ROYALTY AGREEMENT
This Royalty Agreement is entered into as of February 3, 2004 in Santa
Ana, California by and between Hi-Tech Environmental Products, LLC, a Nevada
limited liability company ("Hi-Tech") and VitroCo Materials, LLC, a Nevada
limited liability company ("VitroCo") with reference to the following facts:
A. Enviro Investment Group, LLC, a Nevada limited liability company
("EIG") and Hi-Tech entered into that certain Second Amended and Restated
Agreement dated as of March 16, 2001, which was subsequently amended by a First
Amendment dated December 31, 2001, a Second Amendment dated December 31, 2002
and a Third Amendment dated February 3, 2004 (collectively, the "EIG
Agreement").
B. Red Rock Canyon Mineral, LLC, a California limited liability company
("Red Rock") and Hi-Tech entered into that certain Agreement dated as of April
5, 2002, as amended by a First Amendment dated February 3, 2004 (collectively,
the "Red Rock Agreement").
C. Valley Springs Mineral, LLC, a California limited liability company
("Valley Springs") and Hi-Tech entered into that certain Agreement dated as of
April 5, 2002, as amended by a First Amendment dated as of February 3, 2004
(collectively, the "Valley Springs Agreement"). The acquisition of an interest
in the Valley Springs property by Valley Springs has not been completed, and
entitlements have not been obtained to mine Mineral from the Valley Springs
property
D. The EIG Agreement, the Red Rock Agreement and the Valley Springs
Agreement are collectively referred to as the "Agreements". The real properties
which are the subject of each of the Agreements are collectively referred to
herein as the "Properties". Capitalized terms which are not defined herein are
used as they are defined in the Agreements. In the case of any conflict between
this Royalty Agreement and the Agreements, the terms of this Royalty Agreement
shall control.
E. Hi-Tech desires to assign all of its rights and obligations under the
Agreements to VitroCo, and VitroCo desires to assume all of the obligations of
Hi-Tech under the Agreements.
Now, therefore, in consideration of the foregoing, and other consideration
actually received, the parties hereto agree as follows:
1. Assignment and Assumption. Hi-Tech hereby assigns to VitroCo all of its
rights and obligations under the Agreements, including without limitation all
its right, title and interest in and to the Mineral mined and sold from the
Properties, and VitroCo hereby agrees to accept, receive and assume same.
Attached hereto as Exhibit A is the form of the Assignment and Assumption
Agreement. It shall be a condition to this Agreement that all signatories to the
Assignment and Assumption Agreement execute same.
2. Closing. The assignment and assumption of the Agreements shall occur as
of the date that the Assignment and Assumption Agreement is signed by all
parties, but in no event later than February 3, 2004 ("Closing Date"). If the
transaction has not closed by the Closing Date, then either party can terminate
this Royalty Agreement by written notice to the other party.
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3. As is and Where is Sale. VITROCO ACKNOWLEDGES AND AGREES THAT THE
TRANSACTION CONTEMPLATED HEREBY SHALL BE AS IS, WHERE IS WITHOUT ANY WARRANTY OR
REPRESENTATION OF TITLE, EITHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AND
WITHOUT ANY EXPRESS, IMPLIED, STATUTORY OR OTHER WARRANTY OR REPRESENTATION AS
TO THE CONDITION, QUANTITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE, FREEDOM
