PURCHASE AGREEMENT
Exhibit 10.1
THIS PURCHASE AGREEMENT (“Agreement”), dated as of December 22, 2005 (the “Effective Date”),
is between and among Royal Gold, Inc., a Delaware corporation (“Buyer”) and Kennecott Minerals
Company, a Delaware corporation (“KMC”), Kennecott Montana Company, a Delaware corporation
(“Kennecott Montana”), Kennecott Holdings Corporation, a Delaware corporation (“Kennecott
Holdings”), Kennecott Rawhide Mining Company, a Delaware corporation (“Kennecott Rawhide”), and
Kennecott Nevada Copper Company, a Delaware corporation (“Kennecott Nevada”) (each individually, a
“Seller”, and collectively, the “Sellers”).
RECITALS
A. Pursuant to the Asset Purchase and Sale Agreement for the Xxxx Mine and Rock Creek Project
between and among Kennecott Montana and Revett Silver Company (f/k/a/ Sterling Mining Company) and
Genesis, Inc. dated as of February 21, 2000, as amended by the First Amendment, effective May 18,
2001, the Second Amendment, effective August 1, 2001, the Third Amendment, effective February 1,
2003, the Fourth Amendment, effective January 26, 2005, and the Fifth Amendment, effective February
9, 2005 (collectively, the “Revett Agreement”), Kennecott Montana owns 2,250,000 shares of the
common stock of Sterling Mining Company, now known as Revett Silver Company, a Montana corporation
(“Revett Silver”); and
B. Subject to any limitations approved by the shareholders of Revett Silver, the 2,250,000
shares of the common stock of Sterling Mining Company are exchangeable for (a) 2,250,000 shares of
Class B common stock of Revett Silver; or (b) a combination of shares of Class B common stock of
Revett Silver and common stock of Revett Minerals, Inc., a Canadian corporation (“Revett
Minerals”), totaling 2,250,000 shares (Revett Silver and Revett Minerals being collectively
referred to herein as “Revett” and the 2,250,000 shares of Sterling Mining Company now owned by
Kennecott Montana and exchangeable as described above being referred to herein as the “Shares”);
and
C. Pursuant to the terms of the Revett Agreement, the Shares may be exchanged (the “Royalty
Conversion Right”) for a two percent (2%) net smelter return royalty on any production from any
mine developed on the real property described on Schedule 1-A hereto (the “Rock Creek
Royalty Property”), payable by Revett Silver and RC Resources, Inc., a Montana corporation
wholly-owned by Revett Silver (“RC Resources”) in accordance with the terms set forth in the Revett
Agreement (the “Rock Creek Royalty”); and
D. Pursuant to the terms of a December 20, 1989, Order of the Court entitled “Stipulation to
Dismiss with Prejudice and to Confirm Settlement Agreement” entered in Silver King Mines, Inc.
et al. v. Kennecott Corp., et al., NO CV 89-4027 Dept. No. 9 (2nd Judicial Dist.,
Nevada), as amended by the Amendment to Stipulation to Dismiss with Prejudice and to Confirm
Settlement Agreement, entered by the court on December 11, 1990, and the Amendment No. 2 to
Stipulation to Dismiss with Prejudice and to Confirm Settlement
Agreement, entered by the court on December 12, 1991 (“Stipulation”), Kennecott Holdings,
Kennecott Rawhide and Kennecott Nevada are owners of a three percent (3%) net smelter return
royalty (the “Xxxxxxxx Royalty”) on the base metals and associated metals co-products (including
precious metals) produced from the real property described on Schedule 1-B hereto (the
“Xxxxxxxx Royalty Property”); and
E. Kennecott Holdings, Kennecott Rawhide and Kennecott Nevada are entitled to receive the
Xxxxxxxx Royalty following the funding of a trust fund for Reclamation and Remediation (each as
defined in the Stipulation) of the Xxxxxxxx Royalty Property (“Trust Fund”). Pursuant to the
Stipulation, the proceeds of the Xxxxxxxx Royalty are to be contributed to the Trust Fund until a
total of Twenty Million and No/100 US Dollars (US$20,000,000.00) in principal and interest have
been contributed, credited and/or accrued (“Trust Fund Amount”); and
F. Pursuant to the Xxxxxxxx Property Trust Ancillary Agreement between and among Kennecott
Holdings, Kennecott Rawhide and Kennecott Nevada and BHP Copper, Inc. and BHP Nevada Mining Company
dated September 12, 2003, as amended January 30, 2004 (“Ancillary Agreement”), the parties thereto
agreed, among other things, to more fully define the Xxxxxxxx Royalty (including protocol for
conducting audits and resolving disputes regarding the Xxxxxxxx Royalty) and the obligations to
fund the Trust Fund; and
G. Through various transactions, corporate acquisitions, reorganizations and name changes, as
of the date hereof, Quadra Mining, Ltd, a corporation formed under the Company Act of British
Columbia, and its wholly-owned subsidiary Xxxxxxxx Nevada Mining Company, a Delaware corporation
(collectively, “Quadra”), have assumed the responsibility of funding the Trust Fund and paying the
Xxxxxxxx Royalty to Kennecott Holdings, Kennecott Rawhide and Kennecott Nevada pursuant to the
terms of the Stipulation and the Ancillary Agreement; and
H. Pursuant to the Royalty for Technical Expertise Agreement dated March 23, 2001 (“RTE”), the
Asset Purchase Agreement dated as of December 21, 2000 between and among Minera San Augusto, S.A.
de C.V. (“MSA”), O.N.C. de Mexico, S.A. de C.V. (“ONCM”), now known as Minas de Oro Nacional S.A.
de C.V. (“MON”), and National Gold Corporation (“NGC”)(as amended by the Amendment to Asset
Purchase Agreement dated March 23, 2001 and the Second Amendment Agreement dated August 21, 2001)
and the Assignment and Assumption Agreement dated March 23, 2001 between MSA, as assignor, and KMC
and Tenedoramex S.A. de C.V., as assignees, (collectively, the “Mulatos Agreements”), KMC is the
owner of a thirty percent (30%) portion of (i) a two percent (2%) Net Smelter Return royalty on all
Products, other than Gold and Silver Products; and (ii) a sliding scale royalty on Net Smelter
Returns on Gold and Silver Products, in each case as those capitalized terms are defined in the
RTE, which royalties are payable until the first two million (2,000,000) ounces of gold have been
mined, processed and sold or deemed sold from a mine or mines developed on the 27 concessions
comprising the “Mulatos Royalty Property” (as described on Schedule 1-C hereto) payable by
MON in accordance with the terms set forth in the Mulatos Agreements (the “Mulatos Royalty”); and
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I. Sellers desire to sell and convey their interests in the Mulatos Royalty, the Xxxxxxxx
Royalty and the Shares (along with the Royalty Conversion Right) to Buyer, and Buyer desires to
acquire the same, pursuant to the terms set forth in this Agreement.
AGREEMENT
In consideration of the mutual covenants contained in this Agreement, and other valuable
consideration, the receipt of which is hereby acknowledged by the parties, Buyer and Sellers agree
as follows:
ARTICLE I.
