners for encroachment or under the doctrine of extralateral rights.
The U.S. Congress has, in legislative sessions in recent years, actively
considered several proposals for major revision of the General Mining Law, which
governs mining claims and related activities on federal public lands. If any of
the recent proposals become law, it could result in the imposition of a royalty
upon production of minerals from environmental control measures. It remains
unclear whether the current Congress will pass such legislation and, if passed,
the extent such new legislation will affect existing mining claims and
operations. The effect of any revision of the General Mining Law on the
Company's operations cannot be determined conclusively until such a revision is
enacted.
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THE S & S JOINT VENTURE'S OWL CANYON PROPERTY
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As of September 13, 1996, the Company entered into a Joint Venture
Agreement with the Schwarz family covering approximately 425 acres of unpatented
placer and lode mining claims in the Silurian Hills of California, known as Owl
Canyon. The S & S Joint Venture has since increased its holdings to
approximately 1,600 acres of placer claims, of which 160 acres are also covered
by lode claims and five acres by a mill site claim. These claims are deemed to
be prospective for precious metals and some base metals. The property is located
approximately 23 miles northeast of Baker, California. The property is
accessible by a road which consists of nine miles of paved surface and fourteen
miles of dirt surface. Pursuant to the terms of the Agreement, the Company and
the Schwarz family each have a 50% interest in the S & S Joint Venture which is
operated by the Management Committee, comprised of Mr. Sloan the Company's
president, and Ms. Robin Schwarz, a member of the Schwarz family. Pursuant to
the terms of the Joint Venture Agreement, the Company has been and is funding
the Joint Venture's operations. Any income from the Joint Venture will first be
paid to the Company to repay monies advanced to the Joint Venture or spent on
its account, with any additional income divided 50% to the Company and 50% to
the Schwarz family.
As the acquisition price of its 50% interest in the S & S Joint Venture,
the Company issued 500,000 shares of its common stock to the Schwarz family,
subject to investment restrictions. The shares may only be sold in compliance
with United States securities laws, including Rule 144. Appropriate stop
transfer instructions have been issued to the Company's transfer agent. None of
those shares have been sold. The shares were issued with "No Sale" restrictions,
all of which have expired, except that 100,000 of the shares cannot be sold
until after November 5, 1999. As of December 31, 1998, the Company had a total
investment of approximately $826,000 in the S & S Joint Venture.
The Joint Venture has the following equipment and facilities, all of
which are used, but are operational: a refurbished 8-level screen classifier
which separates various grades of ores; five concentrate tables to obtain
concentrates from the "in-house" processed ore; a fire assay furnace so that the
Venture is able to assay ores and concentrates at its own facility without using
independent sources; a smelting furnace for the production of precious metals;
an impact mill which is used for crushing rock; a conveyor feeding system, built
for quantity, fed by a front end loader which was purchased in 1998 to process
mineralized material from lode mining claims; an additional screening system
constructed for the processing of placer material; several platforms designed
and constructed to access the furnaces and ore loading areas; two 400 lb.
capacity furnaces, (five total furnaces on the property); sediment tanks, with
two additional 3,000 gallon tanks, run by pumps for recycling thousands of
gallons of water used for concentrating shaker tables; plumbing and PVC
installed underground to move water from four levels of the property; a self
contained trailer to facilitate the transportation of water to Owl Canyon; two
air compressors, one a portable for jack hammering on the hillside, the second
on a trailer for portability up and down the canyon; a core drill capable of
drilling to about 80' for further testing; equipment to construct a 7,500'
bucket line to transport head ore from the mountain to the mill site; and
rebuilt engines and new engines for the milling facility.
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A new generating power plant has also been added. New roads have been
constructed throughout the canyon to allow accessibility to the various
deposits. The Venture spent approximately $32,000 to clean up all areas of the
property to the BLM's satisfaction.
The Joint Venture retained Wilmarth & Associates, which is operated by
L. Wade Wilmarth, a registered geologist, to prepare a preliminary geologic
mapping report of the Owl Canyon properties. That report, dated January 21,
1998, contains the following description of the geological setting of the Owl
Canyon properties.
GEOLOGICAL SETTINGS
Geological units within the Silurian Hills consist of Precambrian
metamorphic and granitic rocks; approximately 11,000 feet of
Precambrian clastic sedimentary rocks assigned to the Pahrump
Group; Paleozoic (?) recrystallized carbonate rocks (Riggs
Formation), Cretaceous (?) granitic rocks which intrude older
rocks; Tertiary volcanic and sedimentary rocks and Cenozoic
monolithologic megabreccia deposit consisting of Paleozoic
carbonate rocks derived from apparently, the Goodsprings Dolomite
(which occurs only within the northeast section of the Silurian
Hills) and Cenozoic fan gravels and terrace gravels. Terrace
gravels locally overlie the older rocks.
A relatively flat, locally domed faulted, thrust fault forms the
main structural element of the Silurian Hills. The fault, termed
the Riggs thrust, separates Precambrian rocks of the Pahrump
Group on the lower plate from Paleozoic rocks of the Riggs
Formation on the upper plate. Faulting the Riggs thrust are
significant and numerous north/south to near north/south faults.
Underlying the Riggs thrust are a "chaos" structure and a
"megabreccia" deposit. As noted in Reference 2, "The chaos is a
mass of large and small blocks generally lenticular and elongate
in shape and ranging in size from pods a few feet in diameter to
blocks hundreds of feet long." Each block is bounded on all sides
by surfaces of movement.
The Owl Canyon area and southerly adjacent terrain exhibits an
overall strike of approximately N70W for the canyon drainages and
immediate southerly ridge lines. To the north, Owl Canyon exposes
Paleozoic(?) dolomite rocks with remnant bedding.
Within Owl Canyon, Precambrian metasediments are exposed locally
throughout the canyon within bedded and recrystallized dolomite
rock. Along the northerly-facing ascending southern canyon wall,
in fault-contact between recrystallized dolomite rocks are
Precambrian metasediments and granitic rock. Capping the
immediate ridge, south of Owl Canyon are recrystallized Paleozoic
dolomite rocks. To the south descending from the main ridge line,
in fault contact with dolomite rocks, are
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Precambrian granite and metamorphic rocks. Locally, quartzite
rock occurs throughout the rock sequence.
Structurally, described rock units are in fault contact aligned
primarily with the overall trend of Owl Canyon (N70W). Pervasive
faulting oriented near north/south to north/south occurs
throughout the Owl Canyon area and the southerly terrain.
Dominant closely spaced north/south trending faulting occurs in
the near central area of Owl Canyon where they intersect with
northwest trending faults. In this area, vicinity of north/south
faulting, the rocks are highly fractured with secondary
alteration zones due to migrating hydrothermal fluids. The strike
and dip of remnant bedding, foliations and rock fabric parallel
canyon and ridge alignments. Dominant dip is to the south at
moderate to steep angles with an average near 45 degrees.
Mineralization of the mapped area appears to be related to
Tertiary(?) hydrothermal fluids migrating along north/south
oriented faulting and at the contact between metamorphic and
dolomite rocks. Along the southerly ridge adjacent to Owl Canyon,
metalliferous deposits along north/south oriented fractures are
prevalent near the central area of Owl Canyon. Centrally, along
the southern side of Owl Canyon, fault contact areas exhibit
localized zone alteration from migrating hydrothermal fluids
producing mineral-rich deposits (pyrite, chalcopyrite,
argentite(?) manganese, limonite sylvanite (?), malachite,
copper, lead, barite, scheelite, gold and silver tellurides).
Typically, hydrothermal deposits range in width from
approximately 18 inches to 3 feet.
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OWL CANYON ASSAYS
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Although the Joint Venture has the capability to, and does, perform its
own fire assays, it has sent both samples and whole rocks taken from the surface
of the property to independent laboratories for fire assays. Most of the samples
from the lode claims have been sent to Cone Geochemical, Inc., Denver, Colorado,
an assay firm. Of the most promising surface samples taken, Cone Geochemical,
Inc. reported the following assay results:
Sample ID Location Assay Results
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SQHO Owl Canyon 0.577 oz/ton gold/86 oz/ton silver
SQ Rock 3 Owl Canyon 0.559 oz/ton gold/19.8 oz/ton silver
SQH 0300 Owl Canyon 1.396 oz/ton gold/311 oz/ton silver
SSQ Head Ore Screen Owl Canyon 0.690 oz/ton gold/118 oz/ton silver
In order to determine if those values continued below the surface,
approximately 15 tons of material was removed to a depth of 3 to 4 feet to
expose a continuation of one of the veins. Following that vein structure 8 feet,
a sample was removed from a depth of approximately 3 to 4 feet, and the sample
was again sent for an independent assay. Cone Geochemical, Inc. reported the
following assay on that sample:
8FTSOQ 11-24 Owl Canyon 1.351 oz/ton gold/66.5 oz/ton silver
Wilmarth & Associates then selected four surface samples from different
areas of the lode claims which they sent to Cone Geochemical, Inc. for fire
assay. The results were as follows:
SAMPLE OZ/TON GOLD OZ/TON SILVER
W-1 0.257 5.08
W-2 0.002 0.35
W-3 0.009 0.2
W-4 0.274 1.94
The Joint Venture also had another mining Company perform assays on
surface samples taken from the surface of another area of its lode claims. That
mining Company reported the following results:
Owl Canyon ssq rock & crushed 0.400 oz/ton gold/13.855 oz/ton silver
(Super Quartz)
Super Quartz "Owl Canyon" 0.590 oz/ton gold/84.545 oz/ton silver
13
<PAGE>
The Joint Venture also sent a surface sample to Dr. Ralph Pray, an
assayer, who reported the following results:
RRXX Owl Canyon 2.41 oz/ton gold/24.5 oz/ton silver
The Joint Venture has performed in excess of 500 "in-house"assays from
surface samples on its Owl Canyon lode claims, over 90% of which produced gold
and/or silver beads in varying sizes. Although the work to date indicated that
there are mineralized materials on the property, the extent, grade and ease of
processing of those materials has not been established.
Following two years of extensive exploration work, testing, and assaying
on the claims, the management committee determined there is sufficient evidence
to continue further exploration of the property, including both lode and placer
areas. Following this determination, the Joint Venture acquired two drill rigs,
one reverse circulation rig, and one core rig, which are currently drilling a
series of exploratory holes. As of May 25, 1999, 58 exploratory holes have been
drilled to date in two small sections of the properties under the direction of
the geologists and others with whom the Company contracts. Samples were taken
from each hole for testing, assaying and analysis. This process is ongoing. In
addition, in April and May 1999, the Joint Venture conducted two blasting
operations in which it opened up areas of the property which it believes contain
a vein or veins with precious metal content. The material obtained from drilling
and blasting is currently being assayed and analyzed. It is estimated that this
process will take approximately two months to complete.
THE CERBAT PROPERTY
- -------------------
On March 12, 1998, the Company entered into a Lease and Purchase Option
Agreement covering six patented mining claims in the Cerbat Mountains, Hualapai
Mining District, Mojave County, Arizona. The patented claims cover approximately
120 acres. The Company has paid $10,000 as the initial lease payments and is
obligated to pay the sum of $1,500 per quarter as minimum advance royalties. To
date, the Company has made all minimum advance royalty payments required. The
Company has the option to purchase the property for $250,000, less payments
already made. In the event the Company produces precious metals from the Cerbat
Property prior to the exercise of the Purchase Option, it is required to pay to
the lessor a production royalty of 5% of the gross returns received by the
Company from the sale or other disposition of metals produced. An exploratory
drilling program is scheduled for 1999 on the claims to determine the length of
the structures in existence on the property.
The Company has been informed that the property contains several mine
shafts of up to several hundred feet in length and tailing piles containing
thousands of tons of tailings. The Company has also been informed that the
Cerbat Property has not produced since the late 1800's. However, prior to its
entering into the Lease and Purchase Option Agreement, the Company received
assays of samples taken from tailings and near the entrance of the mine shafts,
as well as engineering reports from reputable assayers and engineers indicating
the presence of precious metals in what may be commercial amounts. The Company
also performed "in-house"assays on samples
14
<PAGE>
taken from the property, with similar results. Extensive additional testing will
be necessary to determine whether the property contains any reserves.
CERBAT GEOLOGY
- --------------
The Company's geologic information regarding the Cerbat claims comes
from a report prepared by a consulting engineer in 1943. The relevant
information contained in that report is as follows:
Veins:
The vein system of the Cerbat Group consists of two
parallel veins which are approximately 70 feet apart at the New
Discovery shaft on the Rolling Wave claim. The eastern branch is,
in my opinion, the southern exposure of the main Cerbat vein on
which the principal development work has been done to a vertical
depth of 250 feet. This is a strong Mineralization outcropping at
intervals for approximately 3000 feet in the Cerbat, Red Dog and
Rolling Wave claims. The vein is steeply dipping and varies in
width from 4.5 feet in its most southerly exposure to an average
of 5.5 feet in the main workings of the Cerbat mine some 3000
feet to the north. The vein material is limonite in a quartz
gangue carrying cerrusite with occasional bunches of very high
grade galena. The accompanying metals are gold and silver. The
western branch of these parallel veins shows only a short segment
exposed at and near the New Discovery shaft. The hanging wall of
this vein is well formed and sharply defined but the footwall as
exposed in the superficial workings of this shaft is a series of
short slips parallel to the strike of the vein, N55W. They have
created what is apparently a false wall which is soft and "drumy"
indicating a talcose condition. Insufficient work has been done
in the single short, superficial drift to determine what extent
these slips may have affected the continuity of the ore both
horizontally and longitudinally. If the Cerbat workings had been
available for study a more definite conclusion could probably be
reached. The primary ore minerals in evidence are galena,
sphalerite and occasional small showings of pyrite.
Location:
The Cerbat Group of claims is located in the Hualapai
Mining District about 15 miles north from Kingman which is the
nearest railroad and supply point. The state highway from Kingman
to Boulder Dam and Las Vegas passes within four miles of the
property and a good County road connects the state highway with
the mine. The County road passes through the Rolling Wave and Red
Dog claims making transportation available to the lower workings.
An old road connects the New Discovery shaft with the Cerbat
workings near the crest of the hill. Because of disuse this road
needs some minor repairs to effect truck transportation to the
upper Cerbat workings. This group of claims is favorably situated
for trucking and transportation purposes.
15
<PAGE>
THE VOLCANIC CINDERS PROPERTY
- -----------------------------
During December 1997, the Company acquired fee title to the Volcanic
Cinders property at Pisgah, San Bernardino County, California. The property is
comprised of approximately 120 acres, containing a very large hill of volcanic
cinders, with easy road access from Interstate 40. Garvin Surveying Sciences, a
California based company, completed a survey of the property estimating
approximately 13,500,000 tons of volcanic cinders above the surface. The Company
has not verified any tonnage existing below the surface. Approximately 3,000,000
tons of the cinders have been screened and stockpiled. The following equipment
is located on the property: a large ball mill (which crushes the cinders), truck
loading pads, two buildings, large storage tanks, conveyors to load trucks, ore
silos and grizzly screening equipment. The Company has caused independent assays
to be performed for gold, silver, and platinum group metals. Those assays (fire
assay for gold and nickel sulfide assays for platinum group metals) indicated
only trace amounts of those metals. The Company has taken samples from 30
different locations on the surface of the cinder hill and performed "in-house"
assays. Of the samples, 28 proved positive for the existence of gold and silver
in varying, although small, amounts.
Mining Lease Agreement with Twin Mountain Rock Venture: In order to
generate cash for its operations, the Company, effective May 1, 1998, entered
into a Mining Lease Agreement on its Volcanic Cinders property with Twin
Mountain Rock Venture, a California general partnership ("Twin Mountain"), which
is an indirect subsidiary of Peter Kiewit & Sons, Inc. of Omaha, Nebraska. The
Agreement is for an Initial Term of ten years, with an option to allow Twin
Mountain to renew the Lease for an Additional Term of ten years. The Company has
agreed to make 600,000 tons of volcanic cinders available to Twin Mountain
during the Initial Term, and an additional 600,000 tons during the Additional
Term, which Twin Mountain will process and sell primarily as decorative rock.
The Agreement provides for minimum annual royalty payments by Twin Mountain of
$22,500 per year for the Initial Term and $27,500 per year for the Additional
Term. Twin Mountain is also obligated to pay the Company a monthly production
royalty for all material mined, processed, consumed, and/or sold or removed from
the premises, calculated as follows: i. the greater 5% of gross sales F.O.B.
Pisgah Crater, or $.80 per ton for material used for block material; and ii. 10%
of gross sales F.O.B. Pisgah Crater for all other material; and iii. Twin
Mountain receives a credit against the amount of any production royalty payment
for minimum royalty payments previously made. The Company received the initial
payment of $22,500 from Twin Mountain upon execution of the Agreement. Twin
Mountain has not yet removed any material from the property and has indicated to
the Company that it is unlikely it will remove any such material for a period of
about two years. However, Twin Mountain does not have the right to remove or
extract any precious metals from the property. Twin Mountain has agreed to use
its good faith efforts to cause its mining permit, reclamation permit, and air
quality permit to be issued in the name of both Twin Mountain and the Company.
This process is currently underway. The transfer will save the Company
significant effort and expense related to obtaining those permits.
Financing Based on the Twin Mountain Lease Agreement: On February 12,
1998, in order to obtain additional funds for its operations, the Company
entered into a Loan Agreement with a
16
<PAGE>
lender in which the lender agreed to loan the Company up to $150,000, subject to
the Company entering into a Mining Lease Agreement with Twin Mountain which was
acceptable to the lender. The Mining Lease Agreement with Twin Mountain was
acceptable to the lender. That Agreement was amended on June 1, 1998, to reduce
the maximum amount of the loan to $127,500. $25,000 was advanced to the Company
by the lender on signing. The lender has loaned the Company a total of $77,500
and the Company does not anticipate that any additional amounts will be loaned.
The loan bears interest at the rate of 8% and is due and payable on July 31,
2001. As security for the loan, the Company has granted the lender a first deed
of trust on the Volcanic Cinders property at Pisgah and has assigned all
payments due it from Twin Mountain to the lender until such time as the loan and
interest are paid in full. In May 1999, Twin Mountain made the second payment of
$22,500 to the lender pursuant to the assignment of payments.
On May 10, 1998, the Company sold 100,000 shares of its common stock to
James Dacyszyn, a citizen and resident of Canada, at $.45 per share ($45,000).
Mr. Dacyszyn was elected a director of the Company on February 8, 1999. Mr.
Dacyszyn had the option at the end of the year to return the 100,000 shares in
exchange for the Company's Promissory Note due one year from the date of
issuance, with interest at 8%, secured by a second mortgage on the Company's
Volcanic Cinders property. Mr. Dacyszyn has elected to retain his shares.
Plasma Furnacing Testing: In the summer of 1998, the Company engaged in
a testing program in which the volcanic cinders were subjected to plasma
furnacing. The Company has submitted samples of volcanic cinders to a third
party which has informed the Company that it has developed a proprietary plasma
furnace, including proprietary plasma furnacing techniques. The Company does not
have access to the plasma furnace or any related technology. It is the Company's
general understanding, however, that, among other things, plasma furnacing
includes heating the cinders to extremely high temperatures, far in excess of
those utilized in conventional assay procedures, and then treating that material
utilizing proprietary techniques to separate any precious metals from the
cinders. The plasma furnacing is conducted exclusively by the third party to
whom the Company submits samples and from whom it receives the treated material.
The Company has caused treated material from the surface of the Volcanic
Cinders property and also from concentrates of its volcanic cinders obtained
from plasma furnacing to be analyzed by a highly experienced independent assayer
selected by it who utilizes Induced Coupled Plasma assaying equipment. The
analytical reports received to date from the assayer indicate the presence of
precious metals. However, all testing to date has been performed on small
quantities of the volcanic cinders, e.g., three ounce samples. These analytical
procedures are not equivalent to conventional fire assay tests. The Company has
been informed that the plasma furnacing equipment is still under development and
is not presently capable of treating large amounts of cinders. As a result, the
Company has not been able to have any of its volcanic cinder material plasma
furnaced since the fall of 1998. It is the Company's intention to use its best
efforts to cause additional testing to be conducted and, if possible, to cause
greater amounts of its volcanic cinders to be plasma furnaced to determine the
presence of precious metals in the materials. No precious metals have been
produced from the volcanic cinders and there is no assurance that any will be
produced.
17
<PAGE>
The Company has been advised orally by the developer of the plasma
furnacing technology and equipment that if the equipment is fully developed and
becomes operational, and if production results are successful, the Company will
be given the first opportunity to negotiate a long-term arrangement or acquire
the technology and related equipment. Any such arrangement would be subject to
appropriate due diligence. There is no assurance that the equipment will be
fully developed, become operational, or that it will achieve any production or
any such arrangement can be achieved.
Reductive Fusion Testing: In May 1999, the Company engaged a California
company which indicated that it had developed a proprietary Reductive Fusion
process to extract precious metals from material containing those metals. The
Company had tests run on 90 gram samples of its volcanic cinders and
concentrates therefrom which had been treated by the Reductive Fusion Process.
The analytical results indicated the presence of precious metals. The Company
then had the California company process 400 lbs. of its volcanic cinders which
it had processed and concentrated. Those concentrates are currently being tested
to determine whether, in fact, they contain any precious metals and if they do
contain any precious metals, whether they can be extracted on an economic basis.
There is no assurance that any precious metals exist in the material, or that if
they do exist, that they can be profitably extracted.
THE LIMESTONE PROPERTY
- ----------------------
This property consists of 460 acres of lode claims on BLM property ,
which the Company regards as prospective for use in cement. The property is
located 18 miles southeast of Lucerne Valley, California, off highway 247. The
first 12 miles is paved surface and the next six miles is excellent dirt road.
The deposit is contained in a very large hill, with the deposit rising from the
ground level to several hundred and possibly a thousand feet up within the hill.
There are dirt roads to the top of the property. The Company is informed that
the property was previously mined by a cement company which discontinued its
mining operation around 1981. There are other companies currently mining
limestone deposits in the same general area. The Company has initiated
discussions with companies engaged in the cement business with respect to the
possible sale of the property to them, but has not yet reached any agreement to
do so. There is no assurance that those companies have any interest in acquiring
the property or that the Company will be able to reach any agreement to sell it.
The Company does not intend to attempt to mine the property itself.
HASSYAMPA PROPERTY
- ------------------
This property consists of 960 acres of placer claims on BLM property
near Tonapah, Arizona. The Company has spent approximately four months testing
and assaying this placer material which, in the Company's opinion, may contain
precious metals. However, further testing of the property will await finishing,
pending exploratory work on other properties the Company owns or is considering
acquiring.
18
<PAGE>
PROCESSING OF MATERIAL - TYRO MILL
- ----------------------------------
During 1996 and 1997, the Company utilized the facilities of the Tyro
Mill located near Bull Head City, Arizona to test and process certain materials
and conduct assaying and other related operations. In that connection, the
Company advanced a substantial amount of funds to Tyro, Inc., a Nevada
corporation ("Tyro"), which asserted that it owned or had the right to acquire
the Tyro Mill and equipment located thereon. Certain disputes arose between the
Company and Tyro, which were resolved by an agreement executed between the
Company, Tyro, and its two owners, individually, whereby Tyro and its two owners
individually agreed to pay the Company the sum of $65,000. That debt is secured
by a financing statement on a substantial amount of equipment at the Tyro Mill,
including mixers, electronic equipment, electrowinning equipment, pumps, tanks
and related materials. The $65,000 was due and payable on May 10, 1998. However,
only $15,000 has been paid and the balance of $50,000, plus interest, is
currently in default.
On March 30, 1998, the Company instituted litigation against Tyro and
its two owners to collect the balance of the funds owed, plus interest, to which
each of the Defendants executed confessions of judgment. The Company has not
pursued the collection of the amounts owed as of this time, pending its
determination of the feasibility of utilizing the Tyro Mill in its operations
and possible negotiations with persons claiming an interest in the Mill site
and/or the equipment located thereon.
The Tyro Mill is located on BLM land. The Company has investigated the
ownership of the title to the claims to the property on which the Tyro Mill is
located and the equipment located thereon. While the issue is not free from
doubt, and will likely be contested, the Company believes that the proper owner
of the claims is someone other than Tyro. The Company is negotiating with that
person to retain the use of the Tyro Mill, even if the ownership is transferred
to another party. Disputes may also exist regarding ownership of certain
equipment at the Tyro Mill.
The Company is informed that the Tyro Mill was constructed, beginning in
1980-82, at a cost in excess of $3 million. Additional equipment has recently
been purchased by the Company and installed in order to accommodate incoming
material for processing purposes. The mill consists of a carbon and pulp factory
and includes buildings, a laboratory, five 33,000 gallon leach tanks with
agitation, numerous smaller tanks, an electrical plan, 120 thousand gallon water
storage tanks, a 4 inch water line approximately five miles in length from Lake
Mohave, an atomic absorption analyzer, a Northwest 20 ton crane, an Eimco filter
press, an Ametek belt filter, a jaw crusher, ball mills, an 8 yard 400 Hough
loader, furnaces, conveyors; electrowinning equipment, a primary crushing
circuit capable of crushing 80 tons per hour, four Chuga carbon pulp 3,000 pound
tanks, three 150 horsepower air compressors, a power line 41/2 miles long, and
two 500 KW power service transformers. The plant was designed to process a
capacity of 500 tons of ore per day.
Beginning in about May 1998, the Company obtained the use of the Tyro
Mill on a limited test basis to test various ores and mineralized material to
determine if they contained precious metals and, if so, whether they could be
extracted on an economic basis. The Company contracted
19
<PAGE>
with a third party which provided a foreman, a person experienced in conducting
various assaying procedures and personnel capable of operating the equipment
located at the mill to conduct testing and processing. The Company utilized the
facilities of the Tyro Mill in producing the 16.8 ounces of gold it produced.
The Tyro Mill is not currently permitted. The Mill will require an
aquifer permit and an air quality permit, with a reclamation plan and bonding
and perhaps other permits from Arizona state agencies and the BLM. The Company
has been informed that the person who the Company believes is the proper owner
of the claims is negotiating with other persons to advance the funds necessary
to obtain the required permits. However, the cost of obtaining all necessary
permits will likely be substantial, and possibly prohibitive, will likely
involve posting of reclamation or other bonds, and could take a substantial
period of time to obtain. The availability of the Tyro Mill to the Company will
be subject to proper permitting by others. If that permitting is not obtained,
the Company will likely not be able to utilize the Tyro Mill, which may have an
adverse effect on the Company's ability to test and process materials and ores.
SCOTMAR INDUSTRIES, INC., dba TRUCK CITY
- ----------------------------------------
Truck City, which was owned and operated by a wholly owned Canadian
subsidiary of the Company, Scotmar Industries, Inc., engaged in the business of
purchasing damaged trucks from insurance companies and dismantling the vehicles
for the sale of guaranteed truck parts to repair shops, collision repair shops
and the retail public. When Truck City was purchased, management decided to
convert it to the specialized field of General Motors trucks only. The Company
was prepared to sustain some losses until the conversion was complete. However,
the conversion required substantial additional funding. The Company determined
to sell Scotmar Industries because it believed that its available funds could be
better utilized in acquiring mineral and testing properties and because Scotmar
Industries would likely continue to incur losses unless and until it obtained
significant additional financing. On January 29, 1999, the Company sold Scotmar
Industries to an unaffiliated British Columbia Company (see Item 7. Certain
Relationships and Related Transactions).
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Set forth in the table below is the number of equity securities of the
Company beneficially owned by all officers and directors as of June 21, 1999.
There were 7,592,282 shares of common stock outstanding on that date. There are
no persons other than those listed below who, to the Company's knowledge, own
more than 5% of the Company's common shares.
20
<PAGE>
<TABLE>
<CAPTION>
Title of Class Name and Address of Amount and Nature Percent of Class
Beneficial Owner of Beneficial Owner
- ----------------- ------------------- ------------------- -----------------
<S> <C> <C> <C>
Common stock, par Ronald D. Sloan*, 785,431 10.3%
value $.001 Vancouver, British
Columbia
Common stock, par John Brian Wolf, 785,431 10.3%
value $.001 Vancouver, British
Columbia
Common stock, par Barry E. Amies, 175,571 2.3%
value $.001 Vancouver, British
Columbia
Common stock, par James Dacysyzn 470,000 6.1%
value $.001 Vancouver, British
Columbia
Common stock, par Terry Rice -0- -0-
value $.001 Kingman, Arizona
Common stock, par All Officers and 2,216,433 29.1%
value $.001 Directors as a group
<FN>
* Mr. Sloan's wife owns 100,000 shares of the Company's common stock.
Mr. Sloan disclaims any beneficial ownership in those shares.
</FN>
</TABLE>
There are no arrangements which may result in a change in control of the
Company. There are no warrants or options outstanding to purchase any shares of
the Company.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS
Ronald Daniel Sloan, age 58, is President and Treasurer, and a Director
of the Company. Mr. Sloan has been employed full time with the Company since May
2, 1996. For the past 10 years, Mr. Sloan, through a number of companies, has
been engaged in the automotive brokerage business, dealing with total loss
vehicles for insurance companies. Since 1994, Mr. Sloan has owned Canadian Auto
Market Trends Ltd., a Company engaged in that business. From approximately 1986
to 1996, Mr. Sloan owned Knight Auto Recyclers Ltd., an automotive parts company
which dismantled total loss vehicles and sold guaranteed parts to automotive
dealers, collision repair shops and the retail public. From 1992 until 1996, Mr.
Sloan worked at Truck City, Inc., which is engaged in the business of purchasing
damaged trucks from insurance companies and dismantling the vehicles for the
sale of parts. Until approximately 1990, Mr. Sloan was a director and secretary
of
21
<PAGE>
Save-On Used Auto and Truck Parts Ltd., which was sold to unaffiliated persons.
He was elected President on May 2, 1996 and a Director on May 3, 1996.
Terry Rice, age 52, joined the Company in April 12, 1999 as Vice
President - Operations. Mr. Rice attended the University of Idaho from 1989
through 1994 and received a B. Sc. in metallurgical engineering in 1994. From
January 1975 through 1985, Mr. Rice worked with Intermountain Mineral Engineers,
Inc. as a metallurgist and mill foreman. He was responsible for metallurgical
reports and testing, lining out crews, and scheduling maintenance at
Intermountain's 250 tpd custom mill that milled for themselves, as well as
several other companies, including Bunker Hill and Independence. From
approximately 1985 through 1990, Mr. Rice worked for American Smelting and
Refining Company as an underground miner. He worked as raise, drift and stope
miner. As a result of an injury, he was unable to continue as an underground
miner and enrolled at the University of Idaho. From January 1990 through
December 1995, Mr. Rice worked part time for Pintlar Corporation, Citizens
Utilities, and the University of Idaho, doing computer drafting and driving a
truck while earning a degree at the University of Idaho. From January 1995
through July 1998, Mr. Rice worked for Addwest Minerals, Inc. at its Gold Road
Mine as a metallurgist, mill superintendent, and environmentalist. He was
responsible for metallurgical testing, daily and monthly metallurgical and mill
reports, the mill budget, purchasing, scheduling maintenance, environmental
sampling and reporting, lab and mill supervision, selling gold, and coordinating
the mill with the mine at a 500 tpd CIP mill. From July 1998 through December
1998, Mr. Rice worked at Martha Mine in Oregon and prepared a feasibility study
on opening a small mine and mill.
Brian John Wolfe, age 46, is Secretary and a Director of the Company. He
was elected Secretary on May 2, 1996 and a Director on May 3, 1996. Mr. Wolfe
has, since 1987, owned Wolfe & Associates Appraisal Services, which appraises
damages sustained by vehicles, recreation vehicles, motorcycles and equipment
after an accident, for insurance companies throughout North America. Prior to
1987, Mr. Wolfe managed Collision Repair Shops in the Vancouver, B.C. area.
Barry E. Amies, age 55, has been Vice President and a Director of the
Company since October 14, 1998. Mr. Amies has extensive experience in financing,
insurance and mining. He started Baron Insurance Agency in 1968 and built it
from a one-man operation to 45 employees, when he sold it in 1994. He also
started Baron Financial, which was added to the insurance business to
incorporate financial investments. Mr. Amies was the President of the Insurance
Brokers of British Columbia, Director and Vice President of Insurance Brokers of
Canada, President/Chairman for the Centre for the Study of Insurance Operations
of Canada, and was Chairman of the Insurance Council of British Columbia, which
is a regulatory body for brokers. In 1990, he was the Insurance Marketer of the
Year for North America. Since 1980, Mr. Amies has been President of Zalmac
Mines, Ltd., which has properties in Canada prospective for gold, silver,
molybdenum, and other metals.
James Dacyszyn, age 68, was elected as a Director of the Company on
February 8, 1999. Mr. Dacyszyn is a Canadian citizen who is semi-retired and is
a member of the association of
22
<PAGE>
professional engineers, geologists andgeophysicists of Alberta, Canada. Mr.
Dacyszyn currentlyowns and operates several concrete transit mix plants and
gravel operations in central Alberta, Canada. The companies are now being
managed by his son, a professional engineer, and Mr. Dacyszyn is retained in a
consulting capacity. Mr. Dacyszyn brings his experience in materials
engineering, including drill testing and engineering evaluation of fine grained
soils, sands and gravels.
Messrs. Sloan and Wolfe may be deemed promoters of the Company in its
present business and operations.
ITEM 6. EXECUTIVE COMPENSATION
No Officer or Director of the Company, other than Mr. Rice, receives any
compensation and no officer or director has any options or other rights to
purchase any shares of the Company. They are reimbursed for out of pocket
expenses incurred on behalf of the Company. Mr. Sloan, a resident of Vancouver,
British Columbia, spends virtually all of his time at the Company's properties
and is reimbursed for the costs of maintaining an apartment in Las Vegas (which
also serves as the Company's executive office).
The Company does not have any stock option or similar plan. In the event
the Company's financial condition becomes adequate to provide for the payment of
other compensation, the Company will consider the issue at that time.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Acquisition of Assets From Aurum LLC
- ------------------------------------
During 1997, the Company's operations were financed in part by funds
loaned by Aurum LLC ("Aurum"), a California limited liability Company. Messrs.
Sloan and Wolfe, Directors of the Company, each owned 36% of Aurum. As of
October 27, 1997, Aurum had loaned $315,045.98 to the Company. The Company was
unable to repay those funds because it has been using all its available funds in
connection with its mining activities, principally the S & S Joint Venture.
In October 1997, the Directors of the Company, including Messrs. Sloan
and Wolfe, determined that it would be in the Company's best interests to
acquire the Pisgah Volcanic Cinders property from Aurum, as well as to seek
cancellation of the Company's indebtedness to Aurum and seek possible additional
financing from Aurum on an equity, as opposed to the debt, basis.
The Company determined that by acquiring the Pisgah Volcanic Cinders
property and cancellation of its indebtedness for stock, it would become debt
free, and it would give the Company a significant positive book value and would
make it far more likely that it would be able to obtain financing to continue
its exploration on the S & S Joint Venture property (Owl Canyon), as well as
explore the Pisgah Volcanic Cinders property.
23
<PAGE>
Aurum indicated it believed that it could sell its Volcanic Cinders
property, which it acquired from the Burlington Northern Santa Fe Foundation on
December 19, 1996, for a price in excess of its cost. However, Aurum agreed, in
order to facilitate the transaction and to insure its fairness to the Company,
to sell the Pisgah Volcanic Cinders property to the Company at its out-of-pocket
cost of $553,716.94, plus legal fees and related costs of $25,755.59 incurred in
acquiring the property, for a total acquisition cost of $579,472.53, cancel the
indebtedness of $315,045.98, for a total cost of $894,518.51, and not charge the
Company any interest for the use of funds that it had invested in the Volcanic
Cinders property or the money it had loaned the Company. In addition, Aurum
agreed to use its best efforts to provide additional equity financing to the
Company in amounts that the Company may reasonably request.
The Company's book value per share as of December 31, 1997, was
approximately $.038 per share. Taking into account the Company's book value, its
interest in the S & S Joint Venture and other operations, the fact that the
Company would obtain cancellation of all its indebtedness to Aurum and obtain
the Pisgah Volcanic Cinders property, which was deemed to have significant
potential value, that trading in the Company stock had been limited for an
extended period of time, that the shares issued to Aurum would be a long-term
investment and illiquid and could not be sold for a considerable period of time,
and then only in very limited amounts, it was determined by the Directors to
value the Company's restricted shares issued to Aurum at $.41 per share and
that, therefore, based on the total cost of $894,518.51, a total of 2,181,752
shares of the Company's common stock would be issued to Aurum.
The Directors, including Messrs. Sloan and Wolfe, unanimously passed a
resolution to this effect and, on October 27, 1997, an agreement was entered
into with Aurum providing for the acquisition of the Pisgah Volcanic Cinders
property by the Company and cancellation of the $315,045.98 of indebtedness by
the Company to Aurum in exchange for 2,181,752 shares of the Company's common
stock subject to investment restrictions, and Aurum agreeing to use its best
efforts to provide additional equity financing as reasonably requested by the
Company by purchasing additional restricted shares of the Company's common stock
at the same price. This transaction was submitted to and approved by the
Company's shareholders at the Company's annual meeting on December 3, 1997. In
addition, Aurum forgave indebtedness of an additional $80,100 which it had
loaned to the Company. The Company has not requested Aurum to provide any
additional equity financing. Following shareholder approval of this transaction,
Aurum distributed the shares to the owners of its beneficial interests. Messrs.
Sloan and Wolfe each received 785,431 shares. All shares are subject to
investment restrictions and Rule 144. None of the shares distributed have been
sold.
Scotmar Industries, Inc.
- ------------------------
On February 13, 1997, Scotmar Industries, Inc.("Scotmar") was acquired
by the Company from Mr. Sloan's wife and son-in-law, both citizens and residents
of Canada, for 200,000 shares of the Company's common stock, which are subject
to investment restrictions. None of those shares have been sold. Scotmar, a
Canadian Company operating under the name of Truck City, engaged
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in the business of purchasing damaged trucks from insurance companies and
dismantling the vehicles for the sale of guaranteed truck parts to repair shops,
collision repair shops, and the retail public. It was the intention of
management to expand Truck City by opening new outlets which would specialize in
specified product lines. The Company advanced a total of $84,820 to Scotmar to
finance its operations. Mr. Sloan's wife and son-in-law advanced a total of
$132,000 to Scotmar. However, the operations of Scotmar proved to be
unsuccessful. Effective January 29, 1999, the Company sold Scotmar to an
unaffiliated person for $65,300. In order to consummate this sale and avoid bank
foreclosure, Mr. Sloan's wife paid approximately $16,500 of Scotmar's bank loans
and was reimbursed at the initial closing. It is anticipated that substantially
all the balance of the proceeds will be used to pay Scotmar's obligations.
Loans by Ronald D. Sloan
- ------------------------
As of December 31, 1998, Mr. Sloan had loaned the Company an aggregate
of $43,800 to finance its operations. The loan is unsecured, due on demand, and
bears interest at 1% over prime.
Purchases of Stock From the Company
- -----------------------------------
Mr. Amies and Amies Holdings Ltd., a Canadian Corporation owned by him
and members of his family, have made the following purchases of stock from the
Company.
Date Number of Shares Price
---- ---------------- -----
10-28-98 60,000 $.50 per share
12-24-98 38,571 $.35 per share
02-18-99 62,500 $.40 per share
05-14-99 15,000 $.50 per share
Mr. Dacyszyn made the following purchases of stock from the Company:
Date Number of Shares Price
---- ---------------- -----
07-11-98 100,000 $.45 per share
12-24-98 200,000 $.35 per share
02-18-99 70,000 $.40 per share
5-14-99 100,000 $.50 per share
All shares purchased are subject to investment restrictions contained in
Regulation S and Rule 144. All shares were sold by the Company to obtain funds
to finance its operations.
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ITEM 8. LEGAL PROCEEDINGS
On March 30, 1998, the Company filed a lawsuit in the District Court for
Clark County, Nevada, against Tyro, Inc., a/k/a Tyro Precious Metals Processing
Center, et al, seeking to collect the $50,000, plus interest and attorneys fees,
for breach of an agreement to pay that amount to Can- Cal. Each of the
Defendants has executed a Confession of Judgment. The Company has not yet filed
the Confession of Judgment in Court or taken any further action to collect the
amounts owed, pending the Company's decisions regarding the Tyro Mill in which
the Defendants are involved.
In the Company's opinion, the amounts owed it are fully collectible.
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTER
The Company's common stock is traded on the NASDAQ OTC Electronic
Bulletin Board under the trading symbol CCRE.
The following table sets forth in United States dollars the high and low
bid quotation for such shares. Such bid quotations reflect inter-dealer prices,
without retail mark-up, mark-down, or commissions, and do not necessarily
represent actual transactions. The source of the following information is the
National Association of Securities Dealers, Inc.'s NASDAQ Electronic Bulletin
Board.
COMMON STOCK
------------
1997 LOW HIGH
----
First Quarter No trades No trades
Second Quarter No trades No trades
Third Quarter $1.375 $1.625
Fourth Quarter $0.321 $2.63
1998 LOW HIGH
----
First Quarter $0.375 $0.930
Second Quarter $0.406 $1.125
Third Quarter $0.375 $1.00
Fourth Quarter $0.281 $0.600
1999 LOW HIGH
----
First Quarter $0.375 $0.812
Second Quarter $0.406 $1.875
(through June 24)
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Penny Stock Rules: The Securities and Exchange Commission has
promulgated rules pursuant to the Securities Exchange Act of 1934 which may
adversely affect the market for the Company's common stock. The Company's common
stock is a "penny stock," as that term is defined by both statute and rule.
Generally, a penny stock is a security that:
o is priced under five dollars;
o is not traded on a national stock exchange or on NASDAQ (the
NASD's automated quotation system for actively traded stocks);
o may be listed in the "pink sheets" or the NASD OTC Bulletin Board;
o is issued by a company that has less than $5 million in net
tangible assets and has been i n business less than three years,
or by a Company that has under $2 million in net tangible assets
and has been in business for at least three years, or by a
Company that has revenues of $6 million in three years.
The penny stock rules approval procedure and related rules may have a
negative effect on the market and the market price for the Company's common
stock. In order to approve a person's account for transactions in penny stocks,
a broker-dealer must first obtain from the person information concerning the
person's financial situation, investment experience, and investment objectives
(Rule 15g-9(b)(1)). The broker-dealer is to use this information to make a
reasonable determination that transactions in penny stocks are suitable for the
person, and that the person (or the person's independent adviser) has sufficient
knowledge and experience in financial matters that the person or the adviser
reasonably may be expected to be capable of evaluating the risks of transactions
in penny stocks (Rule 15g-9(b)(2)).
The broker-dealer is then required to deliver to the person a written
statement setting forth the basis on which the broker-dealer made the
determination regarding suitability of penny stock transactions (Rule
15g-9(b)(3)(i)). A manually signed and dated copy of this written statement must
be obtained from the person by the broker-dealer (Rule 15g-9(b)(4)).
The written statement is to explain, in highlighted format, that it is
unlawful for the broker-dealer to effect a transaction in a penny stock subject
to the provisions of Rule 15g-9(a)(2) unless the broker-dealer has received from
the person, prior to the transaction, a written agreement to the transaction
(Rule 15g-9(b)(3)(ii)).
Also in highlighted format, immediately preceding the customer signature
line, the written statement must explain that the broker-dealer is required to
provide the person with the written statement and that the person should not
sign and return the written statement if it does not accurately reflect the
person's financial situation, investment experience, and investment objectives
(Rule 15g-9(b)(3)(iii)).
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(b) Holders
The Company has approximately 251 shareholders of record.
(c) Dividends
The Company has never paid any dividends. There are no legal
restrictions which limit the Company's ability to pay dividends but, based on
its present financial situation, it is extremely unlikely to do so in the near
future.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
1999: In the last three years, the Company has sold unregistered
securities as set forth below. No underwriters were involved in these
transactions. During 1999, the Company sold an aggregate of 587,121 shares of
its common stock in Canada to citizens and residents of Canada. 62,500 shares
were sold on February 18 to Barry E. Amies, an Officer and Director of the
Company, for $.40 per share, for a total price of $25,000, and an additional
15,000 shares were sold to Amies Holdings, Inc. on May 14, 1999 for $.50 per
share. On February 18, 1999, the Company sold 70,000 shares to James Dacyszyn, a
Director of the Company, for $.40 per share, for a total price of $28,000 and on
May 14, 1999, sold an additional 100,000 shares to Mr. Dacyszyn at $.50 per
share, for a total price of $50,000. 40,000 shares, valued at $.50 per share,
were issued to a Canadian citizen and resident as payment for a Ford one ton
diesel truck on or about March 17, 1999. The remaining 299,621 shares were sold
for $.50 per share. All the purchasers were relatives, friends and/or business
associates of officers and directors of the Company.
The Company relied on the exemption provided by Regulation S promulgated
pursuant to the Securities Act of 1933. All shares issued are subject to the
investment restrictions of Rule 144 and the provisions of Regulation S. The
certificates are legended and appropriate instructions have been issued to the
Company's transfer agent. The shares may be resold only pursuant to an effective
registration statement under the Securities Act of 1933 or pursuant to an
exemption from registration.
In 1998, the Company contracted with an organization to perform services
in connection with the Company's activities at the Tyro Mill. That organization
requested that the Company pay 25% of the monies due it by issuing the Company's
common stock, subject to investment restrictions. That organization requested
that shares due it be distributed directly to persons who performed the
services. On April 19, 1999, the Company issued 32,121 shares of its common
stock to five individuals, all of whom are U.S. persons. Robin Schwarz, an owner
of the S & S Joint Venture, received 8,000 shares. All those persons are fully
familiar with the Company's properties and operations. All shares are subject to
investment restrictions. The certificates are legended and appropriate
instructions have been issued to the Company's transfer agent. The shares may be
resold only pursuant to an effective registration statement under the Securities
Act of 1933 or pursuant to
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<PAGE>
any exemption from registration. The Company relied upon the exemption from
registration provided by Section 4(2) of the Securities Act of 1933.
