1
Exhibit 10.12
LIMITED LIABILITY COMPANY AGREEMENT
OF
THE ROSEBUD MINING COMPANY, L.L.C.
A DELAWARE LIMITED LIABILITY COMPANY
EFFECTIVE AS OF September 6, 1996
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TABLE OF CONTENTS
ARTICLE 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Cross References . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
FORMATION OF COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1 Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.3 Principal Place of Business . . . . . . . . . . . . . . . . . . 10
2.4 Registered Office and Registered Agent . . . . . . . . . . . . 10
ARTICLE 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PURPOSES AND TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2 Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3 Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.5 Implied Covenants . . . . . . . . . . . . . . . . . . . . . . . 11
3.6 No Third Party Beneficiary Rights . . . . . . . . . . . . . . . 11
ARTICLE 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
REPRESENTATIONS AND WARRANTIES; TITLE TO ASSETS . . . . . . . . . . . . . 12
4.1 Representations and Warranties of Both Members . . . . . . . . 12
4.2 Representations and Warranties of Hecla . . . . . . . . . . . . 12
4.3 Representations and Warranties of SFPG . . . . . . . . . . . . 14
4.4 Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.5 Record Title . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.6 Loss of Title . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.7 Payment of Royalties . . . . . . . . . . . . . . . . . . . 16
4.8 Indemnity Concerning the Twin Creeks Plant . . . . . . . . . . 16
4.9 Indemnity Concerning the Euro-Nevada Option Agreement . . . . . 16
4.10 Indemnities/Limitation of Liability . . . . . . . . . . . . . . 17
ARTICLE 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
CONTRIBUTIONS BY MEMBERS . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1 Members' Initial Contributions . . . . . . . . . . . . . . . . 18
5.2 Funding of Operations . . . . . . . . . . . . . . . . . . . . . 18
5.3 Processing of Ores . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
INTERESTS OF MEMBERS . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1 Initial Ownership Interests . . . . . . . . . . . . . . . . . . 20
6.2 Changes in Ownership Interests . . . . . . . . . . . . . . . . 20
6.3 Voluntary Reduction in Ownership . . . . . . . . . . . . . . . 21
6.4 Conversion of Minority Interest . . . . . . . . . . . . . . . . 24
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6.5 Continuing Liabilities Upon Adjustments of Ownership Interests 24
6.6 Grant of Security Interests . . . . . . . . . . . . . . . . . . 25
ARTICLE 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Management Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.1 Management . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2 Organization and Composition of the Management Board . . . . . 26
7.3 Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.4 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.5 Action Without Meeting . . . . . . . . . . . . . . . . . . . . 27
7.6 Matters Requiring Special Approval of Management Board . . . . 27
7.7 Activities During Deadlock . . . . . . . . . . . . . . . . . . 28
7.8 Financial Audits . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
POWERS AND DUTIES OF MANAGERS . . . . . . . . . . . . . . . . . . . . . . 28
8.1 Powers and Duties of Manager for Mining . . . . . . . . . . . . 28
8.2 Powers and Duties of Manager for Processing . . . . . . . . . . 32
8.3 Powers and Duties of Manager for Exploration . . . . . . . . . 34
8.4 Cash Calls . . . . . . . . . . . . . . . . . . . . . . . . 36
8.5 Limited Authority To Bind Company . . . . . . . . . . . . . . . 36
8.6 Liability for Certain Acts, Indemnities . . . . . . . . . . . . 36
8.7 Managers and Members Have No Exclusive Duty to Company . . . . 37
8.8 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.9 Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.10 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.11 Vacancies and Replacements . . . . . . . . . . . . . . . . . . 38
8.12 Compensation, Reimbursement, Organization Expenses. . . . . . . 38
8.13 Right to Rely on the Managers . . . . . . . . . . . . . . . . . 39
ARTICLE 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
RIGHTS AND OBLIGATIONS OF MEMBERS . . . . . . . . . . . . . . . . . . . . 39
9.1 Limitation of Liability . . . . . . . . . . . . . . . . . . . . 39
9.2 List of Members . . . . . . . . . . . . . . . . . . . . . . . . 39
9.3 Approval of Sale of All Assets . . . . . . . . . . . . . . . . 39
9.4 Company Books . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.5 Priority and Return of Capital . . . . . . . . . . . . . . . . 40
9.6 Rights on Failure of a Member to Pay a Cash Call . . . . . 40
9.7 Defaults and Remedies . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
PROGRAMS AND BUDGETS . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.1 Initial Programs and Budgets . . . . . . . . . . . . . . . . . 42
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10.2 Operations Pursuant to Programs and Budgets . . . . . . . . . . 42
10.3 Preparation and Presentation of Programs and Budgets . . . . . 42
10.4 Review and Approval of Proposed Programs and Budgets . . . . . 43
10.5 Deadlock on Proposed Programs and Budgets . . . . . . . . . . . 43
10.6 Election to Participate . . . . . . . . . . . . . . . . . . . . 44
10.7 Budget Overruns; Program Changes . . . . . . . . . . . . . . . 44
10.8 Emergency or Unexpected Expenditures . . . . . . . . . . . . . 44
ARTICLE 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ALLOCATIONS, INCOME TAX, DISTRIBUTIONS, ELECTIONS AND REPORTS . . . . . . 45
11.1 Tax Elections . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.2 Allocations to Members . . . . . . . . . . . . . . . . . . . . 45
11.3 Agreement Not to Cause a Tax Termination . . . . . . . . . . . 48
11.4 Special Allocations. . . . . . . . . . . . . . . . . . . . . . 48
11.5 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.6 Limitation Upon Distributions . . . . . . . . . . . . . . . . . 49
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.7 Interest On and Return of Capital Contributions . . . . . . . . 50
11.8 Loans to Company . . . . . . . . . . . . . . . . . . . . . . . 50
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.9 Records, Audits and Reports . . . . . . . . . . . . . . . . . . 50
11.10 Returns and Other Elections . . . . . . . . . . . . . . . . . 50
11.11 Tax Matters Partner . . . . . . . . . . . . . . . . . . . . . 50
11.12 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ACQUISITIONS WITHIN AREA OF INTEREST . . . . . . . . . . . . . . . . . . 52
12.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.2 Notice to Nonacquiring Member . . . . . . . . . . . . . . . . . 52
12.3 Option Exercised . . . . . . . . . . . . . . . . . . . . . . . 52
12.4 Option Not Exercised . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ABANDONMENT AND SURRENDER OF PROPERTIES . . . . . . . . . . . . . . . . . 53
13.1 Surrender or Abandonment of Property . . . . . . . . . . . . . 53
13.2 Reacquisition . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
14.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
14.2 Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . 54
14.3 Duration of Confidentiality . . . . . . . . . . . . . . . . . . 54
ARTICLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
TRANSFERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
15.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
15.2 Preemptive Right . . . . . . . . . . . . . . . . . . . . . . . 55
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15.3 Exceptions to Preemptive Right . . . . . . . . . . . . . . . . 55
15.4 Consent to Transfer . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ADDITIONAL MEMBERS, SEPARATE OPERATING AREAS . . . . . . . . . . . . . . 56
16.1 Additional Members . . . . . . . . . . . . . . . . . . . . . . 56
16.2 Separate Operating Areas . . . . . . . . . . . . . . . . . . . 57
ARTICLE 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
DISSOLUTION, WINDING UP AND CANCELLATION . . . . . . . . . . . . . . . . 57
17.1 Dissolution and Withdrawal . . . . . . . . . . . . . . . . . . 57
17.2 Winding Up, Liquidation and Distribution of Assets. . . . . . . 58
17.3 Non-Compete Covenants . . . . . . . . . . . . . . . . . . . . . 59
17.4 Certificate of Cancellation . . . . . . . . . . . . . . . . . . 60
17.5 Return of Contribution Nonrecourse to Other Members . . . . . . 60
ARTICLE 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
18.1 Resolution of Disputes . . . . . . . . . . . . . . . . . . . . 60
18.2 General Provisions Concerning Arbitration . . . . . . . . . . 60
18.3 Special Arbitration Procedures for Matters Arising Under
Subsection 10.5(b) . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . 62
19.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
19.2 Application of Delaware Law . . . . . . . . . . . . . . . . . . 63
19.3 Waiver of Action for Partition . . . . . . . . . . . . . . . . 63
19.4 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . 63
19.5 Execution of Additional Instruments . . . . . . . . . . . . . . 63
19.6 Construction . . . . . . . . . . . . . . . . . . . . . . . . . 63
19.7 Headings and Pronouns . . . . . . . . . . . . . . . . . . . . . 63
19.8 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
19.9 Rights and Remedies Cumulative . . . . . . . . . . . . . . . . 64
19.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 64
19.11 Successors and Assigns . . . . . . . . . . . . . . . . . . . . 64
19.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 64
19.13 Force Majeure . . . . . . . . . . . . . . . . . . . . . . 64
19.14 Rule Against Perpetuities . . . . . . . . . . . . . . . . . . 65
19.15 Investment Representations . . . . . . . . . . . . . . . . . . 65
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LIMITED LIABILITY COMPANY AGREEMENT
This Limited Liability Company Agreement ("Agreement") is made and
entered into as of this 6th day of September, 1996, by and between Santa Fe
Pacific Gold Corporation, a Delaware corporation ("SFPG")" and Hecla Mining
Company, a Delaware corporation (Hecla").
RECITALS:
Hecla owns and operates the Hecla Properties (as herein defined). Hecla
has caused plans and budgets to be prepared for the development, construction
and life-of-mine operation of the Rosebud Mine (as herein defined) and SFPG
has reviewed such plans and budgets. Hecla and SFPG desire to jointly
develop and operate the Rosebud Mine.
SFPG owns and operates the Twin Creeks Plant (as herein defined). SFPG
has caused plans and budgets to be prepared for processing ores from the
Rosebud Mine at the Twin Creeks Plant and Hecla has reviewed such plans and
budgets. Hecla and SFPG desire to arrange with SFPG to process ores from the
Rosebud Mine at the Twin Creeks Plant or another processing facility owned by
SFPG in the State of Nevada.
SFPG also owns and operates the SFPG Properties (as herein defined).
Hecla and SFPG desire jointly to explore, and, if warranted, jointly to
develop and operate the SFPG Properties and those portions of the Hecla
Properties not included within the Rosebud Mine.
SFPG and Hecla formed The Rosebud Mining Company, L.L.C. (the "Company")
to develop and operate the Rosebud Mine, to arrange for the processing of
ores produced therefrom, to explore other properties within the Area of
Interest (as herein defined); and to acquire, own, explore, manage, operate,
and dispose of other assets.
A certificate of formation for the Company was filed with the Secretary
of State of Delaware on August 21, 1996.
AGREEMENT:
Hecla and SFPG agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. The following terms used in this Agreement shall
have the meanings assigned to them in this Article (unless otherwise
expressly provided herein);
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(a) "ACT" shall mean the Delaware Limited Liability Company Act,
as amended from time to time, or any corresponding provisions of succeeding
law.
(b) "ACCOUNTING PROCEDURE" shall mean the document attached hereto
as Exhibit N.
(c) "ACTUAL CASH PROCESSING COSTS" shall mean all costs of the
types set forth in set forth in Exhibit M, actually incurred or accrued by
SFPG in Processing the Rosebud Ores and Other Ores, during the relevant
accounting period.
(d) "ADOPTED PROGRAM AND BUDGET" shall mean a Program and Budget
adopted by the Management Board pursuant to Section 10.4, approved by the
Members pursuant to Section 10.5(a), or determined by arbitration pursuant to
Section 10.5(b) and Article 18, and includes the Mine Construction Program
and Budget, the Plant Construction Program and Budget and the initial
Exploration Program and Budget referred to in Section 10.1(b). An Adopted
Program and Budget may include both Investment Costs and Operational Costs.
(e) "AFFILIATE" shall mean, with respect to any Person, (i) any
other Person directly or indirectly controlling, controlled by, or under
common control with such Person, or (ii) any Person owning or controlling
thirty percent (30%) or more of the outstanding voting interests of such
Person. For purposes of this definition, the term "controls," "is controlled
by," or "is under common control with" shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities,
by contract or otherwise.
(f) "AGREEMENT" shall mean this Limited Liability Company
Agreement, including all amendments and modifications thereof, and all
exhibits attached hereto, which are incorporated herein by this reference.
(g) "ALTERNATE PROCESSING PLANT" shall mean any ore processing
facility located in Humboldt County, Nevada, now or hereafter owned or
controlled by SFPG or an Affiliate of SFPG.
(h) "AREA OF INTEREST" shall mean the area described in Exhibit C.
(i) "ASSETS" shall mean the Properties, Products and all other
real and personal property, tangible and intangible, held by or for the
benefit of the Company.
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(j) "AVAILABLE PLANT CAPACITY" shall mean the capacity of the Twin
Creeks Plant, measured in Tons Per Day and determined monthly in advance,
determined in accordance with the following formula: APC = 1000 - R; where
"APC" equals the Available Plant Capacity, and "R" equals the Tons Per Day of
Rosebud Ores projected to be available for Processing in such month in
accordance with the Adopted Programs and Budgets.
(k) "BUDGET" shall mean a detailed estimate of all costs to be
incurred by the Company with respect to a Program and a schedule of cash
advances to be made by the Members.
(l) "CAPITAL ACCOUNT" as of any given date shall mean the Capital
Contribution to the Company by a Member as adjusted up to the date in
question pursuant to Section 11.12.
(m) "CAPITAL CONTRIBUTION" shall mean any contribution to the
capital of the Company in cash or property by a Member whenever made.
(n) "CASH CALL" shall have the meaning set forth in Section 8.4.
(o) "CASH MARGIN" shall have the meaning set forth in Exhibit L.
(p) "CERTIFICATE" shall mean the Certificate of Formation of The
Rosebud Mining Company, L.L.C. as filed with the Secretary of State of
Delaware, as the same may be amended from time to time.
(q) "CODE" shall mean the Internal Revenue Code of 1986 or
corresponding provisions of any subsequent, superseding federal revenue laws.
(r) "COMPANY" shall mean The Rosebud Mining Company, L.L.C.
(s) "COMPANY LIABILITY" shall mean all costs, expenses and
liabilities of every type and nature for which the Company is or becomes
liable, but for which, under the Act, the Members are not personally liable.
(t) "CONTINUING OBLIGATIONS" shall mean any obligations, costs,
responsibilities or liabilities, that are reasonably expected to continue or
arise after Operations on a particular area of the Properties have ceased or
are suspended, such as future monitoring, stabilization, or Environmental
Compliance.
(u) "COVER PAYMENT" shall mean the amount, if any, a non-
defaulting Member advances pursuant to Section 9.6(a) on behalf of a Member
that has defaulted in making a Cash Call.
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(v) "DEVELOPMENT" shall mean, with respect to any portion of the
Properties, all activities subsequent to and other than Exploration necessary
to allow the classification of a Mineral Resource as a Mineral Reserve,
including the preparation of feasibility studies, and all preparation for the
removal and recovery of Rosebud Ores and Other Ores, including the
construction or installation of any improvements to be used for the Mining,
of such ores.
(w) "DILUTING MEMBER" shall have the meaning set forth in Section
6.3(a).
(x) "DILUTION BASE" shall have the meaning set forth in Section
6.3(a).
(y) "DISTRIBUTABLE CASH" shall mean all cash, revenues and funds
received by the Company, less the sum of the following to the extent paid or
set aside by the Company: (i) all principal and interest payments on
indebtedness of the Company and all other sums paid to lenders; (ii) all cash
expenditures incurred incident to the normal operation of the Company's
business; and (iii) such Financial Reserves as the Management Board
reasonably deems necessary to the proper operation of the Company's business.
(z) "DISTRIBUTIONS" shall mean all distributions in cash, Products
or other property.
(aa) "ENCUMBRANCE" shall mean any mortgage, deed of trust, security
interest, pledge, lien, royalty, overriding royalty interest, or other burden
or liability of any nature.
(ab) "ENTITY" shall mean any general partnership, limited
partnership, limited liability partnership, limited liability company,
corporation, joint venture, trust, business trust, cooperative or association
or any foreign trust or foreign business organization.
(ac) "ENVIRONMENTAL COMPLIANCE" shall mean actions performed during
or after Operations to comply with the requirements of Environmental Laws or
with contractual commitments or obligations relating to the reclamation of
lands affected by Operations or compliance with Environmental Laws.
(ad) "ENVIRONMENTAL DAMAGE" shall mean damage or threatened damage
to the air, soil, surface waters, groundwater, or other natural resources on,
above, under or in the general vicinity of the Properties.
(ae) "ENVIRONMENTAL LAWS" shall mean Laws aimed at the reclamation
of mined or disturbed lands; abatement of pollution; protection of the
environment; ensuring public safety from environmental hazards; management,
storage or control of hazardous
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materials and substances; releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances as
wastes into the environment, including without limitation, ambient air,
surface water and groundwater; and all other Laws relating to the
manufacturing, processing, distribution, use, treatment, storage, disposal,
handling or transport of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes.
(af) "EXPLORATION" shall mean, with respect to any portion of the
Properties, all activities, prior to and other than Development, directed
toward ascertaining the existence, location, quantity, quality or commercial
value of deposits of minerals and establishing the existence of a Mineral
Resource.
(ag) "FINANCIAL RESERVES" shall mean, with respect to any fiscal
period, funds set aside or amounts allocated during such period to reserves
which shall be maintained in amounts deemed sufficient by the Managers for
working capital and to pay taxes, insurance, debt service or other costs or
expenses incident to the ownership or operation of the Company's business.
(ah) "FISCAL YEAR" shall mean the Company's fiscal year, which
shall be the calendar year.
(ai) "FORCE MAJEURE" shall have the meaning set forth in Section
19.13.
(aj) "HECLA" shall mean Hecla Mining Company, a Delaware
corporation.
(ak) "HECLA PROPERTIES" shall mean the Properties identified in
Subparagraph 1.1 of Exhibit A.
(al) "INVESTMENT COSTS" shall mean costs which relate to the
incurrence of expenditures for the acquisition or replacement of capital
assets, and require a contribution therefor by the Members.
(am) "KNOWLEDGE" shall mean, with respect to a representation and
warranty of a Member, actual knowledge on the part of the officers, employees
and agents of the Member or of facts that would reasonably lead to the
indicated conclusions.
