<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
Gold Capital Corporation
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(Name of Issuer)
Common Stock, $0.0001 par value per share
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(Title of Class of Securities)
380548 10 7
--------------------------------------
(CUSIP Number)
Jack Stoch With copies to:
President Paul Hilton, Esq.
Globex Mining Enterprises Inc. Kevin P. Stichter, Esq.
146 - 14th Street Davis, Graham & Stubbs LLP
Rouyn-Noranda, 370 17th Street, Suite 4700
Quebec CANADA J9X 2J3 Denver, Colorado 80202
(819) 797-5242 (303) 892-9400
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(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
January 16, 1997
-------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D,
and is filing this schedule because of Rule 13d-1(b)(3) or (4), check
the following box [ ].
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to
whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class
of securities, and for any subsequent amendment containing information
which would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the
Securities Exchange Act of 1934 ("Act") or otherwise subject to the
liabilities of that section of the Act but shall be subject to all
other provisions of the Act (however, see the Notes).
Page 1 of 7 pages<PAGE>
CUSIP No. 380548 10 7 Page 2 of 7 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Globex Mining Enterprises Inc.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Quebec, Canada
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
7 SOLE VOTING POWER
2,287,547 See Item 5.
8 SHARED VOTING POWER
2,287,547 See Item 5.
9 SOLE DISPOSITIVE POWER
2,287,547 See Item 5.
10 SHARED DISPOSITIVE POWER
2,287,547 See Item 5.
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,287,547 See Items 4 and 5.
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Approximately 25.2%, based upon 9,073,653 shares of Common Stock
outstanding as of the date hereof.
See Item 5
14 TYPE OF REPORTING PERSON*
CO
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ITEM 1. SECURITY AND ISSUER.
-------------------
This Schedule 13D relates to shares of common stock, $0.0001
par value per share ("Company Common Stock") of Gold Capital
Corporation, a Colorado corporation (the "Company"), whose principal
executive office is located at 5525 Erindale Drive, Suite 201,
Colorado Springs, Colorado 80918.
ITEM 2. IDENTITY AND BACKGROUND.
-----------------------
Globex Mining Enterprises Inc., a Quebec corporation
("Globex") is a mining exploration company with its principal business
and office located at 146-14th Street, Rouyn-Noranda, Quebec, Canada
J9X 2J3. Globex's common stock, $0.01 par value per share, ("Globex
Common Stock"), is listed for trading on The Montreal Exchange and The
Toronto Stock Exchange. During the last five years, Globex has not
(i) been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors), or (ii) been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state
securities laws or finding any violation with respect to such laws.
Information regarding the executive officers, directors, and any
controlling shareholder of the Company is provided in the attached
Schedule I.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
-------------------------------------------------
Except for its agreement to enter into the transactions set
forth below, Globex has not paid any funds or other consideration for
its option (the "Option") to purchase the subject shares of Company
Common Stock. If Globex exercises the Option, it will issue 632,094
shares of Globex Common Stock as the consideration.
ITEM 4. PURPOSE OF THE TRANSACTION.
--------------------------
(a)-(j) Pursuant to the Stock Purchase Option Agreement,
Agreement Not to Sell Shares, and Agreement to Vote Shares for Merger,
dated January 16, 1997 between U.S. Gold Corporation ("U.S. Gold") and
Globex (the "Option Agreement"), Globex acquired the Option to
purchase 2,287,547 shares of Company Common Stock (the "Shares"). The
Option was acquired by Globex for the purpose of investment and to
further the potential acquisition of all outstanding shares of Company
Common Stock and/or acquisition of a controlling interest in the
Company.
On December 4, 1996, Globex made a conditional offer to
Royalstar Resources, Ltd., a Canadian corporation, to acquire the
4,419,110 shares of Company Common Stock owned by Royalstar at a price
of $0.80 per share. On December 5, 1996, Royalstar accepted Globex's
conditional offer. Globex is currently negotiating a purchase
agreement with Royalstar.
Page 3 of 7 pages<PAGE>
On December 20, 1996, Globex made a conditional offer
to the Company and U.S. Gold (and a wholly-owned subsidiary of U.S.
Gold) to effect a merger between the Company and a wholly-owned
subsidiary of Globex pursuant to which Globex would own all the common
stock of the surviving corporation and the shareholders of the Company
(other than Royalstar) would receive a total of 1,285,067 registered
shares of Globex Common Stock. Globex also offered to provide certain
loans to the Company, as described below, and to use its best efforts
to finance the Company's operations. The Company and U.S. Gold
accepted the conditional offer on December 20, 1996.
On January 16, 1997, Globex, the Company, and U.S. Gold
amended the December 20 letter to provide, among other things, that if
the proposed transaction did not occur due to any party other than
Globex, then the Company would issue to Globex the number of shares of
Company Common Stock equal to 250,000 plus 40,000 for each month
thereafter the Globex negotiations continued. Globex is currently
negotiating a merger agreement with the Company and U.S. Gold.
In connection with the aforementioned transactions and
proposals, Globex may attempt: to change the present board of
directors or management of the Company, to change materially the
present capitalization or dividend policy of the Company, to change
the Company's charter, bylaws or instruments corresponding thereto or
take other actions which may impede the acquisition of control of the
Company by any person other than Globex, to cause the Company Common
Stock to cease to be authorized to be quoted in an inter-dealer
quotation system of a registered national securities association, to
cause the Company Common Stock to become eligible for termination of
registration pursuant to Section 12(g)(4) of the Securities Act of
1934, as amended, to make any other material change in the Company's
business or corporate structure, or take any action similar to those
listed above.
Except as described above, Globex has no present plans or
proposals which relate to or would result in any transaction specified
in paragraphs (a) through (j) of Item 4. In the future, however,
Globex reserves the right to adopt such plans or proposals, subject to
applicable regulatory requirements, if any.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
------------------------------------
(a) Pursuant to the Option Agreement, Globex acquired the
Option to purchase 2,287,547 shares of Company Common Stock. Based
upon information received from the Company, Globex believes that
9,073,653 shares of Company Common Stock are outstanding as of the
date of this Schedule 13D. In such case, the Shares would represent
25.2% of the outstanding Company Common Stock.
(b) From the date of the Option Agreement until its
expiration on August 30, 1997 or earlier upon the occurrence of
certain events such as the successful consummation of the proposed
merger (the "Option Period"), Globex has the sole power to vote the
Shares on matters relating to the merger and related transactions
pursuant to an irrevocable proxy from U.S. Gold, whereas U.S. Gold
retains the right to vote the Shares on other matters. During the
Option Period, Globex has the sole power to acquire the Shares and
U.S. Gold has no power
Page 4 of 7 pages<PAGE>
to otherwise dispose of the Shares. Upon expiration of the Option
Period, if Globex has not acquired the Shares, all rights relating to
the Shares will revert to U.S. Gold. U.S. Gold is a Colorado
corporation with its principal executive offices at 55 Madison, Suite
700, Denver, Colorado 80206.
(c) On January 16, 1997, Globex acquired the Option to
purchase 2,287,547 shares of Company Common Stock as described above
and pursuant to the terms of the Option Agreement.
(d) Under the Option Agreement, U.S. Gold retains the right
to receive all dividends with respect to the Shares until the
exercise, if any, of the Option.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO SECURITIES OF THE ISSUER.
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In addition to the matters addressed in Items 4 and 5, on
January 16, 1997, Globex, the Company, and certain other parties
entered into a Loan Agreement pursuant to which Globex loaned an
initial amount of $415,000 to the Company for use in connection with
the Tonkin Springs Project in Eureka County, Nevada. Globex has the
discretion to loan additional amounts to the Company under the Loan
Agreement. All obligations of the Company under the Loan Agreement
are secured by a security interest in the Tonkin Springs Project, the
principal asset of the Company.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
--------------------------------
Exhibit A Option Agreement, described above.
Exhibit B Letter, dated December 4, 1996, from Jack
Stoch of Globex to John Young of Royalstar.
Exhibit C Letter, dated December 5, 1996, from
John W.W. Hick of Royalstar to Mr. Stoch.
Exhibit D Letter, dated December 20, 1996, from
Mr. Stoch to Bill Conrad of the Company.
Exhibit E Letter, dated January 16, 1997, from
Mr. Stoch to Mr. Conrad and William W. Reid
of U.S. Gold.
Exhibit F Loan Agreement.
Page 5 of 7 pages<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, the undersigned hereby certifies that the information as set
forth in this Schedule 13D is true, complete and correct.
GLOBEX MINING ENTERPRISES INC.
By: JACK STOCH
---------------------------
JACK STOCH, PRESIDENT
Dated: January 27, 1997
Page 6 of 7 pages<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I
NAME, PRINCIPAL OCCUPATION AND CITIZENSHIP OF EACH
DIRECTOR AND OFFICER OF GLOBEX MINING ENTERPRISES, INC.
Name and
Business Address Principal Occupation Citizenship
________________ ____________________ ___________
<S> <C> <C>
Jack Stoch President and Director Canadian
146 - 14th Street of the Company; President
Rouyn-Noranda, Quebec, of Geoconseils Jack Stoch Ltee
Canada J9X 2J3 (mining consultant company)
Dianne Stoch Secretary, Treasurer and Canadian
146 - 14th Street Director of Company; Private
Rouyn-Noranda, Quebec, Consultant
Canada J9X 2J3
Chris Bryan Director of Company; Canadian
146 - 14th Street Mining analyst
Rouyn-Noranda, Quebec,
Canada J9X 2J31
David Watkins Director of Company; Senior Canadian
146 - 14th Street Vice-President of Cyprus
Rouyn-Noranda, Quebec, Amax Minerals Company
Canada J9X 2J3
Ian Atkinson Director of Company; Senior Canadian; British
146 - 14th Street Vice-President of Battle
Rouyn-Noranda, Quebec, Mountain Gold Company
Canada J9X 2J3
</TABLE>
Page 7 of 7 pages
EXHIBIT A
STOCK PURCHASE OPTION AGREEMENT,
AGREEMENT NOT TO SELL SHARES, AND
AGREEMENT TO VOTE SHARES FOR MERGER
THIS STOCK PURCHASE OPTION AGREEMENT, AGREEMENT NOT TO SELL
SHARES, AND AGREEMENT TO VOTE SHARES FOR MERGER (this "Agreement")
dated as of January 16, 1997, is by and between U.S. Gold Corporation,
a Colorado corporation ("Stockholder"), and Globex Mining Enterprises
Inc., a Quebec corporation ("Globex").