1998: During 1998, the Company sold a total of 557,509 shares, for a
total consideration of $211,800. All but one of the purchasers are citizens and
residents of Canada and the sales were made in Canada. Of those shares, 300,000
were sold to James Dacyszyn, who was subsequently elected a director of the
Company. 100,000 shares were sold to Mr. Dacyszyn on or about May 10, 1998, at a
price of $.45 per share, for a total price of $45,000. The remaining 200,000
shares were sold to Mr. Dacyszyn on or about December 24, 1998, at $.35 per
share, for a total consideration of $70,000. 65,000 shares were sold to Amies
Holdings, a company owned by Barry Amies, an officer and director of the
company, on or about October 29, 1998, at a price of $.50 per share, for a total
consideration of $32,500, and an additional 38,571 shares were sold to Amies
Holdings on or about December 24, 1998, at a price of $.35 per share, for a
total price of $13,499.85. 109,450 shares were sold at a price of $.40 per
share, in September and/or October of 1998. Each of the purchasers is a
relative, friend and/or business associate of the officers and directors of the
Company. On or about December 10, 1998, 22,049 shares were sold to two
individuals who are citizens and residents of Canada, at a price of $.41 U.S.
per share. On or about December 10, 1998, 2,439 shares were sold to a U.S.
person for a price of $.41 per share, for a total purchase price of $1,000. That
person is a close friend of the Schwarz family, which owns 50% of the S & S
Joint Venture.
With respect to all offers and sales of shares to persons who are
residents and citizens of Canada, the Company relied on the exemption provided
by Regulation S. All shares are issued subject to investment restrictions and
Regulation S. The certificates are legended and appropriate instructions have
been issued to the Company's transfer agent. The shares may be resold only
pursuant to an effective registration statement under the Securities Act of 1933
or pursuant to an exemption from registration. None of those shares have been
sold.
With respect to the one U.S. person who purchased 2,439 shares at $.41
U.S. per share, those shares are subject to investment restrictions and Rule
144. The certificate evidencing ownership of those shares is legended and
appropriate instructions have been issued to the Company's transfer agent. That
person is familiar with the Company and its properties and its business and
operations. The Company relies upon the exemption from registration provided by
Section 4(2) of the Securities Act of 1933. The shares may be resold only
pursuant to an effective registration statement under the Securities Act of 1933
or pursuant to an exemption from registration. None of the shares issued have
been sold.
1997: In January 1997, the Company issued 200,000 shares of its common
stock in exchange for all the outstanding shares of Scotmar Industries, Inc., a
British Columbia corporation. Mr. Sloan's wife and son-in-law were the only
shareholders of Scotmar and each received 100,000 shares of the Company's common
stock. Both are citizens and residents of Canada. The shares issued are subject
to investment restrictions and Rule 144. The shares may only be resold pursuant
to an effective registration statement or pursuant to an exemption from
registration. The Company
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<PAGE>
relied on the exemption provided by regulations promulgated pursuant to the
Securities Act of 1933. None of those shares have been sold.
In October 1997, the Company exercised its option to acquire a 50%
interest in the S & S Joint Venture and, in consideration for the acquisition of
that 50% interest, issued 500,000 shares of its common stock to six members of
the Schwarz family, all of whom are U.S. persons. In issuing those shares, the
Company relied on the exemption from registration provided by Section 4(2) of
the Securities Act of 1933. The Securities are legended and appropriate
instructions have been issued to the Company's transfer agent. The shares may be
resold only pursuant to an effective registration statement or pursuant to an
exemption from registration. None of those shares have been sold.
On December 3, 1997, the Company issued 2,181,752 shares of its common
stock to Aurum LLC, a California limited liability company. Messrs. Sloan and
Wolfe, officers and directors of the Company, each owed 36% of the beneficial
interest in Aurum. All shares are subject to investment restrictions and Rule
144. The shares may be resold only pursuant to an effective registration
statement under the Securities Act of 1933 or pursuant to an exemption from
registration. The Company relied on the exemption provided by Section 4(2) of
the Securities Act of 1933. None of the shares issued have been sold. (See Item
7. Certain Relationships and Related Transactions)
On December 4, 1997, the Company issued 40,000 shares and 2,000 shares
respectively of its common stock to two individuals in consideration for
rendering geologic assaying and related services to the Company in connection
with its mining properties, particularly the S & S Joint Venture. Both
individuals were fully familiar with the Company, its properties and all other
material matters relating to its operations. The person to whom the 2,000 shares
were issued is a citizen and resident of Canada. The person to whom 40,000
shares were issued is a U.S. person. All shares issued are subject to investment
restrictions and Rule 144. With respect to the issuance of shares to the
Canadian citizen, the Company also relied on the exemption provided by
Regulation S. With respect to the issuance of shares to the U.S. person, the
Company relied upon the exemption from registration provided by section 4(2) of
the Securities Act of 1933. The certificates are legended and appropriate
instructions have been issued to the Company's transfer agent. The shares may be
resold only pursuant to an effective registration statement under the Securities
Act of 1933 or pursuant to an exemption from registration. None of those shares
have been sold.
In September and/or October 1997, the Company sold 77,108 shares of its
common stock to 24 persons, 16 of whom were citizens and residents of Canada and
eight of whom were U.S. persons. 59,528 shares were sold to Canadian citizens
and residents for $44,641. 16,180 shares were issued to U.S. persons for $12,244
and services valued at $3,053. All certificates evidencing ownership of the
shares are legended and subject to the provisions of Rule 144. Appropriate
instructions have been issued to the Company's transfer agent. The shares may be
resold only pursuant to an effective registration statement under the Securities
Act of 1933 or pursuant to an exemption from registration. The Company relied on
the exemption from registration provided by
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<PAGE>
Regulation S. One of the U.S. persons was Aylward Schwarz, an owner of the S & S
Joint Venture. The other U.S. persons are friends of the Schwarz family. One
person received 1,500 shares for fabricating services rendered on the S & S
Joint Venture's Owl Canyon properties. In November 1997, the Company issued
5,475 shares to individuals for services. Robin Schwarz, an owner of the S & S
Joint Venture, received 2,975 shares. 2,000 and 500 shares respectively were
issued to two persons who performed other services for the Company. Those
persons were familiar with the Company's properties and operations. The Company
relied on the exemption from registration provided by Section 4(2) of the
Securities Act of 1933. The shares may be resold only pursuant to an effective
registration statement under the Securities Act of 1933 or pursuant to an
exemption from registration. None of those shares have been sold.
1996: From approximately May to September 1996, the Company sold
1,576,190 shares of its common stock for total proceeds of $639,249. All those
shares were offered and sold in Canada to persons who were Canadian citizens and
residents who were relatives, friends and business associates of officers and
directors of the Company. To the Company's knowledge, there was no trading of
the Company's shares until the third quarter of 1997. The offer and sale of
those shares were made in reliance on the exemption from registration provided
by Regulation S promulgated pursuant to the Securities Act of 1933. Appropriate
instructions were given to the Company's transfer agent.
ITEM 11. DESCRIPTION OF SECURITIES
(a) Common or Preferred Stock
There are no preemptive rights to subscribe to shares of either common
or preferred stock of the Company. All common shares are entitled to one vote
per share. There are no cumulative voting provisions. Common shares are entitled
to dividends when and if declared by the Board of Directors. The preferred
shares are 5% non-voting, cumulative preferred shares. No preferred shares have
been issued.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation provide in relevant part, as
follows:
Twelfth, no director or officer of the Corporation shall be personally
liable to the Corporation or any of its stockholders for damages for breach of
fiduciary duty as a director or officer involving any act or omission of any
such director or officer; provided, however, that the foregoing provision shall
not eliminate or limit the liability of a director or officer (i) for acts or
omissions which involve intentional misconduct, fraud or a knowing violation of
law, or (ii) the payment of dividends in violation of Section 78.300 of the
Nevada Revised Statutes. Any repeal or modification of this Article by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director or
officer of the Corporation for acts or omissions prior to such repeal or
modification.
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Article V of the Company's By-Laws provide as follows:
1. The Corporation shall indemnify any and all of its Directors and
Officers, and its former Directors and Officers, or any person who may have
served at the Corporation's request as a Director or Officer of another
corporation in which it owns shares of capital stock or of which it is a
creditor, against expenses actually and necessarily incurred by them in
connection with the defense of any action, suit or proceeding in which they, or
any of them, are made parties, or a party, by reason of being or having been
Director(s) or Officer(s) of the corporation, or of such other corporation,
except, in relation to matters as to which any such Director or Officer or
former Director or Officer or person shall be adjudged in such action, suit or
proceeding to be liable for negligence or misconduct in the performance of duty.
Such indemnification shall not be deemed exclusive of any other rights to which
those indemnified may be entitled, under By-Law, agreement, vote of stockholders
or otherwise.
The Nevada Corporation Laws, N.R.S. 78.751, provides as follows:
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit of proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interest of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be made for
any claim, issue or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the corporation or for amounts paid in settlement to the
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corporation, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections 1 and 2, or in defense of
any claim, issue or matter therein, he must be indemnified by the corporation
against expenses, including attorneys' fees, actually and reasonably incurred by
him in connection with the defense.
4. Any indemnification under subsections 1 and 2, unless ordered by a
court or advanced pursuant to subsection 5, must be made by the corporation only
as authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances. The
determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting of
directors who were not parties to the act, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were not
parties to the act, suit or proceeding so orders, by independent legal counsel
in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the act,
suit or proceeding cannot be obtained, by independent legal counsel in a written
opinion.
5. The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
the director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this subsection do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
6. The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the articles of
incorporation or any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, for either an action in his official capacity or an
action in another capacity while holding his office, except that
33
<PAGE>
indemnification, unless ordered by a court pursuant to subsection 2 or for the
advancement of expenses made pursuant to subsection 5, may not be made to or on
behalf of any director or officer if a final adjudication establishes that his
acts or omissions involved intentional misconduct, fraud or a knowing violation
of the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs, executors and
administrators of such a person.
ITEM 13. FINANCIAL STATEMENTS
The Financial Statements follow the Signature Page.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
(a) (1) (i) David E. Coffey, who was the Company's auditor for its
financial statements for the year ended December 31, 1996, declined to continue
as the Company's auditor for subsequent years. Mr. Coffey represented to the
Company that he was a sole practitioner with an active practice of auditing
small companies and was unable to audit the Company's financial statements for
subsequent years in view of his schedule and the Company's growing operations.
(ii) The principal accountant's report on the financial statements for
1997 and 1998 did not contain an adverse opinion or disclaimer of opinion and
was not modified as to uncertainty, audit scope or accounting principles.
(iii) Mr. Coffey's inability to continue as the Company's auditor was
accepted by the Board of Directors.
(iv) (A.) There were no disagreements with Mr. Coffey on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure.
(a) (2) The accounting firm of Murphy, Bennington & Co., CPAs, was
engaged to audit Can- Cal's financial statements on approximately February 15,
1998.
(a) (3) The Company has provided Mr. Coffey with a copy of the
disclosures it is making in response to this item. Mr. Coffey's letter addressed
to the Commission is Exhibit 16 hereto.
FORWARD LOOKING STATEMENTS
- --------------------------
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 provide a "safe harbor" for forward looking
statements that are based on current expectations, estimates and projections,
and management's beliefs and assumptions. Words such as "believes," "expects,"
"intends," "plans," "estimates," "may," "attempt," "will," "goal,"
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<PAGE>
"promising," or variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements are not guarantees of
future performance and involve certain risks and uncertainties which are
difficult or impossible to predict. Therefore, actual outcomes and results may
differ materially from what is expressed or forecasted in such forward- looking
statements. The Company undertakes no obligation to update publicly any
forward-looking statement whether as a result of new information, future events
or otherwise.
Such risks and uncertainties include, but are not limited to, the
availability of ore, the existence of precious metals in the ore available to
the Company in an amount which permits their production on an economic basis;
the Company's ability to drill holes and properly test and assay samples, and
its ability to locate and acquire mineral properties which contain sufficient
grades of precious metals and/or minerals; the Company's ability to sell a
portion or all of any of its properties to larger mining companies, to enter
into agreements with larger mining companies to explore and possibly develop its
properties, to produce precious metals on a commercial basis, the prices of
precious metals, obtaining a mill or refinery to extract precious metals on an
economic basis, the Company's ability to maintain the facilities it currently
utilizes; obtain permitting requirements for any mining and milling operations
and pay the costs thereof; have good title to claims and equipment, and the
Company's ability to obtain financing necessary to maintain its operations.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the Registrant caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
Can-Cal Resources, Ltd.
Registrant
DATE: July 7, 1999 By: /s/ Ronald D. Sloan
---------------------------- ----------------------------------
President
35
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CAN-CAL RESOURCES, LTD.
REPORT ON AUDITS OF CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
36
<PAGE>
CAN-CAL RESOURCES, LTD.
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT 1
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated balance sheets 2
Consolidated statements of operations 3
Consolidated statements of changes in stockholders' deficit 4
Consolidated statements of cash flows 5
Notes to consolidated financial statements 6-14
INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL INFORMATION 15
SUPPLEMENTARY SCHEDULE:
Supplemental schedule I - Consolidated operating,
general and administrative expenses 16
37
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Board of Directors and Stockholders
Can-Cal Resources, Ltd.
Las Vegas, Nevada
We have audited the accompanying consolidated balance sheets of Can-Cal
Resources, Ltd. (a Nevada corporation) and subsidiary as of December 31, 1998
and 1997, and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the financial
statements of Scotmar Industries, Inc., a wholly owned subsidiary, which
statements reflect total assets of $88,900 and $137,500 as of December 31, 1998
and 1997, respectively, and total revenues of $97,700 and $79,300, respectively,
for the years then ended. Those statements were audited by other auditors whose
report has been furnished to us, and in our opinion, insofar as it relates to
the amounts included for Scotmar Industries, Inc., is based solely on the
reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits of the balance sheet provides a reasonable basis for
our opinion.
In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Can-Cal Resources, Ltd. and
subsidiary as of December 31, 1998 and 1997, and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.
MURPHY, BENNINGTON & CO.
/s/ Murphy, Bennington & Co.
May 14, 1999
38
<PAGE>
CAN-CAL RESOURCES, LTD.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(ROUNDED TO THE NEAREST HUNDRED, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS 1998 1997
-------------- --------------
CURRENT ASSETS:
<S> <C> <C>
CASH $ 41,600 $ 14,200
ACCOUNTS RECEIVABLE 6,900 7,700
NOTES RECEIVABLE, RELATED PARTIES (NOTE 3) 41,600 38,100
INVENTORY 72,500 116,100
PREPAID EXPENSES 6,600 5,800
OTHER CURRENT ASSETS 100 300
-------------- --------------
TOTAL CURRENT ASSETS 169,300 182,200
PROPERTY AND EQUIPMENT, NET (NOTES 1 AND 4) 264,600 20,400
OTHER ASSETS (NOTE 5) 95,300 65,000
LONG-TERM INVESTMENTS (NOTE 6) 1,365,700 1,362,800
-------------- --------------
$ 1,894,900 $ 1,630,400
============== ==============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
BANK LINE OF CREDIT $ 12,400 $ 35,000
ACCOUNTS PAYABLE 12,800 8,500
ACCRUED EXPENSES 26,200 --
DUE TO RELATED PARTIES -- 148,900
-------------- --------------
TOTAL CURRENT LIABILITIES 51,400 192,400
NOTE PAYABLE, (NOTE 7) 77,500 --
NOTES PAYABLE, RELATED PARTIES (NOTE 8) 243,500 35,600
-------------- --------------
372,400 228,000
-------------- --------------
COMMITMENTS (NOTE 10) -- --
STOCKHOLDERS' DEFICIT:
COMMON STOCK, $.001 PAR VALUE; AUTHORIZED, 15,000,000
SHARES;
ISSUED AND OUTSTANDING, 7,005,161 SHARES 7,000 6,400
PREFERRED STOCK, $.001 PAR VALUE; AUTHORIZED, 10,000,000
SHARES;
NONE ISSUED OR OUTSTANDING -- --
ADDITIONAL PAID-IN-CAPITAL 1,887,600 1,676,400
CUMULATIVE TRANSLATION ADJUSTMENT 8,500 --
ACCUMULATED DEFICIT (380,600) (280,400)
-------------- --------------
$ 1,894,900 $ 1,630,400
============== ==============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
39
<PAGE>
CAN-CAL RESOURCES, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1997
(ROUNDED TO THE NEAREST HUNDRED, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
SALES $ 97,700 $ 79,300
COST OF GOODS SOLD 74,800 148,800
-------------- --------------
GROSS PROFIT 22,900 (69,500)
OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES 131,500 214,800
-------------- --------------
LOSS FROM OPERATIONS (108,600) (284,300)
OTHER INCOME (EXPENSES):
Other income 5,700 3,900
Interest income 6,600 --
Interest expense (3,800) --
-------------- --------------
NET INCOME(LOSS) $ (100,100) $ (280,400)
============== ==============
NET INCOME (LOSS) PER SHARE OF COMMON STOCK
AND COMMON STOCK EQUIVALENTS:
BASIC EPS
Net loss from continuing operations $ (0.02) $ (0.07)
============== ==============
Weighted average shares outstanding $ 6,546,149 $ 4,103,115
============== ==============
DILUTED EPS
Net loss from continuing operations $ (0.02) $ (0.07)
============== ==============
Weighted average shares outstanding $ 6,546,149 $ 4,103,115
============== ==============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
40
<PAGE>
CAN-CAL RESOURCES, LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1998 AND 1997
(ROUNDED TO THE NEAREST HUNDRED, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Additional Cumulative Total
paid-in Accumulated translation stockholders'
Common Stock capital Deficit adjustment equity
----------------------- ----------- ----------- ---------- ------------
Shares Amount
---------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 3,441,217 $ 3,400 $ 625,000 $ (498,000) -- $ 130,400
Adjustment of accumulated deficit (Note 11) -- -- -- 497,900 -- 497,900
---------- --------- ----------- ----------- ---------- ------------
BALANCE DECEMBER 31, 1996, AS RESTATED 3,441,217 3,400 625,000 (100) -- 628,300
Issuance of common stock (Note 9) 500,000 500 18,500 -- -- 19,000
Issuance of common stock (Note 9) 200,000 200 81,800 -- -- 82,000
Issuance of common stock (Note 9) 2,181,752 2,200 892,300 -- -- 894,500
Issuance of common stock 124,683 100 58,800 -- -- 58,900
Net income (loss) for the year -- -- -- (280,400) -- (280,400)
---------- --------- ----------- ----------- ---------- ------------
BALANCE, DECEMBER 31, 1997 6,447,652 6,400 1,676,400 (280,500) -- 1,402,300
Issuance of common stock 557,509 600 211,200 -- -- 211,800
Translation adjustment -- -- -- -- 8,500 8,500
Net income (loss) for the year -- -- -- (100,100) -- (100,100)
---------- --------- ----------- ----------- ---------- ------------
BALANCE, DECEMBER 31, 1998 7,005,161 $ 7,000 $ 1,887,600 $ (380,600) 8,500 $ 1,522,500
========== ========= =========== =========== ========== ============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
41
<PAGE>
CAN-CAL RESOURCES, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
(ROUNDED TO THE NEAREST HUNDRED)
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
$ (100,100) $ (280,600)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,500 4,000
Bad debt expense -- 1,700
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 10,300 (36,000)
(Increase) decrease in inventories 43,600 16,400
(Increase) decrease in prepaid expenses (800) (1,800)
(Increase) decrease in other assets (41,900) --
Increase (decrease) in accounts payable and
other current liabilities 29,400 (300)
-------------- --------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (58,000) (296,600)
-------------- --------------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures related to investment property (24,100) 319,300
Purchase of property and equipment (251,100) --
Proceeds from sale of assets 2,100 (14,000)
-------------- --------------
NET CASH PROVIDED BY INVESTING ACTIVITIES (273,100) 305,300
CASH FLOW FROM FINANCING ACTIVITIES:
Increase in related party debt 50,800 --
Principal payments on note payable (21,900) --
Proceeds from issuance of common stock 191,800 --
Proceeds from debt issuance 129,300 --
-------------- --------------
NET CASH USED BY FINANCING ACTIVITIES 350,000 --
NET CHANGE IN CUMULATIVE TRANSLATION ADJUSTMENT 8,500 --
NET INCREASE (DECREASE) IN CASH 27,400 8,700
CASH AT BEGINNING OF YEAR 14,200 5,500
-------------- --------------
CASH AT END OF YEAR $ 41,600 $ 14,200
============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID DURING THE YEAR FOR:
Interest $ 3,800 $ --
============== ==============
Income taxes $ -- $ --
============== ==============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
42
<PAGE>
CAN-CAL RESOURCES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and nature of business:
Can-Cal Resources, Ltd. ( the "Company") is a corporation formed under
the laws of the State of Nevada on March 22, 1995. The company,
through its wholly owned subsidiary, Scotmar Industries, Inc., a
Canadian corporation, is engaged in the precious metal processing
industry, automobile parts salvage, and other investment
opportunities.
The consolidated financial statements include the accounts of the
Company and Scotmar Industries, Inc. All material intercompany
transactions have been eliminated in consolidation.
Revenue recognition:
Sales revenues are recognized at the point of sale.
Basis of accounting:
The Company prepares its financial statements in accordance with
generally accepted accounting principles.
Cash:
For purposes of preparing the statement of cash flows, unrestricted
currency, demand deposits, and money market accounts are considered
cash and cash equivalents.
Inventories:
Inventories are stated at the lower of cost or market on the first-in,
first-out basis.
Property, equipment and depreciation:
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided on the straight-line method over the
estimated useful lives of the assets. The amounts of depreciation
provided are sufficient to charge the cost of the related assets to
operations over their estimated useful lives.
The cost of maintenance and repairs is charged to expense as incurred.
Expenditures for betterments and renewals are capitalized. Upon sale
or other disposition of depreciable property, cost and accumulated
depreciation are removed from the accounts and any gain or loss is
reflected in income.
43
<PAGE>
CAN-CAL RESOURCES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Concentration of credit risk:
A majority of the Company's business activity is with customers
primarily located in the metropolitan area of Langley, British
Columbia, Canada and Las Vegas, NV, USA.
The company and its subsidiary maintain multiple cash balances at
financial institutions located in Langley, British Columbia, Canada
and Las Vegas, NV, USA. The accounts at the institutions in the USA
are insured by the Federal Deposit Insurance Corporation ("FDIC") up
to $100,000. As of December 31, 1998, the Company and its subsidiary
had no funds in excess of FDIC limits.
Income taxes:
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." This
statement requires an asset and liability approach to account for
income taxes. The Company provides deferred income taxes for temporary
differences that will result in taxable or deductible amounts in
future years based on the reporting of certain costs in different
periods for financial statement and income tax purposes.
Provision is made for taxes on unremitted earnings of related companies
to the extent that such earnings are not deemed to be permanently
invested.
The Company and its wholly owned subsidiary file separate income tax
returns.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Reclassifications:
Certain financial statements from prior years have been reclassified to
conform with current year presentation.
Foreign currency translation:
Assets and liabilities of the Company's Foreign operations are
translated into U.S. dollars at the exchange rate in effect at the
balance sheet date, and revenue and expenses are translated at the
44
<PAGE>
CAN-CAL RESOURCES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Foreign currency translation (continued):
average exchange rate for the period. Translation gains or losses of
the Company's foreign subsidiary are not included in net income but
are reported as a separate component of stockholders' equity. The
functional currency of the subsidiary is the primary currency in which
the subsidiary operates. The Company typically does not enter into
foreign exchange transactions to hedge balance sheet and intercompany
balances against movements in foreign exchange rates.
Net income (loss) per share of common stock:
In1997 the Company adopted Statement of Financial Accounting Standards
No. 128 ("SFAS 128"), "Earnings Per Share," which sets forth the basis
for the computation of "basic" earnings per share and "dilutive"
earnings per share. Basic EPS excludes dilution and is computed by
dividing income (loss) available to common stockholders by the
weighted-average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common
stock that would then share in the earnings of the entity. Diluted EPS
is computed on the basis of the weighted-average shares of Common
Stock outstanding plus common equivalent shares arising from the
effect of cumulative convertible Preferred Stock, using the if-
converted method, and dilutive stock options, using the treasury-stock
method. All EPS amounts for prior years have been restated to conform
to these new standards, and the effect of the restatement was not
significant.
Recent accounting pronouncements:
In 1997, the Financial Accounting Standards Board issued Statement No.
130 ("SFAS 130"), "Reporting Comprehensive Income". SFAS 130 requires
that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as
other financial statements. The statement requires that an enterprise
classify items of other comprehensive income by their nature in a
financial statement and to display the accumulated balance of other
comprehensive income separately from retained earning earnings and
additional paid-in capital in the equity section of a statement of
financial position. SFAS 130 is effective for fiscal years beginning
after December 15, 1997.
2. BUSINESS ACQUISITIONS:
Inaccordance with accounting principles associated with a transaction
where the acquired company has been acquired by a development stage
company and the acquired company is considered a promoter in founding
and organizing the business, the acquired business assets will be
recorded at the historical cost basis of the predecessor. If the
transaction is accounted for in a manner similar to a
45
<PAGE>
CAN-CAL RESOURCES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
2. BUSINESS ACQUISITIONS (CONTINUED):
pooling of interest, the accompanying financial statements have been
restated to include the accounts of the pooled companies as if they
had always been combined. If the transaction is accounted for in a
manner similar to a purchase, the net assets of the acquired company
have been recorded as net proceeds from an issuance of stock, and the
results of operations will be included with the results of the Company
following the date of acquisition.
Scotmar Industries, Inc.
On February 13, 1997 the Company issued 200,000 shares of common stock,
in exchange for all of the issued and outstanding common stock of
Scotmar Industries, Inc.
3. NOTES RECEIVABLE (RELATED PARTIES):
Notes receivable, related parties, at December 31, 1998 consisted of the
following:
<TABLE>
<S> <C>
Note receivable from S&S Mining, Inc.,
a joint venture partner, unsecured,
interest imputed at 8%, due on demand $ 28,000
Note receivable from an individual,
unsecured, interest imputed at 8%,
due on demand $ 12,000
Accrued interest receivable 7,200
-------------
47,200
Allowance for uncollectible accounts 5,600
-------------
$ 41,600
=============
</TABLE>
4. PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1998 consisted of the following:
<TABLE>
<S> <C>
Buildings and plant $ 238,500
Machinery and equipment 35,200
Transportation equipment 27,800
Office equipment and furniture 3,800
-------------
305,300
Less accumulated depreciation (40,700)
-------------
$ 264,600
=============
</TABLE>
Depreciation expense for the year ended December 31,1998 totaled $1,500.
46
<PAGE>
CAN-CAL RESOURCES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
5. OTHER ASSETS:
Other assets at December 31, 1998 consisted of the following:
<TABLE>
<S> <C>
Note receivable from Tyro, Inc., and
principals, a corporation, secured by
equipment, interest accrued at 6% per
annum, due on demand $ 53,300
Deposits 5,600
Mining claims 36,400
------------
$ 95,300
============
</TABLE>
6. LONG-TERM INVESTMENTS:
Long-term investments at December 31, 1998 consisted of the following:
<TABLE>
<S> <C>
Pisgah property $ 567,000
Investment in S&S Mining joint venture 798,700
------------
$ 1,365,700
============
</TABLE>
7. NOTE PAYABLE:
Note payable at December 31, 1998 consisted of the following:
Note payable to joint venture;
secured by 1st deed of trust; interest
at 8% per annum; matures July 31, 2001 $ 77,500
============
8. NOTES PAYABLE, RELATED PARTIES:
Notes payable, related parties, at December 31, 1998 consisted of the
following:
<TABLE>
<S> <C>
Note payable to shareholder; unsecured; interest
at prime plus 1.00% per annum, due on demand $ 43,800
Note payable to shareholder; unsecured; interest
at prime plus 1.00% per annum, due on demand 127,100
Note payable to shareholder; unsecured; interest
at prime plus 1.00% per annum, due on demand 34,000
Note payable to shareholder; unsecured; interest
at prime plus 1.00% per annum, due on demand 38,600
-------------
$ 243,500
=============
</TABLE>
47
<PAGE>
CAN-CAL RESOURCES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
9. STOCKHOLDERS' EQUITY:
COMMON STOCK:
On September 13, 1996, the Board of Directors approved the issuance of
500,000 shares of Can-Cal common stock along with a cash payment of
$100,000 in exchange for a 50% interest in S&S Mining, a joint
venture. Additionally, the Company agreed to loan the joint venture up
to $48,000.
On February 13, 1997 the Board approved the acquisition of Scotmar
Industries, Inc. 200,000 shares of Can-Cal common stock were issued in
return for all of the issued and outstanding stock of the acquired
company.
On October 27, 1997 the Board approved the issuance of 2,181,752
restricted common shares to ARUM, LLC to repay an existing debt of
approximately $315,045.98 and to purchase a property located in San
Bernadino County, California, known as the Pisgah property.
During November, 1997 the Board approved the sale of 124,683 restricted
common shares to various investors.
During December, 1997 the Board approved the issuance of 42,000
restricted common shares in return for services rendered.
In July, 1998 the Board approved the issuance 122,000 restricted common
shares to various investors.
In October, 1998 the Board approved the sale of 172,450 restricted
common shares to various investors.
During December, 1998 the Board approved the sale of 263,059 restricted
common shares to various investors.
10. COMMITMENTS:
Lease commitments:
The Company leases property for the operations of the subsidiary under
an operating lease due to expire June 30, 2001.The lease may be
renewed at the option of the company for a period of three years.
Lease payments for the year ended December 31, 1998 totaled $44,400.
Minimum future rental payments for operating leases for the next five
fiscal year ends are as follows:
48
<PAGE>
CAN-CAL RESOURCES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
10. COMMITMENTS (CONTINUED):
Lease commitments (continued):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
---------------
<S> <C>
1999 $ 49,000
2000 50,000
2001 26,000
Thereafter --
-------------
$ 125,000
=============
</TABLE>
Auto leases:
The Company entered into two operating leases for automobiles that
expire during the year 2000. The monthly lease payments currently
total $300 per month. Lease payments for the year ended December 31,
1998 totaled $10,900.
Minimum future rental payments for operating leases for the next five
fiscal year ends are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
----------------
<S> <C>
1999 $ 7,400
2000 4,800
Thereafter --
-------------
$ 12,200
=============
</TABLE>
11. PRIOR PERIOD ADJUSTMENTS:
Subsequent to the issuance of the 1996 financial statements, development
stage accumulated deficit of the corporation was reclassified as an
increase in the investment in S&S Mining, a development stage joint
venture of which Can-Cal Resources, Ltd. is a 50% venture partner.
The restatement of accumulated deficit for 1996 is as follows:
<TABLE>
<S> <C>
Accumulated deficit, as previously reported $ (498,000)
Increase in long-term investments 497,900
-------------
Accumulated deficit, as restated $ (100)
=============
</TABLE>
49
<PAGE>
CAN-CAL RESOURCES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
12. INCOME TAXES:
Deferred income taxes are provided for the temporary differences between
the financial reporting basis and the tax basis of the Company and
subsidiary's assets and liabilities. The temporary difference that
give rise to the deferred tax asset is primarily as follows:
<TABLE>
<S> <C>
Net operating loss carry forward - December 31, 1998 $ 100,300
Net operating loss carry forward - December 31, 1997 280,400
-----------
380,700
Deferred tax assets 113,900
Total valuation allowance recognized for deferred tax assets (113,900)
-----------
Net deferred tax asset $ 0
===========
</TABLE>
13. NEW ACCOUNTING STANDARD:
OnJanuary 1, 1998, the Company adopted Statement of
Financial/Accounting Standards No. 130 ("SFAS 130") "Reporting
Comprehensive Income", which requires companies to report all changes
in equity during a period, except those resulting from investment by
owners and distribution to owners. The components for comprehensive
income are as follows:
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Net income (loss) $ (100,100) $ (280,400)
Translation adjustment 8,500 --
------------- -------------
Comprehensive income $ (91,600) $ 280,400)
</TABLE>
14. SUBSEQUENT EVENTS:
On January 29, 1999 the Company completed the divestiture of its wholly
owned subsidiary, Scotmar Industries, Inc., to 545538 B.C. Ltd., a
Canadian corporation for approximately $65,300 and forgiveness of
Scotmar Industries, Inc. payable to the Company.
50
<PAGE>
CAN-CAL RESOURCES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
15. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following table presents the carrying amounts and estimated fair
value of the Company's financial instruments at December 31, 1998:
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
------------- -------------
Financial assets:
<S> <C> <C>
Loans receivable-related party $ 41,600 $ 41,600
Inventory 72,500 72,500
Property and equipment 264,600 264,600
Other assets 95,300 95,300
Long-term investments 1,365,700 1,365,700
Financial liabilities:
Notes payable, related parties 243,500 243,500
Note payable 77,500 77,500
</TABLE>
The carrying amounts of cash, trade receivables, prepaid expenses, other
current assets, accounts payable and accrued expenses approximate fair
value because of the short maturity of those instruments.
The fair value of bank line of credit is based upon the borrowing rates
currently available to the Company for bank loans with similar terms
and average maturities.
16. YEAR 2000 COMPLIANCE:
Historically. certain computerized systems have had two digits rather
than four digits to define the applicable year, which could result in
recognizing a date using "00" as the year 1900 rather than the year
2000. This could result in major failures or miscalculations and is
generally referred to as the "Year 2000 issue."
The Company has reviewed, and continues to review, possible effects of
this issue on its financial and operating systems. Review of external
dependencies has revealed that the Company will be exposed to
disruption if there is widespread and prolonged interruption of
electricity, water, and telecommunications services.
The total cost to the Company of these Year 2000 problem related
activities is not anticipated to be material. The costs the Company
may incur to solve the Year 2000 problem are based on management's
estimates. However, there can be no assurance that these estimates
will be achieved and the costs of solving the Year 2000 problem could
differ significantly from management's estimates.
51
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTAL INFORMATION
To the Board of Directors and Stockholders
Can-Cal Resources, Ltd.
Las Vegas, Nevada
Our report on the audits of the basic consolidated financial statements of
Can-Cal Resources, Ltd. for the years ended December 31, 1998 and 1997, appears
on page one. These audits were made for the purpose of forming an opinion on the
basic consolidated financial statements taken as a whole. The supplemental
schedule of consolidated operating, general and administrative expenses are
presented for purposes of additional analysis and are not a required part of the
basic consolidated financial statements. Such information has been subjected to
the auditing procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic consolidated financial statements taken as a whole.
MURPHY, BENNINGTON & CO.
/s/ Murphy, Bennington & Co.
May 14, 1999
52
<PAGE>
CAN-CAL RESOURCES, LTD.
SUPPLEMENTAL SCHEDULE I --
CONSOLIDATED OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- ---------
OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES:
<S> <C> <C>
Office rent $ 44,400 $ 39,800
Wages and benefits 44,400 41,900
Lease expense 10,900 3,600
Telephone 6,800 19,600
Bank charges 6,500 5,600
Repairs and maintenance 3,500 3,200
Insurance 3,000 2,800
Supplies 3,000 6,500
Office expense 2,700 5,900
Accounting and legal 2,300 9,900
Depreciation expense 1,500 4,000
Advertising and promotion 1,400 1,800
Utilities 1,100 1,300
Bad debt expense -- 1,700
Consulting -- 47,900
Miscellaneous -- 7,500
Travel -- 11,800
---------- ---------
$ 131,500 $ 214,800
========== =========
</TABLE>
53
<PAGE>
EXHIBITS
Sequential
Exhibit No. Title of Exhibit Page No.
- ----------- ---------------- -----------
Exhibit 3.0 Articles of Incorporation....................................56
Exhibit 3.1 Amendment to the Articles of Incorporation...................64
Exhibit 3.2 By-Laws......................................................65
Exhibit 10.0 Joint Venture Agreement between Robin Schwarz,
Aylward Schwarz, S&S Mining, a Nevada corporation,
and Can-Cal Resources, Ltd...................................72
Exhibit 10.1 Mining Lease Agreement between
Can-Cal Resources, Ltd.
and Twin Mountain Rock Venture
dated May 1, 1998...........................................108
Exhibit 10.2 Loan Agreement between Owen Sequoia, Inc.
and Can-Cal Resources, Ltd..................................120
Exhibit 10.3 Amendment to Loan Agreement dated June 9, 1998..............123
Exhibit 10.4 Second Amendment to Loan Agreement .........................132
Exhibit 10.5 Deed of Trust, Security Agreement, Financing Statement,
and Fixture Filing with Assignment of Rents.................140
Exhibit 10.6 Lease and Purchase Option Agreement dated March 12, 1998
between Arthur James Good and Wanda Mae Good
and Can-Cal Resources, Ltd..................................167
Exhibit 10.7 Agreement between Can-Cal Resources, Ltd.
and Aurum, LLC dated October 27, 1997.......................176
Exhibit 10.8 Quit Claim Deed from Aurum, LLC
to Can-Cal Resources, Ltd...................................181
Exhibit 10.9 Agreement between Tyro, Inc., Dean Willman,
Roland S. Ericsson, and Can-Cal Resources, Ltd..............185
Exhibit 10.10 Complaint filed in District Court for
Clark County, Nevada on March 30, 1998......................190
54
<PAGE>
Sequential
Exhibit No. Title of Exhibit Page No.
- ----------- ---------------- --------
Exhibit 10.11 Confession of Judgment executed by Tyro, Inc.,
Dean Willman, and Roland S. Ericsson........................196
Exhibit 10.12 Agreement between Can-Cal Resources, Ltd.,
545538 B.C., Ltd., a body incorporated
under the laws of the Province of
British Columbia, and Ronald Daniel Sloan
dated January 29, 1999................................... 200
Exhibit 11.0 Statement re: Computation of per share earnings.............211
Exhibit 16.0 Letter from David E. Coffey
on change of certifying accountant..........................212
Exhibit 23.0 Consent of Independent Auditors,
Murphy, Bennington & Co.....................................213
Exhibit 27 Financial Data Schedule.....................................214
55
<PAGE>
EXHIBIT 3.0
ARTICLES OF INCORPORATION
OF
BRITISH PUBS USA INC.
FIRST. The name of the corporation is:
BRITISH PUBS USA INC
SECOND. Its registered office in the State of Nevada is located
at 253 North Carson Street, Carson City, Nevada 89706 that this Corporation may
maintain an office, or offices, in such other place within or without the Stare
of Nevada as may be from time to time designated by the Board of Directors, or
by the By-Laws of said Corporation, and that this Corporation may conduct all
Corporation business of any kind and nature, including the holding of all
meetings of Directors and Stockholders, outside the State of Nevada as well as
within the State of Nevada.
THIRD. The objects for which this Corporation is formed are: To
engage in any lawful activity, including, but not limited to the following:
(A) Shall have such rights, privileges and powers as may be conferred
upon corporations by any existing law.
(B) May at any time exercise such rights, privileges and powers, when
not inconsistent with the purposes and objects for which this corporation is
organized.
56
<PAGE>
C) Shall have power to have succession by its Corporate name for the
period limited in its certificate or articles of incorporation, and when no
period is limited, perpetually, or until dissolved and its affairs wound up
according to law.
(D) Shall have power to sue and be sued in any court of law or equity.
(E) Shall have power to make contracts. (F) Shall have power to hold,
purchase and convey real and personal estate and to mortgage or lease any such
real and personal estate with its franchises. The power to hold real and
personal estate shall include the power to take the same by devise or bequest in
the State of Nevada, or in any other state, territory or country.
(G) Shall have power to appoint such officers and agents as the affairs
of the corporation shall require, and to allow them suitable compensation.
(H)Shall have power to make By-Laws not inconsistent with the
constitution or laws of the United States, or of the State of Nevada, for the
management, regulation and government of its affairs and property, the transfer
of its stock, the transaction of its business, and the calling and holding of
meetings of its stockholders.
(I) Shall have power to wind up and dissolve itself, or be wound up or
dissolved.
(J) Shall have power to adopt and use a common seal or stamp, and alter
the same at pleasure. The use of a seal or stamp by the corporation on any
corporate documents is not necessary. The corporation may use a seal or stamp,
if it desires, but such use or nonuse shall not in any way affect the legality
of the document.
(K) Shall have power to borrow money and contract debts when necessary
for the transaction of its business, or for the exercise of its corporate
rights, privileges or franchises, or for
57
<PAGE>
any other lawful purpose of its incorporation; to issue bonds, promissory notes,
bills of exchange, debentures, and other obligations and evidences of
indebtedness, payable at a specified time or times, or payable upon the
happening of a specified event or events, whether secured by mortgage, pledge or
otherwise, or unsecured, for money borrowed, or in payment for property
purchased, or acquired, or for any other lawful object.
(L) Shall have power to guarantee, purchase, hold, sell, assign,
transfer, mortgage, pledge or otherwise dispose of the shares of the capital
stock of, or any bonds, securities or evidences of the indebtedness created by,
any other corporation or corporations of the State of Nevada, or any other state
or government, and, while owners of such stock, bonds, securities or evidences
of indebtedness, to exercise all the rights, powers and privileges of ownership,
including the right to vote, if any.
(M) Shall have power to purchase, hold, sell and transfer shares of its
own capital stock, and use therefor its capital, capital surplus, surplus, or
other property or fund.
(N) Shall have power to conduct business, have one or more offices, and
hold, purchase, mortgage and convey real and personal property in the State of
Nevada, and in any of the several states, territories, possessions and
dependencies of the United States, the District of Columbia, and any foreign
countries.
(O) Shall have power to do all and everything necessary and proper for
the accomplishment of the objects enumerated in its certificate or articles of
incorporation, or any amendment thereof, or necessary or incidental to the
protection and benefit of the corporation, and, in general, to carry on any
lawful business necessary or incidental to the attainment of the objects
58
<PAGE>
of the corporation, whether or not such business is similar in nature to the
objects set forth in the certificate or articles of incorporation of the
corporation, or any amendment thereof.
(P) Shall have power to make donations for the public welfare or for
charitable, scientific or educational purposes.
(Q) Shall have power to enter into partnerships, general or limited, or
joint ventures, in connection with any lawful activities, as may be allowed by
law.
FOURTH. That the total number of shares of stock authorized to be
issued by the Corporation is TWENTY-FIVE MILLION (25,000,000) shares as follows:
FIFTEEN MILLION (15,000,000) shares of common stock @ $0.001 par value and TEN
MILLION (10,000,000) shares of 5% non-voting, cumulative preferred shares @
$0.001 per share, redeemable at original invested value, together with
cumulative interest thereon at the discretion of the Board of Directors and no
other class of stock shall be authorized. Said shares may be issued by the
corporation from time to time for such considerations as may be fixed by the
Board of Directors.
FIFTH. The governing board of this corporation shall be known as
directors, and directors may from time to time be increased or decreased in such
manner as shall be provided by the By-Laws of this Corporation, providing that
the number of directors shall not be reduced to fewer than one (1).
The name and post office address of the first board of Directors shall
be one (1) in number and listed as follows:
NAME POST OFFICE ADDRESS
---- -------------------
Cheryl Mall 2533 N. Carson Street
Carson City, Nevada 89706
59
<PAGE>
SIXTH. The capital stock, after the amount of the subscription
price, or par value, has been paid in, shall not be subject to assessment to pay
the debts of the corporation.
SEVENTH. The name and post office address of the Incorporator
signing the Articles of Incorporation is as follows:
NAME POST OFFICE ADDRESS
---- -------------------
Cheryl Mall 2533 North Carson Street
Carson City, Nevada 89706
EIGHTH. The resident agent for this Corporation shall be:
LAUGHLIN ASSOCIATES, INC.
The address of said agent, and, the registered or statutory address of this
corporation in the state of Nevada, shall be:
2533 North Carson Street
Carson City, Nevada 89706
NINTH. The corporation is to have perpetual existence.
TENTH. In furtherance and not in limitation of the power
conferred by statute, the Board of Directors is expressly authorized:
Subject to the By-Laws, if any, adopted by the Stockholders, to
make, alter or amend the By-Laws of the Corporation.
To fix the amount to be reserved as working capital over and
above its capital stock paid in; to authorize and cause to be executed mortgages
and liens upon the real and personal property of this Corporation.
60
<PAGE>
By resolution passed by a majority of the whole Board, to
designate one (1) or more committees, each committee to consist of one or more
of the Directors of the Corporation, which, to the extent provided in the
resolution, or in the By-Laws of the Corporation, shall have and may exercise
the powers of the Board of Directors in the management of the business and
affairs of the Corporation. Such committee, or committees, shall have such name,
or names, as may be stated in the By-Laws of the Corporation, or as may be
determined from time to time by resolution adopted by the Board of Directors.
When and as authorized by the affirmative vote of the
Stockholders holding stock entitling them to exercise at least a majority of the
voting power given at a Stockholders meeting called for that purpose, or when
authorized by the written consent of the holders of at least a majority of the
voting stock issued and outstanding, the Board of Directors shall have power and
authority at any meeting to sell, lease or exchange all of the property and
assets of the Corporation, including its good will and its corporate franchises,
upon such terms and conditions as its board of Directors deems expedient and for
the best interests of the Corporation.
ELEVENTH. No shareholder shall be entitled as a matter of right
to subscribe for or receive additional shares of any class of stock of the
Corporation, whether now or hereafter authorized, or any bonds, debentures or
securities convertible into stock, but such additional shares of stock or other
securities convertible into stock may be issued or disposed of by the Board of
Directors to such persons and on such terms as in its discretion it shall deem
advisable.
TWELFTH. No director or officer of the Corporation shall be
personally liable to the Corporation or any of its stockholders for damages for
breach of fiduciary duty as a director or officer involving any act or omission
of any such director or officer; provided, however, that the
61
<PAGE>
foregoing provision shall not eliminate or limit the liability of a director or
officer (i) for acts or omissions which involve intentional misconduct, fraud or
a knowing violation of law, or (ii) the payment of dividends in violation of
Section 78.300 of the Nevada Revised Statutes. Any repeal or modification of
this Article by the stockholders of the Corporation shall be prospective only,
and shall not adversely affect any limitation on the personal liability of a
director or officer of the Corporation for acts or omissions prior to such
repeal or modification.
THIRTEENTH. This Corporation reserves the right to amend, alter
change or repeal any provision contained in the Articles of Incorporation, in
the manner now or hereafter prescribed by statute, or by the Articles of
Incorporation, and all rights conferred upon Stockholders herein are granted
subject to this reservation.
