MILL OPERATING AND OPTION AGREEMENT By and Between Montana Tunnels Mining, Inc. and Elkhorn Goldfields, Inc.
EXHIBIT
10.3
By
and
Between
Montana
Tunnels Mining, Inc.
and
Elkhorn
Goldfields, Inc.
TABLE
OF CONTENTS
| Page | |||
|
ARTICLE
I
|
DEFINITIONS
|
1
|
|
|
ARTICLE
II
|
PROCESSING
OF ORE FROM THE ELKHORN MINE THROUGH THE MILL
|
6
|
|
|
2.1
|
General
Rights and Obligations with Respect to the Processing of
Ore
|
6
|
|
|
2.2
|
|
Certain
Other Matters
|
7
|
|
2.3
|
Costs
|
8
|
|
|
2.4
|
Personnel
|
8
|
|
|
2.5
|
Fees
Payable to MTM
|
8
|
|
|
2.6
|
Maintenance
of Permits
|
8
|
|
|
2.7
|
Title
and Risk of Loss
|
8
|
|
|
2.8
|
Removal
of Hazardous Materials
|
9
|
|
|
2.9
|
Subordination
of Rights
|
9
|
|
|
2.10
|
Taxes
|
9
|
|
|
2.11
|
Audit
Rights
|
9
|
|
|
ARTICLE
III
|
GRANT
OF OPTION
|
9
|
|
|
3.1
|
Option
Granted
|
9
|
|
|
3.2
|
Option
Period; Termination
|
10
|
|
|
3.3
|
The
Closing
|
10
|
|
|
3.4
|
Removal
of the Mill
|
11
|
|
|
ARTICLE
IV
|
REPRESENTATIVES
OF THE PARTIES
|
11
|
|
|
4.1
|
EGI
Representative
|
11
|
|
|
4.2
|
MTM
Representative
|
11
|
|
|
ARTICLE
V
|
SHUTDOWN
OF MILL
|
11
|
|
|
5.1
|
Shutdown
for Maintenance
|
11
|
|
|
5.2
|
Shutdown
Due to Environmental or Other Concerns
|
12
|
|
|
5.3
|
Limitation
on Remedies
|
12
|
|
|
ARTICLE
VI
|
REPRESENTATIONS
AND WARRANTIES
|
12
|
|
|
6.1
|
EGI’s
Representations and Warranties
|
12
|
|
|
6.2
|
MTM’s
Representations and Warranties
|
13
|
-i-
TABLE
OF CONTENTS
(continued)
| Page | |||
|
ARTICLE
VII
|
INDEMNIFICATION
|
14
|
|
|
7.1
|
Survival
of Representations, Etc.
|
14
|
|
|
7.2
|
MTM’s
Indemnity
|
14
|
|
|
7.3
|
EGI
Indemnity
|
14
|
|
|
7.4
|
Limitation
on Claims
|
14
|
|
|
7.5
|
Claims
Procedure.
|
15
|
|
|
7.6
|
Dispute
Resolution
|
16
|
|
|
7.7
|
Knowledge
of EGI
|
16
|
|
|
7.8
|
Coverage
of Indemnities
|
16
|
|
|
ARTICLE
VIII
|
TERMINATION
|
16
|
|
|
8.1
|
Default
and Termination
|
16
|
|
|
8.2
|
Effect
of Termination
|
17
|
|
|
8.3
|
Survival
|
17
|
|
|
ARTICLE
IX
|
ADDITIONAL
PROVISIONS
|
17
|
|
|
9.1
|
Force
Majeure
|
17
|
|
|
9.2
|
Consequential
and Other Damages
|
17
|
|
|
9.3
|
Assignment
and Sublease
|
18
|
|
|
ARTICLE
X
|
MISCELLANEOUS
|
18
|
|
|
10.1
|
Cooperation
|
18
|
|
|
10.2
|
Entire
Agreement
|
18
|
|
|
10.3
|
Amendments
|
18
|
|
|
10.4
|
Severability
|
18
|
|
|
10.5
|
Counterparts
|
18
|
|
|
10.6
|
No
Waiver
|
18
|
|
|
10.7
|
Fees,
Costs and Expenses
|
19
|
|
|
10.8
|
Third
Party Beneficiaries
|
19
|
|
|
10.9
|
Construction
|
19
|
|
|
10.10
|
Table
of Contents and Headings
|
19
|
|
|
10.11
|
Notices
|
19
|
-ii-
TABLE
OF CONTENTS
(continued)
| Page | |||
|
10.12
|
Applicable
Law
|
20
|
|
|
10.13
|
No
Partnership
|
20
|
|
|
10.14
|
Independent
Contractor
|
20
|
|
|
10.15
|
Confidentiality
|
20
|
-iii-
THIS
MILL OPERATING AND OPTION AGREEMENT is
made
as of the 28th day of July, 2006 (the “Execution Date”), by and between Montana
Tunnels Mining, Inc., a Delaware corporation (“MTM”), and Elkhorn Goldfields,
Inc., a Montana corporation (“EGI”) and an Affiliate of Calim Private Equity LLC
(“CPE”), with MTM and EGI sometimes referred to herein individually as a “party”
and collectively as “parties.”
RECITALS
A. MTM
owns
a mill in Jefferson County, Montana known as the Diamond Hill Mill (the “Mill,”
as more particularly defined below). The Mill is physically located within
a
larger mineral processing facility known as the Montana Tunnels Mill Complex,
which houses another mill used by MTM (the “MTM Mill”) for the processing
of minerals from its Montana Tunnels Mine (the “MTM Mine”).
B. EGI
owns
and operates a gold mine in Jefferson County, Montana known as the Elkhorn
Mine
(the “Elkhorn Mine”).
C. MTM
and
Elkhorn Tunnels, LLC, another CPE Affiliate, are parties to a Mine Operating
and
Development Agreement of even date herewith (the “Mine Operating Agreement”),
pursuant to which they have agreed to the funding, development and mining
of the
MTM Mine. Ore from the MTM Mine will be processed in the MTM Mill.
D. MTM
and
EGI desire to enter into this Agreement to (i) provide for the processing
of ore from the Elkhorn Mine and from other suitable properties in the Mill
and
(ii) provide to EGI an option to purchase the Mill.
AGREEMENT
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged, MTM and EGI hereby agree as follows:
ARTICLE
I
DEFINITIONS
1.1
Definitions. In this
Agreement, the following terms, when capitalized, shall have the following
meanings set forth in the remainder of this Section 1.1. Other capitalized
terms used but not defined in this Agreement shall have the meaning ascribed
to
them in the Mine Operating Agreement:
“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 party to this Agreement. 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.
“Agreement”
means this Agreement, the Schedules and Exhibits attached hereto and any
and all
amendments, supplements, variations, waivers, alterations or modifications
hereto or thereto, made in accordance with this Agreement.