RECITALS
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A. Globex and Gold Capital Corporation, a Colorado
corporation ("Company"), are parties to a Letter of Intent dated
December 20, 1996, which contemplates a series of transactions by
which Globex will acquire all of the issued and outstanding shares of
common stock of the Company (the "Common Stock") pursuant to a series
of transactions (sometimes referred to hereinafter as the "Acquisition
Transactions") which will include (i) a Loan Agreement (the "Loan
Agreement") between Globex and the Company by which Globex will loan
certain amounts to the Company; (ii) a Stock Purchase Agreement (the
"Stock Purchase Agreement") between Globex and Royalstar Resources
Ltd. ("Royalstar"), regarding the sale to Globex of approximately 47%
of the Common Stock, which is owned by Royalstar; and (iii) an
Agreement and Plan of Merger (the "Merger Agreement"), pursuant to
which, and subject to the terms and conditions contained therein,
Globex would purchase the remaining outstanding shares of the
Company's Common Stock, for and in consideration of 1,285,607 shares
of Globex Common Stock (the "Globex Stock") for every share of common
stock, pursuant to a merger (the "Merger") of the Company with a
wholly-owned U.S. subsidiary of Globex (the "Sub").
B. As of the date hereof, Stockholder owns 2,287,547
shares, or approximately 25% of the outstanding Common Stock of the
Company (the "Shares"), and Stockholder desires to (i) grant to Globex
(or Sub) an irrevocable option to purchase the Shares; (ii) agree to
vote in favor of the Merger (subject to the proxy described in
clause (iii)) all the Shares held by Stockholder; (iii) grant to
Globex (or Sub) an irrevocable proxy covering the shares held by
Stockholder to vote in favor of the Merger; and (iv) enter into an
agreement whereby the Stockholder agrees not to sell any of its Shares
during the Option Period (as defined below).
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in this Agreement and other good and valuable
consideration, and intending to be legally bound hereby, the parties
hereby agree as follows:
<PAGE>
1. Grant of Option. Stockholder hereby grants to Globex
(or Sub) an irrevocable option (the "Option") to purchase the Shares
in return for 632,094 shares of Globex Stock (the "Purchase Price").
2. Exercise of Option. (a) Globex (or Sub) may exercise
the Option, in whole but not in part, at any time on or prior to the
Termination Date (as defined herein), which period of time shall be
referred to hereinafter as the "Option Period." In the event Globex
wishes to exercise the Option, Globex will send a written notice to
Stockholder (the "Closing Notice") specifying a place and date no
later than five business days following the date of Closing Notice,
for the closing of such purchase (the "Closing").
(b) Notwithstanding the provisions of clause (a)
above, if any waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, or the rules
and regulations promulgated thereunder (collectively, the
"HSR Act"), applicable to the exercise of the Option shall
not have expired or been terminated, or if any preliminary
or permanent injunction or other order by any court of
competent jurisdiction prohibiting or otherwise restraining
exercise of the Option shall be in effect, in any case, as
of the date specified for the Closing in the Closing Notice,
the period of time during which the Option may be exercised
shall be extended until five business days following the
later to occur of the expiration or termination of such
waiting period or the removal of any such Order.
3. Sale and Purchase. (a) If Globex exercises the Option,
at any Closing hereunder, subject to the terms and conditions hereof,
Stockholders will sell, transfer and deliver to Globex (or Sub) a
certificate or certificates representing the Shares duly endorsed (or
accompanied by duly executed stock powers) to Globex (or Sub) and
otherwise in proper form for transfer, and Globex (or Sub) will
purchase the Shares and will sell, transfer and deliver to Stockholder
a certificate or certificates representing the number of shares of
Globex stock constituting the Purchase Price, duly endorsed (or
accompanied by duly executed stock powers) to Stockholder and
otherwise in proper form for transfer. All such Shares shall be
subject only to those restrictions on transfer, if any, as are placed
on the shares of Globex shares exchanged for shares of stock of the
Company pursuant to the Merger Agreement.
(b) In the event of any change in the number of issued
and outstanding Shares by reason of any stock dividend,
split-up, merger, recapitalization, combination, conversion,
exchange of shares, outstanding options, obligations of the
Company to issue additional Shares or the like, or any other
change in the corporate or capital structure of the Company
that would have the effect of diluting Globex's rights and
privileges hereunder, the number and kind of Shares subject
to the Option and the consideration payable in respect of
such Shares shall be appropriately adjusted to restore to
Globex its rights and privileges hereunder.
-2-<PAGE>
(c) In the event of any change in the number of issued
and outstanding shares of Globex common stock by reason of
any stock dividend, split-up, merger, recapitalization,
combination, conversion, exchange of shares or the like
(except in relation to the Acquisition Transactions
hereunder or financing undertaken by Globex in connection
therewith), or any other change in the corporate or capital
structure of Globex that would have the effect of diluting
the consideration which Stockholder is to receive for the
Shares if Globex exercises the Option, the Purchase Price
payable in respect of such Shares shall be appropriately
adjusted to provide to Stockholder substantially the same
consideration for its Shares.
4. Dividends and Distributions. Until the sale of
Stockholder's Shares at any Closing hereunder, Stockholder will remain
the record and beneficial owner of such Shares and will be entitled to
receive and retain all cash dividends with respect to such Shares
declared prior to the date of Closing and payable to shareholders of
record as of a date prior to the date of the Closing.
5. Agreement to Support Merger. Stockholder agrees,
subject to the terms of Section 7, to vote the Shares held by it in
favor of the Merger pursuant to the terms of the Merger Agreement.
6. Proxy With Respect to the Shares. Stockholder hereby
irrevocably appoints Globex (or Sub) as its attorney and proxy, with
full power of substitution, to vote or to express written consent or
dissent in such manner as such attorney and proxy or its substitute
shall, in its sole discretion, deem proper, and otherwise act
(including pursuant to any corporate action in writing without a
meeting) with respect to all of the Shares which it is entitled to
vote at any meeting of stockholders (whether annual or special and
whether or not an adjourned meeting) of the Company, or pursuant to
written action taken in lieu of any such meeting or otherwise;
provided, however, that Stockholder grants a proxy hereunder only with
respect to the following matters (the "Designated Matters"):
(i) votes or consents with respect to the Merger; (ii) votes or
consents with respect to any action or agreement that would result in
a breach of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement;
(iii) votes or consents with respect to any action or agreement that
would impede, interfere with, delay, postpone or attempt to discourage
the Merger, including, but not limited to, (a) any extraordinary
corporate transaction (other than the Merger), such as a merger, other
business combination, reorganization or liquidation involving Company,
(b) any option, sale, mortgage, transfer or other material transaction
regarding the Tonkin Springs Project in Eureka County, Nevada or any
other material asset of the Company or any of its subsidiaries,
(c) any change in the management or board of directors of the Company,
except as otherwise agreed to in writing by Globex, or (d) any
material change in the present capitalization of the Company; and
(iv) votes or consents relating to any other material change in the
corporate structure or business of the Company. This proxy is
irrevocable, is coupled with an interest sufficient in law to support
an irrevocable proxy and is granted in consideration of and as an
inducement to cause Globex to enter into the transactions contemplated
by this Agreement and the Merger Agreement. This proxy shall revoke
any other proxy granted by Stockholder at any
-3-<PAGE>
time with respect to the Shares and no subsequent proxies will be
given with respect thereto by Stockholder. In addition, if subsequent
to the date hereof Stockholder is entitled to vote the Shares for any
purpose unrelated to the Designated Matters, it shall provide notice
thereof to Globex.
7. Condition to Stockholder's Obligations. The
obligations of the parties to close the transactions contemplated by
this Agreement upon its execution and thereafter shall be subject to
the additional condition that all representations and warranties of
Stockholder (in the case of the obligations of Globex) and Globex (in
the case of the obligations of Stockholder) shall be true and correct
in all material respects as of the date hereof and at and as of the
date of the exercise of the Option and the closing of (i) the Stock
Purchase Agreement and (ii) the Merger Agreement, all with the same
force and effect as though made on and as of the date of this
Agreement.
8. Representations and Warranties of Stockholder.
Stockholder represents and warrants to Globex as follows:
8.1 Ownership of Shares. On the date hereof, the
Shares are all of the shares of the Company's Common Stock currently
beneficially owned by the Stockholder. Stockholder has no rights to
acquire additional shares of the Company's Common Stock, and has
converted all shares of preferred stock of the Company owned by it
into Common Stock. Stockholder currently has, and at the Closing
described in Section 3 will have, good, valid and marketable title to
the Shares, free and clear of all liens, encumbrances, restrictions,
options, warrants, rights to purchase and claims of every kind (other
than the encumbrances created by this Agreement and other than
restrictions on transfer under applicable U.S. Federal and State
securities laws). As set forth on the form 8-K filed by the Company
with the Securities and Exchange Commission on December 19, 1996, and
notwithstanding assertions to the contrary made by Royalstar in a
letter to Company dated January 10, 1997, Stockholder is of the
opinion, based on the advice of its outside counsel, that the
Shareholders' Agreement among John Young, Royalstar, the Company,
Stockholder, Tonkin Springs Venture Limited Partnership and Tonkin
Springs Gold Mining Company terminated effective as of the date John
Young resigned as an officer and director of the Company.
8.2 Power: Binding Agreement. Stockholder has the
full legal right, power and authority to enter into and perform all of
Stockholder's obligations under this Agreement. The execution and
delivery of this Agreement by Stockholder has been authorized by all
necessary corporate action on the part of Stockholder and will not
violate any other agreement to which Stockholder is a party including,
without limitation, any voting agreement, stockholders agreement,
voting trust or proxy. This Agreement has been duly executed and
delivered by Stockholder and constitutes a legal, valid and binding
agreement of Stockholder, enforceable in accordance with its terms,
except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium and similar laws, now or
hereafter in effect affecting creditors' rights and remedies generally
or general principles of equity. Neither the execution or delivery of
this Agreement nor the consummation by Stockholder of the transactions
contemplated hereby will (i) require any consent or approval of or
filing with any governmental or other regulatory body except for
(x) the filings
-4-<PAGE>
required under the H-S-R Act and (y) filings on Schedule 13D under the
Securities Exchange Act of 1934, as amended, or (ii) constitute a
violation of, conflict with or constitute a default under, any
contract, commitment, agreement, understanding, arrangement or other
restriction of any kind to which Stockholder is a party or by which
Stockholder is bound.
8.3 Continuity of Interest. There is no current plan
or intention by Stockholder to sell, exchange or otherwise dispose of
the shares of Globex's common stock received by the Stockholder.