(an) "LAW" or "LAWS" shall mean all applicable federal, state and
local laws (statutory or common), rules, ordinances, regulations, orders,
directives, judgments, decrees, and other governmental restrictions,
including permits and other similar requirements, whether legislative,
municipal, administrative or judicial in nature, including Environmental
Laws.
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(ao) "MAJORITY INTEREST" shall mean one or more interests of
Members which taken together exceed 50% of the aggregate of all Voting
Interests.
(ap) "MANAGEMENT BOARD" shall mean the Board established under
Article 7.
(aq) "MANAGER" shall mean one or more of the managers.
Specifically, "MANAGER FOR MINING" shall mean Hecla or any Member that
succeeds it in that capacity, and "MANAGER FOR PROCESSING" and "MANAGER FOR
EXPLORATION" shall mean SFPG or any Member that succeeds it in that capacity.
(ar) "MATERIAL LOSS" shall have the meaning set forth in Section
4.10(a).
(as) "MEMBER" shall mean each of the parties who executes a
counterpart of this Agreement as a Member and each of the parties who may
hereafter become a Member.
(at) "MEMBER LIABILITY" shall mean any obligation, responsibility,
cost or liability for which a Member becomes personally liable as a result of
Operations of the Company, but excludes Company Liability.
(au) "MINE COMPLETION TEST" shall mean the criteria for the
construction and completion of the Rosebud Mine specified in Exhibit O.
(av) "MINE CONSTRUCTION PROGRAM AND BUDGET" shall mean the Program
and Budget for (i) the Development of the Rosebud Mine and (ii) for Mining at
the Rosebud Mine from the commencement of Mining through December 31, 1997,
attached as Exhibit I, together with any revisions thereto or modifications
thereof adopted as herein provided.
(aw) "MINERAL RESERVE" shall have the meaning set forth on Exhibit
R.
(ax) "MINERAL RESOURCE" shall have the meaning set forth on Exhibit
R.
(ay) "MINING" shall mean the mining, extracting, producing, and
handling of Rosebud Ores and Other Ores, but shall exclude Processing.
(az) "NET RETURNS" shall mean certain amounts calculated as
provided in Exhibit D, which may be payable to a withdrawn Member under
Section 9.6(c)(ii).
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(ba) "NET RETURNS ROYALTY" shall mean a royalty interest,
calculated as provided in Exhibit D, which shall be conveyed to a withdrawn
Member under the circumstances set forth in Section 6.4.
(bb) "NOTICE" shall have the meaning set forth in Section 19.1.
(bc) "OPERATIONAL COSTS" shall mean costs which relate to normal
ongoing Operations for Development, Mining or Processing (but not for
Exploration), and require a contribution therefor by the Members.
(bd) "OPERATIONS" shall mean the activities carried out by or for
the Company under this Agreement.
(be) "OWNERSHIP INTEREST" shall mean a Member's interest in the
Company as such interest may from time to time be adjusted hereunder.
Ownership Interests shall be calculated to five decimal places and rounded to
four decimal places as follows: Decimals of .00005 or more shall be rounded
up (e.g., 1.55519% rounded to 1.5552%); decimals of less than .00005 shall be
rounded down (e.g., 1.55514% rounded to 1.5551%).
(bf) "OTHER ORES" shall mean all ores, other than Rosebud Ores,
produced from the Properties, (including any such ores from a Separate
Operating Area designated under Section 16.2) which can be mined by and
Processed for the Company, during the Processing Period, at any positive Cash
Margin, which are of a grade, mineralogy and amenability to treatment similar
to the Mineral Reserves and Mineral Resources of the Rosebud Mine known to
exist as of the date of this Agreement, but shall exclude ores which are to
be Processed by heap leaching or similar processes not involving grinding of
the ores.
(bg) "PERSON" shall mean any individual or Entity, and shall
include the heirs, executors, administrators, legal representatives,
successors, and assigns of such Person where the context so permits.
(bh) "PLANT COMPLETION TEST" shall mean the criteria for the
modification of the Twin Creeks Plant specified in Exhibit P.
(bi) "PLANT CONSTRUCTION PROGRAM AND BUDGET" shall mean the Program
and Budget for (i) the modification of the Twin Creeks Plant and (ii) for
Processing of Rosebud Ores from the commencement of Processing through
December 31, 1997, attached as Exhibit J, together with any revisions thereto
or modifications thereof adopted as herein provided.
(bj) "PRIME RATE" shall mean the interest rate quoted and published
as "Prime" as published in The Wall Street Journal, under the heading "Money
Rate," as the rate may change from day to day.
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(bk) "PROCESSING" shall mean the transportation of Rosebud Ores and
Other Ores from the Properties to the Twin Creeks Plant or to an Alternate
Processing Plant and the treatment, processing, beneficiation, and refining
of such ores to produce a dore bullion and "PROCESS" shall mean to so
transport, treat, process, beneficiate, and refine Rosebud Ores and Other
Ores.
(bl) "PROCESSING PERIOD" shall have the meaning set forth in
Exhibit L.
(bm) "PRODUCTS" shall mean all Rosebud Ores and Other Ores and all
upgraded or refined materials produced by or for the Company from such ores,
including dore produced by Processing and refined bullion produced by third
party refineries from such dore.
(bn) "PROGRAM" shall mean a description in reasonable detail of
Operations to be conducted and objectives to be accomplished by the Managers
for a Fiscal Year, or, if directed by the Management Board for any longer
period; provided that the Mine Construction Program and Budget and the Plant
Construction Program and Budget shall be for the durations therein provided.
(bo) "PROPERTIES" shall mean the Hecla Properties, the SFPG
Properties, and all other interests in real property within the Area of
Interest which are acquired and held by the Company.
(bp) "RECLAMATION ACCOUNT" shall have the meaning set forth in
Section 8.8.
(bq) "ROAD COMPLETION TEST" shall mean the criteria for the
improvement and construction of roads specified in Exhibit Q.
(br) "ROSEBUD MINE" shall mean the mine to be developed and
constructed in accordance with the Mine Construction Program and Budget.
(bs) "ROSEBUD ORES" shall mean all ores produced by the Company
from the Mineral Reserves and Mineral Resources of the Rosebud Mine known to
exist as of the date of this Agreement and from any extensions thereof or
additions thereto which are of a grade, mineralogy and amenability to
treatment similar to the Mineral Reserves and Mineral Resources of the
Rosebud Mine known to exist as of the date of this Agreement, but shall
exclude ores which are to be Processed by heap leaching or similar processes
not involving grinding of the ores.
(bt) "ROSEBUD PROJECT ASSETS" shall mean (1) the Hecla Properties,
(2) all fixtures, shafts, tunnels, workings, wells, improvements and
equipment located thereon, including without limitation those items
identified in Exhibit E, (3) all information, reports, data, studies,
analyses, interpretations, maps, core, samples or other materials relating
thereto in the
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possession or control of Hecla on the date of this Agreement, and (4) all
permits, approvals, licenses or authorizations from any governmental agency
or authority relating to or affecting the Hecla Properties or the Rosebud
Mine.
(bu) "SFPG" shall mean Santa Fe Pacific Gold Corporation, a
Delaware corporation.
(bv) "SFPG PROPERTIES" shall mean the Properties identified in
Subparagraph 2.1 of Exhibit A.
(bw) "SECURITY AGREEMENTS" shall have the meaning set forth in
Section 6.6.
(bx) "SELLING MEMBER" shall mean any Member which Transfers for
consideration all or any portion of its Ownership Interest.
(by) "TONS PER DAY" shall mean an average number of short tons of
ores calculated over a period of thirty (30) days.
(bz) "TRANSFER" shall mean, when used as a verb, to sell, grant,
assign, create an Encumbrance, or otherwise convey, or dispose of or commit
to do any of the foregoing or to arrange for substitute performance by an
Affiliate or third party, either directly or indirectly; and, when used as a
noun, shall mean a sale, grant, Encumbrance, other disposition or
substitution of performance.
(ca) "TREASURY REGULATIONS" shall include proposed, temporary and
final regulations promulgated under the Code in effect as of the date of
filing the Certificate and the corresponding sections of any regulations
subsequently issued that amend or supersede such regulations.
(cb) "TWIN CREEKS PLANT" shall mean the ore processing facilities
identified in Subparagraph 1.1 of Exhibit B.
(cc) "VOTING INTEREST" shall mean the right of a Member to vote
hereunder which shall be proportionate to a Member's Ownership Interest at
the time the vote is taken.
1.2 CROSS REFERENCES. References to "Articles" refer to Articles
of this Agreement. References to "Sections" and "Subsections" refer to
sections and subsections of this Agreement. References to "Paragraphs" and
"Subparagraphs" refer to paragraphs and subparagraphs of the referenced
Exhibits to this Agreement.
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ARTICLE 2
FORMATION OF COMPANY
2.1 FORMATION. On August 21, 1996, SFPG and Hecla organized a
Delaware Limited Liability Company by executing and filing the Certificate
with the Delaware Secretary of State in accordance with and pursuant to the
Act.
2.2 NAME. The name of the Company is The Rosebud Mining Company,
L.L.C.
2.3 PRINCIPAL PLACE OF BUSINESS. The principal place of business
of the Company within the State of Nevada shall be in Winnemucca, Nevada.
The Company may locate its places of business and registered office at any
other place or places as the Management Board may from time to time deem
advisable.
2.4 REGISTERED OFFICE AND REGISTERED AGENT. The Company's initial
registered office and the name of the registered agent at such address shall
be as set forth in the Certificate. The registered office and registered
agent may be changed from time to time at the direction of the Management
Board by filing the address of the new registered office and/or the name of
the new registered agent with the Secretaries of State of Nevada and Delaware
pursuant to the Act.
ARTICLE 3
PURPOSES AND TERM
3.1 GENERAL. SFPG and Hecla formed the Company and are entering
this Agreement because each believes it is the best available alternative for
realizing their mutual goal of reducing the total costs of Exploring the
Properties, and of Developing, Mining and Processing Rosebud Ores and Other
Ores. Hecla and SFPG intend that the Company economically and efficiently
conduct Exploration, Development and Mining and that SFPG economically and
efficiently conduct Processing, in a manner consistent with industry practice
and with the primary objective of maximizing the economic value of the
Company's Assets, with due regard for environmental, health and safety
considerations and compliance with applicable Laws. In furtherance of the
foregoing, SFPG and Hecla hereby enter into this Agreement for the purposes
hereinafter stated. All of the rights and obligations of SFPG and Hecla with
respect to the Company and all Operations on or in connection with the
Properties or in the Area of Interest shall be subject to and governed by
this Agreement. If there is any inconsistency between this Agreement and any
non-mandatory provision of the Act, the terms and conditions of this
Agreement shall govern.
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3.2 PURPOSES. This Agreement is entered into for the following
purposes and for no others, and shall serve as the exclusive means by which
the Members, or either of them, or the Company accomplish such purposes:
(a) to conduct the Development and Mining of the Rosebud Mine,
(b) to provide for the processing of Rosebud Ores and Other Ores
by SFPG at the Twin Creeks Plant or at an Alternate Processing Plant,
(c) to conduct Exploration at the Rosebud Mine and elsewhere
within the Area of Interest,
(d) to acquire additional Properties within the Area of Interest,
(e) to evaluate the possible Development of portions of the
Properties, in addition to the Rosebud Mine,
(f) to engage in Development and Mining Operations on portions of
the Properties, in addition to the Rosebud Mine,
(g) to conduct and complete all necessary Environmental Compliance
with respect to the Properties,
(h) to preserve and continue the existence of the Company, and
(i) to perform any other activity necessary, appropriate, or
incidental to any of the foregoing.
3.3 LIMITATION. Unless the Members otherwise agree in writing,
Operations shall be limited to the purposes described in Section 3.2, and
nothing in this Agreement shall be construed to enlarge such purposes.
3.4 TERM. The Company shall commence on the date of filing of the
Certificate and shall have perpetual existence and continue until it is
dissolved, wound up and liquidated, as provided in Article 17.
3.5 IMPLIED COVENANTS. No covenants shall be implied in respect
to this Agreement or its performance, other than those of good faith and fair
dealing.
3.6 NO THIRD PARTY BENEFICIARY RIGHTS. This Agreement shall be
construed to benefit the Members and their respective successors and assigns
only, and shall not be construed to create third party beneficiary rights in
any other party or in any governmental organization or agency.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES; TITLE TO ASSETS
4.1 REPRESENTATIONS AND WARRANTIES OF BOTH MEMBERS. Each of the
Members represents and warrants to the other as of the date of this Agreement
as follows:
(a) that it is a corporation duly incorporated and in good
standing in its state of incorporation and that it is qualified to do
business and is in good standing in those states where necessary in order to
carry out the purposes of this Agreement;
(b) that it has the capacity to enter into and perform this
Agreement and all transactions contemplated herein and that all corporate and
other actions required to authorize it to enter into and perform this
Agreement have been properly taken;
(c) it is not subject to any governmental order, judgment, decree,
order, sanction or Law that would preclude the permitting or implementation
of Operations under this Agreement;
(d) that it will not breach any other agreement or arrangement by
entering into or performing this Agreement; and
(e) that this Agreement has been duly executed and delivered by it
and is valid and binding upon it in accordance with its terms.
4.2 REPRESENTATIONS AND WARRANTIES OF HECLA. Hecla represents and
warrants to SFPG, effective as of the date of this Agreement:
(a) With respect to those Hecla Properties in which Hecla holds an
interest under leases or other contracts: (i) Hecla is in exclusive
possession of the Hecla Properties; (ii) Hecla has not received any notice of
default of any of the terms or provisions of such leases or other contracts;
(iii) Hecla has the authority under such leases or other contracts to perform
fully its obligations under this Agreement; (iv) to Hecla's Knowledge, such
leases and other contracts are valid and are in good standing; (v) Hecla has
no Knowledge of any act or omission or any condition on the Properties which
could be considered or construed as a default under any such lease or other
contract; and (vi) to Hecla's Knowledge, the Properties covered thereby are
free and clear of all Encumbrances or defects in title except for those
specifically identified in Subparagraph 1.2 of Exhibit A.
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(b) Hecla has delivered or made available by written notice to
SFPG all information in its possession or control concerning title to and the
mineral potential of the Hecla Properties, including but not limited to true
and correct copies of all leases or other contracts relating to the Hecla
Properties.
(c) With respect to unpatented mining claims located by Hecla that
are included within the Hecla Properties, except as provided in Subparagraph
1.2 of Exhibit A and subject to the paramount title of the United States:
(i) the unpatented mining claims were properly laid out and monumented;
(ii) all required location and validation work was properly performed;
(iii) location notices and certificates were properly recorded and filed with
appropriate governmental agencies; (iv) all assessment work, location fees,
mining claim rental fees, or mining claim maintenance fees required to hold
the unpatented mining claims have been performed or have been paid in a
manner consistent with that required of the Manager for Mining pursuant to
Section 8.1 through the assessment year ending September 1, 1996; (v) all
affidavits of assessment work and other filings required to maintain the
claims in good standing have been properly and timely recorded or filed with
appropriate governmental agencies; (vi) the claims are free and clear of
Encumbrances or defects in title; and (vii) Hecla has no Knowledge of
conflicting mining claims. Nothing in this Subsection, however, shall be
deemed to be a representation or a warranty that any of the unpatented mining
claims contains a deposit of valuable minerals.
(d) With respect to unpatented mining claims not located by Hecla
but which are included within the Hecla Properties, except as provided in
Subparagraph 1.2 of Exhibit A and subject to the paramount title of the
United States, to Hecla's Knowledge: (i) all assessment work, location fees,
mining claim rental fees, or mining claim maintenance fees required to hold
the unpatented mining claims have been performed or have been paid in a
manner consistent with that required of the Manager for Mining pursuant to
Section 8.1 through the assessment year ending September 1, 1996; (ii) all
affidavits of assessment work and other filings required to maintain the
claims in good standing have been properly and timely recorded or filed with
appropriate governmental agencies; (iii) the claims are free and clear of
Encumbrances or defects in title; and (iv) Hecla has no Knowledge of
conflicting mining claims. Nothing in this Subsection, however, shall be
deemed to be a representation or a warranty that any of the unpatented mining
claims contains a deposit of valuable minerals.
(e) With respect to the Hecla Properties, to Hecla's Knowledge,
there are no pending or threatened actions, suits, claims or proceedings, and
there have been no previous transactions affecting its interests in the Hecla
Properties which have not been for fair consideration.
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(f) Except as to matters identified in Subparagraph 1.3 Exhibit A,
(i) to Hecla's Knowledge, the conditions existing on or with
respect to the Hecla Properties and its ownership and operation of
the Hecla Properties are not (a) in violation of any Laws,
including without limitation any Environmental Laws, nor (b)
causing or permitting any damage, including Environmental Damage,
or impairment to the health, safety, comfort or enjoyment of any
person at or on the Hecla Properties or in the general vicinity of
the Hecla Properties, which damage is a violation of any Law;
(ii) to Hecla's Knowledge, there have been no past violations by it
or by any of its predecessors in title of any Environmental Laws or
other Laws affecting or pertaining to the Hecla Properties, nor any
past creation of Environmental Damages; and
(iii) Hecla has not received inquiry from or notice of a pending
investigation from any governmental agency or of any administrative
or judicial proceeding concerning the violation of any Laws
relating to its operation or ownership of the Hecla Properties.
The representations and warranties set forth above shall survive
the execution and delivery of any documents of Transfer provided under this
Agreement.
4.3 REPRESENTATIONS AND WARRANTIES OF SFPG. SFPG represents and
warrants to Hecla, effective as of the date of this Agreement:
(a) With respect to the SFPG Properties: (i) SFPG is in exclusive
possession of such Properties, subject to the rights reserved to others by
the laws of the United States; (ii) SFPG has not received any notice of
default of any of the terms or provisions of leases or other contracts under
which it holds its interest in the SFPG Properties; (iii) SFPG has the
authority under such leases or other contracts to perform fully its
obligations under this Agreement; (iv) to SFPG's Knowledge, such leases and
other contracts are valid and are in good standing; (v) SFPG has no Knowledge
of any act or omission or any condition on the Properties which could be
considered or construed as a default under any such lease or other contract;
and (vi) to SFPG's Knowledge, the Properties covered thereby are free and
clear of all Encumbrances or defects in title except for those specifically
identified in Subparagraph 2.2 of Exhibit A.