“Business
Day” means a day on which banks are open in the State of Colorado.
“Claim
Notice” shall have the meaning set forth in Section 7.5.
“Claims”
shall mean either EGI Claims or MTM Claims, as those terms are defined in
Sections 7.2 and 7.3.
“Code”
means the Internal Revenue Code of 1986, as amended.
“Conforming
Ore” means ore coming from sources other than the Elkhorn Mine which EGI desires
to process at the Mill and MTM has reasonably determined is suitable for
processing through the Mill without (i) damaging the machinery;
(ii) causing the Complex to be in violation of any Environmental Laws; or
(iii) subjecting the Complex to any materially enhanced risk of
Environmental Liabilities; provided that in the case of (ii) or (iii), such
shall not be a reason for MTM not to approve ore for processing at the Mill
if
(A) approval is first obtained by EGI from each Governmental Authority with
applicable jurisdiction and (B) EGI is able to obtain bonding against any
such potential Environmental Liabilities in an amount and with one or more
surety companies satisfactory to each such Governmental Authority and reasonably
satisfactory to MTM.
“Control”
when used as a verb, with respect to a party, means the ability, directly
or
indirectly through one or more intermediaries, to direct or cause the direction
of the management and policies of such party through (i) the legal or
beneficial ownership of voting securities or membership interests; (ii) the
right to appoint managers, directors or corporate management;
(iii) contract; (iv) operating agreement; (v) voting trust or
otherwise; and, when used as a noun, an interest which gives the holder of
Control the ability to exercise any of the foregoing powers with respect
to such
party.
“EGI
Claim” means a Claim by EGI for indemnification, as described in
Section 7.2.
“EGI
Representative” shall have the meaning specified in
Section 4.1.
“Encumbrance”
means any lien (including, without limitation, environmental and tax liens
and
statutory liens), claim, charge, judgment, security interest or mortgage
of any
kind or nature.
“Environmental
Laws” means federal laws including the Comprehensive Environmental Response,
Compensation and Liability Act as amended by the Superfund Amendments and
Reauthorization Act, the Federal Solid Waste Disposal Act as amended by the
Resource Conservation and Recovery Act, the Clean Air Act, the Clean Water
Act,
the Hazardous Materials Transportation Act, the Toxic Substances Control
Act,
the Federal Water Pollution Control Act, the Safe Drinking Water Act, the
Endangered Species Act, the National Environmental Policy Act, the Mine Safety
and Health Act, the Federal Land Policy and Management Act, the 1897 Organic
Act, the Emergency Planning and Community Right to Know Act, and the National
Historic Preservation Act, each as amended, and any state law counterparts,
including but not limited to the Montana Comprehensive Environmental Cleanup
and
Responsibility Act, and applicable state common law, together with all other
laws (including rules, regulations, permits, authorizations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder)
of
federal, state and local governments (and all agencies thereof) concerning
pollution or protection of the environment, reclamation, public health and
safety, or employee health and safety, including laws relating to emissions,
discharges, releases, or threatened releases of pollutants, contaminants,
or
chemical, industrial, hazardous, or toxic materials or wastes into ambient
air,
surface water, ground water, or lands or otherwise relating to the existence,
manufacture, processing, distribution, use, treatment, storage, disposal,
recycling, transport, or handling or reporting or notification to any
governmental authority in the collection, storage, use, treatment or disposal
of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes.
-2-
“Environmental
Liabilities” shall mean any liabilities or obligations (whether known or
unknown, fixed or contingent) arising out of, based on or resulting from
(i) the presence, release, threatened release, discharge or emission into
the environment of any Hazardous Materials or substances existing or arising
on,
beneath or above the Mill and/or emanating or migrating and/or threatening
to
emanate or migrate from the Mill (or the real property on which it is located)
to other properties; (ii) disposal or treatment of or the arrangement for
the disposal or treatment of Hazardous Materials present at, originating
or
transported from the Real Property or the Mill to an off-site treatment,
storage
or disposal facility, (iii) physical disturbance of the environment on or
from the Mill; or (iv) the violation or alleged violation of any
Environmental Laws relating to conditions at or the operation of the Mill.
“Equipment
and Supplies” means the mining, office and other equipment and supplies which
comprise a portion of the Mill, which are identified in Exhibit A
attached
hereto.
“Execution
Date” means the date referred to on page one of this Agreement.
“Governmental
Authority” means any federal, state, local or other governmental authority,
agency or regulatory body, including any board, bureau, department, division,
commission, court or tribunal of any of the foregoing.
“Hazardous
Materials” means any substance: (a) the presence of which requires
reporting, investigation, removal or remediation under any Environmental
Law;
(b) that is defined as a “solid waste,” “hazardous waste,” “hazardous
substance,” “extremely hazardous substance,” “pollutant” or “contaminant” under
any Environmental Law; (c) that is toxic, explosive, corrosive, flammable,
ignitable, infectious, radioactive, reactive, carcinogenic, mutagenic or
otherwise hazardous and is regulated under any Environmental Law; (d) the
presence of which on a property causes or threatens to cause a nuisance upon
the
property or to adjacent properties or poses or threatens to pose a hazard
to the
environment or health or safety of persons on or about the property;
(e) that contains gasoline, diesel fuel or other petroleum hydrocarbons; or
(f) that contains PCBs, asbestos or urea formaldehyde foam insulation; in
each case subject to exceptions provided in applicable Environmental
Laws.
-3-
“Indemnified
Party” means MTM or EGI, as applicable, when one is required to be indemnified
by the other under Sections 7.2 or 7.3.
“Indemnifying
Party” means MTM or EGI, as applicable, when one is required to indemnify the
other pursuant to Sections 7.2 or 7.3 hereof.
“Laws”
means all applicable federal, state and local laws (statutory or common),
rules,
regulations, ordinances, codes, orders, judgments, directives, standards,
and
decrees, whether legislative, municipal, administrative or judicial in
nature.
“Losses”
means demands, claims, causes of action, assessments, including any federal
or
state tax audits, losses, damages, liabilities and costs and expenses,
including, without limitation, reasonable attorneys’ fees and any expenses
incident to the defense, investigation or enforcement of such matters and
remedial and monitoring costs incurred in connection therewith.
“Mill
Closing Date” means the date of the closing of the purchase of the Diamond Hill
Mill by EGI if it exercises the Option.
“Montana
Tunnels Mill Complex” means the physical facilities in Jefferson County, Montana
in which the Mill and the MTM Mill are situated.
“MTM
Claim” means a Claim by MTM for indemnification, as described in
Section 7.3.
“MTM
Representative” shall have the meaning set forth in
Section 4.2.
“Option”
shall mean the exclusive right of EGI to purchase the Diamond Hill Mill pursuant
to Article III.