8.4 Finder's Fees. No person is, or will be, entitled
to any commission or finder's fees from Stockholder in connection with
this Agreement or the transactions contemplated hereby.
9. Representations and Warranties of Globex. Globex
represents and warrants to Stockholder as follows:
9.1 Ownership of Shares. At the Closing described in
Section 3, Globex will have good, valid and marketable title to the
shares of Globex common stock constituting the Purchase Price, free
and clear of all liens, encumbrances, restrictions, options,
warranties, rights to purchase and claims of every kind (other than
restrictions on transfer under applicable Canadian provincial and U.S.
Federal and State securities laws).
9.2 Powers: Binding Agreement. Globex has full legal
right, power and authority to enter into and perform all of its
obligations under this Agreement. The execution and delivery of this
Agreement by Globex has been authorized by all necessary corporate
action on the part of Globex and will not violate any other agreement
to which Globex is a party. This Agreement has been duly executed and
delivered by Globex and constitutes a legal, valid and binding
agreement of Globex, enforceable in accordance with its terms, except
as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws, now or hereafter in
effect, affecting creditors' reorganization, moratorium and similar
laws, now or hereafter in effect, affecting creditors' rights and
remedies generally or general principles of equity. Neither the
execution of this Agreement nor the consummation by Globex of the
transactions contemplated hereby will (i) require any consent or
approval of or filing with any governmental or regulatory body except
for (x) for the filings required under the H-S-R Act and (y) filings
on Schedule 13D under the Securities Exchange Act of 1934, as amended,
or (ii) constitute a violation of, conflict with or constitute a
default under, any contract, commitment, agreement, understanding,
arrangement or other restriction of any kind to which Globex is a
party or by which it is bound.
9.3 Finder's Fees. No person is, or will be, entitled
to any commission or finder's fees from Globex in connection with this
Agreement or the transactions contemplated hereby.
-5-<PAGE>
9.4 No Intention to Sell Shares. If it exercises the
Option, Globex (or Sub) will be acquiring the Shares for investment
purposes and has no intention of selling such Shares in a public
distribution in violation of applicable securities laws.
10. Covenants of Stockholder. (a) So long as the Option
remains exercisable, Stockholder hereby covenants and agrees with
Globex that, except pursuant to the terms of this Agreement,
Stockholder will not, without the prior written consent of Globex,
directly or indirectly, (i) grant any proxies or enter into any voting
trust or other agreement or arrangement with respect to the voting of
any Shares, (ii) acquire or sell, assign, transfer or otherwise
dispose of any Shares, (iii) enter into any contract, option or other
arrangement or understanding with respect to the direct or indirect
acquisition or sale, assignment, transfer or other disposition of any
Shares, or (iv) directly or indirectly, encourage, solicit, initiate
or, participate in any way in discussions or negotiations with, or
knowingly provide any information to, any corporation, partnership,
person or other entity or group (other than Globex or any affiliate or
associate of Globex) concerning any proposal or offer (a "Takeover
Proposal") for a merger or other business combination involving the
Company or the acquisition in any manner, directly or indirectly, of a
material equity interest in any voting securities of or a substantial
portion of the assets of the Company. Stockholder shall promptly
notify Globex of, and communicate to Globex the terms and status of
any inquiry or proposal with respect to any Takeover Proposal and
shall promptly provide Globex with any such information regarding such
proposal as Globex may request (including delivering copies thereof).
(b) In the event that Globex exercises the Option,
Stockholder hereby agrees, for a period of two (2) years
from the date of Globex's exercise of the Option to vote all
shares of Globex Stock which constitute the Purchase Price
under Section 1 of this Agreement (the "Globex Shares") in
the exact manner specified by Globex, or, at the sole
election of Globex, to grant to Globex a duly executed
irrevocable proxy with respect to the Globex Shares in
accordance with C.R.S. Section 7-107-203(5).
(c) In the event that Globex exercises the Option,
Stockholder hereby grants to Globex a first right of refusal
as related to sales of the Globex Shares by Stockholder to
third-party non-affiliates, for a period of two (2) years
from the date of Globex's exercise of the Option, as
provided herein ("First Right of Refusal").
(i) Stockholder will give Globex written
notice of Stockholder's intention to sell (or deliver in
satisfaction of debt) any of the Globex Shares beneficially
owned directly or indirectly by Stockholder to any person,
except for an Affiliate, as hereinafter defined, such
written notice to provide in reasonable detail, the terms,
conditions and timing of such intended sale (or delivery)
provided that a written notice from Stockholder to the
effect that a prescribed number of shares will be sold at
the prevailing market price shall constitute a valid Sales
Notice ("Sales Notice"). An "Affiliate" of
-6-<PAGE>
Stockholder is defined as any entity in which Stockholder directly or
indirectly owns a greater than 50% interest.
(ii) Globex will have 5 business days from
receipt of the Sales Notice to give Stockholder written
notice of Globex's irrevocable election to exercise its
rights to purchase the shares covered by the Sales Notice
under terms and conditions no less favorable to Stockholder
than those included in the Sales Notice.
(iii) If Globex has not given notice to
Stockholder of its irrevocable intent to exercise its rights
as provided in (ii) and within the required time frame
specified above, Globex shall relinquish any First Right of
Refusal related specifically to those shares included in the
Sales Notice, unless such sale(s) are not consummated by
Stockholder within 30 days of the date of the Sales Notice.
(iv) Any election by Globex not to exercise
its First Right of Refusal as related to any Sales Notice
shall not change or diminish Globex's rights under this
Agreement as related to subsequent Sales Notices.
(vi) Stockholder may sell or transfer any of
the Globex Shares which it beneficially owns directly or
indirectly to an Affiliate provided that such Affiliate
agrees in writing to be bound by the terms of this
Agreement.
11. Remedies. The parties hereto agree that if for any
reason Globex or Stockholder shall have failed to perform its
obligations under this Agreement, then any party hereto seeking to
enforce this Agreement against such non-performing party shall be
entitled to seek specific performance and injunctive and other
equitable relief, and the parties hereto further agree to waive any
requirement for the securing or posting of any bond in connection with
the obtaining of any such injunctive or other equitable relief. This
provision is without prejudice to any other rights that either party
hereto may have against the other party hereto for any failure to
perform its obligation under this Agreement.
12. Termination. This Agreement (other than the provisions
relating to expenses (Section 13), and confidentiality (Section 14))
shall terminate (the "Termination Date") on the earliest of:
(a) the date on which Globex and Stockholder mutually
consent to terminate this Agreement in writing;
(b) the date of successful consummation of the Stock
Purchase Agreement and successful consummation of the
Merger;
(c) the date on which Globex provides written notice
to Stockholder of Globex's intention not to exercise the
Option;
-7-<PAGE>
(d) the date upon which Globex gives written notice to
the Company under the Loan Agreement of its intention not to
make any further advances of funds thereunder; or
(e) August 30, 1997.
13. Expenses. Each party hereto will pay all of its
expenses in connection with the transactions contemplated by this
Agreement, including, without limitation, the fees and expenses of its
counsel and other advisers.
14. Confidentiality. Stockholder recognizes that
successful consummation of the transactions contemplated by this
Agreement may be dependent upon confidentiality with respect to these
matters. In this connection, Stockholder agrees that it will not
disclose or discuss these matters with anyone (other than its legal
counsel and advisors) not a party to this Agreement, without prior
written consent of Globex, except to the extent necessary for filings
required pursuant to the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder or disclosures Stockholder's
legal counsel advises in writing are necessary in order to fulfill
Stockholder's obligations imposed by law, in which events Stockholder
shall give prompt prior notice of such disclosure to Globex.
15. Certain Covenants of Globex
15.1 Stock Purchase and Merger. Globex agrees to use
its reasonable best efforts to negotiate the terms of the Stock
Purchase Agreement and the Merger Agreement in good faith, and to
consummate the closing of the Acquisition Transactions contemplated
thereby.
15.2 H-S-R Act Filings. Globex agrees to make in a
timely manner any filings required to be made by it under the H-S-R
Act in connection with the transactions contemplated by this
Agreement, the Stock Purchase Agreement and the Merger Agreement.
16. Notices. All notices or other communications required
or permitted hereunder shall be in writing (except as otherwise
provided here) and shall be deemed duly given when received by
delivery in person, by telecopy, telex or telegram or by certified
mail, postage prepaid, or by an overnight courier service, addressed
as follows:
If to Globex:
146 - 14th Street
Rouyn-Noranda, Quebec, Canada
Attn: Jack Stoch
Chief Executive Officer
-8-<PAGE>
with copies to:
Davis, Graham & Stubbs LLP
370 Seventeenth Street, Suite 4700
Denver, Colorado 80202
Attn: Paul Hilton, Esq.
If to Stockholder:
U.S. Gold Corporation
55 Madison, Suite 700
Denver, Colorado 80206
Attn: William W. Reid
17. Entire Agreement: Amendment. This Agreement, together
with the documents expressly referred to herein, constitute the entire
agreement among the parties hereto with respect to the subject matter
contained herein and supersede all prior agreements and understandings
among the parties with respect to such subject matter. This Agreement
may not be modified, amended, altered or supplemented except by an
agreement in writing executed by the party against whom such
modification, amendment, alteration or supplement is sought to be
enforced.
18. Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other
parties, except that Globex may assign any or all of its rights and
obligations hereunder to Sub without the consent of Stockholder or the
Company, but no such transfer shall relieve Globex of its obligations
under this Agreement.
19. Governing Law. This Agreement, and all matters
relating hereto, shall be governed by, and construed in accordance
with the laws of the State of Colorado without giving effect to the
principles of conflicts of laws thereof.
20. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an
original and all of which together shall constitute one and the same
document.
21. Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement or affecting the
validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable such provision shall be
interpreted to be only so broad as is enforceable.
-9-<PAGE>
22. Further Assurances. Each party hereto shall execute
and deliver such additional documents as may be necessary or desirable
to consummate the transactions contemplated by this Agreement.
23. Third Party Beneficiaries. Nothing in this Agreement,
expressed or implied, shall be construed to give any person other than
the parties hereto any legal or equitable right, remedy or claim under
or by reason of this Agreement or any provision contained herein.
[THIS SPACE INTENTIONALLY LEFT BLANK]
-10-<PAGE>
IN WITNESS WHEREOF, Globex and Stockholder have each caused
this Agreement to be executed by their duly authorized officers as of
the date and year first above written.