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(b) SFPG has delivered or made available by written notice to
Hecla all information in its possession or control concerning title to and
the mineral potential of the SFPG Properties, including but not limited to
true and correct copies of all leases or other contracts relating to the SFPG
Properties.
(c) With respect to the SFPG Properties, to SFPG's Knowledge,
there are no pending or threatened actions, suits, claims or proceedings, and
there have been no previous transactions affecting its interests in the SFPG
Properties which have not been for fair consideration.
(d) With respect to the Twin Creeks Plant: (i) SFPG owns the Twin
Creeks Plant, subject only to the Encumbrances identified in Subparagraph 1.2
of Exhibit B; (ii) SFPG has full right, authority and power to operate the
Twin Creeks Plant to Process Rosebud Ores and Other Ores as contemplated by
this Agreement, subject to its obtaining all governmental authorizations
necessary for it to conduct the Plant Construction Program and to satisfy the
Plant Completion Test; (iii) SFPG is not subject to any governmental order,
judgment, decree, order, sanction or Law that would preclude the permitting
or implementation of Processing as contemplated by this Agreement; and (iv)
SFPG will not breach any other agreement or arrangement by entering into or
performing Processing of Rosebud Ores and Other Ores under this Agreement.
(e) Except as to matters set forth in Subparagraph 1.3 of Exhibit
B,
(i) to SFPG's Knowledge, the conditions existing on or with respect
to the SFPG Properties and the Twin Creeks Plant and its ownership
and operation of the SFPG Properties and the Twin Creeks Plant are
not (a) in violation of any Laws, including without limitation any
Environmental Laws, nor (b) causing or permitting any damage,
including Environmental Damage, or impairment to the health,
safety, comfort or enjoyment of any person at or on the SFPG
Properties or the Twin Creeks Plant or in the general vicinity of
the SFPG Properties or the Twin Creeks Plant, which damage is a
violation of any Law;
(ii) to SFPG's Knowledge, there have been no past violations by it
or by any of its predecessors in title of any Environmental Laws or
other Laws affecting or pertaining to the SFPG Properties or the
Twin Creeks Plant, nor any past creation of Environmental Damages;
and
(iii) SFPG has not received inquiry from or notice of a pending
investigation from any governmental agency or of any administrative
or judicial proceeding concerning the
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violation of any Laws relating to its operation or ownership of the
SFPG Properties or the Twin Creeks Plant.
The representations and warranties set forth above shall survive
the execution and delivery of any documents of Transfer provided under this
Agreement.
4.4 DISCLOSURES. Each of the Members represents and warrants that
it has no Knowledge of any material facts or circumstances which have not
been disclosed in this Agreement, which should be disclosed to the other
Member in order to prevent the representations in this Article 4 from being
materially misleading.
4.5 RECORD TITLE. Title to the Assets shall be held by the
Company.
4.6 LOSS OF TITLE. Any failure or loss of title to the Assets,
and all costs of defending title, shall be borne by the Company and therefore
by the Members in accordance with their Ownership Interests, except that all
costs and losses arising out of or resulting from breach of the
representations and warranties of Hecla or SFPG shall be borne by Hecla or
SFPG, as the case may be.
4.7 PAYMENT OF ROYALTIES. Each Member shall be responsible for
all required payments of royalties to third parties following disposition of
Products to that Member pursuant to Section 11.5(b). Each Member shall make
such payments timely in accordance with the terms of any applicable
agreements and indemnify the Company and the other Member from and against
all costs, claims and liabilities arising from or relating to any failure or
alleged failure by such Member to make such payments in accordance with the
terms of any applicable agreement.
4.8 INDEMNITY CONCERNING THE TWIN CREEKS PLANT. SFPG shall be
solely responsible for and shall indemnify, in accordance with the procedures
set forth in Subsection 4.10(b), the Company and Hecla, and their officers,
directors, agents, employees and Affiliates from and against all costs,
expenses, damages or liabilities, including attorneys' fees and other costs
of litigation (either threatened or pending) arising out of or resulting from
any activities conducted by SFPG at the Twin Creeks Plant (or at an Alternate
Processing Plant, if Rosebud Ores or Other Ores are Processed at an Alternate
Processing Plant) in connection with Processing, including without limitation
any such liability or cost arising under Environmental Laws.
4.9 INDEMNITY CONCERNING THE EURO-NEVADA OPTION AGREEMENT. Hecla
is the successor in interest to Equinox Resources Inc. under that certain
Option Agreement For An Additional 1 1/2% Net Smelter Return Rosebud
Royalty, dated July 30, 1993, by and between
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Equinox Resources Inc. and Euro-Nevada Mining Corporation, Inc. (the "Euro-
Nevada Option Agreement"). Hecla shall, in accordance with the procedures
set forth in Subsection 4.10(b), indemnify the Company and SFPG, and their
officers, directors, agents, employees and Affiliates from and against all
costs, expenses, damages or liabilities, including attorneys' fees and other
costs of litigation (either threatened or pending) arising out of or
resulting from any dispute between Hecla and Euro-Nevada Mining Corporation,
Inc. ("Euro-Nevada") relating to Euro-Nevada's exercise of or right to
exercise the Euro-Nevada Option Agreement.
4.10 INDEMNITIES/LIMITATION OF LIABILITY.
(a) In addition to the indemnities set forth in Sections 4.8 and
4.9, each Member shall indemnify the other Member, its officers, directors,
agents, employees and its Affiliates (collectively the "Indemnified Member")
from and against any Material Loss. "Material Loss" shall mean all costs,
expenses, damages or liabilities, including attorneys' fees and other costs
of litigation (either threatened or pending) arising out of or based on a
breach by a Member (the "Indemnifying Member") of any representation,
warranty or covenant contained in this Agreement. A Material Loss shall be
deemed to have occurred if, in the aggregate, an Indemnified Member incurs
losses, costs, damages or liabilities in excess of One Hundred Thousand
Dollars ($100,000) resulting from the breach of one or more of the warranties
and representations contained in this Agreement, or losses, costs, damages or
liabilities in any amount resulting from the breach of any covenant contained
in this Agreement.
(b) If any claim or demand is asserted against an Indemnified
Member in respect of which such Indemnified Member may be entitled to
indemnification under this Agreement, Notice of such claim or demand shall
promptly be given to the Indemnifying Member. The Indemnifying Member shall
have the right, by notifying the Indemnified Member within thirty (30) days
after its receipt of the Notice of the claim or demand, to assume the entire
control of (subject to the right of the Indemnified Member to participate, at
the Indemnified Member's expense and with counsel of the Indemnified Member's
choice, in) the defense, compromise, or settlement of the matter, including,
at the Indemnifying Member's expense, employment of counsel of the
Indemnifying Member's choice. Any damages to the assets or business of the
Indemnified Member caused by a failure by the Indemnifying Member to defend,
compromise, or settle a claim or demand in a reasonable and expeditious
manner, after the Indemnifying Member has given Notice that it will assume
control of the defense, compromise, or settlement of the matter, shall be
included in the damages for which the Indemnifying Member shall be obligated
to indemnify the Indemnified Member. Any settlement or compromise of a
matter by the Indemnifying Member shall include a full release of claims
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against the Indemnified Member which have arisen out of the claim or demand
for which indemnification is sought.
ARTICLE 5
CONTRIBUTIONS BY MEMBERS
5.1 MEMBERS' INITIAL CONTRIBUTIONS. Hecla hereby contributes the
Rosebud Project Assets to the Company and the Company hereby accepts such
contribution. Promptly after the execution of this Agreement, Hecla shall
execute and deliver to the Company a Special Warranty Deed in the form and
substance of Exhibit F and an Assignment, Bill of Sale and Assumption
Agreement, in the form and substance of Exhibit G, conveying the Rosebud
Project Assets to the Company. SFPG hereby contributes the SFPG Properties
to the Company and the Company hereby accepts such contribution. Promptly
after the execution of this Agreement, SFPG shall execute and deliver to the
Company a Sublease, in the form and substance of Exhibit H, subleasing the
SFPG Properties to the Company.
5.2 FUNDING OF OPERATIONS. Subject to the provisions of this
Section and any election permitted by Section 10.6, each Member shall fund
Adopted Programs and Budgets and all other costs which it is committed to pay
under this Agreement associated with Exploration, Development, Mining,
Processing and other Operations in proportion to its respective Ownership
Interest. Notwithstanding the foregoing:
(a) SFPG shall contribute to the Company, pursuant to Cash Calls
made in accordance with Section 8.4, the first Twelve Million Five Hundred
Thousand Dollars ($12,500,000): (i) expended by Hecla consistent with the
Mine Construction Program and Budget during the period commencing on June 1,
1996 and ending on the effective date of this Agreement, and (ii) required to
be expended by the Company, after the effective date of this Agreement, to
satisfy the Mine Completion Test, which funds shall be expended by the
Manager for Mining in accordance with the Mine Construction Program and
Budget.
(b) Hecla shall contribute to the Company, pursuant to Cash Calls
made in accordance with Section 8.4, all funds in excess of Twelve Million
Five Hundred Thousand Dollars ($12,500,000) required to be expended by the
Company to satisfy the Mine Completion Test, which funds shall be expended by
the Manager for Mining in accordance with the Mine Construction Program and
Budget.
(c) SFPG shall contribute to the Company, pursuant to Cash Calls
made in accordance with Section 8.4, the first One Million Dollars
($1,000,000) required to fund Adopted Programs and Budgets for Exploration of
the Properties, including the Program
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and Budget adopted by the Members pursuant to Section 10.1(b). Thereafter
SFPG shall contribute two thirds and Hecla shall contribute one third of all
amounts required to fund Adopted Programs and Budgets for Exploration of the
Properties. Adopted Programs and Budgets for Exploration shall not include
underground infill or definition drilling at the Rosebud Mine.
Notwithstanding any other provision of this Agreement, all expenses incurred
by SFPG for Exploration of the Properties in accordance with the August 28,
1996 letter from Dennis V. Cole, Director - Land Department, SFPG, to
Nathaniel Adams, Corporate Counsel, Hecla shall be credited against SFPG's
obligation set forth in the first sentence of this Subsection.
(d) In addition to the foregoing contributions to the Company,
SFPG shall, in accordance with the Plant Construction Program and Budget,
conduct all activities and pay all costs required to satisfy (i) the Road
Completion Test, and (ii) the Plant Completion Test; provided, however, that
the Company shall bear Two Hundred Fifty Thousand Dollars ($250,000) of such
costs, which shall be paid by the Members pursuant to a Cash Call made upon
SFPG's satisfaction of the Plant Completion Test.
5.3 PROCESSING OF ORES. Subject to Section 19.14, during the
Processing Period, SFPG as Manager for Processing shall cause to be
Processed, pursuant to Adopted Programs and Budgets for Processing, at the
Twin Creeks Plant or an Alternate Processing Plant, on the terms and
conditions set forth in this Section, (x) all Rosebud Ores up to a maximum of
one thousand (1000) Tons Per Day, and (y) to the extent, but only to the
extent, there is Available Plant Capacity, all Other Ores produced by the
Company. During the Processing Period the Company shall make available to
SFPG for Processing, on the terms and conditions set forth in this Agreement,
all Rosebud Ores and, to the extent SFPG is obligated to Process Other Ores
by the terms of this Agreement, Other Ores.
(a) The Manager for Mining, in accordance with Adopted Programs
and Budgets for Mining, shall cause Rosebud Ores and Other Ores to be
extracted and prepared for shipment to the Twin Creeks Plant and shall notify
SFPG as such ores are ready for shipment. SFPG shall arrange for the timely
transportation of such ores to the Twin Creeks Plant, consistent with its
obligations to Process such ores.
(b) SFPG will batch process the Rosebud Ores and Other Ores at the
Twin Creeks Plant. SFPG will commence such Processing when a sufficient
quantity of such ores has been delivered to the Twin Creeks Plant to allow
SFPG, in its reasonable, good faith judgment, to Process such ores in an
efficient and economically and technologically sound manner, given the other
operations of the Twin Creeks Plant. Notwithstanding the foregoing, SFPG
shall conduct Processing so as not to allow more than twenty-seven
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thousand (27,000) tons of Rosebud Ores to accumulate in stockpiles at the
Twin Creeks Plant.
(c) SFPG may, from time to time, with the prior approval of the
Management Board, Process one or more batches of Rosebud Ores or Other Ores
at an Alternate Processing Plant.
(d) SFPG will cause the dore bullion produced by such Processing
to be shipped to a third party refinery approved by the Management Board
within ten (10) days after its production.
(e) The Company shall pay SFPG for all Processing of Rosebud Ores
or Other Ores SFPG's Actual Cash Processing Costs.
(f) Nothing in this Agreement shall be deemed to grant the Company
or Hecla any ownership of, lien on, or other interest in, the Twin Creeks
Plant or any Alternate Processing Plant. Subject to SFPG's obligations (i)
under the Plant Construction Program and Budget, (ii) under Adopted Programs
and Budgets for Processing, and (iii) to conduct Processing in accordance
with the practices and procedures set forth in this Section 5.3 and in
Exhibit S, SFPG shall retain sole discretion concerning the operation of the
Twin Creeks Plant and all facilities, processes and equipment to be used
therein, and nothing in this Agreement shall be deemed to obligate SFPG as
Manager for Processing to achieve any specific recovery rate or efficiencies
of operation in Processing of Rosebud Ores or Other Ores.
(g) Notwithstanding any other provision of this Agreement, SFPG's
obligation to Process Rosebud Ores and Other Ores during the Processing
Period as set forth in this Section 5.3 shall survive any withdrawal by SFPG
as a Member, the dissolution of the Company, or the Transfer of SFPG's
Ownership Interest.
ARTICLE 6
INTERESTS OF MEMBERS
6.1 INITIAL OWNERSHIP INTERESTS. The Members shall have the
following initial Ownership Interests:
SFPG - 50.0000%
Hecla - 50.0000%
6.2 CHANGES IN OWNERSHIP INTERESTS. A Member's Ownership Interest
shall be changed as follows:
(a) If a Member makes an election provided in Sections 6.3(a) and
10.6;
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(b) If a Member defaults in making its agreed-upon contribution to
an Adopted Program and Budget, followed by an election by the other Member to
invoke Section 9.6(b) or (c);
(c) If a Member's Ownership Interest is converted to a Net Returns
Royalty pursuant to Section 6.4;
(d) Transfer by a Member of less than all its Ownership Interest
in accordance with Article 15; or
(e) Acquisition of less than all of the Ownership Interest of the
other Member, however arising.
6.3 VOLUNTARY REDUCTION IN OWNERSHIP. A Member may elect,
consistent with and limited by Section 10.6, not to contribute to or to
contribute less than the percentage reflected by its Ownership Interest to:
(x) the Investment Costs component of an Adopted Program and Budget for
Development and Mining and the Investment Costs component of an Adopted
Program and Budget for Processing, or (y) an Adopted Program and Budget for
Exploration. Any such election must be made in the same percentage with
respect to the Investment Costs in the Budget for Development and Mining and
in the Budget for Processing.
(a) If a Member (a "Diluting Member") elects not to contribute to
or to contribute a lesser amount than in proportion to its respective
Ownership Interest for (i) the Investment Costs included in the Budget of an
Adopted Program and Budget for Development and Mining and for the Investment
Costs included in the Budget of an Adopted Program and Budget for Processing,
or (ii) to an Adopted Program and Budget for Exploration, and the other
Member elects to fund its proportionate share and all or any part of the
Diluting Member's share of such costs, the Ownership Interest of the Diluting
Member shall be provisionally recalculated as of the effective date of the
Adopted Program and Budget, according to the following formula:
R = DB(M) x 100%
------
DB(AM)
Where:
R =
The recalculated Ownership Interest of the Diluting Member.
DB(M) =
The Dilution Base of each Member, which shall be Twenty-Nine
Million Dollars ($29,000,000) plus the amounts of cash contributed
to the Company by the Member for Investment Costs (but not for
Operational Costs) and for Exploration, but excluding all amounts
contributed to the
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Company or expended by the Member to satisfy its obligations under
Section 5.2, with adjustments to such amounts by crediting to the
contribution by Hecla and deducting from the contributions by SFPG
(solely for the purpose of this calculation) fifty percent (50%) of
the first One Million Dollars ($1,000,000) that SFPG contributes
for Exploration pursuant to Section 5.2(c) and thereafter twenty-
five percent (25%) of all monies SFPG contributes for Exploration,
and as adjusted for anticipated contributions for Investment Costs
based on the Adopted Programs and Budgets and the Diluting Member's
election as to contributions.
DB(AM) =
The Dilution Base of all Members, which shall be Fifty Eight
Million Dollars ($58,000,000) plus the amounts contributed to the
Company by all Members for Investment Costs (but not for
Operational Costs) and for Exploration, but excluding all amounts
contributed to the Company or expended by the Members to satisfy
their obligations under Section 5.2, with adjustments to such
amount by crediting to the contributions by Hecla and deducting
from the contributions by SFPG (solely for the purpose of this
calculation) fifty percent (50%) of the first One Million Dollars
($1,000,000) that SFPG contributes for Exploration pursuant to
Section 5.2(c) and thereafter twenty-five percent (25%) of all
monies SFPG contributes for Exploration, and as adjusted for
anticipated contributions for Investment Costs and for Exploration
based on the Adopted Program and Budget and all Members' elections
as to contributions.
The Ownership Interest of the non-Diluting Member shall be
provisionally increased by the amount of the reduction in the Ownership
Interest of the Diluting Member. The recalculations made under this Section
shall be provisional and subject to the final adjustments provided for under
Subsection 6.3(c) and (d). If the other Member elects not to fund any
portion of the Diluting Member's deficiency, the Ownership Interests of the
Members shall not be recalculated, and the Manager having control over such
Adopted Program and Budget shall prepare and submit to the Manager for Mining
for presentation to the Management Board in accordance with the procedures
specified in Section 10.3 a revised proposed Program and Budget. If the other
Member elects to fund a portion, but not the entire amount, of the Diluting
Member's deficiency, the Ownership Interests of the Members shall be
provisionally recalculated, and the Manager having control over such Adopted
Program and Budget shall reduce the relevant Program and Budget to reflect
the funds available.