PURCHASE & SALE OF ASSETS
1.1 Purchase and Sale of Assets. Upon the terms and provisions of this Agreement, at
the Closing (as defined in Section 1.4), Buyer will purchase and accept delivery from Sellers, and
Sellers will each sell, convey, assign, transfer and deliver to Buyer, all of each Seller’s
respective right, title and interest (except that defined as Excluded Assets in Section 1.2, below)
in and to the following (the “Assets”), free and clear of all (a) liens, claims, charges, equities
or encumbrances of any kind created by, through or under Sellers; and (b) any restrictions
whatsoever created by, through or under Sellers, except (i) with respect to the Shares and the
Royalty Conversion Right, as stated in the Revett Agreement; (ii) with respect to the Xxxxxxxx
Royalty, as stated in the Stipulation and Ancillary Agreement; and (iii) with respect to the
Mulatos Royalty, as stated in the Mulatos Agreements:
(a) the Mulatos Royalty and the Xxxxxxxx Royalty, and any and all rights of Sellers to receive
all amounts accruing or deemed to accrue thereunder immediately following the Closing Date; and
(b) the Shares and the Royalty Conversion Right if a written consent of Revett to assignment
of the Royalty Conversion Right in form and content satisfactory to Buyer has been obtained as of
the Closing (which written consent, if obtained, will be appended to this Agreement as Exhibit F);
and
(c) the rights of every nature, kind and description, whether accrued, contingent or otherwise
(other than the Excluded Assets) (i) that are related to the Assets described in subsections (a)
and (b) above and (ii) that are reasonably necessary to enforce or effectuate (A) any payment or
disclosure obligations arising pursuant to the Rock Creek, Xxxxxxxx or the Mulatos Royalties; (B)
any inspection or audit rights related to such royalties; and (C) the Royalty Conversion Right
(collectively, the “Enforcement Rights”). Buyer and Sellers acknowledge that some rights included
in the Enforcement rights, such as a right to audit, might also be included in the Excluded Assets
(as defined below) and that Buyer and Sellers might be required to coordinate exercise of such
rights under applicable agreements.
1.2 Excluded Assets and Liabilities. Notwithstanding any provision hereof or any
schedule or exhibit hereto and regardless of any disclosure to Buyer:
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(a) Sellers will retain and not sell, convey or transfer, and the Buyer will not purchase or
acquire, any right, title or interest in or to the following (collectively, the “Excluded Assets”):
(i) Any and all rights or interest under the Stipulation and the Ancillary
Agreement, other than the rights in the Xxxxxxxx Royalty and the Enforcement Rights
related thereto, but including any right of Seller to review the reasonableness of
any Remediation and Reclamation activities (as defined in the Stipulation and the
Ancillary Agreement), approve or object to such activities or the characterization
or costs thereof, submit any resulting disputes or disagreements to mediation,
arbitration or litigation, and enforce the results thereof, and any and all rights
or interest under the Stipulation and the Ancillary Agreement to any portion of the
Trust Fund remaining following full completion of the Reclamation and Remediation
activities on the Xxxxxxxx Royalty Property;
(ii) Any and all rights or interest under the Mulatos Agreements acquired by
KMC pursuant to the Mulatos Agreements, other than the rights in the RTE and the
Enforcement Rights related thereto, but including any Seller’s right and interest in
and to any portion of (A) the Kennecott Advanced Amount Promissory Note, the
Kennecott IVA Promissory Note, the Kennecott Deferred Closing Payment, the Kennecott
$525,000 Note, the Kennecott $225,000 Note, the Kennecott Debenture, the Guarantee,
the Capital Payments and the Royalty Reserve Payments, each of which is defined in
that Second Amendment Agreement dated August 21, 2001 and all of which have been
satisfied or paid in full to KMC prior to the Effective Date; (B) the Security and
the Security Documents, each as defined in the Kennecott Debenture; and (C) the
Share Option Agreements, each of which is dated March 23, 2001, with KMC as optionee
and Xxxxxx Matter and National Gold Corporation as optionors (collectively, (but
excluding the RTE and the related Enforcement Rights), the “Mulatos Obligations”);
(iii) Any and all rights or interest under the Revett Agreement, other than the
rights in the Shares, the Royalty Conversion Rights and the Enforcement Rights
related thereto, but including any Seller’s rights or interest in and to any portion
of the promissory note (and principal and interest paid thereon) in the principal
amount of Five Million and No/100 Dollars (US$5,000,000) payable to Kennecott
Montana by Revett and its affiliates; and
(iv) If the consent of Revett to conveyance to Buyer of the Royalty Conversion
Right described in Section 1.1(b) hereof is not obtained prior to Closing, the
Shares, the Royalty Conversion Right and the Enforcement Rights related thereto
shall constitute an Excluded Asset; and all recitals, representations, warranties,
covenants and obligations related to such Shares, Royalty Conversion Right and
Enforcement Rights with respect to the Shares, Royalty Conversion Right and Rock
Creek Royalty shall be deemed to have been stricken from this Agreement and will be
null and void and a statement to that effect will be attached to this Agreement as
Exhibit D.
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(b) Buyer is not assuming any liability, obligation or commitment of any Seller, whether known
or unknown, actual or contingent, now-existing or arising with notice or lapse of time, and
expressly disclaims, in whole and in part, the assumption of all such liabilities, obligations or
commitments (“Excluded Liabilities”). The Excluded Liabilities include, but are not limited to,
the following:
(i) Any and all obligations and liabilities of any Seller relating to or
arising from environmental or other conditions of any portion of the Xxxxxxxx
Royalty Property, the Mulatos Royalty Property or the Rock Creek Royalty Property,
including, but not limited to, any responsibility to fund or perform Reclamation or
Remediation activities as provided in the Stipulation or the Ancillary Agreement;
and
(ii) Any and all obligations and liabilities of any Seller to Quadra or any
predecessor or successor in interest of Quadra as to any portion of the Xxxxxxxx
Royalty Property or the Trust Fund or to any other entity resulting from, arising
under or pursuant to the Stipulation or the Ancillary Agreement, including, but not
limited to, any obligation of any Seller to review and approve or object to the
Remediation and Reclamation being performed on the Xxxxxxxx Royalty Property and the
expenditure of funds therefor from the Trust Fund or any obligation for net proceeds
of minerals or other taxes attributable to funds contributed, credited and/or
accrued to the Trust Fund; and
(iii) Any and all obligations and liabilities of any Seller to MON, Alamos
Gold, Inc., successor by merger to National Gold Corporation (“Alamos”), or any
other person or entity that relates in any manner to the obligation to sell, assign,
transfer or convey, or the alleged failure to sell, assign, transfer or convey, the
Continuación de Virgencita concession (“Virgencita Concession”) included in the
Mulatos Royalty Property; and
(iv) Any and all obligations and liabilities under the RTE for the prior or
future performance of technical services pursuant to the Mulatos Agreements; and
(v) Any and all obligations and liabilities of any Seller that result from or
arise under any breach or violation of any obligation or representation or warranty
of, or default in performance under, the Revett Agreement, the Stipulation or the
Ancillary Agreement or the Mulatos Agreements.
Provided, however, that Sellers shall not be responsible for any liability, obligation or
commitment included in the Excluded Liabilities to the extent Buyer takes any affirmative action,
without the consent of KMC, to supplement, reduce or otherwise amend the Assets that materially and
adversely affects a Seller’s rights or increases a Seller’s obligations or liabilities with respect
to the Excluded Liabilities. For purposes of clarification, an omission or other failure to act,
such as a waiver, shall not constitute an “affirmative action” on the part of Buyer.
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1.3 Purchase Price. In exchange for the Assets, Buyer will pay to Sellers at the
Closing TWENTY-SIX MILLION EIGHT HUNDRED THOUSAND AND NO/100 US DOLLARS (US$26,800,000.00)
(“Purchase Price”) by wire transfer to an account designated by KMC. If the consent described in
Section 1.1(b) hereof has not been obtained as of Closing, the Purchase Price due at Closing shall
be reduced to TWENTY FIVE MILLION AND NO/100 US DOLLARS (US$25,000,000.00).
1.4 Closing. Purchasers and Buyer shall consummate and close the transactions
contemplated herein (“Closing”), at Sellers’ offices located at 000 Xxxxx 0000 Xxxx, Xxxx Xxxx
Xxxx, Xxxx (or at such other place as the parties may mutually agree) at 10:00 o’clock a.m., local
time, on or before five (5) business days after the Effective Date (the “Closing Date”). The
Closing Date may be postponed to a later time and date by mutual agreement of the parties. If the
Closing is postponed, all references to the Closing Date in this Agreement shall refer to the
postponed date.