GLOBEX MINING ENTERPRISES, INC.,
a Quebec corporation
By: JACK STOCH
--------------------------------
Name: JACK STOCH
-------------------------
Title: PRESIDENT
-------------------------
U.S. GOLD CORPORATION,
a Colorado corporation
By: WILLIAM W. REID
----------------------------------
Name: WILLIAM W. REID
---------------------------
Title: PRESIDENT
---------------------------
-11-
EXHIBIT F
LOAN AGREEMENT
______________
THIS LOAN AGREEMENT, dated as of January 16, 1997 (this
"Agreement"), is by and among GLOBEX MINING ENTERPRISES INC., a Quebec
corporation, whose address is 146 - 14th Street, Rouyn-Noranda,
Quebec, Canada, J9X 2J3 (the "Lender"), GOLD CAPITAL CORPORATION, a
Colorado corporation, whose address is 5525 Erindale Drive, Suite 201,
Colorado Springs, Colorado, USA 80918 (the "Borrower"), TONKIN SPRINGS
VENTURE LIMITED PARTNERSHIP, a Nevada limited partnership, whose
address is 55 Madison, Suite 700, Denver, Colorado 80206 ("TSVLP"),
TONKIN SPRINGS GOLD MINING COMPANY a Colorado corporation, general
partner of TSVLP, whose address is 55 Madison, Suite 700, Denver,
Colorado 80206 ("TSGMC") and U.S. GOLD CORPORATION, a Colorado
corporation ("U.S. Gold") of which TSGMC is a wholly-owned subsidiary,
whose address is 55 Madison, Suite 700, Denver, Colorado 80206.
RECITALS
_________
A. Borrower is the owner of an undivided sixty percent (60%)
interest in the Tonkin Springs Project, consisting of unpatented
mining claims, unpatented millsites leases, improvements, permits,
water rights, mines, fixtures and equipment, all located in Eureka
County, Nevada (collectively, the "Project").
B. Borrower and TSVLP are parties to a Purchase and Sale
Agreement dated December 31, 1993 (the "Purchase and Sale Agreement"),
pursuant to which the Borrower acquired its sixty percent (60%)
interest in the Project. Borrower and TSVLP are also parties to a
Mining Venture Agreement dated effective as of December 31, 1993 (the
"Mining Venture Agreement"), pursuant to which operations are
conducted at the Project and under which the Borrower is the Manager
(as defined in the Mining Venture Agreement) of the Project. In
addition, TSVLP is the owner and holder of an Amended and Restated
Secured Promissory Note, as amended (the "TSVLP Note"), executed by
Borrower on or about June 21, 1995, in the original principal amount
of $3,800,000, which is secured by a Security Agreement by and between
Borrower and TSVLP dated December 31, 1993 (the "TSVLP Security
Agreement"). The remaining amount of principal and interest
outstanding under the TSVLP Note, and the schedule for repayment of
those amounts, is set forth in the TSVLP Note.
C. In accordance with the terms of a Letter of Intent dated
December 20, 1996, among the Lender, the Borrower, TSGMC and U.S. Gold
(the "Letter of Intent"), the Borrower and the Lender are
contemplating a series of transactions (the "Acquisition
Transactions") pursuant to which the Lender acquires all of the issued
and outstanding shares of common stock of the Borrower, and in
connection therewith, the Lender has agreed to make certain advances
of funds on Borrower's behalf, for the payment of operating and other
indebtedness of Borrower incurred in connection with the Project.
<PAGE>
D. TSVLP has agreed to execute the Intercreditor Agreement (as
defined below) to provide the Lender a security interest in the
Project pari passu with the security interest in the Project held by
TSVLP pursuant to the TSVLP Security Agreement, for the amount of
funding provided by the Lender under this Agreement.
E. Borrower, TSVLP and Lender desire to memorialize the terms
and conditions upon which such financing will be completed.
NOW, THEREFORE, in consideration of the foregoing recitals, the
covenants and conditions hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
SECTION I
Definitions
____________
As used in this Agreement:
"Accounts Payable" shall mean outstanding amounts currently owed
by the Borrower to third party vendors, a complete list of which (to
the actual knowledge of the Borrower) is set forth on Schedule 1
attached hereto.
"Collateral" shall mean all of the right, title and interest of
Borrower in and to the property defined as "Collateral" or "Debtor"s
Collateral" in the TSVLP Security Agreement, as more particularly
described in Section 2(a)(i)-(ix) thereof, and all of the right, title
and interest of Borrower in and to any additional real or personal
property, ores, minerals or mineral resources, machinery, fixtures or
equipment of any kind at the Project, and general intangibles and
income, products and proceeds associated with the foregoing and any
additional unpatented mining claims or millsites, as more particularly
described on Exhibit A attached hereto and incorporated herein by
reference.
"Deed of Trust" shall mean that Deed of Trust, Security
Agreement, Financing Statement and Assignment of Production and
Proceeds, pursuant to which the Lender is granted a first priority
security interest in and to that portion of the Collateral
constituting real property, in the form of Exhibit B attached hereto
and incorporated herein by reference, subject only to Permitted Liens
and the Lien created by the TSVLP Note and the TSVLP Security
Agreement.
"Distribution" means any dividend payable in cash or property
with respect to any shares of capital stock of Borrower (including,
without limitation, dividends payable in shares of common, preferred,
or other capital stock) or any purchase, redemption or retirement of,
or other payment with respect to any shares of capital stock of
Borrower.
"Environmental Laws" means any and all federal, state and local
statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises,
-2-<PAGE>
licenses, agreements or other governmental restrictions relating to
the protection of human health, safety or the environment or to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances
or wastes into the environment including, without limitation, ambient
air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling or pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes,
which statutes and regulations shall include, without limitation, the
Comprehensive Environmental Response Compensation and Liability Act,
as amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. Section 6901 et seq., the
Federal Water and Pollution Control Act, as amended, 33 U.S.C. Section
1251 et seq., the Federal Clean Air Act, as amended, 42 U.S.C.Section
7401 et seq., the Emergency Planning and Community Right to Know Act,
as amended, 42 U.S.C. Section 110101 et seq., the Toxic Substances
Control Act, as amended, 154 U.S.C. Section Section 2601-2629, the
Safe Drinking Water Act, as amended, 42 U.S.C. Section Section 300f-
300j, and any and all Nevada state law counterparts, and the
regulations issued under each of such federal or state statutes.
"Equity Proceeds" means the net proceeds of sale by Borrower of
any and all common stock, preferred stock, notes, debentures or other
securities (including without limitation any stock sold pursuant to
the exercise of stock options) issued by Borrower and sold subsequent
to the date of this Agreement.
"Event of Default" shall mean the occurrence of any one or more
of the events which constitute an Event of Default under Section VII
of this Agreement.
"Intercreditor Agreement" means that certain Intercreditor
Agreement among the Lender, TSVLP, TSGMC and U.S. Gold of even date
herewith, in the form of Exhibit C attached hereto.
"Lands" means all of the unpatented mining claims and millsites
or other mineral rights owned or leased by the Borrower or TSVLP and
subject to the Mining Venture Agreement.
"Lien" means any lien, mortgage, deed of trust, security
interest, pledge, deposit, production payment, right of a vendor under
any title retention or conditional sale agreement or lease
substantially equivalent thereto or any other charge or encumbrance
for security purposes, whether arising or by law or agreement or
otherwise, but excluding any right of offset which arises without
agreement in the ordinary course of business.
"Loan" shall mean the aggregate amount of the advances provided
for in Section II hereof, as evidenced by the Note to be delivered by
the Borrower to the Lender on the Loan Date.
"Loan Date" shall mean the date on which the Lender makes the
initial installment of the Loan available to the Borrower pursuant to
Section II of this Agreement.
-3-<PAGE>
"Material Project Agreements" means those agreements to which the
Borrower is a party which are material to the conduct of operations at
the Project or the maintenance of any portion of the Collateral.
"Maturity Date" means the earlier of the date of full execution
and delivery of definitive documents by which the Lender acquires all
of the issued and outstanding shares of common stock of the Borrower,
or August 30, 1997.
"Mining Leases" shall mean those Mining Leases described in
Schedule 2 attached hereto.
"Note" shall mean the promissory note of the Borrower, evidencing
the Loan, which shall be automatically amended from time to time as
Lender makes additional advances to Borrower pursuant to Section 2.1,
in the form attached to this Agreement as Exhibit D and incorporated
herein by reference.
"Permitted Liens" shall mean existing indebtedness of the
Borrower (including Accounts Payable) as listed in Schedule 3 attached
hereto.
"Person" shall mean any natural person, company, trust,
corporation, joint venture or business organization.
"Security Documents" shall mean the filings, recordations,
approvals, certificates, title insurance and other documentation,
including without limitation the Deed of Trust, necessary, in the
Lender's sole discretion, to perfect and evidence the Lender's lien
and security interest in the Collateral.
SECTION II
The Loan
__________
Subject to the terms and conditions of this Agreement, the Lender
agrees to make the Loan to the Borrower as follows:
2.1. Amount; Maturity. Subject to the terms and conditions
hereof, Lender agrees to make advances to Borrower under this Loan
Agreement, from time to time, in the initial amount of $415,000 (the
"Initial Advance", which shall be disbursed in accordance with the
procedures described below) and in such additional amounts as
requested in writing (in the form of request set forth on the attached
on Schedule 2.1) by the Borrower and agreed to by the Lender (in each
case not later than three business days following the receipt of such
request, unless the Lender has asked the Borrower for additional
information as to the nature of the advance or the specific uses to
which the funds advanced will be put, which such requests by Lender
Borrower agrees to respond to promptly, in which case, assuming it
receives the additional information, Lender will respond not later
than seven business following the receipt of such request) in its sole
discretion (so long as the
-4-<PAGE>
Lender, subject to its rights to approve or disapprove specific
requests for advances and to elect not to make any further advances
hereunder, agrees to make such advances as are necessary to enable
Borrower to achieve the objectives set forth in clauses (a), (b) and
(c) below), all such amounts to be disbursed and utilized strictly in
accordance with this Section 2.1 and the schedule attached hereto as
Exhibit E and incorporated herein by reference, to enable Borrower to
(a) take such actions as are reasonably necessary to maintain,
preserve and protect the assets and properties of the Tonkin Springs
Project, (b) service the TSVLP Note (which the parties agree shall not
be subject to the Lender's discretion), and (c) pay other necessary
and proper obligations and commitments of Borrower, including such
obligations and commitments of Borrower as are required under the
Letter of Intent and all agreements contemplated thereby. The
Borrower and the Lender hereby agree and the Borrower hereby covenants
and agrees that the proceeds of the Initial Advance shall be disbursed
and used as follows:
(i) $20,000, previously advanced by Lender to Borrower;
(ii) $166,780 to be paid by wire transfers to the Lessors
under the Campbell/Simpson Lease (as defined in Schedule 2), pursuant
to written instructions from the Borrower;
(iii) $141,000 to be paid immediately to TSVLP, $91,000 of
which will be applied to payments, including interest, past due under
the TSVLP Note, and $50,000 of which will cover the January 1997
payment due under the TSVLP Note;
(iv) $30,306.37 to be paid immediately to the Eureka
County, Nevada, Assessor to cover past due personal property taxes for
the Collateral;
(v) $25,000 to cover the Borrower's working capital needs
(as directed by Lender in accordance with the provisions of this
Section 2.1) for January 1997, as set forth on Exhibit E; and
(vi) the balance ($31,913.63) to be used for the payment of
Accounts Payable (as directed by Lender in accordance with the
provisions of this Section 2.1) during January 1997, as set forth on
Exhibit E.
