INTERIM MILLING AGREEMENT

 

 

THIS INTERIM MILLING AGREEMENT ("Agreement") is entered into on this 1st day of
November, 2017, by and between Rose Petroleum, plc (“Rose”) and its wholly-owned
subsidiary Minerales Vane S.A. de C.V. (“Vane”) and Magellan Gold Corporation, a
Nevada corporation (“Magellan”); 

 

WITNESSETH

 

WHEREAS, Vane and Magellan have entered into a Stock Purchase Agreement dated
September 9, 2017, as amended by Amendment No. 1 thereto dated October 17, 2017
which contemplates the purchase by Magellan from Rose of all of Rose’s shares of
equity securities in Minerales Vane 2 S.A. de C.V., a Mexico corporation to be
formed to hold certain assets of Vane related to the ownership and operation of
the SDA Mill (“SDAVane”) pursuant to a definitive Stock Purchase Agreement (the
"Purchase Agreement"); and 

 

WHEREAS, pending closing of the Purchase Agreement, the parties wish to provide
for the reopening of the SDA Mill to begin ore processing, subject to the terms
and conditions set forth below. 

 

NOW THEREFORE, for valuable consideration, the parties do covenant and agree as
follows: 

 

1.Reopening of SDA Mill. 

 

(a)As soon as practicable, Rose shall cause Vane to reopen the SDA Mill and 

recommence operations in a manner consist with past practices.

 

(b)All operations of the SDA Mill beginning the date hereof and ending the
earlier of (i) the consummation of the Purchase Agreement and (ii) November 30,
2017, unless extended at Magellan’s option, shall be subject to the terms of
this Agreement.  

 

           (c)All operations of the SDA Mill under this Agreement shall be under
the sole control and supervision of Rose and Vane, subject, however, to a budget
agreed upon by Rose and Magellan.  Without limiting the generality of the
foregoing, Rose and Vane shall: 

 

(i)purchase such materials, supplies and services as may be needed or required
in connection with the operations of VaneSDA; 

 

(ii)comply with all laws applicable to VaneSDA by virtue of the operation of the
business of VaneSDA, including particularly laws relating to safety
requirements, working conditions, and compensation and benefits to employees; 

 

(iii)keep full and accurate accounts of all business transactions entered into
on behalf of VaneSDA; 

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2.Customers. 

 

(a)During the term hereof, Rose shall have the exclusive right to operate the
SDA Mill and process ore at the SDA Mill for itself or third parties.  Magellan
agrees to refer all inquiries related to the potential for ore processing at the
SDA Mill to Rose. 

 

(b)During the term hereof, any and all new customer engagements obtained or
procured shall be subject to the prior approval of Magellan and shall be deemed
VaneSDA customers and contracts or agreements for services shall be executed in
the name of and inure to the benefit of VaneSDA.  

 

(c)Upon consummation of the Agreement, all VaneSDA customers, contracts and
agreements entered into during the term of this Agreement shall be assigned to
and assumed by Magellan. 

 

(d)Should this Agreement terminate prior to the consummation of the Purchase,
then and in such event  all contracts signed during the term under the VaneSDA
name shall be the sole property of VaneSDA, free of any claim of Magellan.   

 

3.Bank Account.   

 

Rose and Vane shall establish a new bank account(s), or, subject to Magellan’s
approval, Rose may use an existing account provided it is segregated from Rose
and Vane’s other funds (the "Bank Account") in which all revenues received from
the operations of the SDA Mill that result from operations generated under this
Agreement shall be deposited.  Rose shall not commingle any of the above
described revenues with any funds or other property of Vane or Rose.  The Bank
Account shall be under the exclusive control of Rose and Vane.  From the
revenues deposited into the Bank Account, Rose and Vane shall pay the operating
expenses with respect to the VaneSDA business that are identified on the
approved budget to be attached as schedule to this Agreement (the “Budgeted
Expenses”).  Pending closing of the Purchase, all funds deposited into the Bank
Account shall be deemed as sole and separate property of Rose and Vane, free of
any claim, lien or entitlement of Magellan.  Upon closing and consummation of
the Purchase Agreement, all funds remaining in the Bank Account on the closing
date shall be included in the assets transferred to Magellan pursuant to the
Purchase Agreement. 

 

4.Working Capital.  The parties recognize and agree that pending closing and
consummation of the Purchase, operation of VaneSDA's business may require the
infusion of additional working capital in order to satisfy short term
obligations, trade payables and other liabilities necessary for continued
operations.  To the extent that revenues received from operations and deposited
into the Bank Account pursuant to paragraph 3 hereof are insufficient to meet
such working capital requirements, Magellan shall advance sufficient funds to
VaneSDA that Magellan deems necessary to satisfy its immediate working capital
requirements (the "Advances"). In this regard, prior to the execution of this
Agreement, Magellan has advanced to Rose for deposit into the Bank Account the
sum of $50,000. Neither Rose nor Vane shall have any liability to repay any
Advances. 

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5.Funds From Operations.   