1.5 Documents to be Delivered at Closing.
(a) At the Closing, Sellers will deliver to Buyer, in form and substance satisfactory to the
counsel of Buyer:
(i) If the Shares are included in the Assets at Closing:
| (A) | Stock certificates for the Shares, free and clear of all liens, claims, charges, restrictions, equities or encumbrances of any kind, which certificates shall be duly endorsed to Buyer or accompanied by stock powers executed by Kennecott Montana in form satisfactory to Buyer bearing any transfer stamps required by applicable law; | ||
| (B) | An assignment of the Royalty Conversion Right in the form attached hereto as Exhibit A-1 executed by Kennecott Montana; and | ||
| (C) | The non-disturbance agreement in the form attached hereto as Exhibit A-2 executed by Kennecott Montana as to the Shares, the Royalty Conversion Right and the Rock Creek Royalty; |
(ii) As to the Xxxxxxxx Royalty:
| (A) | The Royalty Deed and Assignment in the form attached hereto as Exhibit B, executed by Kennecott Holdings, Kennecott Rawhide and Kennecott Nevada; and | ||
| (B) | An instruction letter executed by Kennecott Holdings, Kennecott Rawhide and Kennecott Nevada advising Quadra of the assignment of the Xxxxxxxx Royalty and related Enforcement Rights to Buyer and directing that |
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| Quadra henceforth (I) make all payments of the Xxxxxxxx Royalty to Buyer (after funding of the Trust Fund); (II) subject to reasonable limitations on subsequent disclosure, allow Buyer access to all information developed prior to Closing which the royalty holder is entitled to review pursuant to the Stipulation or the Ancillary Agreement, and (III) from and after the Closing Date, deliver to Buyer all such information which the royalty holder is entitled to receive that is developed or disclosed on or following the Closing Date; |
(iii) As to the Mulatos Royalty:
| (A) | The Conveyance and Assignment of Royalty for Technical Expertise (“RTE Assignment”) in the form attached hereto as Exhibit C executed by KMC; and | ||
| (B) | An instruction letter executed by KMC advising Alamos and MON of the assignment of the Mulatos Royalty and related Enforcement Rights to Buyer and directing that Alamos and MON henceforth (I) make to Buyer all payments of the Mulatos Royalty; (II) subject to reasonable limitations on subsequent disclosure, allow Buyer access to all information developed prior to Closing which the royalty holder is entitled to review pursuant to the Mulatos Agreements, including the RTE, and (III) from and after the Closing Date, deliver to Buyer all such information which the royalty holder is entitled to receive that is developed or disclosed on or following the Closing Date; and |
(iv) Such other certificates and documents as Buyer or its counsel may
reasonably request.
(b) At the Closing, Buyer will deliver to Sellers, in form and substance satisfactory to the
collective counsel of Sellers:
(i) The Purchase Price by transfer of immediately available funds to such
account at such location as KMC may direct; and
(ii) Such other certificates and documents as Sellers or their collective
counsel may reasonably request.
1.6 Passage of Title at Closing. At the Closing, all right, title and interest of
Sellers in and to all of the Assets will be vested in Buyer.
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1.7 Cooperation. Sellers and Buyer shall cooperate and use reasonable efforts before
Closing to attempt to obtain the consent of Revett to conveyance to Buyer of the Royalty Conversion
Right as described in Section 1.1(b) hereof.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF BUYER
As of the Effective Date and the Closing Date, Buyer represents and warrants to Sellers as
follows:
2.1 Organization of Buyer. Buyer is (a) a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware and (b) is duly authorized
to conduct business and is in good standing under the laws of each jurisdiction where such
qualification is required in connection with the performance or satisfaction of an obligation
hereunder.
2.2 Authorization of Transaction. Buyer has the corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder and Buyer has been duly
authorized by all requisite corporate action to execute, deliver and fully perform under the same.
This Agreement constitutes the valid and legally binding obligation of Buyer, enforceable in
accordance with its terms. Buyer need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any person or governmental agency in order to consummate the
transactions contemplated by this Agreement.
2.3 Buyer Noncontravention; Consents. Neither the execution and the delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (a) violate any
constitution, statute, regulation, rule, injunction, judgment, order or other restriction of any
government, governmental agency, or court to which Buyer is subject or any provision of Buyer’s
organizational documents or (b) conflict with, require consent under, result in a breach of,
constitute a default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any agreement, instrument or
other arrangement to which Buyer is a party or by which it is bound or to which any of its assets
is subject (or result in the imposition of any lien upon any of its assets).
2.4 Brokers’ Fees. Buyer has no liability to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated by this Agreement for which
Sellers could become liable or obligated.
2.5 Litigation. There is no claim, action, suit, proceeding or governmental
investigation pending or, to Buyer’s knowledge, threatened against or involving Buyer that
questions the validity of this Agreement or seeks to prohibit, enjoin, or otherwise challenge the
transactions contemplated by this Agreement.
2.6 Buyer’s Diligence. Buyer represents that it has conducted such due diligence as
it deems necessary or appropriate concerning the Assets, and Buyer has entered into this Agreement
and will complete the transactions contemplated by this Agreement on the basis of its own
diligence. Buyer has reviewed such public records as Buyer deems necessary or appropriate
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in connection with its due diligence activities. Buyer has requested from Sellers such
documents and other information in Sellers’ possession as Buyer deems necessary or appropriate in
connection with its due diligence activities. Buyer is fully satisfied with (a) Sellers’ response
to Buyer’s requests for such information, (b) Buyer’s review of all information related to the
Assets that Sellers have provided or made available to Buyer in response to Buyer’s requests for
information, and (c) Buyer’s review of public records. Buyer further represents that it has
examined this Agreement including its Exhibits and is relying on its own economic, feasibility,
environmental, safety and financial analyses with respect to its plans regarding the Assets and the
suitability of the Assets for Buyer’s purposes.
2.7 Other Representations and Warranties. Buyer further represents that, as of the
Effective Date, it has no knowledge that any of the representations or warranties given or made by
Sellers in this Agreement are inaccurate or incomplete and that, except for the representations and
warranties of Sellers set forth in this Agreement: (a) Buyer accepts the Assets “AS IS, WHERE IS,
WITH ALL FAULTS” and (b) neither Sellers nor any of their affiliates or representatives have made
any other representation or warranty, express or implied, with respect to the Assets, including, in
particular, any representation or warranty that the Assets are suitable for any particular purpose.
ARTICLE III.
GENERAL
REPRESENTATIONS AND WARRANTIES OF SELLERS
As of the Effective Date and the Closing Date, Sellers, jointly and severally, represent and
warrant to Buyer as follows:
3.1 Organization, Qualification, and Corporate Power. Each Seller (a) is a
corporation duly organized, validly existing, and in good standing under the laws of the state of
its incorporation; and (b) is duly authorized to conduct business and is in good standing under the
laws of each jurisdiction where such qualification is required. Each Seller has full corporate
power and authority and all licenses, permits, and authorizations necessary to own the Assets
attributed to it hereunder. No Seller is in default under or in violation of any provision of its
organizational documents.
3.2 Authorization of Transaction. Each Seller has the corporate power and authority
to execute and deliver this Agreement and each of the collateral agreements specified herein and to
perform fully its respective obligations hereunder and thereunder, and each Seller has been duly
authorized by all requisite corporate action of such Seller to execute, deliver and fully perform
under the same. This Agreement is, and on the Closing Date each of the collateral agreements
specified herein to which a Seller is a party will be, legal, valid and binding obligations of such
Seller, enforceable against it in accordance with their respective terms . No Seller need
give any notice to, make any filing with, or obtain any authorization, consent (except for the
consent required of Revett as described in Section 1.1(b) hereof) or approval of any person or
governmental agency in order to consummate the transactions contemplated by this Agreement.
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3.3 Seller Noncontravention; Consents. Neither the execution and the delivery of this
Agreement or the collateral agreements specified herein by Sellers nor the consummation of the
transactions contemplated hereby by Sellers will (a) violate, contravene or result in a breach or
default under any constitution, statute, regulation, rule, injunction, judgment, order or other
restriction of any government, governmental agency, or court to which a Seller is subject or any
provision of a Seller’s organizational documents or, (b) conflict with, require consent under
(except for the consent required of Revett as described in Section 1.1(b) hereof), result in a
breach of, constitute a default under, result in the acceleration of, create in any party the right
to accelerate, terminate, modify, or cancel, or require any notice under any agreement, instrument
or other arrangement to which a Seller is a party or by which it is bound or to which any of its
assets is subject (or result in the imposition of any lien upon any of such assets).