62
<PAGE>
I, THE UNDERSIGNED, being the Incorporator hereinbefore named for
the purpose of forming a Corporation pursuant to the General Corporation Law of
the State of Nevada, do make and file these Articles of Incorporation, hereby
declaring and certifying that the facts herein stated are true, and accordingly
have hereunto set my hand this 22nd day of March, 1995.
/s/ Cheryl Mall
------------------------------
Cheryl Mall
STATE OF NEVADA )
)SS.
CARSON CITY )
On this 22nd day of March, 1995, in Carson City, Nevada, before me, the
undersigned, a Notary Public in and for Carson City, State of Nevada, personally
appeared:
Cheryl Mall
Known to me to be the person whose name is subscribed to the foregoing document
and acknowledged to me that she executed the same.
MARK SHATAS
NOTARY PUBLIC - NEVADA
CARSON CITY /s/ Mark Shatas
My Appt. Expires March 12, 1996 ------------------------------
Notary Public
I, Laughlin Associates, Inc. hereby accept as Resident Agent for the previously
named Corporation.
3/22/95 /s/ Cheryl Mall
- --------------------------------------------
Date Service Coordinator
63
<PAGE>
EXHIBIT 3.1
STATE OF NEVADA
AUG 06 1996
No. C4655-95
CERTIFICATE AMENDING ARTICLES OF INCORPORATION
BRITISH PUBS USA INC.
The undersigned, being President and Secretary of BRITISH PUBS USA INC.,
a Nevada Corporation, hereby certify that by majority vote of the Boards of
Directors and majority vote of the stockholders at a meeting held on July 2nd,
1996, it was agreed by unanimous vote that this CERTIFICATE AMENDING ARTICLES OF
INCORPORATION be filed.
The undersigned further certify that the original Articles of
Incorporation of BRITISH PUBS USA INC. were filed with the Secretary of State of
Nevada on the 23rd day of March, 1995. The undersigned further certify that
Articles First of the original Articles of Incorporation filed on the 23rd day
of March 1995, hearin is amended to read as follows:
ARTICLE FIRST
FIRST. The name shall be
CAN-CAL RESOURCES LTD.
The undersigned hearby certify that they have on this 2nd day of July,
1996, executed this Certificate Amending the original Articles of Incorporation
heretofore filed with the Secretary of State of Nevada.
/s/ Carl Evans
-----------------------------------
President and Secretary
State of California )
)SS.
County of San Diego )
On this 2nd day of July 1996, before me the undersigned a Notary Public in and
for the County of San Diego, State of California, personally appeared Carl Evans
known to be the person whose name is subscribed to the foregoing Certificate
Amending Articles of Incorporation and acknowledged to me that they executed the
same.
/s/ Ranji Patel
-----------------------------------
64
<PAGE>
EXHIBIT 3.2
BRITISH PUBS USA INC
--------------------
BY-LAWS
ARTICLE I MEETINGS OF STOCKHOLDERS
- -------------------------------------
1. Stockholders' Meetings shall be held in the office of the
corporation, at Carson City, NV, or at such other place or places as the
Directors shall from time to time determine.
2. The annual meeting of the stockholders of this corporation shall be
held at 11:00 a.m., on the 22nd day of March of each year beginning in 1996, at
which time there shall be elected by the stockholders of the corporation a Board
of Directors for the ensuing year, and the stockholders shall transact such
other business as shall properly come before them.
3. A notice signed by any officer of the corporation or by any person
designated by the Board of Directors, which sets forth the place of the annual
meeting, shall be personally delivered to each of the stockholders of record, or
mailed postage prepaid, at the address as appears on the stock book of the
company, or if no such address appears in the stock book of the company, to his
last known address, at least ten (10) days prior to the annual meeting.
Whenever any notice whatever is required to be given under any article
of these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to the notice, whether before or after the time of the meeting of the
stockholders, shall be deemed equivalent to proper notice.
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<PAGE>
4. If a quorum is not present at the annual meeting, the stockholders
present, in person or by proxy, may adjourn to such future time as shall be
agreed upon by them, and notice of such adjournment shall be mailed, postage
prepaid, to each stockholder of record at least ten (10) days before such date
to which the meeting was adjourned; but if a quorum is present, they may adjourn
from day to day as they see fit, and no notice of such adjournment need be
given.
5. Special meetings of the stockholders may be called at anytime by the
President; by all of the directors provided there are no more than three, or if
more than three, by any three Directors; or by the holder of a majority share of
the capital stock of the corporation. The Secretary shall send a notice of such
called meeting to each stockholder of record at least ten (10) days before such
meeting, and such notice shall state the time and place of the meeting, and the
object thereof. No business shall be transacted at a special meeting except as
stated in the notice to the stockholders, unless by unanimous consent of all
stockholders present, either in person or by proxy, all such stock being
represented at the meeting.
6. A majority of the stock issued and outstanding, either in person or
by proxy, shall constitute a quorum for the transaction of business at any
meeting of the stockholders.
7. Each stockholder shall be entitled to one vote for each share of
stock in his own name on the books of the company, whether represented in person
or by proxy.
8. All proxies shall be in writing and signed.
9. The following order of business shall be observed at all meetings of
the stockholders so far as is practicable;
a. Call the roll;
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<PAGE>
b. Reading, correcting, and approving of
the minutes of the previous meeting;
c. Reports of officers;
d. Reports of Committees;
e. Election of Directors;
f. Unfinished business; and
g. New business.
ARTICLE II STOCK
- ------------------
1. Certificates of stock shall be in a form adopted by the Board of
Directors and shall be signed by the President and Secretary of the Corporation.
2. All certificates shall be consecutively numbered; the name of the
person owning the shares represented thereby, with the number of such shares and
the date of issue shall be entered on the company's books.
3. All certificates of stock transferred by endorsement thereon shall be
surrendered by cancellation and new certificates issued to the purchaser or
assignee.
ARTICLE III DIRECTORS
- ----------------------
1. A Board of Directors, consisting of at least one (1) person shall be
chosen annually by the stockholders at their meeting to manage the affairs of
the company. The Directors' term of office shall be one (1) year, and Directors
may be re-elected for successive annual terms.
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2. Vacancies on the board of Directors by reason of death, resignation
or other shall be filled by the remaining Director or Directors choosing a
Director or Directors to fill the unexpired term.
3. Regular meetings of the Board of Directors shall be held at 1:00
p.m., on the 22nd day of March of each year beginning in 1996 at the office of
the company at Carson City, NV, or at such other time or place as the Board of
Directors shall by resolution appoint; special meetings may be called by the
President or any Director giving ten (10) days notice to each Director. Special
meetings may also be called by execution of the appropriate waiver of notice and
call when executed by a majority of the Directors of the company. A majority of
the Directors shall constitute a quorum.
4. The Directors shall have the general management and control of the
business and affairs of the company and shall exercise all the powers that may
be exercised or performed by the corporation, under the Statutes, the
certificates of incorporation, and the By-Laws. Such management will be by equal
vote of each member of the Board of Directors with each Board member having an
equal vote.
5. A resolution, in writing, signed by all or a majority of the members
of the Board of Directors, shall constitute action by the Board of Directors to
effect therein expressed, with the same force and effect as though such
resolution had been passed at a duly convened meeting; and it shall be the duty
of the Secretary to record every such resolution in the Minute Book of the
corporation under its proper date.
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<PAGE>
ARTICLE IV OFFICERS
- ---------------------
1. The officers of this company shall consist of: a President, one or
more Vice Presidents, Secretary, Treasurer, and such other officers as shall,
from time to time, be elected or appointed by the Board of Directors.
2. The PRESIDENT shall preside at all meetings of the Directors and the
Stockholders and shall have general charge and control over the affairs of the
corporation subject to the Board of Directors. He shall sign or countersign all
certificates, contracts and other instruments of the corporation as authorized
by the Board of Directors and shall perform all such other duties as are
incident to his office or are required by him by the Board of Directors.
3. The VICE PRESIDENT shall exercise the functions of the President
during the absence or disability of the President and shall have such powers and
such duties as may be assigned to him from time to time by the Board of
Directors.
4. The SECRETARY shall issue notices for all meetings as required by the
ByLaws, shall keep a record of the minutes of the proceedings of the meetings of
the Stockholders and Directors, shall have charge of the corporate books, and
shall make such reports and perform such other duties as are incident to his
office, or properly required of him by the Board of Directors. He shall be
responsible that the corporation complies with Section 78.105 of the Nevada
Corporation Laws and supplies to the Nevada Resident Agent or Registered Office
in Nevada, any and all amendments to the Corporation's Articles of Incorporation
and any and all amendments or changes to the By-Laws of the Corporation. In
compliance with Section 78.105, he will also supply to the Nevada Resident Agent
or Registered Office in Nevada, and maintain, a current statement setting out
the name of the custodian of the stock ledger or duplicate stock
69
<PAGE>
ledger, and the present and complete Post Office address, including street and
number, if any, where such stock ledger or duplicate stock ledger specified in
the section is kept.
5. The TREASURER shall have the custody of all monies and securities of
the corporation and shall keep regular books of account. He shall disburse the
funds of the corporation in payment of the just demands against the corporation,
or as may be ordered by the Board of Directors, making proper vouchers for such
disbursements and shall render to the Board of Directors, from time to time, as
may be required of him, an account of all his transactions as Treasurer and of
the financial condition of the corporation. He shall perform all duties incident
to his office or which are properly required of him by the Board of Directors.
6. The RESIDENT AGENT shall be in charge of the corporation's registered
office in the State of Nevada, upon whom process against the corporation may be
served and shall perform all duties required of him by statute.
7. The salaries of all officers shall be fixed by the Board of Directors
and may be changed from time to time by a majority vote of the Board.
8. Each of such officers shall serve for a term of one (1) year or until
their successors are chosen and qualified. Officers may be re-elected or
appointed for successive annual terms.
9. The Board of Directors may appoint such other officers and agents, as
it shall deem necessary or expedient, who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors.
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ARTICLE V INDEMNIFICATION OF OFFICERS AND DIRECTORS
- ------------------------------------------------------
1. The Corporation shall indemnify any and all of its Directors and
Officers, and its former Directors and Officers, or any person who may have
served at the Corporations request as a Director or Officer of another
corporation in which it owns shares of capital stock or of which it is a
creditor, against expenses actually and necessarily incurred by them in
connection with the defense of any action, suit or proceeding in which they, or
any of them, are made parties, or a party, by reason of being or having been
Director(s) or Officer(s) of the corporation, or of such other corporation,
except, in relation to matters as to which any such Director or Officer or
former Director or Officer or person shall be adjudged in such action, suit or
proceeding to be liable for negligence or misconduct in the performance of duty.
Such indemnification shall not be deemed exclusive of any other rights to which
those indemnified may be entitled, under ByLaw, agreement, vote of stockholders
or otherwise.
ARTICLE VI AMENDMENTS
----------------------
1. Any of these By-Laws may be amended by a majority vote of the
stockholders at any annual meeting or at any special meeting called for that
purpose.
2. The Board of Directors may amend the By-Laws or adopt additional
By-Laws but shall not alter or repeal any By-Laws adopted by the stockholders of
the company.
********************************************************************************
CERTIFIED TO BE THE BY-LAWS OF:
BRITISH PUBS USA INC
BY: /s/ Carl Evans
------------------------------
Secretary
71
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EXHIBIT 10.0
JOINT VENTURE AGREEMENT
BETWEEN
ROBIN SCHWARZ,
AYLWARD SCHWARZ,
S & S MINING, A NEVADA CORPORATION
AND
CAN-CAL RESOURCES, LTD.
72
<PAGE>
JOINT VENTURE AGREEMENT
-----------------------
THIS JOINT VENTURE AGREEMENT, made as of the 13th day of September,
1996, by and between ROBIN SCHWARZ, AYLWARD SCHWARZ, and S & S MINING, a Nevada
corporation (hereinafter collectively referred to as "Schwarz" or "Venturer"),
and CAN-CAL RESOURCES, LTD., a Nevada Corporation (hereinafter referred to as
"Can-Cal" or "Venturer").
RECITALS
WHEREAS, Schwarz owns or has possessory rights to certain mining claims
in San Bernardino County, California, and may acquire or stake additional mining
claims in San Bernardino County, California (the "Area of Interest" as defined
herein) (the "Claims"), and
WHEREAS, Schwarz believes that its claims are prospective for the
existence and commercial extraction and production of precious metals; and
WHEREAS, Schwarz does not have funds with which to engage in the
necessary work and procedures to determine the existence of precious metals on
the claims; and
WHEREAS, Can-Cal is willing to advance certain funds to Schwarz to
ascertain whether precious metals exist on the claims;
WHEREAS, Can-Cal is willing to advance funds only if it acquires a 50%
interest in the claims and its other advances are secured; and
WHEREAS, the parties believe that it is in their respective best
interests to pool their resources to attempt to ascertain the existence of
precious metals of the claims and, if so, to commercially exploit the claims and
the precious metals contained thereon; and
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<PAGE>
WHEREAS, Schwarz and Can-Cal wish to make arrangements for the
exploration, evaluation, development, production and sale of precious metals, if
any, produced from the claims all through this Joint Venture.
NOW THEREFORE, in consideration of the covenants and agreements
contained herein, SCHWARZ AND CAN-CAL AGREE AS FOLLOWS:
ARTICLE I
---------
DEFINITIONS
-----------
1.1 "Accounting Procedure" means the procedures as agreed upon by the
Venturers.
1.2 "Affiliate" means any person, partnership, joint venture,
corporation or other form of enterprise which directly or indirectly controls,
is controlled by, or is under common control with, a Venturer. For purposes of
the preceding sentence, "control" means possession, directly or indirectly, of
the power to direct or cause direction of management and policies through
ownership of voting securities, contract, voting trust or otherwise.
1.3 "Agreement" means this Joint Venture Agreement, including all
amendments and modifications thereof, and all schedules and exhibits, which are
incorporated herein by this reference.
1.4 "Area of Interest" means a five mile radius around the claims listed
on Exhibit A and no other physical areas.
1.5 "Assets" means the Property, Products and all other real and
personal property, tangible and intangible, held by or for the benefit of the
Venturers hereunder.
1.6 "Capital Account" means the Capital Account as defined herein.
74
<PAGE>
1.7 "Claims" means the mining claims listed on Exhibit A hereto.
1.8 "Default" means the occurrence of one or more of the events listed
in Section 10.2.
1.9 "Development" means all preparation for the removal and recovery of
Products, including the construction or installation of any improvements to be
used for the mining or handling, but not the milling or other processing, or
Products.
1.10 "Exploration" means all activities directed toward ascertaining the
existence, location, quantity, quality or commercial value of deposits of
Products.
1.11 "Initial Contribution" means that contribution each Venturer agrees
to make, or is deemed to have made, pursuant to Section 5. 1.
1.12 "Joint Account" means the account maintained in accordance with the
Accounting Procedure showing the charges and credits accruing to the Venturers.
1.13 "Losses" shall have the meaning set forth in Section 4. 1 (b)
herein.
1.14 "Management Committee" means the committee established under
Article VII.
1.15 "Milling" means the milling or processing of ores into precious
metals.
1. 16 "Mining" means the mining, extracting, producing, hauling and
handling of ore from the Property.
1. 17 "Net Proceeds" means net cash flow from Operations.
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<PAGE>
1.18 "Operations" means the Exploration, Development and Mining
activities carried out under this Agreement.
1.19 "Venturer" and "Venturers" mean the persons or entities that from
time to time have Participating Interests in the Claims.
1.20 "Participating Interest(s)" means the percentage interest
representing the operating ownership interest of a Venturer in Assets, and all
other rights and obligations arising under this Agreement, as such interest may
from time to time be adjusted hereunder. Participating Interest shall be
calculated to three decimal places and rounded to two (e.g., 1.519% rounded to
1.52%). Decimals of .005 or more shall be rounded up to .01; decimals of less
than .005 shall be rounded down. The initial Participating Interest of the
Venturers are set forth in Section 6. 1.
1.21 "Products" means all ores, minerals, mineral resources and precious
metals (including, where appropriate, gold) produced from the Claims.
1.22 "Program" means a description of the Exploration, Development,
Mining and Milling to be conducted by the joint venture.
ARTICLE II
----------
REPRESENTATIONS AND WARRANTIES, TITLE TO ASSETS
-----------------------------------------------
2.1 Representations and Warranties. Each of Robin Schwarz, Aylward
Schwarz and S&S Mining and Can-Cal represents and warrants as follows:
(i) that S & S Mining and Can-Cal are each a corporation duly
incorporated and in good standing in its state of incorporation and that it is
qualified to do business and is in good standing in the state of its
incorporation and such other states where necessary in order to carry out the
purposes of this Agreement;
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(ii) that each has the capacity to enter into and perform this Agreement
and all transactions contemplated herein and that all corporate and other
actions required to authorize it to enter into and perform this Agreement have
been properly taken;
(iii) that this Agreement has been duly executed and delivered by it and
is valid, binding and full enforceable against it in accordance with its terms;
(iv) that there is no order, writ, injunction, judgment, award or decree
outstanding, and no legal, administration, arbitration or other proceeding
("Legal Proceeding") pending against it or involving any of its directors,
officers or employees or properties or assets, or to its knowledge, threatened
against it or any of its directors, officers or employees or properties or
assets, which Legal Proceedings, if determined adversely, would have a material
adverse effect on such Venturer or the Joint Venture;
(v) that (A) the execution, delivery and performance by it of this
Agreement and the consummation of the transactions contemplated hereby will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of any lien,
change or encumbrance upon any of its property or assets pursuant to the terms
of any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument by which it is bound or to which any of its property or assets is
subject, or will such action result in any violation of the provisions of its
charter or by-laws or of any statute or any order, rule or regulation of any
court or governmental agency or body of the United States, any State or any
political subdivision of either having jurisdiction over it or any of its
properties or assets; and (B) except what which has already been obtained by it,
no consent, approval, authorization, order, registration, filing, qualification,
license or permit of or with any such court or any such regulatory authority or
other such governmental agency or body in required to be obtained by or with
respect to it in connection with the execution, delivery and performance by it
of this Agreement and the consummation of the transactions contemplated hereby.
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2.2 Disclosures. Each of the Venturers represents and warrants that it
is unaware of any material facts or circumstances which have not been disclosed
in this Agreement, and which should be disclosed to the other Venturers in order
to prevent the representations in this Article II from being materially
misleading or which could foreseeable have a material adverse effect on the
business or assets of the Joint Venture.
ARTICLE III
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FORMATION, PURPOSES AND TERM
----------------------------
3.1 Formation of Joint Venture. Schwarz and Can-Cal hereby form a Joint
Venture for the purposes set forth below. All real and personal property
acquired by the Joint Venture after the date hereof shall be held in its name,
and not in the names of the Venturers, and no Venturer shall have any individual
ownership in such property except for its rights as a Venturer in the Joint
Venture.
3.2 Name. The name of this Joint Venture shall be the Schwarz - Can-Cal
Joint Venture or such other name as determined by the Management Committee. The
principal place of business of the Joint Venture shall be 3651 Lindell, Suite A,
Las Vegas, Nevada, or such other place as the Management Committee may
determine.
3.3 Purposes. This Agreement is entered into for the following purposes
and for no others, and shall serve as the exclusive means by which the
Venturers, or either of them, accomplish such purposes:
(a) to conduct Exploration on the Claims to ascertain whether
precious metals exist on the Claims;
(b) to evaluate the possible Development of the Claims;
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(c) to engage in Development and Mining Operations on the Claims and
milling of the ore to the maximum extent possible;
(d) to engage in marketing of precious metals recovered from the
Claims;
(e) to sell forward, purchase or borrow precious metals from such at
such prices as determined by the Management Committee;
(f) to borrow money necessary to finance the Joint Venture's
activities in accordance with a Program and as directed by the Management
Committee; and
(g) to perform any other operation or activity necessary,
appropriate, or incidental to any of the foregoing.
3.4 Effective Date and Term. The effective date of this Agreement shall
be the date first recited above. The term of this Agreement shall be for fifty
(50) years from the effective date, unless the Agreement is earlier terminated
as herein provided.
ARTICLE IV
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RELATIONSHIP OF THE VENTURERS
-----------------------------
4.1 Relationship; Indemnification.
(a) No Venturer in its capacity as a Venturer may, without the prior
authorization of the Management Committee or except as expressly provided
herein, take any act on behalf of the Joint Venture or affecting any of the
Assets.
(b) Each Venturer shall indemnify, defend and hold harmless the
other Venturer, its directors, officers, and employees from and against any and
all losses, claims, damages, liabilities and expenses (including reasonable
legal fees and expenses incurred as a result of any such claims
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made by third parties against such other Venturer) ("Losses") arising out of (i)
any act or any assumption of liability, by the indemnifying Venturer, or any of
its directors, officers or employees, done or undertaken, or apparently done or
undertaken, on behalf of the other Venturer, except for acts taken in good faith
pursuant to the authority expressly granted herein or otherwise agreed in
writing between the Venturers, (ii) any breach of this Agreement by the
indemnifying Venturer, or (iii) the wilful misconduct or negligence of the
indemnifying Venturer.
4.2 Federal Tax Elections and Allocations. The Venturers agree that
their relationship shall constitute a tax partnership within the meaning of
Section 761 (a) of the United States Internal Revenue Code of 1986.
4.3 State Income Tax. The Venturers also agree that, to the extent
possible under applicable law, their relationship shall be treated for state
income tax purposes in the same manner as it is for Federal income tax purposes.
4.4 Tax Returns. The Tax Matters Venturer, Can-Cal, shall prepare and
shall file, after approval by the Management Committee, any tax returns or other
tax forms required.
4.5 Other Business Opportunities. Subject to the provisions of Article
XI and Section 10.7, the parties hereto agree that any Venturer or its
Affiliates may engage in any other business or investment, whether or not the
same shall be in competition with the business or investment of the Joint
Venture or any other venture, including, without limitation, the acquisition of
property outside the Area of Interest at any time.
4.6 Termination of Rights to Properties. Except as otherwise provided in
this Agreement, neither Venturer shall permit or cause all or any part of its
interest in the Property and the assets to be sold, exchanged, encumbered,
surrendered, abandoned or otherwise terminated.
4.7 Implied Covenants. There are no implied covenants contained in this
Agreement other than those of good faith and fair dealing.
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ARTICLE V
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CONTRIBUTIONS BY VENTURERS; CERTAIN COVENANTS
---------------------------------------------
5.1 Venturers' Initial Contributions.
(a) Schwarz, as its Initial Contribution, hereby transfers to
Can-Cal (A) a 50% interest in all of its right, title and interest in and to the
Claims listed on Exhibit A hereto (subject to the payment of $100,000 by Can-Cal
of expenses relating to the purposes for which this Joint Venture was formed);
and (B) contributes to the Joint Venture its experience and expertise regarding
analyses, processes, formulas and all other information it has regarding the
Claims, to the Joint Venture. Schwarz will forthwith execute all documents
requested by Can-Cal to transfer a 50% interest in the Claims to Can-Cal.
(b) Can-Cal, as its Initial Contribution,
(i) hereby agrees to contribute $100,000 to the Joint Venture. All
such funds shall be spent for the purposes set forth herein and
no other.
(ii)Can-Cal hereby issues in Schwarz's name 500,000 Can-Cal common
shares. Those shares shall be held in escrow by Can-Cal pending
a determination by Can-Cal, in its sole discretion, whether
precious metals exist on the Claims and whether it is
economically feasible to produce them. Can-Cal shall make that
determination no later than September 30, 1997 and shall notify
Schwarz in writing within fourteen (14) days of its
determination. In the event Can- Cal determines that the
production of precious metals from the claims is not
economically feasible, Can-Cal shall return those shares from
escrow to Can- Cal and Schwarz shall have no claim or right to
any of those shares. In the event Can-Cal determines that
production of precious metals from the Claims is economically
feasible, Can-Cal shall deliver the 500,000 shares to Schwarz.
Schwarz represents that they are familiar with the business,
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operations and financial condition of Can-Cal and have worked
extensively with Can-Cal's management in connection with
Can-Cal's other properties and are familiar with them and that
they are acquiring those shares for investment purposes. Schwarz
shall execute all documents required by law in connection with
issuance of those shares, including, but not limited to,
investment representations and stop transfer instructions. In
addition to restrictions imposed by law restricting resale,
Schwarz agrees that the shares shall be, in no event, salable by
them earlier than in accordance with the following schedule:
May 5, 1998 200,000 shares
November 5, 1998 100,000 shares
May 5, 1999 100,000 shares
November 5, 1999 100,000 shares
Schwarz agrees not to sell any Can-Cal shares except in strict
compliance with federal and state securities laws.
5.2 Additional Cash Advances. In addition, Can-Cal agrees to loan the
joint venture $48,000, on the terms to be agreed upon, to be used for the
purposes set forth herein. Can-Cal reserves the right to loan the Joint Venture
additional funds, in its sole discretion, with the consent of the Management
Committee.
5.3 Schwarz's Option to Repurchase Can-Cal's 50% Interest.. In the event
Can-Cal determines by September 30, 1997 that production of precious metals from
the Claims is not economically feasible, Schwarz shall have the option to
purchase Can-Cal's 50% interest in the Claims by paying Can-Cal all funds paid
by Can-Cal for its 501/6 interest plus all funds advanced by Can-Cal to the
Joint Venture. Schwarz must exercise that option and make payment of the option
price in full no later than December 31, 1998. If Schwarz does not exercise the
option and pay the
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option price in full by December 31, 1998, it shall have no further rights with
respect to Can-Cal's 50% interest in the Claims.
5.4 Financing. After Can-Cal makes the balance of its Initial
Contribution in accordance with Section 5. 1 (b) herein, and makes the
determination that production of precious metals from the Claims is economically
feasible, Schwarz and Can-Cal through the Management Committee hereby agree to
use their best efforts to arrange with third-party lenders for working capital
financing for the Joint Venture as required to finance a Program.
5.5 Cash Calls. In the event the Joint Venture is unable to obtain
financing from third party lenders, the Management Committee shall make a
determination of whether or not to make a cash call on the Venturers. In the
event the Management Committee makes a cash call, the parties agree to
contribute their portion of any such cash call to the Joint Venture that
percentage of funds required equal to its Participating interest, as determined
by the Management Committee.
ARTICLE VI
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INTERESTS OF VENTURERS
----------------------
6.1 Initial Participating Interests. The Venturers shall have the
following initial Participating Interests subject to Can-Cal contributing the
balance of its Initial Contribution in accordance with Section 5. 1 (b)(i)
herein:
Schwarz 50%
Can-Cal 50%
6.2 Changes in Participating Interests. A Venturer's Participating
Interest may be changed as follows:
(a) As provided in Sections 10.2 and 10.3; or
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(b) By transfer by a Venturer of less than all its Participating
Interest in accordance with Article XII.
6.3 Elimination of Minority Interest. Upon the reduction of its
Participating Interest to less than ten percent (10%), a Venturer shall be
deemed to have withdrawn from this Agreement and shall relinquish its entire
Participating Interest. Such relinquished Participating Interest shall be deemed
to have accrued automatically to the other Venturer, who at its option, may
cause the interest of the diluted Venturer's Participating Interest to be
exchanged for a two percent (2 %) net profits interest of the Joint Venture. For
purposes of this Section 6.3, net profits is defined as gross revenue less
expenses, where expenses include but are not limited to mining, extraction,
haulage, processing, milling, marketing, severance and ad valorem taxes,
depreciation of Claims, plant and equipment and amortization of development and
exploration, using unit of production method of accounting.
6.4 Continuing Liabilities Upon Adjustments of Participating Interests.
Any reduction of a Venturer's Participating Interest Under Article X shall not
relieve such Venturer of its share of any liabilities to third persons, whether
it accrues before or after such reduction, arising out of Operations conducted
prior to such reduction, or of its other obligations under this Agreement. For
purposes of this Section, such Venturer's share of such liability shall be equal
to its Participating Interest at the time such liability was incurred. The
increased Participating Interest accruing to a Venturer as a result of the
reduction of the other Venturer's Participating Interest shall be free of
royalties, liens or other encumbrances arising by, through or under such other
Venturer, other than those existing at the time the Claims were acquired or
those to which both Venturers have given their written consent. An adjustment to
a Participating Interest need not be evidenced during the term of this Agreement
by the execution and recording of instruments, but each Venturer's Participating
Interest shall be shown in the books of the Joint Venture. Either Venturer, at
any time upon request of the other Venturer, shall execute and acknowledge
instruments necessary to evidence such adjustment in form sufficient for
recording in the jurisdiction where the Claims are located.
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ARTICLE II
----------
MANAGEMENT COMMITTEE
--------------------
7.1 Organization and Composition. The Venturers hereby establish a
Management Committee to determine overall policies, objectives, procedures,
methods and actions under this Agreement. The Management Committee shall consist
of two members, one member appointed by Schwarz and one member appointed by
Can-Cal. Each Venturer may appoint one or more alternates to act in his or her
absence as a regular member (including another member by proxy). Any alternate
so acting shall be deemed a member. Appointments shall be made or changed by
notice to the other Venturer. The initial members shall be Robin Schwarz
(appointed by Schwarz) and Ronald Sloan (appointed by Can-Cal).
7.2 Decisions. Each Venturer, acting through its appointed members,
shall have one vote on the Management Committee. Unless otherwise specifically
provided in this Agreement, the vote of the Venturer with a Participating
Interest over fifty percent (50%) shall determine the decisions of the
Management Committee, It shall also supervise and control all aspects of the
Joint Venture's business and operations including, but not limited to,
exploration, a development, haulage, processing, milling and marketing of the
ore on the Claims.
7.3 Meetings. The Management Committee shall hold regular meetings, at
least quarterly, at 3651 Lindell, Suite A, Las Vegas, Nevada, or at any other
mutually agreed upon place. The Secretary shall give five business days' notice
to the Venturers of such regular meetings. The initial regular meeting shall be
held on June 2, 1997. Additionally, either Venturer may call a special meeting
upon five business days' notice to the other Venturer. In case of emergency,
reasonable notice of a special meeting shall suffice. There shall be a quorum if
at least one member representing a Venturer is present. Each notice of a meeting
shall include an itemized agenda prepared by the Secretary in the case of a
regular meeting, or by the Venturer calling the meeting in the case of a special
meeting, but any matters may be considered with the consent of all Venturers.
The Secretary shall prepare minutes of all meetings and shall distribute copies
of such minutes of all meetings to the Venturers within 14 days after the
meeting. The minutes, when signed
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by all Venturers, shall be the official record of the decisions made by the
Management Committee and shall be binding on the Venturers. If personnel
employed in Operations are required to attend a Management Committee meeting,
reasonable out-of-pocket costs incurred in connection with such attendance shall
be an expense chargeable to the Joint Venture. All other expenses shall be paid
for by the Venturers individually.
7.4 Action Without Meeting. In lieu of participation at meetings in
person, any member of the Management Committee may participate by telephone. All
decisions made at such telephonic conferences will be immediately confirmed in
writing by the Venturers.
7.5 Matters Requiring Approval. The Management Committee shall have
exclusive authority to determine all management matters related to this
Agreement.
7.6 Appointment of Secretary. The Venturers may appoint a Secretary to
keep the books and records of the Joint Venture, give notices and perform such
other duties as the Management Committee may delegate.
7.7 Transactions with Affiliates. If the Joint Venture engages
Affiliates of either Venturer to provide services hereunder, it shall do so on
terms no less favorable to the Joint Venture than would be the case with
unrelated persons in arm's-length transactions.
ARTICLE VIII
------------
PROGRAMS
--------
8.1 Initial Program. The initial Program shall be adopted by the
Venturers within thirty (30) days of the date that Can-Cal makes its
determination pursuant to paragraph 5.1(b)(ii).
8.2 Operations Pursuant to Programs. Operations shall be conducted,
expenses shall be incurred, and Assets shall be acquired only pursuant to
approved Programs.
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8.3 Election to Venturers. Within five (5) days after the final vote
adopting a Program or such later date specified by the Management Committee, the
Venturers shall contribute to the Joint Venture amounts necessary, over and
above that which has been financed with the approval of the Management
Committee, to implement such Program in proportion to its respective
Participating Interest as of the beginning of the period covered thereby.
8.4 Deadlock on Proposed Programs. If the Venturers, acting through the
Management Committee, fail to approve a Program by the beginning of the period
to which the proposed Program applies, or fail to present Program, a Program
comparable to the last adopted Program shall automatically be adopted.
ARTICLE IX
----------
DISTRIBUTIONS
-------------
9.1 Distributions. Joint Venture cash, after due allowance for the cash
necessary for the operation of the Joint Venture business and requirements of
any agreements relating to indebtedness of the Joint Venture, shall be allocated
and distributed to the Venturers in accordance with their respective
Participating Interests, subject to the provisions set forth in Article X, in
aggregate amounts and at times determined by the Management Committee. Any
disproportionate distributions due to differing tax liabilities between the
Venturers shall be taken into account in future distributions, subject to other
provisions of this Article and Article X, in order to have aggregate
distributions to the Venturers in accordance with their respective Joint Venture
Interests. In making determinations regarding distributions, and subject to the
provisions of this Section, the Management Committee shall act consistently with
the principle that available cash should not be distributed to Venturers in any
year until annual operating costs and expenses for that year have been paid or
reserved against and only after an annual audit has been prepared of the
financial statements of the Joint Venture for that year. All funds in excess of
immediate cash requirements shall be invested in interest-bearing accounts for
the benefit of the Joint Account.
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ARTICLE X
---------
DISSOLUTION AND TERMINATION
---------------------------
10.1 Dissolution. The Joint Venture shall dissolve upon, but not before,
the first occur of:
(a) the expiration of the term of the Joint Venture;
(b) the sale, transfer, condemnation or destruction of all or
substantially all of the Claims, except for a sale or transfer in connection
with a sale-leaseback financing transaction or in which the Joint Venture
acquires a purchase money mortgage;
(c) the unanimous written consent of the Venturers;
(d) an election pursuant to Section 10.2(b) hereof to dissolve.
Except as provided herein, no Venturer shall have the right to terminate or
dissolve the Joint Venture.
10.2 Events of Default.
(a) If any of the following events occur:
(i) the entry of a decree or order by a court having
jurisdiction in the premises adjudging a Venturer a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of a Venturer or any of its Parents
under any bankruptcy, insolvency, or other similar state or federal law; or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Venturer or any of its Parents or of any substantial
part of the Claims of a Venturer or any of its Parents, or ordering the winding
up or liquidation of the affairs of a Venturer or any of its Parents,
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and the continuance of any such decree or order remains unstayed and in effect
for a period of ninety (90) consecutive days; or
(ii) the institution by a Venturer or its Parent of bankruptcy
proceedings or other proceedings to be adjudicated as bankrupt or insolvent, or
the consent by a Venturer or its Parent to the institution of bankruptcy or
insolvency proceedings against a Venturer or its Parent, or the filing of a
petition or answer of consent by a Venturer or its Parent seeking reorganization
or relief under any bankruptcy, insolvency, or other similar state or federal
law, or the consent by a Venturer or its Parent to the filing of such petition
or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or similar official) of the Venturer or its Parent or of any substantial part
of the Claims of a Venturer or its Parent, or the making by a Venturer or its
Parent or an assignment for the benefit of creditors, or the admission by a
Venturer or its parent in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by a Venturer or its Parent
in furtherance of any such action; or
(iii) any part of the Participating Interest of a Venturer is
seized by a creditor of such Venturer, and the same is not released from seizure
or bonded out within sixty (60) days from the date of notice of seizure; or
(iv) Can-Cal fails to make the balance of its Initial
Contribution or a Venturer fails to advance funds as required by Section 5.2, or
any other provisions of this Agreement, or to perform any other material
obligation imposed upon such Venturers under any agreement relating to borrowed
money of the Joint Venture or of such Venturer; or
(v) a Venturer fails to perform any of its obligations under
this Agreement or has breached any of the terms, conditions, representations,
warranties or covenants of this Agreement and any such failure or breach has
continued for more than thirty (30) days after written notice by Non-Defaulting
Venturer to the Venturer so failing to perform any of the obligations, terms,
conditions or covenants hereinabove cited, or which has breached, this
Agreement; then such
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Venturer shall be deemed to be in default hereunder and shall be referred to as
the Defaulting Venturer, and the other Venturer shall be referred to as the
Non-Defaulting Venturer.
Any Non-Defaulting Venturer shall have the right to give the
Defaulting Venturer a Notice of Default ("Notice") which shall be in writing,
shall set forth the nature of the Default and, if, applicable, the obligations
that the Defaulting Venturer has not performed, or is in breach of, and shall
set forth the date by which such Default must be cured, which date shall be ten
(10) days after receipt of the Notice if payment or money is required, or thirty
(30) days after receipt of the Notice for events other than defaults in the
payment of money; provided, however, that in the event of a nonmonetary default
if, within the thirty (30) day period following receipt of the Notice, the
Venturer in good faith commences to perform such obligation and cure such
Default and thereafter prosecutes to completion with diligence and continuity
the curing thereof and cures such default within a reasonable time, not to
exceed an additional sixty (60) days, then no Default shall have occurred and
the Venturer shall lose no rights hereunder, or such shorter period as may be
necessary in the good faith judgment of such Non-Defaulting Venturer to prevent
a default under any agreement for borrowed money to which the Joint Venture is a
party or to avoid jeopardizing its investment in the Joint Venture. If, within
the period specified in the Notice, the Defaulting Venturer cures such Default,
the Notice shall be inoperative and the Defaulting Venturer shall lose no rights
hereunder. If, within such specified period, the Defaulting Venturer does not
cure such Default, any Non-Defaulting Venturer at the expiration of such period,
shall have the rights hereinafter specified.
(b) Upon the occurrence and during the continuance of a Default and
the expiration of any applicable grace period, the Non-Defaulting Venturer shall
have the option, in its sole discretion, to:
(i) dissolve the Joint Venture; or
(ii) expel the Defaulting Venturer and purchase on a date
specified by such Non-Defaulting Venturer in a written notice, which date shall
be not more than one hundred
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twenty (120) days from the date of such notice, all of the Defaulting Venturer's
Participating Interest at a price which for such purposes shall be equal in
amount to the Defaulting Venturer's Participating Interest in the lesser of (A)
the fair market value of the Joint Venture on the date of such purchase, as
determined by an independent recognized expert selected by the Non-Defaulting
Venturer, or (B) the net book value of the Joint Venture, as determined by
generally accepted accounting principles as consistently applied by the Joint
Venture (excluding goodwill and any capital resulting from write-up of assets)
as shown on the Joint Venture books as of the date hereof but after deducting
any amounts payable to the Joint Venture by the Defaulting Venturer as of the
date of purchase;, any costs of remedying the Default and any damages or costs
to the Joint Venture or Non-Defaulting Venturer resulting from the Default.
Payment to the Defaulting Venturer may take the form of a ten (10) year note
with interest at the floating "Prime Rate" announced from time to time by The
Chase Manhattan Bank as in effect (the Prime Rate) and providing for ten (10)
equal principal payments on the first ten (10) anniversaries of the making of
such note, annual payment of interest in arrears, and a right to prepay all of
part of the note without penalty. In the event the Joint Venture suffers
liability in respect of a period prior to the expulsion of the Defaulting Joint
Venture which liability had not been accrued on the books of the Joint Venture
on the date the purchase price of the Defaulting Venturer's interest was
determined, the payment provided for above shall be reduced by an amount equal
to the Defaulting Venturer's Participating Interest in such liability; or
(iii) cure the Default, and the cost of such curing shall be
charged against the Defaulting Venturer's Capital Account and credited to the
Non-Defaulting Venturer's Capital Account, and the Participating Interest of the
Defaulting Venturer shall be decreased, and the Participating Interest of the
Non-Defaulting Venturer shall be increased in proportion to the foregoing
adjustments to the capital accounts; or
(iv) in the case of a breach of a Venturer's obligation under
Sections 5.1(b) or 5.2, exercise the remedies set forth in Section 10. 3.
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None of the foregoing options shall relieve the Defaulting
Venturer of its share of liabilities to third persons (whether such accrues
before or after such Default) arising out of Operations conducted prior to such
Default. For purposes of this Section, the Defaulting Venturer's share of such
liabilities shall be equal to its Participating Interest immediately prior to
Default.
10.3 Default in Making Contributions.
(a) If a Venturer Defaults in making a contribution or cash call
required pursuant to Sections 5.1(b) or 5.2, the Non-Defaulting Venturer may
advance the defaulted contribution on behalf of the Defaulting Venturer. The
Non-Defaulting Venturer may at its election treat such advance, together with
accrued interest, as a demand loan to the Defaulting Venturer bearing interest
from the date of the advance at the rate provided in Section 10.2(b)(ii). The
failure to repay said loan within thirty (30) days of notice of demand shall be
an event of Default pursuant to Article X. Each Venturer hereby grants to the
other a security interest in its rights under this Agreement and in its
Participating Interest in the Assets, and the proceeds therefrom, to secure any
loan made hereunder, including the interest thereon, reasonable attorney's fees
and all other reasonable costs and expenses incurred in enforcing such lien or
security interest, or both. Each Venturer hereby irrevocably appoints the other
its attorney-in-fact to execute, file and record all instruments necessary to
perfect or effectuate the provisions hereof. No later than the end of the fiscal
year in which such advance was made the Non-Defaulting Venturer shall be
entitled to receive the amount of such advance plus interest from the Defaulting
Venturer. At its election, the Non-Defaulting Venturer may, in lieu of receiving
repayment of the advance plus interest from the Defaulting Venturer, instruct
the Joint Venture to make a preferential cash distribution equal to the amount
of such advance plus a 10% rate of return. No distributions (other than amounts
required to pay income taxes on Joint Venture income if any cash is available)
shall be made to a Defaulting Venturer until such advance has been repaid. In
addition, the amount of such advance, plus interest thereon, shall be credited
to the Non-Defaulting Venturer's Capital Account. Upon return of such advance,
the amount of such repaid advance, plus interest or other return, shall be
deducted from the Non- Defaulting Venturer's Capital Account.
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(b) The Venturers acknowledge that if a Venturer Defaults in making
a contribution, or a cash call, or in repaying a loan, as required hereunder, it
will be difficult to measure the damages resulting from such Default whether or
not a Non-Defaulting Venturer makes an advance under Section 10.3(a). In the
event of such Default and in addition to, and not in lieu of, provisions of
Section 10.3(a), as reasonable liquidated damages, the Non-Defaulting Venturer
shall be entitled to receive a preferential cash distribution, in addition to
any distribution made under Section 9. 1, equal to the Adjusted Percent of the
Joint Venture's Net Proceeds for that year (which distribution shall be paid out
of the Defaulting Venturer's share of Joint Venture Net Proceeds) and each
additional year for which the advance referred to in Section 10.3(a) is
outstanding. Any such distribution shall be made at the end of the fiscal year
in which any such advance has been outstanding. For purposes of this Section,
the "Adjusted Percent" means a percentage equal to the excess of (a) the
quotient calculated by dividing (i) the sum of (x) the value of the
Non-Defaulting Venturer' s initial contribution under Section 5.1, and (y) the
total of all of the Non-Defaulting Venturer's contributions under Sections 5.2
(including amounts advanced pursuant to Section 10.3(4);) by (ii) the sum of (x)
and (y) above for all Venturers (with amounts advanced by a Venturer; pursuant
to Section 10.3 (a) being treated as a contribution of such Venturer); and then
multiplied the result by one hundred, over (b) fifty (50); provided, however,
that in no event shall the Adjusted Percent exceed ten (10). Such distribution
shall not be deemed a repayment of the advance under Section 10.3(a).
10.4. Continuing Obligations. On dissolution of this Agreement under
Section 10.1, the Venturers shall remain liable for continuing obligations
hereunder until final settlement of all accounts and for any liability, whether
it accrues before or after termination, if it arises out of Operations during
the term of the Agreement.
10.5 Disposition of Assets on Termination.
(a) Upon the dissolution of the Joint Venture pursuant to Section
10.1 the liquidating trustee shall take all action necessary to wind up the
activities of the Joint Venture, and
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all costs and expenses incurred in connection with the termination of the Joint
Venture shall be expenses chargeable to the Joint Venture. Any Venturer that has
a negative Capital Account balance when the Joint Venture is terminated shall
contribute to the Assets of the Joint Venture an amount sufficient to raise such
balance to zero. The Assets shall first be paid, applied, or distributed in the
following order of priority to the extent available:
(i) first, to the payment of any debts and liabilities of the
Joint Venture to persons who are not Venturers which shall then be due and
payable (other than liabilities expressly assumed by one of the Venturers
pursuant hereto);
(ii) second, to the Venturers pro-rata until each shall have
received the outstanding principal of, and accrued and unpaid interest on, any
loans made to the Joint Venture;
(iii) third, to the establishment of any reserve which the
Management Committee or liquidating trustee deems necessary in its sold
discretion to provide for any contingent or unforeseen liabilities or
obligations of the Joint Venture (other than liabilities expressly assumed by
one of the Venturer's pursuant hereto). (At the expiration of such period of
time as the Management Committee or liquidating trustee deems advisable, the
balance remaining in any such reserve after payment of any such liabilities and
obligations shall be distributed in the manner hereinafter set forth in this
Section;
(iv) fourth, to the Venturers pro rata until each shall have
received all accrued and unpaid interest on any additional capital contributions
to the Joint Venture made pursuant to Section 10.3(b) hereof;
(v) fifth, to the Venturers in an amount equal to the positive
balances in their respective Capital Accounts on the date of distribution;
provide, however, that in the event there shall be insufficient funds to repay
in full such Capital Accounts, payment shall be made to Venturers with the
greatest balances in their capital accounts until capital accounts are all in
the same ratio as their respective Participating Interests; and
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(vi) the balance, if any, shall be distributed to the Venturers
in accordance with their respective Participating Interests in the Joint
Venture.
(b) No right, power or remedy conferred upon the Venturers or the
Joint Venture with respect to any Defaulting Partner under this Article shall be
inclusive, and each such Venturer under this Article shall be exclusive, and
each such right, power or remedy shall be cumulative and in addition to every
other right, power or remedy whether conferred by this Agreement or hereafter
available at law or equity or by statute or otherwise. No course of dealing
between the Venturers and any Defaulting Venturer and no delay in exercising any
right, power or remedy conferred in this Article or now or hereafter available
at law or in equity or by statute or otherwise, shall operate as a waiver or
otherwise prejudice any such right, power or remedy.
