Exhibit 10.5
MANAGEMENT SERVICES AGREEMENT
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MANAGEMENT SERVICES AGREEMENT, dated as of October 22, 1996 (this
"Agreement"), among Apex Silver Mines Corporation, a corporation organized and
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existing under the laws of the State of Delaware with its principal office in
Denver, Colorado ("Apex Corporation") and each of the Persons from time to time
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a signatory hereto.
W I T N E S S E T H :
WHEREAS, Apex Silver Mines Limited, an exempted limited liability
company organized and existing under the laws of the Cayman Islands ("Apex
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Limited"), is the majority shareholder of Apex Silver Mines LDC, an exempted
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limited duration company organized and existing under the laws of the Cayman
Islands ("Apex LDC"), and Apex LDC, directly or indirectly, controls the
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Subsidiaries which are engaged in mining exploration and development activities
throughout the world;
WHEREAS, the Apex Group requires advice and assistance with respect to
its management, administration and business operations, including, without
limitation, management services, financial advice and strategic planning;
WHEREAS, Apex Corporation maintains a staff of highly skilled and
experienced mining industry personnel;
WHEREAS, each entity comprising the Apex Group wishes to engage Apex
Corporation to provide, or arrange for other Persons to provide, certain
advisory, administrative and management services to the Apex Group, and Apex
Corporation wishes to provide, or arrange for other Persons to provide, such
services to the Apex Group as set forth in this Agreement; and
NOW, THEREFORE, in consideration of the mutual covenants and conditions
set forth herein and other good and valuable consideration, the parties hereto
hereby agree as follows:
1. Definitions. Unless otherwise defined herein, all capitalized terms
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shall have the meanings set forth in this Section 1.
"Apex Group" means Apex Limited, Apex LDC and each of the
Subsidiaries from time to time a signatory to this Agreement.
"Code" means the U.S. Internal Revenue Code of 1986, as amended, and
the applicable regulations promulgated thereunder.
"Operating Guidelines" means the operating guidelines attached to
this Agreement as Annex A, as the same may be amended from time to time by the
written agreement of the parties hereto.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Subsidiaries" means each of the entities directly or indirectly
owned or controlled by Apex LDC and set forth in the table attached hereto as
Annex B.
2. Appointment. Each member of the Apex Group hereby engages Apex
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Corporation to provide certain management, advisory and administrative services
consistent with the authority and duties set forth in Sections 3 and 4 hereof
for the period and on the terms set forth in this Agreement. Apex Corporation
accepts such engagement to render the services herein set forth for the
compensation herein provided. The Apex Group may request Apex Corporation to
render services in addition to the services to be provided pursuant to this
Agreement and Apex Corporation agrees to use its best efforts to comply with
such requests. Such additional services shall be provided pursuant to one or
more agreements independent of this Agreement; Apex Corporation shall be
compensated for any and all services provided pursuant to such separate
agreements on the terms and subject to the conditions of such separate
agreements.
3. Authority of Apex Corporation. The Apex Group hereby engages Apex
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Corporation on the terms and conditions set forth herein as its independent
consultant to provide certain management, advisory and administrative services
to the Apex Group in connection with the Apex Group's business operations. Apex
Corporation and the Apex Group hereby acknowledge and agree that Apex
Corporation is engaged by the Apex Group solely as a consultant and that, except
as specifically provided for in the Operating Guidelines, Apex Corporation shall
have no authority to conclude contracts or execute other documents in the name
or on behalf of any of the entities in the Apex Group. Any other provision of
this Agreement notwithstanding, Apex Corporation shall use its reasonable
efforts to perform its obligations and duties hereunder in accordance with the
Operating Guidelines which are made part of this Agreement by reference and are
annexed hereto, where applicable, but in no event shall Apex Corporation be
required to take any action or suffer any omission that would violate the
Operating Guidelines. The parties hereto hereby agree that the preceding
sentence is a material term of this Agreement.