3.4 Brokers’ Fees. No Seller has any liability to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated by this Agreement for which
Buyer could become liable or obligated.
3.5 Agreements Related to the Assets. Except as provided in Section 10.5 or as
otherwise disclosed in this Agreement, to Sellers’ knowledge, no Seller or counter-party of any
Seller to any agreement related to the Assets is in material breach or default, or is alleged to be
in material breach or default, of any such agreement, and no event has occurred which, with notice
or lapse of time, would reasonably be expected to form the basis of such a breach or default. To
Sellers’ knowledge, no Seller is a party to any agreement that is material to this transaction or
that directly affects the Assets in any material way that has not been disclosed to Buyer. Except
for payments made to the Trust Fund, (a) no Seller has accepted or received, and no payor has been
credited with, any advance payments against the Xxxxxxxx Royalty or Mulatos Royalty; and (b) no
Seller is a party to any agreement pursuant to which any payment owed under the Xxxxxxxx or Mulatos
Royalties may be reduced by or offset against any amounts owing by one or more Sellers.
3.6 Litigation. Except as provided in Section 10.5 or as has been disclosed by
Sellers to Buyer, to Sellers’ knowledge, the Assets are not subject to, and no outstanding threat
exists which would make the Assets subject to, any action, proceeding, claim, demand, suit,
investigation, inquiry or audit before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator or mediator. Except as
provided in Section 10.5 or as has been disclosed by Sellers to Buyer, Sellers have not been
notified of any claim, action, suit, proceeding or investigation pending or, to Sellers’ knowledge,
threatened against or involving any Seller that questions the validity of this Agreement or seeks
to prohibit, enjoin, or otherwise challenge the transactions contemplated by this Agreement.
3.7 Disclosure. Each Seller represents and warrants that, prior to the Effective Date
and as of the Closing Date, it has provided Buyer with such access to the Assets as has been
requested by Buyer and has made available to Buyer all information requested by Buyer regarding the
Assets which, to such Seller’s knowledge, is in such Seller’s possession.
3.8 Material Changes. With respect to the Assets or any portion thereof:
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(a) No material lien or material encumbrance of any kind whatsoever created by, through or
under Sellers has been imposed or threatened to be imposed upon any of the Assets;
(b) No right or claim (or any series of related rights and claims) arising under the Assets
has been cancelled, compromised, waived, or released or threatened to be cancelled, compromised,
waived, or released by Sellers;
(c) Except as set forth in Section 10.5 hereof, no claims or liabilities of any kind
whatsoever have been asserted against the Assets or threatened to be asserted against the Assets;
(d) Except as set forth in Section 10.5 hereof or as disclosed by Sellers to Buyer, to
Sellers’ knowledge, no licenses, permits, franchises or other governmental or regulatory
authorizations necessary or beneficial to the operations underlying the Assets (i) have been
violated, suspended, cancelled or revoked in any material way; (ii) are subject to any commenced,
pending or threatened judicial or administrative proceeding that could lead to suspension,
cancellation or revocation; or (iii) are otherwise not valid or not in full force and effect;
(e) Except as set forth in Section 10.5 hereof or as disclosed by Sellers to Buyer, to
Sellers’ knowledge, no party has repudiated or breached any material provision of, nor terminated
or threatened or noticed any termination of, any agreement necessary or beneficial to the
operations underlying the Assets;
(f) To Sellers’ knowledge, none of the operations underlying the Assets have been destroyed or
otherwise suffered material damage or loss; and
(g) None of the Sellers has taken any action that would result in the occurrence of any of the
foregoing.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLERS -
THE SHARES
THE SHARES
As of the Effective Date and the Closing Date, Sellers, jointly and severally, represent and
warrant to Buyer as follows:
4.1 Issuance, Etc. The Shares are validly issued, fully paid and non-assessable.
4.2 Ownership. Sellers own and are in possession of the Shares, free and clear of
all liens, claims, charges, restrictions and encumbrances of any kind, and (except for the consent
required of Revett in connection with the Royalty Conversion Right) have full power and legal right
to sell, assign, transfer, convey and deliver the same to Buyer.
4.3 No Exchange; Compliance with Securities Act. Seller has not exchanged or tendered
the certificate representing 2,250,000 shares of the common stock of Sterling Mining Company
(“Sterling Certificate”) for shares of Class B common stock of Revett Silver or shares of common
stock of Revett Minerals. The Sterling Certificate may be tendered for the Shares
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following the Closing. Except to the extent Sellers’ rights to appoint a director to the
board of Revett Silver (which right has not been exercised by Sellers), create such relationship,
no Seller (a) is an affiliate of Revett, as defined under the Securities Act of 1933 and the rules
and regulations promulgated thereunder (“Securities Act”); or (b) with respect to the Shares, has
any knowledge of any facts or circumstances indicating that it is or may be deemed to be (i) an
underwriter within the meaning of the Securities Act or (ii) involved with a distribution of the
Shares subject to the Securities Act.
4.4 Transfer and Conversion. Subject to obtaining Revett’s consent to assignment of
the Royalty Conversion Right, the Shares and rights associated therewith are fully transferable in
compliance with the Securities Act. The Shares constitute all of the common stock of Revett
necessary to be surrendered in exchange for the Rock Creek Royalty pursuant to the Royalty
Conversion Right. As of the Closing Date, (a) the period during which the Shares may be converted
into the Rock Creek Royalty pursuant to the Royalty Conversion Right shall not have been
terminated, shortened or abbreviated, or be subject to termination, shortening or abbreviation, for
any reason whatsoever except as might be provided in the Revett Agreement; (b) Sellers shall not
have converted any of the Shares into the Rock Creek Royalty, notified Revett of any election or
intent to so convert all or any of the Shares, or otherwise taken any action allowing Revett to
cause all or any of the Shares to be so converted without the advance written consent of Buyer; (c)
the total amount payable pursuant to the Rock Creek Royalty shall not have been reduced, or become
subject to reduction; and (d) Sellers shall not have impaired or otherwise adversely affected in
any way whatsoever the ability of Buyer to convert the Shares into the Rock Creek Royalty, whether
through breach of the Revett Agreement or otherwise.
ARTICLE V.
REPRESENTATIONS
AND WARRANTIES OF SELLERS -
THE XXXXXXXX ROYALTY
THE XXXXXXXX ROYALTY
As of the Effective Date and the Closing Date, Sellers, jointly and severally, represent and
warrant to Buyer as follows:
5.1 Trust Fund. As of October 31, 2005, to Sellers’ knowledge, the unaudited balance
in the Trust Fund was Nine Million Seven Hundred Ninety-Two Thousand Seventy-Seven and no/100 US
Dollars (US$9,792,077.00) and the total amount contributed, credited and/or accrued toward the
Trust Fund Amount was Fourteen Million Seven Hundred Thirty-Two Thousand One Hundred Twenty-Five
and 27/100 US Dollars (US$14,732,125.27). The Trust Fund balance includes royalty contributions
earned through September 30, 2005 (paid in October 2005), with interest and account fees paid
through October 31, 2005. A reconciliation between the total amount contributed, credited and/or
accrued toward the Trust Fund Amount and the balance in the Trust Fund is provided in the following
table:
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| Trust Fund | ||||
| Trust Fund | Contribution/Credit/ | |||
| Balance | Accrual | |||
Trust Fund funding and creditable
amount agreed to in the Ancillary
Agreement as of January 2004 (the
US$4,900,000 difference represents the
agreed upon amount of prior qualified
Reclamation and Remediation
expenditures).
|
US$5,300,000.00 | US$10,200,000.00 | ||
Subsequent royalty contributions for
the operating period of October 2004
through September 2005 (September
royalty of US$585,122.82 paid in
October 2005).
|
US$4,358,925.01 | US$4,358,925.01 | ||
Interest (January 2004 – October 2005)
|
US$173,200.26 | US$173,200.26 | ||
Trust Fund account fees (January 2004
through October 2005) (Fees have been
deducted from the account but are an
obligation of BHP/Quadra and will need
to be reimbursed. Also, Quadra has
expended $30,832.75 in Reclamation and
Remediation activities from September
2004 through September 2005, which has
not yet been withdrawn).
|
(US$40,048.27) | |||
| US$9,792,077.00 | US$14,732,125.27 | |||
To Sellers’ knowledge, no audit having been conducted, an audit of the Xxxxxxxx Royalty or the
Trust Fund would not indicate that an adjustment of the amounts set out above would be required.