“Option
Period” shall mean the period of time commencing on the Execution Date and
continuing for a period of two years thereafter, unless EGI has relinquished
its
rights hereunder or this Agreement has been terminated.
“Ore”
shall have the meaning set forth in Section 2.1.
“Permitted
Encumbrances” means (a) (i) liens for taxes, assessments and
governmental charges or levies not yet due and payable; and
(ii) Encumbrances such as materialmen’s, mechanics’, carriers’, workmen’s
and repairmen’s liens and other similar liens arising in the ordinary course of
business securing obligations that (x) are not overdue for a period of more
than 60 days and (y) are not in excess of $5,000 in the aggregate at any
time; (b) minor survey exceptions, easement agreements and other customary
encumbrances on title to real property that (i) were not incurred in
connection with any indebtedness and (ii) do not have a material adverse
effect on the value or the use of such property for its present purposes;
(c) zoning restrictions and other limitations imposed by any Governmental
Authority having jurisdiction over real property; (d) reservations in
federal patents; (e) Encumbrances of record (which for purposes of this
Agreement shall include Encumbrances that are reflected in the official records
of the Xxxxxxxxxx or Xxxxxxxxx County, Montana Clerk and Recorder’s Office or
the Xxxxxxxxxx or Jefferson County Assessor’s Office; (f) liens of pledges
or deposits under workers’ compensation laws or similar legislation,
unemployment insurance or other types of social security or to secure the
performance of tenders, statutory obligations, surety and appeal bonds, bids,
leases, governmental contracts, performance and return of money bonds and
similar obligations; (g) rights reserved to or vested in any Governmental
Authority to control or regulate the Mill in any manner, and all laws, rules
and
regulations of any Governmental Authority; and (h) any other Encumbrances
that do not arise by, through or under MTM.
-4-
“Person”
means any individual, partnership, firm, corporation, company, association,
trust, unincorporated organization or other entity.
“Prudent
Operating Practices” shall mean those practices, methods, equipment,
specifications and standards of safety and performance, as the same may change
from time to time, as are commonly used by operators in the mining industry
of
facilities and equipment of a type and size similar to the Mill as good,
safe
and prudent operating practices.
“Purchase
Price” means $1,000,000 payable to MTM by EGI if EGI exercises the Option,
payable as set forth in Section 3.1.
“Related
Agreements” means the Security Agreement and any other agreements contemplated
hereby.
“Remedial
Costs” means amounts paid directly by EGI for the use, operation and maintenance
of the Mill pursuant to Section 2.2(g).
“Scheduled
Reason” means, with respect to a shutdown of the Mill under Section 5.2, a
valid determination by MTM to cease operations pursuant to either
Section 2.4, 2.6, 2.8 or 4.2.
“Securities
Act” means the United States Securities Act of 1933, as amended.
“Security
Agreement” means a Security Agreement and related financing statements in forms
mutually agreeable to the parties, pursuant to which, effective as of the
Mill
Closing Date, EGI shall grant to MTM a first-priority perfected security
interest in the Mill, to remain in place until the Purchase Price is fully
paid.
“Taxes”
means all taxes, charges, fees, levies or other assessments imposed by any
federal, state or local taxing authority, including, without limitation,
income,
excise, property, sale, transfer, severance, net proceeds of mines, payroll
and
franchise taxes (including any interest, penalties or additions attributable
to
or imposed on or with respect to any such assessment).
1.2
Terms denoting the singular only shall include the plural, and vice
versa.
1.3
Unless otherwise stated, a reference to a Recital, Article, Section, Schedule
or
Exhibit is a reference to a Recital, Article, Section, Schedule or Exhibit
of
this Agreement.
1.4
Section numbers and headings are for convenience of reference only, and shall
not affect the interpretation of this Agreement.
1.5
Reference to any gender includes the other.
-5-
1.6
Whether or not so indicated, reference to “including” means including, but not
by way of limitation.
1.7
Unless otherwise expressly provided in this Agreement, reference to an agreement
(including this Agreement), document, or instrument is the same as amended,
modified, novated or replaced from time to time.
1.8
Reference to a statute or other legislative act, by-law, rule, regulation,
or
order is to the same as amended, modified or replaced from time to time and
to
any rule, regulation or order promulgated pursuant to such law.
1.9
Reference to a “day” is to a calendar day unless otherwise
specified.
1.10
All dollar amounts set forth herein are expressed in United States
currency.
ARTICLE
II
PROCESSING
OF ORE FROM THE
ELKHORN
MINE THROUGH THE MILL
2.1
General Rights and Obligations with Respect to the Processing of Ore.
During the Option Period, to the extent that it does not
unreasonably
interfere with operations at the MTM Mill, MTM shall process ore from the
Elkhorn Mine and Conforming Ore (collectively, “Ore”) through the Mill, on
behalf of EGI. EGI confirms, acknowledges and agrees that EGI has inspected
the
Mill and it is satisfied (or, with respect to Conforming Ore, will first
satisfy
itself) that the Ore is amenable to processing through the Mill and that
the
Mill is in satisfactory condition to process the Ore. MTM shall have the
right
to reject and return to EGI (at EGI’s expense) any shipments of Ore that MTM
reasonably determines are not amenable to processing through the Mill; provided
that MTM shall use reasonable efforts to assess any Ore that may be provided
to
it in sample quantities prior to processing. EGI represents and warrants
that
after careful examination, it is satisfied as of the Execution Date as to
the
character of Equipment and Supplies at the Mill, the availability of labor,
water and power, the adequacy of roads and means of ingress and egress to
and
from the Mill, conditions pertaining to transportation, disposal, handling
and
storage of Ore, the general and local conditions, the prices and availabilities
of equipment and materials, and all other matters which may affect the
processing of the Ore, and that it has taken all actions that a reasonable
and
prudent Person engaged in processing Ore through the Mill would take to become
fully informed regarding all existing and expected conditions and matters
which
could affect the processing of Ore through the Mill in any way, and especially
the cost of such processing. EGI hereby accepts the condition of the Mill
AS IS
AND WHERE IS and as suitable for the processing of the Ore, and hereby expressly
waives and releases MTM from any and all demands or claims for damages of
any
kind whatsoever, fees and/or costs, incurred by EGI by reason of any alleged
representations, warranties, tests, descriptions or statements pertaining
to the
Mill and made by MTM prior to the date hereof, and not expressly set forth
in
this Agreement. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, MTM MAKES
NO
REPRESENTATION OR WARRANTY OF ANY KIND AS TO THE AMENABILITY OF THE ORE TO
PROCESSING THROUGH THE MILL, OR AS TO THE SUITABILITY OF THE MILL FOR PROCESSING
THE ORE OR THE CONDITION OF ALL OR ANY PORTION OF THE EQUIPMENT AND SUPPLIES
COMPRISING THE MILL, AND THE PROCESSING OF ORE THROUGH THE MILL AS SET FORTH
IN
THIS AGREEMENT SHALL BE AT EGI’S SOLE RISK AND EXPENSE.