FROM REDHIBITORY VICES OR DEFECTS, AND THAT ANY AND ALL INFORMATION THAT VITROCO
HAS RECEIVED OR MAY RECEIVE FROM HI-TECH OR ITS MANAGERS, MEMBERS, OFFICERS,
EMPLOYEES, CONSULTANTS OR AGENTS ("HI-TECH'S AGENTS") IS AND SHALL BE FURNISHED
TO VITROCO WITHOUT WARRANTY OR REPRESENTATION BY HI-TECH OF ANY KIND, AND
FURTHER THAT SUCH INFORMATION HAS AND WILL BE ACCEPTED BY VITROCO ON THE EXPRESS
CONDITION THAT VITROCO SHALL MAKE ITS OWN INDEPENDENT VERIFICATION OF THE
ACCURACY AND COMPLETENESS THEREOF. NEITHER VITROCO NOR ITS SUCCESSORS OR ASSIGNS
SHALL ASSERT OR SEEK TO IMPOSE ANY CLAIM, LIABILITY, OR OBLIGATION ON HI-TECH
ARISING OUT OF ANY INACCURACY OR INCOMPLETENESS OF ANY INFORMATION FURNISHED TO
VITROCO BY HI-TECH OR HI-TECH'S AGENTS, AND VITROCO, ITS SUCCESSORS AND ASSIGNS
DO HEREBY RELINQUISH AND WAIVE ALL SUCH CLAIMS, LIABILITIES AND OBLIGATIONS. NO
PERSON ACTING ON BEHALF OF HI-TECH IS AUTHORIZED TO MAKE, AND BY EXECUTION
HEREOF VITROCO ACKNOWLEDGES THAT NO SUCH PERSON HAS MADE, TO VITROCO ANY
REPRESENTATION, WARRANTY, GUARANTEE OR PROMISE, WHETHER ORAL OR WRITTEN,
REGARDING THE AGREEMENTS OR ANY MATTERS RELATING TO THE AGREEMENTS OR TO THIS
ROYALTY AGREEMENT OR THE SUBJECT MATTER HEREOF, EXCEPT AS EXPRESSLY SET FORTH IN
THIS ROYALTY AGREEMENT, AND ANY SUCH REPRESENTATION, WARRANTY, GUARANTEE OR
PROMISE HERETOFORE OR HEREAFTER MADE BY ANY PERSON WHICH IS NOT CONTAINED HEREIN
SHALL NOT BE VALID OR BINDING UPON HI-TECH. VITROCO ACKNOWLEDGES THAT HI-TECH
HAS EXPRESSLY DISCLAIMED AND MADE NO WARRANTIES AS TO MERCHANTABILITY OF THE
UNDERLYING PROPERTIES, THE MINERALTHE MARKETABILITY THEREOF OR ITS SUITABILITY
OR FITNESS FOR ANY PARTICULAR USE. VITROCO REPRESENTS AND WARRANTS TO HI-TECH
THAT VITROCO HAS MADE ITS OWN EXAMINATION, INSPECTION AND INVESTIGATION OF THE
UNDERLYING PROPERTIES AND THE MINERAL WHICH IS THE SUBJECT MATTER THEREOF, AND
ALL MATTERS AS IT DEEMS NECESSARY OR APPROPRIATE. VITROCO IS ENTERING INTO THIS
ROYALTY AGREEMENT BASED UPON THE RESULTS OF SUCH INSPECTIONS AND INVESTIGATIONS
AND NOT IN RELIANCE ON ANY STATEMENT, REPRESENTATION OR AGREEMENTS OF HI-TECH
NOT CONTAINED IN THIS ROYALTY AGREEMENT. VITROCO IS ENTERING INTO THIS ROYALTY
AGREEMENT IN ITS "AS IS" AND "WHERE IS" CONDITION AND SUBJECT TO ANY AND ALL
DEFECTS.
4. Indemnity. VitroCo indemnifies, defends, protects and holds harmless
Hi-Tech from any and all liabilities, losses, claims, demands and expenses
(including attorneys' fees, court costs and litigation expenses) arising from or
relating to the Agreements, the Mineral or the underlying real property
(collectively, "Claim"), whether or not the Claim, or the underlying action or
inaction giving rise to the Claim, occurred before or after the date of this
Royalty Agreement.
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5. Reservation of Royalty; Offset. Hi-Tech reserves and excepts unto
itself, its successors and assigns a royalty equal to the sum of One Dollar
($1.00) per pound of Mineral purchased pursuant to the Agreements, or any
subsequent agreement with an Affiliated Mineral Entity ("Royalty"). Payment to
Hi-Tech of the Royalty by VitroCo, or its successors or assigns, shall be due
and payable concurrently with the payments to EIG, Red Rock and/or Valley
Springs pursuant to their respective Agreements, or to any Affiliated Mineral
Entity pursuant to any subsequent agreement with an Affiliated Mineral Entity,
including but not limited to payments which may be paid to EIG, Red Rock, Valley
Springs (and/or an Affiliated Mineral Entity) to satisfy the Minimum
Requirements, as defined in the Amendments to the Agreements.