4. Duties of Services Company. Apex Corporation will provide
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management, advisory and administrative services in connection with Apex Group's
business operations to each of the entities in the Apex Group, on an as needed
basis, which will include, without limitation, the following:
(i) searching for and identifying investment opportunities for
the Apex Group;
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(ii) evaluating investment opportunities, once identified,
for the Apex Group;
(iii) evaluating and making recommendations regarding
existing investments of the Apex Group;
(iv) making recommendations with respect to the Apex Group's
exploration and development activities and strategy and presenting such
recommendations to the boards of directors of the Apex Group;
(v) staffing in sufficient numbers and with individuals
with such expertise as is necessary to carry out the duties of Apex
Corporation;
(vi) providing on-going monitoring of the Apex Group's
activities;
(vii) providing on-going advice in connection with sales of
personal property by the Apex Group;
(viii) providing the Apex Group with information and advice
relating to the Apex Group's cash and portfolio of investments;
(ix) providing advice in connection with documenting
contractual and financing arrangements; and
(x) providing financial services, including, without
limitation, (A) assisting the Apex Group with respect to raising equity
or debt capital, (B) assisting each Apex Group member in preparing and
maintaining at such member's principal office books and accounting
reports, budgets and forecasts, (C) providing tax advice and (D)
providing advice regarding debt collection.
Apex Corporation may retain third-party consultants to carry out its
obligations hereunder if Apex Corporation, in its discretion, deems such
consultants necessary, desirable or advisable.
In addition, Apex Corporation shall promptly submit or cause to be
submitted to the Apex Group such reports of the operations, assets and
liabilities of the Apex Group as the Apex Group shall from time to time
reasonably request.
5. Remuneration.(a) In consideration for the services to be rendered by
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Apex Corporation pursuant to this Agreement, Apex Corporation shall receive a
fee in an amount equal to the direct and indirect costs incurred by Apex
Corporation in providing such services to the Apex Group (including, without
limitation, personnel costs, travel and expenses for fees and disbursements of
third parties and all overhead expenses), plus ten percent (10%) of such costs
(such fee, the "Service Fee").
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(b) Unless paragraph 5(c) applies, the Service Fee shall be allocated
to each entity comprising the Apex Group in the following manner: time devoted
to any specific Apex Group entity and time devoted to the Apex Group as a whole.
(c) The parties hereby agree that if a method of allocating and
apportioning the Service Fee among the members of the Apex Group exists that is
more appropriate than the method set forth in paragraph 5(b) above, such method
shall be implemented and this Agreement shall be modified accordingly. Factors
to be considered in establishing a different method of allocation and
apportionment shall include, total expenses, asset size, sales, payroll and the
level of expertise of each Apex Group member.
(d) Apex Corporation shall establish and maintain a system that
identifies all costs related to the services provided under this Agreement. The
Apex Group or a mutually agreed upon certified public accountant shall have
access, at all reasonable times, to the accounts and records maintained by the
Apex Corporation which are relevant for the determination of the Service Fee.
(e) The Service Fee shall accrue from the date hereof. Apex shall
invoice Apex LDC for the Service Fee and such Service Fee shall be payable by
Apex LDC (on behalf of any and all relevant Apex Group entities) monthly, in
arrears. The Service Fee payable for any period of less than a full calendar
month shall be the prorated portion thereof for the actual number of days.
(f) In the event that Apex Corporation needs an advance with respect
to the Service Fee in order to render the services set forth herein to the Apex
Group, such advance shall be provided to Apex Corporation upon the consent of
the board of directors of Apex Limited. Such advance shall be credit against
the future monthly Service Fee payable by Apex LDC (on behalf of any and all
relevant Apex Group entities) in a manner mutually agreeable by the parties.
(g) The parties hereto agree that the documentation as required
pursuant to Sections 6038A and 6662(e) of the Code shall be prepared as soon as
practicable and be maintained in order to establish and support the Service Fee.
6. Non-Exclusivity. Nothing in this Agreement shall be construed to
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restrict Apex Corporation's ability to provide services to parties other than
members of the Apex Group, provided that if any such services rendered to a
party other than a member of the Apex Group are similar to the services rendered
to members of the Apex Group under this Agreement, the provision of such
services shall require the prior consent of the board of directors of Apex
Limited.
7. Exculpation and Indemnification of Apex Corporation. (a) To the
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fullest extent permitted by law, none of Apex Corporation or its officers,
directors or employees (each an "Exculpated Party") shall be liable to the Apex
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Group for (i) any act or omission taken or suffered by such Exculpated Party in
connection with the conduct of the business of the Apex Group in connection with
this Agreement, (ii) the rendering of advice to the Apex Group, (iii) the
provision of other services by such Exculpated Party in accordance herewith,
(iv) any
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action or omission taken or suffered by the Apex Group; provided, that such
limitation from any liability shall not apply to any Exculpated Party that is
not a natural person to the extent of any such Exculpated Party's gross
negligence, willful misconduct or bad faith (or the gross negligence, willful
misconduct or bad faith of any shareholder, member, officer, director or
employee of such Exculpated Party) in complying with the material terms of this
Agreement. To the extent that, at law or in equity, any Exculpated Party has
duties (including fiduciary duties) and liabilities relating thereto to the Apex
Group, such Exculpated Party acting under this Agreement shall not be liable to
the Apex Group for its good faith reliance on the provisions of this Agreement.