-6-
2.2
Certain Other Matters. In addition to the agreements in
Section 2.1, the parties agree with respect to the Mill as
follows:
(a)
Capital Improvements. EGI shall make all capital improvements to the Mill
necessary for the processing and treatment of Ore. All such improvements
will be
detailed and agreed by the parties by separate addenda to this Agreement
and,
unless made to existing Equipment, will remain the property of EGI.
(b)
Delivery and Stockpiling. EGI shall arrange and pay for delivery of the
Ore to MTM at the Mill. Ore will be delivered as “run of mine” ore between the
hours of 7:00 a.m. and 8:00 p.m. (Mountain Time) on normal business
days (excluding holidays, Saturdays and Sundays) unless otherwise approved
by
MTM. MTM will select and designate an area at the Complex at which the Ore
shall
be stockpiled and, unless MTM otherwise approves, stockpiles on hand at any
time
shall be limited to 20,000 tons. EGI shall ensure that the Ore is
stockpiled in the designated area, is segregated from and not co-mingled
with
other ores and is properly signed and secured pending processing.
(c)
Crushing. Ore shall be crushed as necessary by EGI to 100 percent
passing minus ¾ inch. To the extent MTM is legally and contractually able
to do so, MTM agrees to make space available at the designated stockpile
area
for temporary use by EGI of a crusher.
(d)
Processing. Crushed Ore shall be transported by MTM from the designated
stockpile area to the Mill fine ore xxxxxx via front-end loaders.
(e)
Concentrate Marketing. EGI shall be responsible for all costs associated
with the marketing, treatment and refinement of any final product produced
from
Ore at the Mill. These costs shall include containment, load-out, shipment
and
insurance of flotation concentrates and dore products. EGI agrees to notify
MTM
of all scheduled shipments of flotation concentrate and dore product from
the
Mill.
(f)
First Right. Except as otherwise provided in Section 2.9, during the
Option Period, EGI shall have the first right of use of the Mill for processing
its Ore, and the Mill shall not be operated for the processing of ore for
Persons other than EGI if such may reasonably be expected to interfere with
processing of Ore for EGI.
(g)
MTM Obligations. Subject to the other terms and provisions of this
Agreement, MTM shall be obligated to run and operate the Mill for the processing
of Ore in a good and workmanlike fashion, including without limitation paying
the normal operating costs of the Mill as and when due and payable and keeping
the Mill well maintained and in good operating condition. In the event EGI
determines that MTM is not in compliance with its obligations hereunder,
as its
sole remedy with respect thereto, EGI may cause all such deficiencies to
be
remedied at its sole cost and expense, in which event to the extent paid
for by
EGI such will become Remedial Costs.
-7-
2.3
Costs. EGI shall be solely
responsible and reimburse MTM for all reasonable and necessary costs associated
with the operation of the Mill for processing Ore during the Option Period.
The
costs for which EGI shall be responsible shall include, without limitation,
employee costs, insurance costs, bonding and permitting costs, costs for
electrical power, water and other utility charges applicable to the Mill,
costs
of maintenance and repairs required to keep the Mill in operating condition,
costs of assessing any Ore for amenability to processing, costs of Equipment
and
Supplies needed to keep the Mill operational, sampling and associated laboratory
costs, costs of reagents, grinding media and fuel. EGI shall also be solely
responsible for all costs associated with the recovery, transportation and
sales
of any products derived from the Ore.
2.4
Personnel. EGI acknowledges
that employees of MTM will process Ore through the Mill. EGI further
acknowledges that MTM may not now or in the future employ a sufficient number
of
employees to adequately and safely process Ore through the Mill. EGI and
MTM
agree that MTM shall have no obligation under this Agreement to employ or
maintain a sufficient number of employees to adequately and safely process
Ore
through the Mill, and that any time during the Option Period when MTM reasonably
believes it does not have a sufficient number of employees to adequately
and
safely process Ore through the Mill, it shall notify EGI and shall thereafter
have no obligation to process any Ore through the Mill.
2.5
Fees Payable to MTM. As
compensation to MTM for the processing of Ore under this Agreement, EGI shall
pay to MTM, on a monthly basis (due and payable not later than the 15th day
after receipt of an invoice for costs from MTM), a fee equal to 20% of the
costs
incurred by MTM to operate the Mill during the previous month, including
costs
of the type described in Section 2.3, but excluding costs borne by EGI
directly, including without limitation (i) capital improvements made
directly by EGI pursuant to Section 2.2(a); and (ii) Remedial Costs.
MTM shall provide with each monthly invoice to EGI a report providing reasonable
evidence of the costs it incurred to operate the Mill during the previous
month,
and the tons of Ore processed through the Mill during that month.
In addition, EGI shall reimburse MTM promptly (and within
no more than ten days) upon receipt of invoices from MTM at any time and
from
time to time for (a) any costs or expenses incurred by MTM in maintaining
any permits, licenses or approvals from any Governmental Authority (“Permits”)
or bonds or other surety required to operate the Mill; and (b) any costs or
expenses (including the fees and expenses of consultants and attorneys) incurred
by MTM in taking any remedial actions required under applicable Environmental
Laws or any Permits with respect to processing of Ore through the
Mill.
2.6
Maintenance of Permits. EGI
acknowledges that MTM must operate the Mill in accordance with applicable
Laws
and the Permits, and MTM shall be obligated to use commercially reasonable
efforts to do so during the Option Period. EGI and MTM agree that if MTM
reasonably determines that it will be unable to operate the Mill in accordance
with applicable Laws and the Permits, it shall notify EGI and shall thereafter
have no obligation to process any Ore through the Mill until such time, if
any,
as the condition is remedied.
2.7
Title and Risk of Loss. EGI
will retain title to and risk of loss associated with the Ore at all times
while
it is being stored or processed in or at the Mill.
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2.8
Removal of Hazardous
Materials. EGI acknowledges that MTM must comply
in conducting operations at the Mill under this Agreement with all applicable
Laws governing the use, handling, processing, production or disposal of
Hazardous Materials. EGI agrees that if for any reason MTM reasonably believes
that it will be unable to comply with such Laws, MTM shall notify EGI and
thereafter shall have no obligation to process any Ore through the
Mill.