(b) Within thirty (30) days after the conclusion of an Adopted
Program and Budget with respect to which a Member's
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Ownership Interest was provisionally reduced under Section 6.3(a), the
Manager having control over such Adopted Program and Budget shall report to
the Diluting Member the total amount of money expended and accrued by the
Manager for such Adopted Program and Budget upon which the Diluting Member
made the election under Section 6.3(a).
(c) Unless Section 6.3(d) is applicable, the Members' Ownership
Interests shall be recalculated pursuant to Section 6.3(a), by substituting
each Member's actual contribution to such Adopted Program and Budget for and
in lieu of the Members' estimated contributions at the time of the Diluting
Member's election under Section 6.3(a). Recalculation of the Members'
Ownership Interests shall be effective as of the date of commencement of the
relevant Adopted Program and Budget.
(d) If the Manager expended or incurred obligations of less than
seventy-five percent (75%) of (i) the Investment Costs included in the
Budgets of an Adopted Program and Budget for Development and Mining and in an
Adopted Program and Budget for Processing, or (ii) the Budget of a Program
and Budget for Exploration, as the case may be, with respect to which a
Diluting Member made an election under Sections 6.3(a) and 10.6 to reduce its
contribution, within ten (10) days of receiving the Manager's report on
expenditures, as provided in Section 6.3(b) the Diluting Member may notify
the other Member of its election to restore its Ownership Interest to its
amount prior to such election. If the Diluting Member makes the election
provided for in the first sentence of this Subsection and the Net
Reimbursement Amount is a positive number, it shall within ten (10) days
thereafter pay to the other Member the Net Reimbursement Amount. If the
Diluting Member makes the election provided for in the first sentence of this
Section and the Net Reimbursement Amount is a negative number, the other
Member shall within ten (10) days thereafter pay to the Diluting Member the
Net Reimbursement Amount.
The "Net Reimbursement Amount" shall mean:
the difference between the Diluting Member's proportionate share
(at the Diluting Member's former Ownership Interest before the
current period's election under Sections 6.3(a) and 10.6 was made)
of the actual amount expended or accrued for such Investment Costs
or to Adopted Program and Budget for Exploration, as the case may
be, and the amount actually contributed by the Diluting Member for
such Investment Costs or to the Program and Budget for Exploration,
as the case may be, plus interest accruing thereon at the Prime
Rate from the date of contribution by the other Member,
less
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the difference between the Diluting Member's proportionate share
(at the Diluting Member's former Ownership Interest before the
current period's election under Sections 6.3(a) and 10.6 was made)
of the value of any distributions (the "Value of Distributions")
resulting from Operations conducted pursuant to the relevant
Program and Budget and the Value of Distributions actually received
by the Diluting Member resulting from Operations conducted pursuant
to the relevant Program and Budget.
"Value of Distributions" shall mean the sum of the Value of
Products, cash and the fair market value of any other Distributions resulting
from the Operations conducted pursuant to the Adopted Program and Budget.
For purposes of this Subsection, the amount of the Budget against
which the seventy-five (75%) criterion is applied shall be reduced to the
extent that the non-Diluting Member elected to fund less than the entire
deficiency of the Diluting Member. Reimbursement of the other Member
pursuant to this Subsection shall restore the Ownership Interest of the
Diluting Member to its position prior to the election under Sections 6.3(a)
and 10.6. Restoration of the Diluting Member's Ownership Interest shall be
effective as of the date of the Diluting Member's payment of the Net
Reimbursement Amount to the other Member and shall not effect the Members'
Capital Accounts under Section 11.12.
6.4 CONVERSION OF MINORITY INTEREST. If a Member's Ownership
Interest is reduced to fifteen percent (15%) or less, such Member shall be
deemed to have withdrawn as a Member from the Company and shall Transfer to
the other Member or its designee the withdrawn Member's entire Ownership
Interest, free and clear of any Encumbrances arising by, through or under
such Member, except any such Encumbrances listed in Subparagraphs 1.2 or 2.2
of Exhibit A. Upon the withdrawal of a Member pursuant to this Section, the
Company shall convey to the withdrawn Member a two percent (2%) Net Returns
Royalty, calculated and payable as provided in Exhibit D.
6.5 CONTINUING LIABILITIES UPON ADJUSTMENTS OF OWNERSHIP
INTERESTS. No reduction or elimination of a Member's Ownership Interest
under this Article 6 or the withdrawal of a Member under Section 17.1(b)
shall relieve such Member of its share of any Company Liability or Member
Liability, including, without limitation, liability for Continuing
Obligations, Environmental Liabilities and Environmental Compliance, whether
arising before or after such reduction, elimination or withdrawal, out of
acts, omissions or circumstances occurring prior to this Agreement or out of
Operations conducted during the term of this Agreement but prior to such
reduction, elimination or withdrawal, regardless of when any funds may be
expended to satisfy such liability, taking into account the limited liability
provided by the Act. For purposes of
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this Article 6, such Member's share of such liability, if any, shall be equal
to its Ownership Interest at the time the act, omission or circumstance
giving rise to such liability occurred (or, as to such liability for acts,
omissions or circumstances prior to the effective date of this Agreement,
such Member's initial Ownership Interest). Should the cumulative cost of
satisfying Continuing Obligations be in excess of cumulative amounts accrued
in the Reclamation Account, each Member shall be liable for its proportionate
share (i.e., its Ownership Interest at the time act, omission or circumstance
giving rise to such liability occurred) of the cost of satisfying such
obligations, whether or not one or more Members has previously withdrawn,
reduced its interest or had its interest converted to a Net Returns Royalty.
6.6 GRANT OF SECURITY INTERESTS. Immediately following the
execution of this Agreement and the completion of the contributions provided
for in Section 5.1, the Members shall cause the Company to execute the Deed
of Trust attached hereto a Exhibit T and the Security Agreement attached
hereto as Exhibit U and each Member shall execute a Pledge and Security
Agreement attached hereto as Exhibit V (collectively, the "Security
Agreements"). The Manager for Mining shall promptly record the Deed of Trust
in the real property records of Humboldt and Pershing Counties, Nevada, and
make all filings and take such other actions as are necessary to perfect and
maintain the security interests created by the Security Agreements and shall
furnish evidence of such actions to the Members.
ARTICLE 7
MANAGEMENT BOARD
7.1 MANAGEMENT. The Members shall act through the Management
Board, and all acts and meetings of the Management Board shall constitute the
acts and meetings of the Members. The ultimate responsibility for management
of the business and affairs of the Company shall reside in the Management
Board, the Company shall be regarded as managed by its Members for all
purposes of the Act, and no statutory managers shall be deemed appointed
under the Act. Except as otherwise delegated to the Managers, the Management
Board shall have exclusive authority to determine all matters related to this
Agreement. Although the Mangers have day-to-day responsibility for the
matters described in this Section 7.1, the ultimate control of all matters
shall be within the absolute control of the Management Board.
Notwithstanding the foregoing, but subject to the limitation that
no statutory manager shall be deemed appointed under the Act, the day-to-day
responsibility for the Company's Operations relating to Development and
Mining shall reside with
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Hecla, as Manager for Mining, and the day-to-day responsibility for the
Company's Operations relating to Processing and Exploration shall reside with
SFPG, as Manager for Processing and Manager for Exploration. In addition,
the Manager for Mining shall have the additional responsibilities for the
Company's administration and for the coordination of the activities of the
Manager for Exploration set forth in Article 8. Except for situations in
which the approval of the Management Board or the Members is expressly
required by this Agreement or by nonwaivable provisions of applicable Law or
is otherwise provided for in this Agreement, but subject to the limitation
that no statutory manager shall be deemed appointed under the Act, each of
the Managers shall, with respect to its areas of responsibility, have full
and complete authority, power and discretion to manage and control the
business, affairs and properties of the Company, to make all decisions
regarding those matters and to perform any and all other acts or activities
customary or incident to the management of the Company's business.
7.2 ORGANIZATION AND COMPOSITION OF THE MANAGEMENT BOARD. The
Members hereby establish a Management Board to determine, except to the
extent such powers are expressly reserved to the Members in Article 9,
overall policies, objectives, procedures, methods and actions under this
Agreement. The Management Board shall consist of two (2) representatives
appointed by SFPG and two (2) representatives appointed by Hecla. Each
Member may appoint one or more alternates to act in the absence of a regular
Management Board representative. Any alternate so acting shall be deemed a
member of the Management Board. Appointments of Management Board
representatives by a Member shall be made or changed by Notice to the other
Member.
7.3 DECISIONS. Other than as provided in Section 7.6, each
Member, acting through its appointed Management Board representatives in
attendance at the meeting, shall have the number of votes on the Management
Board equal to its Voting Interest. Unless otherwise provided in this
Agreement, a majority vote of the Management Board shall be required for all
decisions of the Management Board.
7.4 MEETINGS.
(a) The Management Board shall hold regular meetings at least
quarterly in Winnemucca, Nevada, or at other agreed places. Members of the
Management Board may participate in such meetings by telephone. The Manager
for Mining shall give thirty (30) days Notice to the Members of such regular
meetings. Additionally, either Member may call a special meeting upon ten
(10) days Notice to the other Member. In case of an emergency, reasonable
notice of a special meeting shall suffice. There shall be a quorum if at
least one member representing each Member is present; provided, however, that
if a Member fails to attend two (2) consecutive properly called meetings,
then a quorum shall exist if the other
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Member is represented by its appointed member, and a vote of such Member
shall be considered a majority vote for the purposes of the conduct of all
business properly noticed and not requiring a unanimous vote.
(b) If business cannot be conducted at a regular or special
meeting due to the lack of a quorum, any Member may call the next meeting
upon ten (10) days Notice to the other Member.
(c) Each Notice of a meeting shall include an itemized agenda
prepared by the Manager for Mining in the case of a regular meeting, or by
the Member calling the meeting in the case of a special meeting, but any
matters may be considered if a Member adds the matter to the agenda at least
two (2) business days before the meeting or with the consent of the other
Member. The Manager for Mining shall prepare minutes of all meetings and
shall distribute copies of such minutes to the Members within ten (10) days
after the meeting. The other Member shall sign and return or object to the
minutes prepared by the Manager for Mining within thirty (30) days after
receipt, and failure to do either shall be deemed acceptance of the minutes
as prepared by the Manager for Mining. The minutes, when signed or deemed
accepted by all Members, shall be the official record of the decisions made
by the Management Board. Decisions made at a Management Board meeting shall
be implemented in accordance with Adopted Programs and Budgets. If a Member
timely objects to minutes proposed by the Manager for Mining, the
representatives of the Management Board shall seek, for a period not to
exceed thirty (30) days after receipt by the Manager for Mining of Notice of
the objections, to agree upon minutes acceptable to all Members. If the
Management Board does not reach agreement on the minutes of the meeting
within such thirty (30) day period, the minutes of the meeting as prepared by
the Manager for Mining together with the other Member's proposed changes
shall collectively constitute the record of the meeting. If personnel
employed in Operations are required to attend a Management Board meeting,
reasonable costs incurred in connection with such attendance shall be charged
to the Company. All other costs shall be paid by the Members individually.
7.5 ACTION WITHOUT MEETING. With the consent of all of the
Members' representatives on the Management Board, the Management Board may
hold meetings by telephone, provided all decisions are immediately confirmed
in writing by the representatives.
7.6 MATTERS REQUIRING SPECIAL APPROVAL OF MANAGEMENT BOARD.
Notwithstanding any other provision of this Agreement, the following matters
shall require the approval of seventy percent (70%) of all votes of the
Management Board:
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(a) any Program and Budget for Development and Mining or for
Processing which includes Investment Costs exceeding Six Million Dollars
($6,000,000);
(b) any Program and Budget for Development and Mining which
includes costs for Development exceeding Three Million Dollars ($3,000,000);
(c) any Program and Budget for Exploration exceeding Three Million
Dollars ($3,000,000);
(d) any decision to temporarily (except as a result of Force
Majeure or an emergency) or permanently close the Rosebud Mine;
(e) any decision to change the place at which the Rosebud Ores or
Other Ores are Processed from the Twin Creeks Plant to an Alternate
Processing Plant; or
(f) any decision to temporarily (except as a result of Force
Majeure or an emergency) or permanently close the Twin Creeks Plant prior to
the expiration of the Processing Period.
7.7 ACTIVITIES DURING DEADLOCK. If the Management Board for any
reason fails to adopt a Program and Budget, the Managers shall continue
Operations at levels comparable with the last Adopted Program and Budget
until a new Program and Budget is adopted pursuant to Articles 10 or 18. For
purposes of determining the required contributions of the Members and their
respective Ownership Interests, the last Adopted Program and Budget shall be
deemed extended.
7.8 FINANCIAL AUDITS. The Management Board shall select a
nationally recognized firm of independent certified public accountants to
conduct, at the Company's expense, an annual audit of the Company's accounts,
books and records. Any other work conducted by the auditors which is
authorized by the Management Board shall be performed at the Company's
expense. Until the Management Board determines otherwise, the annual audit
referred to in this Section 7.8 shall be performed by the firm of Coopers &
Lybrand.
ARTICLE 8
POWERS AND DUTIES OF MANAGERS
8.1 POWERS AND DUTIES OF MANAGER FOR MINING. Subject to the terms
and provisions of this Agreement, including the provisions granting the
Management Board control over all Operations, the Manager for Mining shall
have the following powers
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and duties relating to Development and Mining, which shall be discharged in
accordance with Adopted Programs and Budgets:
(a) The Manager for Mining shall manage, direct and control
Development and Mining.
(b) The Manager for Mining shall be responsible for reviewing the
proposed Programs and Budgets prepared by the Manager for Exploration and by
the Manager for Processing and for coordinating each of its proposed Programs
and Budgets for Development and Mining with the proposed Programs and Budgets
prepared by the other Managers.
(c) The Manager for Mining shall make all expenditures necessary
to carry out each Adopted Program for Development and Mining, in accordance
with the Budget therefor.
(d) The Manager for Mining shall: (i) purchase or otherwise
acquire all materials, supplies, equipment, water, and
utility, transportation and other necessary services required for Operations,
such purchases and acquisitions to be made on the best terms available,
taking into account all of the circumstances; (ii) obtain such customary
warranties and guarantees as are available in connection with such purchases
and acquisitions; and (iii) keep the Assets free and clear of all liens and
encumbrances, except for those existing at the time of, or created concurrent
with, the acquisition of such Assets, or mechanic's or materialmen's liens
which shall be released or discharged in a diligent manner.
(e) The Manager for Mining shall conduct such title examinations
and cure such title defects to the Properties as may be advisable in the
reasonable judgment of the Management Board.
(f) The Manager for Mining shall: (i) make or arrange for all
payments required by leases, licenses, permits, contracts and other
agreements related to the Assets, except for the payment of royalties due on
mineral production (which shall be paid by the Members as provide in Section
4.7); (ii) pay all taxes (other than income taxes), assessments and like
charges on Operations and the Assets. The Manager for Mining shall have the
right to contest in the courts or otherwise, the validity or amount of any
taxes, assessments or charges if the Manager for Mining deems them to be
unlawful, unjust, unequal or excessive, or to undertake such other steps or
proceedings as the Manager for Mining may deem reasonably necessary to secure
a cancellation, reduction, readjustment or equalization thereof before the
Manager for Mining shall be required to pay them, but in no event shall the
Manager for Mining permit or allow title to the Assets to be lost as the
result of the nonpayment of any taxes, assessments or like charges; and (iii)
perform all other acts reasonably necessary to maintain the Assets.
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(g) The Manager for Mining shall: (i) apply for and maintain in
the name of the Company all necessary permits, licenses and approvals for
Development and Mining; (ii) comply with applicable Laws concerning
Development and Mining; (iii) notify promptly the Members of any allegations
of violation thereof; (iv) prepare and file all reports or notices required
for Development and Mining; and (vi) conduct at least annually a safety and
environmental audit pursuant to practices determined by the Management Board.
The Manager for Mining shall not be in breach of this provision if a
violation has occurred in spite of good faith efforts to comply, and the
Manager for Mining has timely cured or disposed of such violation through
performance, or payment of fines and penalties.
(h) The Manager for Mining shall prosecute and defend all
litigation or administrative proceedings arising out of Development and
Mining.
(i) The Manager for Mining shall provide insurance for the benefit
of the Company for Development and Mining.
(j) The Manager for Mining may dispose of Assets, whether by
abandonment, surrender or transfer in the ordinary course of business, except
that Properties may be abandoned or surrendered only as provided in Article
13. However, without prior authorization from the Management Board, the
Manager for Mining shall not: (i) dispose of Assets in any one transaction
having a value in excess of Twenty-Five Thousand Dollars ($25,000); (ii)
enter into any sales contracts or commitments for Products, it being the
intention that all Products will be distributed to the Members in kind after
Processing and refining pursuant to Section 11.5(b); (iii) begin a
liquidation of the Company; (iv) dispose of all or a substantial part of the
Assets necessary to achieve the purposes of the Company; or (v) incur any
debt or capitalized lease obligations in the name of the Company.
(k) The Manager for Mining shall perform or cause to be performed
all assessment and other work, and shall pay all rental fees or mining claim
maintenance fees, required by Law in order to maintain the unpatented mining
claims included within the Properties. The Manager for Mining shall have the
right to perform the assessment work required hereunder pursuant to a common
plan of exploration and continued actual occupancy of such claims and sites
shall not be required. The Manager for Mining shall not be liable on account
of any determination by any court or governmental agency that the work
performed by Manager does not constitute the required annual assessment work
or occupancy for the purposes of preserving or maintaining ownership of the
claims, provided that the work done is in accordance with the Adopted Program
and Budget. The Manager for Mining shall timely record with the appropriate
county and file with the appropriate United States agency, affidavits in
proper form attesting to the payment of rental fees and maintenance fees
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and the performance of assessment work or notices of intent to hold in proper
form, and allocating therein, to or for the benefit of each claim, at least
the minimum amount required by Law to maintain such claim or site.