The provisions of this Agreement, to the extent that they restrict the duties
and liabilities of an Exculpated Party otherwise existing at law or in equity,
are agreed by the parties hereto to modify to that extent such other duties and
liabilities of such Exculpated Party.
(b) An Exculpated Party may consult with legal counsel, accountants or
professional advisors selected by it with reasonable care, and any act or
omission taken or suffered by it on behalf of the Apex Group in furtherance of
the business of the Apex Group in good faith in reliance on and in accordance
with the advice of such counsel, accountants or professional advisors shall be
full justification for the act or omission, and the Exculpated Party shall be
fully protected in so acting or omitting to act provided such counsel,
accountants or professional advisors were selected with reasonable care.
(c) Subject to Section 7(e) hereof, to the fullest extent permitted by
law, Apex LDC shall indemnify and save harmless Apex Corporation, and its
officers, directors or employees (each, an "Indemnified Party") from and against
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any and all claims, liabilities, damages, losses, costs and expenses (including
amounts paid in satisfaction of judgments, in compromises and settlements, as
fines and penalties and legal or other costs and expenses of investigating or
defending against any claim or alleged claim but excluding any liabilities for
taxes of any Indemnified Party) of any nature whatsoever, known or unknown,
liquidated or unliquidated, that are incurred by such Indemnified Party and
arise out of or in connection with the business of the Apex Group or the
performance by such Indemnified Party of its responsibilities hereunder
(including, without limitation, those that arise out of or in connection with
the employment by Apex Corporation of advisors, agents or other third parties to
assist Apex Corporation in the performance of its duties pursuant to this
Agreement) (each of the foregoing, a "Claim"); provided, that an Indemnified
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Party shall not be entitled to indemnification hereunder to the extent such
Claim arises from such Indemnified Party's gross negligence, willful misconduct
or bad faith with respect to material terms of this Agreement. The termination
of any proceeding by settlement, judgment, order or upon a plea of nolo
contendere or its equivalent shall not, of itself, create a presumption that an
Indemnified Party was grossly negligent or engaged in willful misconduct or bad
faith. Any Person entitled to indemnification from Apex LDC hereunder shall
obtain the written consent of Apex LDC (which consent shall not be unreasonably
withheld) prior to entering into any agreement or settlement which would result
in an obligation of the Apex Group to indemnify such Person; provided, that any
Person entitled to indemnification hereunder may enter into an agreement or
settlement without the written consent of Apex LDC on the condition that the
right of such Indemnified Party to indemnification by Apex LDC is irrevocably
waived.
(d) Expenses incurred by an Indemnified Party in defense or settlement
of any Claim that may be subject to a right of indemnification hereunder may be
advanced by
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Apex prior to the final disposition thereof upon receipt of an undertaking by or
on behalf of the Indemnified Party to repay such amount to the extent that it
shall be determined ultimately that such Indemnified Party is not entitled to be
indemnified hereunder. The right of any Indemnified Party to the indemnification
provided herein shall be cumulative of, and in addition to, any and all rights
to which such Indemnified Party may otherwise be entitled by contract or as a
matter of law or equity and shall be extended to such Indemnified Party's
successors, assigns and legal representatives.
(e) Promptly after receipt by an Indemnified Party of notice of the
commencement of any action or proceeding or threatened action or proceeding in
connection with any Claim referred to in Section 7(c), such Indemnified Party
shall give written notice thereof to the Apex Group; provided, that the failure
of an Indemnified Party to give such notice shall not relieve Apex LDC of its
obligations pursuant to Section 7(c) hereof, except to the extent that the Apex
Group is actually prejudiced by such failure to give notice.
(f) In case any action or proceeding is commenced against any
Indemnified Party which may be subject to indemnification pursuant to this
Section 7, the Apex Group shall have the right to assume the defense thereof,
with counsel reasonably satisfactory to such Indemnified Party. After notice
from Apex LDC to such Indemnified Party of Apex LDC's election to assume the
defense thereof, Apex LDC will be liable for the expenses subsequently incurred
by such Indemnified Party in connection with the defense thereof. Apex LDC will
not consent to the entry of any judgment or enter into any settlement which does
not include as an unconditional term the giving to such Indemnified Party a
release from all liability in respect of such Claim.