(c) No Venturer shall be entitled to withdraw any part of its
capital contributions to the Joint Venture, or to receive any distribution from
the Joint Venture, except as expressly provided in this Agreement.
10.6 Withdrawal. At any time after the third anniversary of the date of
this Agreement, a Venturer may elect to withdraw by giving written notice to the
other Venturer of the effective date of withdrawal, which shall be the later of
the end of the then current Program or at least thirty (30) days after the date
of the notice. Upon receipt of such notice the other Venturer may elect at any
time to either (a) dissolve the Joint Venture; or (b) purchase, on a date
specified by the non- withdrawing Venturer, all of the withdrawing Venturer's
Participating Interest at a price which for such purposes be equal in amount to
the withdrawing Venturer's Participating Interest in the lesser of (x) the fair
market value of the Joint Venture, as determined by an independent recognized
expert selected by the non-withdrawing Venturer, or (y) the net book value of
the Joint Venture, as determined by generally accepted accounting principles as
consistently applied by the Joint Venture (excluding goodwill and any capital
resulting from write-up of assets) as shown on the Joint Venture books as of the
date hereof but after deducting any amounts payable as of the date of withdrawal
to the Joint Venture by the withdrawing Venturer.
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10.7 Non-Compete Covenants. A withdrawing Venturer shall not directly or
indirectly acquire any interest in Claims within the Area of Interest for twelve
(12) months after the date of withdrawal. If a withdrawing Venturer, or the
Affiliate of a withdrawing Venturer, breaches this Section, such Venturer or
Affiliate shall be obligated to offer to convey to the non-withdrawing Venturer,
without cost, any such Claims or interest acquired in such breach. Such offer
shall be made in writing and can be accepted by the non-withdrawing Venturer at
any time within fortyfive (45) days after it is received by such non-withdrawing
Venturer.
ARTICLE XI
----------
ACQUISITIONS WITHIN AREA OF INTEREST
------------------------------------
11.1 General. Any interest or option to acquire any interest in real
property, including mining claims, within the Area of Interest owned on the date
hereof or acquired thereafter during the term of this Agreement by or on behalf
of a Venturer or any Affiliate shall, except as provided in this Article, be
included in the Claims and shall be subject to the terms and provisions of this
Agreement.
11.2 Notice to Nonacquiring Venturer. Within sixty (60) days after the
acquisition of any interest or the option to acquire any interest in real Claims
wholly or partially within the Area of Interest, the acquiring Venturer shall
notify the other Venturer of such acquisition. The acquiring Venturer's notice
shall describe in detail the acquisition, the lands and minerals covered
thereby, the cost thereof, and the reasons why the acquiring Venturer believes
that the acquisition of the interest is in the best interests of the Venturers
under this Agreement. In addition to such notice, the acquiring Venturer shall
make any and all information concerning the acquired interest available for
inspection by the other Venturer.
11.3 Option Exercised. If, within thirty (30) days after receiving the
acquired Venturer's notice, the other Venturer notifies the acquiring Venturer
of its election to accept a proportionate interest in the acquired interest
equal to its Participating Interest, the acquiring Venturer shall convey to the
other Venturer, by special warranty deed, such a proportionate undivided
interest
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therein. The acquired interest shall become a part of the Claims for all
purposes of this Agreement immediately upon the notice of such other Venturer's
election to accept the proportionate interest therein. Such other Venturer shall
promptly pay to the acquiring Venturer its proportionate share of the latter's
actual out-of-pocket acquisition costs.
11.4 Option Not Exercised. If the other Venturer does not give such
notice within the thirty (30) day period set forth above, it shall have no
interest in the acquired interest, and the acquired interest shall not be a part
of the Claims or be subject to this Agreement.
ARTICLE XII
-----------
TRANSFER OF INTEREST
--------------------
12.1 General. A Venturer shall have the right to transfer, grant,
assign, encumber, pledge or otherwise commit or dispose of ("transfer") to any
third party all of any part of its interests in or to this Agreement, its
Participating Interest, or the Assets solely as provided in this Article.
12.2 Limitations on Free Transferability. The transfer right of a
Venturer in Section 12.1 shall be subject to the following terms and conditions:
(a) No transferee of all or part of the interests of a Venturer
in this Agreement, any Participating Interest, or the Assets shall have the
rights of a Venturer unless and until the transferring Venturer has provided to
the other Venturer notice of the transfer, and the transferee, as of the
effective date of the transfer, has committed in writing to be bound by this
Agreement to the same extent and nature as the transferring Venturer; and,
except as provided in Sections 12.2(g) and 12.2(h), the transfer, as of the
effective date of the transfer, has committed in writing to be bound by this
Agreement to the same extent and nature as the transferring Venturer.
(b) No Venturer, without the consent of the other Venturer, shall
make a transfer which shall cause termination of the tax partnership established
by the provisions of Section 4.2;
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(c) No transfer permitted by this Article shall relieve the
transferring Venturer of its share of any liability, whether accruing before or
after such transfer, which arises out of Operations conducted prior to such
transfer;
(d) The transferring Venturer and the transferee shall bear all
tax consequences of the transfer;
(e) In the event of a transfer of less than all of a
Participating Interest, the transferring Venturer and its transferee shall act
and be treated as one Venturer;
(f) No Venturer shall transfer any interest in this Agreement or
the Assets except by transfer of part or all of its participating Interest;
(g) If the transfer is the grant of a security interest by
mortgage, deed of trust, pledge, lien or other encumbrance of any interest in
this Agreement, any Participating Interest or the Assets to secure a loan or
other indebtedness of a Venturer in a bona fide transaction, such security
interest shall be subordinate to the terms of this Agreement and the rights and
interests of the other Venturer hereunder. Upon any foreclosure or other
enforcement of rights in the security interest, the acquiring third party shall
be deemed to have assumed the position of the encumbering Venturer with respect
to this Agreement and the other Venturer, and it shall comply with the terms and
conditions of Article XIII;
(h) If a sale or other commitment or disposition of Products or proceeds
from the sale of Products by a Venturer upon distribution to it pursuant to
Section 9.1 creates in a third party a security interest in Products or proceeds
therefrom prior to such distribution, such sales, commitment or disposition
shall be subject to the terms and conditions of this Article;
(i) If, contrary to Section 12.2(b), a transfer is made which causes
termination of the tax partnership established by Section 4.2, the transferring
Venturer shall indemnify, defend and hold
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harmless the other Venturer from and against any and all loss, cost, expense or
damage arising from such termination;
(j) Such transfer shall be subject to a preemptive right in the
other Venturer as provided in Section 12.3; and
(k) No transfer may be made without the consent of the other
Venturer.
12.3 Preemptive Right. Except as otherwise provided in Section 12.4, if
a Venturer desires to transfer all or any part of its interest in this
Agreement, and Participating Interest, or the Assets, the other Venturer shall
have a preemptive right to acquire such interests as provided in this Section on
substantially the same terms and conditions as agreed to by any proposed
transferee.
12.4 Exceptions to Preemptive Right and Transfer Restrictions. Sections
12.3 and 12.2(k) shall not apply to the following transfers:
(a) (i) Incorporation of a Venturer, or corporate merger,
consolidation, amalgamation or reorganization of a Venturer by which the
surviving entity shall possess substantially all of the stock, or all of the
Claims rights and interests, and be subject to substantially all of the
liabilities and obligations of that Venturer or (ii) transfer to an Affiliate,
provided that consent is obtained, which consent shall not be unreasonably
withheld; and
(b) The grant by a Venturer of a security interest in any interest
in this Agreement, any Participating Interest, or the Assets by mortgage, deed
of trust, pledge, lien or other encumbrances with the written consent of the
Management Committee.
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ARTICLE XIII
------------
GENERAL PROVISIONS
------------------
13.1 Notices. All notices, payments and other required communications
("Notices") to the Venturers or the Management Committee members shall be in
writing and shall be given (i) by personal delivery to the Venturer, or (ii) by
electronic communication, with a confirmation sent by registered or certified
mail return receipt requested, or (iii) by registered or certified mail return
receipt requested. Notices shall be addressed as follows:
If to Schwarz (or its member representatives on the Management
Committee):
Robin Schwarz
16008 Ash Street
Hesperia, CA 92345
If to Can-Cal (or its member representatives on the Management
Committee):
Ronald Sloan
110 - 5769 201 A Street
Langley, B.C., Canada V3A 8H9
All notices shall be effective if sent to the address specified above
and shall be deemed delivered (i) if by personal delivery on the date of
delivery, (ii) if by electronic communication on the next business day following
receipt of the electronic communication, and (iii) if solely by mail on the next
business day after actual receipt. A Venturer may change its address from time
to time for the purposes hereof by written notice to the other Venturer.
13.2 Waiver. The failure of a Venturer to insist on the strict
performance of any provision of this Agreement or to exercise any right, power
or remedy upon a breach hereof shall not constitute a waiver of any provision of
this Agreement or limit the Venturer's right thereafter to enforce any provision
or exercise right.
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13.3 Modification. No modification or amendment of this Agreement shall
be valid unless made in writing and duly executed by the Venturers.
13.4 Force Majeure. The obligations of a Venturer shall be suspended to
the extent and for the period that performance is prevented by any cause,
whether foreseeable or unforeseeable, beyond its reasonable contract, including,
without limitation, labor disputes (however arising and whether or not employee
demands are reasonable or within the power of the Venturer to grant); acts of
God; laws, regulations, orders, proclamations, instructions or requests of any
government or governmental entity; judgments or orders of any court; inability
to obtain on reasonably acceptable terms any public or private license, permit
or other authorization; curtailment or suspension of activities to remedy or
avoid an actual or alleged, present or prospective violation of federal, state
or local environmental standards; acts of war or conditions arising out of or
attributable to war, whether declared or undeclared; riot, civil strife,
insurrection or rebellion; fire, explosion, earthquake, storm, flood, sink
holes, drought or other adverse weather condition; delay or failure by suppliers
or transporters of materials, parts, supplies, services or equipment or by
contractors' or subcontractors' shortage of, or inability to obtain, labor,
transportation, materials, machinery, equipment, supplies, utilities or
services; accidents; breakdown of equipment, machinery or facilities; or any
other cause whether similar or dissimilar to the foregoing. The affected
Venturer shall promptly give notice to the other Venturer of the suspension of
performance, stating therein the nature of the suspension, the reasons therefor,
and the expected duration thereof. The affected Venturer shall resume
performance as soon as reasonably possible.
13.5 Governing Law. Except as otherwise specifically provided in Article
XIV, this Agreement shall be governed by and interpreted in accordance with the
internal laws but not the laws of conflict of the State of Nevada.
13.6 Rule Against Perpetuities. Any right or option to acquire any
interest in real or personal Claims under this Agreement must be exercised, if
at all, so as to vest such interest in the acquirer within twenty-one (21) years
after the effective date of this Agreement.
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13.7 Further Assurance. Each of the Venturers agrees that it shall take
from time to time such actions and execute such additional instruments as may be
reasonably necessary or convenient to implement and carry out the intent and
purpose of this Agreement.
13.8 Survival of Terms and Conditions. The following Sections shall
survive the termination of this Agreement to the full extent necessary for their
enforcement and the protection of the Venturers in whose favor they run:
Sections 4.1(b), 6.4, 10.3, 10.4, 10.5 and 10.6.
13.9 Entire Agreement; Successors and Assigns. This Agreement contains
the entire understanding of the Venturers and supersedes all prior agreements
and understandings between the Venturers relating to the subject matter hereof.
This Agreement shall be binding upon and inure to the benefit of the respective
successors and permitted assigns of the Venturers.
13.10 Validity and Severability. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under the present or future laws
effective during the term of this Agreement, such provision shall be fully
severable; this Agreement shall be construed and enforced as if such illegal,
invalid, or unenforceable provision had never comprised a part of this
Agreement; and the remaining provisions of this Agreement shall remain in full
force and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance from this Agreement. Furthermore, in lieu of such
illegal, invalid, or unenforceable provision, there shall be added automatically
as a part of this Agreement a provision similar in terms to such illegal,
invalid or unenforceable provision.
13.11 Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute but one and the
same instrument.
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ARTICLE XIV
-----------
RESOLUTION OF DISPUTES; ARBITRATION
-----------------------------------
14.1 Subject of Arbitration. In the event of disagreement between the
Venturers with respect to any question of fact involved in the application of
this Agreement or of any action of the Management Committee, or the
interpretation of any provision of this Agreement or any action of the
Management Committee (whether legal or factual), the matter involved in the
disagreement shall, upon demand of any Venturer, be submitted to arbitration in
the manner hereinafter provided. Submission of a matter to arbitration, as
hereinafter provided, shall be a condition precedent to any right to institute
proceedings at law or in equity concerning such matter, except for injunctive or
other provisions relief pending the arbitration of a matter subject to
arbitration pursuant to this Agreement.
14.2 Agreement to Arbitrate. The Venturers will make every responsible
effort to resolve disputes, claims and controversies through decisions of the
Management Committee prior to any such dispute, claim or controversy reaching a
state that required implementation of this Article for resolution. However,
should any controversy arise between or among the Venturers as to which the
Venturers are unable to effect a satisfactory resolution and which, under the
terms and provisions of this Agreement may be submitted to arbitration, such
controversy shall be submitted to arbitration in accordance with the terms and
provisions of this Article, and in accordance with the rules of the American
Arbitration Association (or any successor organization).
14.3 Submission to Arbitration and Selection of Arbitrators. A Venturer
desiring to submit to arbitration any such controversy shall furnish its demand
for arbitration in writing to the other Venturer, which demand shall contain a
brief statement of the matter if controversy, as well as a list containing the
names of three (3) suggested arbitrators from which list, or from other sources,
all of the Venturers shall choose one (1) mutually acceptable arbitrator. If the
Venturers are unable to agree upon the identity of a single arbitrator, within
ten (10) days from receipt of such demand, each Venturer, within a period of
five (5) additional days, shall name one (1) arbitrator by
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written notice to the other Venturer. Within ten (10) days after this notice,
the two (2) arbitrators so named shall choose a third arbitrator. If any
Venturer fails to name an arbitrator within the specified five (5) day period or
if the two arbitrators chosen by the Venturers fail to select a third arbitrator
within the ten (10) days period, then either Venturer, on behalf of and on
notice to the other Venturer, may request appointment by the American
Arbitration Association (or any organization successor thereto) in accordance
with its rules then prevailing of the required additional arbitrators. If the
American Arbitration Association (or such organization successor thereto) should
fail to appoint the necessary arbitrator(s) within fifteen (15) days after such
request is made, then either Venturer may apply, on notice to the other
Venturer, to a court in Nevada for the appointment of such necessary additional
arbitrators. Each of the arbitrator(s) chosen or appointed pursuant to this
Section shall be a person having at least ten (10) years experience in the
United States in a profession or professions related to the subject matter
involved in the dispute and shall not be a past or present officer, director or
employee of, or have any material interest in, any Venturer or its Affiliate.
14.4 Arbitration Procedure. Each Venturer shall furnish the arbitrator
or arbitrators and all other Venturers with a written statement of matters it
deems to be in controversy for purposes of the arbitration procedures. Such
statement shall also include all arguments, contentions and authorities which it
contends substantiate its position. Hearings may be scheduled by the arbitrator
or arbitrators, provided that if any such hearings are to be held, they shall be
scheduled no later than ten (10) days following the appointment of such
arbitrator or arbitrators. If only one (1) arbitrator is appointed pursuant to
Section 14.3 hereof, such arbitrator shall render his decision and award as soon
as possible but no later than thirty (30) days after the conclusion of any
hearings before such arbitrators. Any such hearings shall be held in Las Vegas,
Nevada or such other location as the parties may agree upon. If, however, three
(3) arbitrators are appointed, they shall render their decision and award upon
the concurrence of at least two (2) of their number, as soon as possible but not
later than thirty (30) days after the conclusion of any hearings before such
arbitrators. The decision and award shall in either case be in writing and
counterpart copies thereof shall be delivered to each of the Venturers. Such
decision shall be based solely upon the written arguments
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and contentions coupled in appropriate cases with evidence and/or legal
authorities, submitted by each Venturer. Except with the consent of each
Venturer, the arbitrator shall not retain or consult any experts in arriving at
the decision. In rendering such decision and award, the arbitrator(s) shall not
add to, subtract from or otherwise modify the provisions of this Agreement. Each
Venturer agrees that judicial judgment may be held on the decision and award of
the arbitrator(s) so rendered and may be enforced in accordance with the laws of
the State of Nevada.
14.5 Successor Arbitrators. Notwithstanding the above, in the event any
arbitrator appointed by a Venturer dies, refuses to act, or becomes incapable of
acting, then such Venturer shall appoint a successor arbitrator within five (5)
days of notice of said disability. In the event such Venturer fails to appoint
the required successor within such time, the other Venturer, on notice, may
apply to a court in Nevada for the appointment of such necessary arbitrator. If
a third arbitrator dies, refuses to act, or become incapable of acting, then a
successor arbitrator shall be chosen pursuant to Section 14.3 hereof.
14.6 Cost of Arbitration. Each Venturer shall bear the expense of the
arbitrator appointed by or for such Venturer, its own counsel, experts and
presentation of proof. The Venturers shall share equally the expense of the
additional arbitrators (or the expense of the single arbitrator if only one (1)
arbitrator is appointed), and all other expenses of the arbitration.
14.7 Submission to Jurisdiction. Schwarz and Can-Cal hereby irrevocably
submit to the non-exclusive jurisdiction of the courts of the State of Nevada
and/or the federal courts in the District of Nevada, over any suit, action or
proceeding to enforce an arbitration award (each a "Proceeding"). Each Venturer
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such Proceeding
brought in any such court and any claim that any such Proceeding brought in such
court has been brought in an inconvenient forum. Each Venturer agrees that a
final judgment in any such Proceeding brought in such a court shall be
conclusive and binding upon it. Each Venturer agrees not to commence any
Proceeding in any jurisdiction other than Nevada.
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14.8 Choice of Forum. Schwarz and Can-Cal hereby agree that the choice
of judicial forum for all matters affecting this Agreement shall be the state or
federal courts located in the State of Nevada, except to enforce an arbitration
award in such circumstances as the court in Nevada may not have subject matter
jurisdiction to enforce the award. Each Venturer irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of venue of any such matter brought in any such court and any
claim that any such matter brought in such court has been brought in an
inconvenient forum. Nothing in this Section shall be deemed to contravene
Section 14. 1.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
/s/ Robin Schwarz
-----------------------------------------
Robin Schwarz
/s/ Aylward Schwarz
-----------------------------------------
Aylward Schwarz
S & S MINING
By: /s/ Robin Schwarz
--------------------------------------
CAN-CAL RESOURCES, LTD
By: /s/ R. D. Sloan
--------------------------------------
Ronald Sloan, President
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EXHIBIT A
County Document # Name of Claim CAMC
- ----------------- ------------- ----
19960300074 Aylward 1 104432
19960300074 Aylward 2 104433
19960300074 Aylward 3 104434
19960300074 Lori Lee 104438
19960300074 Ruth 1 133937
19960300074 Ruth 2 133938
19960300074 Ruth 3 133939
19960300074 Mill Site 171940
19960457449 S&S Mining Placer #1 271288
19960457450 S&S Mining Placer #2 271289
19960457451 S&S Mining Placer #3 271290
19960457452 S&S Mining Placer #4 271291
19960457453 S&S Mining Placer #5 271292
19970136121 S&S Mining, Inc. Placer #9 271524
19970136122 S&S Mining, Inc. Placer #10 271525
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EXHIBIT 10.1
MINING LEASE AGREEMENT
THIS MINING LEASE AGREEMENT ("Lease") is made and entered into this 1
day of May , 1998 (the "Effective Date"), by and between CAN-CAL RESOURCES,
LTD., a Nevada
corporation ("Lessor") and TWIN MOUNTAIN ROCK VENTURE, a California general
partnership ("Lessee").
PRELIMINARY STATEMENT. Lessor is the owner of certain real property and
all mineral rights with respect thereto located in San Bernardino County,
California. Lessee desires to lease such real property from the Lessor together
with the appurtenances, rights, interest, easements and privileges pertaining
thereto for such purposes and upon such terms and conditions as specified in
this Lease.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and such other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. Grant. Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, that certain real property situated in San Bernardino County,
California, as more specifically described on Exhibit A attached hereto,
together with all appurtenances, easements and privileges pertaining thereto
(the "Leased Premises"), solely for the purpose of removing volcanic cinders
("Material") and certain rights associated thereto, in accordance with the terms
of, and as specified, in this Lease.
2. Amount of Material . Lessor represents and warrants that it will make
available to Lessee 600,000 tons of Finished Material during the Initial Term
(the "Initial Amount"). Lessor further represents and warrants that it will make
available to Lessee 600,000 tons of Finished Material during the Additional Term
(the "Additional Amount"). For purposes hereof, "Finished Material" shall mean
Material sold, available for sale, or used in block material by or on behalf of
Lessee.
3. Use. Lessee shall designate the Portion of the Leased Premises from
which it desires to remove Material (the "Designated Portion"), which shall be
reasonably calculated to enable Lessee to process the Initial Amount and the
Additional Amount. Lessee shall have the use of and right and easement to the
Leased Premises for the purpose of mining and removing Material from the
Designated Portion. Lessee's rights hereunder shall be exclusive except to the
extent of Lessor's rights reserved in Paragraph 9 hereof in connection with
Lessee's rights granted herein, Lessee shall have and may exercise the following
rights: (a) the right to enter into possession of the Leased Premises, and
during the term of this Lease, to remain in possession thereof; (b) the right to
use the Leased Premises, including the right to disturb so much of the Leased
Premises as Lessee may require to conduct its operation on the Leased Premises
and the use of any surface or underground
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water or water rights occurring therein or appurtenant to the Leased Premises;
(c) the right to mine, extract, and remove from the Designated Portion the
Material in any manner deemed necessary or convenient by Lessee, whether by
surface or other mining methods; (d) the right to crush, stockpile, store, bag,
and otherwise prepare for market all Material; (e) the right to construct, use,
and operate on the Leased Premises structures, excavations, roads, equipment,
and other improvements and facilities necessary for Lessee for full use and
enjoyment of the Leased Premises; (f) rights of surface access for persons,
equipment, supplies, utilities, and water as may be necessary or convenient for
the conduct of Lessee's operations, including reasonable access under, upon, and
across any other intervening or contiguous land owned or controlled by Lessor or
over which Lessor may have dominion or control; (g) the right to temporarily
store on or in the Leased Premises those minerals, water, byproduct, or
materials produced from the Leased Premises; and (h) all things which in
Lessee's judgment with the consent of Lessor (which shall not be unreasonably
withheld) are reasonably necessary or incidental to such operations. Lessee's
use of and rights to Leased Premises shall not include the right to remove or
extract precious metals.
4. Commencement of Operations; Removal of Material. Lessee shall give
Lessor three (3) months written notice prior to the commencement of operations
on the Leased Premises. Such notice shall state the amount of Material
anticipated to be removed, the period of time during which it is anticipated
such removal will occur and the means that will be utilized to effect such
removal. Lessor shall make all arrangements necessary to permit Lessee to remove
the Material.
5. Term and Duration. (a) The initial term of this Lease (the "Initial
Term") shall be the period commencing on the Effective Date and terminating on
the earlier of: (i) ten (10) years from the Effective Date or (ii) the date upon
which Lessee exhausts the Initial Amount.
(b) If Lessee is not then in default under this Lease, Lessee shall have
the option to extend the Initial Term of this Lease for one (1) additional
period commencing on the date of expiration of the Initial Term and terminating
on the earlier of: (i) ten (10) years from the date of expiration of the Initial
Term or (ii) the date upon which Lessee has exhausted the Additional Amount (the
"Additional Term"), upon all of the terms and conditions of this Lease. Lessee
may exercise such option by giving written notice to Lessor prior to the
expiration of the Initial Term. If Lessee is entitled to and does exercise such
option, then this Lease automatically shall be extended for the Additional Term
and no further documentation shall be required.
(c) Lessee shall have a period of three (3) months from the expiration
of the term of this Lease to remove all of its personal property and equipment
from the Leased Premises and to comply with the terms of the Reclamation Plan
filed by Lessee with San Bernardino County.
6. Royalty Payments. (a) Subject to the provisions of this Paragraph 6,
during the Initial Term, Lessee shall pay Lessor a minimum annual royalty of
$22,500 ("Minimum Royalty") for each twelve (12) month period ("Year")
commencing on the Effective Date. The Minimum Royalty for the Additional Term
shall be $27,500 a Year. The Minimum Royalty shall be payable by Lessee in
advance of the commencement of each applicable Year. The
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Minimum Royalty shall be credited as payment on account of all Production
Royalty payments to be paid by Lessee to Lessor hereunder.
(b) Subject to the provisions of this Paragraph 6, during the Initial
Term and the Additional Term, Lessee shall pay Lessor a monthly production
royalty ("Production Royalty") for all Material mined, processed, consumed and
sold or removed from the Leased Premises, during such month, calculated as
follows: (i) the greater of 5% of gross sales, F.O.B. Pisgah Crater, or $.80 per
ton for Material used for block material; and (ii) 10% of gross sales, F.O.B.
Pisgah Crater, for all other Material. Lessee shall receive a credit against the
amount of any Production Royalty payment payable hereunder in an amount equal to
the amount of any Minimum Royalty payments which have not previously been
credited against Production Royalty payments.
(c) Lessee shall install and maintain a certified scale to weigh all
Material removed from the Leased Premises. Scale tickets or other automatic
means shall be used to record the net weight of all such Material removed. For
the purpose of permitting verification by Lessor of any amounts due hereunder,
Lessee will keep and preserve supporting documentation and records which shall
disclose in reasonable detail all information required to permit Lessor to
verify the Production Royalty calculations under this Lease. Upon reasonable
advance notice to Lessee, Lessor or its agents shall have the right, during
Lessee's regular business hours, to examine or audit such supporting
documentation and records. Lessee shall retain such supporting documentation and
records for a period of one (1) year following the termination or expiration of
this Lease.
(d) On or before the 25th day of the month following each full month of
this Lease, Lessee shall forward to Lessor, at the address herein given, or at
such other place or places as shall from time to time designate in writing,
monthly reports indicating thereon the quantity of Material sold or removed from
the Leased Premises during the previous month, as well as a computation of the
Production Royalty due thereon, and a check in payment of the total amount due
thereon.
7. Taxes and Utilities. (a) Lessor shall pay, prior to their
delinquency, all real taxes and assessments which may be levied or assessed by
any lawful authority against the Leased Premises with respect to any period
wholly or partially within the term of this Lease. Lessee shall pay prior to
delinquency all personal property taxes applicable to Lessee's personal property
fixtures, furnishing and equipment located on the Leased Premises, as well as
all production or severance taxes computed or based upon production or removal
by Lessee of Materials from the Leased Premises. If Lessee shall in good faith
desire to contest the validity or amount of any tax, assessment, levy, or other
governmental charge herein agreed to be paid by Lessee, Lessee shall be
permitted to do so, and to defer payment of such tax or charge, until final
determination of the contest. If the outcome of such contest is unfavorable to
Lessee, Lessee shall immediately pay all taxes, charges, interest and penalties
determined to be due.
(b) Lessee agrees to pay all expenses for heat, electricity, lighting,
telephone, waste management fees and charges for water assessed against the
Leased Premises after Lessee takes
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possession of the Leased Premises, arising from Lessee's activities thereon, at
such time as said charges become due.
8. Permits. (a) Lessee shall use its good faith efforts to cause its
Mining Permit, Reclamation Plan and Air Quality Permits to be issued in the
names of Lessor and Lessee; provided, however, that the parties agree and
acknowledge that such permits are only applicable for activities associated with
mining and production of Material. Lessee shall pay for any fees or costs
associated with obtaining and maintaining such permits, except that Lessor shall
be solely responsible for any additional incremental fees or costs attributable
to Lessor's operations. Lessor shall be responsible for posting any required
reclamation bond related to its activities. Lessor shall be solely responsible
for obtaining any required permits or approvals necessary for Lessor to conduct
any other operations.
(b) In the event that Lessee's permits are terminated or not renewed as
a result of Lessor's actions, Lessee may, in its sole discretion, either (i)
terminate this Lease with no further obligations hereunder; or (ii) suspend the
term of this Lease until Lessee reinstates such permits, up to a maximum period
of two (2) years. During such suspension period, Lessee shall have no obligation
to make any Minimum Royalty payments. In the event Lessee's permits are not
reinstated prior to the expiration of such two (2) year period, or in the event
Lessee notifies Lessor that it has abandoned its efforts to reinstate such
permits, this Lease shall terminate, and Lessee shall have no further
obligations hereunder. In the event that Lessee reinstates such permits within
such two (2) year period, the applicable term of this Lease shall be extended
for the period of suspension.
9. Lessor's Reserved Rights. (a) The rights of Lessee granted hereby
shall be subject to Lessor's reserved concurrent right to use the Leased
Premises for the purpose of exploration, development and mining of Material and
the use of any surface or underground water or water rights occurring on or
appurtenant to the Leases Premises; so long as Lessor's use does not interfere
with the rights granted Lessee herein. Lessee shall be entitled to compensation
for any damages caused by Lessor's use of the Leased Premises.
(b) Lessor shall not be entitled to remove or otherwise take possession
of any Material mined or processed by Lessee without Lessee's prior consent;
provided, however, that Lessee agrees that it will identify those Materials
which it classifies as "reject" Materials, which reject Materials shall
immediately, upon identification, become available to Lessor for its use as
permitted hereunder.
(c) Lessor shall conduct its operations within the limits of, and
pursuant to the terms and conditions of all of Lessee's operating permits,
including, without limitation, the Mining Permit and Reclamation Plan and Air
Quality Permits issued by San Bernardino County. Lessor shall indemnify Lessee
for all costs and liabilities related to, connected with or arising from
Lessor's violation of any such permits.
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(d) Lessor shall not conduct its operations in any way which would
adversely affect Lessee's lawful use of the Leased Premises.
(e) Lessor agrees that for so long as this Lease is in effect, it will
not use any Material from the Leased Premises in any manner which is in
competition of Lessee's Business.
(f) The rights reserved by Lessor hereby are personal in nature, and may
not be assigned, to any party which competes with Lessee's Business, without the
prior written consent of Lessee, which consent shall not be unreasonably
withheld.
(g) For purposes hereof, "Lessee's Business" shall mean the business of
mining, production and sale of Material for sale or use in connection with
construction materials, block products, landscaping and snow control within a
500 mile radius of the Leased Premises.
10. Insurance. Each party shall, at its sole cost and expense,
commencing no later than the date upon which either Lessor or Lessee commences
operations on the Leased Premises, and continuing throughout the duration of
this Lease, obtain, keep, and maintain in full force and effect comprehensive
general public liability insurance against claims for personal injury, bodily
injury, death, or property damage occurring in, upon, or about the Leased
Premises in an amount of not less than Two Million Dollars ($2,000,000.00) in
respect to injury or death of one person and to the limit of not less than Two
Million Dollars ($2,000,000.00) in respect to any one accident, and to the limit
of not less than Two Million Dollars ($2,000,000.00) in respect to property
damage with respect to the use of the Leased Premises. Each party shall deliver
to the other party certificates of insurance, which shall declare that the
respective insurer may not cancel the same, in whole or in part, without giving
each party written notice of its intention to do so at least thirty (30) days'
prior written notice.
11. Indemnification. (a) Lessee shall pay, defend and indemnify and hold
Lessor and its officers, directors, shareholders, agents and employees ("Lessor
Indemnified Parties," individually a "Lessor Indemnified Party") harmless from
and against any and all claims of liability for injury or damage to any person
or property arising from the use of the Leased Premises by Lessee, or from the
conduct of Lessee's business, or from any activity, work or thing done,
permitted or suffered by Lessee or Lessee's invitees, licensees, agents,
contractors or employees in or about the Leased Premises or elsewhere. Lessee
shall further pay, defend, indemnify and hold the Lessor Indemnified Parties
harmless from and against any and all claims arising from any breach of any
representation, warranty or covenant hereunder, or default in the performance of
any obligation on Lessee's part to be performed under this Lease, or arising
from any negligence of Lessee or Lessee's invitees, licensees, agents,
contractors or employees, and from and against all costs, attorneys' fees,
expenses and liabilities incurred in the defense of any such claim or action or
proceeding brought thereon. In the event any action or proceeding is brought
against any Lessor Indemnified Party by reason of any such claim, Lessee, upon
notice from such Lessor Indemnified Party, shall defend the same at Lessee's
expense by counsel reasonably satisfactory to such Lessor Indemnified Party.
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(b) Lessor shall pay, defend and indemnify and hold Lessee and its
officers, directors, shareholders, agents and employees ("Lessee Indemnified
Parties," individually a "Lessee Indemnified Party") harmless from and against
any and all claims of liability for injury or damage to any person or property
arising from the use of the Leased Premises by Lessor, or from the conduct of
Lessor's business, or from any activity, work or thing done, permitted or
suffered by Lessor or Lessor's invitees, licensees, agents, contractors or
employees in or about the Leased Premises or elsewhere. Lessor shall further
pay, defend, indemnify and hold the Lessee Indemnified Parties harmless from and
against any and all claims arising from any breach of any representation,
warranty or covenant hereunder or default in the performance of any obligation
on Lessor's part to be performed under this Lease, or arising from any
negligence of Lessor or Lessor's invitees, licensees, agents, contractors or
employees, and from and against all costs, attorneys' fees, expenses and
liabilities incurred in the defense of any such claim or action or proceeding
brought thereon. In the event any action or proceeding is brought against any
Lessee Indemnified Party by reason of any such claim, Lessor, upon notice from
such Lessee Indemnified Party, shall defend the same at Lessor's expense by
counsel reasonably satisfactory to such Lessee Indemnified Party.
12. Liens. If any liens or claims of mechanics, laborers, or materialmen
shall be filed against the Leased Premises or any part or parts thereof, for any
work, labor, or materials furnished or claimed to be furnished to Lessee, or on
behalf of Lessee, then Lessee shall cause such lien to be discharged within
thirty (30) days after the date such lien is filed; or if such lien is disputed
by Lessee and Lessee contests the same in good faith, Lessee shall cause such
lien to be discharged within thirty (30) days after the date of any judgment by
any court of competent jurisdiction shall become final.
13. Compliance with Laws. Lessee covenants and agrees that, during the
term of this Lease, Lessee shall comply with all applicable laws, ordinances,
orders, rules, regulations, and requirements of any federal, state, county,
city, and municipal government with respect to the Leased Premises.
14. Default; Remedies. (a) The following shall each be deemed to be an
event of default under this Lease:
(i) The failure by Lessee to pay Minimum Royalties, Production
Royalties or any other amount payable by Lessee under this Lease if such failure
continues for twenty (20) days after written notice from Lessor that such amount
is due; or
(ii) A failure by either party to observe and perform any
provisions of this Lease to be observed or performed by such party (other than
Lessee's obligation to pay), where such failure continues for thirty (30) days
after written notice of such failure; provided, however, that if the nature of
the obligation is such that more than thirty (30) days are required for
performance, then the party shall not be in default if it commences performance
within such thirty day period and thereafter diligently prosecutes the same to
completion.
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(b) In the event of any such default by either party, the non-defaulting
party may elect to terminate this Lease by written notice to the defaulting
party. In addition to the foregoing, if a party fails to keep or perform any
obligation required hereunder, the non-defaulting party shall have the right,
but not the obligation, to perform such obligation on behalf of the defaulting
party, and the defaulting party shall reimburse the non-defaulting party for any
and all sums so paid or costs and expenses incurred within ten (10) days after
submission of written verification of such payments. If the defaulting party has
not reimbursed the non-defaulting party within said ten (10) day period, the
non-defaulting party shall have the right to offset such amounts against any
payments due the defaulting party hereunder.
(c) In the event of a default by Lessee and termination of this Lease by
Lessor, Lessor may, at any time after such default, without limiting Lessor in
the exercise of any rights or remedies at law or in equity which Lessor may have
by reason of such default, re-enter and take possession of the Leased Premises
and remove any persons or property by appropriate legal action.
(d) No remedy specified herein shall be exclusive of any other remedy,
but each shall be cumulative and in addition to every other remedy available
hereunder, at law or in equity.
15. Condemnation. (a) In the event a part of the Leased Premises shall
be taken, by eminent domain for any public or quasi-public purpose, or
transferred by agreement in connection with such public or quasi-public use,
with or without any condemnation proceeding being instituted, and such taking
does not materially affect Lessee's operations, only the Lease on the portion
taken shall then expire, on the date when title to such portion of the Leased
Premises vests in the appropriate authority or on the date possession is
required to be surrendered, whichever is earlier. The compensation or damages
for this taking shall be apportioned by and between the Lessor and Lessee taking
into consideration the residual value of the land and surface rights to Lessor,
the value of this Lease and the unmined Material at the time of taking to the
Lessee, and the future anticipated royalties to the Lessor.
(b) In the event that all or substantially all of the Leased Premises
shall be taken by eminent domain for any public or quasi-public purpose such
that Lessee's operations are no longer economically feasible, then this Lease
shall expire on the date when title to the Leased Premises vests in the
appropriate authority or on the date possession is required to be surrendered,
whichever is earlier. The compensation or damages for this taking shall be
apportioned by and between the Lessor and Lessee taking into consideration the
residual value of the land and surface rights to Lessor, the value of this Lease
and the unmined Material at the time of taking to the Lessee, and the future
anticipated royalties to the Lessor.
(c) A voluntary sale or conveyance under threat of condemnation but in
lieu of condemnation shall be deemed an appropriation or taking under the power
of eminent domain.
16. Subordination. This Lease at Lessor's option shall be subject and
subordinate to the lien of any mortgages or deeds of trust in any amount
whatsoever now or in the future placed on or
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against the Leased Premises; provided, however, that as long as Lessee is not in
default hereunder, any lien or encumbrance shall provide that the holder thereof
will recognize Lessee's rights under this Lease notwithstanding foreclosure of
such lien or encumbrance.
17. Representations and Warranties. (a) Lessor represents and warrants
that: (i) it is the true and lawful owner of the Leased Premises free and clear
of all matters affecting the Lessor's title to or possession of the Leased
Premises, subject to matters of public record (the "Permitted Encumbrances");
(ii) it has good right and lawful authority to grant to Lessee the rights
granted herein; (iii) neither the execution and delivery of this Lease, nor the
fulfillment of or compliance with the terms and conditions hereof, conflicts
with or results in a breach of any of the terms, conditions or provisions of any
other restriction, agreement or instrument to which the Lessor is a party or by
which it or the Leased Premises are bound; (iv) to Lessor's actual knowledge,
there is no condemnation claim or other litigation or claim pending or
threatened with respect to the Leased Premises; (v) except for the Permitted
Encumbrances, there are no leases, subleases, licenses or other agreements
granting other parties the right to use the Leased Premises or options or rights
of refusal to purchase the Leased Premises; and (vi) all buildings, fixtures and
improvements located on the Leased Premises are in good operating condition and
repair and the use thereof does not violate in any material respects any
applicable laws, ordinances, orders, rules, regulations, or requirements of any
governmental authority.
(b) Lessor represents and warrants that it has not used the Leased
Premises or done or permitted anything to be done in or about the Leased
Premises which in any way conflicts with any law, statute, zoning restriction,
ordinance or governmental rule or regulation or requirements or duly constituted
public authorities.
18. Notices. Any notice or other communication which may be permitted or
required under this Lease shall be in writing and shall be delivered personally
or sent by United States registered or certified mail, postage prepaid,
addressed as follows, or to any other address as either party may designate by
notice to the other party:
If to Lessor: Can-Cal Resources, Ltd.
1505 Blackcombe Street
Las Vegas, Nevada 89128
With a copy to: William R. Fishman, Esq.
1600 Broadway, Suite 2600
Denver, Colorado 80202
If to Lessee: Twin Mountain Rock Venture
1000 Kiewit Plaza
Omaha, Nebraska 68131
Attention: Real Estate Department
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19. Assignment. Lessee shall not assign or transfer this Lease, or
sublet the Leased Premises or any part thereof, without Lessor's prior written
consent, which consent will not be unreasonably withheld or delayed; except that
such consent shall not be required if such sublease, assignment, or transfer by
Lessee is to an affiliate of Lessee.
20. Binding on Successors and Assigns. All covenants, agreements,
provisions, and conditions of this Lease shall be binding upon and inure to the
benefit of the parties hereto, their respective heirs, personal representatives,
successors, and assigns.
21. Partial Invalidity. If any term or provision of this Lease shall to
any extent be held invalid or unenforceable, then the remaining terms and
provisions of this Lease shall not be affected thereby, but each term and
provision of this Lease shall be valid and be enforced to the fullest extent
permitted by law. In the event that any provision of Agreement relating to the
time periods and/or geographic areas of any restriction shall be declared by a
court of competent jurisdiction to exceed the maximum time period or areas that
such court deems reasonable and enforceable, the time period and/or geographic
areas of restriction deemed reasonable and enforceable by the court shall become
and thereafter be the maximum time period and/or geographic areas.
22. Quiet Enjoyment. So long as Lessee is not in default under the
covenants and agreements of this Lease, Lessee shall and may peaceably and
quietly have, hold and enjoy the Leased Premises for the term of this Lease.
23. Governing Law. This Lease shall be governed by the laws of the State
of California.
24. Captions. The captions of this Lease are for convenience only and
are not to be construed as part of this Lease and shall not be construed as
defining or limiting in any way the scope or intent of the provisions of this
Lease.
25. No Waiver. No waiver of any covenant or condition contained in this
Lease or of any breach of any such covenant or condition shall constitute a
waiver of any subsequent breach of such covenant or condition by either party or
justify or authorize the non-observance on any other occasion of the same or any
other covenant or condition.
26. Entire Agreement: Modification. This Lease represents the entire
understanding and agreement between the parties and supersedes all prior written
instruments or memoranda with respect thereto. No modification of this Lease
shall be binding unless it is in writing and executed by an authorized
representative of Lessor and Lessee.
27. Counterparts. This Lease may be executed in one or more counterparts
which together, shall constitute an original and binding agreement on the
parties hereto.
28. Holding Over . If Lessee remains in possession of the Leased
Premises after the expiration of this Lease without the execution of a new
lease, then Lessee shall be deemed to
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occupying the Leased Premises as a tenant from month-to-month, subject to all of
the conditions provisions, and obligations of this Lease.
29. Short Form Lease. This Lease shall not be recorded, but the parties
agree, at the request of either of them, to execute a Short Form Lease for
recording, containing the names the parties, the legal description of the Leased
Premises, and the term of the Lease.
30. Relationship of the Parties. Nothing contained in this Lease shall
be deemed construed by the parties hereto, nor by any third party, as creating
the relationship of principal and agent, partnership, or joint venture between
the parties hereto, it being understood and agreed that no provision contained
in this Lease nor any acts of the parties hereto shall be deemed to create any
relationship other than the relationship of landlord and tenant.
31. Incorporation of Exhibits. This Lease shall be deemed to have
incorporated by reference all of the Exhibits referred to herein to the same
extent as if such Exhibits were fully set forth herein.
32. Attorneys' Fees. If either party takes any steps or brings any
action to compel performance of or to recover for breach of any term of this
Lease, the losing party shall pay reasonable attorneys' fees of the prevailing
party, in addition to the amount of any judgment and costs.
33. Access. The parties acknowledge that Lessee's obligations hereunder
are conditioned upon its continued access to the Leased Premises.
IN WITNESS WHEREOF, Lessor and Lessee have executed or caused their duly
authorized representatives to execute this Lease as of the date first above
written.
CAN-CAL RESOURCES LTD.
By: /s/ Ronald D. Sloan
------------------------------------------
Name: Ronald D. Sloan
Title: President
TWIN MOUNTAIN ROCK VENTURE
By: /s/ R. David Jennings
------------------------------------------
Name: R. David Jennings
Title: Member Mgt. Committee
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EXHIBIT A TO EXHIBIT 10.1
PAGE 1 OF 2
LEASED PREMISES
N 1/2 NW 1/4, W 1/2 NW 1/4 NE 1/4, and N 1/2 SE 1/4 NW
1/4, Section 32, Township 8 North, Range 6 East of the
San Bernardino Base and Meridian; and
Parcels 2 and 3 as more fully described in a quitclaim
deed dated November 4, 1997 between Aurum, LLC and Can
Cal Resources, Ltd. recorded on November 19, 1997 with
a document number of 19970424165.
all of the above being in San Bernardino County, California
DESIGNATED PORTION
That portion of the Leased Premises (as described
above) that is more specifically illustrated on page 2
of this exhibit. Both the "Mining Area" and the "Plant
Area" are to be considered the Designated Portion.
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EXHIBIT A TO EXHIBIT 10.1
PAGE 2 OF 2
PHOTOGRAMMETRY SITE MAP
Prepared by:
Zenith Aerial, Inc.
2720 Loker Ave. West
Suite P
Carlsbad, CA 92008
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EXHIBIT 10.2
LOAN AGREEMENT
This Agreement is entered into by and between Owen Sequoia, Inc.
("Holder") and Can Cal Resources Limited ("Maker").
RECITALS
WHEREAS, Maker owns certain unimproved real property located in San
Bernardino, California (the "Property").
WHEREAS, Maker seeks financing from Holder in the original principal
amount of $150,000.
WHEREAS, Maker intends to enter into a Mining Lease Agreement with Twin
Mountain Rock Venture, a California general partnership ("Twin Mountain"), for
the purpose of permitting Twin Mountain to mine certain minerals from the
"Property" for certain consideration.
NOW, THEREFORE, in consideration of the mutual obligations of the
parties herein, and other good and valuable consideration, the parties agree as
follows:
1. Subject to the following terms and conditions, Holder agrees to lend Maker
$150,000 ("principal'). Holder shall deliver to Maker $25,000 on or before close
of business February 12, 1998 or on Maker's execution of this Agreement,
whichever is later, and the balance of the $150,000, or $125,000, shall, be
delivered to Maker upon Maker's delivery to Holder of an executed Mining Lease
Agreement in a form satisfactory to Holder.
2. The Maker promises to pay Holder the principal, plus interest at 8% per annum
on the amount of principal owing, principal and interest all due and payable on
or before June 15, 1998.