5.2 Compliance. To Sellers’ knowledge, except for certain periodic reports that
might not have been received by Sellers and that do not materially affect the calculations of
amounts contributed, accrued or credited to the Trust Fund or the Xxxxxxxx Royalty, each party is
in full compliance with all material obligations under, and there is no actual or alleged breach
of or default of any material provision under, the Stipulation, the Ancillary Agreement or the
Trust Agreement dated as of September 12, 2003, between and among Kennecott Holdings, Kennecott
Rawhide and Kennecott Nevada, BHP Copper, Inc. and BHP Nevada Mining Company and the Bank of New
York (“Trust Agreement”).
5.3 Reports. To Sellers’ knowledge, except for certain periodic reports that might
not have been received by Sellers, Sellers have received all material reports obligated to be
provided to it under the Ancillary Agreement regarding the Reclamation and Remediation activities
and associated expenditures that have occurred on the Xxxxxxxx Royalty Property, and there is
presently no outstanding dispute in relation thereto.
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5.4 No Other Royalties. Immediately prior to the Effective Date, the Xxxxxxxx Royalty
is the only royalty or other payment of any kind whatsoever based upon production from the Xxxxxxxx
Royalty Property owing or to be owed to any Seller. With respect to the mining lease dated March
4, 1985, between Kennecott Corporation, a New York corporation, as lessor and Silver King Mines,
Inc., a Nevada corporation, as lessee, all rights accruing to any Seller or any affiliates of a
Seller thereunder have terminated and no Seller or affiliate thereof has any claim to any royalty
arising thereunder.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF SELLERS -
THE MULATOS ROYALTY
THE MULATOS ROYALTY
As of the Effective Date and the Closing Date, Sellers, jointly and severally, represent and
warrant to Buyer as follows:
6.1 Reporting Compliance. To Sellers’ knowledge, except for its delinquency in
supplying certain financial statements to Sellers, MON and Alamos are in full compliance with their
respective reporting and payment obligations under the Mulatos Agreement, and there is no dispute
or other disagreement regarding the amounts paid pursuant to the Mulatos Royalty.
6.2 Royalty Reserve Payments. MON and Alamos have fully paid all amounts due as the
Royalty Reserve quarterly payments as provided in the Mulatos Agreements (“Royalty Reserve
Payments”), and the obligation to make Royalty Reserve Payments has terminated prior to the
Effective Date. No portion of the Royalty Reserve Payments paid prior to the Effective Date is
creditable against, or is being retained by a Seller for possible credit against, any payment of
the Mulatos Royalty becoming due and payable after the Effective Date.
6.3 Credit Agreements. As of the Closing, except with respect to the Mulatos Royalty
and the related Enforcement Rights, there are no further debts or other outstanding monetary
obligations owing to a Seller under the Mulatos Obligations and there are no current outstanding
claims, breaches or defaults thereunder.
ARTICLE VII.
PRE-CLOSING COVENANTS
7.1 Covenants of Sellers with respect to the Business. During the period from the
Effective Date to the Closing, Sellers agree that, except as contemplated or permitted by this
Agreement or to the extent that Buyer otherwise consents in writing:
(a) Sellers shall treat the Assets in the usual, regular and ordinary course consistent with
past practice and use their best efforts to preserve intact the Assets.
(b) Sellers will not, and will not agree to, sell, lease, exchange, or encumber any Assets.
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(c) Sellers will not enter into any new agreements or amendments to existing agreements with
the parties obligated to pay the Mulatos or Xxxxxxxx Royalties or the owners of the underlying
property that affect the Assets without Buyer’s prior written consent.
(d) Sellers will not exchange any of the Shares for the common stock of Revett Minerals or the
Class B common stock of Revett Silver prior to Closing or exercise or otherwise alter in any way
the Royalty Conversion Right without Buyer’s prior written consent.
(e) Sellers will immediately notify Buyer in writing of any event that renders any
representation or warranty of Sellers hereunder incorrect or inaccurate.
7.2 Additional Covenant of Sellers. During the period from the date of this Agreement
until the Closing, Sellers will not take any action that would, or would be reasonably likely to,
result in any of the conditions in Article VIII not being satisfied or that would materially impair
Sellers’ ability to consummate the transactions contemplated hereby in accordance with the terms
hereof or would materially delay such consummation. KMC shall promptly advise Buyer orally and in
writing of any change in, or event with respect to, the Assets having, or that could have, a
material adverse effect on Sellers’ ability to consummate the transactions contemplated hereby.
7.3 Access to Records. Subject to satisfaction of any requirements with respect to
confidentiality, upon reasonable notice, Sellers shall afford to the officers, employees,
accountants, counsel and other representatives of Buyer access, during normal business hours,
during the period prior to the Closing, to all of the books, contracts, commitments and records
relating to the Assets that are in Sellers’ possession and shall furnish to Buyer all other
information concerning the Assets that is in Sellers’ possession as Buyer reasonably requests.
7.4 Exclusivity. During the period from the date of this Agreement until the Closing,
neither Sellers nor their respective officers or directors shall solicit, initiate or encourage the
submission of any proposal or offer from any person relating to the acquisition of the Assets
(including any acquisition by merger or consolidation) or participate in any discussions or
negotiations regarding, furnish information with respect to, assist or participate in, or
facilitate in any manner any effort or attempt by any person to do any of the foregoing.
7.5 Covenant of Buyer. During the period from the date of this Agreement until the
Closing, Buyer will not take any action that would, or would be reasonably likely to, result in any
of the conditions in Article VIII not being satisfied or that would materially impair Buyer’s
ability to consummate the transactions contemplated hereby in accordance with the terms hereof or
would materially delay such consummation. Buyer shall promptly advise KMC orally and in writing of
any change or event that could have a material adverse effect on Buyer’s ability to consummate the
transactions contemplated hereby. Buyer shall also advise KMC as to any determination it makes as
to its intended allocation (for tax and book purposes) of the Purchase Price among the Assets.
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ARTICLE VIII.
CLOSING CONDITIONS
8.1 Conditions to Each Party’s Obligations. The respective obligations of the parties
hereunder are subject to the satisfaction, at or prior to the Closing, of the following conditions:
(a) No temporary restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the transactions contemplated herein shall be in effect (each party agreeing to use
all reasonable efforts to have any such order reversed or injunction lifted).
(b) No claim, action, litigation or proceeding shall be pending or threatened against Buyer or
any Seller for the purpose of enjoining or preventing the consummation of the transactions
contemplated hereby or otherwise claiming that this Agreement or the consummation of the
transactions contemplated hereby are illegal.
8.2 Conditions to Buyer’s Closing Obligation. Buyer’s obligation to close the
transactions contemplated hereunder is subject to the satisfaction by Sellers, at or prior to the
Closing, of the following conditions (unless waived in writing by Buyer):
(a) The representations and warranties of Sellers set forth herein are correct in all material
respects as of the Closing as though they were made as of the Closing.
(b) Sellers shall have fully performed and complied in all material respects with the
covenants hereunder that are to be performed or complied with by it at or prior to the Closing.
