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EXHIBIT A
RESTATED MINING VENTURE AGREEMENT
AMONG
KENNECOTT GREENS CREEK MINING COMPANY
HECLA MINING COMPANY
AND
CSX ALASKA MINING INC.
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TABLE OF CONTENTS
ARTICLE Page No.
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I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
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1.1 "Accounting Procedure" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 "Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 "Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 "Area of Interest" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 "Assets" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 "Available Cash from Operations" . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 "Beginning Equity Account Balance" . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8 "Budget" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.9 "Budgetary Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.10 "Capital" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.11 "Capital Budget" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.12 "Carried Participant" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.13 "Carrying Participant" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.14 "Component" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.15 "Cover Payment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.16 "Development" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.17 "Diluting Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.18 "Diluting Participant" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.19 "Effective Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.20 "Equity Account Balance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.21 "Exploration" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.22 "Exploration Budget" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.23 "Joint Account" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.24 "Liabilities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.25 "Lienholder" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.26 "Management Committee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.27 "Manager" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.28 "Mine and Mill Expansion Project" . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.29 "Mining" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.30 "Net Proceeds" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.31 "New Ore Reserve Area" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.32 "Non-Diluting Participant" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.33 "Norbritex Properties" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.34 "Operating Budget" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.35 "Operating Expenses" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.36 "Operations" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.37 "Participant" and "Participants" . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.38 "Participating Interest" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.39 "Prime Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.40 "Products" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.41 "Program" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.42 "Project Financing" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.43 "Properties" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.44 "Relative Interest" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.45 "Revenue" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
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ARTICLE Page No.
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1.46 "Separate Capital Projects" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.47 "Shutdown Budget" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.48 "Southwest Extension Ore Zone Development Project" . . . . . . . . . . . . . . . . . 7
1.49 "Sustaining Capital" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.50 "Transfer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.51 "Venture" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.52 "West Ore Zone Development Project" . . . . . . . . . . . . . . . . . . . . . . . . . 7
II REPRESENTATIONS AND WARRANTIES; TITLE TO ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
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2.1 Capacity of Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
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2.2 Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
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2.3 Record Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
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2.4 Joint Loss of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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III NAME, PURPOSES AND TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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3.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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3.3 Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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3.4 Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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3.5 Effective Date and Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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IV RELATIONSHIP OF THE PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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4.1 No Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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4.2 Federal and State Tax Elections and Allocations . . . . . . . . . . . . . . . . . . . 10
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4.3 Other Business Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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4.4 Waiver of Right to Partition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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4.5 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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4.6 Transfer or Termination of Rights to Properties . . . . . . . . . . . . . . . . . . . 11
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4.7 Implied Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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V CONTRIBUTIONS BY PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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5.1 Beginning Equity Account Balances . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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5.2 Additional Cash Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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VI INTERESTS OF PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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6.1 Initial Participating Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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6.2 Changes in Participating Interests . . . . . . . . . . . . . . . . . . . . . . . . . 12
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6.3 Voluntary Reduction in Participation . . . . . . . . . . . . . . . . . . . . . . . . 12
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6.4 Default in Making Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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6.5 Elimination of Minority Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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6.6 Continuing Liabilities Upon Adjustments of Participating Interests . . . . . . . . . 18
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VII MANAGEMENT COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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7.1 Organization and Composition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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7.2 Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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7.3 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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7.4 Action Without Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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7.5 Matters Requiring Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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ARTICLE Page No.
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VIII MANAGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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8.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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8.3 Standard of Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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8.4 Resignation; Deemed Offer to Resign . . . . . . . . . . . . . . . . . . . . . . . . . 24
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8.5 Payments to Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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8.6 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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IX PROGRAMS AND BUDGETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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9.1 Operations Pursuant to Programs and Budgets . . . . . . . . . . . . . . . . . . . . . 25
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9.2 Contents of Programs and Budgets . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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9.3 Presentation of Programs and Budgets . . . . . . . . . . . . . . . . . . . . . . . . 26
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9.4 Review of and Vote on Proposed Programs and Budgets . . . . . . . . . . . . . . . . . 26
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9.5 Votes Required for Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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9.6 Reconsideration of Capital Budgets . . . . . . . . . . . . . . . . . . . . . . . . . 28
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9.7 Separate Capital Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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9.8 Election to Participate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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9.9 Deadlock on Proposed Programs and Budgets . . . . . . . . . . . . . . . . . . . . . . 30
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9.10 Budget Overruns; Program Changes . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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9.11 Emergency Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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X ACCOUNTS AND SETTLEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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10.1 Monthly Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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10.2 Cash Calls and Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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10.3 Failure to Meet Cash Calls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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XI DISPOSITION OF PRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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11.1 Taking in Kind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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11.2 Failure of Participant to Take in Kind . . . . . . . . . . . . . . . . . . . . . . . 33
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11.3 Sale of Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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XII WITHDRAWAL AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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12.1 Breach of Agreement; Opportunity to Cure . . . . . . . . . . . . . . . . . . . . . . 34
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12.2 Termination by Expiration or Agreement . . . . . . . . . . . . . . . . . . . . . . . 35
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12.3 Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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12.4 Continuing Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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12.5 Disposition of Assets on Termination . . . . . . . . . . . . . . . . . . . . . . . . 35
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12.6 Non-Compete Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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12.7 Right to Data after Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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12.8 Continuing Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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XIII ACQUISITIONS WITHIN AREA OF INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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13.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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13.2 Notice to Nonacquiring Participant . . . . . . . . . . . . . . . . . . . . . . . . . 37
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13.3 Option Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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13.4 Option Partially Exercised or Not Exercised . . . . . . . . . . . . . . . . . . . . . 38
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13.5 Special Provisions Related To The Norbritex Properties . . . . . . . . . . . . . . . 38
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XIV ABANDONMENT AND SURRENDER OF PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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14.1 Surrender or Abandonment of Property . . . . . . . . . . . . . . . . . . . . . . . . 39
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14.2 Reacquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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ARTICLE Page No.
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XV TRANSFER OF INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
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15.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
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15.2 Limitations on Free Transferability . . . . . . . . . . . . . . . . . . . . . . . . . 40
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15.3 Preemptive Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
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15.4 Exceptions to Preemptive Right . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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15.5 Exception for CSX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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15.6 Exceptions for Greens Creek and Hecla . . . . . . . . . . . . . . . . . . . . . . . . 44
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XVI PROJECT FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
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16.1 Ownership, Transfer and Encumbrance of Participating Interests . . . . . . . . . . . 45
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16.2 Lienholder Rights and Obligations on Foreclosure . . . . . . . . . . . . . . . . . . 46
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16.3 Waiver of Preferential Purchase Right . . . . . . . . . . . . . . . . . . . . . . . . 47
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XVII CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
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17.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
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17.2 Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
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17.3 Disclaimers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
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17.4 Duration of Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
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XVIII GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
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18.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
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18.2 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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18.3 Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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18.4 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
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18.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
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18.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
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18.7 Rule Against Perpetuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
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18.8 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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18.9 Survival of Terms and Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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18.10 Entire Agreement; Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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18.11 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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18.12 Memorandum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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18.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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18.14 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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18.15 Binding Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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EXHIBITS
EXHIBIT A -
PART I - Properties
PART II - Area of Interest
EXHIBIT B - ACCOUNTING PROCEDURE
EXHIBIT C - SAMPLE DILUTION CALCULATION
EXHIBIT D - NET PROCEEDS CALCULATION
EXHIBIT E - INSURANCE
EXHIBIT F - SEPARATE CAPITAL PROJECTS
EXHIBIT G - CONFIDENTIALITY AGREEMENT
EXHIBIT H - NORBRITEX PROPERTIES
EXHIBIT I - MEMORANDUM OF MINING VENTURE AGREEMENT
EXHIBIT J - SAMPLE CARRY RECOVERY
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RESTATED MINING VENTURE AGREEMENT
THIS RESTATED MINING VENTURE AGREEMENT is executed to be effective as of
May 6, 1994 among KENNECOTT GREENS CREEK MINING COMPANY, a Delaware corporation
with an address of P.O. Box 32199, Juneau, Alaska 99803-2199 ("Greens Creek"),
HECLA MINING COMPANY, a Delaware corporation with an office at 6500 Mineral
Drive, Coeur d'Alene, Idaho 83814-8788 ("Hecla") and CSX ALASKA MINING INC., a
Delaware corporation with an office at One James Center, 901 East Cary
Street, Richmond, Virginia 23219 ("CSX"). Greens Creek, Hecla and CSX are
referred to in this Agreement individually as a "Participant" and collectively
as the "Participants."
RECITALS
A. On January 10, 1978, Marietta Resources Company, Ltd., Noranda
Exploration, Inc., Texas Gas Exploration Corporation, Exalas Resources
Corporation and Bristol Resources, Inc. executed the Green's Creek Joint Venture
Agreement (the "Venture Agreement") and entered into the Green's Creek Joint
Venture (the "Venture") for the purposes of development and exploitation of
minerals in certain properties situated in the Juneau Recording District,
Alaska, as more particularly described in Exhibit A to the Venture Agreement.
B. By various transfers of interest or name changes, the original
parties to the Venture Agreement assigned and transferred all of their right,
title, and interest in the Venture Agreement and the Venture to Greens Creek,
Hecla and CSX. Each of Greens Creek, Hecla and CSX assumed all of the duties
and obligations of its predecessors, and agreed to perform and be obligated by
all of the covenants and conditions of the Venture Agreement.
C. By documents denominated the First, Second, Fourth and Fifth
Amendments to the Venture Agreement, dated and effective as of December 31,
1981, January 1, 1982, October 1, 1984, and June 2, 1987, respectively, the
parties to the Venture Agreement amended the Venture Agreement. The Venture
Agreement, as amended, is referred to in this Agreement as the "Amended Venture
Agreement."
D. On January 1, 1981, Noranda Exploration, Inc., Texas Gas
Exploration Corporation, and Bristol Resources, Inc. entered into an Exploration
Joint Venture Agreement (the "Norbritex Venture Agreement"), creating the
venture known as the "Norbritex Venture," for the purpose of exploring certain
properties in the State of Alaska. Greens Creek and CSX Juneau Mining Inc., an
affiliate of CSX ("CSX Juneau"), are the successors in interest to the original
parties to the Norbritex Venture.
E. Greens Creek, Hecla and CSX, pursuant to authority given to it
by its affiliate, desire to integrate operations under the Norbritex Venture
with operations under the Venture. Greens Creek
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and CSX are willing to offer the Norbritex Venture and all properties and other
assets of the Norbritex Venture to the Venture.
F. Greens Creek, Hecla and CSX, the parties to the Amended Venture
Agreement, now desire to further amend and to restate the Amended Venture
Agreement as the Restated Green's Creek Mining Venture Agreement (the "Restated
Agreement"). By this action, Greens Creek, Hecla and CSX do not intend to
terminate or reconstitute the existing Venture or to do anything that would
otherwise affect its continuity.
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, Greens Creek, Hecla and CSX agree that the Amended Venture
Agreement is further amended and restated as provided in this Agreement. From
and after the Effective Date, the terms and provisions of this Agreement shall
supersede the terms and provisions of the Amended Venture Agreement and shall
govern and control all Operations of the Venture.
ARTICLE I
DEFINITION
1.1 "Accounting Procedure" means the procedures set forth in
Exhibit B.
1.2 "Affiliate" means any person, partnership, joint venture,
corporation or other form of enterprise which directly or indirectly controls,
is controlled by, or is under common control with, a Participant. For purposes
of the preceding sentence, "control" means possession, directly or indirectly,
of the power to direct or cause direction of management and policies through
ownership of voting securities, contract, voting trust or otherwise.
Notwithstanding the foregoing, Conzinc Riotinto of Australia Ltd. and United
States Borax and Chemical Corporation, and their respective subsidiaries, shall
not be deemed to be Affiliates of Greens Creek for purposes of Section 12.6 and
Article XIII.
1.3 "Agreement" means this Restated Agreement, including all
amendments and modifications thereof, and all schedules and exhibits, which are
incorporated herein by this reference.
1.4 "Area of Interest" means the area described in Part II of
Exhibit A.
1.5 "Assets" means the Properties, Products and all other real and
personal property, tangible and intangible, held for the benefit of the
Participants hereunder.
1.6 "Available Cash from Operations" means, for budgetary purposes,
the amount of Revenue anticipated to be generated from
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the sale or deemed sale of Products and the sale of other Assets of the Venture
less projected Operating Expenses and projected Sustaining Capital requirements
for the Budgetary Period. "Available Cash from Operations" means, for purposes
of determining the amount available for recovery by a Carrying Participant for
purposes of Section 9.6(b), the amount of Revenue actually generated from the
sale or deemed sale of Products and the sale of other Assets of the Venture
less actual Operating Expenses and actual Sustaining Capital requirements for
any Budgetary Period.
1.7 "Beginning Equity Account Balance" means, for each Participant,
the amount, in dollars, of the Equity Account of each Participant as established
by the final audited financial statement of the Venture, dated as of December
31, 1993. The Beginning Equity Account Balances are set forth in Section 5.1.
1.8 "Budget" means a detailed estimate of all costs to be incurred
by the Participants with respect to a Program and a schedule of cash advances to
be made by the Participants. The Budget shall include an Operating Budget, and
may include one or more Capital Budgets and an Exploration Budget.
1.9 "Budgetary Period" means the budgetary period established as to
any Component in a Program.
1.10 "Capital" means expenditures for property, plant and equipment
or mine development with a useful life of more than one year, required to
expand productive capacity or provide initial access to a New Ore Reserve Area.
Capital shall not include Sustaining Capital or expenditures for Exploration.
1.11 "Capital Budget" means a detailed estimate of all Capital
expenditures to be incurred by the Participants with respect to projects or
activities designed to define or to provide access to a New Ore Reserve Area or
to expand Operations beyond their then existing productive capacity.
1.12 "Carried Participant" means a Participant whose obligations
have been funded as provided in Sections 9.6 and 9.7.
1.13 "Carrying Participant" means a Participant that has funded the
obligations of another Participant as provided in Sections 9.6 and 9.7.
1.14 "Component" means a component of the Budget, such as a
Program, an Operating Budget or a Capital Budget.
1.15 "Cover Payment" means the payment described in Section 6.4(a).
1.16 "Development" means all preparation for the removal and
recovery of Products, including the construction or installation of
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a mill or any other improvements to be used for the mining, handling, milling,
processing or other beneficiation of Products.
1.17 "Diluting Date" means the date described in Section 6.3(a).
1.18 "Diluting Participant" means a Participant who elects not to
participate in an adopted Program and Budget to the full extent of its
Participating Interest as described in Section 6.3.
1.19 "Effective Date" means the date first written above.
1.20 "Equity Account Balance" means the balance in the account
established for each Participant as reflected on the books and records of the
Manager. The Equity Account for each Participant shall be deemed to be equal to
its Beginning Equity Account Balance and shall then be credited with the agreed
value of each Participant's contributions to the Venture after December 31, 1993
(net of liabilities assumed by the Participants and liabilities to which such
contributed property is subject), and each Participant's distributive share of
income and gain (or item thereof) from the Venture after December 31, 1993 .
Each Participant's Equity Account Balance shall likewise be charged with the
cash and the fair market value of property distributed to such Participant after
December 31, 1993 (net of liabilities assumed by such Participant and
liabilities to which such distributed property is subject), and such
Participant's distributive share of loss and deduction (or item thereof) after
December 31, 1993 . Contributions and distributions shall include all cash
contributions or distributions plus the deemed value (expressed in dollars) of
all in-kind contributions or distributions. Prior to any distribution of Assets
(in-kind or otherwise), the Equity Account Balance shall be adjusted for the
gain or loss which would be allocable to each Participant upon a disposition of
such assets for fair market value. All calculations of income, expense, gain,
loss, depletion, depreciation and amortization shall be based upon generally
accepted accounting principles in the United States, consistently applied by the
Manager.
1.21 "Exploration" means all activities directed toward ascertaining
the existence, location, quantity, quality or commercial value of deposits of
Products.
1.22 "Exploration Budget" means a detailed estimate of all
expenditures to be incurred by the Participants with respect to Exploration.
1.23 "Joint Account" means the account maintained in accordance with
the Accounting Procedure showing the charges and credits accruing to the
Participants.
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1.24 "Liabilities" means any and all claims, demands,
investigations, judgments, losses, liabilities, costs and expenses, including
reasonable attorneys' fees.
1.25 "Lienholder" means the holder of a lien as defined in Section
16.1(a).
1.26 "Management Committee" means the committee established under
Article VII.
1.27 "Manager" means the person or entity appointed under Article
VIII to manage Operations, or any successor Manager.
1.28 "Mine and Mill Expansion Project" means the project described
in Part III of Exhibit F.
1.29 "Mining" means the mining, extracting, producing, handling,
milling or other processing of Products.
1.30 "Net Proceeds" means certain amounts calculated as provided in
Exhibit D, a percentage of which may be payable to a Participant under Section
6.5.
1.31 "New Ore Reserve Area" means an ore body or potential ore body
not included in the Southwest Extension Ore Zone or the West Ore Zone, as those
ore zones are described in Parts I and II of Exhibit F.
1.32 "Non-Diluting Participant" means a Participant other than a
Diluting Participant as described in Section 6.3.
1.33 "Norbritex Properties" means those mining claims, leases and
other property rights owned by the Norbritex Venture that are described in
Exhibit H.
1.34 "Operating Budget" means a detailed estimate of all Operating
Expenses and Sustaining Capital expenditures to be incurred by the Participants
with respect to a Program.
1.35 "Operating Expenses" means expenditures for labor, material and
supplies and property, plant and equipment or mine development with a useful
life of less than one year that are required to conduct Operations and to
protect and to maintain the productive capacity of the Assets.
1.36 "Operations" means all activities carried out under this
Agreement consistent with the purposes described in Section 3.3.
1.37 "Participant" and "Participants" means the persons or entities
that from time to time have Participating Interests.
1.38 "Participating Interest" means the percentage interest
representing the operating ownership interest of a Participant in
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Assets, and all other rights and obligations arising under this Agreement, as
such interest may from time to time be adjusted hereunder. Participating
Interests shall be calculated to five decimal places and rounded to four (e.g.,
1.53619% rounded to 1.5362%). Decimals of 0.00005 or more shall be rounded up
to 0.0001, and decimals of less than 0.00005 shall be rounded down. The
initial Participating Interests of the Participants are set forth in Section
6.1.
1.39 "Prime Rate" means the interest rate published as the Prime
Rate in the "Money Rates" column of The Wall Street Journal, as said rate may
change from day to day, or if said column sets forth a range of rates on a
single day, the mean thereof. In the event The Wall Street Journal ceases to be
published or ceases to publish the Prime Rate, the Participants shall select an
alternative and mutually acceptable source which quotes an interest rate as the
Prime Rate.
1.40 "Products" means all ores, minerals and mineral resources
produced from the Properties under this Agreement.
1.41 "Program" means a description in reasonable detail of
Operations to be conducted and objectives to be accomplished by the Manager for
a Budgetary Period.
1.42 "Project Financing" means a financing to fund a Participant's
obligations under this Agreement, as arranged by a Participant as provided in
Section 16.1, or as arranged by the Manager as provided in Section 9.7(b).
1.43 "Properties" means those interests in real property described
in Part I of Exhibit A and all other interests in real property within
the Area of Interest which are acquired and held subject to this Agreement.
1.44 "Relative Interest" means the proportion that a Participant's
Participating Interest bears to the sum of the Participating Interests of all
other Participants that are participating in a particular transaction. For
example, if one Participant transfers its Participating Interest and two other
Participants elect to exercise their preemptive rights as provided in Article
XV, then the Relative Interest of each such electing Participant shall be equal
to the proportion that its Participating Interest bears to the sum of both of
such electing Participants' Participating Interests.
1.45 "Revenue" means the actual proceeds received, net of all costs
of sale, by the Manager from the sale of Products or other Assets of the
Venture or, where Products or other Assets are distributed in kind, the market
value of such Products or other Assets on the date of distribution. When revenue
is forecast for budgetary purposes, "Revenue" shall be based upon the proceeds
anticipated to be received from the sale of Products or other
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Assets or the anticipated market value of distributed Products or other Assets.
For budgetary purposes, Revenues anticipated to be received from the sale or
distribution of Products shall be derived from metals prices forecasts prepared
by The RTZ Corporation PLC for use by its affiliates in preparing annual
budgets, or if such forecasts are not prepared by The RTZ Corporation PLC, the
Manager's best estimates.