2.9
Subordination of Rights. In addition to the
provisions of Sections 5.1 and 5.2, EGI agrees that MTM’s agreement to
process Ore through the Mill under this Agreement is subordinate to MTM’s rights
to operate the MTM Mill with respect to operations conducted under the Mine
Operating Agreement, and that MTM’s agreement to process Ore through the Mill
may be suspended at any time during the Option Period, to the extent such
suspension is necessary in MTM’s reasonable opinion due to operational
requirements or issues associated with the MTM Mill. Such suspension(s) shall
take effect not later than 45 days after receipt by EGI of written notice
from MTM notifying EGI of such suspension. MTM agrees that it will use good
faith efforts to remedy or address the operational requirements or issues
associated with the MTM Mill that necessitated the suspension of EGI’s right to
use the Mill, and the Option Period shall be extended for a period of time
equal
to the duration of such suspension.
2.10
Taxes. EGI shall be
responsible for the payment of and shall pay all Taxes on Ore delivered under
this Agreement and all Taxes with respect to or computed by reference to
the
mining thereof, the severance thereof from the ground, the delivery thereof
to
the Mill and the ownership of concentrate, doré and other products as are
returnable to EGI therefrom pursuant to this Agreement. EGI shall be responsible
for the payment of and shall pay all Taxes with respect to the concentration
or
treatment of such Ore to the extent that such Taxes are imposed on EGI by
reason
of its being the owner of such Ore.
2.11
Audit Rights. EGI, at its sole
election and expense, shall have the right to procure, not more frequently
than
twice annually, an audit of MTM’s records and accounts relating to costs
incurred in operating the Mill and tons of ore processed through the Mill.
All
of the costs reported in any monthly report delivered to EGI under
Section 2.4 shall be considered final and accepted by EGI, unless EGI gives
written notice describing and setting forth a specific objection to any such
costs thereof within six months after receiving any monthly report. MTM shall
account for any agreed upon deficit or excess in any payment made by EGI
to MTM
by adjusting the next monthly statement following completion of such audit
to
account for such deficit or excess.
ARICLE
III
GRANT
OF OPTION
3.1
Option Granted. MTM hereby grants to EGI the
exclusive and irrevocable option to purchase the Mill, exercisable by EGI
in its
sole discretion (the “Option”), but only exercisable by EGI if and after it has
completed its Initial Contribution under the Mine Operating Agreement, by
paying
a purchase price of $1,000,000 (the “Purchase Price”), payable in two equal
annual installments of $500,000 with the first such installment being due
on the
Mill Closing Date, and the second installment being due on the first anniversary
of the Mill Closing Date.
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3.2
Option Period;
Termination.
(a)
Option Period. Unless the Agreement is sooner terminated pursuant to this
Section 3.2, the Option shall expire and this Agreement shall terminate at
5:00 p.m. Mountain time on July 28, 2008 (the “Expiration Date”). The
Option may be exercised by EGI by delivery to MTM of a written notice of
election to exercise the Option at any time prior to the end of the Option
Period (the date such notice is effective being referred to hereinafter as
the
“Exercise Date”).
(b)
Termination.
(i)
In
the event EGI desires to terminate this Agreement, which EGI may elect to
do in
its sole discretion at any time during the Option Period, EGI may terminate
this
Agreement by giving MTM written notice of termination, and this Agreement
shall
be deemed terminated immediately upon receipt by MTM of the notice of
termination. At that time, all outstanding operating costs will become promptly
due and payable after EGI’s receipt of invoices for the same.
(ii)
If
the Mine Operating Agreement is terminated other than for Cause, or if
(A) EGI does not complete its Initial Contribution under the Mine Operating
Agreement, (B) EGI’s Participating Interest under the Mine Operating
Agreement is converted to an interest in Net Proceeds, or (C) EGI transfers
its Participating Interest under the Mine Operating Agreement to a third
party
that is not an Affiliate of EGI, this Agreement shall terminate
automatically.
(iii)
Following expiration of the Option Period without EGI exercising the Option,
or
termination of this Agreement for any reason prior to the expiration of the
Option Period, neither of the Parties shall have any further obligations
or
liabilities hereunder, except as set forth in Article VIII.
3.3
The Closing. If EGI exercises the Option in
accordance with the terms of this Agreement, the closing of the sale of the
Mill
(the “Closing”) shall take place within 30 days after the written notice of
election to exercise the Option is delivered by EGI to MTM, at a time and
place
mutually agreeable to EGI and MTM.
(a)
Deliverables.
(i)
At
the Closing, MTM shall deliver to EGI a fully executed and acknowledged good
and
sufficient special warranty deed, assignment and xxxx of sale, in form and
substance mutually agreeable to the parties (the “Conveyance”), conveying the
Mill to EGI free and clear of all liens and encumbrances arising by, through
or
under MTM, but otherwise without representations or warranties of any
kind.
(ii)
At
the Closing, EGI shall deliver: (a) the first installment of the Purchase
Price ($500,000), which shall be paid by wire transfer in accordance with
written instructions to be delivered by MTM to EGI prior to the Mill Closing
Date, (b) a fully executed Security Agreement, and (c) certificates of
good standing for EGI from the office of the Montana Secretary of State.
In
addition, each of EGI and MTM will deliver such other closing certificates
and
documents as are reasonably requested by the other party. Closing costs,
including transfer taxes, sales taxes, recording costs and any escrow fees
will
be paid by EGI, including all taxes and disbursements.
3.4
Removal of the Mill. Following the Closing, EGI
shall have 365 days to remove the Mill from the Complex, and during such
period, to the extent MTM is legally entitled to grant such rights, EGI shall
be
entitled to operate the Mill at its sole cost and expense and in compliance
with
all applicable Laws and Environmental Laws, and the terms and conditions
of this
Agreement. MTM agrees to cooperate with EGI in the removal process. EGI agrees
to conduct the removal of the Mill from the Montana Tunnels Mill Complex
in a
manner that does not unreasonably interfere with ongoing operations at the
MTM
Mill. EGI may move the Mill to whatever location it may determine; provided
that
before moving the Mill, MTM shall have determined to its reasonable satisfaction
that it has a valid and enforceable first priority security interest in and
to
the Mill at such location.
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ARTICLE
IV
REPRESENTATIVES
OF THE PARTIES
4.1
EGI Representative. EGI hereby
designates Xxxxxx Xxxxxxxx as its representative who shall have the full
authority to act on its behalf in connection with this Agreement (the “EGI
Representative”). EGI shall have the right to appoint an additional or
replacement EGI Representative by written notice to MTM. The EGI Representative
shall have the right to be present at all times when MTM is processing Ore
through the Mill.