8.3 Conditions to Sellers’ Closing Obligations. Sellers’ obligation to close the
transactions contemplated hereunder is subject to the satisfaction by Buyer, at or prior to the
Closing, of the following conditions (unless waived in writing by KMC):
(a) The representations and warranties of Buyer set forth herein are correct in all material
respects as of the Closing as those they were made as of the Closing.
(b) Buyer shall have fully performed and complied in all material respects with the covenants
hereunder that are to be performed or complied with by it at or prior to the Closing.
ARTICLE IX.
TERMINATION
9.1 Termination. This Agreement may be terminated at any time prior to the Closing:
(a) by mutual written consent of KMC (on behalf of Sellers) and Buyer;
(b) by KMC on behalf of Sellers if any of the representations or warranties of Buyer herein
are inaccurate in any material respect and if such inaccuracy cannot reasonably be expected to be
cured prior to the Closing;
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(c) by KMC on behalf of Sellers if any obligation, term or condition to be performed or
observed by Buyer hereunder has not been performed or observed in any material respect at or prior
to the time specified in this Agreement;
(d) by Buyer if any of the representations or warranties of any Seller herein are inaccurate
in any material respect and if such inaccuracy cannot reasonably be expected to be cured prior to
the Closing;
(e) by Buyer if any obligation, term or condition to be performed or observed by any Seller
hereunder has not been performed or observed in any material respect at or prior to the time
specified in this Agreement; and
(f) by either Buyer or KMC (on behalf of Sellers) if any of the conditions set forth in
Section 8.1 have not been satisfied.
9.2 Effect of Termination. If validly terminated pursuant to Section 9.1, this
Agreement will become null and void and all further obligations of the parties under this Agreement
will terminate and there will be no liability on the part of any party.
ARTICLE X.
POST-CLOSING COVENANTS
The parties agree as follows with respect to the period following the Closing:
10.1 General. If, during the three (3) year period following Closing, any further
action is necessary or desirable to carry out the purposes of this Agreement, each party will take
such further action (including the execution and delivery of further instruments and documents) as
any other party reasonably requests, all at the sole cost and expense of the requesting party
(unless the requesting party is entitled to indemnification therefor).
10.2 Litigation Support. Except with respect to the matter discussed in Section 10.5,
if, during the three (3) year period following Closing and for so long as any party actively is
contesting or defending against any action commenced during such period, in connection with (a) any
transaction contemplated under this Agreement or (b) any fact, circumstance, condition, event,
failure to act, or transaction on or prior to the Closing involving Buyer or any Seller, except to
the extent adverse to its own interest, each other party will cooperate with such party and its
counsel in the contest or defense, make available its personnel, and provide such testimony and
access to its books and records as is reasonably necessary in connection with such contest or
defense, all at the sole cost and expense of the contesting or defending party, provided that the
contesting or defending party will not be charged for reasonable manpower hours of the other
party’s personnel who provide assistance (unless the contesting or defending party is entitled to
indemnification therefor).
10.3 Transition. During the period of three (3) years following Closing for Assets
other than the Shares, the Royalty Conversion Right and the Rock Creek Royalty Royalty, and during
the period coincident with the term of the Royalty Conversion Right for the Shares, the Royalty
Conversion Right and the Rock Creek Royalty, neither Sellers nor any affiliate, officer
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or director thereof will take any action that is intended to, or could reasonably be
anticipated to, adversely affect the Assets or the benefits therefrom accruing to Buyer; provided,
however, that in the event a Seller determines, in good faith, that failing to take such action
would be materially adverse to the interest of such Seller, Seller may take such action to the
extent necessary to preserve its interests following written notice of same to Buyer sufficiently
in advance to allow Buyer to attempt to rectify same. Sellers will refer all inquiries directly
relating to the Assets to Buyer from and after Closing. In connection with the foregoing, (a) in
the event Buyer converts the Shares to the Rock Creek Royalty, Sellers shall cooperate with Buyer
in delivering to Revett a certified copy of the recorded instrument evidencing Buyer’s right, title
and interest to the Rock Creek Royalty and shall direct that any payments or notices relating to
the Rock Creek Royalty be delivered by Revett only to Buyer or its designated representative; and
(b) as to the Mulatos Royalty, Sellers shall cooperate with and assist Buyer in recording such
royalty in the Public Registry of Mining or other appropriate office of the Mexican government.
10.4 Trust Fund. Notwithstanding the conveyance of the Xxxxxxxx Royalty hereunder,
subject to such action as might be necessary to protect or preserve their rights and interests in
the Trust Agreement, the Trust Fund, the Stipulation and the Ancillary Agreement, Sellers will
continue to comply, fully and in good faith, with their obligations under the Trust Agreement,
Stipulation and Ancillary Agreement.
10.5 Mulatos Royalty. Sellers have disclosed to Buyer a notice of claim from Alamos
dated September 30, 2005, concerning the Virgencita Concession. If, in connection with the dispute
as to the Virgencita Concession, there is a final judgment by a trial court of competent
jurisdiction that MON does not have rights under the Virgencita Concession, but the validity of the
Mulatos Royalty and Buyer’s ownership thereof is not otherwise impaired, then Sellers shall not be
liable to Buyer for loss of royalty related to loss of the Virgencita Concession. However, if for
any reason related to claims by Alamos or MON against Sellers, it is determined by a trial court of
competent jurisdiction that the right to the Mulatos Royalty is rescinded, unenforceable, void or
otherwise nullified or if, as a result of such determination or as a result of a settlement reached
by Sellers in any such dispute, the Mulatos Royalty is otherwise adversely affected (which, for
purposes of this Agreement means that the court orders, or Sellers in such settlement agree to,
repayment of, or a reduction in future payments of, US$750,000 or more under such royalty), then,
within 90 days of the date of determination by the trial court or such settlement, Buyer may elect
to have Sellers refund to Buyer US$5,600,000 of the original Purchase Price, reduced by any
amounts paid to Buyer under such royalty that do not have to be refunded to Alamos or MON, in which
case Buyer shall simultaneously deliver to Sellers a reconveyance and release of any claim to the
Mulatos Royalty together with the amount, if any, by which such royalties paid to Buyer that do not
have to be returned to Alamos or MON exceed US$5,600,000. Notwithstanding the foregoing, if the
decision of the trial court is appealed, Buyer may defer its election and await the outcome of any
appeal of the trial court’s determination, not subject to further review, and if the appellate
court issues a final judgment that the Mulatos Royalty is rescinded, unenforceable, void or is
otherwise adversely affected, Buyer may elect to have the Purchase Price returned in exchange for
the Mulatos Royalty on the same basis as set forth in the preceding sentence. Such election must
be made within 30 days of the final decision by the appellate court not subject to further review.
If an election is timely made by Buyer in either of the circumstances described above, a closing of
the transaction described above will occur within 30 days of the date of Buyer’s election. In the
event of a disagreement between the parties as to
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any ultimate amount to be refunded, the amount not in dispute shall be refunded within the
above stated period. Buyer may elect to intervene as a party in any judicial proceedings that it
reasonably determines may affect its rights or interests in the Mulatos Royalty, if such
intervention is possible under the rules of procedure applicable to the proceeding. If Buyer so
elects to intervene, it shall be solely responsible for all costs and expenses (including but not
limited to attorneys’ fees) incurred by it, and Sellers shall have no obligation to reimburse Buyer
for same. Buyer also shall have the right to request of and receive from Sellers an assignment of
any claims that any of the Sellers may have against third parties with respect to a claim by Alamos
relating to the Mulatos Royalty. Upon receipt of that claim from Sellers, Buyer shall be
responsible for defending any counterclaim brought by such third party and shall indemnify Sellers
from and against any costs, expenses or damages resulting from either its claim or the third
party’s counterclaim.
10.6 Proration of Royalty Payments. If, during the three (3) year period following
Closing, either party receives a payment of the Mulatos Royalty or the Xxxxxxxx Royalty that covers
a period both before and after Closing, the parties shall seek for a period of 60 days to obtain
specific information accompanying the payment as to when the payment accrued and prorate the
payment accordingly. If such specific information cannot be obtained, any such payment shall be
prorated by dividing the amount of the payment by the number of days in the period to which the
statement accompanying the payment pertains and then attributing to Sellers the per diem amount for
each day prior to Closing and to Buyer the per diem amount for the Closing Date and each day
thereafter.