1.46 "Separate Capital Projects" means the Southwest Extension Ore
Zone Development Project, as more particularly described in Part I of Exhibit
F, the West Ore Zone Development Project, as more particularly described in Part
II of Exhibit F, and the Mine and Mill Expansion Project, as more particularly
described in Part III of Exhibit F.
1.47 "Shutdown Budget" means a budget for curtailing Operations
following the failure of the Management Committee to adopt an Operating Budget
as provided in Section 9.9. During any period in which a Shutdown Budget is in
effect, the Shutdown Budget will serve as the Operating Budget.
1.48 "Southwest Extension Ore Zone Development Project" means the
project described in Part I of Exhibit F.
1.49 "Sustaining Capital" means expenditures for property, plant and
equipment or mine development with a useful life of more than one year, required
to operate initially at nominal 1320 tons per day, and for future periods at the
then existing capacity. Sustaining capital includes replacement of equipment
and facilities, mine development including development drifting and in fill
drilling required to sustain mill feed (but excluding initial access to a New
Ore Reserve Area), and expenditures for compliance with environmental or safety
standards established by the Manager.
1.50 "Transfer" means sell, grant, assign, encumber, pledge or
otherwise commit or dispose of.
1.51 "Venture" means the business arrangement of the Participants
under this Agreement.
1.52 "West Ore Zone Development Project" means the project described
in Part II of Exhibit F.
ARTICLE II
REPRESENTATIONS AND WARRANTIES; TITLE TO ASSETS
2.1 Capacity of Participants. Each of the Participants
represents and warrants 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
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jurisdictions 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) that it will not breach any other agreement or arrangement by
entering into or performing this Agreement;
(d) that this Agreement has been duly executed and delivered by it and
is valid and binding upon it in accordance with its terms;
(e) that there are no pending or threatened actions, suits, claims,
notices of default or other proceedings with respect to its Participating
Interest or its interest in the Venture, the Properties or the Assets; and
(f) that its Participating Interest and its interest in the Venture,
the Properties and the Assets are free and clear of all defects, royalties,
liens (except liens arising as a matter of law), and other encumbrances, except
for those existing at the time the Venture was formed, those authorized by the
Management Committee, or those expressly identified in this Agreement.
2.2 Disclosures. Each of the Participants represents and
warrants that it is unaware of any material facts or circumstances which have
not been disclosed in this Agreement, which should be disclosed to any other
Participant in order to prevent the representations in this Article II from
being materially misleading.
2.3 Record Title. Title to the Properties and all other
Assets may be held by the Manager for the benefit of the Venture or by the
Participants as co-tenants for the benefit of the Venture. Upon request by any
Participant, and subject to any restrictions or limitations imposed by permits
or other applicable documents, each Participant shall provide to the Manager
such instruments in recordable form as are necessary to convey to the other
Participants an interest in the Properties and all other Assets equal to such
Participants' Participating Interests. The Manager shall distribute such
instruments to the Participants who shall then hold the Properties and other
Assets as co-tenants for the benefit of the Venture.
2.4 Joint Loss of Title. Any failure or loss of title to
the Assets, and all costs of defending title, shall be charged to the Joint
Account, except that all costs and losses arising out of or resulting from
breach of the representations and warranties of a Participant shall be charged
to that Participant or from a breach of the Manager's duty shall be charged to
the Manager.
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ARTICLE III
NAME, PURPOSES AND TERM
3.1 General. Greens Creek, Hecla and CSX hereby enter
into this Agreement for the purposes hereinafter stated, and they agree that
all of their rights in and to, and all of the Operations on or in connection
with, the Properties or the Area of Interest shall be subject to and governed
by this Agreement.
3.2 Name. The name of this Venture shall be the Green's
Creek Joint Venture. If not previously accomplished, the Manager shall make
any registration required by applicable assumed or fictitious name statutes and
similar statutes.
3.3 Purposes. This Agreement is entered into for the
following purposes and for no others, and shall serve as the exclusive means by
which the Participants, or any of them, accomplish such purposes:
(a) to conduct Exploration within the Area of Interest;
(b) to acquire additional properties within the Area of
Interest;
(c) to evaluate the possible Development of the
Properties;
(d) to engage in Development and Mining Operations on
the Properties;
(e) to engage in marketing Products, to the extent
permitted by Article XI; and
(f) to perform any other activity necessary, appropriate,
or incidental to any of the foregoing.
3.4 Limitation. Unless the Participants otherwise agree
in writing, the Operations shall be limited to the purposes described in
Section 3.3, and nothing in this Agreement shall be construed to enlarge such
purposes.
3.5 Effective Date and Term. The Effective Date of this
Agreement shall be the date first recited above. The term of this Agreement
shall be for 20 years from the Effective Date and for so long thereafter as
Products are produced from the Properties or the Participants continue to have
an ownership interest in the Assets, unless this Agreement is earlier
terminated as herein provided.
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ARTICLE IV
RELATIONSHIP OF THE PARTICIPANTS
4.1 No Partnership. Nothing contained in this Agreement
shall be deemed to constitute any Participant the partner of the others, nor,
except as otherwise herein expressly provided, to constitute any Participant
the agent or legal representative of the others, nor to create any fiduciary
relationship among them. It is not the intention of the Participants to
create, nor shall this Agreement be construed to create, any mining, commercial
or other partnership. No Participant shall have any authority to act for or to
assume any obligation or responsibility on behalf of the other Participants,
except as otherwise expressly provided herein. The rights, duties, obligations
and liabilities of the Participants shall be several and not joint or
collective. Each Participant shall be responsible only for its obligations as
herein set out and shall be liable only for its share of the costs and expenses
as provided herein, it being the express purpose and intention of the
Participants that their ownership of Assets and the rights acquired hereunder
shall be as tenants in common. Each Participant shall indemnify, defend and
hold harmless each other Participant and its Affiliates, its or their
directors, officers, employees, agents and attorneys from and against any and
all Liabilities arising out of any act or any assumption of liability by the
indemnifying Participant, or any of its directors, officers, employees, agents
and attorneys done or undertaken, or apparently done or undertaken, on behalf
of the other Participants, except pursuant to the authority expressly granted
herein or as otherwise agreed in writing among the Participants.
4.2 Federal and State Tax Elections and Allocations. The
Participants hereby agree to elect that this Agreement and all Operations
hereunder be excluded from the applications of the provisions of Subchapter K
of Chapter 1 of Subtitle A of the United States Internal Revenue Code of 1986,
as amended (the "Code"), and the similar provisions of applicable state law.
Each Participant agrees to effect this election pursuant to Section 761(a) of
the Code. Subject to the written approval of the Participants, the Manager
shall prepare and file any documents required to insure the Participants'
exclusion from Subchapter K and from similar provisions of applicable state
law.
4.3 Other Business Opportunities. Except as expressly
provided in this Agreement, each Participant shall have the right independently
to engage in and receive full benefits from business activities, whether or not
competitive with the Operations, without consulting the other. The doctrines
of "corporate opportunity" or "business opportunity" shall not be applied to
any other activity, venture, or operation of any Participant, and, except as
otherwise provided in Section 12.6, no Participant shall have any obligation to
the others with respect to any opportunity to acquire any property outside the
Area of Interest at any time, or within the Area of Interest after the
termination of this Agreement. Unless
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otherwise agreed in writing, no Participant shall have any obligation to mill,
beneficiate or otherwise treat any Products or any other Participant's share of
Products in any facility owned or controlled by such Participant.
4.4 Waiver of Right to Partition. The Participants
hereby waive and release all rights of partition, or of sale in lieu thereof,
or other division of Assets, including any such rights provided by statute.
4.5 Employees. Employees of the Manager are not and
shall not be employees of any other Participant or of the Venture.
4.6 Transfer or Termination of Rights to Properties.
Except as otherwise provided in this Agreement, no Participant shall Transfer
all or any part of its interest in the Assets or this Agreement or otherwise
permit or cause such interests to terminate.
4.7 Implied Covenants. There are no implied covenants
contained in this Agreement other than those of good faith and fair dealing.
ARTICLE V
CONTRIBUTIONS BY PARTICIPANTS
5.1 Beginning Equity Account Balances. The Participants
agree that the Beginning Equity Account Balances of the Participants are as
follows:
Greens Creek $ 74,069,674
Hecla $ 38,135,099
CSX $ 16,053,293
5.2 Additional Cash Contributions. After the Effective
Date, the Participants, subject to any election permitted by Section 6.3, shall
be obligated to contribute funds to adopted Programs in proportion to their
respective Participating Interests.
ARTICLE VI
INTERESTS OF PARTICIPANTS
6.1 Initial Participating Interests. The Participants
shall have the following initial Participating Interests:
Greens Creek - 57.7505%
Hecla - 29.7331%
CSX - 12.5164%
6.2 Changes in Participating Interests. A Participant's
Participating Interest shall be changed as follows:
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(a) Upon an election by a Participant pursuant to Section
6.3 to contribute less to an adopted Budget than the percentage reflected by
its Participating Interest; or
(b) In the event of default by a Participant in making
its agreed-upon contribution to an adopted Budget, followed by an election by
the other Participant to invoke Section 6.4; or
(c) As provided in Section 6.5; or
(d) Transfer by a Participant of less than all of its
Participating Interest in accordance with Article XV; or
(e) Acquisition by a Participant of some or all of the
Participating Interest of another Participant, however arising.
6.3 Voluntary Reduction in Participation.
(a) A Participant may elect in the manner and to the extent
provided in Section 9.8, to limit its contributions to an adopted Budget to some
lesser amount than its respective Participating Interest. If a Participant
elects to contribute to an adopted Budget some lesser amount than its respective
Participating Interest, except in the case where the Participant is a Carried
Participant, that Participant shall be deemed a "Diluting Participant". The
Participating Interest of such Diluting Participant will be reduced effective as
of the date the adopted Budget is commenced (the "Diluting Date").
(b) A Diluting Participant's Participating Interest will be
provisionally recalculated effective as of the Diluting Date according to the
following formula:
R = BE(P) + C(P) + N(P)
-------------------
BE(A) + C(A) + N(A)
R = Revised interest of the Diluting Participant expressed as a percentage.
BE(P) = The Equity Account Balance of the Diluting Participant, expressed in dollars, as of the date
immediately prior to commencement of the applicable calendar year.
BE(A) = The Equity Account Balances of all Participants, expressed in dollars, as of the date
immediately prior to the commencement of the applicable calendar year.
C(P) = The agreed contribution, if any, of the Diluting Participant toward a Capital Budget or an
Exploration Budget.
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C(A) = The aggregate contributions by all Participants called for by a Capital Budget or an Exploration
Budget.
N(P) = The agreed contribution, if any, of the Diluting Participant toward any Budget other than a
Capital Budget or an Exploration Budget, net of the Diluting Participant's allocable share of
projected cash distributions under such Budget, computed after giving effect to any dilution
relating to a Capital Budget or an Exploration Budget for the same calendar year.
N(A) = The aggregate contributions by all Participants called for by any Budget other than a Capital
Budget or an Exploration Budget, net of projected cash distributions under such Budget, but in
no event less than zero.
The Participating Interests of all Non-Diluting Participants shall be increased
in proportion to their Relative Interests by the amount by which the
Participating Interest of the Diluting Participant is reduced. The
recalculations made under this Section 6.3(b) will be provisional and subject
to the final adjustments provided for under Section 6.3(c). Examples
demonstrating the use of the above dilution formula are included in Exhibit C.
(c) As soon as practicable after the end of each calendar year, a
final recalculation of each Participant's Participating Interest as of the end
of the calendar year shall be made by adjusting the provisional recalculations
made under Section 6.3(b) to reflect actual debits, credits and contributions
made during that calendar year. A Diluting Participant shall retain all of its
rights and all of its obligations (except as provided in Section 6.3(b) above
and subject to the provisions of Section 6.5), including the right to
participate in future Programs and Budgets at its recalculated Participating
Interest.
6.4 Default in Making Contributions.
(a) If (i) a Participant defaults in its obligation to pay a
contribution or cash call hereunder or, (ii) the Manager is unable to make such
reimbursements, reallocations of production, contributions or other adjustments
as required under clause (iv) of the second sentence of Section 6.5(b), then any
other Participant, by notice to the defaulting Participant, may at any time, but
shall not be obligated to, elect to make such contribution or meet such cash
call on behalf of the defaulting Participant (a "Cover Payment"). If more than
one Participant elects to make the Cover Payment, such Participants, unless they
otherwise agree, shall make such Cover Payment in proportion to their Relative
Interests, and such Participants shall jointly elect and pursue any remedy
provided in this Agreement to recover the Cover Payment. If more
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than one Cover Payment is made for a defaulting Participant, such Cover
Payments shall be aggregated, and the rights and remedies described herein
pertaining to an individual Cover Payment shall be read to apply to the
aggregated Cover Payments.
(b) Each Cover Payment shall constitute indebtedness due from the
defaulting Participant to the non-defaulting Participant or Participants that
make the Cover Payment, which indebtedness shall be payable upon demand and
shall bear interest from the date incurred, payable upon demand, or, in the
absence of any demand, on the last day of each calendar month, at the rate
specified in Section 10.3.
(c) Each Participant hereby grants to the other Participants, as
security for the repayment of the indebtedness referred to in Section 6.4(b)
above or for the repayment of any amount a Carrying Participant is entitled to
recover as provided in Section 9.6(b) (together with interest thereon,
reasonable attorneys' fees and all other reasonable costs and expenses incurred
in collecting payment of such indebtedness or obtaining such recovery and
enforcing such security interest), a security interest, mortgage and lien
(hereinafter a "security interest"), subordinate only to any security interest
granted by Hecla as described below, in and on such Participant's right, title
and interest in, whenever acquired or arising, (i) the Assets, (ii) its rights
under this Agreement, and (iii) its Participating Interest, together with all
Products, proceeds and accessions of the foregoing. Each Participant hereby
represents and warrants to each other Participant that such security interest
ranks prior to any and all other security interests, except, in the case of
Hecla, a security interest in Hecla's interest in Products and proceeds
therefrom given under the Bank Credit Agreement dated January 25, 1993, as
amended, with Mase Westpac Limited, et al, and any extension or renewal of such
security interest granted by Hecla pursuant to any extension or renewal of said
bank credit agreement, but not to exceed $50,000,000 and not to extend beyond
December 31, 2000. Each Participant hereby agrees to take all action necessary
to perfect such security interest, and irrevocably appoints each other
Participant as its attorney-in- fact to execute, file and record all financing
statements and any other documents necessary to perfect or maintain such
security interest or otherwise give effect to the provisions hereof. Each
Participant hereby agrees that it shall not execute, foreclose or otherwise take
action to enforce such security interest except upon 30 days' prior notice to
the defaulting Participant, provided that the foregoing shall not prohibit the
taking of any action to make, prove or protect a claim in any bankruptcy or
insolvency proceeding of the defaulting Participant. Upon completion of
execution, foreclosure or other action to enforce the security interest
described herein, the defaulting Participant shall be deemed to have withdrawn
from this Agreement and shall relinquish its entire Participating Interest. In
the event the defaulting Participant is subjected to execution or foreclosure
proceedings pursuant to the terms of this Section,
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to the extent allowed by applicable law the defaulting Participant waives any
available right of redemption from and after the date of judgment, any required
valuation or appraisal of the mortgaged or secured property prior to sale, any
available right to stay execution or to require a marshalling of assets and any
required bond in the event a receiver is appointed. In addition, to the extent
permitted by applicable law, each Participant grants to each other Participant
a power of sale as to any property that is subject to the security interest
granted hereunder, such power to be exercised in the manner provided by
applicable law or otherwise in a commercially reasonable manner and upon
reasonable notice.
(d) If a Cover Payment shall have been made, upon the giving of
not less than 15 days' prior notice to the defaulting Participant, the
non-defaulting Participants that made the Cover Payment may, but shall not be
obligated to, elect to effect an adjustment of the defaulting Participant's
Participating Interest pursuant to this Section 6.4(d); provided, however, that
if within such 15 day period the defaulting Participant shall provide evidence
to the reasonable satisfaction of the non- defaulting Participants that made the
Cover Payment that it will have the funds to, and will, within 10 days of the
expiration of such 15 day period, pay all indebtedness owing by the defaulting
Participant to such non-defaulting Participants, then such adjustment of the
Participating Interest may not be effected until the end of such additional 10
day period. Upon such election, or, if applicable, at the end of such
additional 10 day period, an amount equal to 125% times the Cover Payment made
by each non-defaulting Participant shall be deducted from the defaulting
Participant's Equity Account Balance and added to the Equity Account Balance of
the non-defaulting Participants that made the Cover Payment, and the
Participating Interests of the Participants shall be recalculated based on the
adjusted Equity Accounts.
(e) If a Cover Payment shall have been made and the indebtedness
arising therefrom shall not have been discharged, upon not less than 30 days'
notice to the defaulting Participant, the non-defaulting Participants that made
the Cover Payment may, but shall not be obligated to, elect to purchase the
whole of the Participating Interest of the defaulting Participant, at a purchase
price equal to the fair market value of such Participating Interest as
determined by an independent appraiser appointed by such non-defaulting
Participants (or, if the defaulting Participant objects to the person so
appointed, within 10 days of receiving notice thereof, then by an independent
appraiser appointed by joint action of independent appraisers appointed by each
of the non-defaulting and defaulting Participants; provided, however, that if
the defaulting Participant fails to designate an independent appraiser for such
purpose within 10 days of such objection, then the person originally designated
by such non-defaulting Participants shall serve as the independent appraiser).
There shall be withheld from the purchase price payable upon transfer of such
Participating Interest the amount of indebtedness of the
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defaulting Participant owing to the non-defaulting Participants that made the
Cover Payment, together with unpaid interest accrued thereon to the date of
such transfer. Upon payment of such purchase price, the defaulting Participant
shall be deemed to have withdrawn from this Agreement and shall relinquish its
entire Participating Interest. Such relinquished Participating Interest shall
be deemed to have been assigned automatically to the non-defaulting
Participants that made the Cover Payment in proportion to their Relative
Interests.
(f) In lieu of the remedy provided in Section 6.4(e) above, if a
Cover Payment shall have been made and the indebtedness therefrom shall not have
been discharged, upon not less than 30 days' notice to the defaulting
Participant, the non- defaulting Participants that made such Cover Payment may,
but shall not be obligated to, deem the defaulting Participant to have
automatically relinquished to such non-defaulting Participants that portion of
its Participating Interest as is necessary to reduce such interest to less than
5%, such that the defaulting Participant becomes subject to Section 6.5. Such
relinquished Participating Interest shall be deemed to have been assigned
automatically to the non-defaulting Participants that made the Cover Payment in
proportion to their Relative Interests.
(g) Upon a default of the type referred to in Section 6.4(a)
above, the right of the defaulting Participant to take delivery in kind under
Article XI shall cease. Subject to prior existing liens or security interests,
the non-defaulting Participants that made the Cover Payment may sell the
defaulting Participant's share of Products in any commercially reasonable
manner. If the non-defaulting Participants that made the Cover Payment elect to
sell the defaulting Participant's share of Products, they shall apply the
proceeds thereof first, to make any contribution or meet any cash call not made
or met by the defaulting Participant or made or met on its behalf, and second,
to pay the indebtedness and unpaid and accrued interest thereon then owing by
the defaulting Participant to such non-defaulting Participants. If the proceeds
are not adequate to meet any cash call and to pay any indebtedness and interest
thereon, the non- defaulting Participants that made the Cover Payment may
proceed to exercise all other rights available to such Participants pursuant to
the procedures set out in this Section 6.4. The right of a defaulting
Participant to take in kind its share of Products shall be reinstated at the
first time when such Participant is not in default in its obligation to make a
contribution or meet a cash call and all indebtedness and interest thereon
arising out of the making by the non-defaulting Participants of Cover Payments
has been paid in full.
(h) A defaulting Participant may cure such default by paying all
indebtedness and interest thereon then owing to the non-defaulting Participants
that made the Cover Payment, and all costs and expenses, including reasonable
attorneys' fees, incurred
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by such non-defaulting Participants in the exercise of their rights hereunder,
at any time prior to (i) consummation of an action to execute or foreclose on a
security interest granted pursuant to Section 6.4(c), (ii) an adjustment of
Participating Interests being effected pursuant to Section 6.4(d), (iii)
consummation of a purchase of its Participating Interest pursuant to Section
6.4(e), or (iv) relinquishment of a portion of its Participating Interest
pursuant to Section 6.4(f).