3. In order to induce Holder to extend the financing referenced herein and in
order to cover certain costs of Holder, including attorney's fees, Maker shall
pay Holder a $5,000 non-refundable fee upon execution of this Agreement by
Maker.
4. Maker understands that Holder's obligation to lend the $125,000 payment to
Maker referenced in paragraph 1 is expressly made conditioned upon Maker and
Twin Mountain Rock Venture entering into a Mining Lease Agreement acceptable to
Holder. Should Maker or Twin Mountain fail for any reason to make such an
agreement, Holder shall be under no obligation to deliver such sum to Maker.
5. The privilege is reserved of prepaying in full or in any amount of the
outstanding principal balance due hereunder on any interest date.
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6. While any default exists in the making of any of the payments, agreements or
conditions of this Agreement or the Deed of Trust, the undersigned recognizes
that such default will result in the loss and additional expenses to the Holder
of this Agreement in servicing the indebtedness evidenced hereby, handling such
delinquent payments and meeting its other financial obligations. Therefore, if
any installment of principal and/or interest due hereunder is not paid when due,
and Holder of this Agreement does not accelerate this Agreement as provided in
Paragraph 8 below, then a reasonable late charge in an amount equal to six
percent (6%) of the delinquent payment may be charged by the Holder of this
Agreement, at its option, for the purpose of defraying such losses and expenses.
If applicable law requires a lesser such charge, however, then the maximum
charge permitted by such law may be charged by the Holder of this Agreement for
said purposes. The late charges that accrue during any month shall be payable on
the next monthly payment date. Failure to assert or collect a late charge for
any particular month or months shall not waive Holder's right to assert and
collect late charges in subsequent months.
7. Maker agrees that any installment not paid within fifteen days of the date
that such installment was due shall be subject to the late charge discussed in
Paragraph 6 and shall bear interest from the date such payment was due which
shall be compounded monthly on the first day of each calendar mouth at that rate
of interest equal to the rate of interest under this Agreement, or the maximum
amount allowed by law, whichever is the lesser.
8. While any default exists in the making of any of said payments or in the
performance or observance of any of the covenants, agreements or conditions of
this Agreement or the Deed of Trust, the Holder of this Agreement may apply
payments received on any amounts due hereunder or under the terms of any
instrument now or hereafter evidencing or securing said indebtedness as said
holder may determine and if the Holder of this Agreement so elects, notice of
election being expressly waived, the principal remaining unpaid with accrued
interest shall at once become due and payable.
9. If amounts due under this Agreement are not paid when due, whether at
maturity or by acceleration, the undersigned promises to pay all costs of
collection, including, but not limited to, reasonable attorneys' fees, and all
expenses incurred in connection with the protection or realization of any
collateral or enforcement of any guaranty, incurred by the holder hereof, on
account of any such collection, whether or not suit is filed hereon or on any
instrument granting a security interest or on any guaranty related to this
Agreement.
10. The Maker expressly waives presentment, protest and demand, notice of
protest, demand and dishonor and nonpayment of this Agreement and all other
notices of any kind, and expressly agrees that this Agreement, or any payment
thereunder, may be extended from time to time without in any way affecting the
liability of the Maker. To the fullest extent permitted by law, the defense of
the statute of limitations in any action on this Agreement is waiver by the
undersigned. This Note is to be governed by the laws of the State of California
and venue for any action brought regarding the interpretation or enforcement of
this Agreement shall lie exclusively in San Bernardino County, California.
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11. No single or partial exercise of any power hereunder shall preclude any
other or further exercise thereof or the exercise of any other power. No delay
or omission on the part of the holder hereof in exercising any right hereunder
shall operate as a waiver of such right or of any other right under this
Agreement shall not operate to release any other party liable hereon.
12. All agreements between the undersigned and the holder hereof are expressly
limited so that in no contingency or event whatsoever, whether by acceleration
of maturity of the unpaid principal balance hereof or otherwise, shall the
amount paid or agreed to be paid to the holder hereof for the use, forbearance
or detention of the money to be advanced hereunder exceed the highest lawful
rate permissible under applicable usury laws. If, for any circumstances
whatsoever, fulfillment of any provision hereof at the time performance of such
provision shall be due, shall involve transcending the limit of validity
prescribed by law which a court of competent jurisdiction may deem applicable
hereto, then ipso facto, the obligation to be fulfilled shall be reduced to the
limit of such validity, and if from any circumstances the holder hereof shall
ever receive as interest an amount which would exceed the highest lawful rate,
such amount which would be excessive interest shall be applied to the reduction
of the unpaid principal balance due hereunder and not to the payment of
interest. This provision shall control every other provision of all agreements
between the undersigned and the Holder hereof.
13. This Agreement may from time to time be extended or renewed, with notice to
and acceptance by the undersigned and any related right may be waived,
exchanged, surrendered or otherwise dealt with, all without affecting the
liability of the undersigned hereon.
14. If the Maker consists of more than one person or entity, all agreements,
conditions, covenants, provisions, stipulations, authorizations made or given by
the Maker shall be joint and several and shall bind and affect all persons and
entities who are defined as Maker.
15. The obligations referenced in this Agreement are secured by a Deed of Trust.
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed on the date referenced below.
OWEN SEQUOIA, INC.
By: /s/ John Edwards
---------------------------------------------
February 12, 1998
-------------------------------
Date
CAN CAL RESOURCES LIMITED
By: /s/ R. D. Sloan, President
---------------------------------------------
FEB 12/98
-------------------------------
Date
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EXHIBIT 10.3
AMENDMENT TO LOAN AGREEMENT
This AMENDMENT TO LOAN AGREEMENT (the "Agreement") is made as of the 9th
day of June , 1998 by and between CAN CAL RESOURCES LIMITED ("Borrower")
and OWEN SEQUOIA, INC. ("Lender").
RECITALS
A. On or about February 12, 1998, Lender and Borrower entered into a
Loan Agreement whereby, subject to the terms and conditions of that agreement,
Lender agreed to provide financing to Borrower.
B. Pursuant to the terms of the Loan Agreement, Borrower executed a deed
of trust in favor of the Lender recorded against certain real property owned by
Borrower located at Pisgah, San Bernardino (the "Deed of Trust"), and Borrower
assigned to Lender all rights to income and profits emanating from that certain
Mining Lease Agreement executed by and between Borrower and Twin Mountain Rock
Venture (the "Mining Lease"), a true and correct copy of which is attached
hereto as Exhibit "A".
C. On or about May 1, 1998, Borrower received $22,500 from Twin Mountain
Rock Venture pursuant to the terms of the Mining Lease.
D. As of May 15, 1998, Borrower owes Lender the sum of $25,000 as
principal plus accrued interest resulting from Lender's loan to Borrower of
$25,000 (the "Initial Obligation") pursuant to the terms of the Loan Agreement.
E. The Loan Agreement, the Deed of Trust and Mining Lease will sometimes
hereafter be referred to as the "Existing Documents".
F. The Borrower has requested that Lender modify the Existing Documents.
As consideration for the requested modification, the Borrower has agreed to the
terms and conditions as set forth in this Agreement. The Existing Documents and
this Agreement may sometimes hereinafter be referred to as the "Financing
Documents".
NOW, THEREFORE, WITNESSETH that in consideration of the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Borrower and
Lender agree as follows:
1. Recitals. The Recitals are incorporated into and made a part of this
Agreement.
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2. Existing Financing Modification Terms. The Existing Documents shall
be modified as follows:
(a) Additional Loan Amount. On or before July 31, 1998, Lender shall
lend Borrower up to the principal sum of $102,500 which represents the $150,000
referenced in the Loan Agreement minus the Initial Obligation minus the $22,500
received by the Borrower from Twin Mountain Rock Venture. The sum of $102,500
representing principal plus the Initial Obligation plus all interest plus any
other cost or charge referenced herein will hereafter be referred to as the
"Obligation".
(b) Term. The Obligation, including interest and all other charges, is
due and payable July 31, 2001.
(c) Interest Rate. The Obligation shall bear interest at the rate
depicted in the Loan Agreement.
Unless specifically modified herein, the terms and conditions under the
Loan Agreement shall remain in full force and effect.
3. Representation and Warranties. In order to induce Lender to enter
into this Agreement, the Borrower, for itself and for its heirs, personal
representatives, successors, and assigns, hereby acknowledges, represents, and
warrants to Lender as follows:
(a) Lender is not required to extend the Borrower any more financing.
(b) The Loan Agreement constitutes the legal, valid and binding
obligation of the Borrower. This Agreement when executed by the Borrower shall
constitute the legal, valid, and binding obligations of such party, enforceable
in accordance with their respective terms.
(c) The Borrower has no defenses, affirmative defenses, setoffs, claims,
counterclaims, actions, or causes of action of any kind of nature whatsoever
against Lender or any of its or their respective past, present, or future
directors, officers, employees, agents, attorneys, legal representatives,
predecessors, affiliates, successors, or assigns, or the Initial Obligation,
directly or indirectly, arising out of, based upon, or in any manner connected
with any transaction, event, circumstance, action, failure to act, or occurrence
of any sort or type, whether known or unknown, which occurred, existed, was
taken, permitted, or begun prior to the execution of this Agreement and
occurred, existed, was taken, permitted, or begun in accordance with, pursuant
to, or by virtue of any of the terms of the Existing Documents.
(d) There is no litigation, at law or in equity, nor any proceeding
before any federal, state, or other governmental or administrative agency or any
arbitration pending or, to the knowledge of the Borrower, threatened against the
Borrower nor any other litigation or proceeding pending or, to the knowledge of
the Borrower, threatened affecting any collateral in favor of Lender.
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(e) All documents, reports, certificates, and statements furnished to
Lender by or on behalf of Borrower in connection with the transactions
contemplated hereby are true, correct, and complete; do not contain any untrue
statement of material fact; and do not omit any fact necessary to make the
information contained therein not misleading.
(f) All taxes, assessments, levies, license fees, permit fees and all
other charges heretofore levied, assessed, confirmed, or imposed upon, or in
respect of, or which might become a lien upon, any collateral in favor of Lender
under the Loan Agreement or the Financing Documents have been paid in full.
(g) Borrower has not received any more money from Twin Mountain Rock
Venture pursuant to the Mining Lease other than the $22,500 referenced in the
Recitals.
The continued validity in all respects of all representations and
warranties made in this Agreement and all other documents delivered by the
Borrower in connection with this Agreement will be a condition precedent to
Lender obligations and agreements created by this Agreement.
4. Covenants of Obligors. In addition to the covenants and warranties
provided to Lender, the Borrower covenants as follows:
(a) The Borrower shall duly and punctually pay all sums to be paid to
Lender in accordance with the terms and conditions of this Agreement and the
Financing Documents.
(b) The Borrower consents to allow Lender to communicate with Twin
Mountain Rock Venture regarding the Mining Lease and consents to allow Lender to
receive the income and profits from the Mining Lease directly from Twin Mountain
Rock Venture. Borrower agrees that should it receive any monies from Twin
Mountain rock Venture pursuant to the Mining Lease, it will immediately deliver
such monies to Lender. All monies received by Lender shall be credited towards
the Obligation, first to interest, then to principal.
5. Events of Default. The occurrence of any one or more of the following
shall constitute an "Event of Default" under this Agreement:
(a) Failure of Borrower to make any payment to Lender on or before the
date on which such payment is due or failure to pay all remaining principal and
interest and all other charges and costs due Lender.
(b) Default by Borrower under any of the Existing Documents or further
default by Borrower under any of the Financing Documents.
(c) Entry of a judgment or filing of a lien against Borrower or any its
properties, which remains unpaid, unstayed, unbonded, undischarged, or
undismissed for a period longer than thirty (30) days.
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(d) Failure of Borrower to execute and/or deliver any of the documents
provided for in this Agreement or any other documents required by Lender.
(e) Failure of Borrower to observe or perform any covenant, agreement,
term, or condition of this Agreement or the Financing Documents, as and when
provided herein.
(f) If any representation or warranty made herein, in the Financing
Documents, or in any report, certificate, financial statement or other
instrument or document furnished in connection with this Agreement or
contemplated hereby, shall prove to have been materially false or misleading on
the date as of which it was made.
(g) If Borrower shall: (U) apply for or consent to or suffer the
appointment of a receiver, trustee, or liquidator for its properties; (V) admit
in writing an inability to pay its debts as they mature; (W) make a general
assignment for the benefit of creditors; (X) file a voluntary petition or a
petition or answer seeking reorganization or an arrangement with creditors or
take advantage of any bankruptcy, reorganization, insolvency, readjustment of
debt, dissolution, or liquidation statute or law, or make or file an answer
admitting material allegations of a petition filed against it in any proceeding
under any such law; (Y) fail to cause to be dismissed any bankruptcy proceedings
commenced against it within sixty (60) days after commencement of the same; or
(Z) have entered against it an order, judgment, or decree of any court of
competent jurisdiction, approving a petition seeking reorganization of assets or
appointing a receiver, trustee, or liquidator for any assets.
6. Remedies.
(a) Immediately upon the occurrence of any Event of Default, the
obligation and agreements of Lender set forth in this Agreement shall terminate
and Lender shall have the right to exercise any and all rights and remedies
available to it hereunder, under the Financing Documents, and under applicable
law to the same extent as though this Agreement had not been executed, without
regard to any notice or cure period contained therein or otherwise available.
(b) All rights and remedies available to Lender under any of the
Existing Documents, and applicable law may be asserted concurrently,
cumulatively, or successively, from time to time, as long as any indebtedness or
obligations under the Financing Documents shall remain unpaid or outstanding.
7. Cross-Default. Any default under this Agreement, the Loan Agreement,
or any of the Financing Documents shall constitute an event of default under all
other agreements, financing statements or documents related to the transaction
referenced herein.
8. Release and Waivers. Borrower, for itself and its heirs, personal
representatives, successors, and assigns, hereby jointly and severally,
knowingly and voluntarily RELEASES, DISCHARGES, and FOREVER WAIVES and
RELINQUISHES any and all claims, demands, obligations, liabilities, defenses,
affirmative defenses, setoffs, counterclaims, actions, and causes
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of action of whatsoever kind or nature, whether known or unknown, which he or it
has, may have, or might have or may assert now or in the future against Lender
directly or indirectly, arising out of, based upon, or in any manner connected
with any transaction, event, circumstance, action, failure to act, or occurrence
of any sort or type, whether known or unknown, which occurred, existed, was
taken, permitted, or begun prior to the execution of this Agreement and
occurred, existed, was taken, permitted, or begun in accordance with, pursuant
to, or by virtue of the transaction referenced herein or any of the terms of any
of the Existing Documents, or which was related or connected in any manner,
directly or indirectly, to the Initial Obligation, the transaction referenced
herein or the Existing Documents, or any part thereof. Borrower hereby
acknowledges and agrees that the execution of this Agreement by Lender shall not
constitute an acknowledgment of or admission by Lender of the existence of any
such claims or of liability for any matter or precedent upon which any liability
may be asserted. Borrower hereby further acknowledges and agrees that, to the
extent that any such claims may exist, they are of a speculative nature so as to
be incapable of objective valuation and that, in any event, the value to the
Borrower of the covenants and obligations of Lender contained in this Agreement
and the other documents and instruments executed and delivered in connection
herewith substantially and materially exceeds any and all value of any kind or
nature whatsoever of any such claims.
In connection with the general release set forth above, Borrower, for
themselves and Borrower's Affiliates, and each of them, hereby waive and
relinquish all rights and benefits afforded under the provisions of Section 1542
of the California Civil Code, which provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR
AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY
HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR."
9. Waiver of Jury by Trial. Each party to this Agreement agrees that any
suit, action, or proceeding brought or instituted by any party hereto or any
successor or assign of any party on or with respect to this Agreement, any of
the documents executed in connection with this Agreement, or any of the
Financing Documents or any event, transaction or occurrence arising out of or in
any way connected therewith, or the dealings of the parties with respect
thereto, shall be tried only by a court and not a jury. EACH PARTY HEREBY
EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION, OR
PROCEEDING. Borrower acknowledges and agrees that this provision is a specific
and material aspect of this Agreement between the parties and that Lender would
not agree to the restructure of obligations, extension of the time of payment,
or forbearance from exercising its rights and remedies if this waiver of jury
trial provision were not a part of this Agreement.
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10. Miscellaneous.
(a) No Oral Modifications. No modification or waiver of any provision of
this Agreement, any documents executed in connection with this Agreement, the
Existing Documents, and no consent by Lender to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be in writing
and then such waiver or consent shall be effective only in the specific instance
or for the purpose for which given. No notice to, or demand upon the Borrower in
any case shall entitle Borrower to any other or further notice or demand in the
same, similar, or other circumstances.
(b) No Release or Discharge; No Novation. Nothing contained in this
Agreement is intended to or shall act to nullify, discharge, release, or
extinguish, in whole or in part, any or all of the obligations or indebtedness
under the Existing Documents or to waive or release any collateral securing the
loan referenced herein or discharge any guarantor thereof, nor shall this
Agreement and the documents executed in connection herewith be deemed or
considered to operate as a novation of any of the Existing Documents, except as
otherwise provided in this Agreement and the documents executed in connection
herewith. This Agreement represents a modification, amendment, restatement, and
continuation of the contractual obligations and indebtedness of the Borrower
under certain of the Financing Documents. This Agreement and the documents
executed in connection herewith set out the terms and conditions under which the
Borrower will satisfy its obligations to Lender pursuant to the Financing
Documents. Except to the extent of any express conflict with this Agreement and
except to the extent modified by this Agreement, each and all of the terms and
conditions of the Existing Documents shall remain in full force and effect.
(c) Interpretation. To the extent, if any, that any of the terms and
provisions of this Agreement or of any of the other documents or instruments
executed and delivered in connection herewith are inconsistent with any of the
terms and provisions of the Existing Documents, this Agreement and the documents
and instruments executed and delivered in connection herewith shall control.
(d) Applicable Law. The performance, construction, and enforcement of
this Agreement and each of the other Financing Documents shall be governed by
the laws of the State of California.
(e) Survival; Successors and Assigns. All covenants, agreements,
representations, and warranties made in this Agreement and in the Financing
Documents shall survive settlement and shall continue in full force and effect.
Whenever in this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the successors and assigns of such party,
but this shall not be deemed to permit assignment by the Borrower of any or all
of its interests in the Deed of Trust or any part thereof. All covenants,
agreements, representations, and warranties by or on behalf of the Borrower that
are contained in this Agreement of any of the Financing Documents shall inure to
the benefit of Lender and its successors and assigns and shall bind the
Borrower, and its respective heirs, personal representatives, successors, and
assigns. Borrower may not assign this Agreement or any of its rights hereunder.
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(f) Severability. If any term, provision, or condition, or any part
thereof, of this Agreement or of any of the Financing Documents shall for any
reason be found or held to be invalid or unenforceable by any court or
governmental agency of competent jurisdiction, such invalidity or
unenforceability shall not affect the remainder of such term, provision, or
condition or any other term, provision, or condition, and this Agreement, and
any Financing Document shall survive and be construed as if such invalid or
unenforceable term, provision, or condition had not been contained therein.
(g) Merger and Integration. This Agreement, the Financing Documents, and
any documents or instruments to be delivered in accordance with this Agreement
contain the entire agreement of the parties hereto with respect to the matters
covered and the transactions contemplated hereby, and no other agreement,
statement, representation, warranty or promise made prior hereto or
contemporaneously herewith by any party hereto, or any employee, officer, agent,
or attorney of any party hereto, shall be valid or binding or relied upon by any
party as an inducement to enter into, or as consideration for, this Agreement.
(h) Construction of Agreement. Each party acknowledges (i) that it has
participated in the negotiation of this Agreement and the other documents
executed and delivered in connection herewith, and no provision of this
Agreement or the other documents executed and delivered in connection herewith
shall be construed against or interpreted to the disadvantage of any party
hereto or thereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured, dictated or
drafted such provision; (ii) that the Borrower, at all times have had access to
an attorney in the negotiation of the terms of and in the preparation and
execution of this Agreement and the other documents executed and delivered in
connection herewith, and the Borrower, has had the opportunity to review,
analyze, and discuss with its counsel this Agreement and the other documents
executed and delivered in connection herewith, and the underlying factual
matters relevant to this Agreement, for a sufficient period of time prior to the
execution and delivery hereof and thereof; (iii) that all of the terms of this
Agreement and the other documents executed and delivered in connection herewith
were negotiated at arm's-length; (iv) that this Agreement and the other
documents executed and delivered in connection herewith were prepared and
executed without fraud, duress, undue influence, or coercion of any kind exerted
by any of the parties upon the others; and (v) that the execution and delivery
of this Agreement is the free and voluntary act of the Borrower.
(i) Notices. Any notices required or permitted by this Agreement shall
be in writing and shall be deemed delivered if hand delivered or delivered by
certified mail, postage prepaid, return receipt requested, first class mail
postage prepaid, or by telecopy (immediately followed by hard copy by first
class mail) as follows, unless such address is changed by written notice as
provided hereunder:
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If to the Borrower:
CAN CAL RESOURCES LIMITED
Attn:
20140 49 A Avenue
Langley, B.C., Canada V3A 3S1
Telephone: (604) 534-7283
Facsimile: (604) 532-6811
If to the Lender:
OWEN SEQUOIA, INC.
c/o Attn: Bruce G. Holden, Esq.
Arter & Hadden LLP
5 Park Plaza, Suite 1000
Irvine, CA 92614-8528
Telephone: (949) 252-3102
Facsimile: (949) 833-96042
(j) Gender. The singular includes the plural and vice versa. Each gender
includes all other genders.
(k) Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original, but all of
which shall constitute one in the same agreement.
(l) Binding Effect. This Agreement shall have no effect at law or in
equity unless and until this Agreement has been executed by Lender. Lender in
its sole discretion may require that all of the exhibits to this Agreement are
fully executed and delivered simultaneously with Lender execution of this
Agreement.
(m) Third Party Obligations. No person not a party to this Agreement
will be a third-party beneficiary or acquire any rights hereunder.
(n) Costs. Any costs incurred by Lender resulting from the transactions
contemplated by this Agreement such as legal expense, the filing of any
financing statement, or property inspection, shall be solely at Borrower's
expense and without right of setoff.
(o) Venue. Venue for any action brought regarding the interpretation of
this Agreement shall lie exclusively in Orange County, California.
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IN WITNESS WHEREOF, the parties hereto have executed or caused to
be executed, this Agreement under seal as of the date first written above.
Borrower:
CAN CAL RESOURCES LIMITED
By: /s/ R. D. Sloan
--------------------------------
Lender:
OWEN SEQUOIA, INC.
By: /s/ John Edwards
--------------------------------
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EXHIBIT 10.4
SECOND AMENDMENT TO LOAN AGREEMENT
This SECOND AMENDMENT TO LOAN AGREEMENT (the "Agreement") is made as of
the day of 2nd day of August, 1998 by and between CAN CAL RESOURCES LIMITED
("Borrower") and OWEN SEQUOIA, CORP. ("Lender").
RECITALS
A. On or about February 12, 1998, Lender and Borrower entered into a
Loan Agreement whereby, subject to the terms and conditions of that agreement,
Lender agreed to provide financing to Borrower.
B. Pursuant to the terms of the Loan Agreement, Borrower executed a deed
of trust in favor of the Lender recorded against certain real property owned by
Borrower located at Pisgah, San Bernardino (the "Deed of Trust"), and Borrower
assigned to Lender all rights to income and profits emanating from that certain
Mining Lease Agreement executed by and between Borrower and Twin Mountain Rock
Venture (the "Mining Lease").
C. On or about May 1, 1998, Borrower received $22,500 from Twin Mountain
Rock Venture pursuant to the terms of the Mining Lease.
D. As of May 15, 1998, Borrower owed Lender the sum of $25,000 as
principal plus accrued interest resulting from Lender's loan to Borrower of
$25,000 (the "Initial obligation") pursuant to the terms of the Loan Agreement.
E. On or about June 9, 1998 the Loan Agreement was amended pursuant to
the terms of an Amendment to Loan Agreement made between Borrower and Lender
(the "First Amendment") and the total present principal amount owed by the
Borrower to Lender including the Initial Obligation is $100,000 (the "Present
Obligation").
F. The Loan Agreement, the Deed of Trust, Mining Lease and First
Amendment will sometimes hereafter be referred to as the "Existing Documents".
G. The Borrower has requested that Lender modify the Existing Documents.
As consideration for the requested modification, the Borrower has agreed to the
terms and conditions as set forth in this Agreement. The Existing Documents and
this Agreement may sometimes hereinafter be referred to as the "Financing
Documents".
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NOW, THEREFORE, WITNESSETH that in consideration of the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Borrower and
Lender agree as follows:
1. Recitals. The Recitals are incorporated into and made a part of
this Agreement.
2. Existing Financing Modification Terms. The Existing Documents shall
be modified as follows:
(a) Additional Loan Amount. On or before November 30, 1998, Lender shall
lend Borrower up to the principal sum of $50,000. This sum plus the Present
Obligation plus interest owed on the Present Obligation and any other cost or
charge owed by Borrower pursuant to this Agreement shall hereafter be referred
to as the "Obligation".
(b) Term. The obligation, including interest and all other charges, is
due and payable July 31, 2001.
(c) Interest Rate. The Obligation shall bear interest at the rate
depicted in the Loan Agreement.
Unless specifically modified herein, the terms and conditions under the
Loan Agreement as amended by the First Amendment shall remain in full force and
effect.
3. Representation and Warranties. In order to induce Lender to enter
into this Agreement, the Borrower, for itself and for its heirs, personal
representatives, successors, and assigns, hereby acknowledges, represents, and
warrants to Lender as follows:
(a) Lender is not required to extend the Borrower any more financing.
(b) The Loan Agreement constitutes the legal, valid and binding
obligation of the Borrower. This Agreement when executed by the Borrower shall
constitute the legal, valid, and binding obligations of such party, enforceable
in accordance with their respective terms.
(c) The Borrower has no defenses, affirmative defenses, setoffs, claims,
counterclaims, actions, or causes of action of any kind of nature whatsoever
against Lender or any of its or their respective past, present, or future
directors, officers, employees, agents, attorneys, legal representatives,
predecessors, affiliates, successors, or assigns, or the Obligation, directly or
indirectly, arising out of, based upon, or in any manner connected with any
transaction, event, circumstance, action, failure to act, or occurrence of any
sort or type, whether known or unknown, which occurred, existed, was taken,
permitted, or begun prior to the execution of this Agreement and occurred,
existed, was taken, permitted, or begun in accordance with, pursuant to, or by
virtue of any of the terms of the Existing Documents.
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(d) There is no litigation, at law or in equity, nor any proceeding
before any federal, state, or other governmental or administrative agency or any
arbitration pending or, to the knowledge of the Borrower, threatened against the
Borrower nor any other litigation or proceeding pending or, to the knowledge of
the Borrower, threatened affecting any collateral in favor of Lender.
(e) All documents, reports, certificates, and statements furnished to
Lender by or on behalf of Borrower in connection with the transactions
contemplated hereby are true, correct, and complete; do not contain any untrue
statement of material fact; and do not omit any fact necessary to make the
information contained therein not misleading.
(f) All taxes, assessments, levies, license fees, permit fees and all
other charges heretofore levied, assessed, confirmed, or imposed upon, or in
respect of, or which might become a lien upon, any collateral in favor of Lender
under the Loan Agreement or the Financing Documents have been paid in full.
(g) Borrower has not received any more money from Twin Mountain Rock
Venture pursuant to the Mining Lease other than the $22,500 referenced in the
Recitals.
The continued validity in all respects of all representations and
warranties made in this Agreement and all other documents delivered by the
Borrower in connection with this Agreement will be a condition precedent to
Lender obligations and agreements created by this Agreement.
4. Events of Default. The occurrence of any one or more of the following
shall constitute an "Event of Default" under this Agreement:
(a) Failure of Borrower to make any payment to Lender on or before the
date on which such payment is due or failure to pay all remaining principal and
interest and all other charges and costs due Lender.
(b) Default by Borrower under any of the Existing Documents or further
default by Borrower under any of the Financing Documents.
(c) Entry of a judgment or filing of a lien against Borrower or any its
properties, which remains unpaid, unstayed, unbonded, undischarged, or
undismissed for a period longer than thirty (30) days.
(d) Failure of Borrower to execute and/or deliver any of the documents
provided for in this Agreement or any other documents required by Lender.
(e) Failure of Borrower to observe or perform any covenant, agreement,
term, or condition of this Agreement or the Financing Documents, as and when
provided herein.
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(f) If any representation or warranty made herein, in the Financing
Documents, or in any report, certificate, financial statement or other
instrument or document furnished in connection with this Agreement or
contemplated hereby, shall prove to have been materially false or misleading on
the date as of which it was made.
(g) If Borrower shall: (U) apply for or consent to or suffer the
appointment of a receiver, trustee, or liquidator for its properties; (V) admit
in writing an inability to pay its debts as they mature; (W) make a general
assignment for the benefit of creditors; (X) file a voluntary petition or a
petition or answer seeking reorganization or an arrangement with creditors or
take advantage of any bankruptcy, reorganization, insolvency, readjustment of
debt, dissolution, or liquidation statute or law, or make or file an answer
admitting material allegations of a petition filed against it in any proceeding
under any such law; (Y) fail to cause to be dismissed any bankruptcy proceedings
commenced against it within sixty (60) days after commencement of the same; or
(Z) have entered against it an order, judgment, or decree of any court of
competent jurisdiction, approving a petition seeking reorganization of assets or
appointing a receiver, trustee, or liquidator for any assets.
5. Remedies.
(a) Immediately upon the occurrence of any Event of Default, the
obligation and agreements of Lender set forth in this Agreement shall terminate
and Lender shall have the right to exercise any and all rights and remedies
available to it hereunder, under the Financing Documents, and under applicable
law to the same extent as though this Agreement had not been executed, without
regard to any notice or cure period contained therein or otherwise available.
(b) All rights and remedies available to Lender under any of the
Existing Documents, and applicable law may be asserted concurrently,
cumulatively, or successively, from time to time, as long as any indebtedness or
obligations under the Financing Documents shall remain unpaid or outstanding.
6. Cross-Default. Any default under this Agreement, the Loan Agreement,
the First Amendment or any of the Financing Documents shall constitute an event
of default under all other agreements, financing statements or documents related
to the transaction referenced herein.
7. Release and Waivers. Borrower, for itself and its heirs, personal
representatives, successors, and assigns, hereby jointly and severally,
knowingly and voluntarily RELEASES, DISCHARGES, and FOREVER WAIVES and
RELINQUISHES any and all claims, demands, obligations, liabilities, defenses,
affirmative defenses, setoffs, counterclaims, actions, and causes of action of
whatsoever kind or nature, whether known or unknown, which he or it has, may
have, or might have or may assert now or in the future against Lender directly
or indirectly, arising out of, based upon, or in any manner connected with any
transaction, event, circumstance, action, failure to act, or occurrence of any
sort or type, whether known or unknown, which occurred, existed, was taken,
permitted, or begun prior to the execution of this Agreement and occurred,
existed, was taken, permitted, or begun in accordance with, pursuant to, or by
virtue of the transaction referenced herein
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or any of the terms of any of the Existing Documents, or which was related or
connected in any manner, directly or indirectly, to the obligation, the First
Amendment, the transaction referenced herein or the Existing Documents, or any
part thereof. Borrower hereby acknowledges and agrees that the execution of this
Agreement by Lender shall not constitute an acknowledgment of or admission by
Lender of the existence of any such claims or of liability for any matter or
precedent upon which any liability may be asserted. Borrower hereby further
acknowledges and agrees that, to the extent that any such claims may exist, they
are of a speculative nature so as to be incapable of objective valuation and
that, in any event, the value to the Borrower of the covenants and obligations
of Lender contained in this Agreement and the other documents and instruments
executed and delivered in connection herewith substantially and materially
exceeds any and all value of any kind or nature whatsoever of any such claims.
In connection with the general release set forth above, Borrower, for
themselves and Borrower's Affiliates, and each of them, hereby waive and
relinquish all rights and benefits afforded under the provisions of Section 1542
of the California Civil Code, which provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR
AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY
HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH
THE DEBTOR."
8. Waiver of Jury by Trial. Each party to this Agreement agrees that any
suit, action, or proceeding brought or instituted by any party hereto or any
successor or assign of any party on or with respect to this Agreement, any of
the documents executed in connection with this Agreement, or any of the
Financing Documents or any event, transaction or occurrence arising out of or in
any way connected therewith, or the dealings of the parties with respect
thereto, shall be tried only by a court and not a jury. EACH PARTY HEREBY
EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION, OR
PROCEEDING. Borrower acknowledges and agrees that this provision is a specific
and material aspect of this Agreement between the parties and that Lender would
not agree to the restructure of obligations, extension of the time of payment,
or forbearance from exercising its rights and remedies if this waiver of jury
trial provision were not a part of this Agreement.
9. Miscellaneous.
(a) No Oral Modifications. No modification or waiver of any provision of
this Agreement, any documents executed in connection with this Agreement, the
Existing Documents, and no consent by Lender to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be in writing
and then such waiver or consent shall be effective only in the specific instance
or for the purpose for which given. No notice to, or demand upon the Borrower in
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any case shall entitle Borrower to any other or further notice or demand in the
same, similar, or other circumstances.
(b) No Release or Discharge; No Novation. Nothing contained in this
Agreement is intended to or shall act to nullify, discharge, release, or
extinguish, in whole or in part, any or all of the obligations or indebtedness
under the Existing Documents or to waive or release any collateral securing the
loan referenced herein or discharge any guarantor thereof, nor shall this
Agreement and the documents executed in connection herewith be deemed or
considered to operate as a novation of any of the Existing Documents, except as
otherwise provided in this Agreement and the documents executed in connection
herewith. This Agreement represents a modification, amendment, restatement, and
continuation of the contractual obligations and indebtedness of the Borrower
under certain of the Financing Documents. This Agreement and the documents
executed in connection herewith set out the terms and conditions under which the
Borrower will satisfy its obligations to Lender pursuant to the Financing
Documents. Except to the extent of any express conflict with this Agreement and
except to the extent modified by this Agreement, each and all of the terms and
conditions of the Existing Documents shall remain in full force and effect.
(c) Interpretation. To the extent, if any, that any of the terms and
provisions of this Agreement or of any of the other documents or instruments
executed and delivered in connection herewith are inconsistent with any of the
terms and provisions of the Existing Documents, this Agreement and the documents
and instruments executed and delivered in connection herewith shall control.
(d) Applicable Law. The performance, construction, and enforcement of
this Agreement and each of the other Financing Documents shall be governed by
the laws of the State of California.
(e) Survival; Successors and Assigns. All covenants, agreements,
representations, and warranties made in this Agreement and in the Financing
Documents shall survive settlement and shall continue in full force and effect.
Whenever in this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the successors and assigns of such party,
but this shall not be deemed to permit assignment by the Borrower of any or all
of its interests in the Deed of Trust or any part thereof. All covenants,
agreements, representations, and warranties by or on behalf of the Borrower that
are contained in this Agreement of any of the Financing Documents shall inure to
the benefit of Lender and its successors and assigns and shall bind the
Borrower, and its respective heirs, personal representatives, successors, and
assigns. Borrower may not assign this Agreement or any of its rights hereunder.
(f) Severability. If any term, provision, or condition, or any part
thereof, of this Agreement or of any of the Financing Documents shall for any
reason be found or held to be invalid or unenforceable by any court or
governmental agency of competent jurisdiction, such invalidity or enforceability
shall not affect the remainder of such term, provision, or condition or any
other term, provision, or condition, and this Agreement, and any Financing
Document shall survive and be
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construed as if such invalid or unenforceable term, provision, or condition had
not been contained therein.
(g) Merger and Integration. This Agreement, the Financing Documents, and
any documents or instruments to be delivered in accordance with this Agreement
contain the entire agreement of the parties hereto with respect to the matters
covered and the transactions contemplated hereby, and no other agreement,
statement, representation, warranty or promise made prior hereto or
contemporaneously herewith by any party hereto, or any employee, officer, agent,
or attorney of any party hereto, shall be valid or binding or relied upon by any
party as an inducement to enter into, or as consideration for, this Agreement.
(h) Construction of Agreement. Each party acknowledges (i) that it has
participated in the negotiation of this Agreement and the other documents
executed and delivered in connection herewith, and no provision of this
Agreement or the other documents executed and delivered in connection herewith
shall be construed against or interpreted to the disadvantage of any party
hereto or thereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured, dictated or
drafted such provision; (ii) that the Borrower, at all times have had access to
an attorney in the negotiation of the terms of and in the preparation and
execution of this Agreement and the other documents executed and delivered in
connection herewith, and the Borrower, has had the opportunity to review,
analyze, and discuss with its counsel this Agreement and the other documents
executed and delivered in connection herewith, and the underlying factual
matters relevant to this Agreement, for a sufficient period of time prior to the
execution and delivery hereof and thereof; (iii) that all of the terms of this
Agreement and the other documents executed and delivered in connection herewith
were negotiated at arm's-length; (iv) that this Agreement and the other
documents executed and delivered in connection herewith were prepared and
executed without fraud, duress, undue influence, or coercion of any kind exerted
by any of the parties upon the others; and (v) that the execution and delivery
of this Agreement is the free and voluntary act of the Borrower.
(i) Notices. Any notices required or permitted by this Agreement shall
be in writing and shall be deemed delivered if hand delivered or delivered by
certified mail, postage prepaid, return receipt requested, first class mail
postage prepaid, or by telecopy (immediately followed by hard copy by first
class mail) as follows, unless such address is changed by written notice as
provided hereunder:
If to the Borrower:
CAN CAL RESOURCES LIMITED
1505 Blackcombe Street
Unit 203, Building #2
Las Vegas, NV 89123
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If to the Lender:
OWEN SEQUOIA, CORP.
c/o Attn: Bruce G. Holden, Esq.
Arter & Hadden LLP
5 Park Plaza, Suite 1000
Irvine, CA 92614-8528
Telephone: (949) 252-3102
Facsimile: (949) 833-9604
(j) Gender. The singular includes the plural and vice versa. Each gender
includes all other genders.
(k) Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original, but all of
which shall constitute one in the same agreement.
(1) Binding Effect. This Agreement shall have no effect at law or in
equity unless and until this Agreement has been executed by Lender. Lender in
its sole discretion may require that all of the exhibits to this Agreement are
fully executed and delivered simultaneously with Lender execution of this
Agreement.
(m) Third Party Obligations. No person not a party to this Agreement
will be a third-party beneficiary or acquire any rights hereunder.
(n) Costs. Any costs incurred by Lender resulting from the transactions
contemplated by this Agreement such as legal expense, the filing of any
financing statement, or property inspection, shall be solely at Borrower's
expense and without right of setoff.
(o) Venue. Venue for any action brought regarding the interpretation of
this Agreement shall lie exclusively in Orange County, California.
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed, this Agreement under seal as of the date first written above.
Borrower:
CAN CAL RESOURCES LIMITED
By: /s/ R. D. Sloan
-------------------------------
Lender:
OWEN SEQUOIA CORP.
By: /s/ John Edwards
-------------------------------
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EXHIBIT 10.5
RECORDING REQUESTED BY
WHEN RECORDED MAIL TO
Arter & Hadden
Attn: Bruce G. Holden, Esq.
5 Park Plaza, Suite 1000
Irvine, CA 92614-8528
DEED OF TRUST, SECURITY AGREEMENT, FINANCING STATEMENT
AND FIXTURE FILING WITH ASSIGNMENT OF RENTS
ATTENTION: COUNTY RECORDER -- THIS INSTRUMENT COVERS GOODS THAT ARE OR ARE TO
BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN AND IS TO BE FILED FOR
RECORD IN THE RECORDS WHERE DEEDS OF TRUST ON REAL ESTATE ARE RECORDED.
ADDITIONALLY, AS A DEED OF TRUST, BUT ALSO AS A FINANCING STATEMENT COVERING
GOODS THAT ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN.
THE MAILING ADDRESSES OF THE TRUSTOR (DEBTOR) AND BENEFICIARY (SECURED PARTY)
ARE SET FORTH IN SECTION 4.5 OF THIS DEED OF TRUST.
This Deed of Trust, Security Agreement, Financing Statement and Fixture
Filing With Assignment of Rents (this "Deed of Trust") is made as of February
12, 1998 by and among Can Cal Resources Limited, a Nevada corporation
("Trustor"), CHICAGO TITLE INSURANCE COMPANY ("Trustee"), whose address is 560
E. Hospitality Lane, San Bernardino, California, and OWEN SEQUOIA, INC., a
Nevada Corporation ("Beneficiary") whose address is 3651 Lindell Road, Suite A,
Las Vegas, Nevada 89103.
This Deed of Trust is given, inter alia, for the purpose of securing a
loan (the "Loan") from Beneficiary, as lender, to Trustor, as borrower.
FOR GOOD AND VALUABLE CONSIDERATION, including the indebtedness herein
recited and the trust herein created, the receipt of which is hereby
acknowledged, Trustor hereby irrevocably grants, transfers, conveys and assigns
to Trustee, IN TRUST, WITH POWER OF SALE, for the benefit and security of
Beneficiary, under and subject to the terms and conditions hereinafter set
forth, the real property located in the County of San Bernardino, State of
California, more particularly described in Exhibit A attached hereto (the
"Premises").
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TOGETHER WITH any and all buildings and improvements now or hereafter
erected on the Premises including, but not limited to the fixtures, attachments,
appliances, equipment, machinery, and other articles attached to said buildings
and improvements (the "Improvements"), all of which shall be deemed and
construed to be a part of the realty;
TOGETHER WITH all rents, issues profits, royalties, income and other
benefits (collectively, the "Rents") derived from any lease, sublease, license,
franchise, concession or other agreement (collectively, the "Leases") now or
hereafter affecting all or any portion of the Premises and the Improvements or
the use or occupancy thereof;
TOGETHER WITH all interests, estates or other claims, both in law and in
equity, which Trustor now has or may hereafter acquire in the Premises or the
Improvements;
TOGETHER WITH all easements, rights-of-way and rights now owned or
hereafter acquired by Trustor used in connection therewith or as a means of
access thereto, including, without limiting the generality of the foregoing, all
rights pursuant to any trackage agreement and all rights to the nonexclusive use
of common drive entries, and all tenements, hereditaments and appurtenances
thereof and thereto, and all water and water rights and shares of stock
evidencing the same;
TOGETHER WITH all leasehold estate, right, title and interest of Trustor
in and to all Leases covering the Premises, the Improvements or any portion
thereof now or hereafter existing or entered into, and all right, title and
interest of Trustor thereunder including, without limitation, all cash or
security deposits, advance rentals, and deposits or payments of similar nature;
TOGETHER WITH all right, title and interest now owned or hereafter
acquired by Trustor in and to any greater estate in the Premises or the
Improvements;
TOGETHER, with any and all of Trustor's interest in any and all tangible
personal property owned by Trustor now or any time hereafter located on or used
in any way in connection with the use, enjoyment, occupancy or operation of the
Premises or the Improvements or any portion thereof, including, but not limited
to, all goods, machinery, tools, equipment (including fire sprinklers and alarm
systems, air conditioning, heating, boilers, refrigerating, electronic
monitoring, water, lighting, power, sanitation, waste removal, entertainment,
recreational, window or structural cleaning rigs, maintenance and all other
equipment of every kind), lobby and all other indoor or outdoor furniture
(including tables, chairs, planters, desks, sofas, shelves, lockers and
cabinets), furnishings, appliances, inventory, rugs, carpets and other floor
coverings, draperies, drapery rods and brackets, awnings, venetian blinds,
partitions, chandeliers and other lighting fixtures, and all other fixtures,
apparatus, equipment, furniture, furnishings, and articles located on or used in
any way in connection with the use, enjoyment, occupancy or operation of the
Premises or the Improvements or any portion thereof, it being understood that
the enumeration of any specific articles of property shall in nowise result in
or be held to exclude any items of property not specifically mentioned;
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TOGETHER WITH all right, title and interest of Trustor, now owned or
hereafter acquired, in and to any land lying within the right-of-way of any
street, open or proposed, adjoining the Premises, and any and all sidewalk,
alleys and strips and gores of land adjacent to or used in connection with the
Premises;
TOGETHER WITH all the estate, interest, right, title, other claim or
demand, both in law and in equity, including claims or demands with respect to
the proceeds of insurance in effect with respect thereto, which Trustor now has
or may hereafter acquire in the Premises or the Improvements, and any and all
awards made for the taking by eminent domain, or by any proceeding or purchase
in lieu thereof, of the whole or any part of the Trust Estate (as hereinafter
defined), including, without limitation, any awards resulting from a change of
grade of streets and awards for severance damages.
TOGETHER WITH all collections, proceeds and products of any of the
foregoing.
The entire estate, property and interest hereby conveyed to Trustee may
hereafter be collectively referred to as the "Trust Estate".
FOR THE PURPOSE OF SECURING:
(a) payment of indebtedness in the total principal amount of up to One
Hundred Fifty Thousand Dollars ($150,000) with interest thereon, evidenced by
that certain Secured Promissory Note (the "Note") of even date herewith executed
by Trustor, which Note and any and all modifications, extensions, renewals and
replacements thereof are by this reference hereby made a part hereof;
(b) payment of all sums advanced by Beneficiary to protect the Trust
Estate, with interest thereon from the date of the advance at the rate of
interest as set forth in the Note (which rate of interest is hereinafter
referred to as the "Agreed Rate");
(c) payment of all other sums, with interest thereon, which may
hereafter be loaned to Trustor, or its successors or assigns, by Beneficiary, or
its successors or assigns when evidenced by a promissory note or notes reciting
that they are secured by this Deed of Trust;
(d) payment of all other sums, with interest thereon, becoming due and
payable under the provisions of the Loan Documents;
(e) performance of every obligation, covenant or agreement of Trustor contained
herein and in the Note, and all supplements, amendments and modifications
thereto and all extensions and renewals thereof;
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(f) performance of every obligation, covenant and agreement of Trustor
contained in any agreement now or hereafter executed by Trustor which recites
that the obligations thereunder are secured by this Deed of Trust;
(g) compliance with and performance of each and every material provision
of any declaration of covenants, conditions and restrictions pertaining to the
Trust Estate or any portion thereof.