Except for the Initial Advance, as to which no election is permitted,
the parties hereby acknowledge and agree that in addition to
responding affirmatively or negatively to specific written requests
for advances of funds as set forth above, Lender, by written notice to
the Borrower at any time, may elect to terminate its obligation to
make any further advances to the Borrower pursuant to this Agreement.
In that event, the Lender shall have no obligation or liability to the
Borrower, any other party hereto, or any third party for the
foreseeable or unforeseeable consequences of an election by the Lender
not to make any further advances.
2.2. Note. The Obligation of Borrower to repay the Loan, with
interest thereon, shall be evidenced by the Note, which shall be
deemed automatically amended to reflect all amounts
-5-<PAGE>
advanced by Lender to Borrower pursuant to Section 2.1, at the time
each such advance is made. The Note shall be payable on the Maturity
Date or upon acceleration as hereinafter set forth. The Note shall
bear interest at a rate equal to two percent (2%) over the existing
prime rate, as published in the Wall Street Journal, Western Edition,
on the day the initial portion of the Loan is funded. Interest shall
accrue at the annual rate of fifteen percent (15%) (the "Default
Rate") on any past-due payment of principal and, to the fullest extent
permitted by law, of any interest or other amount payable under this
Agreement. Interest shall be calculated on the basis of a three
hundred sixty (360) day year of twelve (12) thirty (30) day months.
2.3. Acceleration. The Maturity Date of the Note shall be
accelerated (the "Acceleration Date") (a) as provided under Section
8.1, (b) in the event the Borrower shall receive Equity Proceeds in an
aggregate amount of not less than $2,000,000 at any date subsequent to
the Loan Date, (c) in the event the TSVLP Note shall be declared in
default and action to foreclose the underlying security (pursuant to
the TSVLP Security Agreement) is taken in connection with such an
Event of Default, or (d) in the event any third party takes any
foreclosure action or otherwise attempts to collect against the
Collateral.
2.4. Prepayments.
(a) Within five (5) business days after receipt by Borrower
of any Equity Proceeds in excess of $2,000,000, Borrower shall make
mandatory prepayment of the entire amount of the Loan.
(b) Borrower shall have the right to prepay the Note at any
time, either in whole or in part, with or without notice, without
penalty or premium.
2.5. Payment to Lender. Borrower will pay to the Lender on the
Maturity Date, or the Acceleration Date, whichever shall first occur,
the principal amount, together with accrued interest not later than
12 noon, Denver, Colorado time in lawful money of the United States of
America in immediately available funds. Any payment received after
that time will be deemed to have been made on the next following
business day. Should the payment become due and payable on a day
other than a business day, the maturity of that payment shall be
extended to the next succeeding business day, and in the case of a
payment of principal, interest shall accrue and be payable for the
period of such extension. At the Lender's election, which may be
exercised by its giving written notice to the Borrower not less than
ten (10) business days prior to the Maturity Date or the Acceleration
Date, whichever is applicable, the Lender may request the Borrower to
issue to the Lender common stock of the Borrower in lieu of payment of
the amounts outstanding under the Note, the number of common shares to
be issued to be determined by dividing $.80 into the amount
outstanding under the Note. The Borrower agrees, at its sole expense,
that it will upon the Lender's written request use its reasonable best
efforts to register the sale of such shares with the United States
Securities and Exchange Commission, in accordance with the provisions
of Exhibit F attached hereto. In connection therewith, the Borrower
shall have obtained all authorizations and approvals of, and all other
actions required to be taken by, any applicable governmental authority
or regulatory body or stock exchange and shall have given all notices
to, and made all filings with, any such
-6-<PAGE>
governmental authority or regulatory body or stock exchange, that may
be required in connection with such issuance and registration of the
Borrower's common stock. The Borrower may elect not to issue the
stock if it timely pays to Lender in immediately available funds the
full amount of principal and interest owed under the Note. Upon the
issuance of the stock, the amount due under the Loan shall be deemed
no longer due and payable, and this Agreement shall be deemed
terminated and the Note deemed canceled.
2.6. Continuation of Indebtedness. If at any time prior to
August 30, 1997, Lender and Borrower and any necessary third parties
have executed and delivered definitive agreements pursuant to which
Lender has acquired all of the issued and outstanding shares of
Borrower's common stock (as contemplated under the Letter of Intent),
the amount due under the Loan shall remain due and payable and the
Note shall remain outstanding, but the security interest of Lender
under this Agreement shall be deemed terminated. In connection
therewith, U.S. Gold hereby agrees that it will vote (and cause its
officers and directors and TSVLP and TSGMC to vote) all of the shares
of common stock of the Borrower that it (or they) own(s) in favor of
the planned acquisition of all such stock by the Lender (in exchange
for common stock of Lender at the ratio and as otherwise set forth in
the Letter of Intent), and that it (and they) will not sell any of its
(their) shares of common stock of the Borrower to any third party, all
pursuant to the terms and provisions of a Stock Purchase Option
Agreement between U.S. Gold and the Lender to be executed
simultaneously herewith.
SECTION III
Security
________
3.1. The Security. The obligations of the Borrower hereunder
will be secured by the Security Documents and any additional Security
Documents hereinafter delivered by Borrower and accepted by Lender.
3.2. Priority of Security. The Lien of Lender created by the
Security Documents shall rank pari passu with the Lien of TSVLP
evidenced by the TSVLP Security Agreement and accompanying financing
statements, such ranking in an amount equal to the principal amount of
the Loan (plus applicable interest). Proceeds from exercise of any
rights granted by the Security Documents and the TSVLP Security
Agreement shall be split pari passu between Lender and TSVLP, share
and share alike until the Lender has recovered the principal amount of
the Loan (plus applicable interest). TSVLP agrees to execute and
file, as deemed necessary by counsel for Lender, any documents
necessary to evidence the equal priority granted Lender hereunder.
3.3. Forbearance by Lender. Notwithstanding written notice by the
Lender of an election not to make any additional advances hereunder,
the Lender hereby agrees to forebear exercising any rights under the
Security Documents through and including the Maturity Date, so long as
no Events of Default have occurred hereunder or thereunder, to allow
the Borrower to perform its duties as Manager at the Project and to
seek additional financing during that time. Notwithstanding such
forbearance, however, Lender shall be entitled to declare the Loan
-7-<PAGE>
immediately due and payable in accordance with the provisions of
Section 8.1 and to exercise all rights it has to the full extent of
the Security Documents in the event that (a) TSVLP shall undertake any
action to enforce its rights under the TSVLP Security Agreement or
other documents securing its existing Lien, or (b) any third party
shall exercise any rights of foreclosure or other collection action
against the Collateral.
SECTION IV
Conditions Precedent
_____________________
The Lender's obligation to make the Initial Advance under the
Loan (or decision to make any further advance of additional amounts
thereunder following the Loan Date) shall be subject to the
satisfaction of each of the following conditions precedent:
4.1. Note. The Note shall have been executed by the Borrower and
delivered to the Lender.
4.2. Security Documents and Security. The Security Documents,
duly executed and delivered in form, substance and date satisfactory
to the Lender, shall have been delivered to the Lender, and the Lender
shall have a valid and perfected lien and security interest in the
Collateral in accordance with the terms of the Security Documents,
subject only to Permitted Liens and the Lien created by the TSVLP
Security Agreement.
4.3. Intercreditor Agreement. The Lender shall have received the
Intercreditor agreement, duly executed and delivered by TSVLP in form,
substance and date satisfactory to the Lender.
4.4. Approvals; Certificates. The Lender shall have received,
dated the date hereof, certificates of the Secretary or Assistant
Secretary of the Borrower certifying (a) the resolutions of the Board
of Directors of the Borrower approving this Agreement, the Note and
the Security Documents and (b) the names and true signatures of the
officers authorized to sign said agreement and documents.
4.5. Representations and Warranties. Each and every
representation and warranty made by or on behalf of the Borrower
relating to this Agreement, the Note, the Security Documents or any
instruments or transactions contemplated hereby or thereby shall be
true and complete on and as of the Loan Date, and on the date of each
subsequent advance of funds hereunder by the Lender.
4.6. No Defaults. There shall exist no Event of Default (other
than the technical defaults under the Purchase and Sale Agreement and
the Mining Venture Agreement referred to in Section 5.6 below) and no
event which, with the giving of any notice or the passage of any
period of time, would constitute an Event of Default.
-8-<PAGE>
4.7. Counsel Opinion. The Borrower shall have delivered to the
Lender an opinion of the Borrower's counsel dated the date hereof in
form and substance satisfactory to the Lender and its counsel, as to
the matters referred to in Sections 5.1 and 5.2 of this Agreement and
with respect to such other matters as the Lender may reasonably
require.
4.8. Lockup Agreement. The Lender shall have received the Stock
Purchase Option Agreement referred to in Section 2.6, duly executed
and delivered by U.S. Gold in form, substance and date satisfactory to
the Lender.
SECTION V
Representations and Warranties
______________________________
In order to induce the Lender to enter into this agreement, the
Borrower hereby represents and warrants to the Lender as follows:
5.1 Existence. The Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Colorado, and is qualified to do business and in good standing in the
State of Nevada. The Borrower is qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which
the nature of the business transacted by it or the nature of the
property owned or leased by it makes such qualification necessary and
where failure to so qualify would have a material adverse effect on
the ability of the Borrower to perform its obligations under this
Agreement, the Security Documents or the Note.