4.2
MTM Representative. MTM hereby
designates Xxxxx Xxxxxxx as its representative who shall have the full authority
to act on its behalf in connection with this Agreement (the “MTM
Representative”). MTM shall have the right to replace the MTM Representative by
written notice to EGI. EGI acknowledges and agrees that the MTM Representative
may in his reasonable discretion refuse to allow further processing of Ore
through the Mill if the MTM Representative believes that such operations
(a) may be dangerous to MTM’s employees; (b) may negatively impact
operations at the Montana Tunnels Mill Complex; (c) may be deleterious to
environmental conditions at or in the vicinity of the Mill or the Montana
Tunnels Mill Complex; or (d) may cause or result in a violation of any
Environmental Law or result in increased or additional Environmental Liabilities
at the Mill or the Montana Tunnels Mill Complex. The MTM Representative shall
have the authority, on behalf of MTM, to enforce the provisions of this
Agreement and to shut down EGI’s operations at the Mill in accordance with the
provisions of Sections 5.1 and 5.2.
ARTICLE
V
SHUTDOWN
OF MILL
5.1
Shutdown for Maintenance. MTM
shall have the right to shut down the Mill for maintenance purposes whenever
in
its reasonable judgment such action is necessary. Such shutdown may be imposed
in connection with MTM’s maintenance activities at any other portion of the
Montana Tunnels Mill Complex. In the event such a maintenance shut down is
required, MTM shall be relieved of its obligation to process Ore through
the
Mill during the period that the Mill is so shut down. In connection with
any
such shutdown in excess of 48 hours, MTM agrees to (i) provide EGI
with reasonable notice prior to the shutdown, together with an estimate of
the
duration of the proposed shutdown and (ii) to use good faith efforts to
minimize the duration of each such shutdown.
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5.2
Shutdown Due to Environmental or Other
Concerns. At any time and from time to time, for
any Scheduled Reason, or in the event of any other default by EGI under this
Agreement, the MTM Representative may deliver to EGI a notice that MTM will
immediately cease processing of Ore through the Mill under this Agreement.
In
that notice, the MTM Representative shall identify the provisions or provisions
of this Agreement triggering the shutdown. If the shutdown results from a
default by EGI, such shutdown notice shall remain in place until the event
of
default is cured as provided in Section 8.1(b). If the event of default is
not timely cured, MTM may terminate this Agreement in accordance with the
provisions of Section 8.1(b).
5.3
Limitation on Remedies. If
operations at the Mill are shut down by MTM for any reason under this Agreement,
MTM shall have absolutely no obligation or liability to EGI for any
consequential, special or punitive damages or lost profits incurred by or
resulting to EGI as a result of such shutdown.
ARTICLE
VI
REPRESENTATIONS
AND WARRANTIES
6.1
EGI’s Representations and Warranties. EGI represents and
warrants to MTM the following as of the Execution Date hereof (except as
specified otherwise) and as of the Mill Closing Date:
(a)
EGI
is corporation duly organized, validly existing and in good standing under
the
laws of the State of Montana.
(b)
EGI
has the full power and authority to enter into and perform this Agreement
and to
consummate the transactions contemplated hereby. The execution and delivery
of
this Agreement by EGI, the consummation of transactions contemplated hereby,
and
the performance by EGI of all of its obligations under this Agreement have
been
duly authorized and approved by EGI. This Agreement has been duly executed
and
delivered by authorized officers of EGI. All requisite actions on the part
of
EGI’s members, manager, officers and directors, necessary for the execution,
delivery and performance by EGI of this Agreement and the Related Agreements,
have been taken.
(c)
Each
of this Agreement and the Related Agreements constitutes the legal, valid
and
binding obligation of EGI enforceable against it in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
reorganization, moratorium, fraudulent transfer or other similar laws affecting
creditors’ rights generally or by principles governing the availability of
equitable remedies.
(d)
Neither the execution and delivery of this Agreement and the Related Agreements
by EGI, nor the performance by EGI of its obligations hereunder or thereunder,
will conflict with or result in a breach of any of the terms, conditions
or
provisions of EGI’s articles of organization, as amended, or operating
agreement, as amended, or of any statute or administrative regulation applicable
to it, nor of any order, writ, injunction, judgment or decree of any court
or
any Governmental Authority or of any arbitration award applicable to
it.
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(e)
Neither the execution and delivery of this Agreement and the Related Agreements
by EGI, nor the performance by EGI of its obligations hereunder or thereunder,
will (i) violate, conflict with or constitute a breach of or default under
(without regard to requirements of notice, passage of time or elections of
any
Person), (ii) permit or result in the termination, suspension or
modification of, (iii) result in the acceleration of (or give any Person
the right to accelerate) the performance of EGI under, (iv) or result in
the creation or imposition of any Encumbrance under, any contract, agreement,
obligation, arrangement, commitment or plan to which EGI is a party or by
which
EGI or any of its assets is bound or affected.
(f)
EGI
is the owner of the Mine and of the Ore, and has the full, legal right to
have
the Ore processed through the Mill free of any claims or rights of any third
party.
6.2
MTM’s Representations and Warranties. MTM hereby represents and
warrants to EGI as of the Execution Date (except as otherwise specified)
and as
of the Mill Closing Date:
(a)
MTM
is a corporation duly incorporated, validly existing and in good standing
under
the laws of the State of Delaware. MTM is qualified to do business and in
good
standing under the laws of the State of Montana.
(b)
MTM
has the full corporate or organizational power and authority to enter into
and
perform this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by MTM, the consummation of
the
transactions contemplated hereby, and the performance by MTM of all of its
obligations under this Agreement have been duly authorized and approved by
MTM.
This Agreement has been duly executed and delivered by authorized officers
of
MTM. All requisite corporate action on the part of MTM and its officers,
directors and shareholders, necessary for the execution, delivery and
performance by MTM of this Agreement and the Related Agreements, have been
taken.
(c)
Each
of this Agreement and the Related Agreements constitutes the legal, valid
and
binding obligation of MTM enforceable against it in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
reorganization, moratorium, fraudulent transfer or other similar laws affecting
creditors’ rights generally or by principles governing the availability of
equitable remedies.
(d)
Neither the execution and delivery of this Agreement and the Related Agreements
by MTM, nor the performance by MTM of its obligations hereunder or thereunder,
will conflict with or result in a breach of any of the terms, conditions
or
provisions of MTM’s articles or certificate of incorporation, as amended, or
by-laws, as amended, or of any statute or administrative regulation applicable
to it, nor of any order, writ, injunction, judgment or decree of any court
or
any Governmental Authority or of any arbitration award applicable to
it.
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(e)
Neither the execution and delivery of this Agreement and the Related Agreements
by MTM, nor the performance by MTM of its obligations hereunder or thereunder,
will (i) violate, conflict with or constitute a breach of or default under
(without regard to requirements of notice, passage of time or elections of
any
Person), (ii) permit or result in the termination, suspension or
modification of, (iii) result in the acceleration of (or give any Person
the right to accelerate) the performance of MTM under, or (iv) result in
the creation or imposition of any Encumbrance (other than Permitted
Encumbrances) under, any contract, agreement, obligation, arrangement,
commitment or plan to which MTM is a party or by which MTM or any of its
assets
are bound or affected.