This Deed of Trust, the Note, the Assignment of Rents, and any other
deeds of trust, mortgages, agreements, guaranties or other instruments given to
evidence or further secure the payment and performance of any obligation secured
hereby may hereafter be collectively referred to as the "Loan Documents."
TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR, HEREBY COVENANTS
AND AGREES AS FOLLOWS:
ARTICLE I
COVENANTS AND AGREEMENTS OF TRUSTOR
1.1 Payment of Secured Obligations. Trustor shall pay when due the
principal of and the interest on the indebtedness evidenced by the Note; all
charges, fees and other sums as provided in the Loan Documents; the principal of
and interest on any future advances secured by this Deed of Trust; and the
principal of and interest on any other indebtedness secured by this Deed of
Trust.
1.2 Application of Payment. Except as otherwise expressly provided by
applicable law or any other provision of this Deed of Trust, all payments
received by Beneficiary from Trustor under the Note or this Deed of Trust shall
be applied by Beneficiary in the following order: (1) costs, fees, charges, and
advances paid or incurred by Beneficiary or payable to Beneficiary, and interest
thereon pursuant to any provision of the Note, this Deed of Trust, and any other
loan documents securing the Note, in such order as Beneficiary, in Beneficiary's
sole discretion, elects; (2) interest payable under the Note; and (3) principal
payable under the Note.
1.3 Estoppel Certificates. Within ten (10) days after any request by
Beneficiary for such information, Trustor will execute and deliver to
Beneficiary, and any third party designated by Beneficiary, in recordable form,
a certificate reciting that the Note and this Deed of Trust are unmodified and
in full force and effect, or that the Note and this Deed of Trust are in full
force and effect as modified and specifying all modifications asserted by
Trustor.
Such certificate shall also recite the amount(s) of principal, interest,
and other sums payable under either the Note or this Deed of Trust that remain
unpaid, the date(s) through which payments due and owing under the Note or under
this Deed of Trust have been paid, the amount(s) of any payments theretofore
made under the Note and/or this Deed of Trust, and a
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detailed statement of any right of set-off, counterclaim, or other defense that
exists or which Trustor contends exists, against any indebtedness secured by
this Deed of Trust or any obligation of borrower under this Deed of Trust.
Should Trustor fail to execute and deliver such certificate within ten
(10) day period: (a) the Note and this Deed of Trust shall, as to Trustor,
conclusively be deemed to be either in full force and effect, without
modification, or in full force and effect, modified in the manner and to
the-extent specified by Beneficiary, whichever Beneficiary reasonably and in
good faith may represent; and (b) Trustor shall conclusively be deemed
irrevocably to have constituted and appointed Beneficiary as Trustor's special
attorney-in-fact to execute and deliver such certificate to any third party.
Trustor and Beneficiary expressly agree that any certificate executed
and delivered by Trustor, or any representation in lieu of a certificate made by
Beneficiary under this Deed of Trust may be relied upon by any prospective
purchaser of the estate, or any prospective assignee of any interest of
Beneficiary in the Property, and any other person, without independent
investigation or examination to determine the accuracy, reasonableness, or good
faith of the recitals.
The exercise by Beneficiary of any right or remedy provided by this
paragraph shall not constitute a waiver of, or operate to cure any default by
Trustor under this Deed of Trust, or preclude any other right or remedy that is
otherwise available to Beneficiary under this Deed of Trust or applicable law.
1.4 Future Advances. Upon request by Trustor, Beneficiary, at
Beneficiary's option, may make future advances to Trustor. All such future
advances, with interest thereon, shall be added to and become a part of the
indebtedness secured by this Deed of Trust when evidenced by promissory note(s)
reciting that such note(s) are secured by this Deed of Trust.
1.5 Maintenance. Repair. Alterations and Compliance with Laws. Trustor
shall:
(a) Maintain, preserve and keep the Trust Estate in good condition
and repair;
(b) Not remove, demolish or substantially alter any of the
Improvements except upon the prior written consent of Beneficiary;
(c) Complete promptly and in a good and workmanlike manner any
Improvement which m ay be now or hereafter constructed on the Premises and
promptly restore in like manner any portion of the Improvements which may be
damaged or destroyed thereon from any cause whatsoever, and pay when due all
claims for labor performed and materials furnished therefor;
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(d) Comply with all laws, ordinances, regulations, covenants,
conditions and restrictions now and hereafter affecting the Trust Estate or any
part thereof or requiring any alterations or Improvements;
(e) Not commit or permit any waste or deterioration of the Trust
Estate, and keep and maintain abutting grounds, sidewalks, roads, parking and
landscape areas in good and neat order and repair;
(f) Comply with the provisions of any lease, if this Deed of Trust
is on a leasehold; and
(g) Not commit, suffer or permit any act to be done in or upon the
Trust Estate in violation of any law, ordinance or regulation. Trustor shall not
apply for, willingly suffer or permit any change in zoning, subdivision or land
use regulations affecting the Property without first obtaining the written
consent of Beneficiary which consent shall not be unreasonably withheld.
1.6 Required Insurance. Trustor shall at all times provide, maintain and
keep in force or cause to be provided, maintained and kept in force, at no
expense to Trustee or Beneficiary, policies of insurance in form and amounts and
issued by companies, associations or organizations reasonably satisfactory to
Beneficiary covering such casualties, risks, perils, liabilities and other
hazards as Beneficiary may reasonably require. All such policies of insurance
required by the terms of this Deed of Trust shall contain an endorsement or
agreement by the insurer that any loss shall be payable in accordance with the
terms of such policy notwithstanding any act or negligence of Trustor or any
party holding under Trustor which might otherwise result in forfeiture of said
insurance and the further agreement of the insurer waiving all rights of setoff,
counterclaim or deductions against Trustor.
1.7 Delivery of Policies. Payment of Premiums.
(a) At Beneficiary's option all policies of insurance shall either
have attached thereto a lender's loss payable endorsement for the benefit of
Beneficiary in form and substance satisfactory to Beneficiary or shall name
Beneficiary as an additional insured. Trustor shall furnish Beneficiary with an
original, a certified copy of an original or a certificate of all policies of
insurance required under Section 1.6 above which sets forth the coverage, the
limits of liability, the name of the carrier, the Policy number and the period
of coverage. If Beneficiary consents, Trustor may provide any of the required
insurance through blanket policies carried by Trustor and covering more than one
location, or by policies procured by a tenant or other party holding under
Trustor; provided, however, all such policies shall be in form and substance and
issued by companies satisfactory to Beneficiary. At least thirty (30) days prior
to the expiration of each required policy, Trustor shall deliver to Beneficiary
evidence of the renewal or replacement of such policy, continuing insurance in
form and substance as required by this Deed of Trust. All such policies shall
contain a provision that, notwithstanding any contrary agreement
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between Trustor and insurance company, such policies will not be cancelled,
allowed to lapse without renewal, surrendered or materially amended, which term
shall include any reduction in the scope or limits of coverage, without at least
thirty (30) days' prior written notice to Beneficiary.
(b) In the event Trustor fails to provide, maintain, keep in force
or deliver to Beneficiary the policies of insurance required by this Deed of
Trust Beneficiary may (but shall have no obligation to) procure such insurance
or single-interest insurance for such risks covering Beneficiary's interest, and
Trustor will pay all premiums thereon promptly upon demand by Beneficiary, and
until such payment is made by Trustor, the amount of all such premiums shall
bear interest at the Agreed Rate. Upon the occurrence of an Event of Default and
request by Beneficiary, Trustor shall deposit with Beneficiary in monthly
installments, an amount equal to one-twelfth (1/12) of the estimated aggregate
annual insurance premiums on all policies of insurance required by this Deed of
Trust. In such event Trustor further agrees to cause all bills, statements or
other documents relating to the foregoing insurance premiums to be sent or
mailed directly to Beneficiary. Upon receipt of such bills, statements or other
documents evidencing that a premium for a required policy is then payable, and
providing Trustor has deposited sufficient funds with Beneficiary pursuant to
this Section 1.7, Beneficiary shall timely pay such amounts as may be due
thereunder out of the funds so deposited with Beneficiary. If at any time and
for any reason the funds deposited with Beneficiary are or will be insufficient
to pay such amounts as may be then or subsequently due, Beneficiary shall notify
Trustor and Trustor shall immediately deposit an amount equal to such deficiency
with Beneficiary. Notwithstanding the foregoing, nothing contained herein shall
cause Beneficiary to be deemed a trustee of said funds or to be obligated to pay
any amounts in excess of the amount of funds deposited with Beneficiary pursuant
to this Section 1.7, nor shall anything contained herein modify the obligation
of Trustor set forth in Section 1.6 hereof to maintain and keep such insurance
in force at all times. Beneficiary may commingle said reserve with its own funds
and Trustor shall be entitled to no interest thereon.
1.8 Casualties: Insurance Proceeds. In the event of any loss, whether or
not covered by insurance, Trustor shall give immediate written notice to the
Beneficiary and to the insurance carrier, if applicable, on an insured risk.
Trustor authorizes and empowers irrevocably, at Beneficiary's option and in
Beneficiary's sole discretion as attorney-in-fact for Trustor, to make proof of
loss, to adjust and compromise any claim under insurance policies, to appear in
and prosecute any action arising from such insurance policies, to collect and
receive insurance proceeds, and to deduct therefrom Beneficiary's expenses
incurred in the collection of such proceeds, including reasonable attorneys'
fees. Trustor further authorizes Beneficiary, at Beneficiary's option and in
Beneficiary's sole discretion, and regardless of whether there is any impairment
of the security for this Deed of Trust: (a) to apply the balance of such
proceeds, or any portion of them, upon any indebtedness secured by this Deed of
Trust, whether or not then due, including but not limited to, principal, accrued
interest and advances, and in such order or combination as Beneficiary may
determine; or (b) to hold the balance of such proceeds, or any portion of them,
in a noninterest bearing liability account to be used for the cost of
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reconstruction, repair, or alteration of the Improvements on the property; or
(c) to release the balance of such proceeds, or any portion of them, to the
Trustor. If the insurance proceeds are held by Beneficiary to be used to
reimburse Trustor for the costs of restoration and repair of the Improvements,
the Improvements shall be restored to the equivalent of its original condition,
or such other condition as Beneficiary may approve in writing, and Beneficiary
may, at Beneficiary's option, condition disbursement of the proceeds on
Beneficiary's approval of such plans and specifications prepared by an architect
satisfactory to Beneficiary, contractor's cost estimates, architect's
certificates, waivers of liens, sworn statements of mechanics and materialmen,
and such other evidence of costs, percentage completion of construction,
application of payments, and satisfaction of liens, as Beneficiary may
reasonably require. Prior to disbursement or application of the proceeds, they
may be utilized by Beneficiary, who is entitled to all earnings on the proceeds,
if any.
If the insurance proceeds are applied to the payment of the sums secured
by this Deed of Trust, any such application of proceeds to principal shall not
extend or postpone the due date of the monthly installments referred to in this
Deed of Trust or change the amount of such installment.
If, after default under this Deed of Trust, the Premises are sold or the
Premises are acquired by Beneficiary, all right, title, and interest of Trustor
in and to any insurance policies and unearned premiums on those, policies and in
and to the proceeds of those policies, resulting from damage to the Premises
prior to the sale or acquisition, shall pass to Beneficiary.
In no event shall either Trustee or Beneficiary be obligated to see to,
approve, or supervise the proper application of any hazard insurance proceeds
released to Trustor.
The receipt, application, use, and release of the hazard insurance
proceeds shall not cure or constitute a waiver of any default or pending notice
of default under this Deed of Trust, nor invalidate any act done pursuant to
such notice.
No hazard insurance proceeds paid or released to Trustor or applied on
the cost of repair, restoration, or alteration of the Improvements shall
constitute a payment of the indebtedness secured by this Deed of Trust.
It is further expressly understood and agreed between Trustor and
Beneficiary that the right and option of Beneficiary, in the exercise of its
sole discretion, to apply the proceeds or so much of them as may be necessary to
pay the indebtedness secured by this Deed of Trust, in whole or in part, is
absolute, and is not contingent or conditional upon the adequacy or value of the
remaining property to secure such unpaid indebtedness, or the nature, or extent
of the loss or damage for which such insurance proceeds are paid.
1.9 Assignment of Policies Upon Foreclosure. In the event of foreclosure
of this Deed of Trust or other transfer of title or assignment of the Trust
Estate in extinguishment, in
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whole or in part, of the debt secured hereby, all right, title and interest of
Trustor in and to all policies of insurance required by Section 1.3 and covering
solely the Trust estate or any portion thereof shall inure to the benefit of and
pass to the successor in interest to Trustor or to the purchaser or grantee of
the Trust Estate.
1.10 Indemnification: Subrogation: Waiver of Offset.
(a) If Beneficiary is made a party to any litigation concerning the
Deed of Trust, any of the Loan Documents, the Trust Estate or any part thereof
or interest therein, or the occupancy of the Trust Estate by Trustor, then
Trustor shall indemnify, defend and hold Beneficiary harmless from all liability
by reason of said litigation, including reasonable attorneys' fees and expenses
incurred by Beneficiary as a result of any such litigation, whether or not any
such litigation is prosecuted to judgment. However, Trustor shall not be
obligated to indemnify, defend and hold Beneficiary harmless from and against
any claims which arise solely out of the gross negligence or willful misconduct
of Beneficiary. Beneficiary may employ an attorney or attorneys to protect its
rights hereunder, and in the event of such employment following any breach by
Trustor, Trustor shall pay Beneficiary reasonable attorneys' fees and expenses
incurred by Beneficiary, whether or not an action is actually commenced against
Trustor by reason of its breach.
(b) Trustor waives any and all right to claim or recover against
Beneficiary, its officers, employees, agents and representatives, for loss of or
damage to Trustor, the Trust Estate, Trustor's property or the property of
others under Trustor's control from any cause insured against or required to be
insured against by the provisions of this Deed of Trust.
(c) All sums payable by Trustor pursuant to this Deed of Trust shall
be paid without notice, demand, counterclaim, setoff, deduction or defense and
without abatement, suspension, deferment, diminution or reduction, and the
obligations and liabilities of Trustor hereunder shall in no way be released,
discharged or otherwise affected (except as expressly provided herein) by reason
of: (i) any damage to or destruction of or any condemnation or similar taking of
the Trust Estate or any part thereof; (ii) any restriction or prevention of or
interference by any third party with any use of the Trust Estate or any part
thereof; (iii) any title defect or encumbrance or any eviction from the Premises
or the Improvements or any part thereof by title paramount or otherwise; (iv)
any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceeding relating to Beneficiary, or
any action taken with respect to this Deed of Trust by any trustee or receiver
of Beneficiary, or by any court, in any such proceeding; (v) any claim which
Trustor has or might have against Beneficiary; (vi) any default or failure on
the part of Beneficiary to perform or comply with any of the terms hereof or of
any other agreement with Trustor; or (vii) any other occurrence whatsoever,
whether similar or dissimilar to the foregoing whether or not Trustor shall have
notice or knowledge of any of the foregoing. Except as expressly provided
herein, Trustor waives all rights now or hereafter conferred by statute or
otherwise to any abatement,
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suspension, deferment, diminution or reduction of any sum secured hereby and
payable by Trustor.
1.11 Taxes and Impositions.
(a) Trustor shall pay, or cause to be paid prior to delinquency, all
real property taxes and assessments, general and special, and all other taxes
and assessments of any kind or nature whatsoever, including, without limitation,
nongovernmental levies or assessments such as maintenance charges, levies or
charges resulting from covenants, conditions and restrictions affecting the
Trust Estate, which are assessed or imposed upon the Trust Estate, or become due
and payable, and which create, may create or appear to create a lien upon the
Trust Estate, or any part thereof, or upon any property, equipment or other
facility used in the operation or maintenance thereof (all the above shall
collectively be hereinafter referred to as "Impositions"); provided, however,
that if, by law any such Imposition is payable, or may at the option of the
taxpayer be paid, in installments, Trustor may pay the same or cause it to be
paid, together with any accrued interest on the unpaid balance of such
Imposition, in installments as the same become due and before any fine, penalty,
interest or cost may be added thereto for the nonpayment of any such installment
and interest.
(b) If at any time after the date hereof there shall be assessed or
imposed (i) a tax or assessment on the Trust Estate in lieu of or in addition to
the impositions payable by Trustor pursuant to Section 1.11(a), or (ii) a
license fee, tax or assessment imposed on Beneficiary and measured by or based
in whole or in part upon the amount of the outstanding obligations secured
hereby, then all such taxes, assessments or fees shall be deemed to be included
within the term "Impositions" as defined in Section 1.11(a) and Trustor shall
pay and discharge the same as herein provided with respect to the payment of
Impositions. If Trustor fails to pay such Impositions prior to delinquency or if
Trustor is prohibited by law from paying such Impositions, Beneficiary may at
its option declare all obligations secured hereby together with all accrued
interest thereon, immediately due and payable. Anything to the contrary herein
notwithstanding, Trustor shall have no obligation to pay any franchise, estate,
inheritance, income, excess profits or similar tax levied on Beneficiary or on
the obligations secured hereby.
(c) Subject to the provisions of Section 1.11(d) and upon request by
Beneficiary, Trustor shall deliver to Beneficiary within thirty (30) days after
the last date prior to delinquency for payment of any such Imposition official
receipts of the appropriate taxing authority, or other proof satisfactory to
Beneficiary, evidencing the payment thereof.
(d) Trustor shall have the right before any delinquency occurs to
contest or object to the amount or validity of any such Imposition by
appropriate proceedings, but such right shall not be deemed or construed in any
way as relieving, modifying or extending Trustor's covenant to pay any such
Imposition at the time and in the manner provided in this Section 1.11, unless
Trustor has given prior written notice to Beneficiary of Trustor's intent to so
contest or object to an Imposition, and unless, at Beneficiary's sole option,
(i) Trustor shall demonstrate to
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Beneficiary's satisfaction that the proceedings to be initiated by Trustor shall
conclusively operate to prevent the sale of the Trust Estate, or any part
thereof, and to satisfy such Imposition prior to final determination of such
proceedings; and (ii) Trustor shall furnish a good and sufficient bond or surety
as requested by and satisfactory to Beneficiary; or (iii) Trustor shall
demonstrate to Beneficiary's satisfaction that Trustor has provided a good and
sufficient undertaking as may be required or permitted by law to accomplish a
stay of any such sale.
(e) Upon the occurrence of any Event of Default and request by
Beneficiary, Trustor shall pay to Beneficiary an initial cash reserve in an
amount adequate to pay all Impositions for the ensuing tax fiscal year and shall
thereafter continue to deposit with Beneficiary, in monthly installments, an
amount equal to one twelfth (1/12) of the sum of the annual Impositions
reasonably estimated by Beneficiary, for the purpose of paying the installment
of Impositions next due on the Trust Estate (funds deposited for this purpose
shall hereinafter be referred to as "Impounds"). In such event Trustor further
agrees to cause all bills, statements or other documents relating to Impositions
to be sent or mailed directly to Beneficiary. Upon receipt of such bills,
statements or other documents, and providing Trustor has deposited sufficient
Impounds with Beneficiary pursuant to this Section 1.11(e), Beneficiary shall
timely pay such amounts as may be due thereunder out of the Impounds so
deposited with Beneficiary. If at any time and for any reason the Impounds
deposited with Beneficiary are or will be insufficient to pay such amounts as
may then or subsequently be due, Beneficiary may notify Trustor and upon such
notice Trustor shall deposit immediately an amount equal to such deficiency with
Beneficiary. Notwithstanding the foregoing, nothing contained herein shall cause
Beneficiary to be deemed a trustee of said funds or to be obligated to pay any
amounts in excess of the amount of funds deposited with Beneficiary pursuant to
this Section 1.11(e). Beneficiary may commingle Impounds with its own funds and
shall not be obligated to pay or allow any interest on any Impounds held by
Beneficiary pending disbursement or application hereunder. Beneficiary may
reserve for future payment of Impositions such portion of the Impounds as
Beneficiary may in its absolute discretion deem proper. Upon an Event of Default
under any of the Loan Documents or this Deed of Trust, Beneficiary may apply the
balance of the Impounds upon any indebtedness or obligation secured hereby in
such order as Beneficiary may determine, notwithstanding that said indebtedness
or the performance of said obligation may not yet be due according to the terms
thereof. Should Trustor fail to deposit with Beneficiary (exclusive of that
portion of said payments which has been applied by Beneficiary upon any
indebtedness or obligation secured hereby) sums sufficient to fully pay such
Impositions at least fifteen (15) days before delinquency thereof, Beneficiary
may, at Beneficiary's election, but without any obligation so to do, advance any
amounts required to make up the deficiency, which advances, if any, shall be
secured hereby and shall be repayable to Beneficiary as herein elsewhere
provided, or at the option of Beneficiary the latter may, without making any
advance whatever, apply any Impounds held by it upon any indebtedness or
obligation secured hereby in such order as Beneficiary may determine,
notwithstanding that said indebtedness or the performance of said obligation may
not yet be due according to the terms thereof. Should any Event of Default occur
or exist on the part of the Trustor in the payment or performance of any of
Trustor's or any guarantor's obligations under the terms of the Loan
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Documents, Beneficiary may, at any time, at Beneficiary's option, apply any sums
or amounts in its hands received pursuant to Sections 1.11(e) hereof, or as
rents or income of the Trust Estate or otherwise, to any indebtedness or
obligation of the Trustor secured hereby in such manner and order as Beneficiary
may elect, notwithstanding said indebtedness or the performance of said
obligation may not yet be due according to the terms thereof. The receipt, use
or application of any such Impounds paid by Trustor to Beneficiary hereunder
shall not be construed to affect the maturity of any indebtedness secured by
this Deed of Trust or any of the rights or powers of Beneficiary or Trustee
under the terms of the Loan Documents or any of the obligations of Trustor or
any guarantor under the Loan Documents.
(f) Trustor shall not suffer, permit or initiate the joint
assessment of any real and personal property which may constitute all or a
Portion of the Trust Estate or suffer, Permit or initiate any other procedure
whereby the lien of the real property taxes and the lien of the personal
property taxes shall be assessed, levied or charged to the Trust Estate as a
single lien.
(g) If requested by Beneficiary, Trustor shall cause to be furnished
to Beneficiary a tax reporting service covering the Trust Estate of the type,
duration and with a company satisfactory to Beneficiary.
1.12 Utilities. Trustor shall pay or shall cause to be paid when due all
utility charges which are incurred by Trustor for the benefit of the Trust
Estate or which may become a charge or lien against the Trust Estate for gas,
electricity, water or sewer services furnished to the Trust Estate and all other
assessments or charges of a similar nature, whether public or private, affecting
or related to the Trust Estate or any portion thereof, whether or not such
taxes, assessments or charges are or may become liens thereon
1.13 Actions Affecting Trust Estate. Trustor shall appear in and contest
any action or proceeding purporting to affect the security hereof or the rights
or powers of Beneficiary or Trustee; and shall pay all costs and expenses,
including the cost of evidence of title and attorneys' fees, in any such action
or proceeding in which Beneficiary or Trustee may appear.
1.14 Actions By Trustee or Beneficiary to Preserve Trust Estate. If
Trustor fails to make any payment or to do any act as and in the manner provided
in any of the Loan Documents, Beneficiary and/or Trustee, each in its own
discretion, without obligation so to do, without releasing Trustor from any
obligation, and without notice to or demand upon Trustor, may make or do the
same in such manner and to such extent as either may deem necessary to protect
the security hereof. In connection therewith (without limiting their general
powers, whether conferred herein, in another Loan Document or by law),
Beneficiary and Trustee shall have and are hereby given the right, but not the
obligation, (i) to enter upon and take possession of the Trust Estate; (ii) to
make additions, alterations, repairs and improvements to the Trust Estate which
they or either of them may consider necessary or proper to keep the Trust Estate
in good condition and repair; (iii) to appear and participate in any action or
proceeding affecting or which may affect the security hereof or the rights or
powers of Beneficiary or Trustee; (iv) to
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pay, purchase, contest or compromise any encumbrance, claim, charge, lien or
debt which in the judgment of either may affect or appear to affect the security
of this Deed of Trust or be prior or superior hereto; and (v) in exercising such
powers, to pay necessary expenses, including employment of counsel or other
necessary or desirable consultants. Trustor shall, immediately upon demand
therefor by Beneficiary and Trustee or any of them, pay to Beneficiary and
Trustee an amount equal to all respective costs and expenses incurred by them in
connection with the exercise by either Beneficiary or Trustee or both of the
foregoing rights, including, without limitation, costs of evidence of title,
court costs, appraisals, surveys and receiver's, trustee's and attorneys' fees,
together with interest thereon from the date of such expenditures at the Agreed
Rate.
1.15 Transfer of Trust Estate by Trustor. In order to induce Beneficiary
to make the loan secured hereby, Trustor agrees that, in the event of any
transfer of the Trust Estate without the prior written consent of the
Beneficiary, Beneficiary shall have the absolute right at its option, without
prior demand or notice, to declare all sums secured hereby immediately due and
payable. Consent to one such transaction shall not be deemed to be a waiver of
the right to require consent to future or successive transactions. Beneficiary
may grant or deny such consent in its sole discretion and, if consent should be
given, any such transfer shall be subject to this Deed of Trust, and any such
transferee shall assume all obligations hereunder and agree to be bound by all
provisions contained herein. Such assumption shall not, however, release Trustor
or any maker or guarantor of the Note from any liability thereunder without the
prior written consent of Beneficiary. As used herein, "transfer" includes the
direct or indirect sale, agreement to sell, transfer, conveyance, pledge,
collateral assignment or hypothecation of the Trust Estate, or any portion
thereof or interest therein, whether voluntary, involuntary, by operation of law
or otherwise, the execution of any installment land sale contract or similar
instrument affecting all or a portion of the Trust Estate, or the lease of all
or substantially all of the Trust Estate. The term "transfer" shall also include
the direct or indirect transfer, assignment, hypothecation or conveyance of
legal or beneficial ownership of (i) any partnership interest in Trustor
(general or limited), or (ii) more than 50% of the voting stock of Trustor. The
term "transfer" shall not include the sale of any portion of the Premises so
long as Trustor complies with any reasonable conditions specified by Beneficiary
relating to such sales activity.
1.16 Full Performance Required: Survival of Warranties. All
representations, warranties and covenants of Trustor contained in any loan
application or made to Beneficiary in connection with the loan secured hereby or
contained in the Loan Documents or incorporated by reference therein, shall
survive the execution and delivery of this Deed of Trust and shall remain
continuing obligations, warranties and representations of Trustor so long as any
portion of the obligations secured by this Deed of Trust remain outstanding.
1.17 Eminent Domain. In the event that any proceeding or action be
commenced for the taking of the Trust Estate, or any part thereof or interest
therein, for public or quasi-public use under the power of eminent domain,
condemnation or otherwise, or if the same be taken or damaged by reason of any
public improvement or condemnation proceeding, or in any other
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manner, or should Trustor receive any notice or other information regarding such
proceeding, action, taking or damage, Trustor shall give prompt written notice
thereof to Beneficiary. Beneficiary shall be entitled at its option, without
regard to the adequacy of its security, to commence, appear in and prosecute in
its own name any such action or proceeding. Beneficiary shall also be entitled
to make any compromise or settlement in connection with such taking or damage.
All compensation, awards, damages, rights of action and proceeds awarded to
Trustor by reason of any such taking or damage to the Premises or the
Improvements, or any part thereof or any interest therein for public or
quasi-public use under the power of eminent domain by reason of any public
improvement or condemnation proceeding, or in any other manner (the
"Condemnation Proceeds") are hereby assigned to Beneficiary and Trustor agrees
to execute such further assignments of the Condemnation Proceeds as Beneficiary
or Trustee may require. After deducting therefrom all costs and expenses
(regardless of the particular nature thereof and whether incurred with or
without suit), including attorneys' fees, incurred by it in connection with any
such action or proceeding, Beneficiary shall apply all such Condemnation
Proceeds to the restoration of the Improvements, provided that the taking or
damage will not, in Beneficiary's reasonable judgment, materially affect the
contemplated use and operation of the Improvements.
If the above condition is met, Beneficiary shall disburse the
Condemnation Proceeds as repairs or replacements are effected and continuing
expenses become due and payable. If the following completion of all such repairs
and replacements any Condemnation Proceeds remain undisbursed, then Beneficiary
shall apply such undisbursed Condemnation Proceeds toward payment of the
outstanding balance of the Loan, and any Condemnation Proceeds which remain
undisbursed after payment in full of the Loan shall be released by Beneficiary
to the person or persons legally entitled thereto. If any one or more of the
above conditions are not met, Beneficiary shall apply all of the Condemnation
Proceeds, after deductions as herein provided, to the repayment of the
outstanding balance of the Note, together with accrued interest thereon,
notwithstanding that said outstanding balance may not be due and payable. If the
Condemnation Proceeds are not sufficient to repay the Note in full, Trustor
shall immediately pay any remaining balance, together with accrued interest
thereon. Application or release of the Condemnation Proceeds as provided herein
shall not cure or waive any default or notice of default hereunder or under any
other Loan Document or invalidate any act done pursuant to such notice.
1.18 Additional Security. No other security now existing, or hereafter
taken, to secure the obligations secured hereby shall be impaired or affected by
the execution of this Deed of Trust, and all additional security shall be taken,
considered and held as cumulative. The taking of additional security, execution
of partial releases of the security, or any extension of the time of payment of
the indebtedness shall not diminish the force, effect or lien of this Deed of
Trust and shall not affect or impair the liability of any maker, surety or
endorser for the payment of said indebtedness. In the event Beneficiary at any
time holds additional security for any of the obligations secured hereby, it may
enforce the sale thereof or otherwise realize upon the same, at its option,
either before, concurrently, or after a sale in made hereunder.
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1.19 Appointment of Successor Trustee. Beneficiary may, from time to
time, by a written instrument executed and acknowledged by Beneficiary, mailed
to Trustor and recorded in the county in which the Trust Estate is located and
by otherwise complying with the provisions of applicable law, substitute a
successor or successors to any Trustee named herein or acting hereunder; and
said successor shall, without conveyance from the Trustee predecessor, succeed
to all title, estate, rights, powers and duties of said predecessor.
1.20 Successors and Assigns. This Deed of Trust applies to, inures to
the benefit of and binds all parties hereto, their heirs, legatees, devisees,
administrators, executors, successors and assigns. The term "Beneficiary" shall
mean the owner and holder of the Note, whether or not named as Beneficiary
herein.
1.21 Inspections. Beneficiary, or it agents, representatives or workers,
are authorized to enter at any reasonable time upon or in any part of the Trust
Estate for the purpose of inspecting the same and for the purpose of performing
any of the acts it is authorized to perform hereunder or under the terms of any
of the Loan Documents.
1.22 Liens. Trustor shall pay and promptly discharge, at Trustor's cost
and expense, all liens, encumbrances and charges upon the Trust Estate, or any
part thereof or interest therein; provided that Trustor shall have the right to
contest in good faith the validity of any such lien, the encumbrance or charge.
If Trustor shall fail to remove and discharge any such lien, encumbrance or
charge, then, in addition to any other right or remedy of Beneficiary,
Beneficiary may, but shall not be obligated to, discharge the same, either by
paying the amount claimed to be due, or by procuring the discharge of such lien,
encumbrance or charge by depositing in a court a bond or the amount claimed or
otherwise giving security for such claim, or by procuring such discharge in such
manner as is or may be prescribed by law. Trustor shall, immediately upon demand
therefor by Beneficiary, pay to Beneficiary an amount equal to all costs and
expenses incurred by Beneficiary in connection with the exercise by Beneficiary
of the foregoing right to discharge any such lien encumbrance or charge,
together with interest thereon from the date of such expenditure at the Agreed
Rate.
1.23 Trustee's Powers. At any time, or from time to time, without
liability therefor and without notice, upon written request of Beneficiary and
presentation of this Deed of Trust and the Note secured hereby for endorsement,
and without affecting the personal liability of any person for payment of the
indebtedness secured hereby or the effect of this Deed of Trust upon the
remainder of said Trust Estate, Trustee may (i) reconvey any part of said Trust
Estate, (ii) consent in writing to the making of any map or plat thereof, (iii)
join in granting any easement thereon, (iv) or join in any extension agreement
or any agreement subordinating the lien or charge hereof.
1.24 Beneficiary's Powers. Without affecting the liability of any other
person liable for the payment of any obligation herein mentioned, and without
affecting the lien or charge of this Deed of Trust upon any portion of the Trust
Estate not then or theretofore released as
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security for the full amount of all unpaid obligations, Beneficiary may, from
time to time and without notice (i) release any person so liable, (ii) extend
the maturity or alter any of the terms of any such obligation, (iii) grant other
indulgences, (iv) release or reconvey, or cause to be released or reconveyed at
any time at Beneficiary's option any parcel, portion or all of the Trust Estate,
(v) take or release any other or additional security for any obligation herein
mentioned, or (vi) make compositions or other arrangements with debtors in
relation thereto.
1.25 Trade Names. At the request of Beneficiary, Trustor shall execute a
certificate in form satisfactory to Beneficiary listing the trade names or
fictitious business names under which Trustor intends to operate the Trust
Estate or any business located thereon and representing and warranting that
Trustor does business under no other trade names or fictitious business name*--
with respect to the Trust Estate. Trustor shall immediately notify Beneficiary
in writing of any change in said trade names or fictitious business names, and
will, upon request of Beneficiary, execute any additional financing statements
and other certificates necessary to reflect the change in trade names or
fictitious business names.
1.26 Leasehold. If a leasehold estate constitutes a portion of the Trust
Estate, Trustor agrees not to amend, change, terminate or modify such leasehold
estate or any interest therein without the prior written consent of Beneficiary.
Consent to one amendment, change, agreement or modification shall not be deemed
to be a waiver of the right to require consent to other, future or successive
amendments, changes, agreements or modifications. Trustor agrees to perform all
obligations and agreements under said leasehold and shall not take any action or
omit to take any action which would effect or permit the termination of said
leasehold. Trustor agrees to promptly notify Beneficiary in writing with respect
to any default or alleged default by any party thereto and to deliver to
Beneficiary copies of all notices, demands, complaints or other communications
received or given by Trustor with respect to any such default or alleged
default. Beneficiary shall have the option to cure any such default and to
perform any or all of Trustor's obligations thereunder. All sums expended by
Beneficiary in curing any such default shall be secured hereby and shall be
immediately due and payable without demand or notice and shall bear interest
from date of expenditure at the Agreed Rate.
ARTICLE II
ASSIGNMENT OF RENTS, ISSUES AND PROFITS
2.1 Assignment of Rents, Issues and Profits. Trustor further irrevocably
grants, transfers and assigns to Beneficiary the rents, income, issues, and
profits from the Premises, absolutely and unconditionally, and not merely as
additional collateral security for the indebtedness secured by this Deed of
Trust. In addition, upon execution by Trustor, Trustor assigns all right to
income and profits emanating from that certain Mining Lease Agreement by and
between Trustor and Twin Mountain Rock Venture to Beneficiary, and Beneficiary
shall have the right to directly make demand on Twin Mountain Rock Venture for
such income and profits.
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2.2 Assignment to Beneficiary. Trustor hereby assigns and transfers to
Beneficiary all the Rents of the Trust Estate, and hereby gives to and confers
upon Beneficiary the right, power and authority to collect such Rents. Trustor
irrevocably appoints Beneficiary its true and lawful attorney-in-fact, at the
option of Beneficiary at any time and from time to time, to demand, receive and
enforce payment, to give receipts, releases and satisfactions, and to sue, in
the name of Trustor, Trustee or Beneficiary, for all such Rents, issues and
profits and apply the same to the indebtedness secured hereby; provided,
however, that so long as an Event of Default shall not have occurred hereunder
and be continuing, Trustor shall have the right to collect such Rents in
accordance with and subject to the provisions of the Assignment of Rents. Upon
request of Beneficiary, Trustor shall execute and deliver to Beneficiary, in
recordable form, a specific assignment of any Lease, now or hereafter affecting
the Trust Estate or any portion thereof, to further evidence the assignment
hereby made.
2.3 Election of Remedies. Upon the occurrence of an Event of Default
hereunder Beneficiary may, at its option, exercise its rights under the
Assignment of Rents or exercise (or cause the Trustee to exercise) its rights
hereunder. If Beneficiary elects to exercise its rights hereunder, Beneficiary
or Trustee may, at any time without notice, either in person, by agent or by a
receiver appointed by a court, enter upon and take possession of all or any
portion of the Trust Estate, enforce all Leases, collect all Rents, including
those past due and unpaid, and apply the same, to the costs and expenses of
operation of the Trust Estate and collection, including, without limitation,
attorneys' fees, and to any indebtedness then secured hereby, and in such order
as Beneficiary may determine. In connection with the exercise by Beneficiary of
its rights hereunder or under the Assignment of Rents, Trustor agrees that
Beneficiary shall have the right to specifically enforce such rights and to
obtain the appointment of a receiver in accordance with the provisions of
Section 3.4 hereof without regard to the value of the Trust Estate or the
adequacy of any security for the obligations then secured hereby. The collection
of such Rents or the entering upon and taking possession of the Trust Estate, or
the application thereof as aforesaid, shall not cure or waive any default or
notice of default hereunder or invalidate any act done in response to such
default or pursuant to such notice of default, or be deemed or construed to make
Beneficiary a mortgage-in-possession of the Trust Estate or any portion thereof.
ARTICLE III
REMEDIES UPON DEFAULT
3.1 Events of Default. Any of the following events shall be deemed an
Event of Default hereunder (an "Event of Default"):
(a) Default shall be made in the payment of any installment of principal
or interest or any other sum secured hereby when due; or
(b) A failure by Trustor to perform any other covenant or obligation or
any breach by Trustor of any other agreements, representations or warranties
contained in this Deed of Trust, the Note, the Assignment of Rents, or any other
Loan Document; or
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(c) the occurrence of a default or an "Event of Default" under any of
the Loan Documents;
(d) A writ of execution or attachment or any similar process shall be
issued or levied against all or any part of or interest in the Premises, or any
judgment involving monetary damages in any such case shall be entered against
Trustor which shall become a lien on the Premises or any portion thereof.
(e) A default by Trustor of any terms or conditions of a Prior
Encumbrance.
For purposes of this Deed of Trust, the term "Prior Encumbrance" shall
mean any lien or encumbrance upon the Premises or any part thereof on a parity
with or prior or superior to the lien of this Deed of Trust.
3.2 Acceleration Upon Default, Additional Remedies. Upon the occurrence
of an Event of Default, Beneficiary may, at its option, declare all indebtedness
secured hereby to be immediately due and payable without any presentment,
demand, protest or notice of any kind.
Thereafter, Beneficiary may:
(a) Either in person or by agent, with or without bringing any
action or proceeding, or by a receiver appointed by a court and without regard
to the adequacy of its security, enter upon and take possession of the Trust
Estate, or any part thereof, in its own name or in the of Trustee, and do any
act which it deems necessary or desirable to preserve the value, marketability
or rentability of the Trust Estate, or any part thereof or interest therein,
increase the income therefrom or protect the security thereof and, with or
without taking possession of the Trust Estate, sue for or otherwise collect the
rents, issues and profits thereof, including those past due and unpaid, and
apply the same, less costs and expenses of operation and collection including,
without limitation, attorneys' fees, upon any indebtedness secured hereby, all
in such order as Beneficiary may determine. The entering upon and taking
possession of the Trust Estate, the collection of such rents, issues and profits
and the application thereof as aforesaid, shall not cure or waive any default or
notice of default hereunder or invalidate any act done in response to such
default or pursuant to such notice of default and, notwithstanding the
continuance in possession of all or any portion of the Trust Estate or the
collection, receipt and application of rents, issues or profits, Trustee or
Beneficiary shall be entitled to exercise every right provided for in any of the
Loan Documents or by law upon occurrence of any Event of Default, including the
right to exercise the power of sale;
(b) Commence an action to foreclose this Deed of Trust as a
mortgage, appoint a receiver, or specifically enforce any of the covenants
hereof;
(c) Deliver to Trustee a written declaration of default and demand
for sale, and a written notice of default and election to cause Trustor's
interest in the Trust Estate to be sold,
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which notice Trustee or Beneficiary shall cause to be duly filed for record in
the Official Records of the county in which the Trust Estate is located; or
(d) Exercise all other rights and remedies provided herein in any
Loan Document or other document or agreement now or hereafter securing all or
any portion of the obligations secured hereby, or by law.
3.3 Foreclosure by Power of Sale. Should Beneficiary elect to foreclose
by exercise of the power of sale hereby contained, Beneficiary shall notify
Trustee and shall deposit with Trustee this Deed of Trust and the Note and such
receipt and evidence of expenditures made and secured hereby as Trustee may
require.
(a) Upon receipt of such notice from Beneficiary, Trustee shall
cause to be recorded, published and delivered to Trustor such Notice of Default
and Election to Sell as then required by law and by this Deed of Trust. Trustee
shall, without demand on Trustor, after lapse of such time as may then be
required by law and after recordation of such Notice of Default and after Notice
of Sale having been given as required by law, sell the Trust Estate at the time
and place of sale fixed by it in said Notice of Sale, either as a whole, or in
separate lots or parcels or items as Trustee shall deem expedient, and in such
order as it may determine, at public auction to the highest bidder for cash in
lawful money of the United States payable at the time of sale. Trustee shall
deliver to such purchaser or purchasers thereof its good and sufficient deed or
deeds conveying the property so sold, but without any covenant or warranty,
express or implied. The recitals in such deed of any matters or facts shall be
conclusive proof of the truthfulness thereof. Any person, including, without
limitation, Trustor, Trustee or Beneficiary, may purchase at such sale and
Trustor hereby covenants to warrant and defend the title of such purchaser or
purchasers.
(b) After deducting all costs, fees and expenses of Trustee and of
this Trust, including costs of evidence of title in connection with sale,
Trustee shall apply the proceeds of sale in the following priority, to payment
of: (i) first, all sums expended under the terms hereof, not then repaid, with
accrued interest at the Agreed Rate; (ii) second, all other sums then secured
hereby; and (iii) the remainder, if any, to the person or persons legally
entitled thereto.
(c) Subject to California Civil Code Section 2924g, Trustee may
postpone sale of all or any portion of the Trust Estate by public announcement
at such time and place of sale, and from time to time thereafter may postpone
such sale by public announcement or subsequently noticed sale, and without
further notice make such sale at the time fixed by the last postponement, or
may, in its discretion, give a new notice of sale.
3.4 Appointment of Receiver. Upon the occurrence of an Event of Default
hereunder, Beneficiary, as a matter of right and without notice to Trustor or
anyone claiming under Trustor, and without regard to the then value of the Trust
Estate or the adequacy of any security for the obligations then secured hereby,
shall have the right to apply to any court having
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jurisdiction to appoint a receiver or receivers of the Trust Estate, and Trustor
hereby irrevocably consents to such appointment and waives notice of any
application therefor. Any such receiver or receivers shall have all the usual
powers and duties of receivers in like or similar cases and all the powers and
duties of Beneficiary in case of entry as provided herein and shall continue as
such and exercise all such powers until the later of (i) the date of
confirmation of sale of the Trust Estate; (ii) the disbursement of all proceeds
of the Trust Estate collected by such receiver and the payment of all expenses
incurred in connection therewith; or (iii) the termination of such receivership
with the consent of Beneficiary or pursuant to an order of a court of competent
jurisdiction.
3.5 Remedies Not Exclusive. Trustee and Beneficiary, and each of them,
shall be entitled to enforce payment and performance of any indebtedness or
obligations secured hereby and to exercise all rights and powers under this Deed
of Trust or under any Loan Document or other agreement or any laws now or
hereafter in force, notwithstanding some or all of the said indebtedness and
obligations secured hereby may now or hereafter be otherwise secured, whether by
mortgage, deed of trust, pledge, lien, assignment or otherwise. Neither the
acceptance of this Deed of Trust nor its enforcement whether by court action or
pursuant to the power of sale or other powers herein contained, shall prejudice
or in any manner affect Trustee's or Beneficiary's right to realize upon or
enforce any other security now or hereafter held by Trustee or Beneficiary, it
being agreed that Trustee and Beneficiary, and each of them, shall be entitled
to enforce this Deed of Trust and any other security now or hereafter held by
Beneficiary or Trustee in such order and manner as they or either of them may in
their absolute discretion determine. No remedy herein conferred upon or reserved
to Trustee or Beneficiary is intended to be exclusive of any other remedy herein
or by law provided or permitted, but each shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute. Every power or remedy given by any of the Loan
Documents to Trustee or Beneficiary or to which either of them may be otherwise
entitled, may be exercised, concurrently or independently, from time to time and
as often as may be deemed expedient by Trustee or Beneficiary and either of them
may pursue inconsistent remedies. No waiver of any default of the Trustor
hereunder shall be implied from any omission by the Beneficiary to take any
action on account of such default if such default persists or be repeated, and
no express waiver shall affect any default other than the default specified in
the express waiver and that only for the time and to the extent therein stated.
No acceptance of any payment of any one or more delinquent installments which
does not include interest at the penalty or default rate from the date of
delinquency, together with any required late charge, shall constitute a waiver
of the right of Beneficiary at any time thereafter to demand and collect payment
of interest at such default rate or of late charges, if any.
3.6 Request for Notice. Trustor hereby requests a copy of any notice of
default and that any notice of sale hereunder by mailed to it at the address set
forth in Section 4.5 of this Deed of Trust.
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ARTICLE IV
MISCELLANEOUS
4.1 Amendments. This Deed of Trust nor any provision hereof cannot be
waived, changed, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of any waiver, change,
discharge or termination is sought.
4.2 Trustor Waiver of Rights. Trustor waives to the extent permitted by
law, (i) the benefit of all laws now existing or that may hereafter be enacted
providing for any appraisement before sale of any portion of the Trust Estate,
and, (ii) all rights of redemption, valuation, appraisement, stay of execution,
notice of election to mature or declare due the whole of the secured
indebtedness and marshaling in the event of foreclosure of the liens hereby
created, and (iii) all rights and remedies which Trustor may have or be able to
assert by reason of the laws of the State of California pertaining to the rights
and remedies of sureties; provided, however, nothing contained herein shall be
deemed to be a waiver of Trustor's rights under Section 2924c of the California
Civil Code.