10.7 Access to Books and Records. During the one (1) year period following Closing
Sellers shall maintain and make available to Buyer for review and copying at Buyer’s expense and
subject to satisfaction of any limitations on disclosure under any relevant agreements, any all
books, records, manuals and other materials in the possession of Sellers and that can be located by
Sellers relating to the Assets, including, without limitation, (i) all production data and
financial and accounting records or reports provided to or produced by the Sellers regarding any
royalty described herein (including records of tonnage, product volume, analyses of products,
weight, moisture, assays of pay metal content, allowable deductions for further processing and
other records related to the computation of any such royalty), (ii) the results and supporting
materials of any audit regarding the payment of any royalty described herein, (iii) all reports
regarding or relating to the reclamation or remediation of any real property subject to any royalty
described herein; (iv) all correspondence between Sellers and the payors of the Mulatos Royalty and
Xxxxxxxx Royalty concerning such royalties; (v) any and all annual or interim reports submitted to
Sellers by the royalty payors of the activities conducted upon or to be conducted upon the real
property subject to any royalty described herein; and (vi) any reports or analyses produced by or
for Sellers with respect to any inspections of the surface or subsurface portions of the real
property subject to any royalty described herein or the improvements or operations thereon;
provided that any such access will be made upon reasonable advance notice during normal business
hours in such a manner as to not unduly interfere with Sellers’ operations.
-19-
ARTICLE XI.
INDEMNIFICATION
11.1 Buyer Claims. Sellers shall jointly and severally indemnify and hold harmless
Buyer and its successors and assigns, and its and their respective officers, directors,
shareholders, employees and agents, against, and in respect of any and all damages, claims, losses,
liabilities and expenses, including, without limitation, reasonable legal, accounting and other
expenses incurred in connection therewith (collectively, “Damages”), resulting from (a) the loss or
reduction in value of any of the Assets arising out of a breach of any Seller’s representations,
warranties, covenants or agreements contained in this Agreement, (b) a breach of any Seller’s
representations, warranties, covenants or agreements contained in this Agreement that results in
Damages other than those associated with a loss or reduction in value of any of the Assets, or (c)
any Excluded Liabilities, including any liability arising out of the ownership or operation of the
Assets on or before the Closing Date. For purposes of this Section 11.1, any claim for a loss or
reduction in value of any of the Assets as provided in subsection (a) above, (i) must be asserted
by Buyer as provided in Section 11.5 within three (3) years of the Closing and (ii) will be limited
to no more than US$1,800,000 in the case of the Shares or the Rock Creek Royalty; US$5,600,000 in
the case of the Mulatos Royalty; or US$19,400,000 in the case of the Xxxxxxxx Royalty.
11.2 Sellers Claims. Buyer shall indemnify and hold harmless Sellers and their
respective successors, assigns, officers, directors, shareholders, employees and agents, against,
and in respect of, any Damages resulting from (a) the breach of any of Buyer’s representations,
warranties, covenants or agreements contained in this Agreement (which representations and
warranties shall survive the Closing) or (b) Buyer’s negligence or willful misconduct with respect
to the ownership or operation of the Assets.
11.3 Third Party Claims. With respect to claims for indemnification from any claim by
a third party, the indemnified party shall provide written notice (the “Claim Notice”) to the
indemnifying party of any such claim within five (5) days after becoming aware of such claim;
provided, however, that the indemnifying party shall have no obligation to indemnify the indemnitee
against Damages, if any, resulting directly from the failure to timely give a Claim Notice, but
that such failure will not be deemed a forfeiture of the rights granted by this Section 11.3. The
parties shall make available to each other all information that is in their possession and is
material to any such claim. The indemnifying party may defend at its expense any third-party claim
against the indemnified party, so long as the notice of the intent to control the defense is given
to the indemnified party within five (5) days after receipt of the Claim Notice by the indemnifying
party. The indemnified party shall cooperate with the indemnifying party in such defense, and may
employ counsel at its own expense.
11.4 Virgencita Concession Indemnification. With respect to any action taken against
Buyer by Alamos, MON or any other party concerning the validity of the Mulatos Royalty as a result
of the dispute regarding the Virgencita Concession referenced in Section 10.5, Sellers shall have
the right, but not the obligation, to assume Buyer’s defense of such action and to prosecute or
settle same.
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(a) If Sellers assume Buyer’s defense of such action, Sellers’ indemnification liability shall
be limited to reimbursement of any cost or attorneys fees incurred by Buyer in defending such claim
during the period (not to exceed ten (10) days) prior to the assumption of the defense by Sellers
and to the return of the amount set out in Section 10.5 if an adverse decision is received from a
trial court or appellate court or if the Mulatos Royalty is otherwise adversely affected, as
provided in Section 10.5, as a result of a settlement reached by Sellers in any such dispute, and
the other requirements of Section 10.5 are met.
(b) If Sellers elect not to assume defense of such action, Buyer may elect within twenty (20)
days of the date Sellers give Buyer notice of such decision (i) to return the Mulatos Royalty to
Sellers in exchange for US$5,600,000 of the original Purchase Price, reduced by any amounts paid to
Buyer under such royalty that do not have to be refunded to Alamos or MON (and provided that if
Buyer has been paid in excess of US$5,600,000 it shall refund to Seller the amount by which such
payments exceed US$5,600,000), in which case Sellers will assume responsibility for any damages
imposed on Buyer arising out of such action and Buyer shall have no further rights or obligations
with respect to the Mulatos Royalty or such action, or (ii) to retain the Mulatos Royalty and
defend the action, retain any royalties that have been paid, assume responsibility for any damages
that might result and release Seller from any liability with respect to the Mulatos Royalty.
Notwithstanding Buyer’s election to defend the action, upon the earlier of: (x) ninety (90) days
after an adverse decision by a trial court, or (y) two (2) years after the date of Buyer’s election
to defend the action, Buyer may further elect by written notice to Sellers to terminate its defense
of the action and return the Mulatos Royalty to Sellers in exchange for US$5,600,000 of the
original Purchase Price, reduced by any amounts paid to Buyer under such royalty that do not have
to be refunded to Alamos or MON (and provided that if Buyer has been paid in excess of
US$5,600,000, it shall refund to Seller the amount by which such payments exceed US$5,600,000). In
addition, in this case, Sellers shall assume responsibility for any damages imposed on Buyer
arising out of such action, and Buyer shall have no further rights or obligations with respect to
the Mulatos Royalty or such action, provided, however, that to the extent damages
(including attorneys’ fees and interest) have been or ultimately are awarded to Alamos or MON, and
such damages are greater than those claimed or that would have been imposed at the date of Buyer’s
election, the additional amount of damage shall be Buyer’s sole responsibility.
(c) If Buyer makes the election to return the Mulatos Royalty to Sellers following Buyer’s
assumption of defense of such action, all legal costs and expenses incurred by Buyer in defending
the action and any settlement costs paid or agreed to by Buyer prior to its termination of its
defense pursuant to Section 11.4(b)(ii) (which settlement shall be entered into only following
consultation throughout the settlement process with Sellers and which shall be subject to Sellers’
prior written approval) shall be at Buyer’s sole cost and expense, and Sellers shall have no
obligation to reimburse Buyer for all or any portion of same. If Buyer does not elect to return
the Mulatos Royalty to Sellers, then all legal costs and expenses incurred by Buyer in defending
the action and any settlement costs paid or agreed to by Buyer shall be at Buyer’s sole cost and
expense, and Sellers shall have no obligation to reimburse Buyer for all or any portion of same,
provided further that Sellers shall have no right to consultation with Buyer regarding any
such settlement or to participate in any such settlement.