(l) If authorized by the Management Board, the Manager for Mining
may: (i) locate, amend or relocate any unpatented mining claim or mill site
or tunnel site, (ii) locate any fractions resulting from such amendment or
relocation, (iii) apply for patents or mining leases or other forms of
mineral tenure for any such unpatented claims or sites, (iv) abandon any
unpatented mining claims for the purpose of locating mill sites or otherwise
acquiring from the United States rights to the ground covered thereby, (v)
abandon any unpatented mill sites for the purpose of locating mining claims
or otherwise acquiring from the United States rights to the ground covered
thereby, (vi) exchange with or convey to the United States any of the
Properties for the purpose of acquiring rights to the ground covered thereby
or other adjacent ground, and (vii) convert any unpatented claims or mill
sites into one or more leases or other forms of mineral tenure pursuant to
any federal law hereafter enacted.
(m) The Manager for Mining shall keep and maintain current (on a
monthly basis) all required accounting and financial records pursuant to the
Accounting Procedure and in accordance with customary cost accounting
practices in the mining industry, and shall have the primary responsibility
for producing all financial and accounting records for the Company, with the
cooperation and input of the Manager for Processing and the Manager for
Exploration.
(n) The Manager for Mining shall prepare an Environmental
Compliance Plan for all Development and Mining Operations consistent with the
requirements of any applicable Laws or contractual obligations and shall
include in each Program and Budget which it prepares sufficient funding to
implement the Environmental Compliance Plan and to satisfy the financial
assurance requirements of any applicable Law or contractual obligation
pertaining to Environmental Compliance. To the extent practical, the
Environmental Compliance Plan shall incorporate concurrent reclamation of
Properties disturbed by Development and Mining.
(o) The Manager for Mining shall keep the Members advised of all
Operations it conducts by submitting in writing to the Members: (i) monthly
progress reports concerning Development and Mining, which reports shall
include statements of expenditures and comparisons of such expenditures to
the Adopted Budget on a monthly, quarterly and year-to-date basis, within
twenty (20) days after the end of the relevant month; (ii) no later than the
fifth (5th) business day of each month, preliminary accounting and financial
data for the preceding month; (iii) periodic summaries of
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data acquired; (iv) copies of reports concerning Development and Mining; and
(v) such other reports as the Members may reasonably request. At all
reasonable times the Manager for Mining shall provide the Members, upon the
request of any Member, access to, and the right to inspect and copy all maps,
drill logs, core tests, reports, surveys, assays, analyses, production
reports, operations, technical, accounting and financial records, and other
information acquired in Operations or otherwise in the Company's possession
or control. In addition, the Manager for Mining shall allow any Member, at
such Member's sole risk and expense, and subject to reasonable safety
regulations, to inspect the Assets and Operations at all reasonable times, so
long as the inspecting Member does not unreasonably interfere with
Operations.
(p) The Manager for Mining shall arrange for annual audits of the
Mineral Reserves of the Company by an independent consulting firm selected by
the Management Board.
(q) The Manager for Mining shall have the right to carry out its
responsibilities hereunder through agents, Affiliates or independent
contractors; but the Manager for Mining shall discharge its responsibilities
principally through the use of its own officers and employees.
(r) The Manager for Mining shall prepare and submit all statements
to the Company for costs and expenses it makes or accrues for Development or
Mining, whether for use in the preparation of Cash Calls, for reporting
purposes, or otherwise, strictly in accordance with the Accounting Procedure.
(s) The Manager for Mining shall undertake all other activities
reasonably necessary to fulfill the foregoing and its other responsibilities
under this Agreement.
8.2 POWERS AND DUTIES OF MANAGER FOR PROCESSING. Subject to the
terms and provisions of this Agreement, including the provisions granting the
Management Board control over all Operations, the Manager for Processing
shall have the following powers and duties relating to Processing, which
shall be discharged in accordance with Adopted Programs and Budgets:
(a) The Manager for Processing shall manage, direct and control
Processing.
(b) The Manager for Processing shall make all expenditures
necessary to carry out each Adopted Program for Processing, including
expenditures for transportation which may be incurred as a portion of
transportation costs incurred by SFPG under a contract involving other mines,
and for which SFPG as Manager for Processing will bill the Company as
specified in Exhibit M.
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(c) The Manager for Processing shall: (i) apply for and maintain
all necessary permits, licenses and approvals for Processing; (ii) comply
with applicable Laws and regulations regarding Processing; (iii) notify
promptly the Members of any allegations of violation thereof; (iv) prepare
and file all reports or notices required for Processing; and (v) conduct at
least annually a safety and environmental audit pursuant to practices
determined by the Management Board. The Manager for Processing shall not be
in breach of this provision if a violation has occurred in spite of its good
faith efforts to comply, and the Manager for Processing has timely cured or
disposed of such violation through performance, or payment of fines and
penalties.
(d) The Manager for Processing shall prosecute and defend all
litigation or administrative proceedings arising out of Processing.
(e) The Manager for Processing shall keep the Members advised of
all Operations it conducts by submitting in writing to the Manager for
Mining, who shall promptly forward to the Members: (i) monthly progress
reports concerning Processing, which reports shall include statements of
expenditures and comparisons of such expenditures to the Adopted Budget on a
monthly and year-to-date basis, within fifteen (15) days after the end of the
relevant month; (ii) no later than the third (3rd) business day of each
month, preliminary accounting and financial data for the preceding month;
(iii) periodic summaries of data acquired relative to Processing; (iv) copies
of any reports produced by or for SFPG concerning Processing; and (v) such
other reports as the Members may reasonably request. At all reasonable times
the Manager for Processing shall provide the Members, upon the request of any
Member, access to, and the right to inspect and copy all reports, assays,
analyses, operations, technical, accounting and financial records, and other
information relating to or acquired in Processing. In addition, the Manager
for Processing shall allow any Member, at the latter's sole risk and expense,
and subject to reasonable safety regulations, to inspect the Twin Creeks
Plant at all reasonable times, so long as the inspecting Member does not
unreasonably interfere with operations at the plant.
(f) The Manager for Processing shall provide insurance for the
benefit of the Company regarding Processing.
(g) The Manager for Processing shall keep and maintain current (on
a monthly basis) all required accounting and financial records pursuant to,
and shall prepare and submit to the Company all statements for costs and
expenses it makes or accrues for Processing, whether for use in the
preparation of Cash Calls, for reporting purposes, or otherwise, strictly in
accordance with, Exhibits M and the Accounting Procedure and in accordance
with customary cost accounting practices in the mining industry. The
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Manager for Processing shall support the Manager for Mining in connection
with the latter's responsibilities under Section 8.1(m).
(h) The Manager for Processing shall undertake all other
activities reasonably necessary to fulfill the foregoing and its other
responsibilities under this Agreement.
8.3 POWERS AND DUTIES OF MANAGER FOR EXPLORATION. Subject to the
terms and provisions of this Agreement, including the provisions granting the
Management Board control over all Operations, the Manager for Exploration
shall have the following powers and duties relating to Exploration, which
shall be discharged in accordance with Adopted Programs and Budgets:
(a) The Manager for Exploration shall manage, direct and control
Exploration within the Area of Interest. The Manager for Exploration shall
(i) keep the Manager for Mining informed with respect to the conduct and
results of Exploration and shall consider all suggestions with respect to
Exploration made by the Manager for Mining, (ii) coordinate its activities
with the Manager for Mining, and (iii) conduct Exploration so as not to
interfere with Development and Mining.
(b) The Manager for Exploration shall make all expenditures
necessary to carry out each Adopted Program for Exploration.
(c) The Manager for Exploration shall: (i) apply for, in the name
of the Company, all necessary permits, licenses and approvals for
Exploration; provided that the Manager for Exploration shall first afford the
Manager for Mining the opportunity to apply for and maintain such permits,
licenses and approvals; (ii) comply with applicable Laws regarding
Exploration; (iii) notify promptly the Members of any allegations of
violation thereof; (iv) prepare and file all reports or notices required for
Exploration; and (v) conduct at least annually a safety and environmental
audit pursuant to practices determined by the Management Board. The Manager
for Exploration shall not be in breach of this provision if a violation has
occurred in spite of its good faith efforts to comply, and the Manager for
Exploration has timely cured or disposed of such violation through
performance, or payment of fines and penalties.
(d) The Manager for Exploration shall prosecute and defend all
litigation or administrative proceedings arising out of Exploration.
(e) The Manager for Exploration shall provide insurance for the
benefit of the Company regarding Exploration.
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(f) The Manager for Exploration shall prepare an Environmental
Compliance Plan for all Exploration Operations consistent with the
requirements of any applicable Laws or contractual obligations and shall
include in each Program and Budget which it prepares sufficient funding to
implement the Environmental Compliance Plan and to satisfy the financial
assurance requirements of any applicable Law or contractual obligation
pertaining to Environmental Compliance. To the extent practical, the
Environmental Compliance Plan shall incorporate concurrent reclamation of
Properties disturbed by Exploration.
(g) The Manager for Exploration shall keep the Members advised of
all Operations it conducts by submitting in writing to the Manager for
Mining, who shall promptly forward to the Members: (i) monthly progress
reports concerning Exploration, which reports shall include statements of
expenditures and comparisons of such expenditures to the Adopted Budget on a
monthly, quarterly and year-to-date basis, within fifteen (15) days after the
end of the relevant month; (ii) no later than the third (3rd) business day of
each month, preliminary accounting and financial data for the preceding
month; (iii) periodic summaries of data acquired; (iv) copies of reports
concerning Exploration; and (v) such other reports as the Members may
reasonably request.
(h) The Manager for Exploration shall keep and maintain current
(on a monthly basis) all required accounting and financial records pursuant
to the Accounting Procedure and in accordance with customary cost accounting
practices in the mining industry and shall support the Manager for Mining in
connection with its duties under Section 8.1(m). The Manager for Exploration
shall prepare and submit to the Company all statements for costs and expenses
it makes or accrues for Exploration, whether for use in the preparation of
Cash Calls, for reporting purposes, or otherwise, strictly in accordance with
the Accounting Procedure and in accordance with customary cost accounting
practices in the mining industry. The Manager for Exploration shall support
the Manager for Mining in connection with the latter's responsibilities under
Section 8.1(m).
(i) The Manager for Exploration shall have the right to carry out
its responsibilities hereunder through agents, Affiliates or independent
contractors; but the Manager for Exploration shall discharge its
responsibilities principally through the use of its own officers and
employees.
(j) The Manager for Exploration shall undertake all other
activities reasonably necessary to fulfill the foregoing and its other
responsibilities under this Agreement.
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8.4 CASH CALLS.
(a) On the basis of the relevant Adopted Programs and Budgets and
any supplemental information provided by the other Managers relating to
expenditures made pursuant to Sections 10.7 and 10.8, the Manager for Mining
shall submit to the Members prior to the last day of each month, a
consolidated billing (a "Cash Call") for the estimated cash requirements for
Exploration, Development, Mining and Processing for the next month. Within
ten (10) days after receipt of each billing, each Member shall contribute to
the Company its proportionate share of the Cash Call. The Manager for Mining
shall at all times maintain a cash balance approximately equal to the rate of
the Company's anticipated disbursement for up to thirty (30) days.
(b) If a Member fails to meet Cash Calls in the amount and within
the time specified in Section 8.4(a), the amount not timely contributed to
the Company shall bear interest from the date due at an annual rate equal to
the Prime Rate, but in no event shall such rate of interest exceed the
maximum permitted by Law. Interest accruing shall accrue to the benefit of
the Company, and shall be deemed as amounts contributed by the non-defaulting
Member if the other member elects to invoke Section 9.6(c). The Manager for
Mining shall immediately notify both Members if either Member fails to timely
pay a Cash Call and the other Member shall have those other rights, remedies,
and elections specified in Sections 9.6 and 9.7.
8.5 LIMITED AUTHORITY TO BIND COMPANY. Unless authorized to do so
by this Agreement or by the Management Board, no attorney-in-fact, employee
or other agent of the Company shall have any power or authority to bind the
Company in any way, to pledge its credit or to render it liable pecuniarily
for any purpose. No Member shall have any power or authority to bind the
Company unless the Member has been authorized by the Managers to act as an
agent of the Company in accordance with the previous sentence.
8.6 LIABILITY FOR CERTAIN ACTS, INDEMNITIES.
(a) The Managers do not, in any way, guarantee the return of the
Members' Capital Contributions or a profit for the Members from Operations.
Subject to the provisions of Sections 4.6, through 4.10 and Section 10.7, the
Managers shall not be liable to the Company or to any Member for any loss or
damage sustained by the Company or any Member, unless the loss or damage
shall have been the result of such Manager's fraud, deceit, gross negligence
or willful misconduct.
(b) Subject to the provisions of Section 8.6(a), the Company shall
indemnify the Managers and their officers, directors, employees and agents
for, and hold them harmless from, any
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liability, whether civil or criminal, and any loss, damage, or expense,
including reasonable attorneys' fees, when acting for or on behalf of the
Company. In connection with such indemnification, the Company shall make
advances for expenses to the maximum extent permitted under the Act. The
Company shall similarly indemnify its employees and other agents who are not
Managers to the fullest extent permitted by Law. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of NOLO CONTENDERE or its equivalent shall not of itself create a
presumption that indemnification is not available hereunder. The obligation
of the Company to indemnify any Manager hereunder shall be satisfied out of
the Assets only, and if the Assets are insufficient to satisfy its obligation
to indemnify any Manager, such Manager shall not be entitled to contribution
from any Member.
8.7 MANAGERS AND MEMBERS HAVE NO EXCLUSIVE DUTY TO COMPANY. To
the extent permitted under the Act, the Managers shall not be required to
manage the Company as their sole and exclusive function and they may have
other business interests and may engage in other activities in addition to
those relating to the Company. Neither the Company nor any Member shall have
any right, by virtue of this Agreement, to share or participate in such other
investments or activities of any Manager or Member or to the income or
proceeds derived therefrom. Neither the Managers nor any Member shall incur
any liability to the Company or to any of the Members as a result of engaging
in any other business or venture. Notwithstanding the foregoing the conduct
of or involvement in other business by a Member (i) shall be conducted in a
manner such that it does not interfere with the performance of this
Agreement; and (ii) shall not excuse any breach of this Agreement
8.8 BANK ACCOUNTS. The Manager for Mining may from time to time
open bank accounts in the name of the Company, and the Manager for Mining
shall be the sole signatory thereon, unless the Management Board determines
otherwise. Notwithstanding the foregoing, the Manager for Mining shall
establish a separate interest bearing account into which all funds
contributed by the Members for reclamation (other than funds used in
concurrent reclamation activities) shall be deposited (the "Reclamation
Account"). The authorization of all Members, which shall not be withheld
unreasonably, shall be required for withdrawals from the Reclamation Account.
8.9 RESIGNATION. The Manager for Mining and the Manager for
Exploration may resign at any time by giving Notice to the Members. The
Manager for Processing may resign at any time after the end of the Processing
Period by giving Notice to the Members. The resignation of any Manager shall
take effect thirty (30) days after receipt of Notice thereof or at such later
time as shall be specified in such Notice; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make
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it effective. The resignation of a Manager who is also a Member shall not
affect the resigning Manager's rights or status as a Member and shall not
constitute a withdrawal of a Member. If a Manager commits any Event of
Default, other than the failure to pay timely a Cash Call or to repay a Cover
Payment Loan on demand the Manager shall be deemed to have resigned as a
Manager.
8.10 REMOVAL. At a special meeting of the Management Board called
expressly for that purpose, any Manager may be removed at any time for a
material breach of its responsibilities as Manager under this Agreement, if
such breach remains uncured at the time of the meeting, by the affirmative
vote of Members holding a majority of the Voting Interests including any
Voting Interest held by the Manager or an Affiliate of the affected Manager.
The removal of a Manager who is also a Member shall not affect the removed
Manager's rights or status as a Member and shall not constitute a withdrawal
of a Member. If SFPG is removed as Manager for Processing as provided
herein, the Company shall have no right to have Rosebud Ores or Other Ores
Processed at the Twin Creeks Plant or at any Alternate Processing Plant and
all obligations of SFPG with respect to Processing under this Agreement shall
be terminated by such removal; but SFPG shall remain liable to the Company
for any and all damages caused by the unavailability of the Twin Creeks Plant
or an Alternative Processing Plant to Process Rosebud Ores or Other Ores to
the extent that Section 5.3 of this Agreement requires SFPG to Process such
ores.
8.11 VACANCIES AND REPLACEMENTS. Any vacancy occurring for any
reason in the office of the Manager for Mining, the Manager for Processing or
the Manager for Exploration shall be filled by the affirmative vote of
Members holding a majority of the Voting Interest (determined without regard
to any Voting Interest owned by a Manager who resigned or was removed during
the preceding twenty-four (24) month period). Notwithstanding the foregoing,
(a) if the Ownership Interest of Hecla declines to thirty percent (30%) or
less, SFPG shall, in its sole discretion, have the right to replace Hecla as
Manager for Mining by designating itself as the Manager for Mining; and (b)
if the Ownership Interest of SFPG declines to thirty percent (30%) or less,
Hecla shall, in its sole discretion, have the right to replace SFPG as
Manager for Exploration by designating itself as the Manager for Exploration.
8.12 COMPENSATION, REIMBURSEMENT, ORGANIZATION EXPENSES.
(a) The compensation of the Managers, if any, shall be fixed from
time to time by the Management Board.
(b) The Managers shall cause the Company to make an appropriate
election to treat the expenses incurred by the Company in connection with the
formation and organization of the Company to be amortized under the sixty
(60) month period beginning with the month in which the Company begins
business to the extent that such
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expenses constitute "organizational expenses" of the Company within the
meaning of Section 709(b)(2) of the Code.
8.13 RIGHT TO RELY ON THE MANAGERS. Any Person dealing with the
Company may rely (without duty of further inquiry) upon a certificate signed
by any Manager as to:
(a) The identity of any Manager or Member;
(b) The existence or nonexistence of any fact or facts which
constitute a condition precedent to acts on behalf of the Company by any
Manager or which are in any other manner germane to the affairs of the
Company;
(c) The Persons who are authorized to execute and deliver any
instrument or document of the Company; or
(d) Any act or failure to act by the Company or any other matter
whatsoever involving the Company or any Member.
ARTICLE 9
RIGHTS AND OBLIGATIONS OF MEMBERS
9.1 LIMITATION OF LIABILITY. Except as provided by the
nonwaivable provisions of the Act and by this Agreement, no Member shall be
liable for an obligation of the Company solely by reason of being or acting
as a Member.
9.2 LIST OF MEMBERS. Upon written request of any Member, the
Management Board shall provide a list showing the names, addresses and
Ownership Interests of all Members.