(i) The Participants acknowledge that if a Participant defaults in
making a contribution or cash call or in repaying the indebtedness resulting
from a Cover Payment as required in this Agreement, the damages resulting from
such default will be uncertain and difficult to measure. The Participants agree
that rights and remedies provided to the nondefaulting Participants in this
Agreement constitute reasonable liquidated damages.
6.5 Elimination of Minority Interest.
(a) Upon the reduction of its Participating Interest to less than
5%, except where such reduction results from the operation of the provisions of
Section 6.4(c), (d) or (e), a Participant shall be deemed to have withdrawn from
this Agreement and shall relinquish its entire Participating Interest. Such
relinquished Participating Interest shall be deemed to have been assigned
automatically to the other Participants in proportion to their Relative
Interests, subject to a right of the withdrawing Participant to receive 5% of
Net Proceeds, if any, calculated as provided in Exhibit D, and not from any
other source, up to an aggregate amount equal to the withdrawing Participant's
Equity Account Balance as of the date of such withdrawal. In the event that any
of Greens Creek, Hecla or CSX shall, as a result of one or more transfers, have
more than one successor, each such Participant and its successors in the
aggregate shall not be entitled to a Net Proceeds interest in excess of 5%.
(b) For purposes of this Section 6.5, the determination of
whether a Participant's Participating Interest has been reduced to less than 5%
under the provisions of Section 6.3 shall be made on the basis of the
provisionally recalculated Participating Interest provided for under Section
6.3(b), and the relinquishment, withdrawal and entitlements provided for in this
Section 6.5 shall be effective as of the Diluting Date. However, if the final
adjustment provided for under Section 6.3(c) results in a recalculated
Participating Interest of 5% or more: (i) the Diluting Participant's
recalculated Participating Interest shall be deemed, effective as of the last
day of the Budgetary Period, to have automatically revested; (ii) such
Participant shall be reinstated as a Participant, with all of the rights and
obligations pertaining thereto; (iii) the Net Proceeds interests (if any)
vested under the terms of Section 6.5(a) shall terminate; and (iv) the Manager,
on behalf of the Participants, shall make such reimbursements, reallocations of
production, contributions and
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other adjustments as are necessary so that, to the extent possible, each
Participant will be placed in the position it would have been in had the
adjusted recalculated Participating Interests been in effect throughout the
Budgetary Period. Similarly, if such final adjustment results in a
recalculated Participating Interest for any Participant of less than 5% for a
Budgetary Period as to which the provisional calculation had not resulted in a
Participating Interest of less than 5%, then such Participant, at its election
within 30 days of notice of the final adjustment, may contribute an amount
which would result in a revised final adjustment of 5%, or, if no such election
is made, such Participant shall be deemed to have withdrawn under the terms of
Section 6.5(a) as of the end of such Budgetary Period. If the Participants are
required to make contributions or other adjustments pursuant to this Section
6.5(b), the Manager shall have the right to sell a Participant's share of
Products and to apply the proceeds of such sale to satisfy that Participant's
obligation to make such contributions or adjustments.
6.6 Continuing Liabilities Upon Adjustments of Participating
Interests. Any reduction of a Participant's Participating Interest under this
Article VI shall not relieve such Participant of its share of any liability
(including, without limitation, its share of any reclamation liability), arising
out of Operations conducted prior to such reduction, whether such liability is
known or unknown at the time of such reduction and whether such liability is
asserted before or after such reduction. For purposes of this Article VI, such
Participant's share of such liability shall be equal to its Participating
Interest at the time such liability was incurred. The increased Participating
Interest accruing to a Participant as a result of the reduction of any other
Participant's Participating Interest shall be free of royalties, liens or other
encumbrances arising by, through or under such other Participant, other than
those existing at the time the Properties were acquired or those to which the
Participants have given their written consent. An adjustment to a Participating
Interest need not be evidenced during the term of this Agreement by the
execution and recording of appropriate instruments, but each Participant's
Participating Interest shall be shown in the books of the Manager. However, any
Participant, at any time upon the request of any other Participant, shall
execute and acknowledge instruments necessary to evidence such adjustment in
form sufficient for recording in the jurisdiction where the Properties are
located.
ARTICLE VII
MANAGEMENT COMMITTEE
7.1 Organization and Composition. The Participants hereby
establish a Management Committee to determine overall policies, objectives,
procedures, methods and actions under this Agreement, and to adopt Programs and
Budgets as provided in Article IX. The Management Committee shall consist of
one member appointed by each Participant. Each Participant may appoint one or
more alternates
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to act in the absence of its regular member. Any alternate so acting shall be
deemed a member. Appointments shall be made or changed by notice to the other
Participants.
7.2 Decisions. Each Participant, acting through its appointed
member, shall have one vote on the Management Committee. Unless otherwise
provided in this Agreement, the vote of the Participant or Participants with a
Participating Interest over 50% shall determine the decisions of the Management
Committee.
7.3 Meetings.
(a) The Management Committee shall hold regular quarterly
meetings in each of the first three calendar quarters and an annual meeting on
or before December 10th of each year. The meetings will be held in Juneau,
Alaska, or at other mutually agreed places. The Manager shall give 30 days'
notice to the Participants of such regular meetings. Additionally, any
Participant may call a special meeting upon 10 days' notice to the Manager and
the other Participants. In case of emergency, reasonable notice of a special
meeting shall suffice. A quorum of the Management Committee shall be necessary
to conduct Management Committee business. There shall be a quorum if at least
one member representing each Participant is present. Each notice of a meeting
shall include an itemized agenda prepared by the Manager in the case of a
regular meeting, or by the Participant calling the meeting in the case of a
special meeting, but any matters may be considered with the consent of all
Participants. The Manager shall prepare minutes of all meetings and shall
distribute copies of such minutes to the Participants within 20 days after the
meeting. The minutes, when signed by all Participants, shall be the official
record of the decisions made by the Management Committee and shall be binding on
the Manager and the Participants. If personnel employed in Operations are
required to attend a Management Committee meeting, reasonable costs incurred in
connection with such attendance shall be a Venture cost. All other costs shall
be paid for by the Participants individually.
(b) If a Participant fails to attend a regular or special meeting
for which notice has been given as described above, the Manager or the
Participant calling the meeting, as applicable, may give a second notice of the
meeting in compliance with the above rules for special meetings. If the
non-attending Participant does not attend the meeting scheduled by the second
notice, there shall be a quorum if at least one member of each other
Participant is present.
7.4 Action Without Meeting. In lieu of meetings, upon unanimous
agreement of the Participants, the Management Committee may hold conferences by
telephone or other means of electronic communication, so long as all decisions
are immediately confirmed in writing by the Participants.
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7.5 Matters Requiring Approval. Except as otherwise delegated to
the Manager in Section 8.2, the Management Committee shall have exclusive
authority to determine all management matters related to this Agreement.
ARTICLE VIII
MANAGER
8.1 Appointment. The Participants hereby appoint Greens Creek as
the Manager with overall management responsibility for Operations. Greens Creek
hereby agrees to serve until it resigns as provided in Section 8.4.
8.2 Powers and Duties of Manager. Subject to the general oversight
and direction of the Management Committee as described in Section 7.1, the
Manager is vested with full authority to carry out the day-to-day management of
the Venture and to conduct all Operations. The Manager agrees, by itself, or
through its employees, agents or contractors, to carry out its duties in
accordance with the terms and intent of this Agreement, on behalf of and for the
account of the Participants according to their Participating Interests. Without
limiting the generality of the foregoing, the Manager shall have the following
powers and duties:
(a) The Manager shall manage, direct and control Operations.
(b) The Manager shall implement the decisions of the Management
Committee, shall make all expenditures necessary to carry out adopted Programs,
and shall promptly advise the Management Committee if it lacks sufficient funds
to carry out its responsibilities under this Agreement.
(c) The Manager shall: (i) purchase or otherwise acquire all
material, supplies, equipment, water, utility and transportation 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
concurrently with, the acquisition of such Assets, or mechanic's or
materialmen's liens which shall be released or discharged in a diligent manner,
or liens and encumbrances specifically approved by the Management Committee.
(d) The Manager shall conduct such title examinations and cure such
title defects as may be advisable in the reasonable judgment of the Manager.
(e) The Manager shall: (i) make or arrange for all payments
required by leases, licenses, permits, contracts and other
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agreements related to the Assets; (ii) pay all taxes, assessments and like
charges on Operations and Assets except taxes determined or measured by a
Participant's sales revenue or net income. If authorized by the Management
Committee, the Manager shall have the right to contest in the courts or
otherwise, the validity or amount of any taxes, assessments or charges if the
Manager deems them to be unlawful, unjust, unequal or excessive, or to
undertake such other steps or proceedings as the Manager may deem reasonably
necessary to secure a cancellation, reduction, readjustment or equalization
thereof before the Manager shall be required to pay them, but in no event shall
the Manager 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) shall do all
other acts reasonably necessary to maintain the Assets.
(f) The Manager shall: (i) apply for all necessary permits,
licenses and approvals; (ii) comply with applicable federal, state and local
laws and regulations; (iii) notify promptly the Management Committee of any
allegations of substantial violation thereof; and (iv) prepare and file all
reports or notices required for Operations. The Manager shall not be in breach
of this provision if a violation has occurred in spite of the Manager's good
faith efforts to comply, and the Manager has timely cured or disposed of such
violation through performance, or payment of fines and penalties.
(g) The Manager shall prosecute and defend, but shall not initiate
without consent of the Management Committee, all litigation or administrative
proceedings arising out of Operations. The non-managing Participants shall have
the right to participate, at their own expense, in such litigation or
administrative proceedings. The non-managing Participants shall approve in
advance any settlement involving payments, commitments or obligations in excess
of $250,000 in cash or value. The failure by a Participant to vote on any
settlement proposed by the Manager shall be deemed to be a vote to approve the
proposed settlement.
(h) The Manager shall provide insurance for the benefit of the
Participants as provided in Exhibit E.
(i) The Manager 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 XIV. However,
without prior authorization from the Management Committee, the Manager shall
not: (i) dispose of Assets in any one transaction having a value in excess of
$250,000; (ii) enter into any sales contracts or commitments for Product, except
as permitted in Sections 6.4(g), 6.5(b), 11.2 or 11.3; (iii) begin a liquidation
of the Venture; or (iv) dispose of all or a substantial part of the Assets
necessary to achieve the purposes of the Venture.
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(j) The Manager shall have the right to carry out its
responsibilities hereunder through agents, Affiliates or independent
contractors, but the Manager shall remain accountable to the Participants for
the acts or omissions of such agents, Affiliates or contractors.
(k) The Manager shall perform or cause to be performed during the
term of this Agreement all assessment and other work or make any payments in
lieu thereof required by law in order to maintain the unpatented mining claims
included within the Properties. The Manager 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 shall not be liable on account of any determination by any court or
governmental agency that the work performed or payment made by the Manager does
not constitute the required annual assessment work or occupancy or payments for
the purposes of preserving or maintaining ownership of the claims, provided that
the work is done or the payments are made in accordance with the adopted Program
and Budget. The Manager shall timely record with the appropriate county and
file with the appropriate United States agency, affidavits in proper form
attesting to 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 Committee, the Manager 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 shall keep and maintain all required accounting and
financial records pursuant to the Accounting Procedure and in accordance with
customary cost accounting practices in the mining industry.
(n) The Manager shall keep the Management Committee advised of all
Operations by submitting in writing to the Management Committee: (i) monthly
progress reports which include statements of expenditures and comparisons of
such expenditures to
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the adopted Budget; (ii) periodic summaries of data acquired; (iii) copies of
reports concerning Operations; (iv) a detailed final report within 60 days
after completion of each Program and Budget, which shall include comparisons
between actual and budgeted expenditures and comparisons between the objectives
and results of Programs; and (v) such other reports as the Management Committee
may reasonably request. At all reasonable times the Manager shall provide the
Management Committee or the representative of any Participant, upon the request
of any member of the Management Committee, 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. Such material and information
shall be solely for the benefit of the Participants to whom such material and
information are made available and the Participants agree not to discuss or
disclose the same to any third parties except as provided in this Agreement.
The non-managing Participants further agree that their use of or reliance on
such material and information shall be at their sole risk and further agree to
indemnify, defend and hold harmless the Manager and its Affiliates, and its or
their respective directors, officers, shareholders, employees, agents and
attorneys, from and against any Liabilities which may be imposed upon, asserted
against or incurred by any of them and which arise out of or result from use of
or reliance on such material and information by the non- managing Participant,
or any third party to whom the non-managing Participant discloses such material
and information. Subject to the Manager's standard of care under Section 8.3,
the Manager makes no representation or warranty as to the completeness or
accuracy of any material or information disclosed hereunder.
(o) The Manager shall allow the non-managing Participants, at the
latter'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 Participant does not unreasonably interfere with Operations.
(p) The Manager shall prepare and present Programs and Budgets as
provided in Article IX.
(q) The Manager shall undertake all other activities reasonably
necessary to fulfill the foregoing.
If the Manager's failure to perform any duty under this Section 8.2
results from the failure of a non-managing Participant to perform acts or to
contribute amounts required of it by this Agreement the Manager shall not be in
default of any duty owed to such non-managing Participant.
8.3 Standard of Care. The Manager shall conduct all Operations in
a good, workmanlike and efficient manner, in accordance with sound mining and
other applicable industry standards and practices, and in accordance with the
terms and
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provisions of leases, licenses, permits, contracts and other agreements
pertaining to Assets. The Manager shall not be liable to the non-managing
Participants for any act or omission resulting in damage or loss except to the
extent caused by or attributable to the Manager's willful misconduct or gross
negligence.
8.4 Resignation; Deemed Offer to Resign. The Manager may resign
upon two months' prior notice to the other Participants. If the Manager resigns
or is deemed to have resigned and such deemed offer is accepted as provided in
this Section, then the other Participants shall elect a new Manager at least 15
days prior to the effective date of the Manager's resignation. If any of the
following shall occur, the Manager shall be deemed to have offered to resign,
which offer shall be accepted by the other Participants, if at all, within 90
days following the date of the event constituting such deemed offer:
(a) The Participating Interest of the Manager becomes less than
any other Participant; or
(b) The Manager fails to perform a material duty or obligation
imposed upon it under this Agreement and such failure continues for a period of
60 days after notice from the other Participants demanding performance; or
(c) The Manager fails to pay or contest in good faith its bills
within 60 days after they are due; or
(d) A receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for a substantial part of its assets is
appointed and such appointment is neither made ineffective nor discharged within
60 days after the making thereof, or such appointment is consented to, requested
by, or acquiesced in by the Manager; or
(e) The Manager commences a voluntary case under any applicable
bankruptcy, insolvency or similar law now or hereafter in effect; or consents to
the entry of an order for relief in an involuntary case under any such law or to
the appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or other similar official of any substantial
part of its assets; or makes a general assignment for the benefit of creditors;
or fails generally to pay its or Venture debts as such debts become due; or
takes corporate or other action in furtherance of any of the foregoing; or
(f) Entry is made against the Manager of a judgment, decree or
order for relief affecting a substantial part of its assets by a court of
competent jurisdiction in an involuntary case commenced under any applicable
bankruptcy, insolvency or other similar law of any jurisdiction now or hereafter
in effect.
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8.5 Payments to Manager. The Manager shall be compensated for its
services and reimbursed for its costs hereunder in accordance with the
Accounting Procedure.
8.6 Transactions with Affiliates. If the Manager engages
Affiliates to provide services hereunder, it shall do so on terms no less
favorable than would be the case with unrelated persons in arm's-length
transactions.
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ARTICLE IX
PROGRAMS AND BUDGETS
9.1 Operations Pursuant to Programs and Budgets. Except as
otherwise provided in Section 9.11 and Article XIII, Operations shall be
conducted, expenses shall be incurred, and Assets shall be acquired only
pursuant to Programs and Budgets adopted by the Management Committee.
9.2 Contents of Programs and Budgets. The Program and Budget shall
consist of the following components (each a "Component") together with such
other information determined to be relevant by the Manager or required by the
Management Committee:
(a) The Program;
(b) A forecast of projected Revenues for the Budgetary Period;
(c) An Operating Budget covering Operating Expenses and
Sustaining Capital expenditures for the Budgetary Period;
(d) Projected Available Cash from Operations for the Budgetary
Period;
(e) If appropriate, a Budget for Exploration within the Area of
Interest for the Budgetary Period;
(f) If appropriate, a Capital Budget for the Budgetary
Period; and
(g) If appropriate, a Program and Budget for each Separate Capital
Project approved pursuant to Section 9.7.
9.3 Presentation of Programs and Budgets. Proposed Programs and
Budgets shall be prepared by the Manager for a period of one year or, in the
case of Capital Budgets, any longer period. Individual Components of the Budget
will not necessarily have the same Budgetary Period. Each adopted Program and
Budget, regardless of length of time encompassed by the Program and Budget,
shall be reviewed at least once a year at the annual meeting of the Management
Committee. At least one month prior to the annual meeting of the Management
Committee, a proposed Program and Budget for the succeeding period shall be
prepared by the Manager and submitted to the Participants.
9.4 Review of and Vote on Proposed Programs and Budgets.
(a) Within 15 days after submission of a proposed Program
and Budget, each Participant shall submit to the Manager its comments on the
proposed Program and Budget. The Manager shall then consider the comments and
may, but shall not be obligated to,
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revise the Program and Budget to take into account any such comments. Within
10 days of receipt of any comments or 10 days after the close of the 15 day
period if no comments are received, the Manager shall submit the final proposed
Program and Budget to the Participants. At the annual meeting of the
Management Committee, each Participant shall vote to adopt or reject each
Component of the proposed Program and Budget identified in Sections 9.2(c), (e)
and (f).
(b) If a Participant fails to vote on any or all of the Components
of the proposed Program and Budget, the failure shall be deemed to be a vote by
the Participant to reject each Component of the proposed Program and Budget
identified in Sections 9.2(c), (e) and (f) that the Participant has not voted to
adopt, except that a failure to vote on an Operating Budget that requires
unanimous approval pursuant to Section 9.5(a), an Exploration Budget that
requires unanimous approval pursuant to Section 9.5(c), or a Budget overrun that
requires a unanimous vote of the Participants funding the affected Component of
a Budget as provided in Section 9.10, shall be deemed to be a vote to adopt the
component of the Budget or to approve the overrun.
9.5 Votes Required for Approval. The Program and Budget may be
adopted in whole or in part as follows:
(a) Operating Budgets. If Available Cash from Operations as
projected in the Budget is positive or is no more than $7.0 million negative for
any one year period, a favorable vote of the Participant or Participants
representing a majority of the Participating Interests shall be required to
adopt the Operating Budget. If Available Cash from Operations as projected in
the Budget is more than $7.0 million negative for any one year period, a
favorable vote of two Participants holding a majority of the Participating
Interests shall be required to adopt the Operating Budget. For purposes of this
requirement, Participants that are Affiliates shall be deemed to be a single
Participant. For the second or any subsequent consecutive year for which
Available Cash from Operations is projected in the Budget to be more than $7.0
million negative for any one year period, a favorable unanimous vote of all
Participants shall be required to adopt the Operating Budget.
(b) Capital Budgets. Capital Budgets may be proposed for a single
year or multiple years. In each year for which a vote on a Capital Budget is
required, all proposed expenditures for Capital for that year and the amount of
a multiple year Capital Budget budgeted to be spent in that year, except for
amounts in a budget to be spent in Capital Budgets for those projects identified
in Section 9.7 below, will be aggregated in a single Capital Budget for purposes
of determining the vote required to adopt the proposed single year Capital
Budget for that year.
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(i) For any single year in which the aggregate of all Capital
Budgets is $10 million or less, a favorable vote of the Participant or
Participants representing a majority of the Participating Interests shall be
required to adopt a Capital Budget;
(ii) For any single year in which the aggregate of all Capital
Budgets is more than $10 million, a unanimous favorable vote of all Participants
shall be required to adopt a Capital Budget;
(iii) For any multiple year Capital Budget that is $10 million or
less in any single year and is $25 million or less in the aggregate, a favorable
vote of the Participant or Participants representing a majority of the
Participating Interests shall be required to adopt the Capital Budget; and
(iv) For any multiple year Capital Budget of more than $10 million
in any single year or more than $25 million in the aggregate, a unanimous
favorable vote of all Participants shall be required to adopt the multiple year
Capital Budget.