ARTICLE
VII
INDEMNIFICATION
7.1
Survival of Representations,
Etc. MTM and EGI agree that the
representations, warranties, covenants and agreements of the parties set
forth
in this Agreement, and the indemnification provided for in this Agreement
shall
survive the consummation of the transactions contemplated by this
Agreement.
7.2
MTM’s Indemnity. MTM shall
defend, indemnify and hold EGI harmless from and against all Losses that
EGI may
suffer, sustain or become subject to by reason of or arising out of (i) any
breach of any covenant or agreement of MTM contained in this Agreement, and
(ii) any inaccuracy in any representation or warranty of MTM contained in
this Agreement, or any other agreement or instrument executed by MTM pursuant
to
this Agreement. All of the foregoing are hereinafter collectively referred
to as
“EGI Claims.”
7.3
EGI Indemnity. EGI shall
defend, indemnify and hold MTM harmless from and against all Losses that
MTM may
suffer, sustain or become subject to by reason of or arising out of (i) any
breach of any covenant or agreement of EGI contained in this Agreement,
(ii) any inaccuracy in any representation or warranty of EGI contained in
this Agreement, or any other agreement or instrument executed by EGI pursuant
to
this Agreement, (iii) any Environmental Liability or other liability
arising from or related to the processing of the Ore or the tailings derived
therefrom, (iv) any claim made by any employee or agent of MTM at any time
arising from or related to injuries, death or property damage sustained while
processing Ore at the Mill, unless arising from a negligent act or omission
of
MTM, (v) EGI’s operation of the Mill pursuant to Section 3.4, and (vi)
the quality or quantity of the Ore processed through the Mill or pertaining
to
the Ore after it has left the Mill site. All of the foregoing are hereinafter
collectively referred to as “MTM Claims.” The indemnification obligations of the
parties in this Agreement shall remain in full force and effect and applicable
notwithstanding the fact that either of them may have availed itself of any
other remedy available under this Agreement.
7.4
Limitation on Claims. Neither
party shall be entitled to make either an EGI Claim or an MTM Claim (each
of
which may be referred to as a “Claim” or “Claims” in the remainder of this
Article VII) under Section 7.2(i) and 7.2(ii), or Section 7.3(i)
and 7.3(ii), as applicable, unless and until the aggregate value of all of
EGI’s, on the one hand, or MTM’s, on the other, Claims exceeds $10,000. EGI
shall be entitled to compensation for EGI Claims and MTM shall be entitled
to
compensation for MTM Claims arising under Sections 7.3(i) or (ii) only if
the required Claim is served upon either MTM or EGI within twelve months
after
the Mine Closing Date. None of the limitations on Claims set forth in this
Section 7.4 will apply to MTM Claims arising under Sections 7.3(iii),
(iv) or (v).
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7.5
Claims Procedure.
(a)
In
the event that any Claim or demand for which any party would be liable to
an
Indemnified Party under this Agreement is asserted against or sought to be
collected by a third party, the Indemnified Party shall promptly notify the
Indemnifying Party of such claim or demand, specifying the nature of such
Claim
or demand and the amount or the estimated amount thereof to the extent then
feasible (which estimate shall not be conclusive of the final amount of such
Claim or demand) (the “Claim Notice”). The Indemnifying Party shall have
ten days from its receipt of the Claim Notice (the “Notice Period”) to
notify the Indemnified Party (i) whether or not the Indemnifying Party
disputes its liability to the Indemnified Party hereunder with respect to
such
claim or demand, and (ii) if it does not dispute such liability, whether or
not it desires, at its sole cost and expense, to defend the Indemnified Party
against such claim or demand; provided, however, that the Indemnified Party
is
hereby authorized prior to and during the Notice Period to file any motion,
answer or other pleading that it shall deem necessary or appropriate to protect
its interests; provided further, that the Indemnified Party shall use its
reasonable efforts to provide the Indemnifying Party with notice of any such
filing and an opportunity to comment thereon. In the event that the Indemnifying
Party notifies the Indemnified Party within the Notice Period that the
Indemnifying Party desires to defend against such claim or demand, then except
as hereinafter provided, the Indemnifying Party shall have the right to defend
by appropriate proceedings, which proceedings shall be promptly settled or
prosecuted to a final conclusion as the Indemnifying Party deems necessary
or
advisable. If an Indemnified Party desires to participate in, but not control,
any such defense or settlement it may do so at its sole cost and
expense.
(b)
In
the event that an Indemnified Party should have a claim against the Indemnifying
Party under this Agreement that does not involve a claim or demand being
asserted against or sought to be collected from it by a third party, the
Indemnified Party shall promptly send a Claim Notice with respect to such
claim
to the Indemnifying Party. If the Indemnifying Party does not notify the
Indemnified Party within the Notice Period that it disputes such claim, the
amount of such claim shall be conclusively deemed a liability of the
Indemnifying Party hereunder.
(c)
Nothing herein shall be deemed to prevent an Indemnified Party from making
a
claim hereunder for potential or contingent claims or demands provided the
Claim
Notice sets forth the specific basis for any such potential or contingent
claim
or demand and the estimated amount thereof to the extent then feasible and
an
Indemnified Party has reasonable grounds to believe that such a claim or
demand
will be made.
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7.6
Dispute Resolution.
(a)
Good Faith Efforts. If any dispute arises as to the interpretation of or
the rights and obligations of the parties under this Agreement, the parties
agree to use good faith efforts to resolve such a dispute within 30 days
after either party gives notice to the other asserting the existence of such
a
dispute and specifically referring to this Section 7.6, although the
provisions of this Section 7.6(a) shall not prevent either party from
seeking emergency temporary relief such as a temporary restraining order
or a
preliminary injunction.
(b)
Venue and Jurisdiction. Any action arising from or in any way related to
this Agreement or the MTM Mill or MTM Mine shall be brought only in the state
or
federal courts in Denver County, Colorado and each party agrees that it shall
not seek forum non conveniens dismissal of any actions so brought. This forum
selection agreement applies no matter what the form of action, whether in
rem,
in personam, or any other, and no matter what the theory of the action, whether
in tort, contract, or any other, or whether based in common law or on any
statute, rule, or regulation whether now existing or hereafter
enacted.
(c)
Attorneys’ Fees. The prevailing party in any such action shall be
entitled to recover its costs and expenses incurred in connection with such
action, including without limitation reasonable attorneys’ fees.
7.7
Knowledge of EGI. EGI shall not be entitled to recover in
respect of any Claims in connection with any matter which was disclosed by
MTM,
or of which EGI, its officers, directors, employees or agents, had actual
knowledge or reasonably should have had knowledge by exercise of reasonable
diligence at or prior to the Mill Closing Date.