9.3 APPROVAL OF SALE OF ALL ASSETS. The affirmative vote of one
hundred percent (100%) of Voting Interests of all Members shall be required
to approve the sale, exchange or other disposition of all, or substantially
all, of the Company's assets (other than in the ordinary course of the
Company's business) which is to occur as part of a single transaction or
plan.
9.4 COMPANY BOOKS. The Manager for Mining shall have overall
responsibility for maintaining the Company's books and records and for
providing accounting services to it. The Managers shall maintain and
preserve, during the term of the Company, and for five (5) years thereafter,
all accounts, books, and other relevant Company documents related to
financial, environmental, regulatory, operational and other matters. Each
Member shall have the right to request in writing that all accounts, books,
and other relevant Company documents be maintained for a longer period at the
requesting Member's cost. Upon reasonable request, each Member
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shall have the right, during ordinary business hours, to inspect and copy
such Company documents at the requesting Member's expense.
9.5 PRIORITY AND RETURN OF CAPITAL. No Member shall have priority
over any other Member, either as to the return of Capital Contributions or as
to net profits, net losses or distributions; provided that this Section 9.5
shall not apply to loans (as distinguished from Capital Contributions) which
a Member has made to the Company.
9.6 RIGHTS ON FAILURE OF A MEMBER TO PAY A CASH CALL.
(a) If a Member fails to pay a Cash Call within the period
specified in Section 8.4:
(i) The other Member may make, but shall not be obligated to make,
a Cover Payment on behalf of the Member failing to pay the Cash
Call. Each and every Cover Payment will constitute a demand loan
bearing interest from the date of the advance at the rate provided
in Section 8.4(b) (a "Cover Payment Loan"). If more than one Cover
Payment is made, the Cover Payments shall be aggregated and the
rights and remedies described herein pertaining to an individual
Cover Payment shall apply to the aggregated Cover Payments.
(ii) The right of the Member to take and receive a Distribution of
Products in kind pursuant to Section 11.5(b) shall be suspended.
If the other Member has made a Cover Payment Loan with respect to
the defaulted Cash Call, it shall have the right to sell the
defaulting Member's share of Products in any reasonable manner,
subject to the obligation to pay any royalty due thereon, and apply
the net proceeds of such sale to the balance due under the Cover
Payment Loan, including interest and costs. The right of a Member
that has defaulted with respect to a Cash Call to take and receive
a Distribution of Products in kind shall be reinstated, if at all,
when all amounts due with respect to the defaulted Cash Call and
Cover Payment Loan and any interest or other costs due with respect
thereto have been discharged. If a Member exercises its right to
take and receive another Member's Distribution of Products, the
Member originally entitled to such Products shall be treated as
having taken such Products and sold them, with the proceeds of such
sale being used to repay the Cover Payment Loan.
(b) If a Member fails to timely pay a Cash Call or fails to pay a
Cover Payment Loan on demand, and the defaulting Member has not cured the
default by paying the Cash Call and/or the Cover Payment Loan, (including
through the application of the proceeds of any sales of Products made
pursuant to Subsection 9.6(a)(i)) within ninety (90) days after the date on
which the Cash Call or Cover
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Payment Loan was due, the other Member may elect, on not less than ten (10)
days Notice to the defaulting Member, one of the following:
(i) To have the defaulting Member deemed to have resigned from
the Company and to have automatically made a Transfer of its
Ownership Interest to the non-defaulting Member or its designee,
but such defaulting Member shall remain liable for its Member
Liability, if any; provided, however, the defaulting Member shall
have the right to receive only from two percent (2%) of Net Returns
thereafter received by the Company, if any, and not from any other
source, an amount equal to seventy-five percent (75%) of the
defaulting Member's Dilution Base as of the date of the default.
Upon receipt of such amount, the withdrawn Member shall thereafter
have no further rights or interests with respect to the Company.
(ii) To purchase all the Ownership Interest of the defaulting
Member at a purchase price equal to eighty percent (80%) of the
fair market value thereof (without regard to any Member Liability)
as determined by a qualified independent appraiser appointed by the
non-defaulting Member (or, if the defaulting Member objects to the
person so appointed within ten (10) days of receiving Notice
thereof, then by an independent and qualified appraiser appointed
by the joint action of the appraiser appointed by the non-
defaulting Member and a qualified independent appraiser appointed
by the defaulting Member; provided, however, that if the defaulting
Member fails to designate a qualified independent appraiser for
such purpose within ten (10) days of such objection, then the
person originally designated by the non-defaulting Member shall
serve as the appraiser; provided further, that if the appraisers
appointed by each of the Members fail to appoint a third qualified
independent appraiser within five (5) days of the appointment of
the last of them, then an appraiser shall be appointed by a judge
of a court of competent jurisdiction in the State of Nevada upon
the application of either Member). There shall be withheld from
the purchase price payable, upon Transfer of the defaulting
Member's Ownership Interest, the amount of indebtedness of the
defaulting Member owing to the non-defaulting Member and to the
Company together with unpaid interest accrued thereon to the date
of such transfer; provided further, that the purchase price
determined by the appraiser shall not take into account any
minority or marketability discounts.
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(c) Upon the deemed resignation of a Member or the purchase of its
Ownership Interest pursuant to Section 9.6(b), the defaulting Member shall
remain liable for any Member Liability, including without limitation any such
liability arising from Environmental Liabilities, Continuing Obligations and
Environmental Compliance. In addition to the rights provided in Article 9,
if a Member fails timely to pay a Cash Call or to pay a Cover Payment Loan
on demand, or comments any material breach of this Agreement not cured within
any cure period herein provided, the non-defaulting Member may also exercise
any other rights and remedies available to it under Section 9.7 or under Law.
9.7 DEFAULTS AND REMEDIES.
(a) The circumstances constituting an "Event of Default" under the
Pledge and Security Agreement, Exhibit V, shall also constitute an Event of
Default under this Agreement.
(b) Upon the occurrence of an Event of Default, the non-defaulting
Member shall have all of the rights and remedies available to it under the
Security Agreements.
ARTICLE 10
PROGRAMS AND BUDGETS
10.1 INITIAL PROGRAMS AND BUDGETS. The Members hereby adopt:
(a) The Mine Construction Program and Budget (but only for the
period through December 31, 1997 insofar as it covers Mining), which was
prepared by the Manager for Mining, a copy of which is attached as Exhibit I;
(b) The initial Program and Budget for Exploration, which was
prepared by the Manager for Exploration, a copy of which is attached as
Exhibit K; and
(c) The Plant Construction Program and Budget (but only for the
period through December 31, 1997 insofar as it covers Processing), which was
prepared by the Manager for Processing, a copy of which is attached as
Exhibit J.
10.2 OPERATIONS PURSUANT TO PROGRAMS AND BUDGETS. Except as
otherwise provided in Sections 10.7 and 10.8, Operations shall be conducted,
expenses shall be incurred, and Assets shall be acquired only pursuant to
Adopted Programs and Budgets.
10.3 PREPARATION AND PRESENTATION OF PROGRAMS AND BUDGETS.
Annually, on or before October 1, the Manager for Mining shall prepare a
proposed Program and Budget for Development and
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Mining, the Manager for Processing shall prepare a proposed Program and
Budget for Processing, and the Manager for Exploration shall prepare a
proposed Program and Budget for Exploration. In preparing each proposed
Program and Budget for Exploration, the Manager for Exploration shall consult
with a knowledgeable geologist concerning the Rosebud Mine whom is designated
by the Manager for Mining. Each proposed Program and Budget for Development
and Mining and each proposed Program and Budget for Exploration shall include
a cash accrual for all reasonably anticipated reclamation costs. In
preparing the proposed Budgets, the Manager for Mining and the Manager for
Processing shall confer concerning their respective proposed Programs and
Budgets so that timing and nature of production of Rosebud Ores and Other
Ores and the availability of Processing capacity at the Twin Creeks Plant are
reasonably coordinated. Each Program and Budget for Processing or for
Development and Mining shall specifically identify those elements thereof
which are Operational Costs and those elements thereof which are Investment
Costs. Each of the Managers shall present to the Management Board a proposed
Program and Budget for the ensuing year on or before October 15.
10.4 REVIEW AND APPROVAL OF PROPOSED PROGRAMS AND BUDGETS. Within
fifteen (15) days after submission of a proposed Program and Budget, the
Management Board shall meet to consider the proposed Program and Budget and
to vote on its adoption. The Management Board shall vote separately with
respect to the adoption of the proposed Program and Budget for Development
and Mining, the proposed Program and Budget for Processing, and the proposed
Program and Budget for Exploration.
10.5 DEADLOCK ON PROPOSED PROGRAMS AND BUDGETS. If the Members,
acting through their representatives on the Management Board, fail to approve
a Program and Budget for Development and Mining (including any such Program
and Budget subject to Subsection 7.6 (a) or (b)), a Program and Budget for
Processing, or a Program and Budget for Exploration (including any such
Program and Budget subject to Subsection 7.6 (c), on or before the beginning
of the period to which the proposed Program and Budget applies, the following
procedures shall be followed:
(a) The matter shall be referred to the Presidents of each of the
Members, who shall meet personally, within ten (10) days after such referral
to attempt to reach agreement concerning the proposed Program and Budget. If
the Presidents of the Members reach agreement with respect to a Program and
Budget, the Program and Budget thus agreed to shall be the Adopted Program
and Budget.
(b) If the Presidents of the Members cannot agree with respect to
a Program and Budget within five (5) days after the meeting held pursuant to
Subsection 10.5(a), either Member may refer the matter to arbitration in
accordance with Article 18 and
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the Program and Budget determined by arbitration shall be the Adopted Program
and Budget.
10.6 ELECTION TO PARTICIPATE. By Notice to the Management Board
within twenty (20) days after establishment of any Adopted Program and
Budget (other than the Mine Construction Program and Budget, the Plant
Construction Program and Budget and the initial Program and Budget for
Exploration referred to in Subsection 10.1(b)) a Member may elect, by Notice
to the Management Board, to contribute to the Investment Costs of such a
Program and Budget or to a Program and Budget for Exploration in some lesser
proportion than its respective Ownership Interest, or not at all, in which
cases its Ownership Interest shall be recalculated as provided in Article 6.
If a Member fails to so notify the Management Board, the Member shall be
deemed to have elected to contribute to such Program and Budget in proportion
to its respective Ownership Interest as of the beginning of the period
covered by the Program and Budget. No Member shall be entitled to make the
election provided for in this Section with respect to the Operational Costs
of any Adopted Program and Budget for Development and Mining or of any
Adopted Program and Budget for Processing.
10.7 BUDGET OVERRUNS; PROGRAM CHANGES. The Manager having
responsibility for an Adopted Program and Budget shall, within twenty (20)
days after the start of each quarter, provide the Management Board with
quarterly forecasts comparing anticipated performance with the Adopted
Program and Budget and shall immediately notify the Members of any material
departure from an Adopted Program and Budget. If the total expenses for an
Adopted Program and Budget (other than the Mine Construction Program and
Budget or the Plant Construction Program and Budget) exceed the Budget by
more than twenty percent (20%), then the Manager responsible for such Program
and Budget shall be solely liable for all such excess over twenty percent
(20%), unless directly caused by an emergency or unexpected expenditure made
pursuant to Section 10.8 or unless otherwise authorized by the Management
Board and such excess shall not be included in the calculations of the
Ownership Interests.
10.8 EMERGENCY OR UNEXPECTED EXPENDITURES. In case of emergency, a
Manager may take any reasonable action it deems necessary to protect life,
limb or property, to protect the Assets or to comply with law or government
regulation. The Manager may also make reasonable expenditures for unexpected
events which are beyond its reasonable control and which do not result from a
breach by it of its standard of care. The Managers shall promptly notify the
Members of the emergency or unexpected expenditure, and the Managers shall be
reimbursed for all resulting costs by the Members in proportion to their
respective Ownership Interests at the time the emergency or unexpected
expenditures are incurred.
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ARTICLE 11
ALLOCATIONS, INCOME TAX, DISTRIBUTIONS, ELECTIONS AND REPORTS
11.1 TAX ELECTIONS. The Company shall make the following elections
for purposes of all Company income tax returns:
(a) To use the accrual method of accounting.
(b) Pursuant to the provisions at Section 706(b)(1) of the
Code, to use as its taxable year the calendar year.
(c) To deduct currently all development expenses to the
extent possible under Sections 616 and 291 of the Code.
(d) Unless the Management Board unanimously agrees otherwise,
to compute the allowance for depreciation in respect of all depreciable
Assets using the maximum accelerated tax depreciation method and the shortest
life permissible.
(e) To treat advance royalties as deductions from gross
income for the year paid or accrued to the extent permitted by law.
(f) To adjust the basis of Company property under Section 754
of the Code at the request of any Member;
(g) To amortize over the shortest permissible period all
organizational expenditures and business start-up expenses under Sections 195
and 709 of the Code;
(h) To aggregate or disaggregate mineral interests under
Section 614(c)(1) of the Code in a manner the Management Board determines
will be in the best interest of the Members;
(i) To make any other election required or permitted
specifically under Section 703(b) of the Code, or generally under any other
Section of the Code, as determined by the Management Board to be in the best
interest of the Members.
(j) Any other election required or permitted under the Code
or any state tax law shall be made as determined by the Management Board.
Each Member shall elect under Section 617(a) of the Code to deduct currently
all exploration expenses to the extent possible.
11.2 ALLOCATIONS TO MEMBERS. Except as provided in Section
11.5(b), allocations for tax purposes shall be in accordance with the
following:
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(a) If the right to take in kind is interpreted to mean only
that a Member is authorized to direct the disposition of its share of
Products by the Company, all income, gains, losses, deductions or tax
attributes realized by the Company from any disposition of Products shall be
allocated to such Member, and any deductions arising from expenditures
incurred by such Member in connection with such disposition (to the extent
they are attributed to the Company) shall also be allocated to such Member.
If, pursuant to Section 11.5(b), a Manager purchases a Member's share of
Products for its own account, or sells such share of Products, the net
profits or losses from such sale (computed after taking into account the
reasonable expenses incurred) shall be allocated to the Member.
(b) Exploration expenses and development cost deductions
shall be allocated among the Members in accordance with their respective
contributions to such expenses and costs.
(c) Subject to Section 11.2(l), depreciation and loss
deductions with respect to a depreciable Asset shall be allocated among the
Members in accordance with their respective contributions to the adjusted
basis of the Asset which gives rise to the depreciation or loss deduction.
(d) Production and operating cost deductions shall be
allocated among the Members in accordance with their respective contributions
to such costs.
(e) Subject to Section 11.2(l), cost depletion and any loss
deduction with respect to a depletable property (as defined in Section 614 of
the Code) shall be allocated to the Members in accordance with their
respective contributions to the adjusted basis of the depletable property.
Percentage depletion under Section 613 of the Code shall be allocated
(i) first in the same manner as cost depletion to the extent it does not
exceed cost depletion and (ii) second, to the extent percentage depletion
exceeds cost depletion, to the Members in the same proportion as their
distributive share of gross income from the depletable property (as
determined under Section 613(c) of the Code) for the year in which such
depletion is allowable.
(f) All deductions and losses which are not described in
Subsections 11.2(a) through (e), shall be allocated among the Members in
accordance with their respective contributions to the costs producing each
such deduction or the adjusted basis of the Asset producing each such loss.
(g) Subject to Section 11.2(l), any gain recognized on the
sale or other disposition of a depreciable Asset shall be allocated
(i) first, to the extent such gain does not exceed the amount of depreciation
claimed with respect to such Asset, to the Members in proportion to the
amount of such depreciation previously
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allocated to, or claimed by, them; and (ii) second, to the Members in
accordance with their Ownership Interests.
(h) Subject to Section 11.2(l), any gain recognized on the
sale or other disposition of a depletable property (as defined in Section 614
of the Code) shall be allocated (i) first, to the extent such gain does not
exceed the total Recapturable Deductions (as defined below) with respect to
such Property, to the Members in proportion to the total Recapturable
Deductions previously allocated to, or claimed by, them with respect to such
property (adjusted for any recapture of such deductions previously allocated
to, or recognized by, the Members), and (ii) second, to the Members in
accordance with their Ownership Interests. As used in the previous sentence,
"Recapturable Deductions" shall mean depletion deductions (to the extent
reflected in the capital accounts of the Members), exploration expense
deductions, and development expense deductions attributable to a depletable
property, reduced (but not below zero) by any prior recapture of such
deductions.
(i) Subject to Section 11.2(l), any recapture of exploration
expenses under Section 617(b)(1)(A) of the Code, and any increase in taxable
income realized by reason of the disallowance of depletion under Section
617(b)(1)(B) of the Code, shall be allocated to the Members in the same
manner as the related exploration expenses were allocated to, or claimed by,
them.
(j) Subject to Section 11.2(l), all other items of income and
gain shall be allocated to the Members in accordance with their Ownership
Interests.
(k) All tax credits shall be allocated to the Members in
proportion to the allocation of the item of income, gain, loss or deduction
generated by the receipt or expenditure giving rise to the credit. Any
credit recapture shall be allocated to the Members in the same proportion as
the related credit was allocated.
(l) Notwithstanding the foregoing, in the event all or
substantially all the Assets or Properties (by value) are sold or otherwise
disposed of, any gain or loss recognized by the Company shall be allocated
among the Members so that, to the extent possible, the Members' resulting
Capital Account balances are in proportion to the Members' Ownership
Interests. Any recapture for tax purposes of mining exploration and
development expenditures, depreciation deductions and depletion deductions
arising by reason of such a sale or other disposition shall be allocated, to
the extent consistent with the allocation of gain giving rise to such
recapture, to the Member which was originally allocated, or which originally
claimed, the recaptured deduction.
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(m) Notwithstanding the foregoing, allocations required by
Section 704(c) of the Code or applicable Treasury Regulations under Section
704(b) shall take precedence over the foregoing allocations, but only to the
extent required by the Code or the Treasury Regulations.
(n) Notwithstanding the foregoing, any required allocation
under Section 482 of the Code shall be accompanied by a corresponding
allocations so that, to the extent possible, the overall allocation to the
Members, are consistent with the allocation that would have been made to each
of them without regard to any allocation under Section 482 of the Code.