(c) Exploration Budgets. Exploration Budgets for Exploration
within the Area of Interest of $1.5 million or less shall be adopted by the
favorable vote of the Participant or Participants representing a majority of the
Participating Interests. Exploration Budgets for Exploration within the Area of
Interest of more than $1.5 million require a unanimous favorable vote of all
Participants for adoption.
(d) Indexing of Budgetary Limits. The budgetary limits
set out in Sections 9.5(a), (b) and (c) shall be indexed upwards or downwards by
multiplying each amount by a fraction, the numerator of which is the latest
available Producers Price - All Commodities Index and the denominator of which
is the most recently available Producers Price - All Commodities Index as of
March 1, 1994.
9.6 Reconsideration of Capital Budgets. If the Management
Committee fails to adopt a Capital Budget, the Manager may call for
reconsideration of the Capital Budget.
(a) By calling for reconsideration, the Manager (and any
Participant electing to become a Carrying Participant) shall become a Carrying
Participant and shall be a obligated to fund the share of the Capital Budget of
each Participant that failed to vote favorably for the Capital Budget, who shall
become a Carried Participant, and each Carried Participant shall be deemed to
have voted favorably for the Capital Budget.
(b) If a Participant becomes a Carrying Participant for a Carried
Participant as provided in Section 9.6(a), following completion of the project
for which the Capital Budget was adopted, the Carrying Participant shall be
entitled to recover out of 70% of
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the Carried Participant's share of Available Cash from Operations, as reduced
by the Carried Participant's obligation to fund other Capital Budgets or
Exploration Budgets in which it has elected to participate, any amount funded
pursuant to the Capital Budget on behalf of the Carried Participant, together
with interest at the Prime Rate plus 2%. The Carrying Participant shall have
the same rights with respect to the Carried Participant's interest in the
Venture and the Assets as are afforded a Lienholder in a Project Financing
undertaken pursuant to Section 16.2 and the lien, security interest and
mortgage provided in Section 6.4(c). An example showing the manner in which
the Carrying Participant recovers the amount funded is set forth in Exhibit J.
9.7 Separate Capital Projects. In addition to the items that might
be included in a Capital Budget proposed pursuant to Section 9.5(b), Separate
Capital Projects have been identified by the Manager that may be proposed by the
Manager. These projects will have separate Programs and Budgets which will be
prepared, presented and reviewed as provided in Sections 9.2 and 9.3 but which
will not be subject to the voting procedures and requirements set forth in
Sections 9.4, 9.5 and 9.6. All other relevant provisions of this Agreement
shall apply to such Programs and Budgets.
(a) The Management Committee shall be deemed to have
adopted the Programs and Budgets for the Southwest Extension Ore Development
Project and the West Ore Zone Development Project, whether proposed individually
or as a single project, if the Manager completes a feasibility study and
recommends approval of the project or projects. Each Participant shall have the
same right to elect to participate or not in these Budgets as is provided for
other Capital Budgets in Section 9.8.
(b) The Management Committee shall be deemed to have adopted the
Program and Budget for the Mine and Mill Expansion Project if the Manager
completes a feasibility study and recommends approval of the project. Each
Participant will have the same right to elect to participate or not in this
Budget as is provided for other Capital Budgets in Section 9.8. In the
alternative, each Participant shall have the right, at its option, to fund its
share of the Budget for the Mine and Mill Expansion Project through Project
Financing arranged by the Manager to the extent the Participant's share of these
Budgets exceeds its projected share of Available Cash from Operations as reduced
by its projected obligations to fund Exploration Budgets and other Capital
Budgets. If Project Financing is not available at reasonable terms in the
opinion of the Manager, the Manager shall be obligated to fund, at the election
of each other Participant, such other Participant's share of the budget for the
project to the extent its share of the budget exceeds its projected share of
Available Cash from Operations as reduced by its projected share of Exploration
Budgets or other Capital Budgets. In such case, the Manager shall become a
Carrying Participant and each nonfunding Participant shall become
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a Carried Participant on the same terms as described in Section 9.6(b) above,
except that the Carrying Participant shall be entitled to recover the amounts
funded before completion of the Mine and Mill Expansion Project.
9.8 Election to Participate. At the time of the final vote
adopting or rejecting a Program and Budget pursuant to Section 9.4, where
permitted as provided below, each Participant shall advise the Management
Committee whether it desires to contribute to a Component of a Budget in some
lesser amount than its respective Participating Interest, or not at all. If a
Participant fails to so notify the Management Committee, the Participant shall
be deemed to have elected not to contribute to any Component of the Budget for
which it may so elect in proportion to its respective Participating Interest as
of the beginning of the period covered by the Program and Budget. If a
Participant notifies or is deemed to have notified the Management Committee that
it does not intend to contribute all or part of its share to a Budget, the
following provisions shall apply:
(a) If the Component of the Budget is an Operating Budget and
Available Cash from Operations as projected in the Budget is positive or is no
more than $7.0 million negative in a calendar year, or if the Budget is a
Shutdown Budget, a Participant will have no right to elect to contribute less
than its full share of the Operating Budget and will be in default as provided
in Section 10.3 for a failure to meet a cash call issued pursuant to such
Operating Budget or Shutdown Budget, and the provisions of Section 6.4 will
apply.
(b) If the Component of the Budget is an Operating Budget and the
Available Cash from Operations as projected in the Budget is more than $7.0
million negative in a calendar year, a Participant may elect to contribute less
than its share, or not at all, to the Operating Budget to the extent such
Available Cash from Operations is more than $7.0 million negative in a calendar
year, and its Participating Interest shall be recalculated as provided in
Section 6.3.
(c) If the Component of the Budget is an Exploration Budget, a
Participant may elect to contribute less than its share, or not at all, and its
Participating Interest shall be recalculated as provided in Section 6.3.
(d) If the Component of the Budget is a Capital Budget, a
Participant may elect to contribute less than its share, or not at all, and its
Participating Interest shall be recalculated as provided in Section 6.3. In
addition, a Participant will have the right to change its election in each year
of a multiple year Capital Budget, except for a Capital Budget adopted pursuant
to Section 9.7, at the time the Capital Budget is reviewed pursuant to Section
9.3; provided, however, that if a Participant that has previously elected to
participate in a multiple year Capital Budget
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subsequently elects to reduce its participation and no other Participant agrees
to fund the amount of the reduction, the Manager will limit to the extent
practicable or terminate the project contemplated by the Capital Budget and, if
a project is terminated, the Participants that initially agreed to fund the
Capital Budget will share proportionately the costs of termination.
(e) Notwithstanding a Participant's right to contribute less than
its full share of a Component of the Budget, or not at all, as provided in
Sections 9.8(b), 9.8(c) and 9.8(d) above, if no other Participant agrees to fund
the amount of the Component of the Budget that another Participant is unwilling
to contribute, the Component of the Budget will be deemed not to have been
adopted and the other provisions of this Article IX will apply.
9.9 Deadlock on Proposed Programs and Budgets. If the
Participants, acting through the Management Committee, fail to adopt an
Exploration Budget or a Capital Budget by the beginning of the period to which
the proposed Budget applies or fail to approve an overrun of an Exploration
Budget or Capital Budget as provided in Section 9.10, the Manager shall make no
expenditures or additional expenditures, as appropriate, with respect to those
Components of the Budget. If the Participants fail to adopt an Operating Budget
by the beginning of the period to which the proposed Budget applies or fail to
approve an overrun of an Operating Budget as provided in Section 9.10, the
Manager shall curtail operations and reduce all activities of the Venture,
whether funded by an Operating Budget or some other Budget, except for those
provided for in Section 9.7, to the level required to protect the Assets, to
maintain the operating permits of the Venture, and to generally provide for
safety, environmental compliance and compliance with other legal and contractual
obligations of the Venture. The costs of such activities shall be shared by the
Participants in proportion to their Participating Interests and will be included
in a Shutdown Budget, as may be amended from time to time. As soon as
practicable following the failure to adopt an Operating Budget or to approve an
overrun of an Operating Budget, the Manager will prepare and circulate a
Shutdown Budget. A Shutdown Budget and subsequent amendments thereto will be
circulated for review and comment as provided in Section 9.4 but the budget
shall be deemed to have been adopted by the Management Committee without a vote.
9.10 Budget Overruns; Program Changes. The Manager shall
immediately notify the Management Committee of any material departure from an
adopted Program and Budget. If the Manager exceeds an adopted Operating,
Capital or Exploration Budget by more than 10%, then the excess over 10% (the
"Excess Amount"), unless directly caused by an emergency expenditure made
pursuant to Section 9.11, shall (a) subject to the provisions of the next
sentence, be borne by the Participants according to their Participating
Interests if the 10% overrun and the Excess Amount are added to the Budget by a
unanimous vote called for by the
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Manager at any time, of the Participants that are funding the Component of the
Budget to which the overrun applies, or (b) if the overrun and the Excess
Amount are not added to the Budget, the Excess Amount shall be borne by the
Manager. Budget overruns of 10% or less or Budget overruns of more than 10%
when approved by a vote of the Participants as provided in the preceding
sentence shall be borne by the voting Participants in proportion to their
respective Participating Interests as of the time the overrun occurs, except
that (i) a non-voting Participant may affirmatively elect to share in the
overrun and payment of the Excess Amount, or (ii) if a non-voting Participant
fails to make such affirmative election, in the case of a Participant that is a
Carried Participant pursuant to Section 9.6, or in the case of a Participant
that has elected to contribute less, or not at all, to a Budget pursuant to
Section 9.8, or in the case of a Participant that is having its share of a
Budget funded pursuant to Section 9.7, the overrun shall be borne by the
Carrying Participant or Participants, the funding Participant or Participants
or the Project Financing or the Manager, as appropriate.
9.11 Emergency Expenditures. In case of emergency, the Manager may
make emergency expenditures in taking any reasonable action it deems necessary
to protect life, limb or property, to protect the Assets or to comply with law
or government regulation. Emergency expenditures shall also include reasonable
expenditures for events which are beyond the Manager's reasonable control and
which do not result from a breach by the Manager of its standard of care,
including, without limitation, repair of damages resulting from acts of God or
accidents, defense of unanticipated litigation, costs associated with
unanticipated changes in ores and the like. The Manager shall promptly notify
the Participants of the emergency expenditure, and the Manager shall be
reimbursed for all resulting costs by the Participants in proportion to their
respective Participating Interests at the time the emergency expenditures are
incurred.
ARTICLE X
ACCOUNTS AND SETTLEMENTS
10.1 Monthly Statements. The Manager shall promptly submit to the
Management Committee monthly statements of account reflecting in reasonable
detail and in accordance with the provisions of Exhibit B, the charges and
credits to the Joint Account during the preceding month.
10.2 Cash Calls and Contributions. The Manager shall submit to each
Participant prior to the last day of each month, a billing for estimated cash
requirements for the next month on the basis of the adopted Budget, emergency
expenditures under Section 9.11 or for any other expenditures authorized
hereunder. The Manager may set off any cash calls or other contributions a
Participant is required to make against proceeds from the sale of Products
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deposited in the account of the Venture pursuant to Section 11.3. Within 10
days after receipt of each billing, each Participant shall advance to the
Manager its proportionate share of the estimated amount net of any set off made
by the Manager. Time is of the essence in the payment of such billings. The
Manager may maintain a cash balance approximately equal to the rate of
disbursement for up to a maximum of 60 days and shall promptly distribute to
the Participants any funds in excess of that amount. All funds retained by the
Manager in excess of immediate cash requirements shall be invested for the
benefit of the Joint Account in interest-bearing accounts with a bank selected
by the Manager.
10.3 Failure to Meet Cash Calls. If a Participant fails to meet any
cash call or make any other contribution as provided in Section 10.2, the
Manager shall notify such Participant, and such Participant shall have ten days
from receipt of such notice to meet such cash call or make such contribution.
If the Participant fails following such notice to meet such cash call or make
such contribution, such Participant shall be in default, and the amounts of the
defaulted cash call or contribution shall bear interest from the date due at an
annual rate equal to five percentage points over the Prime Rate, but in no event
shall said rate of interest exceed the maximum permitted by law. The
non-defaulting Participant or Participants shall have those rights, remedies and
elections specified in Section 6.4.
10.4 Audits. Within three months following the end of any calendar
year (or, if the Management Committee has adopted an accounting period other
than the calendar year, within three months after the end of such period), the
Manager shall order an audit of the accounting and financial records for such
calendar year (or other accounting period). The costs associated with such
audit shall be charged to the Joint Account. All written exceptions to and
claims upon the Manager for discrepancies disclosed by such audit shall be made
not more than 12 months after receipt of the audit report. Failure to make any
such exception or claim within the 12 month period shall mean the audit is
correct and binding upon the Participants. The audits shall be conducted by a
firm of certified public accountants selected by the Manager, unless otherwise
agreed by the Management Committee. Additional audits may be requested by any
Participant at any time, the costs of which shall be borne by the Participant
requesting the same. Such additional audits shall not interfere with the
performance of the audits chargeable to the Joint Account or alter the binding
effect of such audits.
ARTICLE XI
DISPOSITION OF PRODUCTION
11.1 Taking in Kind. Subject to the provisions of Sections 6.4(g)
and 6.5(b), each Participant shall take in kind or separately dispose of its
share of all Products in accordance with
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its Participating Interest. Any extra expenditure incurred in the taking in
kind or separate disposition by any Participant of its proportionate share of
Products shall be borne by such Participant. Nothing in this Agreement shall
be construed as providing, directly or indirectly, for any joint or cooperative
marketing or selling of Products or permitting the processing of Products of
any parties other than the Participants at any processing facilities
constructed by the Participants pursuant to this Agreement. The Manager shall
give the Participants notice at least 10 days in advance of the delivery date
upon which their respective shares of Products will be available.
11.2 Failure of Participant to Take in Kind. If a Participant fails
to take in kind and has not authorized the Manager to act as its agent under
Section 11.3, the Manager shall have the right, but not the obligation, for a
period of time consistent with the minimum needs of the industry, but not to
exceed one year, to purchase the Participant's share for its own account or to
sell such share as agent for the Participant 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 the Manager is purchasing or selling a
Participant's share of production, the Participant may elect by notice to the
Manager to take in kind. The Manager shall be entitled to deduct from proceeds
of any sale by it for the account of a Participant reasonable expenses incurred
in such a sale.
11.3 Sale of Products. Each Participant hereby authorizes the
Manager to negotiate on its behalf the terms of any marketing, smelting or
refining agreement recommended to the Management Committee by the Manager. Such
authority shall continue until revoked by written notice delivered to the
Manager. Notwithstanding the foregoing, (i) each Participant shall be
responsible for approving the final terms of any such agreement and shall
execute the same on its own behalf; (ii) each Participant shall continue to have
the right to take its share of production in kind as provided in this Article
XI, and (iii) each Participant shall direct the purchaser of Products to deposit
the proceeds from the sale of such Products into the account of the Venture.
ARTICLE XII
WITHDRAWAL AND TERMINATION
12.1 Breach of Agreement; Opportunity to Cure.
(a) The failure of a Participant to keep or perform any material
obligation arising under this Agreement shall constitute a default under this
Agreement. Such a default, other than a default which is addressed by Section
8.4 regarding the Manager's removal or by Sections 6.4 and 10.3 regarding
failure to meet a cash call or other required contribution, shall be subject to
the provisions of this Section 12.1.
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(b) In the event of an alleged default subject to the
provisions of this Section 12.1, the Manager, or upon the failure or refusal of
the Manager to do so, any non-defaulting Participant, shall first give the
defaulting Participant notice of its intention to declare such alleged default
to be a breach of this Agreement, specifying the particular default relied upon
by it. The defaulting Participant shall have a reasonable time, but not more
than 30 days after receipt of such notice, in which to cure or commence in good
faith to cure or contest such alleged default. If such alleged default is
cured, there shall be no breach hereunder with respect to such alleged default.
If the defaulting Participant fails to cure or contest such default, any
non-defaulting Participant may exercise any one or more of the remedies provided
by law or in equity, including injunctive relief. The prevailing party shall be
awarded all costs and expenses, including reasonable attorneys' fees, incurred
in any such action.
(c) Nothing contained herein shall preclude any Participant under
appropriate circumstances from seeking a temporary injunction or restraining
order.
12.2 Termination by Expiration or Agreement. This Agreement shall
terminate as expressly provided in this Agreement, unless earlier terminated by
written agreement.
12.3 Withdrawal. A Participant may elect to withdraw as a
Participant from this Agreement by giving notice to the other Participants of
the effective date of withdrawal, which shall be the later of the end of the
then current Program and Budget or at least 30 days after the date of the
notice. If upon such withdrawal only one Participant remains, this Agreement
shall terminate, and the withdrawing Participant shall be deemed to have
transferred to the remaining Participant, without cost and free and clear of
royalties, liens or other encumbrances arising by, through or under such
withdrawing Participant, except those exceptions to title described in Part I
of Exhibit A and those to which all Participants have given their written
consent after the date of this Agreement, all of its Participating Interest in
the Assets and in this Agreement. If upon such withdrawal more than one
Participant remains, this Agreement shall not terminate, but the withdrawing
Participant shall be deemed to have transferred to the remaining Participants,
in proportion to their respective Relative Interests, and without cost and free
and clear of royalties, liens or other encumbrances arising by, through or under
such withdrawing Participant, except those exceptions to title described in
Part I of Exhibit A and those to which all Participants have given their written
consent after the date of this Agreement, all of its Participating Interest in
the Assets and in this Agreement. Any withdrawal under this Section 12.3 shall
not relieve the withdrawing Participant of its share of any liability to third
parties (including, without limitation, reclamation) which arises out of
Operations conducted prior to such withdrawal, whether such liability is known
or unknown at the time of the withdrawal and
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whether such liability is asserted before or after the withdrawal. For
purposes of this Section 12.3, the withdrawing Participant's share of such
liabilities shall be equal to its Participating Interest at the time such
liability was incurred.
12.4 Continuing Obligations. On termination of this Agreement under
Section 12.2 or 12.3, the Participants shall remain liable for continuing
obligations hereunder until final settlement of all accounts and for any
liability (including, without limitation, reclamation) which arises out of
Operations conducted during the term of the Agreement, whether such liability is
known or unknown at the time of termination and whether such liability is
asserted before or after termination.
12.5 Disposition of Assets on Termination. Promptly after
termination of this Agreement under Section 12.2 or 12.3, the Manager shall take
all action necessary to wind up the activities of the Venture, and all costs and
expenses incurred in connection with the termination of the Venture shall be
expenses chargeable to the Venture. The Assets shall first be paid, applied, or
distributed in satisfaction of all liabilities of the Venture to third parties
and then to satisfy any debts, obligations, or liabilities owed to the
Participants. Before distributing any funds or Assets to Participants, the
Manager shall have the right to segregate amounts which, in the Manager's
reasonable judgment, are necessary to discharge continuing obligations or to
purchase for the account of Participants, bonds or other securities for the
performance of such obligations. The foregoing shall not be construed to
include the repayment of any Participant's capital contributions. Thereafter,
any remaining cash and all other Assets shall be distributed (in undivided
interests unless otherwise agreed) to the Participants, first in the ratio and
to the extent of their respective Equity Account Balances and then in proportion
to their respective Participating Interests, subject to any dilution, reduction,
or termination of such Participating Interests as may have occurred pursuant to
the terms of this Agreement. No Participant shall receive a distribution of any
interest in Products or proceeds from the sale thereof if such Participant's
Participating Interest therein has been terminated pursuant to this Agreement.
12.6 Non-Compete Covenants. A Participant that withdraws pursuant
to Section 12.3, or is deemed to have withdrawn pursuant to Sections 6.4 or 6.5,
shall not directly or indirectly acquire any interest in property within the
Area of Interest for 12 months after the effective date of withdrawal. If a
withdrawing Participant, or the Affiliate of a withdrawing Participant, breaches
this Section 12.6, such Participant or Affiliate shall be obligated to offer to
convey to the non-withdrawing Participant or Participants, without cost, any
such property or interest acquired. Such offer shall be made in writing and can
be accepted by the non-withdrawing Participant or Participants at any time
within 45
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days after it is received by such non- withdrawing Participant or Participants.