 

(a)In consideration of the Advances to be made by Magellan pursuant to this
Agreement, Magellan shall be entitled to receive all cash flow and funds from
operations, if any, generated by the operations of VaneSDA after payment of the
Budgeted Expenses received during or after the term hereof (the "FFO").  Such
FFO shall be calculated without allowance for depreciation, amortization and
income taxes, and shall be calculated in accordance with generally accepted
accounting principles consistently applied. 

 

(b)Magellan shall have the right and option to utilize any and all amounts
outstanding as Compensation hereunder as a credit against the Purchase Price of
the VaneSDA securities pursuant to the Purchase Agreement.  

 

6.Costs and Expenses.  Rose and Vane shall be entitled to reimbursement from the
Bank Account in accordance with an approved budget for any and all costs or
expenses incurred by it in connection with operating the SDA Mill hereunder,
including, without limitation, expenses for wages and salary, payroll taxes,
workers' compensation premiums, fringe benefits, travel, lodging, entertainment
and other costs or expenses incurred in connection with its performance
hereunder.  Such expenses shall be reimbursed twice monthly from the Bank
Account in accordance with the provisions of paragraph 4 above. 

 

7. Risk of Loss.   During the Term of this Agreement, Magellan shall bear all
risk of loss, damage or claims for bodily injury or property damage arising from
the operations of the SDA Mill; provided, however, that Rose, and not Magellan,
shall be liable for and assume the risk of losses, damages or claims arising or
resulting from any gross negligence or intentional misconduct on the part of
Rose or Vane or their agents and employees. 

 

8.Insurance.   During the term of this Agreement, Rose and Vane shall maintain
in full force and effect all policies of insurance currently held by Vane and
related to the SDA Mill including, without limitation, all general public
liability, hazard and property insurance. In the event of any loss or claim
arising during the Term for which there is insurance coverage, Rose and Vane
agree to submit all such claims in a prompt manner and to prosecute such claims
to the fullest extent permitted by law or contract.  To the extent any insurance
proceeds are collected by Rose or Vane for an insurable risk for which Magellan
is responsible pursuant to Section 9 above, such proceeds shall be payable to
Magellan to the extent Magellan has covered the loss. 

 

9.Termination. 

 

(a)The term of this Agreement shall commence upon the execution hereof and end
on November 30, 2017, unless extended at Magellan’s option, or until the closing
of the Purchase, whichever occurs first (the "Term” or "Termination"). Should
the Stock Purchase Agreement be terminated, without the purchase being
consummated, this agreement will terminate on November 30, 2017 or immediately
if terminated after this date.  

 

(b)Magellan may terminate this Agreement immediately upon written notice at any
time in the event the Stock Purchase Agreement is terminated, with or without
cause, without the Purchase being consummated. 

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10.Miscellaneous. 

 

(a)This Agreement constitutes the entire understanding between the parties with
respect to the subject matter hereof, superseding all previous communications
and negotiations, whether written or oral.   

 

(b) Any amendment or modification or this Agreement shall be in writing and
shall be signed by the parties. 

 

(c)If, for any reason, any provision of this Agreement is held invalid, such
invalidity shall not affect any other provision of this Agreement, and each such
other provision shall to the full extent consistent with law continue in full
force and effect.  If any provision of this Agreement should be invalid in part,
such invalidity shall in no way affect the rest of such provision, which shall,
together with all other provisions of this Agreement, to the full extent
consistent with law, continue in full force and effect. 

 

(d)All notices, requests, demands, and other communications hereunder in writing
and shall be delivered personally or sent by first class registered or certified
mail, overnight courier service, or telecopy as follows: 

 

If to Vane, to:Chris Eadie, Finance Director 

 

with a copy to: 

If to Magellan:W. Pierce Carson, President 

 

 

with copy to:Clifford L. Neuman, Esq. 

1507 Pine Street 

Boulder, CO 80302 

 

or such other address or telecopy number as may be designated in writing by any
party to the other parties hereto.  Any notice or other communication so
transmitted shall be deemed to have been given on the day of delivery, if
delivered personally, on the business day following receipt of telecopy
confirmation, if sent by telecopy, one business day after delivery to an
overnight courier service, or five days after mailing if sent by mail.

 

(e)This Agreement shall be binding upon and shall inure to the benefit of, the
parties hereto and their permitted successors and assigns.  This Agreement is a
personal services contract, and it is expressly agreed that the rights and
interests of Magellan and Discovery hereunder may not be sold, transferred,
assigned, pledged, or hypothecated.  

 

(f)This Agreement may be executed in counterparts, each of which shall be deemed
to be an original, but all of which together shall be deemed to be one and the
same instrument. 

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IN WITNESS WHEREOF, this Agreement has been executed by the parties on the day
and year first above written.

 

ROSE PETROLEUM, plc

 

 

By:  /s/ Matthew Idiens 

 

 

 

VANE MINERALES S.A. de C.V.., a Mexican corporation

 

 

By:  /s/ Matthew Idiens 

 

 

MAGELLAN GOLD CORPORATION, a Nevada  

corporation  

 

 

By:  /s/ W. Pierce Carson 

  W. Pierce Carson, President 

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