(g) Any person who is not a party to this Agreement may be required,
prior to being paid any amount under this Section 7, to agree to the provisions
of this Section 7 applicable to Indemnified Parties.
(h) Any claims which may be the subject of a right of indemnification
pursuant to this Section 7 shall be subject to verification by an independent
accountant acceptable both to the party giving and the party receiving
indemnification.
8. Term and Termination. (a) This Agreement shall become effective as
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of October 22, 1996 and shall remain in full force and effect until the date of
termination or removal pursuant to subsections 8(b) and 8(c) below.
(b) The Apex Group may terminate this Agreement or remove Apex
Corporation at any time upon 30 days' written notice to Apex Corporation
delivered in accordance with the provisions of Section 11 hereof.
(c) Apex Corporation may terminate this Agreement at any time by
delivering to Apex LDC (with a copy to Apex Limited's Board of Directors) a
notice to that effect (the "Resignation Notice"). Apex Corporation's
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resignation shall be effective on the 90th day following the receipt of the
Resignation Notice by Apex LDC (the "Resignation Date").
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(d) If the Resignation Date is a date other than the end of a calendar
month, at the start of the calendar month in which the Resignation Date will
occur, Apex LDC shall pay to Apex Corporation the amount of its Services Fee
allocable to that portion of the calendar month which is prior to the
Resignation Date.
(e) The provisions of Section 7 shall survive the termination of this
Management Services Agreement.
9. Independent Contractor Status. This Agreement is intended to
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create, and creates, a contractual relationship for services to be rendered by
Apex Corporation acting in the ordinary course of its business as independent
contractor and is not intended to create, and does not create, a partnership,
joint venture or any like relationship among the parties hereto (or any other
parties).
10. Arbitration. Any dispute or disagreement which may arise under, or
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as a result of, or in any way relate to, the interpretation, construction or
application of this Agreement shall be determined by binding arbitration. The
parties may agree to submit the matter to a single arbitrator or to several
arbitrators, may require that arbitrators possess special qualifications or
expertise or may agree to submit a matter to a mutually acceptable firm of
experts for decision. In the event the parties shall fail to thus agree upon
terms of arbitration within twenty (20) days from the first written demand for
arbitration, then such disputed matter shall be settled by arbitration under the
Rules of the American Arbitration Association, by three arbitrators appointed in
accordance with such Rules. Such arbitration shall be held in New York, New
York. Once a matter has been submitted to arbitration pursuant to this section,
the decision of the arbitrators reached and promulgated as a result thereof
shall be final and binding upon all parties. The cost of arbitration shall be
shared equally by Apex Limited and the Consultant and each party shall pay the
expenses of its attorneys, except that the arbitrators shall be entitled to
award the costs of arbitration, attorneys' and accountants' fees, as well as
costs, to the party that they determine to be the prevailing party in any such
arbitration.
11. Notices. All notices, demands and requests shall be sent to the
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following addresses, or such other addresses as may be provided by the parties
hereto from time to time:
If to Apex Limited or Apex LDC:
Apex Silver Mines Limited/Apex Silver Mines LDC (as applicable)
Caledonian House
Mary Street, P.O. Box 1043
George Town, Grand Cayman
Cayman Islands, B.W.I.
Attention: Board of Directors
Telephone: (345) 949-0050
Facsimile: (345) 949-8062
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If to Apex Corporation:
Apex Silver Mines Corporation
1 Norwest Center, Suite 3050
1700 Lincoln Street
Denver, Colorado 80203
Attention: Mr. Gregory G. Marlier
Telephone: (303) 839-5060
Facsimile: (303) 839-5907
If to any of the Apex Group entities other than Apex Limited or Apex LDC,
to such address or addresses as such entities may from time to time designate to
Apex Corporation.
12. Service Mark. Apex LDC hereby grants Apex Corporation a non-
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exclusive royalty-free right to the use in the course of its business solely as
it relates to the Apex Group, the service mark that has been developed by Apex
LDC for the Apex Group. Apex Corporation acknowledges that Apex LDC intends to
register this mark with the appropriate authorities in the United States and in
the countries in which the Apex Group operate. The parties agree that Apex
Corporation shall not acquire any other rights to the service mark other than
those set forth herein. Apex LDC and Apex Corporation further agree and
acknowledge that the right conveyed by this Section 12 is limited to such period
as this Agreement shall remain in effect, and may be revoked by Apex LDC at any
time.