12.7 Right to Data after Termination. After termination of this
Agreement pursuant to Section 12.2 or 12.3, each Participant shall be entitled
to copies of all information acquired hereunder before the effective date of
termination not previously furnished to it, but the terminating or withdrawing
Participant shall not be entitled to any such copies after any other termination
or any withdrawal.
12.8 Continuing Authority. Upon termination of this Agreement under
Section 12.2, or upon the deemed withdrawal of a Participant pursuant to Section
6.4 or 6.5 or the withdrawal of a Participant pursuant to Section 12.3 such that
only one Participant remains, the Manager shall have the power and authority,
subject to control of the Management Committee, if any, to do all things on
behalf of the Participants or the sole remaining Participant which are
reasonably necessary or convenient to:
(a) wind up Operations; and
(b) complete any transaction and satisfy any obligation, unfinished
or unsatisfied, at the time of such termination or withdrawal, if the
transaction or obligation arises out of Operations prior to such termination or
withdrawal.
The Manager shall have the power and authority to grant or receive extensions
of time or change the method of payment of an already existing liability or
obligation, prosecute and defend actions on behalf of the Participants and the
Venture, mortgage Assets, and take any other reasonable action in any matter
with respect to which the former Participants continue to have, or appear or
are alleged to have, a common interest or a common liability.
ARTICLE XIII
ACQUISITIONS WITHIN AREA OF INTEREST
13.1 General. Any interest or right to acquire any interest in real
property within the Area of Interest acquired during the term of this Agreement
by or on behalf of a Participant or any Affiliate shall be subject to the terms
and provisions of this Agreement.
13.2 Notice to Nonacquiring Participant. Within 10 days after the
acquisition of any interest or the right to acquire any interest in real
property wholly or partially within the Area of Interest (except real property
acquired by the Manager pursuant to a Program), the acquiring Participant shall
notify the other Participants of such acquisition. The acquiring Participant's
notice shall describe in detail the acquisition, the lands and minerals covered
thereby, the cost thereof, and the reasons why the
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acquiring Participant believes that the acquisition of the interest is in the
best interests of the Participants under this Agreement. In addition to such
notice, the acquiring Participant shall make any and all information concerning
the acquired interest available for inspection by the other Participants.
13.3 Option Exercised. If, within 30 days after receiving the
acquiring Participant's notice, all other Participants notify the acquiring
Participant of their election to accept a proportionate interest in the acquired
interest equal to its Participating Interest, the acquiring Participant shall
convey to the other Participants, by special warranty deed, such proportionate
undivided interests therein. The acquired interest shall become a part of the
Properties for all purposes of this Agreement immediately upon the notice of the
other Participants' election to accept the proportionate interest therein. The
other Participants shall promptly pay to the acquiring Participant their
proportionate shares of the latter's actual out-of-pocket acquisition costs.
13.4 Option Partially Exercised or Not Exercised.
(a) If only one other Participant gives notice within the 30 day
period set forth in Section 13.3, the non-notifying Participant shall have no
interest in the acquired interest and the acquired interest shall not become a
part of the Properties or be subject to this Agreement. The acquiring
Participant and the notifying Participant shall follow the procedures set out in
Section 13.3 and the notifying Participant shall receive and pay for an interest
in the interest equal to its Relative Interest and the acquiring Participant and
the notifying Participant shall then own the interest independently of the
Venture.
(b) If no other Participant gives such notice within the 30 day
period set forth in Section 13.3, the non-notifying Participants shall have no
interest in the acquired interest, and the acquired interest shall not become a
part of the Properties or be subject to this Agreement.
13.5 Special Provisions Related To The Norbritex Properties. The
Participants agree and, to the extent necessary, Greens Creek and CSX Juneau,
which joins in this Agreement solely for the purposes of this Section 13.5,
amend the Norbritex Venture Agreement, as follows:
(a) Upon execution of this Agreement, the area of influence of the
Norbritex Venture shall automatically terminate, and the Norbritex Venture
Agreement is hereby amended to delete all provisions relating thereto.
(b) Within 12 months from the Effective Date, an independent
geological assessment and appraisal of the Norbritex Properties and all other
rights relating thereto shall be prepared and submitted to the Management
Committee. The cost of such
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assessment and appraisal shall be borne by the Venture. The Management
Committee shall decide at the next meeting following such submission whether to
acquire the Norbritex Property.
(c) If the Management Committee unanimously decides to acquire the
Norbritex Property, the Norbritex Property shall be transferred by the Norbritex
Venture parties to the Venture. If the appraised value of the Norbritex
Property is less than or equal to $318,000, no payment shall be made by the
Venture for the Norbritex Property. If the appraised value is in excess of
$318,000, the excess shall be paid by the Venture to Greens Creek (73.89%) and
CSX Juneau (26.11%) as the Norbritex Venture parties.
(d) If the Management Committee does not unanimously decide to
acquire all or a portion of the Norbritex Property, the Manager shall dispose of
such property on behalf of the Norbritex Venture (i) to a Participant or an
Affiliate at the appraised value, or (ii) to a third party on reasonable arm's
length terms. Proceeds from the disposal of the Norbritex Property under this
Section 13.5 shall be distributed as follows:
Proceeds Proceeds in
Payee Up to $318,000 Excess of $318,000
----- -------------- ------------------
Greens Creek 57.7505% 73.89%
Hecla 29.7331% 0.00%
CSX 12.5164% 0.00%
CSX Juneau 0.0000% 26.11%
--------- -------
100.0000% 100.0%
(e) Upon disposition of the Norbritex Property pursuant to this
Section, the Norbritex Venture and the Norbritex Venture Agreement shall
automatically terminate. The Participants and CSX Juneau agree to execute any
other instruments or take such actions as may be necessary to effectuate the
disposition of the Norbritex Property and the termination of the Norbritex
Venture and the Norbritex Venture Agreement.
ARTICLE XIV
ABANDONMENT AND SURRENDER OF PROPERTIES
14.1 Surrender or Abandonment of Property. The Management Committee
may authorize the Manager to surrender or abandon part or all of the Properties.
If the Management Committee authorizes any such surrender or abandonment over
the objection of a Participant or Participants, the Participant or Participants
that desire to abandon or surrender shall assign to the objecting Participant or
to the objecting Participants in proportion to their Relative Interests, by
special warranty deed and without cost to the surrendering Participant or
Participants, all of the surrendering Participant's or Participants' interest in
the property to be
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abandoned or surrendered, and the abandoned or surrendered property shall cease
to be part of the Properties.
14.2 Reacquisition. If any Properties are abandoned or surrendered
under the provisions of this Article XIV, then, unless this Agreement is earlier
terminated, no Participant nor any Affiliate thereof shall acquire any interest
in such Properties for a period of two years following the date of such
abandonment or surrender. If a Participant reacquires any Properties in
violation of this Section 14.2, any other Participant may elect by notice to the
reacquiring Participant with 45 days after it has actual notice of such
reacquisition, to have such properties 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 Participant and shall not be included for
purposes of calculating the Participants' respective Participating Interests.
ARTICLE XV
TRANSFER OF INTEREST
15.1 General. A Participant shall have the right to Transfer to
any third party all or any part of its interest in or to this Agreement, its
Participating Interest, or the Assets solely as provided in this Article XV.
15.2 Limitations on Free Transferability. The Transfer right of a
Participant in Section 15.1 shall be subject to the following terms and
conditions:
(a) No transferee of all or any part of the interest of a
Participant in this Agreement, any Participating Interest, or the Assets shall
have the rights of a Participant unless and until the transferring Participant
has provided to the other Participants notice of the Transfer, and except as
provided in Sections 15.2(g) and 15.2(h), the transferee, as of the effective
date of the Transfer, has committed in writing to be bound by this Agreement to
the same extent as the transferring Participant;
(b) No transfer shall be permitted if admission of the transferee
to the Venture would prohibit or limit the Venture under then applicable law
from obtaining, amending, revising, renewing, or maintaining in good standing
any permits or approvals necessary to conduct Operations. Any proposed
transferee must represent and warrant to the Venture that the proposed
transferee's admission would not result in any such prohibition or limitation;
(c) No Transfer permitted by this Article XV shall relieve the
transferring Participant of its share of any liability (including, without
limitation, reclamation liability) which arises out of Operations conducted
prior to such Transfer, whether such
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liability is known or unknown at the time of Transfer and whether such
liability is asserted before or after the Transfer;
(d) The transferring Participant and the transferee shall
bear all tax consequences of the Transfer;
(e) In the event of a Transfer of less than all of a
Participating Interest other than to another Participant, the transferring
Participant and its transferee shall act and be treated as one Participant;
(f) No Participant shall Transfer any interest in this Agreement or
the Assets except by Transfer of part or all of its Participating Interest;
(g) If the Transfer is the grant of a security interest to a third
party by mortgage, deed of trust, pledge, lien or other encumbrance of any
interest in this Agreement, any Participating Interest or the Assets to secure
a loan or other indebtedness of a Participant in a bona fide transaction, such
security interest shall be subordinate to the terms of this Agreement and the
rights and interests of the other Participants hereunder other than as provided
in Section 6.4(c). Upon any foreclosure or other enforcement of rights in the
security interest, the acquiring third party shall be deemed to have assumed the
position of the encumbering Participant with respect to this Agreement and the
other Participants, and it shall comply with and be bound by the terms and
conditions of this Agreement;
(h) If a sale or other commitment or disposition of Products or
proceeds from the sale of Products by a Participant upon distribution to it
pursuant to Article XI creates in a third party a security interest in Products
or proceeds therefrom prior to such distribution, such sales, commitment or
disposition shall be subject to the terms and conditions of this Agreement;
(i) For purposes of the notice required under Section 15.3(a), the
purchase price for all Transfers shall be expressed in U.S. dollars, regardless
of whether the purchase price calls for the payment of money, and to the extent
the purchase price includes property other than Assets, such purchase price
shall describe the portion of the purchase price attributable to Assets;
(j) The following shall not be deemed a Transfer, nor shall the
transferee be deemed an assignee for purposes of this Agreement:
(i) a transfer by a Participant to an Affiliate, provided that the
Participant shall continue to be liable for all obligations hereunder, and
provided further that any transfer of less than all of a Participant's
Participating Interest shall be subject to the provisions of Section 15.2(e);
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(ii) a transfer by a Participant of all or
substantially all of its assets, or a sale of all shares of a corporate
Participant by its parent corporation or other entity holding such shares, or
such other corporate merger, consolidation or reorganization of a Participant,
by which the surviving entity shall possess substantially all of the property
rights and interests, or all of the shares, and shall be subject to
substantially all of the liabilities and obligations of that Participant;
provided, however, that the interest of the Participant in this Agreement and
the Assets and its Participating Interest are not substantially all of assets of
the Participant; and provided further, however, that the transferee is or
following the Transfer will be substantially similar in financial strength to
the transferring Participant;
(iii) an incorporation of a Participant; or
(iv) a transfer by a Participant to a joint venture or partnership
in which such Participant is a participating venturer or partner with a majority
or controlling interest, provided that any transfer of less than all of a
Participant's Participating Interest shall be subject to the provisions of
Section 15.2(e); and
(k) If the interest of a Participant in this Agreement and the
Assets and its Participating Interest are all or substantially all of the assets
of the Participant, or are not all or substantially all of its assets but the
financial strength of the transferee will be substantially less than the
financial strength of the transferring Participant, a sale of all shares of a
corporate Participant or the sale of all shares of any Affiliate of a
Participant (by which the Participant is effectively subject to new ownership or
management) or such other corporate merger, consolidation or reorganization,
shall be deemed a Transfer. A transfer by a Participant to a joint venture or
partnership in which such Participant is a participating venturer or partner
with a minority or non- controlling interest shall also be deemed a Transfer,
provided that any transfer of less than all of a Participant's Participating
Interest shall be subject to the provisions of Section 15.2(e).
15.3 Preemptive Right. Except as otherwise provided in Section
15.4, if a Participant desires to Transfer all or any part of its interest in
this Agreement, any Participating Interest, or the Assets, the other
Participants shall have a preemptive right to acquire such interests as provided
in this Section 15.3.
(a) A Participant intending to Transfer all or any part of its
interest in this Agreement, its Participating Interest, or the Assets shall
promptly notify the other Participants of its intentions. The notice shall
state the price and all other pertinent terms and conditions of the intended
Transfer, and shall be accompanied by a copy of the offer or contract for sale.
The
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other Participants shall have 30 days from the date such notice is delivered to
notify the transferring Participant whether they elect to acquire the offered
interest at the price stated in the notice and on the same terms and conditions
as set forth in the notice. If one or more Participants so elect, the Transfer
shall be consummated promptly after notice of such election is delivered to the
transferring Participant. If more than one Participant does so elect, the
offered interest shall be transferred to each electing Participant in
proportion to its Relative Interest. If only one Participant does so elect,
the offered interest shall be transferred to the electing Participant.
(b) If all other Participants fail to so elect within the period
provided for in Section 15.3(a), the transferring Participant shall have 180
days following the expiration of such period to consummate the Transfer to a
third party at the price stated in the notice and on terms and conditions no
less favorable than those stated in the notice required in Section 15.3(a).
(c) If the transferring Participant fails to consummate the
Transfer to a third party within the period set forth in Section 15.3(b), the
preemptive right of the other Participants in such offered interest shall be
deemed to be revived. Any subsequent proposal to Transfer such interest shall
be conducted in accordance with all of the procedures set forth in this Section
15.3.
(d) Upon a foreclosure or other enforcement of rights in a security
interest created by mortgage, deed of trust, lien or other encumbrance of any
interest in this Agreement or the Assets or its Participating Interest made to
secure a loan or other indebtedness of a Participant (herein a "Foreclosure or
Other Sale"), each other Participant shall have a preemptive right to acquire
the interests purchased at the Foreclosure or Other Sale from the acquiring
third party at the price paid by the acquiring third party, which right shall be
exercised within 30 days after such sale occurs, by notice given to the
acquiring third party, reflecting each such other Participant's election to
acquire such interest at the price paid by such acquiring third party in the
Foreclosure or Other Sale. If one or more of such other Participants does so
elect, the Transfer to such Participant or Participants shall be consummated
promptly after such notice. The preemptive right created under this Section
shall be subject to all of the redemption rights or other rights to recover
property created by law.
(e) If a Participant's interest in this Agreement and the Assets
and its Participating Interest are all or substantially all of the assets of
such Participant, or are not all or substantially all of the assets but the
financial strength of the transferee, if any, will be substantially less than
the financial strength of the transferring Participant, the preemptive right
created under this Section shall apply to a transfer of all shares
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of a corporate Participant or the sale of all shares of any Affiliate of a
Participant (by which the Participant is effectively subject to new ownership
or management) or such other corporate merger, consolidation or reorganization.
A transfer by a Participant to a joint venture or partnership in which such
Participant is a participating venturer or partner with a minority or
non-controlling interest shall also be subject to the preemptive right created
under this Section.
(f) The sale of a Participant's interest in this Agreement and the
Assets and its Participating Interest pursuant to a bankruptcy or similar
proceeding shall be subject to the preemptive right of the other Participants
created under this Section.
15.4 Exceptions to Preemptive Right. Section 15.3 shall not apply
to the following:
(a) Incorporation of a Participant, or corporate merger,
consolidation, amalgamation or reorganization of a Participant 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 Participant;
(b) The transfers referred to in Sections 15.2(j);
(c) The grant by a Participant of a security interest in any
interest in this Agreement, any Participating Interest, or the Assets by
mortgage, deed of trust, pledge, lien or other encumbrance; or
(d) A sale or other commitment or disposition of Products or
proceeds from sale of Products by a Participant upon distribution to it pursuant
to Article XI.
15.5 Exception for CSX. Notwithstanding anything else contained in
this Article XV, a Transfer by CSX of all of its interest in this Agreement and
the Assets and its Participating Interest or sale of all shares of the stock of
CSX by its parent corporation shall not be subject to (a) Section 15.2(c), so
long as CSX demonstrates to the reasonable satisfaction of Greens Creek and
Hecla that the transferee has a net worth sufficient to cover CSX's share of
estimated reclamation liabilities as described in that certain Greens Creek Mine
Reclamation Cost Estimate dated July 10, 1992 filed with the United States
Forest Service, as may be amended from time to time hereafter, provided that no
amendments within the six month period preceding the transfer shall be
considered in determining the sufficiency of the transferee's net worth; and (b)
Section 15.3. Upon such Transfer or sale, the exceptions provided by this
Section 15.5 shall terminate and the transferee shall not be entitled to the
exceptions contained in this Section 15.5 but shall be subject to all of the
provisions of
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this Agreement. For purposes of this Section 15.5, the provisions of Sections
15.2(j) and (k) shall not apply to determine when a transaction constitutes
a Transfer, so that any Transfer by CSX of its interest in this Agreement and
the Assets and its Participating Interest or sale of all shares of the stock of
CSX shall be subject to all other provisions of Section 15.2 except as
specifically provided in this Section 15.5.
15.6 Exceptions for Greens Creek and Hecla. Notwithstanding anything
else contained in this Article XV, a Transfer by Greens Creek or Hecla of all or
any part of their respective interests in this Agreement and the Assets and
their Participating Interests or the sale of all shares of the stock of Greens
Creek by its parent corporation shall be subject to the following provisions:
(a) The price at which another Participant may purchase the offered
interest of Greens Creek or Hecla pursuant to Section 15.3(a) shall be 110% of
the price stated in the notice to the other Participants;
(b) The sale of all shares of the stock of Greens Creek shall not
be subject to the provisions of Section 15.3; and
(c) Hecla shall be entitled to transfer its interest in this
Agreement and the Assets and its Participating Interest to a single purpose,
wholly owned subsidiary of Hecla, and such transfer and the sale of all shares
of stock of such subsidiary by Hecla shall not be subject to the provisions of
Section 15.3.
Upon the Transfer or sale, the exceptions provided by this Section 15.6 shall
terminate with respect to the interest transferred or sold and the transferee
shall not be entitled to the exceptions contained in this Section 15.6 but
shall be subject to all of the provisions of this Agreement. For purposes of
this Section 15.6, the provisions of Sections 15.2(j) and (k) shall not apply
to determine when a transaction constitutes a Transfer, so that any Transfer by
Greens Creek or Hecla of its interest in this Agreement and the Assets and its
Participating Interest or the sale of all shares of the stock of Greens Creek
shall be subject to all other provisions of Section 15.2.
ARTICLE XVI
PROJECT FINANCING
16.1 Ownership, Transfer and Encumbrance of Participating Interests.
Each of the Participants may fund its obligations under this Agreement (except
for obligations arising under Section 9.7(b) which will be financed or funded by
the Manager) through a financing arranged by the Participant, the repayment of
which is secured by a Lien, as defined below, Any such financing shall be
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deemed to be a "Project Financing" and shall be subject to the provisions of
this Article XVI.
(a) The Manager will maintain a record (the "Ownership Record") of
the persons owning Participating Interests in the Venture, their respective
Participating Interest amounts and dates of ownership. On the request of any
Participant, the Manager will also record any direct or indirect lien, pledge,
mortgage or other security interest covering that Participant's Participating
Interest in the Venture (or any part thereof), the capital stock of such
Participant, and/or any other collateral assignment of the related rights of
such Participant under this Agreement (collectively, a "Lien") by noting such
Lien in the Ownership Record. A Lien so noted is referred to in this Agreement
as a "Recorded Lien" and the holder thereof, a "Lienholder". The Manager will
not be responsible for updating the Lien information on the Ownership Record,
except when requested to do so by a Participant. The Manager will not be liable
to any person for any actions taken in connection with maintaining the Ownership
Record. A Participant may remove a Recorded Lien from the Ownership Record by
delivering to the Manager an executed form of satisfaction relating to such
Recorded Lien. Should any inconsistency or conflict arise between the Ownership
Record and any applicable public record as to the relative priority of any
Recorded Lien, the public records shall control in determining the relative
rights and priorities of third parties.
(b) No direct or indirect Transfer of a Participating Interest
subject to a Recorded Lien shall be effective unless prior written notice of
such action is delivered to the existing Lienholder not less than 30 days prior
to consummation of such action. Any such Transfer shall be subject to such
Recorded Lien.