4.3 Statements by Trustor. Trustor shall, within ten (10) days after
written notice thereof from Beneficiary, deliver to Beneficiary a written
statement stating the unpaid principal of and interest on the Note and any other
amounts secured by this Deed of Trust and stating whether any offset or defense
exists against such principal and interest.
4.4 Reconveyance by Trustee. Upon written request of Beneficiary stating
that all sums secured hereby have been paid in full, and upon surrender of this
Deed of Trust and the Note to Trustee for cancellation and retention, and upon
payment by Trustor of Trustee's fees, Trustee shall reconvey to Trustor, or to
the person or persons legally entitled thereto, without warranty, any portion of
the Trust Estate then held hereunder. The recitals in such reconveyance of any
matters or facts shall be conclusive proof of the truthfulness thereof. The
grantee in any reconveyance may be described as "the person or persons legally
entitled thereto."
4.5 Notices. All notices, requests and demands to be made hereunder to
the parties hereto shall be in writing and shall be delivered by hand or sent by
registered or certified mail, return receipt requested, postage pre-paid through
the United States Postal Service to the addresses shown below or such other
addresses which the parties may provide to one another in accordance herewith.
Such notices, requests and demands, if sent by mail, shall be deemed given five
(5) days after deposit in the United States mails and if delivered by hand,
shall be deemed given when delivered.
To Beneficiary: Owen Sequoia, Inc.
3651 Lindell Road, Suite A
Las Vegas, NV 89103
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With a copy to: Arter & Hadden
Attn: Bruce G. Holden, Esq.
Jamboree Center
5 Park Plaza, Suite 1000
Irvine, CA 92714
To Trustor: Can Cal Resources, Ltd
Attn: Ron Sloan
1505 Blackcombe St., Unit 203
Las Vegas, NV 89128
4.6 Acceptance by Trustee. Trustee accepts this Trust when this Deed of
Trust, duly executed and acknowledged, is made a public record as provided by
law.
4.7 Captions. The captions or headings at the beginning of each Section
hereof are for the convenience of the parties and are not a Part of this Deed of
Trust.
4.8 Invalidity of Certain Provisions. Every provision of this Deed of
Trust is intended to be severable. In any event any term or provision hereof is
declared to be illegal or invalid for any reason whatsoever by a court of
competent jurisdiction, such illegality or invalidity shall not affect the
balance of the terms and provisions hereof, which terms and provisions shall
remain binding and enforceable. If the lien of this Deed of Trust is invalid or
unenforceable as to any part of the debt, or if the lien is invalid or
unenforceable as to any part of the Trust Estate, the unsecured or partially
unsecured portion of the debt shall be completely paid prior to the payment of
the remaining and secured or partially secured portion of the debt, and all
payments made on the debt, whether voluntary or under foreclosure or other
enforcement action or procedure, shall be considered to have been first paid on
and applied to the full payment of that portion of the debt which is not secured
or fully secured by the lien of this Deed of Trust.
4.9 Subrogation. To the extent that proceeds of the Note are used to pay
any outstanding lien, charge or Prior Encumbrance against the Trust Estate, such
proceeds have been or will be advanced by Beneficiary at Trustor's request and
Beneficiary shall be subrogated to any and all rights and liens held by any
owner or holder of such outstanding liens, charges and Prior Encumbrances
irrespective of whether said liens, charges or encumbrances are released.
4.10 Attorneys' Fees. If the Note is not paid when due or if any Event
of Default occurs, Trustor promises to pay all costs of enforcement and
collection, including but not limited to, reasonable attorneys' fees, whether or
not such enforcement and collection includes the filing of a lawsuit. As used
herein, the term "attorneys' fees" or "attorneys' fees and costs" shall have the
meanings usually given such terms.
4.11 No Merger of Lease. If both the lessor's and lessee's estate under
any lease or any portion thereof which constitutes a part of the Trust Estate
shall at any time become vested in
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one owner, this Deed of Trust and the lien created hereby shall not be destroyed
or terminated by application of the doctrine of merger unless Beneficiary so
elects as evidenced by recording a written declaration so stating, and, unless
and until beneficiary so elects, Beneficiary shall continue to have and enjoy
all of the rights and privileges of Beneficiary as to the separate estates. In
addition, upon the foreclosure of the lien created by this Deed of Trust on the
Trust Estate pursuant to the provisions hereof, any leases or subleases then
existing and affecting all or any portion of the Trust Estate shall not be
destroyed or terminated by application of the law of merger or as a matter of
law or as a result of such foreclosure unless Beneficiary or any purchaser at
such foreclosure sale shall so elect. No act by or on behalf of Beneficiary or
any such purchaser shall constitute a termination of any Lease or sublease
unless Beneficiary or such purchaser shall give written notice thereof to such
tenant or subtenant.
4.12 Governing Law. This Deed of Trust shall be governed by and
construed in accordance with the laws of the State of California.
4.13 Joint and Several Obligations. Should this Deed of Trust as signed
by more than one party, all obligations herein contained shall be deemed to be
the joint and several obligations of each party executing this Deed of Trust.
Any married person signing this Deed of Trust agrees that recourse may be had
against community assets and against his or her separate property for the
satisfaction of all obligations contained herein.
4.14 Interpretation. In this Deed of Trust the singular shall include
the plural and the masculine shall include the feminine and neuter and vice
versa, if the context so requires.
4.15 Loan Statement Fees. Trustor shall pay the amount demanded by
Beneficiary or its authorized loan servicing agent for any statement regarding
the obligations secured hereby; provided, that such amount may not exceed the
maximum amount allowed law at the time request for the statement is made.
4.16 Counterparts. This Deed of Trust may be executed and acknowledged
in counterparts, all of which executed and acknowledged counterparts shall
together constitute a single document. Signature and acknowledgement pages may
be detached from the counterparts and attached to a single copy of this document
to physically form one document, which may be recorded.
4.17 Financing Statement and Fixture Filing.
(a) This Deed of Trust constitutes a Security Agreement with
respect to all personal property and fixtures in which Beneficiary is granted a
security interest hereunder, and Beneficiary shall have all of the rights and
remedies of a secured party under the California Commercial Code as well as all
other rights and remedies available at law or in equity. Trustor hereby agrees
to execute and deliver on demand and hereby irrevocably constitutes and appoints
Beneficiary the attorney-in-fact of Trustor, to execute, deliver and, if
appropriate, to file with the
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appropriate filing officer or office such security agreements, financing
statements, continuation statements or other instruments as Beneficiary may
request or require in order to impose, perfect or continue the perfection of,
the lien or security interest created hereby. Upon the occurrence and during the
continuance of any default by Trustor hereunder, Beneficiary shall have the
right to cause any of the Trust Estate which is personal property and subject to
the security interest of Beneficiary hereunder to be sold at any one or more
public or private sales as permitted by applicable law, and Beneficiary shall
further have all other rights and remedies, whether at law, in equity, or by
statute, as are available to secured creditors under applicable law. Any such
disposition may be conducted by an employee or agent of Beneficiary or Trustee.
Any person, including both Trustor and Beneficiary, shall be eligible to
purchase any part or all of such property at any such disposition.
Expenses of retaking, holding, preparing for sale, selling or the
like shall be borne by Trustor and shall include Beneficiary's and Trustee's
reasonable attorneys' fees and legal expenses. Trustor, upon demand of
Beneficiary, shall assemble such personal property and make it available to
Beneficiary at the Premises, a place which is hereby deemed to be reasonably
convenient to Beneficiary and Trustor. Beneficiary shall give Trustor at least
five (5) days prior written notice of the time and place of any public sale or
other disposition of such property or of the time of or after which any private
sale or any other intended disposition is to be made, and if such notice is sent
to Trustor, as the same is provided for the mailing of notices herein, it is
hereby deemed that such notice shall be and is reasonable notice to Trustor.
(b) This Deed of Trust constitutes a financing statement filed as a
fixture filing in the Official Records of the county recorder of the county in
which the Premises are located with respect to any and all fixtures included
within the term "Trust Estate" as used herein and with respect to any goods or
other personal property that may now be, or hereafter become, such fixtures
4.18 Further Assurances. Trustor, Beneficiary and Trustee agree to do or
to cause to be done such further acts and things and to execute and deliver or
to cause to be executed and delivered such additional assignments, agreements,
powers and instruments, as any of them may reasonably require or deem advisable
to keep valid and effective the charges and lien hereof, to carry into effect
the purposes of this Deed of Trust or to better assure and confirm unto any of
them their rights, powers and remedies hereunder; and, upon request by
Beneficiary, shall supply evidence or fulfillment of each of the covenants
herein contained concerning which a request for such evidence has been made
4.19 Nonforeign Entity. Section 1445 of the Internal Revenue Code of
1986, as amended (the "Internal Revenue Code") and Section 18805 of the
California Revenue and Taxation Code provides that a transferee of a U.S. real
property interest must withhold tax if the transferor is a foreign person. To
inform Beneficiary that the withholding of tax will not be required in the event
of the disposition of the Premises or Improvements pursuant to the terms of this
Deed of Trust, Trustor hereby certifies, under penalty of perjury that:
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(a) Trustor is not a foreign corporation, foreign partnership, foreign
trust or foreign estate, as those terms are defined in the Internal Revenue Code
and the regulations promulgated thereunder; and
(b) Trustor's U.S. employer identification number has been applied for
and promptly upon receipt shall be provided to Beneficiary; and
(c) Trustor's principal place of business is 1505 Blackcombe St., Unit
203, Las Vegas, Nevada 89128.
It is understood that beneficiary may disclose the contents of this
certification to the Internal Revenue Service and the California Franchise Tax
Board and that any false statement contained herein could be punished by fine,
imprisonment or both. Trustor covenants and agrees to execute such further
certificates, which shall be signed under penalty of perjury, as Beneficiary
shall reasonably require. The covenant set fort herein shall survive the
foreclosure of the lien of this Deed of Trust or acceptance of a deed in lieu
thereof.
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the
day and year first above written.
Trustor:
CAN CAL RESOURCES LIMITED
By: /s/ R. D. Sloan - President
---------------------------------
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EXHIBIT "A"
LEGAL DESCRIPTION OF REAL PROPERTY
PARCEL NO. 1:
A PARCEL OF LAND BEING A PORTION OF THE ATCHISON, TOPEKA AND SANTA FE RAILWAY
COMPANY'S PROPERTY LYING IN SAID RAILWAY COMPANY'S NEEDLES SUBDIVISION AND THIS
PARCEL OF LAND BEING ALL OF THAT CERTAIN MINING CLAIM OR PREMISES DESCRIBED IN A
MINING CLAIM BETWEEN THE UNITED STATES GOVERNMENT, GRANTOR, AND THE ATCHISON,
TOPEKA AND SANTA FE RAILWAY COMPANY, GRANTEE, (SANTA FE DOCUMENT DEED NO.
CL-11310) DATED APRIL 8, 1963, AS RECORDED IN BOOK 5907, PAGE 451, ON MAY 10,
1963 IN THE OFFICE OF THE RECORDS OF SAN BERNARDINO COUNTY, CALIFORNIA, THE
ABOVE REFERENCED PARCEL OF LAND, KNOW AS THE CINDER AND CINDER #2 PLACER MINING
CLAIMS AND LYING IN THE NORTH HALF OF SECTION 32, TOWNSHIP 8 NORTH, RANGE 6 EAST
OF THE SAN BERNARDINO MERIDIAN, SAN BERNARDINO COUNTY, CALIFORNIA BEING
DESCRIBED IN SAID MINING CLAIM AS FOLLOWS:
CINDER CLAIM, EMBRACING:
THE NORTH HALF OF THE NORTHWEST QUARTER, (N1/2, NW1/4), AND THE WEST HALF OF THE
NORTHWEST QUARTER OF THE NORTHEAST QUARTER, (W1/2, NW1/4, NE1/4), OF SAID
SECTION 32.
CINDER #2, EMBRACING:
THE NORTH HALF OF THE SOUTHEAST QUARTER OF THE NORTHWEST QUARTER, (N1/2, SE1/4,
NW1/4) OF SAID SECTION 32.
EXCEPTING THEREFROM ANY VEINS OR LOOKS OF QUARTZ OR OTHER ROCK IN PLACE NEARING
GOLD, SILVER, CINNABAR, LEAD, TIN, COPPER OR OTHER VALUABLE DEPOSITS WITHIN THE
LAND ABOVE DESCRIBED WHICH MAY HAVE BEEN DISCOVERED OR KNOW TO EXIST PRIOR TO
SEPTEMBER 11, 1959.
EXCEPTING THEREFROM CERTAIN OIL, GAS, CASING-HEAD GAS AND ORES AND
MINERALS AS RESERVED IN THE DEED RECORDED DECEMBER 19, 1996 AS
INSTRUMENT NO. 96-465341 OFFICIAL RECORDS.
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PARCEL NO. 2:
AN EASEMENT FOR A PRIVATE ROAD AND A POLE LINE FOR TELEPHONE AND POWER WIRES
OVER A STRIP OF LAND SIXTY AND 00/100 (60.00) FEET IN WIDTH BEING ALL THAT
PORTION OF SECTION TWENTY-NINE (29), TOWNSHIP EIGHT (8) NORTH, RANGE SIX (6)
EAST, SAN BERNARDINO BASE AND MERIDIAN, ACCORDING TO THE OFFICIAL PLAT THEREOF,
LYING BETWEEN LINES WHICH ARE PARALLEL WITH AND DISTANT THIRTY AND 00/100
(30.00) FEET MEASURED AT RIGHT ANGLES FROM AND ON EACH SIDE OF THE FOLLOWING
DESCRIBED CENTER LINES:
BEGINNING AT A POINT IN THE NORTH LINE OF SAID SECTION TWENTY-NINE (29), DISTANT
EASTERLY ALONG SAID NORTH LINE NINE HUNDRED AND 00/100 (900.00) FEET FROM AA
ONE-HALF (1/2) INCH PIPE SET FOR THE NORTHWEST CORNER OF SAID SECTION
TWENTY-NINE (29); THENCE SOUTHWESTERLY ALONG A DIRECT LINE DEFLECTING
SOUTHWESTERLY FROM SAID NORTH LINE AN ANGLE OF SIXTY-ONE DEGREES (61(degree)), A
DISTANCE OF ONE THOUSAND FOUR HUNDRED THIRTY-FIVE AND 00/100 (1,435.00) FEET;
THENCE SOUTHWESTERLY ALONG A DIRECT LINE DEFLECTING AN ANGLE OF SIXTEEN DEGREES,
THIRTY MINUTES (16(degree)30') TO THE LEFT FROM LAST COURSE, A DISTANCE OF ONE
THOUSAND SEVEN HUNDRED EIGHT-FIVE AND 00/100 (1,785.00) FEET; THENCE
SOUTHEASTERLY ALONG A DIRECT LINE DEFLECTING AN ANGLE OF EIGHTEEN DEGREES,
THIRTY MINUTES (18(degree)30') TO THE LEFT FROM LAST COURSE, A DISTANCE OF FOUR
HUNDRED FIFTY AND 00/100 (450.00) FEET; THENCE SOUTHEASTERLY ALONG A DIRECT LINE
DEFLECTING AN ANGLE OF FORTY-ONE DEGREES, THIRTY MINUTES (23(degree)30') TO THE
RIGHT FROM LAST COURSE, A DISTANCE OF SEVEN HUNDRED AND 00/100 (700.00) FEET;
THENCE SOUTHEASTERLY ALONG A DIRECT LINE DEFLECTING AN ANGLE OF EIGHTEEN DECREES
(18(degree)) TO THE LEFT FROM LAST COURSE, A DISTANCE OF ONE THOUSAND THREE
HUNDRED THIRTY AND 00/100 (1,330.00) FEET; THENCE SOUTHWESTERLY ALONG A DIRECT
LINE DEFLECTING AN ANGLE OF FORTY-THREE DEGREES, THIRTY MINUTES (43(degree)30')
TO THE RIGHT FROM LAST COURSE, A DISTANCE OF SIXTY AND 00/100 (60.00) FEET MORE
OR LESS TO POINT OF ENDING IN THE SOUTH LINE OF SAID SECTION TWENTY-NINE (29),
AND BEING OVER THE WEST HALF OF WEST HALF (W1/2 OF W1/2) OF SAID SECTION TWENTY-
NINE (29).
THE SIDE LINES OF SAID STRIP TO BE LENGTHENED OR SHORTENED AS THE CASE MAY BE SO
THAT ALL PORTIONS OF SAID STRIP SHALL FALL WITHIN THE BOUNDARIES OF SAID SECTION
TWENTY-NINE (29).
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EXHIBIT 10.6
LEASE AND PURCHASE OPTION AGREEMENT
BY THIS LEASE AND OPTION AGREEMENT dated the 12th day of March, 1998,
by and between ARTHUR JAMES GOOD (also know as A. J. Good) and WANDA
MAE GOOD, husband and wife whose address is 620 El Rancho Drive, Kingman Arizona
86401 ("LESSOR" herein),
and
Can-Cal Resources, Ltd., whose address is 1505 Blackcombe Street, Unit 203, Las
Vegas, Nevada 89128 ("Lessee" herein)
the Lessor, in consideration of the payments and promises set forth herein, has
granted certain rights to Lessee under the following terms and conditions:
1. GRANT
a. LEASE - Lessor hereby grants, demises, leases and lets those certain
patented mining claims known as JUROR #1, JUROR #2, CERBAT, REDDOG and ROLLING
WAVE, located in the Gold Nugget Cerbat Mountain, Hualapai Mining District,
Mojave County, Arizona, more particularly described in the attached Exhibit "A"
(the "Property" herein), including all rights appurtenant to the Property
recognized under the mining laws of the United States or established under the
laws of the State of Arizona, including water rights, easements, and
rights-of-way pertaining or appurtenant to the Property, exclusively unto
Lessee, its successors, and assigns, with the exclusive rights and privileges to
explore for, mine (by open pit, strip, underground, solution mining or any other
method, including and method hereafter developed), extract, mill, store,
process, remove and market all ores and minerals as may be authorized by the
mineral laws of the United States from in, upon or under the Property. Lessee is
further granted the right to place, construct, maintain, use, and remove such
structures, facilities, equipment, roadways, haulage ways and such other
improvements on the surface or subsurface of the Property as Lessee, consistent
with authorizations obtained from the Governmental Agencies, if applicable,
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may deem necessary, useful or convenient for the full enjoy enjoyment of all the
rights herein granted.
2. b. TERM
Unless sooner terminated under the termination provisions hereinafter
contained, the term of this Agreement shall be for a term of Twenty (20) years
commencing on the effective date hereof.
3. PAYMENTS TO LESSOR
a. COMPENSATION - Lessee shall pay Lessor as compensation upon execution
of this Agreement a total of Two Thousand Five Hundred Dollars ($2,500.00).
b. Lessee shall pay Lessor as additional compensation thirty days from
the date of execution of this Agreement an additional Two Thousand Five Hundred
Dollars ($2,500.00).
c. Lessee shall pay Lessor as additional compensation sixty days from
the date of execution of this Agreement an additional Five Thousand Dollars
($5,000.00).
d. MINIMUM ROYALTY - Beginning with the first yearly quarter after the
effective date of this agreement, the sum of fifteen hundred dollars ($1,500.00)
will be paid. Every quarter thereafter a payment of fifteen hundred dollars
($1,500.00) will be paid. Such advance royalties shall be a credit toward any
moneys due Lessor under the provision of subsection c of this Section 3.
e. PRODUCTION ROYALTY - If Lessee mines and markets Leased Substances
from the Property, Lessee shall pay to Lessor a production royalty of FIVE
PERCENT (%5) of the "Gross Returns" received by Lessee from the sale or other
disposition of Leased Substances. The term "Gross Returns" received by Lessee
from the sale or other disposition of Leased Substances. The term "Gross
Returns" shall mean the total dollar value received from the purchaser of Leased
Substances, less only any weighing, sampling, penalty, processing or other
charges assessed by the purchaser. Production Royalty is to continue for 10
years or until the Lessee exercises it option to purchase, whichever occurs
sooner.
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f. PAYMENT OF PRODUCTION ROYALTY -
(1) Production royalty paid to Lessor hereunder shall be due and payable
within thirty (30) days after the end of each calendar quarter for those Leased
Substances sold and a settlement sheet received during the applicable calendar
quarter after first deducting any advance minimum royalty paid under subsection
b of Section 3 not previously recovered from prior payments under this
subsection d. All production royalty shall be accompanied by the settlement
sheets or a similar statement showing the basis upon which the payment was
computed.
(2) Lessor may elect to receive its royalty in kind by physical delivery
of gold and/or silver bullion for any calendar year, by notifying Lessee of its
election on or before December 1 in the preceding calendar year. An election by
Lessor to receive its royal in kind shall be irrevocable for the calendar year
for which it was made. Failure of Lessor to notify Lessee by December 1 or its
election to take the royalty in kind, shall be deemed a waiver by Lessor of all
rights to take the royalty in kind during the following calendar year.
(3) On or before the fifth day of the month following the end of each
calendar quarter, Lessee shall make the bullion available to Lessor at the place
where the bullion has been refined. The bullion shall be in the form in which
Lessee sells or otherwise disposes of same. Lessee shall provide ten (10) days'
prior notice Lessor of the name and location of the refinery and the date or
dates on which the bullion will be available to Lessor. If Lessor desires Lessee
to deliver the bullion to it at a place other than the place of refining, Lessor
shall reimburse Lessee for the costs incurred by Lessee in making such delivery,
which costs include transportation and insurance.
(4) The value of any in kind royalty delivered to Lessor for purposes of
establishing the credit for advance minimum royalty shall be based upon the
"Quarterly Average Gold Price" as of the date of delivery to Lessor. The
Quarterly Average Gold Price shall be the price for immediate delivery quoted at
the close of business by the COMEX, calculated by dividing the sum of all such
prices reported for the quarter by the number of days for which such prices were
quoted.
(e) METHOD OF MAKING PAYMENTS - All payments required hereunder may be
mailed or delivered to Lessor's address or to any single depository as Lessor
may instruct. Upon making payment to the authorized agent or depository, Lessee
shall be relieved of any
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responsibility for the distribution of such payment to Lessor. The delivery or
the deposit in the mail of any payment hereunder on or before the due date
thereof shall be deemed timely payment hereunder.
4. EXERCISE OF OPTION; PURCHASE PRICE
a. Exercise of Option - Lessee may elect to exercise its option to
purchase the Property at any time during the term specified in Section 2 by
giving written notice of its election in the manner specified in Section 9 of
this Agreement, which notice shall also designate a bank or title insurance
company within the state of Arizona to serve as escrow agent. Lessor and Lessee
shall promptly execute and deliver instructions to the escrow agent consistent
with the terms and conditions of this Agreement.
b. PURCHASE PRICE - If Lessee exercises its option to purchase the
Property, the purchase price shall be (1) Two Hundred Fifty Thousand Dollars
($250,000.00) plus interest at the rate of EIGHT PERCENT (%8) compounded
annually from and after the date of its exercise of the option to purchase the
property. If Lessee exercises its option to so purchase, all funds paid to
Lessor under the terms of Section 3 hereof shall be a credit toward such
purchase price as of the date such payments were made hereunder.
c. CLOSING - Within the (10) days after Lessee has exercised its option
to purchase, Lessor shall furnish escrow agent with a conveyance of the Property
in a form acceptable to Lessee. Lessee shall, within the (10) days after its
receipt of the form of the conveyance pay the purchase price to the escrow
agent. Upon such receipt, escrow agent shall close the escrow by recording the
conveyance in the official records of Mojave County and paying the purchase
price to Lessor. One-half of the charges of the escrow agent shall be paid by
each party. Lessee shall pay all recording fees in connection with its exercise
of its option to purchase.
5. INSPECTION
Lessor (or any agent of Lessor with authorization in writing), at
Lessor's risk and expense, may (1) enter upon the Property to inspect the same
at such times and upon such notice to lessee as shall not unreasonably or
unnecessarily hinder or interrupt the operations of Lessee, and (2) inspect the
accounts and records used in calculating production royalty paid to Lessor
hereunder, which right may be exercised, at any reasonable time during a period
of one (1) year from and after the date on which the applicable quarterly
payment of production royalty was
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made. Lessor agrees to treat all information received hereunder as confidential
and not to disclose the same without proper permission of Lessee.
6. OBLIGATIONS OF LESSEE
a. CONDUCT OF OPERATIONS - All work performed by Lessee on the Property
pursuant to this Agreement shall be done in good and workmanlike manner and in
compliance with all state and federal laws and regulations governing such
operations, together with all local ordinances, including without limitation,
those regulations related to the use of the Property and all sanitary and health
regulations. The operations of Lessee shall be further subject to the following
special requirements:
(1) Lessor shall be furnished with copies of all notices of
intent, plans of operation, or other documents furnished to government entities
having supervision or control of Lessee's activities hereunder; and
(2) Lessee shall not stockpile ore or concentrates off of the
Property without the prior written consent of Lessor.
b. PROTECTION FROM LIENS - Lessee shall pay all expenses incurred by it
in its operation on the Property hereunder and shall allow no liens arising from
any act of Lessee to remain upon the property; provided, however, that Lessee
shall not be required to remove any such lien as long as Lessee is contesting in
good faith the validity or amount thereof. Lessee shall post and maintain upon
the Property a notice of non-liability.
c. INDEMNITY AND INSURANCE - Lessee shall protect, defend and indemnify
Lessor against and hold Lessor harmless from any suit, claim, judgment or
demand, administrative proceeding or sanction, expense, including attorney's
fees, whatsoever arising out of Lessee's exercise of any of its rights pursuant
to this Agreement, provided that if any individual Lessor or any person or
instrumentality acting on Lessor's behalf shall have been a contributing cause
to the event giving rise to such suit, claim, demand or judgment, Lessee's
obligation to indemnify Lessor hereunder shall be limited to the extent
permitted by law under the permitted application of rules of contributory or
comparative negligence. Lessee shall further maintain insurance to support the
combined bodily injury and property damage, and a similar amount of property
damage. Lessor shall be named as co-insured under such policies and Lessee shall
furnish Lessor with a certificate of such insurance prior to conducting any
activities on the Property
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pursuant to this Agreement excepting such activities as securing mine shafts,
tunnels, holes or other hazardous situations.
d. PAYMENT OF TAXES - Lessee shall pay all taxes levied against the
Property and production therefrom. Lessee shall not be liable for any taxes
levied or measured by income of Lessor. Lessee shall have the right to contest,
in the courts or otherwise, the validity or amount of any taxes or assessments,
before it shall be required to pay the same. If this Agreement is terminated or
otherwise expires, and if the Property is classified as an "Operating Mine" as a
result of lessee's activities, Lessee shall pay all ad valorem taxes based on
such classification until such classification is removed.
7. TITLE MATTERS
a. REPRESENTATION - Lessor represents to lessee that to the best
of its knowledge: (1) the patented mining claims constituting the Property have
been located and appropriate record made thereof in compliance with the laws of
the United States and the laws of Arizona; (2) there is no claim of adverse
mineral rights affecting such claims; (3) except as specified in Exhibit A,
Lessor's possessory right and title to the Property is free and clear of all
lines and encumbrances, and (4) the Lessor has the full right, power and
capacity to enter into this Agreement upon the terms set forth herein.
b. TITLE DOCUMENTS; DATA - Upon written request of Lessee at any time
during the term hereof, Lessor shall promptly deliver to Lessee all abstracts of
title to and copies of all title do cuments affecting the Property which Lessor
has in its possession.
c. OBJECTIONS TO TITLE - If, during the first six months from and after
the effective date of this Agreement, Lessee notifies Lessor of the existence of
any matter related to the status of title to the Property constituting a
material violation of the representations made under in subsection a of this
Section 6, Lessor agrees to either (1) remove such defects at lessor's costs, or
(2) return all funds theretofore paid to Lessor under the terms of Section 3.
d. CHANGE OF LAW - If the laws of the United States concerning mineral
rights on private managed lands is repealed, amended, or new legislation is
enacted, Lessee shall have the right to take whatever action it deems
appropriate to preserve a right to explore for, develop, and mine Leased
Substances. If Lessee elects to take any action under the terms of this
subsection, it shall first notify Lessor in writing setting forth the nature of
the proposed action and an
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explanation thereof. Lessor agrees to cooperate with Lessee and execute whatever
documents are deemed necessary to Lessee to accomplish such action. Nothing in
this subsection shall impose any obligation upon Lessee to take any action, or
diminish the right of Lessor to take action it deems appropriate; provided,
however, that if Lessor chooses to take any action, it will first inform Lessee
of the nature of such contemplated action.
e. GENERAL - Nothing herein contained and no notice or action which may
be taken under this Section 7 shall limit or detract from Lessee's right to
terminate this Agreement in the manner hereinafter provided.
8. TERMINATION; REMOVAL OF PROPERTY; DATA
a. TERMINATION BY LESSOR - If Lessee defaults in the performance of its
obligations hereunder, Lessor shall give Lessee written notice specifying the
default. If the default is not cured within sixty (60) days after Lessee has
received the notice, or if Lessee has not within that time begun action to cure
the default and does not thereafter diligently prosecute such action to
completion, Lessor may terminate this Agreement by delivering to Lessee written
notice of such termination, subject to Lessee's right to remove its property and
equipment from the Property, as hereinafter provided. If Lessee in good faith
disputes the existence of a default, Lessee shall initiate appropriate action in
court of competent jurisdiction within the 60-day period and the time to cure
shall run from the date of a final determination that a default exists. Lessor
shall have no right to terminate this Agreement except as set forth in this
subsection a of Section 8.
b. TERMINATION BY LESSEE - Lessee shall have the right to terminate this
Agreement at any time by written notice from Lessee to Lessor. From and after
the date of termination, all right, title and interest of Lessee under this
Agreement shall terminate, and Lessee shall not be required to make any further
payments or to perform any further obligations hereunder concerning the
property, except payment and obligations the due dates for the payment or
performance of which occur prior to the termination date, including the
obligations related to damages to the surface and improvements thereon.
c. REMOVAL OF PROPERTY - Upon any termination or expiration of this
Agreement Lessee shall have a period of one (1) year from and after the
effective date of termination within which it may elect to remove from the
Property all of its machinery, buildings, structures, facilities, equipment and
other property of every nature and description erected, placed or
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situated thereon, except supports placed in shafts, drifts or opening in the
property. Failure of Lessee to do so shall constitute an abandonment by Lessee
to Lessor of the same; provided, however, that Lessee may be required to remove
such property upon notice form Lessor given at any time during the one-year
period and sixty (60) days thereafter.
d. RELINQUISHMENT OF RECORD - If this Agreement is terminated or
otherwise expires, Lessee shall provide Lessor with a recordable document
sufficient to provide notice that Lessee no longer asserts rights to the
Property under this Agreement.
9. NOTICES
Any notice or communication required or permitted hereunder shall be
effective when personally delivered or deposited, postage prepaid, certified or
registered, in the United States mail to the address specified above. Either
party may, by notice to the other given as aforesaid, change its mailing address
for future notices.
10. BINDING EFFECT; ASSIGNMENT
The rights of either party hereunder may be assigned in whole or in part
and the provisions hereof shall inure to the benefit of and be binding upon the
heirs, personal representative, beneficiaries, successors and assigns, but no
change or division of ownership of the Property or payments hereunder, however
accomplished, shall operate to enlarge the obligations or diminish the rights of
Lessee hereunder. No such change or division in the ownership of the Property
shall be binding upon Lessee for any purpose until the first day of the month
next succeeding the month in which such person acquiring any interest shall
furnish evidence to Lessee's satisfaction of such change, transfer or division
of ownership.
11. FORCE MAJEURE
If Lessee is delayed or interrupted in or prevented from excising its
rights or performing its obligation, as herein provided by reason of "force
majeure," then, and in all such cases, Lessee shall be excused, without
liability, from performance of its obligations set forth in this Agreement
(except as to obligations to pay money set forth in Section 3 and 6), but the
provisions shall again come into full force and effect upon the termination of
the period of delay, prevention, disability or condition. Lessee shall notify
Lessor of the beginning and ending date of any period of force majeure and the
period of the disability. "Force majeure" includes all
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disabilities arising from causes beyond reasonable control of Lessee, including
without limitation, acts of God, accidents, fires, damages to facilities, labor
troubles, unavailability of fuels, supplies and equipment, orders or
requirements of courts or government agencies, or the inability to obtain
environmental clearance or operating permits that may be required by
governmental authorities.
12. MEMORANDUM
The parties to this Agreement agree to execute and record a Memorandum
of this Agreement in a form sufficient to constitute record notice to third
parties of the rights granted hereunder, which may be recorded in the official
records of Mojave County, Arizona.
13. CONSTRUCTION
a. GOVERNING LAW - This Agreement shall be construed by the internal
laws but not the laws of conflict of the State of Arizona.
b. HEADINGS - The headings used in this Agreement are for convenience
only and shall not be deemed to be a part of this Agreement for purposes of
construction.
c. INTEGRATION - The entire agreements and understandings of the parties
with reference to the Property are contained in this Agreement and this
Agreement superseded all prior agreements and understandings regarding the
Property.
SIGNED, effective as of the date recited above.
LESSOR LESSEE
.
/s/ Arthur James Good CAN-CAL RESOURCES, LTD
- ----------------------------------
Arthur James Good
/s/ R. D. Sloan
------------------------------------
Ronald D. Sloan, President
/s/ Wanda Mae Good
- ----------------------------------
Wanda Mae Good
/s/ Jean Ervin /s/ Bettyann Sloan
- ---------------------------------- ------------------------------------
Witness Witness
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EXHIBIT 10.7
AGREEMENT
THIS AGREEMENT made this 27th day of October, 1997, by and between
Can-Cal Resources, Ltd ("Can-Cal"), a Nevada corporation, and Aurum LLC
("Aurum"), a California limited liability company.
WHEREAS, Aurum owns approximately 120 acres located near Pisgah, San
Bernardino County, California ("the Property"), which has approximately 13.5
million tons of volcanic cinders; and
WHEREAS Aurum has loaned $315,045.98 to Can-Cal ("the Indebtedness");
and
WHEREAS, Can-Cal does not have funds with which to repay the
Indebtedness; and
WHEREAS, Can-Cal has a continuing need for funds and wishes to be able
to obtain those funds on an equity basis to avoid incurring additional
indebtedness which it may be unable to repay; and
WHEREAS, Can-Cal wishes to acquire the Property and obtain cancellation
of the Indebtedness in exchange for shares of Can-Cal; and
WHEREAS, Aurum is willing to transfer the Property to Can-Cal and cancel
the Indebtedness in exchange for shares of Can-Cal's common stock and arrange
for equity financing for Can-Cal, all on the terms set forth herein.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, receipt whereof is hereby acknowledged, it is agreed as
follows:
1. Can-Cal shall purchase and Aurum shall sell to Can-Cal the Property
by a Quitclaim Deed identical to the Quitclaim Deed that it received from
Burlington Northern Santa Fe Foundation when it acquired the Property. The
Property is situated near the station of Pisgah, in San Bernardino County,
California, as shown on the map marked Exhibit "A," dated July 22, 1996 attached
hereto and made a part hereof. Aurum has furnished Can-Cal with the
documentation relating to its acquisition of the Property
2. Aurum hereby cancels and extinguishes the Indebtedness of $315,045.98
which Can- Cal owes it and waives any claim it has to interest on that
Indebtedness. Aurum represents that Can- Cal is not indebted to it in any
amount.
3. In consideration for the transfer of the Property and the
cancellation of the Indebtedness, Can-Cal herewith issues to Aurum 2,181,752
shares of its common stock, par value
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$.001. Can-Cal represents and warrants that the 2,181,752 shares of its common
stock issued to Aurum are validly issued, fully paid and non-assessable. All
such shares are "restricted securities" pursuant to the Securities Act of 1933
and are subject to the restrictions imposed by that Act and Rule 144 promulgated
thereunder. Aurum agrees that an appropriate legend shall be printed on the
stock certificate evidencing ownership of those shares and appropriate stock
transfer instructions will be issued to Can-Cal's stock transfer agent.
4. Aurum agrees that the sale of the Property to Can-Cal will be on the
same terms and conditions that it acquired that property from the Burlington
Northern Santa Fe Foundation and at its cost plus its out of pocket expenses
incurred in connection with the acquisition of that Property. which Aurum
represents to be $553,716.94, plus legal fees and related costs of $25,755.59,
for a total purchase price of $579,472.53.
5. (a) Aurum also agrees to use its best efforts to furnish funds as may
reasonably be requested by Can-Cal by purchasing common shares of Can-Cal at
$.41 per share, the same price at which the shares are valued for purposes of
acquiring the Property and cancellation of the Indebtedness. In the event
Can-Cal requests Aurum to purchase shares of its common stock, it shall do so by
written notice not less than ten (10) calendar days prior to the date it wants
the funds, which notice shall include the amount of funds it requires and the
date it requires those funds. Aurum shall use its best efforts to furnish
Can-Cal with the funds it requires by purchasing shares of Can-Cal's common
stock. Can-Cal represents and warrants that all shares purchased by Aurum shall
be validly issued, fully paid and nonassessable. This agreement by Aurum shall
not be construed as a guarantee or assurance that it will be able to purchase a
sufficient number of Can-Cal common shares or that Can-Cal will receive the
funds it needs on the terms and conditions set forth herein. All shares issued
pursuant to purchases made by Aurum will be "restricted shares" as that term is
defined in the Securities Act of 1933 and subject to the investment.
(b) Nothing herein shall obligate Can-Cal to obtain financing
from Aurum. Can-Cal is free to obtain financing from any source it deems
appropriate.
CONVEYANCE
- ----------
6. Aurum shall convey, or cause to be conveyed, all of Aurum's right,
title and interest in and to the Property, if any, to Can-Cal by Quitclaim Deed
subject to the exceptions and reservations, whether or not of record and in
accordance with the other terms, conditions and reservations contained herein.
Aurum represents that the Quitclaim Deed to Can-Cal is identical to the
Quitclaim Deed it received from Burlington Northern Santa Fe Foundation from
whom it purchased the Property.
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SUCCESSORS IN INTEREST
- ----------------------
7. Wherever referred to herein, Aurum shall imply, mean and apply to
Aurum, its successors, assigns, heirs, executors, administrators, or designees,
who shall be severally and collectively liable for any and all performance
hereunder.
8. Wherever referred to herein, Can-Cal shall imply, mean and apply to
Can-Cal, its successors, assigns, heirs, executors, administrators, or
designees, who shall be severally and collectively liable for any and all
performance hereunder.
9. This Agreement shall bind and inure to the benefit of Aurum, Can-Cal
and their heirs, executors, administrators, successors and assigns.
THIS OFFER IS, AND THE CONVEYANCE OF THE PROPERTY SHALL BE, SUBJECT TO THE
FOLLOWING TERMS, CONDITIONS AND RESERVATIONS
10. REAL ESTATE COMMISSIONS. Can-Cal and Aurum represent and warrant to
each other that no real estate broker or agent has a valid claim for commissions
in connection with this transaction and agree to indemnify and hold harmless
each other from any such claims arising out of their actions.
11. OTHER LIENS. Any judgment against Aurum which may appear of record
as a lien against the Property shall be settled and satisfied by Aurum if and
when it is judicially determined to be valid, and Aurum hereby indemnifies
Can-Cal for all loss arising out of Aurum's failure to have a judgment lien so
settled and satisfied. All outstanding assessments levied or due in the year the
deed is delivered shall be paid Can-Cal.
12. GENERAL REAL ESTATE TAXES. Real estate taxes or assessments payable
or paid in the year the deed is delivered shall be prorated by the parties as of
the date on which the deed is delivered on the basis of the most recent
ascertainable taxes assessed against the subject Property, or as may be
equitably apportioned thereto by Aurum if the Property is not separately
assessed or unless the payment of same has been assumed by a tenant under an
existing lease to be assigned to Can-Cal.
13. TRANSFER TAXES. Can-Cal agrees to purchase, affix and cancel any and
all documentary stamps in the amount prescribed by statute, and to pay any and
all required transfer taxes, excise taxes and any and all fees incidental to
recordation of the conveyance instrument. In the event of Can-Cal's failure to
do so, if Aurum shall be obligated so to do, Can-Cal shall be liable for all
costs, expenses and judgments to or against Aurum, including all of Aurum's
legal fees and expenses and same shall constitute a lien against the Property to
be conveyed until paid by Can-Cal.
14. NOTICES AND DEMANDS. All notices, demands, payments and other
instruments required or permitted to be given or served by either party shall be
in writing and deemed to have
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been given or serve by either party if sent by registered or certified mail,
addressed to the other party at the address shown herein.
15. GOVERNMENTAL APPROVAL. If the approval of any governmental agency is
required for the sale of the Property, it is understood and agreed that this
Agreement is subject thereto and that both parties shall use their best efforts
to obtain such approval.
In the event a city, county, or other governing authority wherein said
Property is located requires a survey or plat or has a subdivision ordinance,
Can-Cal shall obtain such survey or plat, all at Can-Cal's sole cost and
expense. The survey or plat shall be submitted by Can-Cal to Aurum for review
and approval prior to recording and within a period of forty-five (45) days
after the date of Aurum's acceptance of this offer.
16. COMPLETE AGREEMENT. This Agreement contains the entire agreement
between Aurum and Can-Cal with respect to the Property and, except as set forth
in this Agreement, neither Aurum, nor Aurum's agents or employees, have made any
agreements, covenants, warranties or representations of any kind or character,
express or implied, oral or written, with respect to the Property.
17. Aurum is a California limited liability company and not a foreign
person as the term is used and defined in Section 1445 of the Internal Revenue
Code of 1954, as amended, and the regulations promulgated thereunder.
18. Can-Cal has been allowed to make an inspection of the Property and
has knowledge as to the past use of the Property. Based on this inspection and
knowledge Can-Cal is aware of the condition of the Property and BUYER IS AWARE
THAT BUYER IS PURCHASING THE PROPERTY ON AN "AS-IS WITH ALL FAULTS" BASIS WITH
ANY AND ALL PATENT AND LATENT DEFECTS AND THAT CAN-CAL IS NOT RELYING ON ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, OF ANY KIND WHATSOEVER FROM
AURUM AS TO ANY MATTERS CONCERNING THE PROPERTY, including the physical
condition of the property and any defects thereof, the presence of any hazardous
substances, wastes or contaminants in, on or under the Property, the condition
or existence of any of the above-ground or underground structures or
improvements in, on or under the Property, the condition of title to the
Property, and the leases, easements or other agreements affecting the Property.
Can-Cal is aware of the risk that hazardous substances and contaminants may be
present on the Property, and indemnifies, holds harmless and hereby waives,
releases and discharges forever Aurum from any and all present or future claims
or demands, and any and all damages, loss, injury, liability, claims or costs,
including fines, penalties and judgments, and attorney's fees, arising from or
in any way related to the condition of the Property or alleged presence, use,
storage, generation, manufacture, transport, release, leak, spill disposal or
other handling of any hazardous substances or contaminants in, on or under the
Property. Losses shall include, without limitation, (a) the cost of any
investigation, removal, remedial or other response action that is required by
any environmental law, that is required by judicial order or by order of or
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agreement with any governmental authority, or that is necessary or otherwise is
reasonable under the circumstances, (b) capital expenditures necessary to cause
Aurum's remaining property or the operations or business of Aurum on its
remaining property to be in compliance with the requirements of any
environmental law, (c) losses for injury or death of any person, and (d) losses
arising under any environmental law enacted after transfer. The rights of Aurum
under this section shall be in addition to and not in lieu of any other rights
or remedies to which it may be entitled under this document or otherwise. This
indemnity specifically includes the obligation of Can-Cal to remove, close,
remediate, reimburse or take other actions requested or required by any
governmental agency concerning any hazardous substances or contaminants on the
Property. This section shall survive closing.
The term "environmental law" means any federal, state or local
statute, regulation, code, rule, ordinance, order, judgment, decree, injunction
or common law pertaining in any way to the protection of human health or the
environment, including without limitation, the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response, Compensation and
Liability Act, the Toxic Substances Control Act, and any similar or comparable
state or local law.
The term "hazardous substance" means any hazardous, toxic,
infections substance, material or waste as defined, listed or regulated under
any environmental law, and incudes, without limitation, petroleum oil and any of
its fractions.
19. All terms, conditions and provisions of this Agreement shall survive
closing.
AURUM LLC, BY ACQUITAINE TRUST,
ITS MANAGER
/s/ John D. Edwards
----------------------------------------------
John D. Edwards, Trustee for Acquitaine Trust
CAN-CAL RESOURCES, LTD.
/s/ R. D. Sloan
----------------------------------------------
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EXHIBIT 10.8
RECORDING REQUESTED BY Recorded in Official Records, County of
ARTER & HADDEN San Bernardino, Errol J. Mackzum, Recorder
634.00
AND WHEN RECORDED MAIL THIS DEED AND, UNLESS Doc No. 19970424165
OTHERWISE SHOWN BELOW, MAIL TAX STATEMENT TO: 10:10 am 11/19/97
NAME BILL FISHMAN, ESQ.
STREET
ADDRESS 1600 Broadway, Suite 2600
CITY, STATE &
ZIP CODE Denver, CO 80202-4926
TITLE ORDER NO. __________ ESCROW NO.________
DOCUMENTARY TRANSFER TAX $ 605.00
X computed on full value of property conveyed, or
QUITCLAIM DEED computed on full value
less liens and encumbrances
remaining at time of sale.
/s/ Bruce G. Holden, Esq. Arter & Hadden
Signature of Declarant or Agent Determining Tax Firm Name
AURUM, LLC
- --------------------------------------------------------------------------------
(NAME OF GRANTOR(S))
the undersigned grantor(s), for a valuable consideration, receipt of which is
hereby acknowledged, do ___ hereby remise, release and forever quitclaim to
Can-Cal Resources, Ltd.
-----------------------
(NAME OF GRANTEE(S))
the following described real property in the City of N/A , County of San
Bernardino , State of CA :
Legally described in Exhibit A attached hereto and incorporated herein by
reference.