13. Miscellaneous. (a) This Agreement contains the entire agreement
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between the parties hereto and may be modified only by a written agreement
signed by the parties hereto. The Apex Group and Apex Corporation agree to
review the terms of this Agreement, particularly as to the adequacy of the
Service Fee and the allocation of such fee among the Apex Group entities, and
the royalty-free right to use the service mark, from time to time upon the
request of any party hereto. In the event any of the parties hereto determine
that any of the terms of the Agreement should be modified, the parties hereto
hereby agree to use their best efforts to revise such terms accordingly.
(b) This Agreement may not be assigned by any party without the
prior written consent of the other parties.
(c) Subject to the foregoing, this Agreement shall inure to the
benefit of and be binding upon the parties hereto and their successors and
assigns.
(d) This Agreement shall be governed by and construed in accordance
with the law of the State of New York.
(e) This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
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(f) If any term or provision hereof, or the application thereof to any
Person or circumstance, shall to any extent be contrary to any applicable
exchange or government regulation or otherwise invalid or unenforceable, the
remainder of this Agreement or the application of such term or provision to
Persons or circumstances other than those as to which it is contrary, invalid,
or unenforceable shall not be affected thereby and, to the extent consistent
with the overall intent hereof as evidenced by this Agreement, shall be
enforceable to the fullest extent permitted by applicable regulation and law.
(g) All books and records of Apex Corporation shall be audited by a
recognized international independent certified public accounting firm.
(h) The parties hereby agree that Apex Corporation will be designated
as agent for the Apex Group for purposes of receiving service of process [in the
United States]. In the event that Apex Corporation receives service of process
on behalf of a member of the Apex Group, Apex Corporation shall forward such
documentation to the appropriate Apex Group member.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the date hereinabove written.
APEX SILVER MINES CORPORATION
By: /s/ Thomas S. Kaplan
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Name: Thomas S. Kaplan
Title: Director
APEX SILVER MINES LDC
By: /s/ Thomas S. Kaplan
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Name: Thomas S. Kaplan
Title: Director
APEX SILVER MINES LIMITED
By: /s/ Thomas S. Kaplan
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Name: Thomas S. Kaplan
Title: Director
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ANDEAN SILVER MINES CORPORATION LDC
By: /s/ Thomas S. Kaplan
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Name: Thomas S. Kaplan
Title: Director
APEX ASIA LDC
By: /s/ Thomas S. Kaplan
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Name: Thomas S. Kaplan
Title: Director
APEX PARTNERS LDC
By: /s/ Thomas S. Kaplan
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Name: Thomas S. Kaplan
Title: Director
ASC BOLIVIA LDC
By: /s/ Thomas S. Kaplan
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Name: Thomas S. Kaplan
Title: Director
ASC PARTNERS LDC
By: /s/ Thomas S. Kaplan
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Name: Thomas S. Kaplan
Title: Director
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ASC PERU LDC
By: /s/ Thomas S. Kaplan
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Name: Thomas S. Kaplan
Title: Director
ASM HOLDINGS LIMITED
By: /s/ Thomas S. Kaplan
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Name: Thomas S. Kaplan
Title: Director
COMPANIA MINERALES DE ZACATECAS,
S. DE R.L. DE C.V.
By: /s/ Thomas S. Kaplan
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Name: Thomas S. Kaplan
Title: Director
COMPANIA METALURGICA BARONES, S. DE R.L.
DE C.V.
By: /s/ Thomas S. Kaplan
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Name: Thomas S. Kaplan
Title: Director
COMPANIA METALURGICA LARGO, S. DE R.L.
DE C.V.
By: /s/ Thomas S. Kaplan
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Name: Thomas S. Kaplan
Title: Director
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CORDILLERAS SILVER MINES LTD.
By: /s/ David Sean Hanna
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Name: David Sean Hanna
Title: Director
CORDILLERAS SILVER MINES (CAYMAN) LDC
By: /s/ Thomas S. Kaplan
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Name: Thomas S. Kaplan
Title: Director
KUMUSHTAK MANAGEMENT COMPANY
By: /s/ Alexander Novak
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Name: Alexander Novak
Title: Director
MINERA DE CORDILLERAS, S. DE R.L. DE C.V.
By: /s/ Thomas S. Kaplan
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Name: Thomas S. Kaplan
Title: Director
MINERA DE CORDILLERAS (HONDURAS),
S. DE R.L.
By: /s/ Thomas S. Kaplan
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Name: Thomas S. Kaplan
Title: Director
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