(o) For purposes of maintaining the Capital Accounts, items
of income, gain, loss, depletion and deduction shall be allocated to the
extent possible in the same manner as such items are allocated for tax
purposes (as described above), but taking into account the Capital Accounting
rules as specified in the Treasury Regulations under Section 704(b) of the
Code, as reflected in Section 11.12.
11.3 AGREEMENT NOT TO CAUSE A TAX TERMINATION. The Members agree
that if any one of them makes a sale or assignment of its Ownership Interest
under this Agreement, such sale or assignment shall be structured so as not
to cause a termination under Section 708(b) (1)(B) of the Code. If a Section
708(b) (1)(B) termination is caused, the Member causing the termination shall
indemnify the other Member and save it harmless for any increase in taxes,
interest, and penalties to the other Member caused by the termination of the
tax partnership created hereunder. The indemnification, if any, shall be
computed in a cash flow basis taking into consideration the liability for tax
on any indemnification proceeds received by the Member not causing the
termination.
11.4 SPECIAL ALLOCATIONS. Notwithstanding the foregoing,the
Members agree that SFPG, in recognition of its funding obligations, will
benefit to the extent of its Capital Account balance under Section 11.12 from
a special allocation of all tax deductions during the period of -four (24)
months beginning with the month of first commercial production. Likewise,
Hecla, after a twelve (12) month break between SFPG's special allocation will
receive, in recognition of its contribution of the Hecla Properties, a
special allocation of tax deductions for the next twenty-four (24) month
period, but only up to the dollar value of SFPG's special allocation. After
the SFPG and Hecla special allocations, the Members shall be subject to the
allocation provisions of Sections 11.2 or 11.5.
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11.5 DISTRIBUTIONS. Except as provided in Section 17.3, relating
to Distributions in connection with the liquidation of the Company, all
Distributions of Distributable Cash shall be made to the Members as follows:
(a) Except as provided in Section 11.5(b) and except for
Distributions in liquidation of the Company, from time to time, the
Management Board shall determine in its reasonable judgment to what extent,
if any, the Company's cash on hand exceeds the current and anticipated needs,
including, without limitation, needs for operating expenses, debt service,
acquisitions, reserves, and mandatory Distributions, if any. To the extent
such excess exists (as determined by the Management Board), the Manager for
Mining shall make Distributions to the Members in accordance with their
Ownership Interests at the time of the Distribution. Such Distributions
shall be in cash or property (which need not be distributed proportionately)
or partly in both, as determined by the Management Board.
(b) Notwithstanding Section 11.5(a) and except as otherwise
provided in Article 17.3 (relating to Distributions in liquidation of the
Company), each Member shall take and receive a distribution in kind of its
share (in accordance with its Ownership Interest) of all refined bullion and
other Products produced from the dore shipped by the Manager for Processing
to a third party refinery pursuant to Section 5.3. Any expenditure incurred
following the Distribution in kind to a Member of its proportionate share of
such Products shall be borne by such Member. The Manager for Processing
shall give the Members advance Notice of the anticipated delivery date upon
which their respective shares of such Products will be available. If a
Member fails to take its share of such Products in kind, the other Member
shall have the right, but not the obligation, to purchase the Member's share
for its own account or to sell such share as agent for the Member at not less
than the prevailing market price in the area. Subject to the terms of any
such contracts of sale then outstanding, during any period that a Member is
purchasing or selling the other Member's share of such Products, the Other
Member may elect by Notice to the Member to take its Distribution of Products
in kind. A Member selling the other Member's share of Products as agent for
the other Member shall be entitled to deduct from proceeds of any sale by it
for the account of the other Member all reasonable expenses incurred in the
sale.
11.6 LIMITATION UPON DISTRIBUTIONS. No Distribution shall be
declared and paid unless, after the Distribution is made, the assets of the
Company are in excess of all liabilities of the Company, except liabilities
to Members on account of their contributions.
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11.7 INTEREST ON AND RETURN OF CAPITAL CONTRIBUTIONS. No Member
shall be entitled to interest on its Capital Contribution or to return of its
Capital Contribution, except as otherwise specifically provided for herein.
11.8 LOANS TO COMPANY. Nothing in this Agreement shall prevent any
Member from making secured or unsecured loans to the Company by agreement
with the Company.
11.9 RECORDS, AUDITS AND REPORTS. At the expense of the Company,
and in addition to the records required by Article 8, the Managers shall
maintain records and accounts of all operations and expenditures of the
Company. At a minimum the Company shall keep at its principal place of
business the following records:
(a) A current list of the full name and last known business,
residence, or mailing address of each Member and Manager, both past and
present;
(b) A copy of the Certificate of the Company and all
amendments thereto, together with executed copies of any powers of attorney
pursuant to which any amendment has been executed;
(c) Copies of the Company's federal, state, and local income
tax returns, tax work papers and reports, if any, for at least the four (4)
most recent years;
(d) Originals of this Agreement, copies of any writings
permitted or required with respect to a Member's obligation to contribute
cash, property or services, and copies of any financial statements of the
Company for the three (3) most recent years;
(e) Minutes of every annual, special meeting and court-
ordered meeting;
(f) Any written consents obtained from Members for actions
taken by Members without a meeting.
11.10 RETURNS AND OTHER ELECTIONS. The Manager for Mining shall
cause the preparation and timely filing of all tax returns required to be
filed by the Company pursuant to the Code and all other tax returns deemed
necessary and required in each jurisdiction in which the Company does
business. Copies of such returns, or pertinent information therefrom, shall
be furnished to the Members within a reasonable time after the end of the
Company's Taxable Year.
11.11 TAX MATTERS PARTNER. Hecla, so long as it is Manager for
Mining and is also a Member, is hereby designated the Tax Matters Partner
("TMP") as defined in Section 6231(a)(7) of the Code. The TMP and the other
Members shall use their best efforts
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to comply with the responsibilities outlined in Sections 6221 through 6233 of
the Code (including any Treasury Regulations promulgated thereunder), and in
doing so shall incur no liability to any other Member.
11.12 CAPITAL ACCOUNTS.
(a) A separate Capital Account shall be maintained for each
Member. Each Member's Capital Account shall be credited with the amount of
Twenty-Nine Million Dollars ($29,000,000) when such Member has made the
contributions required of it by Section 5.1 and satisfied its funding
obligations under Section 5.2, regardless of the amounts actually expended by
such Member to make such contributions or satisfy such obligations. Each
Member's Capital Account shall generally be increased by (1) the amount of
money contributed by such Member to the Company for Operations, but excluding
amounts contributed for Operations conducted to satisfy the obligations of
the Members pursuant to Section 5.2; (2) the fair market value of property
contributed by such Member to the Company, but excluding contributions made
to satisfy the obligations of the Members pursuant to Section 5.1, (net of
liabilities secured by such contributed property that the Company is
considered to assume or take subject to under Section 752 of the Code; and
(3) allocations of income or gain to such Member. Each Member's Capital
Account shall generally be decreased by (1) the amount of money distributed
to such Member by the Company; (2) the fair market value of property
distributed to such Member by the Company (net of liabilities secured by such
distributed property that such Member is considered to assume or take subject
to under Section 752 of the Code); and (3) allocations to such Member of
expenditures described in Section 705(a)(2)(B) of the Code; and (4) any items
in the nature of deduction and loss that are allocated to such Member
hereunder.
(b) In the event of a permitted Transfer of an Ownership
Interest, the Capital Account of the transferor shall become the Capital
Account of the transferee to the extent it relates to the transferred
Ownership Interest in accordance with Section 1.704-1(b)(2)(iv) of the
Treasury Regulations.
(c) The manner in which Capital Accounts are to be maintained
pursuant to this Section 11.12 is intended to comply with the requirements of
Section 704(b) of the Code and the Treasury Regulations promulgated
thereunder. If in the opinion of the Company's accountants the manner in
which Capital Accounts are to be maintained pursuant to the preceding
provisions of this Section 11.12 should be modified in order to comply with
Section 704(b) of the Code and the Treasury Regulations thereunder, then
notwithstanding anything to the contrary contained in the preceding
provisions of this Section 11.12, the method in which Capital Accounts are
maintained shall be so modified; provided, however, that any change in the
manner of maintaining Capital
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Accounts shall not materially alter the economic agreement between or among
the Members.
(d) Upon liquidation of the Company, as provided in section
17.3, liquidating Distributions shall be made in accordance with the positive
Capital Account balances of the Members, as determined after taking into
account all Capital Account adjustments for the Company's Taxable Year during
which the liquidation occurs. The Company may offset damages for breach of
this Agreement by a Member whose interest is liquidated (either upon the
withdrawal of the Member or the liquidation of the Company) against the
amount otherwise distributable to such Member.
ARTICLE 12
ACQUISITIONS WITHIN AREA OF INTEREST
12.1 GENERAL. Any interest in or right to acquire any interest in
real property, mineral rights, water or water rights within the Area of
Interest acquired during the term of this Agreement by or on behalf of a
Member or any Affiliate of a Member shall be subject to the terms and
provisions of this Agreement.
12.2 NOTICE TO NONACQUIRING MEMBER. Within ten (10) days after the
acquisition of any interest or the right to acquire any interest in real
property, mineral rights, water or water rights wholly or partially within
the Area of Interest (except real property, water or water rights acquired by
the Managers, for the Company, pursuant to an Adopted Program and Budget),
the acquiring Member shall notify the other Member of such acquisition. The
acquiring Member's Notice shall describe in detail the acquisition, the real
property, mineral rights, water or water rights covered thereby, the cost
thereof, and the reasons why the acquiring Member believes that the
acquisition of the interest may be in the best interests of the Company. In
addition to such Notice, the acquiring Member shall make any and all
information and material in its possession or control concerning the acquired
interest available for inspection by the other Member.
12.3 OPTION EXERCISED. If, within twenty (20) days after receiving
the acquiring Member's Notice, the other Member notifies the acquiring Member
of its election to accept a proportionate interest in the acquired interest
equal to its Ownership Interest, the acquiring Member shall convey the
acquired interest to the Company, by special warranty deed. The acquired
interest shall become a part of the Properties for all purposes of this
Agreement immediately upon the Notice of such other Member's election to
accept the proportionate interest therein. Such other Member shall promptly
pay to the acquiring Member its proportionate share of the latter's actual
out-of-pocket acquisition costs and such purchase price shall be treated as a
contribution to the Capital of the
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Company, followed by a Transfer of such purchase price to the acquiring
Member.
12.4 OPTION NOT EXERCISED. If the other Member does not give such
Notice within the twenty (20) day period set forth in Section 12.3, it shall
have no interest in the acquired interest, and the acquired interest shall
not be a part of the Properties or be subject to this Agreement.
ARTICLE 13
ABANDONMENT AND SURRENDER OF PROPERTIES
13.1 SURRENDER OR ABANDONMENT OF PROPERTY. The Management Board
may authorize the Manager for Mining to surrender or abandon part or all of
the Properties. If the Management Board authorizes any such surrender or
abandonment over the objection of a Member, the Company shall assign to the
objecting Member, by quit claim deed and without cost to the objecting
Member, all of the Company's interest in the property to be abandoned or
surrendered, and the abandoned or surrendered property shall cease to be part
of the Properties. Notwithstanding any provision of this Section, the
Members shall remain liable for Environmental Liabilities, Continuing
Obligations and Environmental Compliance with respect to such surrendered
property pursuant to Section 6.5.
13.2 REACQUISITION. If any Properties are abandoned or surrendered
under the provisions of this Article 13, then, unless this Agreement is
earlier terminated, the neither the surrendering Member nor any of its
Affiliates shall acquire any interest in such Properties or a right to
acquire such Properties for a period of one (1) year following the date of
such abandonment or surrender. If a Member reacquires any Properties in
violation of this Section 13.2, the other Member may elect by Notice to the
reacquiring Member within forty-five (45) days after it has actual notice of
such reacquisition, to have such properties conveyed to the Company and made
subject to the terms of this Agreement. In the event such an election is
made, the reacquired properties shall thereafter be treated as Properties,
and the costs of reacquisition shall be borne solely by the reacquiring
Member and shall not be included for purposes of calculating the Members'
respective Ownership Interests.
ARTICLE 14
CONFIDENTIALITY
14.1 GENERAL. This Agreement and all information with respect to
this Agreement or the performance of the Company shall be the exclusive
property of the Members and, except as provided in
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Section 14.2, shall not be disclosed to any third party or the public without
the prior written consent of the other Member, which consent shall not be
unreasonably withheld.
14.2 EXCEPTIONS. The consent required by Section 14.1 shall not
apply to a disclosure:
(a) To an Affiliate, consultant, contractor or subcontractor
that has a bona fide need to be informed;
(b) To any third party to whom the disclosing Member
contemplates a Transfer of all or any part of its Ownership Interest;
(c) To a governmental agency or to the public which the
disclosing Member believes in good faith is required by applicable law or
regulation or the rules of any stock exchange on which a Member's securities
are traded;
(d) To the lenders, potential lenders, credit rating
agencies, or insurance providers or brokers of the Company or any Member; or
(e) To securities, financial or investment analysts of any
Member, provided that before disclosure of such information to any such
analyst the disclosing Member shall have provided to the non-disclosing
Member a description or copy of the information to be disclosed.
As to any disclosure pursuant to Subsection 14.2(a) or (b), only such
confidential information as such third party shall have a legitimate business
need to know shall be disclosed and such third party shall first agree in
writing to protect the confidential information from further disclosure to
the same extent as the Members are obligated under this Article 14.
14.3 DURATION OF CONFIDENTIALITY. The provisions of this Article
14 shall apply during the term of this Agreement and for two (2) years
following termination of this Agreement pursuant to Section 6.4, 9.6(c)(ii)
or 17.1(c), and shall continue to apply to any Member who withdraws, who is
deemed to have withdrawn, or who Transfers its Ownership Interest, for two
(2) years following the date of such occurrence.
ARTICLE 15
TRANSFERABILITY
15.1 GENERAL. Except as otherwise specifically provided herein no
Member shall have the right to Transfer (with or without consideration) all
or any part of its Ownership Interest, directly,
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indirectly or beneficially. Each Member hereby acknowledges the
reasonableness of the restrictions on Transfer of Ownership Interests imposed
by this Agreement in view of the Company's purposes and the relationship of
the Members. Accordingly, the restrictions on Transfer contained herein
shall be specifically enforceable. In the event that any Member pledges or
otherwise encumbers any of its Ownership Interest as security for repayment
of a liability, any such pledge or hypothecation shall be made pursuant to a
pledge or hypothecation agreement that requires the pledgee or secured party
to be bound by all the terms and conditions of this Article 15.
15.2 PREEMPTIVE RIGHT. Except as otherwise provided in Section
15.3, if a Member desires to Transfer all or any part of its Ownership
Interest, the other Member shall have a preemptive right to acquire such
interests as provided in this Section 15.2
(a) A Member desiring to Transfer all or any part of its
Ownership Interest shall first offer such interest to the other Member. The
offer shall state the price and all other pertinent terms and conditions of
the desired Transfer. The other Member shall have thirty (30) days from the
date such offer is delivered to notify the transferring Member whether it
elects to acquire the offered interest at the price and on the terms and
conditions set forth in the offer. If it does so elect, the Transfer shall
be consummated promptly after Notice of such election is delivered to the
transferring Member.
(b) If the Member fails to so elect within the period
provided for in Section 15.2(a), the transferring Member shall have one
hundred twenty (120) days following the expiration of such period to market
and consummate a Transfer at a price and on terms no less favorable than
those offered by the transferring Member to the other Member in the Notice
required in Section 15.2(a).
(c) If the transferring Member fails to consummate a Transfer
within the period set forth in Section 15.2(b), the preemptive right of the
other Member in such offered interest shall be deemed to be revived. Any
subsequent efforts to Transfer such Ownership Interest shall be conducted in
accordance with all of the procedures set forth in this Section 15.2.
15.3 EXCEPTIONS TO PREEMPTIVE RIGHT. Section 15.2 shall not apply
to the following:
(a) Transfer by a Member of all or any part of its Ownership
Interest to its Affiliate, provided that if the transferee ceases to be an
Affiliate of Hecla or SFPG, it shall be required to offer to sell such
Ownership Interest to the other Member in accordance with Section 15.2 at a
price equal to the fair
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market value of such Ownership Interest as determined by an independent
appraiser agreed to by the Members;
(b) A corporate merger, consolidation, amalgamation or
reorganization of a Member by which the surviving entity shall possess
substantially all of the stock, or all of the property rights and interests,
and be subject to substantially all of the liabilities and obligations of
that Member;
(c) A sale or other commitment or disposition of Products or
proceeds from sale of Products by a Member upon distribution to it pursuant
to Section 11.5; or
(d) Transfer of all or any portion of the capital stock of a
Member, provided that the Ownership Interest or Interests of such Member do
not constitute more than 80% of the total assets owned by such Member.
15.4 CONSENT TO TRANSFER. Notwithstanding any other provisions of
this Agreement, no Member may Transfer its Ownership Interest without the
express written consent of the other Member, which consent may be withheld
for any reason, provided, however, that the provisions of this Section 15.4
shall not apply and any transferee of an interest in the Company in
accordance with the terms of this Agreement shall be admitted to the Company
upon execution and delivery to the Manager of a copy of this Agreement and/or
any other documents or instruments requested by the Manager to reflect the
terms of such transferee's admission, at any time when the requirement that
the foregoing consent of Members is no longer necessary for the Company to be
classified as a partnership for federal income tax purposes.
ARTICLE 16
ADDITIONAL MEMBERS, SEPARATE OPERATING AREAS
16.1 ADDITIONAL MEMBERS. From the date of the formation of the
Company, any Person acceptable to the Management Board may become a Member in
the Company either by the issuance by the Company of Ownership Interests for
such consideration as the Members by their unanimous vote shall determine, or
as a transferee of a Member's Ownership Interest or any portion thereof,
subject to the terms and conditions of this Agreement. No new Members shall
be entitled to any retroactive allocation of losses, income or expense
deductions incurred by the Company. The Management Board may, at its option,
when a new Member is admitted, close the Company books (as though the
Company's tax year had ended) or make pro rata allocations of loss, income
and expense deductions to a new Member for that portion of the Company's tax
year in which a Member was admitted in accordance with the provisions of
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Section 706(d) of the Code and the Treasury Regulations promulgated
thereunder.