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11.5 Non-Third Party Claims. If the indemnified party asserts the existence of a
claim, other than a claim by a third party, it shall give written notice to the indemnifying party
specifying the nature and amount of the claim asserted. Within 30 days after such notice of a
claim has been received by the indemnifying party, the indemnifying party may give written notice
to the indemnified party of its intent to contest the assertion of the indemnified party; if no
such notice is received, the assertion by the indemnified party will be deemed accepted by the
indemnifying party. If the indemnifying party does contest the assertion of the claim, an
authorized representative of each party shall attempt in good faith to resolve the dispute for a
period of 30 days. If the dispute is not resolved as agreed in writing by the parties at the end
of such 30-day period, either party may pursue the rights and remedies available to it at law or in
equity.
ARTICLE XII.
MISCELLANEOUS
12.1 Knowledge. As used in this Agreement, references to the “knowledge” of any
entity shall mean the actual knowledge of the current executive officers and senior employees of
such entity responsible for the area of operations to which such officers’ and employees’ knowledge
relates, and such individuals will be deemed to have knowledge of a particular fact, circumstance
or other matter only if such individual is actually aware of such fact, circumstance or other
matter, no investigation having been made.
12.2 Press Releases and Public Announcements. No party will issue any press release
or make any public announcement relating to the subject matter of this Agreement prior to the
Closing without the prior written approval of Buyer and KMC; but any party may make any public
disclosure it believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the disclosing party will use
its reasonable efforts to advise the other parties prior to making the disclosure as to the form,
content and timing of such disclosure and will provide the other parties the opportunity to make
comment thereon).
12.3 No Third-Party Beneficiaries. This Agreement will not confer any rights or
remedies upon any person other than the parties and their respective successors and permitted
assigns.
12.4 Entire Agreement. This Agreement constitutes the entire agreement among the
parties and supersedes any prior understandings, agreements, or representations by or among the
parties, written or oral, to the extent they related to the subject matter hereof.
12.5 Succession and Assignment. This Agreement will be binding upon and inure to the
benefit of the parties named herein and their respective successors and assigns.
12.6 Notices. All notices, requests, demands, claims, and other communications
hereunder (“Notices”) must be in writing. Any party may send any Notice to the intended recipient
at the address set forth below using certified mail, nationally recognized express courier,
personal delivery or facsimile transmittal, and any such Notice will be deemed to have
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been duly given (a) three days after being deposited in the U.S. mail, postage prepaid, (b)
the next business day after being deposited with a nationally recognized overnight courier and upon
confirming delivery with such courier, and (c) when actually received by an individual at the
intended recipient’s facsimile number and acknowledged as received).
| If to Sellers: | Kennecott Minerals Company | |||
| 000 Xxxxx 0000 Xxxx | ||||
| Xxxx Xxxx Xxxx, XX 00000 | ||||
| Attention: President & CEO | ||||
| Fax: (000) 000-0000 | ||||
| Copy to: | Kennecott Minerals Company | |||
| 000 Xxxxx 0000 Xxxx | ||||
| Xxxx Xxxx Xxxx, XX 00000 | ||||
| Attention: General Counsel | ||||
| Fax: (000) 000-0000 | ||||
| And to: | Xxxxxxx Xxxxx & Xxxxxxx | |||
| 000 Xxxxx Xxxx Xxxxxx, Xxxxx 0000 | ||||
| Xxxx Xxxx Xxxx, Xxxx 00000 | ||||
| Attention: Chairman, Natural Resources Department | ||||
| Fax: (000) 000-0000 | ||||
| If to Buyer: | Royal Gold, Inc. | |||
| 0000 Xxxxxxx Xxxxxx, Xxxxx 0000 | ||||
| Xxxxxx, Xxxxxxxx 00000 | ||||
| Attention: President | ||||
| Fax: (000) 000-0000 | ||||
| Copy to: | Xxxxx & Xxxxxxxxx, LLP | |||
| 000 Xxxx 00xx Xxx, Xxxxx 0000 | ||||
| Xxxxxx, Xxxxxxxx 00000 | ||||
| Attention: Xxxxx X. Xxxx, Esq. | ||||
| Fax: (000) 000-0000 |
Notice to KMC in accordance with this Section shall be effective as notice to all Sellers hereunder
and only KMC shall be authorized to give notice from or on behalf of any Seller unless KMC appoints
a single successor entity as the agent for notice for all Sellers in accordance with this Section.
Any party may change the address to which Notices are to be delivered by giving the other parties
notice in the manner herein set forth.
12.7 Governing Law. This Agreement will be governed by and construed in accordance
with the laws of the State of Utah without giving effect to any choice or conflict of law provision
or rule that would cause the application of the laws of any jurisdiction other than the State of
Utah.
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12.8 Amendments and Waivers. No amendment or waiver of any provision of this
Agreement will be valid unless it is in writing and signed by each party. No such waiver by any
party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, will be deemed to extend to any prior or subsequent default, misrepresentation,
or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of
any prior or subsequent such occurrence.
12.9 Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction will not affect the validity or enforceability
of the remaining terms and provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction.
12.10 Expenses. Each Seller, on the one hand, and Buyer, on the other hand, will bear
its own costs and expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby. Any transfer or sales taxes arising by virtue
of the sale of the Assets by Sellers to Buyer will be borne by Buyer.
12.11 Construction. The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement will be construed as if drafted jointly by the parties and no presumption or
burden of proof will arise favoring or disfavoring any party by virtue of the authorship of this
Agreement. Unless the context otherwise requires: (a) “or” is not exclusive; (b) words in the
singular include the plural, and words in the plural include the singular; (c) reference to a law,
statute, rule, regulation, organizational document and the like is deemed to be followed by “as in
effect on the date of this Agreement”; (d) “herein,” “hereof,” and other similar words refer to
this Agreement as a whole and not to any particular section, subsection, paragraph, clause, or
other subdivision; (e) “include,” “includes,” or “including” will be deemed to be followed, as
appropriate, by “, but not limited to,” (f) the masculine, feminine and neuter genders will each be
deemed to include the others; (g) “will,” “shall,” or “agrees” are mandatory, and “may” is
permissive; and (h) any reference to any federal, state, local, or foreign statute or law will be
deemed also to refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. The parties intend that each representation, warranty, and covenant contained
herein will have independent significance. If any party has breached any representation, warranty,
or covenant contained herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of the relative levels of
specificity) that the party has not breached will not detract from or mitigate the fact that the
party is in breach of the first representation, warranty, or covenant.
12.12 Specific Performance. Each party acknowledges and agrees that the other parties
would be damaged irreparably if any provision of this Agreement is not performed in accordance with
its specific terms or otherwise is breached. Accordingly, the obligations of the parties hereunder
will be specifically enforceable.
12.13 Survival. Except as specifically provided herein, the representations and
warranties contained in Articles II, III, IV, V and VI of this Agreement shall survive the Closing
and for a period of three (3) years thereafter.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above
written.
Royal Gold, Inc.
|
Kennecott Minerals Company | |
| /s/ XXXX XXXXXX | /s/ X. XXXXXXX | |
Signature
|
Signature | |
| XXXX XXXXXX | X. XXXXXXX | |
Name
|
Name | |
| President & COO | SR. V.P. & CEO | |
(Title)
|
(Title) | |
| Kennecott Montana Company | ||
| /s/ X. XXXXXXX | ||
| Signature | ||
| X. XXXXXXX | ||
| Name | ||
| President & CEO | ||
| (Title) | ||
| Kennecott Holdings Corporation | ||
| /s/ X. XXXXXXX | ||
| Signature | ||
| X. XXXXXXX | ||
| Name | ||
| President & CEO | ||
| (Title) | ||
| Kennecott Rawhide Mining Company | ||
| /s/ X. XXXXXXX | ||
| Signature | ||
| X. XXXXXXX | ||
| Name | ||
| President & CEO | ||
| (Title) | ||
| Kennecott Nevada Copper Company | ||
| /s/ X. XXXXXXX | ||
| Signature | ||
| X. XXXXXXX | ||
| Name | ||
| President & CEO | ||
| (Title) |
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