5.2 Authority. The Borrower has all necessary corporate power
and authority to execute, deliver, observe and perform the terms of
this Agreement, the Security Documents, and the Note. Neither the
Borrower's execution and delivery of this Agreement, the Security
Documents, or the Note, nor the performance or observance by the
Borrower of the provisions hereof or thereof, violates, or will
violate, any provisions in the Borrower's articles of incorporation,.0
bylaws or other constitutive documents, or will constitute a default
or a violation under, or result in the imposition of any lien under,
or conflict with, or result in any breach of any of the provisions of,
any existing contract or other obligation binding upon the Borrower or
its property or the Collateral. This Agreement, the Security
Documents, and the Note have been duly executed and delivered by the
Borrower, and this Agreement, the Security Documents, and the Note are
legal, valid and binding obligations of the Borrower, enforceable
against the Borrower in accordance with their respective terms
(subject to applicable bankruptcy, reorganization, insolvency or
similar laws affecting the enforcement of creditors' rights
generally). The Borrower's obligations hereunder under the Security
Documents and under the Note will rank not less than pari passu with
all of the Borrower's secured indebtedness to TSVLP, as evidenced by
the TSVLP Security Agreement.
5.3. Litigation; Taxes. Except for Permitted Liens, and as set
forth in Schedule 5.3, there are no legal or arbitral proceedings or
any proceedings by or before any judicial, governmental or regulatory
body, now pending, or (to the knowledge of the Borrower) threatened,
against the Borrower or pertaining to or which could affect any of its
property which, if adversely determined, could have a material adverse
effect on the ability of the Borrower to perform its
-9-<PAGE>
obligations under this Agreement, the Security Documents, or the Note,
or which could have a material adverse impact on the Project. The
Borrower has filed all United States Federal income tax returns and
all other material tax returns which are required to be filed by it
and has paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Borrower or any of its subsidiaries. The
charges, accruals and reserves on the books of the Borrower and its
subsidiaries in respect of taxes and other governmental charges are,
in the opinion of the Borrower, adequate therefor.
5.4. Financial Condition; No Material Adverse Effect. The
Borrower has delivered to the Lender audited consolidated financial
statements as of and for the year ended December 31, 1995 and
unaudited consolidated financial statements for the three quarters
ended September 30, 1996 (as set forth in Borrowers' Annual Report on
form 10-K for the fiscal year ending December 31, 1995 and Borrower's
Quarterly Reports on form 10-Q for the periods ended March 31, 1996,
June 30, 1996 and September 30, 1996, copies of each of which the
Lender acknowledges receiving from the Borrower prior to the Loan
Date), which have been certified by the principal financial officer
of the Borrower. Such financial statements are complete and correct
in all material respects and have been prepared in accordance with
generally accepted accounting principles consistently applied and
fairly and accurately present the financial position of the Borrower
as of said dates and the results of its operations for the periods
then ended (subject, in the case of unaudited quarterly financial
statements, to normal and customary year-end adjustments). Since
September 30, 1996, except as set forth on the Schedules attached to
this Agreement, to the best of the Borrower's knowledge, no event or
condition has occurred that reasonably could be expected to have a
material adverse effect on the ability of the Borrower to perform its
obligations under this Agreement, the Security Documents or the Note.
5.5. No Approvals or Consents. No authorization or approval or
other action by, and no notice to or filing with, any court,
governmental authority or regulatory body, or any consent or approval
of any other third party, is required for the due execution, delivery
and performance by the Borrower of this Agreement, the Security
Documents, the Note, or any other agreements or instruments required
of the Borrower by this Agreement.
5.6. Title to Properties.
(a) The Borrower owns an undivided sixty percent (60%)
interest in and to the Project pursuant to the provisions of the
Purchase and Sale Agreement and the Mining Venture Agreement. The
Purchase and Sale Agreement and the Mining Venture Agreement are in
full force and effect; provided, however, that the parties acknowledge
that the Borrower is in technical default under the Purchase and Sale
Agreement and the Mining Venture Agreement as to the performance of
certain of Borrower's obligations as the Manager under the Mining
Venture Agreement.
(b) (i) The Borrower owns an undivided sixty percent (60%)
interest, and, to the best of Borrower's knowledge, TSVLP owns an
undivided forty percent (40%) interest in and to all of the unpatented
lode mining claims comprising a portion of the Project and which are
described in Schedule 5.6(b)(i) attached hereto and Schedule A-1 to
the Deed of Trust, which title
-10-<PAGE>
is, subject to Liens held by TSVLP, and the Royalties described in
Section 5.7, superior and paramount to any adverse claim or right of
title which may be asserted subject only to the paramount title of the
United States as to any unpatented mining claims and the rights of
third parties to such unpatented mining claims pursuant to the
Multiple Mineral Development Act of 1954 and the Surface Resources and
Multiple Use Act of 1955.
(ii) The Borrower and TSVLP are tenants in common and
hold an undivided one hundred percent (100%) leasehold interest in and
to each of the Mining Leases. Each of the Mining Leases is in full
force and effect, and the lessee has performed all of its obligations
thereunder (other than payment of the Advance Minimum Royalty payment
due thereunder between January 1 and 15, 1997), and neither party is
in default thereunder. To the best of Borrower's knowledge, the title
of the lessor under each of the Mining Leases to the unpatented mining
claims covered thereby is, subject to Liens held by TSVLP, and the
Royalties described in Section 5.7, superior and paramount to any
adverse claim or right of title which may be asserted subject only to
the paramount title of the United States as to any unpatented mining
claims and the rights of third parties to such unpatented mining
claims pursuant to the Multiple Mineral Development Act of 1954 and
the Surface Resources and Multiple Use Act of 1955.
(c) With respect to the unpatented lode mining claims
listed on Schedule 5.6(b)(i) attached hereto and Schedule A-1 to the
Deed of Trust; (1) the Borrower is in exclusive possession thereof,
free and clear of all liens, claims, encumbrances or other burdens on
production (other than Permitted Liens, the Lien held by TSVLP
pursuant to the TSVLP Security Agreement, and the Royalties set forth
in Schedule 5.7); (2) the claims were located, staked, filed and
recorded on available public domain land in compliance with all
applicable state and federal laws and regulations; (3) assessment
work, intended in good faith to satisfy the requirements of state and
federal laws and regulations and generally regarded in the mining
industry as sufficient, for all assessment years up to and including
the assessment year ending September 1, 1992, was timely performed on
or for the benefit of the claims and affidavits evidencing such work
were timely recorded; (4) claim rental and maintenance fees required
to be paid under federal law in lieu of the performance of assessment
work, in order to maintain the claims commencing with the assessment
year ending on September 1, 1993 and through the assessment year
ending on September 1, 1997, have been timely and properly paid, and
affidavits or other notices evidencing such payments and required
under federal or state laws or regulations have been timely and
properly filed or recorded; (5) all filings with the BLM with respect
to the claims which are required under the Federal Land Policy and
Management Act of 1976 ("FLPMA") have been timely and properly made,
and (6) there are no actions or administrative or other proceedings
pending or to the best of the Borrower's knowledge threatened against
or affecting the claims. With respect to the unpatented lode mining
claims listed on Schedule 5.6(b)(ii) attached hereto and Schedule A-2
to the Deed of Trust: (1) the Borrower is in exclusive possession
thereof, free and clear of all liens, claims, encumbrances or other
burdens of production (except as set forth in the Mining Leases);
(2) to the best of Borrower's knowledge, the claims were located,
staked, filed and recorded on available public domain land in
compliance with all applicable state and federal laws and regulations;
(3) to the best of Borrower's knowledge, assessment work, intended in
good faith to satisfy the requirement of state and federal laws and
regulations and generally regarded in the mining industry is
sufficient, for all assessment
-11-<PAGE>
years up to and including the assessment year ending September 1,
1992, was timely performed on or for the benefit of the claims and
affidavits evidencing such work were timely recorded; (4) claim rental
and maintenance fees required to be paid under federal law in lieu of
the performance of assessment work, in order to maintain the claims
commencing with the assessment year ending on September 1, 1993 and
through the assessment year ending on September 1, 1997, have been
timely and properly paid, and affidavits or other notices evidencing
such payment and required under federal or state laws or regulations
have been timely and properly filed and recorded; (5) all filings with
the BLM with respect to the claims which are required under FLPMA have
been timely and properly made; and (6) there are no actions or
administrative or other proceedings pending or to the best of the
Borrower's knowledge threatened against or affecting the claims.
Nothing herein shall be deemed a representation that any unpatented
claim listed on Schedule 5.6(b) contains a discovery of valuable
minerals. In addition, with respect to each of the unpatented mining
claims listed on Schedule 5.6(b) attached hereto and Schedule A to the
Deed of Trust, the Borrower represents that they have been
remonumented as necessary, and that evidence of such remonumentation
has been timely and properly recorded, all in compliance with the
provisions of N.R.S. Section 517.030.
(d) The Borrower has good and marketable title to the
equipment, machinery, property and fixtures comprising a portion of
the Project, as described in Exhibit A and in Schedule B to the Deed
of Trust. The Lands that are described in Schedule 5.6(b) attached
hereto and Schedule A to the Deed of Trust and the equipment,
machinery, property and fixtures described in Exhibit A and in
Schedule B to the Deed of Trust constitute all of the properties and
assets, tangible or intangible, real or personal, which are used in
the conduct of the business of the Borrower, as such business is
presently being conducted and as pertains to the Project. All such
properties and assets are owned free and clear of all clouds to title
and of all Liens, except Permitted Liens and Liens created under the
TSVLP Security Agreement. All equipment, machinery, property and
fixtures owned by the Borrower and described in Exhibit A attached
hereto and Schedule B of the Deed of Trust is in a state of repair
adequate for normal operations and is in all material respects in good
working order
5.7. Leases and Royalties. The Lands described in
Schedule 5.6(b) attached hereto and Schedule A to the Deed of Trust
are not subject to any leases or other agreements other than the
Mining Leases. The Lands described in Schedule 5.6(b) attached hereto
as Schedule A of the Deed of Trust are not subject to any Royalties
burdening such Lands except as set forth in the Mining Leases and
other agreements listed on Schedule 5.7. For purposes hereof,
"Royalties" shall mean all amounts payable as a share of the product
or profit or profit from the Lands or any mineral products produced
therefrom and includes without limitation, production payments, net
profits interests, net smelter return royalties, landowner's
royalties, minimum royalties, overriding royalties and royalty
bonuses.
5.8. Agreements. Other than the Material Project Agreements (all
of which are listed on the attached Schedule 5.8), the Borrower is not
a party to any agreement or instrument or subject to any charter or
other corporate restriction adversely affecting its business or the
Project. Except for failure to make payments required under certain
of the Material Project Agreements, as set forth on Schedule 3 or in
Section 5.6(b)(ii), all such Material Project Agreements are in full
force
-12-<PAGE>
and effect and the Borrower is not (nor, to the Borrower's best
knowledge, is any other party to such agreements) in default in the
performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any Material Project Agreement or
any other agreement or instrument to which it is a party, the effect
of which would have a material adverse effect on the financial
condition, properties or operations of the Borrower or on the
Collateral. Copies of all such Material Project Agreements have been
delivered to the Lender and its counsel and are full, complete and
current copies of such agreements.