Assessor's parcel No. 0552-0110-10
Executed on November 4 , 1997 , at Irvine, California
------------------ ------- ----------------------------------
(CITY AND STATE)
AURUM, LLC
STATE OF California By Acquitaine Trust, Manager
COUNTY OF Orange By: /s/ John Edwards, Trustee
RIGHT THUMBPRINT (Optional)
Thumbprint on Document Here
On November 4, 1997 before me,
Deborah Kae Colsch personally appeared
John Edwards, Trustee proved me on the
basis of satisfactory evidence) to be
the person whose name is subscribed
to the within instrument and acknowledged
to me that he executed the CAPACITY CLAIMED BY SIGNER(S)
same in his capacity, and that by his __ INDIVIDUALS
signature on the __ CORPORATE
instrument the person, or the entity upon OFFICERS(S) ______________
behalf of which the person acted, (TITLES)
executed the instrument. __ PARTNER(S) __ LIMITED
__ GENERAL
__ ATTORNEY IN FACT
X TRUSTEE
WITNESS my hand and official seal. __ GUARDIAN/CONSERVATOR
__ OTHER:____________________
DEBORAH KAE COLSCH
Commission # 1152519
Notary Public - California
Orange County
My Comm. Expires Aug 22, 2001
/s/ Deborah Kae Colsch
- ------------------------------------
(SIGNATURE OF NOTARY)
MAIL TAX Can Cal Resources, Ltd., c/o Bill Fishman, Esq.
STATEMENTS TO: 1600 Broadway, Suite 2600, Denver, CO 80202-4926
SIGNER IS REPRESENTING
Person(s) or Entity(ies)
cquitaine Trust, Manager
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EXHIBIT A
- ---------
TO QUITCLAIM DEED
- -----------------
PARCEL l
- ---------
A parcel of land being a portion of the Atchison, Topeka and Santa Fe Railway
Company's property lying in said Railway Company's Needles Subdivision and this
parcel of land being all of that certain mining claim or premises described in a
mining claim between the United States Government, Grantor, and The Atchison,
Topeka and Santa Fe Railway Company, Grantee, dated April 8, 1963, and recorded
in Book 5907, Page 451, on May 10, 1963 in the Office of Records of San
Bernardino County, California, the above referenced parcel of land, known as the
Cinder and Cinder No. 2 Placer Mining Claims, being the N1/2NW1/4, the
W1/2NW1/4NE1/4 and the Nl/2SE1/4NW1/4 of Section 32, Township 8 North, Range 6
East of the San Bernardino Base and Meridian, San Bernardino County, California,
EXCEPTING THEREFROM, any veins or lodes of quartz or other rock in place bearing
gold, silver, cinnabar, lead, tin, copper or other valuable deposits within the
land above described which may have been discovered or known to exist prior to
September 11, 1959; also,
PARCEL 2
--------
All that certain 60.0 foot wide road described in deed dated November 16, 1956,
from Southern Pacific Land Company to The Atchison, Topeka and Santa Fe Railway
Company, recorded December 24, 1956 in Book 4117 of Official Records at Page 24
of the Records of the County Recorder's Office of said County, described for
reference as follows:
An easement for a private road and a pole line for telephone and power wires
over a strip of land 60.0 feet wide, being all that portion of Section 29,
Township 8 North, Range 6 East, San Bernardino Base and Meridian, according to
the Official Plat thereof, lying between lines which are parallel with and
distant 30.0 feet, as measured at right angles from and on each side of the
following described centerlines:
Beginning at a point in the North line of said Section 29, distant 900.0 feet
Easterly, as measured along said North line from a 1/2 inch pipe set for the
Northwest corner of said Section 29; thence Southwesterly along a direct line,
deflecting Southwesterly from said North line an angle of 61(degree)00', a
distance of 1,435.0 feet; thence Southwesterly along a direct line, deflecting
an angel of 16(degree)30' to the left from the last described course, a distance
of 1,785.0 feet; thence Southeasterly along a direct line, deflecting an angle
of 18(degree)30' to the left from the last described course, a distance of 450.0
feet; thence Southeasterly along a direct line, deflecting an angle of
41(degree)30' to the left from the last described course, a distance of 240.0
feet; thence Southeasterly along a direct line, deflecting an angle of
23(degree)30' to the right from the last described course, a distance of 700.0
feet; thence Southeasterly along a direct line, deflecting an angel of
18(degree)00' to the left from the last described course, a distance of 1,330.0
feet; thence Southwesterly along a direct line, deflecting an angle of
43(degree)30' to the right from the last described course, a distance of
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60.0 feet, more or less, to a point in the South line of said Section 29, and
there terminating. The side lines of said strip to be lengthened or shortened as
the case may be so that all portions of said strip shall fall within the
boundaries of said Section 29; also,
PARCEL 3
All of Grantor's right, title and interest in and to the 60.0 foot wide strip
lying over, under, upon through and across Sections 20 and 30, all in Township 8
North, Range 6 East of the San Bernardino Base and Meridian, for an existing
access roadway to the hereinabove described PARCEL 1, as it now exists.
SUBJECT, however, to all existing interests, including but not
limited to all reservations, rights-of-way and easements of record or otherwise.
Grantee has been allowed to make an inspection of the property
and has knowledge as to the past use of the property. Based upon this inspection
and knowledge, Grantee is aware of the condition of the property and GRANTEE
ACKNOWLEDGES THAT GRANTEE IS PURCHASING THE PROPERTY IN AN "AS-IS WITH ALL
FAULTS" BASIS WITH ANY AND ALL PATENT AND LATENT DEFECTS AND THAT GRANTEE IS NOT
RELYING ON ANY REPRESENTATION OR WARRANTIES, EXPRESS OR IMPLIED, OF ANY KIND
WHATSOEVER FROM GRANTOR AS TO ANY MATTERS CONCERNING THE PROPERTY, including the
physical condition of the property and any defects thereof, the presence of any
hazardous substances, wastes or contaminants in, on or under the property, the
condition or existence of any of the above ground or underground structures or
improvements in, on or under the property, the condition of title to the
property, and the leases, easements or other agreements affecting the property.
Grantee is aware of the risk that hazardous substances and contaminants may be
present on the property, and indemnifies, holds harmless and hereby waives,
releases and discharges forever Grantor from any and all present or future
claims or demands, and any and all damages, loss, injury, liability, claims or
costs, including fines, penalties and judgments, and attorney's fees, arising
from or in any way related to the condition of the property or alleged presence,
use, storage, generation, manufacture, transport, release, leak, spill, disposal
or other handling of any hazardous substances or contaminants in, on or under
the property. Losses shall include without limitation (a) the cost of any
investigation, removal, remedial or other response action that is required by
any Environmental Law, that is required by judicial order or by order of or
agreement with any governmental authority, or that is necessary or otherwise is
reasonable under the circumstances, (b) capital expenditures necessary to cause
the Grantor's remaining property or the operations or business of the Grantor on
its remaining property to be in compliance with the requirements of any
Environmental Law, (cr Losses for injury or death of any person, and (d) Losses
arising under any Environmental Law enacted after transfer. The rights of
Grantor under this section shall be in addition to and not in lieu of any other
rights or remedies to which it may be entitled under this document or otherwise.
This indemnity specifically includes the obligation of Grantee to remove, close,
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remediate, reimburse or take other actions requested or required by any
governmental agency concerning any hazardous substances or contaminants on the
property.
The term "Environmental Law" means any federal, state or local
statute, regulation, code, rule, ordinance, order, judgment, decree, injunction
or common law pertaining in any way to the protection of human health or the
environment, including without limitation, the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response, Compensation and
Liability Act, the Toxic Substances Control Act, and any similar or comparable
state or local law.
The term "Hazardous Substance" means any hazardous, toxic,
radioactive or infectious substance, material or waste as defined, listed or
regulated under any Environmental Law, and includes without limitation petroleum
oil and any of its fractions.
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EXHIBIT 10.9
AGREEMENT
Agreement dated this 30th day of October, 1997, by and between Tyro
Inc., a Nevada corporation, also known as Tyro Precious Metals Processing Center
("Tyro"), Dean Willman ("Willman"), Individually, and Roland S. Ericsson
(Ericsson), Individually (collectively referred to as "Debtors"), and Can-Cal
Resources Ltd. ("Can-Cal").
WHEREAS, by letter of agreement dated September 11, 1996 and amendments
thereto, by and between Tyro, A. R. Trust, acting on behalf of Can-Cal, entered
into an agreement to process precious metals and perform other services; and
WHEREAS, disputes have risen by and between the parties with respect to
the propriety of expenditures of monies advanced by Can-Cal through A. R. Trust
to the escrow account of Ericsson to Tyro; and
WHEREAS, the parties desire to resolve their differences amicably and
provide for the repayment of a portion of funds advanced by Can-Cal through A.
R. Trust to Tyro; and
WHEREAS, the parties wish to, upon completion of payments required by
this Agreement, release each other from any other and further obligations to
each other.
NOW, THEREFORE, it is agreed as follows:
PAYMENTS TO CAN-CAL
1.Tyro, Willman, Individually, and Ericsson, Individually, (Collectively
"Debtors") each hereby jointly and severally covenant and promise to pay to
Can-Cal the sum of $65,000 as follows:
Date Due Amount
-------- ------
November 10, 1997 $10,000
December 10, 1997 $10,000
January 10, 1998 $10,000
February 10, 1998 $10,000
March 10, 1998 $10,000
April 10, 1998 $10,000
May 10, 1998 $ 5,000
There shall be a ten (10) day grace period before a default is declared by
Can-Cal, with the exception of the payment due on November 10,1997 which must be
made on that date. All payments
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shall bear interest at six percent (6%) per annum with the exception of the
first payment of $10,000 due on November 10,1997 which shall be paid without any
interest.
Debtors each agree that they are primarily liable for the payment of all
monies as set forth herein and that, in the event of the occurrence of an event
of default, they will pay to Can-Cal all costs including reasonable attorney's
fees incurred in enforcing this Agreement, their lien and security interests, or
the rights and remedies herein provided.
COLLATERAL
- ----------
2. Debtors hereby agree to secure and collateralize the obligation of
$65,000 to Can-Cal by pledging to Can-Cal the collateral listed on Exhibit A
hereto. Debtors will forthwith execute appropriate financing statements and all
other documents as Can-Cal may reasonably require in order to make all required
filings as evidence of the pledge of the collateral to Can-Cal.
DEBTORS' REPRESENTATIONS AND WARRANTIES
- ---------------------------------------
3. Debtors hereby represent and warrant:
a. that they own each item of collateral set forth on Exhibit A free
and clear of all liens, security interests, encumbrances or claims by third
parties and that by pledging the collateral to Can-Cal they are not violating
any agreement, covenant, promise or undertaking.
b. that the collateral will be kept and stored at Tyro's facilities
near Bullhead City, Arizona and will not be removed therefrom without the
express prior written consent of Can- Cal; and
c. Debtors will defend the collateral against claims or demands made
by all persons claiming either the collateral or any interest in it.
d. Debtors will promptly pay when due all taxes, assessments, liens
and encumbrances levied against the collateral or upon the use of the collateral
or upon operations in which the collateral is used, or those levied against the
obligation secured by this Agreement. If the collateral is attached to real
property owned by Debtors or under any contract which obligates Debtors to pay
taxes on the real property, Debtors agree to pay taxes, assessments and
encumbrances upon the real property on which the collateral is located.
USE OF COLLATERAL
- -----------------
4. Until the occurrence of any event of default, Debtors may have
possession of the collateral. Debtors may use the collateral in any lawful
manner which is not inconsistent with this Agreement, any policy of insurance
upon the collateral or the laws and regulations of the State of Arizona. Debtors
will maintain and keep the collateral in good order and repair and agree not to
use
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the collateral in any manner which results in waste, unreasonable deterioration
or depreciation. Can- Cal's representatives may enter upon the Debtors' property
and inspect the collateral at any reasonable time.
EVENTS QF DEFAULT
- -----------------
5. Debtors are in default under this Agreement upon the happening of one
or more of the following events or conditions:
a. Default in the payment of monies when due;
b. If a warranty, representation or statement made or furnished by
Debtors to Can-Cal is false or proves to have been false in any material respect
when it was made;
c. Loss, theft, damage, destruction, sale or encumbrance of the
collateral or any part of it, or a levy, seizure or attachment of the collateral
or any part of it;
d. Debtors' failure to perform any covenant in this Agreement or the
taking of action by Debtors which is inconsistent with or in violation of this
Agreement; or which endangers the safety or integrity of the collateral or
Can-Cal's security interest;
e. Dissolution, termination of existence, insolvency of any Debtor,
appointment of a receiver for any part of any property belonging to Debtors
whether or not it is collateral under this Agreement, assignment for the benefit
of creditors, or the commencement of proceedings under a bankruptcy or
insolvency law by or against the Debtors.
ACCELERATION
- ------------
6. Upon the happening of an event of default, all amounts owed by
Debtors to Can-Cal, pursuant to this Agreement, shall become immediately due and
payable.
7. Upon the occurrence of any event of default hereunder, Can-Cal shall
have the right to take possession of the collateral and to sell or any part
thereof consistent with commercially reasonable standards at public or private
sale at Can-Cal's option at any time or times without advertisement or demand
upon or notice to any Debtor (all of which are hereby waived), except such
notice as is required by applicable statute and cannot be waived; with the right
on the part of Can- Cal or its nominee to become the purchaser thereof at any
such sale (unless prohibited by statute), free from any equity of redemption and
from all other claims, and after deducting all legal and other expenses for
maintaining or selling the collateral and all attorneys fees, legal or other
expenses for collection, sale and delivery, to apply the residue of the proceeds
of such sale or sales to pay all amounts owed by Debtors to Can-Cal.
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OTHER REMEDIES AVAILABLE TO CAN-CAL
- -----------------------------------
8. The amount to be paid by Debtors to Can-Cal pursuant to this
Agreement represents a compromise of claims asserted by Can-Cal against Debtors.
In the event the Debtors fail to make timely payment of the amounts due pursuant
to paragraph 1 herein, Can-Cal, in addition to its rights to obtain judgment for
any unpaid balance due, shall have the right to file a lawsuit against Debtors
seeking damages in addition to the amounts required to be paid hereunder.
DEBTORS' AUTHORITY
- ------------------
9. Debtors have the authority to enter into this Agreement and any
person signing it on Debtors' behalf does so with the authority of the Debtors.
REPRESENTATIONS AND WARRANTIES OF CAN-CAL
- -----------------------------------------
10. Can-Cal represents that it has, either directly or through A. R.
Trust advanced funds to Tyro by depositing them in the escrow account of
Ericsson and that no other party has any interest in the funds advanced by it.
Can-Cal further represents that it has the authority to enter into this
Agreement and any person signing it on Can-Cal's behalf does so with the
authority of Can-Cal.
ASSIGNMENT OF RIGHTS
- --------------------
11. Debtors, and each of them, hereby assign to Can-Cal any and all
rights, claims, or causes of action they have or may have against John Doherty
for actions taken or failed to be taken, monies spent, monies received or any
other matter relating to services performed or failed to be performed, equipment
purchased or obtained in connection with services performed by Debtors for
Can-Cal.
RELEASES
- --------
12. Upon receipt of all payments required by paragraph 1 of this
Agreement timely made by Debtors, Can-Cal irrevocably releases Debtors and each
of them from all actions, causes of action, suits, debts and all other matters
Can-Cal ever had or has by reason of any matter to the date of this Agreement.
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13. In consideration of the execution of this Agreement by Can-Cal,
Debtors and each of them hereby release Can-Cal from all actions, causes of
action, suits, debts and all other matters Debtors ever had or has by reason of
any matter to the date of this Agreement.
TYRO INC., A NEVADA CORPORATION
By: /s/ Dean Willman, President
------------------------------------
/s/ Dean Willman
----------------------------------------
Dean Willman, Individually
/s/ Roland S. Ericsson
-----------------------------------------
Roland S. Ericsson, Individually
CAN-CAL RESOURCES LTD.
By: /s/ R. D. Sloan
-------------------------------------
189
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EXHIBIT 10.10
SYLVESTER & POLEDNAK, ESQ.
DONALD T. POLEDNAK, ESQ.
Nevada Bar No. 4721
601 S. Sixth Street
Las Vegas, Nevada 8901
(702) 952-5200
DISTRICT COURT
CLARK COUNTY, NEVADA
CAL-CAN RESOURCES, LTD., )
) Case No. A386420
Plaintiff ) Dept. No. VII
) Docket No. P
vs. )
) EXEMPT FROM ARBITRATION
TYRO, INC., a Nevada corporation, ) DISPUTE IN EXCESS OF $40,000
aka TYRO PRECIOUS METALS )
PROCESSING CENTER, DEAN )
WILLMAN and ROLAND S. ERICSSON, )
and DOES I through X, inclusive, )
)
Defendants )
)
- --------------------------------------------
COMPLAINT
Cal-Can Resources, Ltd. ("Plaintiff"), by and through its legal counsel,
Donald T. Polednak, Esq. of the law firm of Sylvester & Polednak, Ltd., hereby
alleges and complains of the Defendants, and each of them, as follows:
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GENERAL ALLEGATIONS
1. Plaintiff is a corporation formed and existing under the laws of the
State of Nevada, with its principal place of business located at 1505 Blackcombe
Street, Suite 203, Las Vegas, Nevada 89128.
2. Defendant Tyro, Inc. aka Tyro Precious Metals Processing Center
("Tyro") is a corporation formed and exiting under the laws of the State of
Nevada with its principal place of business located in Clark County, Nevada.
3. Defendant Dean Willman ("Willman") is an individual residing in Clark
County, Nevada.
4. Defendant Roland S. Ericsson ("Ericsson") is an individual residing
in Clark County, Nevada.
5. The true names and capacities of Defendant DOES I through V are
unknown to Plaintiff, and Plaintiff therefore sues said Defendants by said
fictitious names. Plaintiff is informed and believes, and thereupon alleges that
each of the Defendants designated as DOE is responsible in some manner for the
events and happenings referred to and caused the damages to Plaintiff as
alleged, and Plaintiff will ask leave of this court to amend this Complaint to
insert the true names and capacities of DOES I through V when they are
ascertained by Plaintiff together with appropriate charges and allegations to
join such Defendants in this action.
6. On or about October 30, 1997, the above-named Defendants, jointly and
severally, entered into an agreement (the "Agreement") with Plaintiff
memorializing certain
191
<PAGE>
indebtedness owed to Plaintiff by Defendants. A true and correct copy of the
Agreement is attached hereto as Exhibit "1" and incorporated herein by this
reference.
7. Pursuant to the terms of the Agreement, and repayment schedule
contained therein, the Defendants, individually, and jointly and severally,
covenanted and promised to pay Plaintiff the total sum of $65,000 pursuant to
the terms set forth in the Agreement. 8. The Defendants, and each of them,
agreed and covenanted that they were primarily liable for all monies set forth
in the Agreement, and in that of the event of any default, they would pay
Plaintiff all costs, including reasonable attorney's fees and costs in enforcing
the Agreement, its lien and security interest, and the rights and remedies
provided within the Agreement. 9. The Agreement contains an "acceleration
clause" which provides that upon the occurrence of an event of default all
amounts owed by the Defendants pursuant to the Agreement become immediately due
and payable to Plaintiff. 10. Events of default under the Agreement specifically
include failure to repay any of the amounts set forth in to the Agreement. 11.
Defendants, and each of them, have failed to make payments pursuant to the terms
of the Agreement despite demand and it has been necessary for Plaintiff to
retain the services of an attorney to bring suit to recover amounts due under
the Agreement. Pursuant to the specific terms of the Agreement, the Plaintiff is
entitled to recover its attorney's fees and costs incurred in the enforcement of
the Agreement.
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<PAGE>
FIRST CLAIM FOR RELIEF
(Breach of Contract)
12. Plaintiff restates and realleges paragraphs 1 through 11 as though
fully set forth herein at length.
13. The Agreement between the parties constitutes a contract.
14. Defendants, and each of them, have failed, despite demand, to
perform under the terms of the contract by specifically failing and refusing to
make payments due under the payment schedule set forth in the Agreement. As of
the date of the filing of this Complaint, the Plaintiff is owed the approximate
amount of $50,000, exclusive of interest accruing pursuant to the terms of the
Agreement and attorney's fees and costs of suit incurred.
15. As a result of Defendants failure to make payment under the terms of
the contract between the parties, Plaintiff has been damaged in an amount in
excess of $10,000.
16. Plaintiff has been required to retain the services of legal counsel
to enforce the Agreement and, pursuant to the terms of the Agreement, is
entitled to recovery of attorney's fees and costs of suit.
WHEREFORE, Plaintiff prays that judgment be entered against Defendants,
jointly and severally as follows:
As to the First Cause of Action
- ----------------------------------
(a) For damages pursuant to the terms of the Agreement in the amount of
$50,000.00 (in excess of $10.000), plus accruing interest.
(b) For attorney's fees and costs of suit incurred herein.
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(c) For such other and further relief as is deemed just and appropriate.
DATED this 30th day of March, 1998.
SYLVESTER & POLEDNAK, LTD.
By /s/ Donald T. Polednak, Esq.
-----------------------------------------
Donald T. Polednak, Esq.
601 S. Sixth Street
Las Vegas, Nevada 89101
194
<PAGE>
EXHIBIT 1
AGREEMENT DATED OCTOBER 30, 1997 BETWEEN CAN-CAL RESOURCES AND TYRO PRECIOUS
METALS CENTER IS FILED AS EXHIBIT 10.9 TO THE FORM 10SB OF WHICH THIS COMPLAINT
IS MADE A PART OF AS EXHIBIT 10.10.
195
<PAGE>
EXHIBIT 10.11
SYLVESTER & POLEDNAK, ESQ.
DONALD T. POLEDNAK, ESQ.
Nevada Bar No. 4721
601 S. Sixth Street
Las Vegas, Nevada 8901
(702) 952-5200
DISTRICT COURT
CLARK COUNTY, NEVADA
CAL-CAN RESOURCES, LTD., )
) Case No. A386420
Plaintiff ) Dept. No. VII
) Docket No. P
vs. )
)
TYRO, INC., a Nevada corporation, )
aka TYRO PRECIOUS METALS )
PROCESSING CENTER, DEAN )
WILLMAN and ROLAND S. ERICSSON, )
and DOES I through X, inclusive, )
)
Defendants )
)
- --------------------------------------------
CONFESSION OF JUDGMENT
Defendants, Tyro, Inc., Dean Willman and Roland S. Ericsson, jointly and
severally, pursuant to NRS 17.090, et seq., hereby confess judgment in favor of
the above named
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<PAGE>
Plaintiff, Can-Cal Resources, Ltd. (filed as Cal-Can Resources, Ltd. hereafter
"Can-Cal") and authorize judgment to be entered in the total amount of:
1. The principal amount of $50,000.00, with interest thereon accruing at
the rate of six percent (6%) per annum on the unpaid principal balance from
December 10, 1997, together with attorney fees and costs incurred in the amount
of $900.00.
2. The total amount above, less any payments made thereon, is justly due
from Defendants, jointly and severally, to Can-Cal.
3. The total amount above became payable to Can-Cal as a result of
Defendants', and each of them, breach of the Agreement executed by Defendants in
favor of Can-Cal. A copy of said Agreement is attached hereto as Exhibit "1" and
incorporated herein by this reference.
DATED this 7th day of May, 1998.
/s/ Roland S. Ericsson /s/ Dean Willman
- ---------------------------------- ------------------------------------
Roland S. Ericsson Dean Willman
TYRO, INC.
By /s/ Dean Willman
---------------------------------
Its President
---------------------------------
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<PAGE>
VERIFICATION
STATE OF NEVADA )
COUNT OF CLARK )
I hereby certify that I have read the foregoing CONFESSION OF JUDGMENT
and know the contents thereof. I am informed and believe, and on that ground
state, that the matters set forth therein are true.
/s/ Roland S. Ericsson
------------------------------------
Roland S. Ericsson
SUBSCRIBED and SWORN before me
this 7th day of May , 1998.
/s/ Yesenia Otero (Notary Seal)
- ----------------------------------
NOTARY PUBLIC
STATE OF NEVADA )
COUNT OF CLARK )
I hereby certify that I have read the foregoing CONFESSION OF JUDGMENT
and know the contents thereof. I am informed and believe, and on that ground
state, that the matters set forth therein are true.
/s/ Dean Willman
------------------------------------
Dean Willman
SUBSCRIBED and SWORN before me
this 7th day of May , 1998.
/s/ Veronica Sue Smith (Notary Seal)
- ----------------------------------
NOTARY PUBLIC
STATE OF NEVADA )
COUNT OF CLARK )
I hereby certify that I have read the foregoing CONFESSION OF JUDGMENT
and know the contents thereof. I am informed and believe, and on that ground
state, that the matters set forth therein are true.
TYRO, INC.
By /s/ Dean Willman
---------------------------------
Its President
---------------------------------
SUBSCRIBED and SWORN before me
this 7th day of May , 1998.
/s/ Veronica Sue Smith (Notary Seal)
NOTARY PUBLIC
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<PAGE>
EXHIBIT 1
AGREEMENT DATED OCTOBER 30, 1997 BETWEEN CAN-CAL RESOURCES AND TYRO PRECIOUS
METALS CENTER IS FILED AS EXHIBIT 10.9 TO THE FORM 10SB OF WHICH THIS COMPLAINT
IS MADE A PART OF AS EXHIBIT 10.11.
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<PAGE>
EXHIBIT 10.12
THIS AGREEMENT made as of the 29th day of January, 1999.
BETWEEN:
CAN-CAL RESOURCES LTD., a body corporate,
having a place of business situate at 3651 Lindell Road,
Las Vegas, Nevada USA 89103;
(hereinafter called the "Vendor")
OF THE FIRST PART
AND:
545538 B.C. LTD., (Inc. No. 545538), a body
corporate, duly incorporated under the laws of
the Province of British Columbia and having its
registered office situate at #208 - 1899 Willingdon
Avenue, Burnaby, B.C. V5C 5Tl;
(hereinafter called the "Purchaser")
OF THE SECOND PART
AND:
RONALD DANIEL SLOAN, Businessman, of #203,
Building 2, 1505 Blackcomb Street, Las Vegas,
Nevada USA 89128
(hereinafter called the "Covenantor")
OF THE THIRD PART
WITNESSETH that for and in consideration of the promises, covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
1. VENDORS WARRANTIES AND REPRESENTATIONS
--------------------------------------
1.01 The Vendor warrants and represents that:
(a) SCOTMAR INDUSTRIES INC. (hereinafter called the "Company") is a
corporation duly incorporated under the laws of the Province of
British Columbia as a non-reporting company, is validly existing,
and is in good standing in British Columbia and does not carry on
business outside that province;
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(b) The authorized capital of the Company is THREE HUNDRED THOUSAND
shares divided into One Hundred Thousand Class "A" Voting Common
Shares without par value; One Hundred Thousand Class "B"
Non-Voting Common Shares without par value; and One Hundred
Thousand Class "C" Non-Voting Preference Shares without par
value, of which there are Ten (10) Class "A Voting Common Shares
and One (1) Class "B" Non-Voting Common Shares issued and
outstanding as fully paid and non-assessable Shares;
(c) The Vendor is the registered holder and beneficial owner of
the following, shares:
Name Number/Class/Kind
---- -----------------
Can-Cal Resources Ltd. Ten (10) Class "A" Voting Common Shares
Can-Cal Resources Ltd. One (1) Class "B" Non-Voting Share
(hereinafter called the "Vendor's Shares");
(d) The Vendor's Shares are validly issued and outstanding as fully
paid and non- accessible in the capital of the Company and are
free and clear of all liens, charges and encumbrances;
(e) The Vendor has good and sufficient right and authority to enter
into this Agreement on the terms and conditions herein set forth
and to transfer the legal and beneficial title and ownership of
the Vendor's Shares to the Purchaser;
(f) There are no outstanding securities of the Company which are
convertible into shares in the capital of the Company and there
are no outstanding options on or rights to subscribe for any of
the unissued shares in the capital of the Company or options to
purchase the Vendor's Shares;
(g) The directors and officers of the Company are as follows:
Directors: - SCOTT A. NICHOLS
Officers: President - SCOTT A. NICHOLS
Secretary - KIM NICHOLS
(h) The unaudited balance sheet of the Company as of December 31,
1997 and the supporting statements for the year ended December
31, 1997 which are attached to this Agreement as Schedule "A"
were prepared by Bouchard & Company, Chartered Accountants, in
accordance with generally accepted accounting principles applied
on a basis consistent with prior years and the monthly financial
statements for the year 1998 are substantially correct in every
particular and present fairly and
201
<PAGE>
accurately the financial condition and position of the Company as
at December 31, 1998 and the results of its operations for the
year ended on December 31, 1998;
(i) There are no liabilities of the Company arising in respect of
operations of the Company or incurred on or before December 31,
1998 not disclosed or reflected in Schedule "A" and no such
undisclosed liabilities have been paid since December 31, 1998;
(j) There are no liabilities of the Company which are not disclosed
or reflected in Schedule "A" except those incurred in the
ordinary course of its business since December 31, 1998;
(k) The provision for doubtful accounts receivable as recorded in
Schedule "A" are, and collections since December 31, 1998 have
proven them to be, adequate;
(l) Since December 31, 1998:
(i) no dividends of any kind have been declared or paid by the
Company;
(ii) no capital expenditures or commitments therefore have been
made by the Company;
(iii) there has been no material adverse change in the financial
position or condition of the Company and no damage, loss
or destruction materially affecting the business or
property of the Company;
(iv) the Company has not increased the pay of or paid or agreed
to pay any pension, bonus, share of profits or other
similar benefit to, or for the benefit of, any employee,
director, or officer of the Company, except increases in
normal course of business to employees other than officers
and directors; and
(v) the Company has conducted its business in its usual and
normal manner;
(m) The Company has good title to and possession of all the assets
referred to in Schedule "A" and all assets acquired since
December 31, 1998, are free and clear of all liens, charges or
encumbrances except those described in Schedule "B", and is not
in default of any term of any lien, charge or encumbrance
described in Schedule "B". All machinery and equipment comprised
in the assets are in normal operating condition and in a state of
reasonable maintenance and repair;
(n) The Company is the holder of a valid and subsisting Lease
Agreement with Yuk Lan Kwun and Benny Kwun of the lands and
premises more particularly described in Schedule "C" hereto;
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(o) All leases of equipment as more particularly described in
Schedule "D" hereto are valid and subsisting leases and the rents
thereby reserved have been fully and duly paid up to the Closing
Date as hereinafter defined and the covenants and conditions
therein contained have been duly performed by the Company to the
date hereof and the Company has not assigned or encumbered any
such leases;
(p) The Company is indebted to the Vendor in the amount of ONE
HUNDRED SIXTY- SEVEN THOUSAND FOUR HUNDRED SEVENTY-SEVEN DOLLARS
AND SIXTY-THREE CENTS ($167,477.63), which said sum the Vendor
shall assign to the Purchaser on the Closing Date (hereinafter
called the "Vendor's Shareholder Loans");
(q) The Company is not subject to any contract or agreement running
for more than one year save and except for the following: (i)
Lease relating to the Promises of the Company.
(r) The Company has been assessed for federal and provincial income
tax for all years to and including the fiscal year of the Company
ended December 31, 1998 and adequate provision will be made on
Closing for any and all taxes payable by the Company for the
period of operations to and including December 31, 1998;
(s) The office or employment of all employees and officers of the
Company can be terminated by not more than 4 weeks notice;
(t) The Vendor is not indebted to the Company;
(u) To the best of the Vendor's knowledge, the Company is not in
breach of any statute, regulation or by-law applicable to the
Company or its operations;
(v) The Vendor is not "resident in Canada" within the meaning of that
phrase in Section 116 of the Income Tax Act of Canada;
(w) The Company holds all permits, licences, consents and authorities
issued by any federal, provincial, regional or municipal
government or agency thereof which are necessary or desirable in
connection with the operations of the Company and the ownership
of its assets and a true and complete list of the permits,
authorities, licences and consents held by the Company is set out
in Schedule "E";
(x) To the best of the: Vendor's knowledge, the making of this
Agreement and the completion of the transactions contemplated
hereby and the performance of and compliance with the terms
thereof, does not conflict with or result in the breach of or the
acceleration of any indebtedness under, any terms, provisions or
conditions of, or constitute default under the Memorandum or
Articles of the Company or any
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indenture, mortgage, deed of trust, agreement, lease, franchise,
certificate, consent, permit, licence, authority, or other
instrument to which the Company is a party or is bound or any
judgment, decree, order, rule or regulation of any court or
administrative body by which the Company is bound or, to the
knowledge of the Vendor any statute or regulation applicable to
the Company;
(y) The Company has no bank or chequing accounts, safety deposit
boxes or other depositories except as set out in Schedule "F";
(z) **deleted**
(aa) The Company is not party to any collective agreement with any
labour union or other association of employees;
(bb) The Company is not a party to any pension, profit sharing, group
insurance, or similar plans or other deferred compensation plans,
save and except for a group insurance plan with the Automotive
Retailers Association;
(cc) The Company has not experienced nor is it aware of any occurrence
or event which has had, or might reasonably be expected to have,
a materially adverse effect on its business or the results of its
operations;
(dd) The Company has made all elections required to be made under the
Income Tax Act in connection with any distributions by the
Company and all such elections were true and correct;
(ee) The Company has withheld and remitted to Revenue Canada, or the
applicable tax collecting authority, all amounts required to be
withheld and remitted to Revenue Canada or the tax collecting
authority respecting payments to employees and has paid all
installments of corporate taxes due and payable;
(ff) All Workers' Compensation Board, corporation capital tax,
provincial sales tax and federal tax returns, and all employee
remittances, Canada Pension Plan, Unemployment Insurance and
other reports and information required to be filed with all
applicable government authorities, agencies and regulatory bodies
have been duly and timely filed; and
(gg) **deleted**
2. SURVIVAL OF COVENANTS
---------------------
2.01 The representations, warranties, covenants and agreements by the Vendor and
the Purchaser contained in this Agreement or in the documents delivered pursuant
hereto or in connection with
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<PAGE>
the transactions contemplated hereby shall be true at and as of the time of
closing as though such representations were made at and as of such time.
2.02 Notwithstanding any investigations or enquiries made by the Purchaser prior
to the closing or the waiver of any condition by the Purchaser, the
representations, warranties, covenants and agreements of the Vendor and the
Purchaser shall survive the closing and notwithstanding the closing of the
purchase and sale herein contemplated shall continue in full force and effect.
3. PURCHASE AND SALE
-----------------
3.01 On the basis of the warranties and representations of the Vendor set forth
in Paragraph 1 of this Agreement and subject to the terms and conditions of this
Agreement, the Purchaser agrees to buy from the Vendor and the Vendor agrees to
sell to the Purchaser, on the Closing Date (hereinafter defined), the Vendor's
Shares and the Vendor's Shareholder Loans for the sum of NINETY-NINE THOUSAND
EIGHT HUNDRED ($99,800.00) Dollars of lawful money of Canada (hereinafter called
the "Purchase Price"). The Purchase Price shall be allocated as follows:
(a) Vendor's Shares $ 1.00
(b) Vendor's Shareholder Loans 99,799.00
-----------
TOTAL: $99,800.00
3.02. The Purchase Price shall be paid and satisfied as follows:
(a) the sum of $1,000.00 at or before the execution hereof, the
receipt of which the Vendor does hereby acknowledge;
(b) the sum of $43,800.00 shall be paid by the Purchaser to the
Vendor on the Closing Date, subject to the provisions of this
Agreement; and
(c) the balance, namely the sum of $55,000.00, together with interest
at the rate of Eight (8%) Percent per annum, calculated yearly,
not in advance, as and from the Closing Date until paid, shall be
paid by the Purchaser to the Vendor on February 25, 1999,
provided that the Vendor has delivered a Certificate as
contemplated in paragraph 4.04. In the event the Vendor has not
delivered a Certificate within 90 days from the Closing Date,
then the Purchaser shall be entitled to invoke the provisions of
paragraph 4.04 hereof.
4. COVENANTS OF THE VENDOR
-----------------------
4.01 The Vendor shall do all reasonable acts and things to assist the Purchaser
and the officers and directors of the Company in continuing and furthering the
business and goodwill of the Company.
205
<PAGE>
4.02 The Vendor will cause the Company at all reasonable times prior to the
Closing Date to permit representatives of the Purchaser full access to its
property and books and records including contracts and agreements, minute books
and share registers, to give the Purchaser and its representatives such
information with respect thereto as may be reasonably required and to permit the
Purchaser to make such audit (at its cost) of the books of account of the
Company as the Purchaser may see fit.
4.03 The vendor shall cause to be obtained on the Closing Date the written
resignation of Scott A. Nichols as a director and officer and Kim Nichols as an
officer.
4.04 The Vendor shall, if required by the Purchaser, cause to be delivered to
the Purchaser a certificate issued pursuant to Section 116(4) of the Income Tax
Act of Canada, or a certificate issued pursuant to Section 116(2) of the Income
Tax Act of Canada in respect of the purchase and sale contemplated by this
Agreement fixing a certificate limit which is not less than the cost to the
Purchaser of the Assets, or failing delivery of either certificate, will permit
the Purchaser to withhold such amount as the Purchaser would be liable to pay on
behalf of the Vendor pursuant to Section 116(5) of the Income Tax Act of Canada
(hereinafter called the "Holdback") from any amount or amounts otherwise payable
to the Vendor pursuant to this Agreement. The Holdback will be paid in trust to
Messrs. Hawthorne, Piggott & Company to pay the Holdback to the Vendor upon
delivery to Messrs. Hawthorne, Piggott & Company of a certificate issued
pursuant to Section 116 of the Income Tax Act of Canada which is satisfactory to
the Purchaser or to pay out of the Holdback the tax payable by the Purchaser
pursuant to Section 116(5) of the Income Tax Act of Canada and the balance, if
any, to the Vendor.
4.05 The Vendor shall pay all wages and salaries and all amounts due in lieu of
holiday pay to and including the Effective Date to all officers and employees of
the Company. The Vendor shall and the Covenantor shall remain solely liable for
any and all severance due to any such officer and/or employee
4.06 The Vendor will cause its Chartered Accountants to prepare audited
Financial Statements for the Company as of December 31, 1998, together with all
schedules and corporate Income Tax Returns, at the Vendor's cost.
5. CONDITIONS
----------
5.01 The Purchaser's obligation to carry out the terms of this Agreement and to
complete the purchase referred to in paragraph 3 hereof is subject to the
following conditions:
(a) that on the Closing Date the warranties and representations of
the Vendor as set forth in paragraph 1 of this Agreement shall be
true in every particular as if such warranties and
representations had been made by the Vendor on the Closing Date;
206
<PAGE>
(b) that all of the agreements to be performed by the Vendor
hereunder shall have been performed;
(c) that the Vendor shall have delivered to the Purchaser:
(i) Resignations in writing of all directors and officers of
the Company;
(ii) a certified copy of a resolution of the directors of the
Company authorizing the transfer of the Vendor's Shares
and registration of the same in the name of the Purchaser
and authorizing the issue of new share certificates
representing the Vendor's Shares in the name of the
Purchaser;
(iii) a duly executed share certificate in the name of the
Purchaser representing the Vendor's Shares;
(iv) all corporate records of the Company including the minute
books, share register book, share certificate books and
annual reports as well as the common seal of the Company;
(v) all share certificates of the Vendor, duly endorsed, for
transfer; and
(vi) a General Security Agreement executed by the Company in
order to secure the balance due under paragraph 3.02(c);
(vii) a guarantee in the form set forth in Schedule "G";
(viii) **deleted**
(ix) an Assignment of Shareholder Loans in favour of the
Purchaser.
5.02 The conditions set forth in paragraph 5 of this Agreement are for the
exclusive benefit of the Purchaser and may be waived by the Purchaser in writing
in whole or in part on or before the Closing Date but except as so waived the
completion of the purchase referred to in paragraph 3 hereof by the Purchaser
shall not prejudice or affect in any way the rights of the Purchaser in respect
of the warranties and representations of the Vendor set forth in paragraph 1 of
this Agreement.
6. INDEMNIFICATION
---------------
6.01 The Vendor and the Covenantor, jointly and severally, covenant and agree to
indemnify and save the Purchaser harmless from all loss, damage, costs, actions
and suits arising out of or in connection with any breach of any representation,
warranty, covenant, agreement or condition contained in this Agreement including
any loss resulting from any reassessment for income or corporate tax, interest
and/or penalties for a period up to the Closing Date. The Vendor and the
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<PAGE>
Covenantor acknowledge and agree that the Purchaser has entered into this
Agreement relying on the warranties and representations and other terms and
conditions of this Agreement and that no information which is now known or which
may hereafter become known to the Purchaser or its officers, directors or
professional advisors shall limit or extinguish the right to indemnity
hereunder. The Purchaser may deduct the amount of any loss or damage from any
installment of the unpaid purchase price.
7. GENERAL PROVISIONS
------------------
7.01 Time shall be of the essence of this Agreement.
7.02 The parties hereto shall execute and deliver such further and other
documents, instruments and things and do all acts and things as may be requisite
either before or after the Closing Date to carry out the full intent and meaning
of this Agreement.
7.03 This Agreement contains the whole agreement between the parties hereto in
respect of the purchase and sale contemplated herein, and there are no
warranties, representations, terms, conditions or collateral agreements,
express, implied or statutory other than as expressly set forth in this
Agreement.
7.04 Delivery of an executed copy of this Agreement by telecopy, telex or other
means of electronic communication producing a printed copy will be deemed to be
execution and delivery of this Agreement on the date of such communication by
the party so delivering such copy, subject to delivery of an originally executed
copy of this Agreement to the other parties hereto within two (2) weeks of the
date of delivery of the copy sent via the electronic communication.
7.05 This Agreement may be executed by the parties in two or more counterparts
and such counterparts as so executed together form one original Agreement and
shall be read together and construed as if all the parties had executed one
original Agreement
8. NOTICE
------
8.01 Any notice to be given under this Agreement shall be duly and properly
given if mailed by prepaid registered post in British Columbia addressed as
follows and any such notice shall be deemed to be received 48 hours after the
hour of mailing:
(a) To the Purchaser:
545538 B.C. LTD.,
#208-1899 Willingdon Avenue,
Burnaby, B.C. V5C 5T1
208
<PAGE>
(b) To the Vendor:
CAN-CAL RESOURCES LID.,
3651 Lindell Road,
Las Vegas, Nevada USA 89103
(d) To the Covenantor:
RONALD DANIEL SLOAN,
#203 Building 2, 1505 Blackcomb Street,
Las Vegas, Nevada USA 89128
or at such other address as the Purchaser or the Vendor may from time to time
designate by notice in writing to the other.
9. CLOSING DATE
------------
9.01 The purchase and sale contemplated herein shall take effect as of and from
the closing of business on January 29, 1999 (hereinafter called the "Effective
Date") and the Closing shall take place by an exchange of documents with
appropriate solicitors' undertakings, on January 29, 1999 (which date is herein
called the "Closing Date").
IN WITNESS WHEREOF the parties hereto have hereunto set their hands and seals
the day and year first above written.
The Common Seal of CAN-CAL )
RESOURCES LTD. was )
hereunto affixed in the presence of: )
) c/s
)
)
Per: /s/ Brian Wolfe )
------------------------------
Authorized Signatory
SIGNED, SEALED AND DELIVERED )
by the Covenantor, RONALD DANIEL )
SLOAN in the presence of: )
) /s/ R. D. Sloan
Robin Schwarz ) ----------------------
- ----------------------------------- ) RONALD D. SLOAN
16008 Ash St. )
- ------------------------------------ )
Hesperia, CA 92345 )
- ------------------------------------
209
<PAGE>
The Common Seal of 545538 B.C. LTD. )
was hereunto affixed in the presence of: )
)
) c/s
)
Per: /s/ Michael Gordon )
-------------------------------
Authorized Signatory
210
<PAGE>
EXHIBIT 11.0
COMPUTATION OF EARNINGS PER SHARE
YEAR ENDED DECEMBER 31, 1998
(ROUNDED TO THE NEAREST HUNDRED DOLLARS, EXCEPT SHARE DATA)
Weighted average number of common shares outstanding 6,546,149
- --------------------------------------------------------------------------------
Common stock equivalents - stock options 0
Common stock equivalents - preferred stock 0
- --------------------------------------------------------------------------------
Average common and common stock equivalents outstanding 6,546,149
- --------------------------------------------------------------------------------
Net income (loss) $ (100,100)
- --------------------------------------------------------------------------------
Earnings per share (1) $ (0.02)
- --------------------------------------------------------------------------------
(1) Fully diluted earnings per share have not been presented because the
effects are not material.
211
<PAGE>
EXHIBIT 16.0
DAVID E. COFFEY 3651 Lindell Rd. - Suite H Las Vegas, NV 89103
- --------------------------------------------------------------------------------
Certified Public Accountant (702) 871-3979
June 30, 1999
United States
Securities and Exchange Commission
Washington, D.C.
Gentlemen,
I have been furnished the disclosure made by Can-Cal Resources, Ltd. in
Item 14 of its Form 10-SB. I agree with the statements made by Can-Cal
Resources, Ltd. there were no disagreements on any matter of accounting
principle or practices, financial statement disclosures or auditing scope or
procedure. I was unable to continue as the Company's auditor in view of my
personal schedule and time availability.
Sincerely,
/s/ David E. Coffey
David E. Coffey
212
<PAGE>
EXHIBIT 23.0
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the publication of our report dated May 14, 1999 on the
financial statements on form 10-SB of Can-Cal Resources, Ltd. for the year ended
December 31, 1998.
MURPHY, BENNINGTON & CO.
/s/ Murphy, Bennington & Co.
June 28, 1999
213
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
accompanying financial statements and is qualified in its entirety by reference
to such financial statements
</LEGEND>
<CIK> 0001083848
<NAME> CAN-CAL RESOURCES,LTD
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 41,600
<SECURITIES> 0
<RECEIVABLES> 101,500
<ALLOWANCES> 5,600
<INVENTORY> 72,500
<CURRENT-ASSETS> 169,300
<PP&E> 264,600
<DEPRECIATION> 1,500
<TOTAL-ASSETS> 1,894,900
<CURRENT-LIABILITIES> 318,500
<BONDS> 0
0
0
<COMMON> 7,000
<OTHER-SE> 1,515,500
<TOTAL-LIABILITY-AND-EQUITY> 1,894,900
<SALES> 97,700
<TOTAL-REVENUES> 97,700
<CGS> 74,800
<TOTAL-COSTS> 131,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,800
<INCOME-PRETAX> (100,100)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (100,100)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