16.2 Lienholder Rights and Obligations on Foreclosure.
(a) In the event that the Lienholder forecloses upon the
Participating Interest (or capital stock) of a Participant (the "Affected
Participant") subject to its Lien or exercises rights prior to a foreclosure
pursuant to a security instrument ("Pre-Foreclosure Rights"), then, subject to
compliance with the provisions of Section 16.2(b), the Lienholder will be
entitled to exercise all rights of the Affected Participant with respect to the
Venture and this Agreement (including, without limitation, the right to vote
such Participating Interest in accordance with the provisions of this Agreement,
the right to otherwise participate in the management and administration of the
Venture's business and affairs, the right to obtain information regarding the
Venture and its transactions and the right to inspect the books and records of
the Venture). If a Lienholder initiates foreclosure proceedings or exercises
Pre-Foreclosure Rights with respect to the Participating Interests (or capital
stock) of more than one Affected Participant, the Lienholder may vote such
Participating Interest on behalf of, and in substitution of the vote of, such
Participant until such
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time as either (i) another Participant or other Participants purchases the
collateral pursuant to Section 15.3(d) or (ii) the collateral is sold at a
foreclosure sale.
(b) A Lienholder shall be permitted to exercise Preforeclosure
Rights and foreclose upon its Lien on a Participating Interest if such
Lienholder delivers to the Manager (or, if the Manager is the Affected
Participant, to each other Participant) either (i) a copy of an involuntary or
voluntary bankruptcy petition (or an equivalent document under state law) filed
in connection with the bankruptcy or insolvency of the Affected Participant,
(ii) a copy of a preliminary injunctive order (or equivalent judicial action),
issued by a court of competent jurisdiction, permitting the Lienholder to
exercise such Pre-Foreclosure Rights or to foreclose or (iii) a copy of a
declaratory judgment (or equivalent judicial action) issued by a court of
competent jurisdiction, declaring that the Lienholder is entitled to exercise
such Pre-Foreclosure Rights or to foreclose.
(c) Upon compliance with the provisions of Section 16.2(b), a
Lienholder may deliver written notice to the Manager (or, if the Manager is the
Affected Participant, to each other Participant) initiating the procedure set
forth in this Section 16.2(c) and identifying the Affected Participant, the
collateral subject to the Recorded Lien, and the aggregate amount of the
principal of, accrued interest on and other amounts owing with respect to the
financing secured by the Recorded Lien (the "Accelerated Loan Amount"); provided
that a Lienholder exercising Pre-Foreclosure Rights shall deliver a notice
pursuant to this Section 16.2(c) no later than 90 days after the delivery of the
documentation referred to in Section 16.2(b). Each Participant that is not an
Affected Participant shall have the right and option, exercisable within 30 days
of the date of delivery of such notice, to purchase (and the Lienholder and the
Affected Participant shall be obligated to convey) all, but not less than all,
the collateral subject to the Recorded Lien, upon payment to the Lienholder of
the Accelerated Loan Amount. If two or more Participants desire to purchase
such collateral, each such Participant shall be entitled to purchase their
Relative Interests in the collateral.
(d) In exercising Pre-Foreclosure Rights, each Lienholder will be
subject to the provisions of this Agreement, as such provisions would apply to
the Affected Participant.
(e) Any action taken by the Lienholder in the exercise of
Pre-Foreclosure Rights shall bind such Affected Participant. The Affected
Participant waives any and all claims against the other Participants arising out
of the exercise by a Lienholder of Pre-Foreclosure Rights.
16.3 Waiver of Preferential Purchase Right. The following actions
will not be subject to the preemptive rights set forth in
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Section 15.3 (provided that written notice of such action shall be given to the
Manager at least 10 days prior to the effectiveness of any transaction pursuant
to paragraphs (a) and (b) below and no more than 30 days after the exercise of
Pre- Foreclosure Rights pursuant to paragraph (c) below):
(a) The grant of a Lien covering the Participating Interest of a
Participant to any bank or other financial institution to secure financing
obtained by such Participant to fund its portion of any approved Program and
Budget (a "Financing").
(b) The grant of a Lien covering the capital stock of a Participant
to secure Financing.
(c) Any extension of Pre-Foreclosure Rights by a Lienholder
pursuant to any Financing with respect to the Participating Interest or capital
stock of a Participant.
ARTICLE XVII
CONFIDENTIALITY
17.1 General. The financial terms of this Agreement and all
information obtained in connection with the performance of this Agreement shall
be the exclusive property of the Participants and, except as provided in Section
17.2, shall not be disclosed to any third party or the public without the prior
written consent of the other Participants, which consent shall not be
unreasonably withheld.
17.2 Exceptions. The consent required by Section 17.1 shall not
apply to a disclosure:
(a) By a Participant to a potential successor by sale of all or
substantially all of its assets, or to a potential successor by consolidation or
merger, or to a proposed joint venture or partnership in which such Participant
may become a participating partner or venturer;
(b) To an Affiliate, consultant, contractor or subcontractor that
has a bona fide need to be informed;
(c) To any third party to whom the disclosing Participant
contemplates a Transfer of all or any part of its interest in or to this
Agreement, its Participating Interest, or the Assets; or
(d) To a governmental agency or to the public which the disclosing
Participant believes in good faith is required by pertinent law or regulation or
the rules of any stock exchange;
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In any case to which this Section 17.2 is applicable, the disclosing
Participant shall give notice to the other Participants concurrently with the
making of such disclosure. As to any disclosure pursuant to Section 17.2(a),
(b) or (c), 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 Participants are obligated under this
Article XVII. A confidentiality agreement in the form attached to this
Agreement as Exhibit G executed by such third party shall be deemed to comply
with the requirements of the preceding sentence.
17.3 Disclaimers. Notwithstanding anything contained in this
Agreement to the contrary, a Participant shall not disclose any geological,
engineering or other data to any third party without disclosing the existence
and nature of any disclaimers which accompany such data or which are made in
Section 8.2(n).
17.4 Duration of Confidentiality. The provisions of this Article
XVII shall apply during the term of this Agreement and for two years following
termination of this Agreement pursuant to Section 12.1 or 12.2, and shall
continue to apply to any Participant who withdraws, who is deemed to have
withdrawn, or who Transfers its Participating Interest, for two years following
the date of such occurrence.
ARTICLE XVIII
GENERAL PROVISIONS
18.1 Notices. All notices and other communications ("Notices")
required or allowed by this Agreement shall be in writing, and shall be
addressed respectively as follows:
If to Greens Creek:
Kennecott Greens Creek Mining Company
P.O. Box 32199
Juneau, Alaska 99803-2199
Attention: General Manager
Telephone: (907) 789-8100
Telecopier: (907) 789-7112
with a copy to:
Kennecott Corporation
10 East South Temple Street
Salt Lake City, Utah 84133
Attention: Law Department
Telephone: (801) 322-7000
Telecopier: (801) 322-8081
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and to:
Kennecott Minerals Company
10 East South Temple Street
Salt Lake City, Utah 84133
Attention: President
Telephone: (801) 322-7000
Telecopier: (801) 322-8181
If to Hecla:
Hecla Mining Company
6500 Mineral Drive
Coeur d'Alene, Idaho 83814-8788
Attention: Vice President - Metal Mining
Telephone: (208) 769-4100
Telecopier: (208) 769-4159
with a copy to:
Hecla Mining Company
6500 Mineral Drive
Coeur d'Alene, Idaho 83814-8788
Attention: Vice-President - General Counsel
Telephone: (208) 769-4100
Telecopier: (208) 769-4159
If to CSX:
CSX Alaska Mining Inc.
One James Center
901 East Cary Street
Richmond, Virginia 23219
Attention: James Ermer
Telephone: (804) 782-1427
Telecopier: (804) 783-1380
with a copy to:
CSX Alaska Mining Inc.
1049 West 5th Avenue
Anchorage, Alaska 99501
Attention: William V. McHugh
Telephone: (907) 265-3100
Telecopier: (907 265-3180
And to:
CSX Corporation
One James Center
901 East Cary Street
Richmond, Virginia 23219
Attention: General Counsel
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Telephone: (804) 783-1343
Telecopier: (804) 783-1355
All Notices shall be given (i) by personal delivery, or (ii) by electronic
communication, with a confirmation sent by registered or certified mail return
receipt requested, or (iii) by registered or certified mail return receipt
requested. All Notices shall be effective and shall be deemed delivered (i) if
by personal delivery on the date of delivery if delivered during normal
business hours, and, if not delivered during normal business hours, on the next
business day following delivery, (ii) if by electronic communication on the
next business day following receipt of the electronic communication, and (iii)
if solely by mail on the next business day after actual receipt. A Participant
may change its address by Notice to the other Participants.
18.2 Waiver. The failure of a Participant to insist on the strict
performance of any provision of this Agreement or to exercise any right, power
or remedy upon a breach hereof shall not constitute a waiver of any provision of
this Agreement or limit the Participant's right thereafter to enforce any
provision or exercise any right.
18.3 Modification. No modification of this Agreement shall be valid
unless made in writing and duly executed by the Participants.
18.4 Force Majeure. Except for the obligation to make payments when
due hereunder, the obligations of a Participant 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 participant to grant); acts of God;
laws, regulations, orders, proclamations, 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; 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 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; or any
other cause whether similar or dissimilar to the foregoing. The affected
Participant shall promptly give notice to the other Participants of the
suspension of
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performance, stating therein the nature of the suspension, the reasons
therefor, and the expected duration thereof. The affected Participant shall
resume performance as soon as reasonably possible. During the period of
suspension the obligations of the Participants to advance funds pursuant to
Section 10.2 shall be reduced to levels consistent with Operations.
18.5 Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Alaska, except for its
rules pertaining to conflicts of laws.
18.6 Severability. In the event that any condition, covenant or
other provision of this Agreement is held to be invalid or void by any court of
competent jurisdiction, the same shall be deemed severable from the remainder of
this Agreement and shall in no way affect any other condition, covenant or other
provision. If such condition, covenant or other provision shall be deemed
invalid due to its scope or breadth, such condition, covenant or other provision
shall be deemed valid to the extent of the scope or breadth permitted by law.
18.7 Rule Against Perpetuities. Notwithstanding any other provision
contained herein, if any property interest created hereunder does not vest on
the execution of this Agreement, it shall either vest within 20 years and 364
days after the death of the last surviving descendant of the individuals who
sign this Agreement on behalf of the Participants who is alive on the execution
of this Agreement, or such interest shall terminate on such date.
18.8 Further Assurances. Each of the Participants agrees that it
shall take from time to time such actions and execute such additional
instruments as may be reasonably necessary or convenience to implement and carry
out the intent and purpose of this Agreement.
18.9 Survival of Terms and Conditions. The following Sections shall
survive the termination of this Agreement to the full extent necessary for their
enforcement and the protection of the Participant in whose favor they run:
Sections 4.3, 6.4, 6.5, 6.6, 10.3, 12.3, 12.4, 12.5, 12.6, 12.7, 12.8 and
Article XVII.
18.10 Entire Agreement; Integration. This Agreement contains the
entire understanding of the Parties and supersedes all prior agreements and
understandings between the Parties relating to the subject matter hereof.
18.11 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the respective successors and permitted assigns of
the Parties.
18.12 Memorandum. At the request of any Participant, a Memorandum or
short form of this Agreement, as appropriate, which
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shall not disclose financial information contained herein, shall be prepared
and recorded by the Manager. This Agreement shall not be recorded.
18.13 Counterparts. This Agreement may be executed in counterparts,
each of which when so executed shall be deemed an original, and such
counterparts shall together constitute but one and the same instrument.
18.14 Headings. The section headings contained in this Agreement are
for reference purposes only and shall not affect the meaning or interpretation
of this Agreement.
18.15 Binding Agreement. The Participants intend this Agreement to
be binding and effective immediately upon execution by the Participants.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
KENNECOTT GREENS CREEK MINING
COMPANY
By
Its
HECLA MINING COMPANY
By
Its
CSX ALASKA MINING INC.
By
Its
Entered into and agreed to and executed solely for the purposes of
Section 13.5 of this Agreement.
CSX JUNEAU MINING INC.
By
Its
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EXHIBIT B
ACCOUNTING PROCEDURE
The financial and accounting procedures to be followed by the Manager
and the Participants under the Agreement are set forth below. References in
this Accounting Procedure to Sections and Articles are to those located in this
Accounting Procedure unless it is expressly stated that they are references to
the Agreement.
ARTICLE I
GENERAL PROVISIONS
1.1 General Accounting Records. The Manager shall maintain
detailed and comprehensive cost accounting records in accordance with this
Accounting Procedure, including general ledgers, supporting and subsidiary
journals, invoices, checks and other customary documentation, sufficient to
provide a record of revenues and expenditures and periodic statements of
financial position and the results of operations for managerial, tax,
regulatory or other financial reporting purposes. Such records shall be
retained for the duration of the period allowed the Participants for audit or
the period necessary to comply with tax or other regulatory requirements. The
records shall reflect all obligations, advances and credits of the
Participants.
1.2 Bank Accounts. The Manager shall maintain one or more
separate bank accounts for the payment of all expenses and the deposit of all
cash receipts for the Venture.
1.3 Statements and Billings. The Manager shall prepare statements
and bill the Participants as provided in Article X of the Agreement. Payment of
any such billings by any Participant, including the Manager, shall not
prejudice such Participant's right to protest or question the correctness
thereof for a period not to exceed 12 months following the receipt of an audit
prepared pursuant to Section 10.4 of the Agreement for the year for which such
billings were made. All written exceptions to and claims upon the Manager for
incorrect charges, billings or statements shall be made upon the Manager within
such 12 month period. The time period permitted for adjustments hereunder
shall not apply to adjustments resulting from periodic inventories as provided
in Article V.
ARTICLE II
CHARGES TO JOINT ACCOUNT
Subject to the limitations hereinafter set forth, the Manager shall
charge the Joint Account with the following:
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2.1 Rentals, Royalties and Other Payments. All property
acquisition and holding costs, including filing fees, license fees, costs of
permits and assessment work, delay rentals, production royalties, including any
required advances, and all other payments made by the Manager which are
necessary to acquire or maintain title to the Assets.
2.2 Labor and Employee Benefits.
(a) Salaries and wages of (i) the Manager's employees
directly engaged in Operations, including salaries or wages of employees who
are temporarily assigned to and directly employed by same; and (ii) technical
personnel of the Manager or its parent or Affiliate that may be required or
utilized by the Manager and who are not employed by or assigned to the Venture.
The salaries and wages of such nonassigned personnel shall be charged
proportionately to the time actually devoted to the Venture and the Venture
shall also be charged for travel and living expenses as appropriate.
(b) The Manager's cost of holiday, vacation, sickness and
disability benefits, and other customary allowances applicable to the salaries
and wages chargeable under Sections 2.2(a) and 2.12. Such costs may be charged
on a "when and as paid basis" or by "percentage assessment" on the amount of
salaries and wages. If percentage assessment is used, the rate shall be
applied to wages or salaries excluding overtime and bonuses. Such rate shall
be based on the Manager's cost experience and it shall be periodically adjusted
at least annually to ensure that the total of such charges does not exceed the
actual cost thereof to the Manager.
(c) The Manager's actual cost of established plans for
employees' group life insurance, medical and hospitalization, stock purchase,
thrift, bonus (except production or incentive bonus plans under a union
contract based on actual rates of production, cost savings and other production
factors, and similar non-union bonus plans customary in the industry or
necessary to attract competent employees, which bonus payments shall be
considered salaries and wages under Sections 2.2(a) or 2.12; rather than
employees' benefit plans) and other benefit plans of a like nature applicable
to salaries and wages chargeable under Sections 2.2(a) or 2.12, provided that
the plans are limited to the extent feasible to those customary in the
industry, and the Manager's estimated cost as established by actuarial
calculations for established pension, retirement and post-retirement benefit
plans.
(d) Cost of assessments imposed by governmental authority which are
applicable to salaries and wages chargeable under Sections 2.2(a) and 2.12,
including all penalties except those resulting from the willful misconduct or
gross negligence of the Manager.
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2.3 Materials, Equipment and Supplies. The cost of materials,
equipment and supplies (herein called "Material") purchased from unaffiliated
third parties or furnished by the Manager or any Participant as provided in
Article III. The Manager shall purchase or furnish only so much Material as
may be required for immediate use in efficient and economical Operations. The
Manager shall also maintain inventory levels of Material at reasonable levels
to avoid unnecessary accumulation of surplus stock.
2.4 Equipment and Facilities Furnished by Manager. The cost of
machinery, equipment and facilities owned by the Manager and used in Operations
or used to provide support or utility services to Operations charged at rates
commensurate with the actual costs of ownership and operation of such
machinery, equipment and facilities. Such rates shall include costs of
maintenance, repairs, other operating expenses, insurance, taxes, depreciation
and interest at a rate not to exceed 3% per annum. Such rates shall not exceed
the average commercial rates currently prevailing in the vicinity of the
Operations.
2.5 Transportation. Reasonable transportation costs incurred in
connection with the transportation of employees and material necessary for the
Operations.
2.6 Contract Services and Utilities. The cost of contract
services and utilities procured from outside sources, other than services
described in Sections 2.9 and 2.13. If contract services are performed by the
Manager or an Affiliate thereof, the cost charged to the Joint Account shall
not be greater than that for which comparable services and utilities are
available in the open market within the vicinity of the Operations.
2.7 Insurance Premiums. Net premiums paid for insurance required
to be carried for Operations for the protection of the Participants. When the
Operations are conducted in an area where the Manager may self-insure for
Workmen's Compensation and/or Employer's Liability under state law, the Manager
may elect to include such risks in its self-insurance program and shall charge
its costs of self-insuring such risks to the Joint Account provided that such
charges shall not exceed published manual rates.
2.8 Damages and Losses. All costs in excess of insurance proceeds
necessary to repair or replace damage or losses to any Assets resulting from
any cause other than the willful misconduct or gross negligence of the Manager.
The Manager shall furnish the Management Committee with written notice of
damages or losses as soon as practicable after a report thereof has been
received by the Manager.
2.9 Legal and Regulatory Expense. Except as otherwise provided in
Section 2.13, all legal and regulatory costs and expenses incurred in or
resulting from the Operations or necessary
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to protect or recover the Assets of the Venture. All attorney's fees and other
legal costs to handle, investigate and settle litigation or claims, including
the cost of legal services provided by the Manager's legal staff shall not be
charged to the Joint Account unless approved by the Management Committee.
Settlements in excess of $250,000 in cash or value shall not be charged to the
Joint Account unless also approved by each of the non-managing Participants as
provided in Section 8.2(g) of the Agreement.
2.10 Audit. Cost of annual audits under Section 10.4 of the
Agreement.
2.11 Taxes. All taxes (except income taxes) of every kind and
nature assessed or levied upon or in connection with the Assets, the production
of Products or Operations, which have been paid by the Manager for the benefit
of the Participants. Each Participant is separately responsible for income
taxes which are attributable to its respective Participating Interest.
2.12 District and Camp Expense (Field Supervision and Camp
Expenses). A pro rata portion of (i) the salaries and expenses of the
Manager's superintendent and other employees serving Operations whose time is
not allocated directly to such Operations, and (ii) the costs of maintaining
and operating an office other than its parent corporation's corporate
headquarters (herein called "the Manager's Project Office") and any necessary
suboffice and (iii) all necessary camps, including housing facilities for
employees, used for Operations. The expense of those facilities, less any
revenue therefrom, shall include depreciation or a fair monthly rental in lieu
of depreciation of the investment. The total of such charges for all
properties served by the Manager's employees and facilities shall be
apportioned to the Joint Account on the basis of a ratio, the numerator of
which is the direct labor costs of the Operations and the denominator of which
is the total direct labor costs incurred for all activities served by the
Manager.