5.9. Compliance with Laws. With respect to the Project and
operations undertaken at the Project or in connection therewith, the
Borrower, except as set forth in Schedule 5.9 attached hereto, has
complied in all material respects with all applicable local, state and
federal laws, including Environmental Laws, and regulations relating
to the operation of the Project, and the Borrower is not aware of any
investigation (other than a routine inspection) of the Borrower or the
Project underway by any local, state or federal agency with respect to
enforcement of such laws and regulations. The existing and planned
use of the Project complies with all legal requirements, including,
but not limited to, applicable zoning in ordinances, regulations and
restrictive covenants affecting the Lands as well as all
environmental, ecological, landmark and other applicable laws and
regulations; and all requirements for such use have been satisfied.
No release, emission or discharge into the environment of hazardous
substances, as defined under any Environmental Law, has occurred or is
presently occurring or will occur in operating the Project in its
intended form in excess of federal or state permitted release levels
or reportable quantities, or other concentrations, standards or
limitations under the foregoing laws or under any other federal, state
or local laws, regulations or governmental approvals in connection
with the construction, ore treatment fuel supply, power generation and
transmission or waste disposal, or any other operations or processes
relating to the Project. The Lands and the Borrower's use and
proposed use thereof are not and will not be in violation of any
environmental, occupational safety and health or other applicable law
now in effect, the effect of which violation, in any case or in the
aggregate, would materially adversely affect the Lands or the
Borrower's use thereof, or which, in any case or in the aggregate,
would impose a material liability on the Lender or jeopardize the
interest of the Lender in the Lands. Except as set forth on Schedule
5.9, the Borrower has no knowledge of any past or existing violations
of any such laws, ordinances or regulations issued by any governmental
authority.
5.10. Permits Affecting Properties. The Borrower has
obtained, as set forth on Schedule 5.10 attached hereto, all licenses,
operating bonds (other than the reclamation bond required by the BLM),
permits and approvals from all governments, governmental commissions,
boards and other agencies required in respect to its present
operations at the Project, but the Borrower does not warrant that
those constitute all of the Material Project Permits that will be
required for the Project. The Borrower has listed on Schedule 5.10
all Material Project Permits. Copies of all such Material Project
Permits have been made available to the Lender and are full, complete
and current copies of same.
5.11. Prior Security Interest. Except for the due and timely
filing or recording of any Security Document (and except for the
delivery to the Lender of any Collateral as to which possession is the
only method of perfecting a security interest in or Lien on such
Collateral), no
-13-<PAGE>
further action is necessary to establish and perfect the Lender's
prior security interest in or shared first Lien on all Collateral
other than Collateral subject to Permitted Liens and the Lien created
by the TSVLP Security Agreement.
SECTION VI
Covenants
__________
The Borrower agrees that, until the principal amount of the Loan
and all accrued interest thereon shall have been paid in full, the
Borrower shall perform, observe and comply with each of the following:
6.1. Notice to the Lender. The Borrower will promptly give
notice to the Lender as soon as it becomes aware of:
(a) Any Event of Default or potential Event of Default;
(b) Any loss or damage to the Collateral in excess of
$25,000;
(c) Every notice, and the contents thereof, received by the
Borrower in relation to any renewal of any rights with respect to, or
having a material adverse effect upon , the Lands, and any
circumstances which might result in a loss of or a failure to obtain
or a failure to be able to renew the Borrower's interest in a material
part of the Lands;
(d) Each new issuance or approval of a Material Project
Permit and each new change in operations that necessitates any
amendment or modification of any Material Project Agreement or
Material Project Permit; and
(e) The cessation of any Event of Default.
6.2. Dispositions of Assets or Dissolution. Except as otherwise
specifically permitted hereunder, the Borrower shall not:
(a) sell, assign, convey, lease or otherwise dispose of
any part of its assets or properties, or grant the option or any other
right to purchase, or otherwise acquire such assets, whether now owned
or hereafter acquired, except in the ordinary course of business or
for the replacement of a capital asset with an asset of equal or
greater value (in accordance with the provisions of Section 6.12);
(b) dissolve, liquidate or otherwise cease to do business;
-14-<PAGE>
(c) so long as Lender has not given written notice of its
intention not to make any further advances pursuant to Section 2.1,
without the prior written consent of the Lender, directly or
indirectly, (i) grant any proxies or enter into any voting trust or
other agreement or arrangement with respect to the voting of any of
its shares of common stock (the "Shares"), (ii) acquire or sell,
assign, transfer or otherwise dispose of any Shares, (iii) enter into
any contract, option or other arrangement or understanding with
respect to the direct or indirect acquisition or sale, assignment,
transfer or other disposition of any Shares, or (iv) directly or
indirectly, encourage, solicit, initiate or participate in any way in
discussions or negotiations with, or knowingly provide any information
to, any corporation, partnership, person or other entity or group
(other than the Borrower or any affiliate or subsidiary of the
Borrower) concerning any proposal or offer (a "Takeover Proposal") for
a merger or other business combination involving the Borrower or the
acquisition in any manner, directly or indirectly, of a material
equity interest in any voting securities of or a substantial portion
of the assets of the Borrower; provided, however, that to the extent
required in the exercise of the fiduciary duties of the Borrower's
directors and officers to the Borrower or its shareholders under
applicable law (after duly considering the written advice of outside
counsel to the Borrower), the Borrower may, in response to an
unsolicited request therefor, furnish information with respect to the
Borrower to any such corporation, partnership, person or other entity
or group who has made a bona fide offer for a Takeover Proposal that
the board of directors of the Borrower determines in its good faith
judgment to be more favorable to the Borrower's stockholders than the
Acquisition Transactions. The Borrower shall promptly notify the
Lender of, and communicate to the Lender the terms and status of any
inquiry or proposal with respect to any Takeover Proposal and shall
promptly provide the Lender with any such information regarding such
proposal as the Lender may request (including delivering copies
thereof).
6.3. No Liens. Neither the Borrower nor any subsidiary shall
create, assume or suffer to exist any Lien or other security interest
on any real or personal property or interest therein now owned or
hereafter acquired by it, except for Permitted Liens or any such Liens
or security interests created under the TSVLP Security Agreement or
the Security Documents. In addition, the Borrower will use its best
efforts to obtain and record in the official records of Eureka County
release documents for the liens listed on the attached Schedule 6.3.
6.4. Taxes and Other Obligations. The Borrower shall pay and
discharge all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or upon any portion of
the Project prior to the date on which penalties attach thereto, and
all lawful claims which, if unpaid, might become a lien or charge
upon any such portion of the Project, except for any such tax,
assessment, charge, levy or claim, which constitutes a Permitted Lien
or the payment of which is being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained,
or if the non-payment thereof would not have a material adverse effect
on the ability of the Borrower to perform its obligations under this
Agreement, the Security Documents or the Note.
6.5. Use of Loan Proceeds. The Borrower agrees that all Loan
Proceeds shall be used only as set forth on Exhibit E.
-15-<PAGE>
6.6. Properties.
(a) Maintenance of Properties. The Borrower shall maintain
and preserve all of the properties comprising the Project in good
standing without default of any obligations with respect thereto,
including without limitation payment of claim maintenance fees, and
making federal filings and state recordings regarding the unpatented
claims comprising the Collateral.
(b) Compliance with Agreements. The Borrower shall comply
with all of the provisions of the Mining Leases, the Purchase and Sale
Agreement, the Mining Venture Agreement, the TSVLP Security Agreement
and all other agreements to which it is a party, except where
noncompliance therewith would not have a material adverse effect on
the ability of the Borrower to perform its obligations under this
Agreement, the Security Documents, or the Note.
(c) Insurance. The Borrower shall maintain such insurance
policies as are currently in place for activities at or undertaken in
correction with the Project.
6.7. Corporate Existence and Good Standing. The Borrower shall
preserve and maintain its corporate existence, and shall be and remain
qualified to do business as a foreign corporation and be in good
standing in each jurisdiction in which such qualification is necessary
or desirable in view of its business or operations or the ownership of
its properties; provided that nothing contained in this Section 6.6 or
otherwise in this Agreement shall prevent the termination of the
existence of any subsidiary of the Borrower or of any rights,
franchises or privileges of the Borrower or such a subsidiary if the
Borrower deems such termination thereof to be advisable in its own
discretion so long as such termination does not have a material
adverse effect on the financial condition of the Borrower or its
ability to comply with its obligations hereunder.
6.8. Compliance with Law. The Borrower shall comply at all times
and in all material respects with all valid and applicable statutes,
rules and regulations of the United States of America, of the states
thereof and their counties, municipalities and other subdivisions and
of any other jurisdictions applicable to it (including, without
limitation, Environmental Laws), and the provisions of permits,
licenses and any other authorizations issued to it or pertaining to
the Project, except where noncompliance would not have a material
adverse effect on the ability of the Borrower to perform its
obligations under this Agreement, the Security Documents or the Note,
or where compliance shall be currently contested in good faith by
appropriate proceedings, timely instituted, which shall operate to
stay any order with respect to noncompliance.
6.9. Additional Debt and Distributions. The Borrower shall not
(unless the Lender has given written notice of its intention not to
make any further advances pursuant to the provisions of Section 2.1),
create, incur, assume or permit to exist any debt except the Loan, the
TSVLP Note, Permitted Liens, trade debt to suppliers and contractors
and debt of the types permitted by the Security Documents. Further,
the Borrower shall not (unless the Lender has given written notice of
its intention not to make any further advances pursuant to the
provisions of Section 2.1) make Distributions of any kind or otherwise
issue any additional shares of its common stock or sell
-16-<PAGE>
or otherwise transfer or grant options for any shares of its common
stock or enter into any agreements with any third parties
contemplating any of the foregoing.
6.10. Security Documents; Further Assurances. The Borrower
at its cost shall take all actions necessary or reasonably requested
by the Lender to maintain the Security Documents in full force and
effect and enforceable in accordance with their respective terms,
including (i) making filings and recordations, (ii) making payments of
fees and other charges, (iii) issuing supplemental documentation,
including continuation statements, and (iv) taking all actions
necessary or reasonably requested by the Lender to ensure that the
Collateral is and remains subject to a valid and enforceable lien and
security interest in favor of the Lender (subject only to Permitted
Liens and the TSVLP Security Agreement).