16.2 SEPARATE OPERATING AREAS. If at any time during the term of
this Agreement, the Management Board determines that it is advisable to
conduct further Development or Mining within the Area of Interest, but
separately from Operations at the Rosebud Mine, the Management Board shall
designate which portion of the Properties will comprise the separate area
(the "Separate Operating Area"), and the Members shall enter into a new
agreement for the purpose of further Exploration, Development and Mining of
the Separate Operating Area ("Separate Operating Agreement"). If the
Management Board so determines, a separate Entity may be established to own
and/or operate the Separate Operating Area. The Separate Operating Agreement
shall provide that each Member's initial contribution to the Separate
Operating Agreement shall be determined by multiplying its Ownership Interest
by the fair market value of the Separate Operating Area as determined by a
qualified independent appraiser acceptable to both Members. The Separate
Operating Agreement shall also provide for the manner in which Products from
the Separate Operating Area shall be processed, subject to SFPG's obligations
with respect to processing as set forth in Section 5.3. Following execution
of the Separate Operating Agreement, this Agreement shall terminate insofar
as it affects the Properties included in the Separate Operating Area. The
Ownership Interests of the Members in the Properties subject to the Separate
Operating Agreement may differ from the Ownership Interests of the Members in
the remainder of the Properties. If pursuant to a Separate Operating
Agreement the Ownership Interest of a Member in the Properties subject
thereto is reduced to fifteen percent (15%), such Ownership Interest shall be
deemed Transferred to the other Member or its designee, subject to the
conveyance to the Member whose Ownership Interest was Transferred of a two
percent (2%) Net Returns Royalty in such Properties.
ARTICLE 17
DISSOLUTION, WINDING UP AND CANCELLATION
17.1 DISSOLUTION AND WITHDRAWAL.
(a) The Company shall be dissolved only:
(i) by the unanimous written agreement of all Members;
(ii) as provided in Section 17.1(b); or
(iii) on the bankruptcy of any Member unless the other
Member consents in writing to the continuation of the Company within ninety
(90) days after the bankruptcy.
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(b) A Member may elect to withdraw as a Member by giving
Notice to the Company of the effective date of withdrawal, which shall be the
later of the end of the then current Adopted Program and Budget or at least
thirty (30) days after the date of the Notice. Upon such withdrawal, the
Company shall dissolve unless in writing within ninety (90) days after the
withdrawal the remaining Member elects to continue the Company, but all
relevant terms of this Agreement shall continue and the withdrawing Member
shall be deemed to have transferred to the Company or a designee of the other
Member, without cost and free and clear of royalties, liens or other
encumbrances arising by, through or under such withdrawing Member, all of its
Ownership Interest. No withdrawal under this Section 17.1(b) shall relieve
the withdrawing Member of its obligation to make contributions with respect
to Operations for which it has agreed to make contributions and shall not
affect its liability under Section 6.5.
(c) Except as provided in Section 17.1(a), the Company shall
not dissolve and shall continue notwithstanding the expulsion, bankruptcy of
any Member or the occurrence of any event that terminates the continued
membership of any Member.
17.2 WINDING UP, LIQUIDATION AND DISTRIBUTION OF ASSETS.
(a) Upon dissolution, an accounting shall be made by the
Company's independent accountants of the accounts of the Company and of the
Company's assets, liabilities and operations, from the date of the last
previous accounting until the date of dissolution. A Manager designated by
the Management Board shall immediately proceed to wind up the affairs of the
Company.
(b) If the Company is dissolved and its affairs are to be
wound up, the designated Manager shall:
(i) Sell or otherwise liquidate all of the Assets as
promptly as practicable (except to the extent the Management Board
may determine to distribute any Assets to the Members in kind),
(ii) Allocate any gain, income or loss resulting from
such sales to the Members' Capital Accounts in accordance with
Article 11,
(iii) Discharge all liabilities of the Company, including
liabilities to Members who are also creditors, to the extent
otherwise permitted by law, other than liabilities to Members for
Distributions and the return of capital, and establish such
reserves as may be reasonably necessary to provide for contingent
liabilities of the Company (for purposes of determining
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the Capital Accounts of the Members, the amounts of such reserves
shall be deemed to be an expense of the Company),
(iv) Distribute the remaining Assets in the following
order:
(A) If any Assets are to be distributed in kind,
the net fair market value of such Assets as of the date
of dissolution shall be determined by independent
appraisal or by agreement of the Members. Such Assets
shall be deemed to have been sold as of the date of
dissolution for their fair market value, and the Capital
Accounts of the Members shall be adjusted pursuant to the
provisions of Article 11 to reflect such deemed sale.
(B) The positive balance (if any) of each Member's
Capital Account (as determined after taking into account
all Capital Account adjustments for the Company's taxable
year during which the liquidation occurs) shall be
distributed to the Members, either in cash or in kind, as
determined by the Management Board, with any assets
distributed in kind being valued for this purpose at
their fair market value. Any such Distributions to the
Members in respect of their Capital Accounts shall be
made in accordance with the time requirements set forth
in Section 1.704-1(b)(2)(ii)(b)(2) of the Treasury
Regulations.
(c) Upon a liquidation within the meaning of Section 1.704-
1(b)(2)(ii)(g) of the Treasury Regulations, if any Member has a deficit
Capital Account (after giving effect to all contributions, Distributions,
allocations and other Capital Account adjustments for all taxable years,
including the year during which such liquidation occurs), such Member shall
make, within the time periods required by the Treasury Regulations,
contributions to the Company equal to the negative balance of such Member's
Capital Account.
17.3 NON-COMPETE COVENANTS. A Member that is deemed to have
withdrawn pursuant to Sections 6.4, 9.6(b)(ii) or 17.1(b), shall not directly
or indirectly acquire any interest in property within the Area of Interest
for twelve (12) months after the effective date of withdrawal. If a
withdrawing Member, or an Affiliate of a withdrawing Member, breaches this
Section, such Member or Affiliate shall be obligated to offer to convey to
the non-withdrawing Member, without cost, any such property or interest so
acquired. Such offer shall be made in writing and can be
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accepted by the non-withdrawing Member at any time within forty-five (45)
days after it is received by such non-withdrawing Member.
17.4 CERTIFICATE OF CANCELLATION. When all debts, liabilities and
obligations have been paid and discharged or adequate provisions have been
made therefor and all of the remaining property and assets have been
distributed to the Members and the Manager responsible therefor has otherwise
completed the winding up of the Company, a certificate of cancellation shall
be executed and filed as required by the Act. Upon the filing of the
certificate of cancellation, the existence of the Company shall cease, except
for the purpose of suits, other proceedings and appropriate action as
provided in the Act. The Managers shall have authority to distribute any
Company property discovered after dissolution, convey real estate and take
such other action as may be necessary on behalf of and in the name of the
Company.
17.5 RETURN OF CONTRIBUTION NONRECOURSE TO OTHER MEMBERS. Except
as provided by Law or as expressly provided in this Agreement, upon
dissolution, each Member shall look solely to the Assets for the return of
its Capital Contribution. If the Company's property remaining after the
payment or discharge of the debts and liabilities of the Company is
insufficient to return the contributions of one or more Members, such Members
shall have no recourse against any other Member.
ARTICLE 18
ARBITRATION
18.1 RESOLUTION OF DISPUTES. The Members shall resolve by
arbitration as provided in this Article 18 all disputes between them (i)
arising out of or relating to this Agreement, its interpretation, execution,
validity, breach, application or termination, (ii) relating to the Company,
including the adoption of Programs and Budgets as provided in Section
10.5(b), or (iii) arising out or relating to the Security Agreements.
18.2 GENERAL PROVISIONS CONCERNING ARBITRATION. The arbitration
shall be conducted in Denver, Colorado in accordance with the Commercial
Arbitration Rules of the American Arbitration Association ("AAA") then in
effect, as varied and supplemented by the provisions of this Article 18. If
there is a conflict between the terms and conditions, either express or
fairly implied, of this Agreement and the Commercial Arbitration Rules, the
terms and conditions of this Agreement shall apply. Judgment may be entered
on any arbitral award by any court of competent jurisdiction.
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18.3 SPECIAL ARBITRATION PROCEDURES FOR MATTERS ARISING UNDER
SUBSECTION 10.5(b). In any arbitration of a matter submitted to arbitration
pursuant to Subsection 10.5(b) the following shall apply:
(a) The arbitration shall be heard and determined by one impartial
arbitrator, chosen by the Members from a list of potential arbitrators
submitted to the Members by the AAA. The arbitrator shall be knowledgeable
concerning the mining industry and qualified by education, training and/or
experience in the subject matter of the issue to be arbitrated. The
arbitrator shall take an oath of impartiality prior to the commencement of
the hearing.
(b) The arbitration proceedings shall be conducted in accordance
with the Expedited Procedures of the Commercial Arbitration Rules, except
that:
(i) The list of potential arbitrators submitted to the
Members need not be limited to individuals on the National
Panel of Commercial Arbitrators.
(ii) The time for various procedures in the arbitration shall
be as follows:
(A) Appointment of arbitrator - lists of potential
arbitrators shall be returned to the AAA by the
Members within ten (10) days after mailing of the
lists.
(B) Objection to the appointment of an arbitrator
within two (2) days after receipt of notice of
appointment.
(C) Hearing - within fifteen (15) days after the
appointment of the arbitrator, to be completed on
consecutive days within ten (10) days after its
commencement.
(D) Award - within ten (10) days after the close of
the hearing.
(c) There shall be no discovery as part of or in connection with
any arbitration conducted pursuant to Subsection 10.5(b), and the Members
hereby irrevocably waive all rights to conduct discovery.
(d) The demand shall specify the Program and Budget which the
Member wishes adopted for the ensuing period. The other Member shall, within
ten (10) days after receipt of such a demand, notify the Member initiating
the arbitration and the AAA of the
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Program and Budget it wishes to have adopted for the ensuing period.
(e) The arbitrator shall be limited to selecting, as the only
remedy or relief that may be awarded, the Program and Budget proposed in
accordance with Subsection 18.3(d) by one or the other of the Members. The
arbitrator shall not effect a compromise or award any relief or remedy, and
shall have no authority to award any type or form of damages.
Notwithstanding the foregoing, the arbitrator shall be authorized to impose
sanctions for abuse or frustration of the arbitration process.
(f) The arbitrator shall award to the Member whose proposed
Program and Budget is selected by the arbitrator all of its pre-award costs
of arbitration, including the arbitrator's fee, administrative and other fees
paid to the AAA, witness fees, experts fees, travel expenses, and its
attorneys' fees.
(g) In determining which of the Members' proposed Programs and
Budgets to adopt, the arbitrator shall determine which proposal would better
contribute to the reasonable, prudent and efficient Exploration Development
and Mining of the Properties, or Processing of ores, as the case may be,
consistent with the purposes of the Company set forth in Section 3.1. The
financial condition or business plans of the Members shall not be deemed
relevant or considered in the arbitrator's determination.
ARTICLE 19
MISCELLANEOUS PROVISIONS
19.1 NOTICES. All notices, demands and other required or permitted
communications (each a "Notice") to either Member shall be in writing, and
shall be addressed respectively as follows:
If to Hecla: 6500 Mineral Drive,
Coeur d'Alene,
Idaho, 83814
Attention: VP General Counsel
Telephone: (208) 769-4100
Facsimile: (208) 769-7612
With a Copy to: V.P. Metal Mining
Telephone: (208) 769-4100
Facsimile: (208) 769-4107
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If to SFPG: 6200 Uptown Blvd. N.E., Suite 400
Albuquerque NM 87110
Attention: LeRoy E. Wilkes
Chief Operating Officer
Telephone: (505) 880-5300
Facsimile: (505) 880-5435
All Notices shall be given (a) by personal delivery to an officer of the
Member, or (b) by electronic communication, with a confirmation of
transmission sent by registered or certified mail return receipt requested,
(c) by registered or certified mail return receipt requested; or (d) by
nationally recognized overnight or other express courier service. All
Notices shall be effective and shall be deemed delivered on the date of
receipt if received during normal business hours, and, if not received during
normal business hours, on the next business day following receipt. Either
Member may change its address for Notice by Notice to the other Member.
19.2 APPLICATION OF DELAWARE LAW. This Agreement, and the
application of interpretation hereof, shall be governed exclusively by its
terms and by the Laws of the State of Delaware, and specifically the Act.
19.3 WAIVER OF ACTION FOR PARTITION. Each Member irrevocably
waives during the term of the Company any right that it may have to maintain
any action for partition with respect to the Properties.
19.4 AMENDMENTS. This Agreement may not be amended except by the
unanimous written agreement of all of the Members.
19.5 EXECUTION OF ADDITIONAL INSTRUMENTS. Each Member hereby
agrees to execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to comply
with any applicable Laws, rules or regulations.
19.6 CONSTRUCTION. Whenever the singular number is used in this
Agreement and when required by the context, the same shall include the plural
and vice versa, and the masculine gender shall include the feminine and
neuter genders and vice versa.
19.7 HEADINGS AND PRONOUNS. The headings in this Agreement are
inserted for convenience only and are in no way intended to describe,
interpret, define, or limit the scope, extent or intent of this Agreement or
any provision hereof.
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19.8 WAIVERS. The failure of any Member to seek redress for
violation of or to insist upon the strict performance of any covenant or
condition of this Agreement shall not prevent a subsequent act, which would
have originally constituted a violation, from having the effect of an
original violation. All waivers of rights under this Agreement shall be in
writing, identified as a waiver and signed by the Member who is waiving the
rights.
19.9 RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies
provided by this Agreement are cumulative and in addition to any other rights
the parties may have by Law or otherwise. The use of any one right or remedy
by any Member shall not preclude or waive the right to use any or all other
remedies, provided that multiple recovery of loss or damage shall not occur.
19.10 SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid, illegal
or unenforceable to any extent, the remainder of this Agreement and the
application there of shall not be affected and shall be enforceable to the
fullest extent permitted by Law.
19.11 SUCCESSORS AND ASSIGNS. Each and all of the covenants,
terms, provisions and agreements herein contained shall be binding upon and
inure to the benefit of the Members and, to the extent permitted by this
Agreement, their respective successors and assigns.
19.12 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument.
19.13 FORCE MAJEURE. Except for the obligation to make payments
when due hereunder, the obligations of a Manager shall be suspended to the
extent and for the period that performance is prevented by any cause, whether
foreseeable or unforeseeable, beyond its reasonable control, including,
without limitation, labor disputes (however arising and whether or not
employee demands are reasonable or within the power of the Manager to grant);
acts of God; Laws, instructions or requests of any government or governmental
entity; judgments or orders of any court; inability to obtain on reasonably
acceptable terms any public or private license, permit or other
authorization; curtailment or suspension of activities to remedy or avoid an
actual or alleged, present or prospective violation of federal, state or
local environmental standards; action or inaction by any federal state or
local agency that delays or prevents the issuance or granting of any approval
or authorization required to conduct Operations beyond the reasonable
expectations of the Manager; acts of war or conditions arising out of or
attributable to war, whether declared or undeclared; riot, civil strife,
insurrection or rebellion; fire, explosion, earthquake, storm, flood, sink
holes, drought or other adverse
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weather condition; delay or failure by suppliers or transporters of
materials, parts, supplies, services or equipment or by contractors' or
subcontractors' shortage of, or inability to obtain, labor, transportation,
materials, machinery, equipment, supplies, utilities or services; accidents;
breakdown of equipment, machinery or facilities; actions by native rights
groups, environmental groups, or other similar special interest groups; or
any other cause whether similar or dissimilar to the foregoing ("Force
Majeure"). If an event of Force Majeure occurs, the Manager shall promptly
give Notice to the Company of the suspension of performance, stating therein
the nature of the suspension, the reasons therefor, and the expected duration
thereof. The affected Manager shall resume performance as soon as reasonably
possible.
19.14 RULE AGAINST PERPETUITIES. The Members intend that the Rule
Against Perpetuities (and any similar rule of law) not be applicable to any
provisions of this Agreement.
19.15 INVESTMENT REPRESENTATIONS. The Members understand (1) that
the Ownership Interests evidenced by this Agreement have not been registered
under the Securities Act of 1933 or any state securities laws (the
"Securities Acts") because the Company is issuing these Ownership Interests
in reliance upon the exemptions from the registration requirements of the
Securities Acts providing for issuance of securities not involving a public
offering, (2) that the Company has relied upon the fact that the Ownership
Interests are to be held by each Member for investment, and (3) that
exemption from registrations under the Securities Acts would not be available
if the Ownership Interests were acquired by a Member with a view to
distribution.
Accordingly, each Member hereby confirms to the Company and each
other Member that such Member is acquiring the Ownership Interests for such
own Member's account, for investment and not with a view to the resale or
distribution thereof. Neither Member shall Transfer or offer to Transfer any
of portion of the Ownership Interests unless there is an effective
registration or other qualification relating thereto under the Securities
Acts or unless the holder of Ownership Interests delivers to the Company an
opinion of counsel, satisfactory to the Company, that such registration or
other qualification under the Securities Acts is not required in connection
with such Transfer or offer. Each Member acknowledges that the Company is
under no obligation to register the Ownership Interests or to assist such
Member in complying with any exemption from registration under the Securities
Acts if such Member should at a later date, wish to dispose of the Ownership
Interest. Furthermore, each Member realizes that the Ownership Interests are
unlikely to qualify for disposition under Rule 144 of the Securities and
Exchange Commission unless such Member is not an "affiliate" of the Company
and the Ownership Interest has been beneficially owned and fully paid for by
such Member for at least three (3) years.
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Each Member, prior to acquiring an Ownership Interest, has made an
investigation of the Company and its proposed business, and has had made
available to each such Member all information with respect thereto which such
Member needed to make an informed decision to acquire the Ownership Interest.
Each Member considers itself to possess experience and sophistication as an
investor which are adequate for the evaluation of the merits and risks of
such Member's investment in the Ownership Interest.
IN WITNESS WHEREOF, the Members have executed this Agreement as of
the year and date first above written.
Santa Fe Pacific Gold Corporation
/s/ Bruce D. Hansen
--------------------------------------------
Senior Vice President, Corporate Development
--------------------------------------------
Hecla Mining Company
/s/ Roger A. Kauffman
---------------------------------------------
Executive Vice President & Chief Operating Officer
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