2.13 Administrative Charge.
(a) Each month, the Manager shall charge the Joint Account a sum which
shall be a liquidated amount to reimburse the Manager for its home office
overhead and general and administrative expenses incurred during that month and
which shall be in lieu of any management fee. The charge shall be at the
graduated rate shown in the following table:
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BRACKET ALLOWABLE COSTS ADMINISTRATIVE CHARGE
------- --------------- ---------------------
A $1 to $250,000 7% of the amount in this Bracket
B $250,001 to $500,000 5% of the amount in this Bracket plus 7% of the amount in
Bracket A
C $500,001 to $750,000 3% of the amount in this Bracket plus 5% and 7% of the amounts
in Brackets B and A, respectively
D $750,001 to $1,000,000 2% of the amount in this Bracket plus 3%, 5% and 7% of the
amounts in Brackets C, B and A, respectively
E Over $1,000,000 1% of the amount in this Bracket plus 2%, 3%, 5% and 7% of the
amounts in Brackets D, C, B and A, respectively
(b) The term "Allowable Costs" as used in this Section 2.13 for
Operations shall mean all charges to the Joint Account for that month excluding
(i) the administrative charge referred to herein; (ii) depreciation, depletion
or amortization of tangible or intangible assets; (iii) amounts charged for the
Manager's parent corporation's corporate headquarter's expenses and the costs of
administrative, accounting or secretarial services performed by manager's
non-technical employees.
(c) The Management Committee shall annually review the administration
charges and shall amend the methodology or rates used to determine such charges
if they are found to be insufficient or excessive. Amendment of the methodology
or rates shall require a unanimous decision by the members of the Management
Committee.
2.14 Other Expenditures. Any reasonable direct expenditure, other
than expenditures which are covered by the foregoing provisions, incurred by the
Manager for the necessary and proper conduct of Operations.
ARTICLE III
BASIS OF CHARGES TO JOINT ACCOUNT
3.1 Purchases. Material purchased and services procured from third
parties shall be charged to the Joint Account by the Manager at invoiced cost,
including applicable transfer taxes, less all discounts taken. If any Material
is determined to be defective or is returned to a vendor for any other reason,
the Manager shall credit the Joint Account when an adjustment is received from
the vendor.
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3.2 Material Furnished by or Transferred to the Manager or a
Participant. Any Material furnished by the Manager or Participant from its
stocks or transferred to the Manager or Participant shall be priced on the
following basis:
(a) New Material. New Material transferred from the
Manager or Participant shall be priced F.0.B. the nearest reputable supply
store or railway receiving point, where like Material is available, at the
current replacement cost of the same kind of Material, exclusive of any
available cash discounts, at the time of the transfer (herein called, "New
Price").
(b) Used Material.
(1) Used Material in sound and serviceable condition and suitable
for reuse without reconditioning shall be priced as follows:
(i) Used Material transferred by the Manager or Participant shall
be priced at seventy-five percent (75%) of the New Price;
(ii) Used Material transferred to the Manager or Participant shall
be priced (1) at seventy-five percent (75%) of the New Price if such Material
was originally charged to the Joint Account as new Material, or (2) at
sixty-five percent (65%) of the New Price if such Material was originally
charged to the Joint Account as good used Material at seventy-five percent (75%)
of the New Price.
(2) Other used Material which, after
reconditioning will be further serviceable for original function as good
secondhand Material, or which is serviceable for original function but not
substantially suitable for reconditioning shall be priced at 50 percent (50%) of
New Price. The cost of any reconditioning shall be borne by the transferee.
(3) All other Material, including junk, shall be priced at a value
commensurate with its use or at prevailing prices. Material no longer suitable
for its original purpose but usable for some other purpose shall be priced on a
basis comparable with items normally used for such other purposes.
(c) Obsolete Material. Any Material which is serviceable
and usable for its original function, but its condition is not equivalent to
that which would justify a price as provided above shall be priced by the
Management Committee. Such price shall be set at a level which will result in a
charge to the Joint Account equal to the value of the service to be rendered by
such Material.
3.3 Premium Prices. Whenever Material is not readily obtainable at
published or listed prices because of national
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emergencies, strikes or other unusual circumstances over which the Manager has
no control, the Manager may charge the Joint Account for the required Material
on the basis of the Manager's direct cost and expenses incurred in procuring
such Material and making it suitable for use. The Manager shall give written
notice of the proposed charge to the Participants prior to the time when such
charge is to be billed, whereupon any Participant shall have the right, by
notifying the Manager within ten days of the delivery of the notice from the
Manager, to furnish at the usual receiving point all or part of its share of
Material suitable for use and acceptable to the Manager.
3.4 Warranty of Material Furnished by the Manager or Participants.
Neither the Manager nor any Participant warrants the Material furnished beyond
any dealer's or manufacturer's warranty and no credits shall be made to the
Joint Account for defective Material until adjustments are received by the
Manager from the dealer, manufacturer or their respective agents.
ARTICLE IV
DISPOSAL OF MATERIAL
4.1 Disposition Generally. The Manager shall have no obligation to
purchase a Participant's interest in Material. The Management Committee shall
determine the disposition of major items of surplus Material, provided the
Manager shall have the right to dispose of normal accumulations of junk and
scrap Material either by sale or by transfer to the Participants as provided in
Section 4.2.
4.2 Distribution to Participants. Any Material to be distributed
to the Participants shall be made in proportion to their respective
Participating Interests, and corresponding credits shall be made to the Joint
Account on the basis provided in Section 3.2.
4.3 Sales. Sales of Material to third parties shall be credited to
the Joint Account at the net amount received. Any damages or claims by the
Purchaser shall be charged back to the Joint Account if and when paid.
ARTICLE V
INVENTORIES
5.1 Periodic Inventories, Notice and Representations. At
reasonable intervals, inventories shall be taken by the Manager, which shall
include all such Material as is ordinarily considered controllable by operators
of mining properties and the expense of conducting such periodic inventories
shall be charged to the Joint Account. Inventories of in process and finished
Products shall be taken at least quarterly and the Manager shall promptly
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prepare and present to the Management Committee a report on the results of such
inventory. A Participant may be represented at any inventory. Except in the
case of fraud by the Manager, a Participant shall be deemed to have accepted
the results of any inventory of Material taken by the Manager if the
Participant fails to be represented at such inventory and to have accepted the
results of any inventory of Products taken by the Manager if the Participant
fails to object to the results of the inventory within 30 days of receipt of
the Manager's report.
5.2 Reconciliation and Adjustment of Inventories. Reconciliation of
inventory with charges to the Joint Account shall be made, and a list of
averages and shortages shall be furnished to the Management Committee within six
(6) months after the inventory is taken. Inventory adjustments shall be made by
the Manager to the Joint Account for averages and shortages, but the Manager
shall be held accountable to the Venture only for shortages due to lack of
reasonable diligence.
5.3 Special Inventories. Special inventories may be taken by a
Participant and any purchaser of the Participant's interest in the Venture in
connection with the sale of such interest. Both the selling Participant and the
purchaser may be represented at the special inventory. The expense of such
inventory shall be borne solely by the selling Participant and the purchaser.
The results of any special inventory shall promptly be provided to the
Management Committee.
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EXHIBIT D
NET PROCEEDS CALCULATION
A. DEFINITION OF NET PROCEEDS.
"Net Proceeds" shall be any excess of Receipts over Disbursements for
any calendar quarter. To compute Net Proceeds, the Receipts for the calendar
quarter are compared to all prior unrecovered Disbursements (including
Disbursements for the present quarter). If Receipts exceed all prior
unrecovered Disbursements (including Disbursements for the present quarter), Net
Proceeds will be paid at the appropriate percentage. If Receipts are less than
all prior unrecovered Disbursements (including Disbursements for the present
quarter), the amount by which Disbursements exceed Receipts will be carried
forward and added to the Disbursements made in the ensuing calendar quarter and
the process will be repeated.
B. OTHER DEFINITIONS.
1. "Payor" shall mean the person or entity obligated to pay Net
Proceeds to the Royalty Holder pursuant to the terms of the Agreement.
2. "Royalty Holder" shall mean the person or entity entitled to
receive a Net Proceeds interest pursuant to the terms of the Venture Agreement.
3. "Receipts" shall be all revenues actually received during the
calendar quarter from the sale, lease or rental of Assets to third parties or
the use of Assets by the Payor other than with respect to the Properties;
insurance proceeds from the loss, damage or destruction of Assets; and the
production of Products from the Properties. Receipts from the production, sale,
use or other disposition of Assets or Products shall be determined as follows:
(a) If Products derived from the Properties are sold to a
smelter, refiner or other purchaser (other than the Payor or Affiliates of the
Payor), Receipts shall equal the amount of revenues actually received by the
Payor from the smelter, refiner or other purchaser of Products, plus any bonuses
and subsidies, less all penalties, assaying and sampling charges whether
deducted by the purchaser or paid or incurred by the Payor;
(b) Except as provided in (c) below, if Products derived from the
Properties are sold to the Payor or an Affiliate of the Payor or if any
Participant takes its share of Products in kind under Section 11.1 of the
Agreement, then for purposes of determining Receipts, such Products shall be
deemed conclusively
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to have been sold at a price equal to the fair market value of a sale to arm's
length purchasers;
(c) If the Payor produces as a final product or has produced as a
final product through a tolling/refining contract or any other transaction that
results in the Payor owning title to fine gold and/or silver bullion or dore
bullion produced from the Properties, and such products have not been sold
within 30 days after the end of the month in which the final product was
produced, then Receipts shall mean the amount of fine gold and/or silver
bullion produced or the amount of payable gold and/or silver contained in dore
bullion produced from the Properties multiplied by (i) for gold, the average
London Bullion Market Association P.M. Gold Fixing for the calendar quarter of
production and (ii) for silver, the average London Bullion Market Association
daily Silver Fixing on the date such bullion is made available to the Payor by
the smelter, mint or refiner that processes such Products. The average price
for the calendar quarter shall be determined by dividing the sum of all daily
prices posted during the calendar quarter by the number of days that prices were
posted. The posted price shall be obtained from The Wall Street Journal,
Reuters, or other reliable source. If either the London Bullion Brokers P.M.
Gold Fixing or the London Bullion Market Association daily Silver Fixing ceases
to be published, the parties shall agree upon a similar alternative method for
determining the average daily spot market price for gold or silver, as the case
may be. In any case, the Royalty Holder shall have no right to participate in
any hedging, trading or other similar transaction involving Products derived
from the Properties; and
(d) If Assets are leased, sold, rented or used by the Payor other
than with respect to the Properties, Receipts shall be the actual revenues
received; provided, however, that if such sale, lease, rental or use is not an
arms-length transaction, the fair market value of such transaction shall be used
to determine Receipts.
4. "Disbursements" shall mean Capital Expenditures and Operating
Expenses actually paid, at or for the benefit of Assets, by the Payor subsequent
to the date a Participant is deemed to have withdrawn pursuant to Section 6.5 of
the Agreement.
5. "Capital Expenditures" shall mean the aggregate of costs
incurred relating to the development of a mine and Assets, within the Area of
Interest existing at the time the Royalty Holder became entitled to receive Net
Proceeds as follows:
(a) all costs of or related to the construction of a mine or any
mine or mill building, including crushing, grinding, washing, concentrating
and/or other treatment or operation facility, and all costs of any related
equipment;
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(b) all costs of or related to the construction of storage and
warehouse facilities for ore or Products derived from such mine;
(c) all costs of or related to transportation facilities for moving
ore or concentrates derived from such mine or mill and/or any Products derived
from such ore or concentrates;
(d) all costs of or related to the provision of utilities, housing
for employees, training of employees, medical and recreational facilities, and
similar infrastructure costs, not otherwise included in Operating Expenses;
(e) all costs of or related to property acquisition within the Area
of Interest at the time the Royalty Holder became entitled to Net Proceeds; and
(f) all other costs, whether similar or dissimilar to the
foregoing, which are treated as capital items under the Payor's accounting
practices.
6. "Operating Expenses" shall mean the following costs and
expenses relating to a mine or the Assets within the Area of Interest at the
time the Royalty Holder became entitled to Net Proceeds:
(a) all costs of or related to Exploration and Development;
(b) all costs of or related to pre-development drilling and
stripping of overburden to expose and gain access to the ore;
(c) all mining, milling or processing costs, including custom or
toll milling (with respect to the milling the Products of such mine) and
transportation costs of such Products to the mill and/or the smelter and/or to
the purchaser thereof;
(d) all maintenance, repair and replacement costs;
(e) all costs of or related to the sale and marketing of any of the
Products, including an allowance for commissions at rates which are normal and
customary in the industry;
(f) all costs resulting from or in connection with the preparation,
equipping, modifying or expansion of any mine;
(g) all taxes, assessments, fees, rentals, advance royalties,
royalties and duties payable to relevant third parties or to any governmental
body, charged, levied or imposed on such mine, or payable on or in respect of or
measured by the Products produced from such mine, including all governmental
royalties relating thereto and mining duties or mining taxes but excluding
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the Alaska Mining License Tax and state, local and federal income and franchise
taxes;
(h) interest related to debt financing arrangements by third party
lenders to the Participants for such mine, mill or other facilities; and
(i) all other costs of or related to the conduct of operations in
connection with a mine on the Properties paid by the Venture, including actual
and documented general and administrative expenses;
Operating Expenses shall not include any non-cash charges.
C. ACCOUNTING MATTERS.
All Receipts and Disbursements shall be determined in accordance with
generally accepted accounting principles and practices consistently applied and,
to the extent not inconsistent with the provisions of this Exhibit D, the
Accounting Procedure set forth in Exhibit B of the Agreement shall also be
referred to in determining Receipts and Disbursements, except that Receipts and
Disbursements shall be determined by the cash method.
D. COSTS OF COMMON FACILITIES.
Where any Capital Expenditures or Operating Expenses are paid with
respect to the mining, milling, processing, selling or delivering of Products
produced from the Properties in conjunction with the mining, milling,
processing, selling or delivering of minerals produced from other properties
controlled by the Payor, such Capital Expenditures and Operating Expenses shall
be fairly allocated and apportioned in accordance with generally accepted
practices in the mining industry.
E. PAYMENTS OF NET PROCEEDS.
The Payor shall deliver to the Royalty Holder a payment equal to the
percentage, as set forth in the Agreement, of all Net Proceeds realized by the
Payor during any calendar quarter within 30 days after the end of said calendar
quarter, together with a copy of the accounting made in connection with such
payment. All quarterly payments of Net Proceeds to the Royalty Holder shall be
subject to adjustment, if required, at the end of each calendar year.
F. AUDIT AND DISPUTES.
1. The Royalty Holder, upon written notice, shall have the right
to have an independent firm of certified public accountants audit the records
that relate to the calculation of Net Proceeds
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within 24 months after receipt of a payment described in Section E of this
Exhibit for a calendar quarter.
2. The Royalty Holder shall be deemed to have waived any right it
may have had to object to a payment made for any calendar quarter, unless it
provides notice in writing of such objection within 24 months after receipt of
final payment for the calendar quarter. If the parties are unable to resolve
the dispute within 60 days after the receipt of such notice, the dispute shall
be resolved by arbitration in Anchorage, Alaska pursuant to the commercial
arbitration rules of the American Arbitration Association. The resolution
pursuant to such arbitration shall be binding on the parties. Alternatively, the
parties may elect to submit the dispute to a mutually acceptable certified
public accountant, or firm of certified public accountants, for a binding
resolution thereof. Unless the parties agree to share the costs of arbitration,
the arbitrator shall determine what part of the costs and expenses incurred in
any such proceeding shall be borne by each party participating in the
arbitration.
G. GENERAL.
1. Unless otherwise specified, capitalized terms used herein shall
have the same meaning as given to them in the Agreement to which this Exhibit D
is attached.
2. Accurate records of tonnage, volume of products, analyses of
products, weight, moisture, assays of pay metal content and other records
related to the computation of Net Proceeds hereunder shall be kept by the Payor.
3. The Royalty Holder or its authorized representative on not less
than 5 days' notice to the Payor, may enter upon all surface and subsurface
portions of the Properties for the purpose of inspecting the Properties, all
improvements thereto and operations thereon, and may inspect and copy all
records and data pertaining to the computation of its interest, including
without limitation such records and data which are maintained electronically.
The Royalty Holder or its authorized representative shall enter the Properties
at the Royalty Holder's own risk and may not unreasonably hinder operations on
or pertaining to the Properties. The Royalty Holder shall indemnify and hold
harmless all Participants and their Affiliates (including without limitation
direct and indirect parent companies), and its or their respective directors,
officers, shareholders, employees, agents and attorneys, from and against any
Liabilities which may be imposed upon, asserted against or incurred by any of
them by reason of injury to the Royalty Holder or any of its agents or
representatives caused by the Royalty Holder's exercise of its rights herein.
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4. All notices or communications hereunder shall be made and
effective in accordance with the provisions of the Agreement.
5. The Net Proceeds interest shall attach to any amendments,
relocations or conversions of any mining claims or leases comprising the
Properties, or to any renewals or extensions of leases, and to any mineral
rights acquired by the Payor and any Affiliates in lands embraced within any
mining claims or leases comprising the Properties within one year after the loss
or relinquishment of any mining claim or lease comprising the Properties. The
Net Proceeds interest shall be a real property interest that runs with the
Properties and shall be applicable to any person who produces and sells Products
from the Properties.
6. All information and data provided to the Royalty Holder shall
be subject to the confidentiality provisions of Article XVII of the Agreement.
7. The Payor shall have the right to commingle ore and minerals
from the Properties with ore from other lands and properties; provided,
however, that the Payor shall calculate from representative samples the average
grade of the ore and shall weigh (or calculate by volume) the ore before
commingling. If concentrates are produced from the commingled ores by the
Payor, the Payor shall also calculate from representative samples the average
recovery percentage for all concentrates produced during the calendar quarter.
In obtaining representative samples, calculating the average grade of the ore
and average recovery percentages, the Payor may use any reasonable procedures
that are commonly accepted in the mining and metallurgical industry which it
believes suitable for the type of mining and processing activity being conducted
and, in the absence of fraud, its choice of such procedures shall be final and
binding on the Royalty Holder. In addition, comparable procedures may be used
by the Payor to apportion among the commingled ores penalty charges, if any,
imposed by the purchaser of such ore or concentrates. In the case of any
dispute regarding the reasonableness of any procedure adopted by Payor, and if
that dispute cannot be resolved by the parties, then the dispute should be
submitted to arbitration, pursuant to Section F.2. Fraud should not be the
standard for resolving any such dispute; rather, the adoption of any such
procedure should be subject to a determination of reasonableness.
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EXHIBIT E
INSURANCE
The Manager shall, at all times while conducting Operations, comply
fully with the applicable worker's compensation laws and purchase, or provide
through self-insurance, protection for the Participants comparable to that
provided under standard form insurance policies for (i) comprehensive public
liability and property damage with combined limits of Ten Million Dollars for
bodily injury and property damage; (ii) automobile insurance with combined
limits of One Million Dollars; and (iii) adequate and reasonable insurance
against risk of fire, earthquake and flood, and other risks ordinarily insured
against in similar operations. If the Manager elects to insure through an
affiliated entity, it may charge to the Joint Account an amount equal to the
premium it would have paid had it secured and maintained a policy or policies of
insurance on a competitive bid basis in the amount of such coverage. Each
Participant shall self-insure or purchase for its own account such additional
insurance as it deems necessary. Each Participant shall be named as an
additional named insured on the Manager's policies of insurance and the Manager
shall, upon request made by a Participant, supply a certificate reflecting the
Participant's status as named insured.
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EXHIBIT F
SEPARATE CAPITAL PROJECTS
Part I
"Southwest Extension Ore Zone Development Project" means the development and
mining activities required to produce a nominal 1,320 tons per day of ore from
the Southwest Extension inferred resource, as described in the December 31,
1993 Ore Reserve/Resource Statement for Greens Creek, including any extensions
which may be delineated by diamond drilling in 1994.
Part II
"West Ore Zone Development Project" means the development and mining activities
required to produce a nominal 1,320 tons per day of ore from the West Ore Zone,
as described in the December 31, 1993 Ore Reserve/Resource Statement for Greens
Creek.
Part III
"Mine and Mill Expansion Project" means the capital construction and
development requirements to expand the current nominal 1,320 tons per day mine
and mill capacity to a nominal 2,000 tons per day capacity.
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EXHIBIT G
CONFIDENTIALITY AGREEMENT
This Confidentiality Agreement ("Confidentiality Agreement") is made
this _____ day of ______________, 1994, by and between XX, a
____________________ corporation with its principal office at
______________________ ("XX"), and OO, a ____________ corporation with its
principal office at __________________________ ("OO").