6.11. Books and Records. The Borrower shall keep proper
books of record in accordance with generally accepted accounting
principles and permit representatives of the Lender to visit and
inspect the properties, to examine the books of record and accounts
and to discuss the affairs, finances and accounts of the Borrower with
the Borrower's principal officers, engineers and independent
accountants, all at such reasonable times during business hours and at
such intervals as the Lender may desire; provided, however, that the
Lender shall provide the Borrower with at least three Business Days'
notice of any visit and shall use their best efforts not to
unreasonably disrupt the Borrower's business during such visits.
6.12. Alterations, Disposal of Assets, Etc. The Borrower
will not cause any building, structure or fixture or other improvement
which is part of the Collateral to be erected, removed, demolished, or
materially changed or altered, except in the ordinary course of
business. Except in the ordinary and normal course of business, the
Borrower shall not remove or permit the removal of any of the personal
property constituting part of the Collateral or any part thereof
(including renewal, replacement and other after-acquired property)
from the Lands or the Project; provided, however, that obsolete or
worn out property may be removed concurrently with the replacement or
renewal thereof with property of at least equal quality, usefulness,
value and class to the original property, if such replacement is in
accordance with prudent industry practices; provided, further,
however, that the Borrower shall have the right, but not the
obligation, to amend or relocate any or all of the unpatented lode
mining claims included in the Lands (under any applicable federal or
state statute) and to locate any fractions resulting from the
amendment or relocation of such claims. Any mining claims amended or
relocated by the Borrower shall be included in the Lands, and the
Borrower agrees that the amendment or relocation of such claims shall
not result in any diminution of the total acreage presently included
within the lands. The Borrower shall not commit or permit any waste
in, on or about the Lands or the Project that would have a material
adverse effect on the Collateral.
6.13. Leases and Other Agreements. The Borrower shall not
enter into, assume or otherwise become liable with respect to any non-
cancelable operating leases or other agreements having terms in excess
of or renewable for more than one (1) month if the aggregate minimum
required payments under any such leases or other agreements exceeds
Ten Thousand Dollars ($10,000).
-17-<PAGE>
6.14. Change in Business. The Borrower shall not engage in
any business activities or operations substantially different form the
business of exploration, mining and production of Gold and other
precious metals or base metals associated with any Gold mine.
6.15. Capital Expenditures. The Borrower shall not make
capital expenditures in excess of the aggregate amount of Ten Thousand
Dollars ($10,000) without the Lender's prior written approval.
6.16. Loans; Intercompany Accounts. Other than as
contemplated in this Agreement, the Borrower shall not lend or advance
money, gold, or other assets to any entity or person.
6.17. Additional Covenants of TSVLP. TSVLP hereby confirms
that the Borrower is not in default under the provisions of the TSVLP
Note or the TSVLP Security Agreement, and that while technical
defaults by Borrower (as referred to in Section 5.6) exist under the
Purchase and Sale Agreement and the Mining Venture Agreement, such
events of default shall be deemed suspended, and TSVLP will take no
actions in connection therewith, for so long as (i) Lender has not
elected to terminate the advancement of funds to the Borrower and has
made advances of funds as required under Section 2.1 hereof,
(ii) Lender continues good faith negotiations with the Borrower and
other necessary third parties for definitive agreements by which
Lender acquires all of the issued and outstanding shares of Borrower's
common stock and (iii) no third party attempts to foreclose or
otherwise take any collection action against the Collateral.
SECTION VII
Events of Default
__________________
Each of the following shall constitute an Event of Default under
this Agreement:
7.1. Payments.
(a) The Borrower shall fail to make payment of any
principal amount of the Loan or accrued interest thereon under this
Agreement or the Note when the same shall become due and payable
(whether prior to its stated maturity or otherwise).
(b) TSVLP has declared an event of default based on the
Borrower's failure to make any payment of any amount due under the
TSVLP Note or the TSVLP Security Agreement or any other event of
default thereunder.
7.2. Representations and Covenants. Any representation or
warranty made by the Borrower under this Agreement or the Security
Documents proves to have been incorrect in any material respect when
made (unless such representation or warranty was incorrect as a result
of actions taken by the officers of the Borrower between October 1 and
December 15, 1996), or the
-18-<PAGE>
Borrower shall violate, fail or omit to perform or observe any other
covenant, agreement, condition or provision contained in this
Agreement, the Note or the Security Documents and any such violation,
failure or provision shall continue without being corrected for five
(5) days after the Lender has given written notice thereof to the
Borrower.
7.3. Insolvency. The Borrower shall not pay its debts as they
become due (unless such failure is caused by an election by the Lender
not to make any further advances of funds pursuant to Section 2.1),
shall file or consent by answer or otherwise to the filing against it
of a petition for relief, reorganization, arrangement or any petition
in bankruptcy, for liquidation or to take advantage of any bankruptcy
or insolvency law of any jurisdiction, shall make an assignment for
the benefit of its creditors, shall be adjudicated insolvent or be
liquidated, or shall take corporate action for the purpose of any of
the foregoing.
7.4. Change in Control. There shall occur any change in the
effective control of the Borrower (other than by way of acquisition by
the Lender of all of the shares of common stock of the Borrower).
SECTION VIII
Remedies Upon an Event of Default
_________________________________
Notwithstanding any contrary provisions or inference herein or
elsewhere:
8.1. Acceleration of Loan. If an Event of Default shall occur
and be continuing hereunder, and such Event of Default does not result
directly from a decision by the Lender not to make any further
advances pursuant to Section 2.1, then the Lender shall have the
right, but not the obligation, upon written notice to the Borrower, to
declare the entire unpaid principal balance of, and any accrued
interest on, the Loan to be immediately due and payable, whereupon the
Note, all such interest and any other amounts payable hereunder shall
become and be forthwith due and payable, without presentment, demand
or notice of any kind, all of which are hereby expressly waived by the
Borrower.
8.2. Exercise of Remedies. The aforementioned right to
accelerate is in addition to and not a substitute for any other
remedies available to Lender hereunder, under the Security Documents,
under the Note and under applicable laws.
SECTION IX
Miscellaneous
_______________
9.1. Amendments, Etc. No amendment or waiver of any provision of
this Agreement, the Security Documents or the Note, nor consent to any
departure by the Borrower
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therefrom, shall in any event be effective unless by an agreement in
writing signed by authorized representatives of both parties.
9.2. Notices. All notices and other communications provided for
hereunder shall be in writing and shall be delivered by hand, by
reputable overnight courier or telecopied; if to the Borrower, at its
address as set forth above, Attention: Bill Conrad; if to the Lender,
at its address as set forth above, Attention: Jack Stoch; if to
TSVLP, at its address set forth above, Attention: William W. Reid; or,
as to any party, at such other address as shall be designated by such
party in a written notice to the other party.
9.3. No Waivers; Remedies. No failure on the part of the Lender
to exercise, and no delay in exercising, any right hereunder or under
the Note shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies
provided by law.
9.4. Costs and Expenses. The Borrower shall reimburse the Lender
in the event the Lender incurs any legal or other fees and expenses in
connection with the modification or amendment of this Agreement, the
Note or the Security Documents or in protecting or enforcing its
rights hereunder or thereunder whether or not any legal action or suit
is brought.
9.5. Entire Agreement. This Agreement, the Note, and the
Security Documents contain the entire agreement of the parties
pertaining to the subject matter hereof and supersede all prior
written and oral agreements pertaining hereto.
9.6. Successors and Assigns. This Agreement, the Note and the
Security Documents shall be binding on and inure to the benefit of the
Borrower and the Lender and their respective successors and assigns;
provided, however, that the Borrower may not assign any of its rights
or delegate any of its obligations hereunder without the prior written
consent of the Lender.
9.7. Survival. The obligations of the Borrower under Section 9.4
shall survive the repayment of the Loan and the termination of this
Agreement and the Note.
9.8. Counterparts. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together constitute one and the same
instrument.
9.9. Governing Law. This Agreement, the Security Documents and
the Note shall be governed by and construed in accordance with the
laws of the State of Colorado, without regard to its principles
concerning conflicts of laws.
9.10. Further Assurances. At the request of any party
hereto, the parties shall execute and deliver any further instruments,
agreements, documents or other papers and take such
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other actions as may be reasonably requested by any other party to
effect the purposes of this Agreement and the transactions
contemplated hereby.
9.11. Public Announcements. Each party shall obtain the
prior written consent of each of the other parties to this Agreement
before making any public announcement with respect to this Agreement,
any related agreement or the transactions contemplated hereunder or
thereunder, unless counsel for the disclosing party advises it that
such public announcement is required under applicable laws or
securities exchange regulations (in which case such public
announcement shall be made only after the text of such announcement
has been disclosed to the other parties with reasonable advance
notice).
9.12. Confidentiality. Except as otherwise set forth in
Section 9.11, the parties hereto and their collective representatives
shall forever treat confidentially all information concerning the
terms and conditions of this Agreement, all related agreements, and of
the transactions contemplated hereunder or thereunder (collectively
"Confidential Information"); provided, however, that Confidential
Information shall not include information which concerns the Tonkin
Springs Project which is or becomes generally known to the public
other than as the result of a breach of the provisions of this Section
9.12 by any party hereto or its representatives. The obligation to
treat the Confidential Information confidentially shall not apply to
the extent that any party or its representatives shall be required to
disclose such information in connection with an investigation or legal
proceeding where the failure to disclose such information could result
in liability for contempt or other censure or penalty; provided,
however, that such party and/or its representatives shall notify the
other parties as soon as possible and in any event prior to such
disclosure and shall cooperate with the other party in the event that
the other party elects to legally contest such disclosure.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
GOLD CAPITAL CORPORATION, a Colorado
corporation
By: BILL M. CONRAD
---------------------------------
BILL M. CONRAD
PRESIDENT
GLOBEX MINING ENTERPRISES INC., a Quebec
corporation
By: JACK STOCH
----------------------------------
JACK STOCH
PRESIDENT
TONKIN SPRINGS VENTURE LIMITED
PARTNERSHIP, a Nevada limited
partnership
By: TONKIN SPRINGS GOLD MINING
COMPANY, a Colorado corporation
By: WILLIAM W. REID
---------------------------------
WILLIAM W. REID
PRESIDENT
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TONKIN SPRINGS GOLD MINING COMPANY, a
Colorado corporation
By: WILLIAM W. REID
---------------------------------
WILLIAM W. REID
PRESIDENT
U.S. GOLD CORPORATION, a Colorado
corporation
By: WILLIAM W. REID
---------------------------------
WILLIAM W. REID
PRESIDENT
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