For the calendar years 2004 and 2005, if, on a monthly basis, VitroCo
collects sales proceeds from any sale of Mineral (i.e., sales which occur in
that month or which occurred in a prior month, but for which in either case
collected sales proceeds are received in the current month), divided by the
number of pounds of Mineral represented by those sales proceeds ("Average
Collected Price"), and that resultant figure is less than Five Dollars and
Twenty Five Cents ($5.25) per pound ("Target Price"), then the royalty shall
equal the Average Collected Price divided by the Target Price, multiplied by One
Dollar ($1.00) per pound, but in no event shall the computed royalty amount be
less than Seventy Five Cents ($.75) per pound for any month.
For each year after calendar year 2005, the Target Price shall increase in
actual amount, as opposed to percentage, by the increase in the per pound price
due EIG, Red Rock and Valley Springs under the respective Agreements.
There shall be no netting of overage versus underage royalty payments from
one month to the next, notwithstanding the fact that the royalty is paid on a
quarterly basis.
The Royalty due Hi-Tech shall not be reduced by any taxes, whether sales,
use, ad valorum or otherwise, fees or other obligations, including royalties to
third parties (all of which shall be the obligation of VitroCo), other than the
payment by Hi-Tech's members of income tax, which shall be paid by Hi-Tech's
members.
6. Performance under Agreements. VitroCo agrees to fully perform all of
the obligations under the Agreements in a timely manner.
7. Default. VitroCo shall be in default under this Royalty Agreement
("Event of Default") if any of the following shall occur:
a. The failure by VitroCo to perform any monetary obligation under
this Royalty Agreement, which failure is not cured within fifteen (15) business
days after receipt of written notice from Hi-Tech;
b. The failure by VitroCo to perform any non-monetary obligation
under this Royalty Agreement, which failure is not cured within ten (10)
business days after receipt of written notice from Hi-Tech, except that if such
non-monetary failure cannot be reasonably cured within such ten (10) business
day period, VitroCo shall not be in default hereunder if it commences to cure
such failure within the ten (10) business day period, and thereafter completes
such cure with all due diligence;
c. i) The making by VitroCo of any general arrangement or assignment
for the benefit of creditors; (ii) VitroCo becomes a "debtor" as defined in 11
U.S.C. 101 or any successor statute thereto (unless, in the case of petition
filed against VitroCo, the same is dismissed within sixty (60) days); (iii) the
appointment of a trustee or receiver to take possession of substantially all of
VitroCo's assets, where possession is not restored to VitroCo within sixty (60)
days; or (iv) the attachment, execution or other judicial seizure of
substantially all of VitroCo's assets, where such seizure is not discharged
within sixty (60) days;
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Upon an Event of Default, Hi-Tech shall have all rights and remedies
available to it at law or in equity. Interest shall accrue on any unpaid sum at
the maximum rate permitted by law. No previous waiver and no failure or delay by
Hi-Tech in acting with respect to the terms of this Royalty Agreement, shall
constitute a waiver of any breach, default, or failure of condition under this
Royalty Agreement.
8. Guaranty. This Agreement is further conditioned upon VitroTech
Corporation guaranteeing all of the obligations of VitroCo under this Royalty
Agreement. A copy of the Guaranty is attached hereto as Exhibit B.
9. Memorandum. A Memorandum of this Agreement may be recorded in the
official records. Each party agree to sign, acknowledge and deliver a Memorandum
upon request of the other party.
10. Miscellaneous. This Royalty Agreement shall be governed by the laws of
the State of California. Venue for any action shall be in Orange County,
California. This Royalty Agreement shall be binding upon, and inure to the
benefit of, the parties hereto and their respective successors, assigns, heirs
and representatives. This Royalty Agreement is the entire agreement among the
parties hereto with respect to the subject matter hereof, and supersedes all
prior agreements and understandings. Any modification to this Royalty Agreement
shall be in writing and executed by each party hereto. If either party hereto
commences proceedings to enforce the terms of this Royalty Agreement, the party
that prevails in such proceeding shall be entitled to recover its reasonable
attorneys' fees, court costs and litigation expenses. This Royalty Agreement may
be executed in counterparts. Time is of the essence of this Royalty Agreement.
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In witness whereof, this Royalty Agreement was entered into as of the date
first written above.
HI-TECH: VITROCO:
Hi-Tech Environmental Products, LLC, VitroCo Materials, LLC,
a Nevada limited liability company a Nevada limited liability company
By: _______________________ By: Hi-Tech Environmental
Products, its sole member/manager
Its:_______________________
By:_____________________
Its:_____________________
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Exhibit A
Assignment and Assumption Agreement