WITNESSETH:
WHEREAS, XX owns, possesses, or controls certain proprietary information
pertaining to or contained in that Mining Venture Agreement between XX and YY
dated ________________; and
WHEREAS, OO desires to obtain such proprietary information (the
"Information") for the purpose of _____________________; and
WHEREAS, XX desires to provide the Information to OO.
NOW THEREFORE, in consideration of the premises, covenants, and
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledge, the parties agree as
follows:
1. All right, title and interest in and to the Information shall
remain the exclusive property of XX and YY.
2. The Information which OO shall obtain from XX shall be used for
the sole purpose of ______________________________, and shall be treated by OO
in the utmost and strictest confidence, and the information contained therein
shall not, without prior written consent of XX and YY, be disclosed by OO in any
manner whatsoever, in whole or in part; provided, however, that such prior
written consent shall not be required with respect to disclosures of the
Information;
(a) to an affiliate, consultant, contractor or
subcontractor of OO that has a bona fide need
to be informed;
(b) which at the time of disclosure is readily
available to the public; or
(c) required by law. However, in such event OO
shall notify XX and YY prior to such
disclosure and further OO agrees to cooperate
with XX and YY in any legal proceeding
arising therefrom.
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3. OO shall keep the Information confidential for a period of
three years from the date hereof and OO will return to XX all information
furnished by XX hereunder promptly upon demand.
4. The Information shall not be used directly or through third
parties to adversely affect or compete with the business of XX and/or YY or
their parents, affiliates, or subsidiaries, if any.
5. All notices required hereunder shall be deed to have been given
only if such notice is reduced to writing and delivered personally, or by first
class United States mail with postage prepaid and return receipt requested, or
by confirmed telecopier (FAX) transmission, or by prepaid overnight courier
service addressed to the appropriate party as set forth below:
If to XX:
___________________
___________________
___________________
Attn:______________
Fax:_______________
If to OO:
___________________
___________________
___________________
Attn:______________
Fax:_______________
The parties may change their addresses by giving notice of such change in the
manner set forth herein. Any notice given to a party by mail or by courier
shall be deemed delivered three days following the date upon which it is
deposited in the United States mail, with postage prepaid and return receipt
requested, or delivered, prepaid to the courier, as the case may be, addressed
to the party in question as set forth herein. Any notice given to a party by
FAX shall be deemed effective on the date it is actually transmitted to the
party in question at the FAX number specified herein.
6. OO hereby acknowledges that XX makes no representation or
warranty as to the accuracy or completeness of the Information provided
hereunder and XX and YY shall have no liability resulting from the use by OO of
such information.
7. OO acknowledges that failure or delay by XX and YY in
exercising any right, power, or privilege hereunder shall not operate as a
waiver thereof, nor shall any single or partial exercise thereof or the exercise
of any other right, power, or privilege hereunder so operate as a waiver.
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8. This Confidentiality Agreement constitutes the entire
understanding of the parties with regard to its subject matter, and may not be
changed or amended by an instrument in writing executed by the parties hereto.
9. This Confidentiality Agreement and the rights contained herein
shall not be assigned by either party without the prior written consent of the
other party.
10. OO acknowledges that XX and the other parties to the Mining
Venture Agreement would be irreparably damaged if any of the provisions of this
Confidentiality Agreement were not performed by OO. Accordingly, XX and the
other parties to the Mining Venture Agreement shall be entitled to an injunction
or injunctions to prevent breaches of this Confidentiality Agreement and may
specifically enforce the provisions hereof. These specific remedies are in
addition to any other remedy to which XX and the other parties to the Mining
Venture Agreement may be entitled at law or in equity.
11. This Confidentiality Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute a single Confidentiality Agreement.
12. If any provision of this Confidentiality Agreement is held to
be invalid or unenforceable in whole or in part, such invalidity or
unenforceability shall attach only to such provision or part thereof and the
remaining part of such provision and all other provisions hereof shall continue
in full force and effect.
13. This Confidentiality Agreement shall inure to the benefit of
and be binding upon the respective successors and permitted assigns of the
parties hereto.
14. This Confidentiality Agreement shall be governed by and
construed in accordance with the laws of the State of Alaska.
IN WITNESS WHEREOF, each party to this Confidentiality Agreement has
caused it to be executed by its duly authorized officer on the date first
referenced above.
XX
By
Its
OO
By
Its
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EXHIBIT I
MEMORANDUM
OF
RESTATED MINING VENTURE AGREEMENT
NOTICE IS HEREBY GIVEN that under that certain Restated Mining Venture
Agreement (the "Agreement") made and entered into effective as of the ____ day
of __________, 1994 (the "Effective Date") by and between KENNECOTT GREENS CREEK
MINING COMPANY, a Delaware corporation ("Greens Creek"), HECLA MINING COMPANY, a
Delaware corporation ("Hecla"), and CSX ALASKA MINING INC., a Delaware
corporation ("CSX") (Greens Creek, Hecla and CSX are sometimes referred to as a
"Participant" or the "Participants"), the Participants have agreed and do hereby
agree to undertake Exploration, and, if warranted, Development and Mining of
Products from the real property described in Part I of Exhibit A (the
"Properties") attached hereto.
The Agreement shall be the exclusive means by which the Participants, or
either of them or any Affiliate, engage in any activity within the Area of
Interest described in Part II of Exhibit A attached hereto (except as otherwise
provided by paragraph 9 below); acquire interests in real property within the
Properties; engage in marketing Products to the extent permitted by the
Agreement; or engage in any other lawful purposes related or incidental to the
foregoing. The Agreement shall continue for 20 years from the Effective Date
and for so long thereafter as Products are produced from the Properties or the
Participants continue to have an ownership interest in the Assets, unless the
Agreement is earlier terminated or is extended.
This memorandum is executed for the purpose of affording notice of the
existence of the Agreement and the terms and provisions thereof, which terms and
provisions are incorporated herein by reference for all purposes. This
memorandum is not intended to alter or vary the terms of the Agreement. All
capitalized words in this memorandum have the same meaning as assigned to them
in the Agreement. Some of the terms and provisions of the Agreement are hereby
summarized as follows:
1. The Participants have the following Participating Interests:
Greens Creek - 57.7505%
Hecla - 29.7331%
CSX - 12.5164%
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Although record title to the Properties may appear in the name of the Manager
for the benefit of the Venture or in the name of the Participants, the
Participants shall hold their interests in the Properties as tenants in common
in proportion to their Participating Interests as such interests might be
adjusted from time-to-time, and the Participants shall, from time-to-time,
execute such conveyances as are necessary to effectuate such ownership.
2. A Participant's Participating Interest shall be changed in any
of the following instances (among others):
(a) Upon an election by a Participant to contribute less to an
adopted Budget than the percentage reflected by its Participating Interest;
(b) In the event of default by a Participant in making its agreed
upon contribution to an adopted Budget, followed by an election by another
Participant to invoke remedies permitted by Section 6.4 of the Agreement;
(c) Transfer by a Participant of less than all of its Participating
Interest in accordance with Article XV of the Agreement; or
(d) Acquisition by a Participant of some or all of the
Participating Interest of another Participant, however arising.
3. Upon reduction of a Participant's Participating Interest to
less than 5%, such Participant shall be deemed to have withdrawn from the
Venture pursuant to Section 6.5 of the Agreement.
4. (a) If (i) a Participant defaults in its obligation to pay
a contribution or cash call hereunder, or (ii) the Manager is unable to make
certain reimbursements, reallocations of production, contributions or other
adjustments as required by Section 6.5 of the Agreement, then any other
Participant, by notice to the defaulting Participant, may at any time, but shall
not be obligated to, elect to make such contribution or meet such cash call on
behalf of the defaulting Participant (a "Cover Payment"). Each Cover Payment
shall constitute indebtedness due from the defaulting Participant to the
non-defaulting Participant or Participants that elected to make the Cover
Payment, which indebtedness shall be payable upon demand and shall bear interest
from the date incurred, payable upon demand or, in the absence of any demand, on
the last day of each calendar month, at the rate specified in Section 10.3 of
the Agreement. The Agreement contains various remedies by which a
non-defaulting Participant can recover such indebtedness, including the remedy
described in (b) below.
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(b) Each Participant hereby grants to each other Participant, as
security for the repayment of the indebtedness described above or for repayment
of any amount a Carrying Participant is entitled to recover as provided in
Section 9.6(b) of the Agreement (together with interest thereon, reasonable
attorneys' fees and all other reasonable costs and expenses incurred in
collecting payment of such indebtedness and enforcing such security interest), a
security interest, mortgage and lien (hereinafter a "security interest")
subordinate only to any security interest previously granted by Hecla as
described below in and on such Participant's right, title and interest in,
whenever acquired or arising, (i) the Assets, (ii) its rights under the
Agreement, and (iii) its Participating Interest, together with all Products,
proceeds and accessions of the foregoing. Each Participant hereby represents
and warrants to each other Participant that such security interest ranks prior
to any and all other security interests, except, in the case of Hecla, a
security interest in Hecla's interest in Products and proceeds therefrom given
under the Bank Credit Agreement dated January 25, 1993, as amended with Mase
Westpac Limited, et al, and any extension or renewal of such security interest
granted by Hecla pursuant to any extension or renewal of said bank credit
agreement, but not to exceed $50,000,000 and not to extend beyond December 31,
2000. Each Participant hereby agrees to take all action necessary to perfect
such security interest and irrevocably appoints each other Participant as its
attorney-in- fact to execute, file and record all financing statements and any
other documents necessary to perfect or maintain such security interest or
otherwise give effect to the provisions hereof. Each Participant hereby agrees
that it shall not execute, foreclose or otherwise take action to enforce such
security interest except upon 30 days' prior notice to the defaulting
Participant, provided that the foregoing shall not prohibit the taking of any
action to make, prove or protect a claim in any bankruptcy or insolvency
proceeding of the defaulting Participant. In the event the defaulting
Participant is subjected to execution or foreclosure proceedings pursuant to the
terms hereof, to the extent allowed by applicable law the defaulting Participant
waives any available right of redemption from and after the date of judgment,
any required valuation or appraisement of the mortgaged or secured property
prior to sale, any available right to stay execution or to require a marshalling
of assets and any required bond in the event a receiver is appointed. In
addition, to the extent permitted by applicable law, each Participant grants to
each other Participant a power of sale as to any property that is subject to the
security interest granted hereunder, such power to be exercised in the manner
provided by applicable law or otherwise in a commercially reasonable manner and
upon reasonable notice.
5. Nothing contained in the Agreement shall be deemed to
constitute a Participant the partner of any other Participant nor, except as
otherwise therein expressly provided, to
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constitute a Participant the agent or legal representative of any other
Participant, nor to create any fiduciary relationship among the Participants.
It is not the intention of the Participants to create, nor shall the Agreement
be construed to create, any mining, commercial or other partnership. A
Participant shall not have any authority to act for or to assume any obligation
or responsibility on behalf of any other Participant, except as otherwise
expressly provided in the Agreement. The rights, duties, obligations and
liabilities of the Participants shall be several and not joint or collective.
Each Participant shall be responsible only for its obligations as set out in
the Agreement and shall be liable only for its share of the costs and expenses
as provided therein, it being the express purpose and intention of the
Participants that their ownership of the Assets and the rights acquired under
the Agreement shall be as tenants in common.
6. The Participants hereby waive and release all rights of
partition or sale in lieu thereof or other division of Assets, including any
such rights provided by statute.
7. Except as otherwise provided in the Agreement, no Participant
shall Transfer all or any part of its interest in the Assets or the Agreement
or otherwise permit or cause such interests to terminate.
8. a Participant withdraws or is deemed to have withdrawn under
any provision of the Agreement, neither such Participant nor its Affiliates
shall directly or indirectly acquire any interest in property within the Area
of Interest for 12 months after the effective date of such withdrawal. If such
Participant, or an Affiliate of such Participant, breaches this restriction,
such Participant or Affiliate shall be obligated to offer to convey to the other
Participants, without cost, any such property or interest acquired in such
breach. Such offer shall be made in writing and can be accepted by the other
Participants at any time within 45 days after they receive such offer.
9. Part or all of the Properties may be surrendered or abandoned
consistent with the terms and conditions of any agreement under which such
portion or portions of the Properties were acquired by the Manager upon
authorization from the Management Committee. If one or more Participants object
to the surrender or abandonment, the Participant that desires to abandon or
surrender shall assign to the objecting Participant or Participants, by special
warranty deed and without cost to the surrendering Participant or Participants,
all of the surrendering Participant's or Participants' interest in the property
to be abandoned or surrendered, and the abandoned or surrendered property shall
cease to be part of the Properties.
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10. If any of the Properties are abandoned or surrendered pursuant
to Section 14.1 of the Agreement, neither an abandoning Participant nor its
Affiliates (except for a Participant who has objected to the abandonment or
surrender) shall acquire any interest (or rights to acquire interests) in such
Properties for a period of two years following the date of such abandonment or
surrender. If an abandoning Participant reacquires any Properties (or rights to
acquire Properties) in violation of Section 14.2, any other Participant shall
have the right, within 45 days after it has actual notice of such
reacquisition, to have such Properties made subject to the Agreement.
11. Any interest or right to acquire any interest in real property
within the Area of Interest acquired during the term of the Agreement by or on
behalf of a Participant or any Affiliate shall be offered to the nonacquiring
Participants for inclusion in the Agreement as part of the Properties.
12. A Participant may Transfer to any third party all or any part
of its interest in or to the Agreement or the Assets or its Participating
Interest solely as provided in Article XV of the Agreement. All Transfers shall
be subject to the following terms and conditions (among others):
(a) Except for certain specified purposes, no transferee of all or
any part of the interest of a Participant in the Agreement or the Assets or its
Participating Interest shall have the rights of a Participant unless and until
the transferee, as of the effective date of the Transfer, has committed in
writing to be bound by the Agreement to the same extent and nature as the
transferring Participant;
(b) No Participant shall Transfer any interest in the Agreement or
the Assets except by Transfer of part or all of its Participating Interest. In
the event of a Transfer of less than all of a Participating Interest, the
transferring Participant and its transferee shall act and be treated as one
Participant;
(c) If the Transfer is the grant of a security interest to a third
party by mortgage, deed of trust, pledge, lien or other encumbrance of any
interest in the Agreement or the Assets or its Participating Interest to secure
a loan or other indebtedness of a Participant, such security interest shall be
subordinate to the terms of the Agreement and the rights and interests of the
other Participants thereunder. Upon any foreclosure or other enforcement of
rights in the security interest, the acquiring third party shall be deemed to
have assumed the position of the encumbering Participant with respect to the
Agreement and the other Participants, and it shall comply with the terms and
conditions of the Agreement;
(d) If a sale or other commitment or disposition of Products or
proceeds from the sale of Products by a Participant
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upon distribution to it pursuant to Article XI creates in a third party a
security interest in Products or proceeds therefrom prior to such distribution,
such sales, commitment or disposition shall be subject to the terms and
conditions of the Agreement;
(e) The following shall not be deemed a Transfer, nor shall the
transferee be deemed an assignee for purposes of the Agreement:
(i) a transfer by a Participant to an Affiliate,
provided that the Participant shall continue to be liable for all obligations
hereunder, and provided further that any transfer of less than all of a
Participant's Participating Interest shall be subject to the provisions of 12(b)
above;
(ii) a transfer by a Participant of all or substantially all of its
assets, or a sale of all shares of a corporate Participant by its parent
corporation or other entity holding such shares, or such other corporate merger,
consolidation or reorganization of a Participant, by which the surviving entity
shall possess substantially all of the shares, or all of the property rights and
interests, and shall be subject to substantially all of the liabilities and
obligations of that Participant; provided, however, that the interest of the
Participant in the Agreement and the Assets and its Participating Interest are
not substantially all of the assets of the Participant; provided further,
however, that the transferee is or following the Transfer will be substantially
similar in financial strength to the transferring Participant;
(iii) an incorporation of a Participant; or
(iv) a transfer by a Participant to a joint venture or partnership in
which such Participant is a participating venturer or partner with a majority or
controlling interest, provided that any transfer of less than all of a
Participant's Participating Interest shall be subject to the provisions of 12(b)
above; and
(f) If the interest of a Participant in the Agreement and the Assets
and its Participating Interest are all or substantially all of the assets of the
Participant, or are not all or substantially all of its assets but the financial
strength of the transferee will be substantially less than the financial
strength of the transferring Participant, a sale of all shares of a corporate
Participant or the sale of all shares of any Affiliate of a Participant (by
which the Participant is effectively subject to new ownership or management) or
such other corporate merger, consolidation or reorganization, shall be deemed a
Transfer. A transfer by a Participant to a joint venture or partnership in
which such Participant is a participating venturer or partner with a minority or
non- controlling interest shall also be deemed a Transfer, provided that any
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transfer of less than all of a Participant's Participating Interest shall be
subject to the provisions of 12(b) above.
13. (a) Except as otherwise provided in paragraphs 14 and 15
below, if a Participant desires to Transfer all or any part of its interest in
the Agreement or the Assets or its Participating Interest, the other
Participants shall have a preemptive right to acquire such interests by
notifying the transferring Participant within 30 days after receiving notice of
the intended Transfer that it or they elect to acquire the offered interest.
(b) Upon a foreclosure or other enforcement of rights in a security
interest created by mortgage, deed of trust, lien or other encumbrance of any
interest in the Agreement or the Assets or its Participating Interest made to
secure a loan or other indebtedness of a Participant (herein a "Foreclosure or
Other Sale"), the other Participants shall have a preemptive right to acquire
the interests purchased at the Foreclosure or Other Sale from the acquiring
third party, which right shall be exercised within 30 days after such sale
occurs, by notice given to the acquiring third party, reflecting such other
Participant's or Participants' election to acquire such interest at the price
paid by such acquiring third party in the Foreclosure or Other Sale. If one or
more of such Participants does so elect, the Transfer to such Participant or
Participants shall be consummated promptly after such notice. The preemptive
right created hereunder shall be subject to all of the redemption rights or
other rights to recover property created by law.
(c) The sale of a Participant's interest in the Agreement and the
Assets and its Participating Interest pursuant to a bankruptcy or similar
proceeding shall be subject to the preemptive right of the other Participants
created hereunder.
14. Paragraph 13 above shall not apply to the following:
(a) The transfers referred to in paragraph 12(e) above;
(b) The grant by a Participant of a security interest in any
interest in the Agreement or the Assets or its Participating Interest by
mortgage, deed of trust, pledge, lien or other encumbrance ; or
(c) A sale or other commitment or disposition of Products or
proceeds from sale of Products by a Participant upon distribution to it pursuant
to Article XI.
15. The preemptive right described in Paragraph 13 above is subject
to special rules and exceptions in the case of each of CSX, Hecla and Greens
Creek, but not their successors in interest.
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16. The Agreement shall terminate upon the happening of any of the
following events (among others):
(a) The mutual consent of the Participants; or
(b) Expiration of the Agreement at the end of its term.
17. A copy of the Agreement is on file with the Manager whose
address is
Kennecott Greens Creek Mining Company
P.O. Box 32199
Juneau, Alaska 99801-2199
18. The Participants intend the Agreement to supersede the Green's
Creek Joint Venture Agreement dated January 10, 1978, as amended by the First,
Second, Fourth and Fifth Amendments; provided, however, that the Participants do
not intend to terminate or reconstitute the existing Venture or to do anything
that would otherwise affect is continuity.
EXECUTED effective as of the date first above written.
"GREENS CREEK"
KENNECOTT GREENS CREEK MINING COMPANY
By
Its
"HECLA"
HECLA MINING COMPANY
By
Its
"CSX"
CSX ALASKA MINING INC.
By
Its
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STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
The foregoing instrument was acknowledged before me by
______________________, ______ President of Kennecott Greens Creek Mining
Company, this ____ day of ______________, 1994.
NOTARY PUBLIC
Residing at:
My Commission Expires:
_____________________
STATE OF __________ )
: ss.
COUNTY OF _________ )
The foregoing instrument was acknowledged before me by
______________, _____ President of Hecla Mining Company, this ____ day of
_____________, 1994.
NOTARY PUBLIC
Residing at:
My Commission Expires:
_____________________
STATE OF __________)
: ss.
COUNTY OF _________)
The foregoing instrument was acknowledged before me by ______________,
_____ President of CSX Alaska Mining Inc., this ____ day of _______________,
1994.
NOTARY PUBLIC
Residing at:
My Commission Expires:
_____________________
9