7.8
Coverage of Indemnities. Rights of indemnity (or rights to be
held harmless) created in this Agreement stated as in favor of EGI shall
also be
in favor of the officers, directors and employees of EGI and its Affiliates.
Rights of indemnity (or rights to be held harmless) created in this Agreement
or
in the Assumption Agreement stated as in favor of MTM shall also be in favor
of
the officers, directors and employees of MTM and its Affiliates.
ARTICLE
VIII
TERMINATION
8.1
Default and Termination. This Agreement may be terminated at any
time prior to the Mill Closing:
(a)
Upon
the mutual written consent of MTM and EGI;
(b)
By
MTM, in the event of a default by EGI in the performance of any of its covenants
or obligations under this Agreement after the Execution Date, after MTM has
provided EGI written notice of the default and EGI has not (a) with respect
to a default in the making of any payment, made such payment within 15 days
after receipt of such notice or (b) with respect to any other default,
cured such default within 30 days after receipt of such notice;
or
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(c)
As
set forth in Section 3.2(b).
8.2
Effect of Termination. Termination of this Agreement by a party
pursuant to this Article VIII shall not of itself result in any liability
of such party or its respective representatives, directors, officers,
shareholders or agents; provided, however, that in the event of such termination
neither party shall be relieved of any of its obligations or liabilities
under
this Agreement that have accrued prior to the date of such termination, or
its
indemnification obligations under Article VII. In the event of termination
of this Agreement, the proposed transactions contemplated hereunder shall
terminate, and MTM shall have no further liabilities or obligations under
this
Agreement. Any party’s right of termination under this Article VIII is in
addition to any other rights it may have under this Agreement or otherwise,
and
the exercise of a right of termination will not be deemed an election of
remedies.
8.3
Survival. The provisions of Sections 2.5, 2.10, 3.3, 3.4,
7.3(iii) and (v), 7.5, 7.8, 8.2, 8.3, 9.2, 9.3 and 10.4 of this Agreement
shall
survive the exercise of the Option by EGI.
ARTICLE
IX
ADDITIONAL
PROVISIONS
9.1
Force Majeure. MTM shall not be liable for any interruption in
the processing of Ore through the Mill, delay or failure to perform under
this
Agreement when such interruption, delay or failure results from causes beyond
MTM’s reasonable control, including, but not limited to, any strikes, lock-outs
or other labor difficulties, acts of any Governmental Authority (including
the
inability to timely obtain, retain or modify any Permits or the issuance
of any
order or notice), acts of environmental groups or other non-governmental
organizations, changes in Laws, riot, insurrection or other hostilities,
embargo, fuel or energy shortage, fire, flood, acts of God, wrecks or
transportation delays, or inability to obtain necessary labor, materials
or
utilities. In any such event, MTM’s obligations hereunder shall be postponed for
such time as MTM’s performance is suspended or delayed on account thereof. MTM
will notify EGI promptly, either orally or in writing, upon learning of the
occurrence of such event of force majeure.
9.2
Consequential and Other Damages. MTM shall not be liable for,
and EGI expressly waives any right to recover, whether in contract, in tort
(including without limitation negligence and strict liability), or otherwise,
any punitive, exemplary, special, indirect, incidental or consequential damages
whatsoever, which in any way arise out of, relate to, or are a consequence
of,
MTM’s performance or nonperformance hereunder, or the provision of or failure
to
provide access to or the right to use the Mill hereunder, including, but
not
limited to, loss of profits, business interruptions and claims of customers.
In
addition, MTM shall not be liable for, and EGI expressly waives any right
to
recover, whether in contract, in tort (including without limitation negligence
and strict liability), or otherwise, damages of any kind whatsoever (including
actual damages and those listed above), which in any way arise out of, relate
to, or are a consequence of, the quantity or quality of any Ore processed
through the Mill, or which pertain to the Ore after it has left the Mill
site.
9.3
Assignment and Sublease. EGI’s rights and obligations under this
Agreement shall not be assigned, delegated or otherwise transferred (other
than
to an Affiliate, in which case EGI shall remain responsible for all of its
and
its Affiliate’s obligations and liabilities under this Agreement) without the
prior written consent of MTM, which consent MTM may withhold in its sole
discretion.
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ARTICLE
X
MISCELLANEOUS
10.1
Cooperation. MTM and EGI shall execute, acknowledge and deliver
or cause to be executed, acknowledged and delivered such instruments and
take
such other action as may be necessary or advisable to carry out their
obligations under this Agreement and under any document, certificate or other
instrument delivered in connection herewith or required by law.
10.2
Entire Agreement. This Agreement and the Security Agreement, and
each instrument and agreement delivered by one party to the other party on
the
Execution Date or at the Closing, constitute the entire agreement between
the
parties and supersede any and all other prior or contemporaneous understandings,
negotiations or agreements between the parties relating to the transactions
contemplated hereby, and shall be binding upon and inure to the benefit of
the
parties hereto and their respective legal representatives and permitted
successors and assigns. Each Exhibit and Schedule to this Agreement shall
be considered incorporated into this Agreement.
10.3
Amendments. Any amendment, supplement, variation, alteration or
modification to this Agreement must be made in writing and duly executed
by an
authorized representative or agent of each of the parties hereto.
10.4
Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any other jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, each party hereby waives any law which renders any provision
hereof prohibited or unenforceable in any respect.
10.5
Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, and all such counterparts
shall
be deemed to constitute one and the same instrument.
10.6
No Waiver. The failure in any one or more instances of a party
to insist upon performance of any of the terms, covenants or conditions of
this
Agreement, to exercise any right or privilege in this Agreement conferred,
or to
waive any breach of any of the terms, covenants or conditions of this Agreement,
shall not be construed as a subsequent waiver of any such terms, covenants,
conditions, rights or privileges, but the same shall continue and remain
in full
force and effect as if no such forbearance or waiver had occurred. No waiver
shall be effective unless it is in writing and signed by an authorized
representative of the waiving party. A breach of any representation, warranty
or
covenant shall not be affected by the fact that a more general or more specific
representation, warranty or covenant was not also breached.
-18-
10.7
Fees, Costs and Expenses. Except as otherwise provided herein,
each of EGI, on the one hand, and MTM, on the other hand, shall be responsible
for its own fees, costs and expenses incurred by it in connection with this
Agreement and the transactions contemplated hereby.
10.8
Third Party Beneficiaries. Except as otherwise specifically set
forth in this Agreement, nothing in this Agreement is intended to create,
nor
shall anything in this Agreement be intended to create, nor shall anything
in
the Agreement be deemed to create or have created, any third party beneficiary
rights, other than the indemnification provided in Article VII for EGI’s
and MTM’s officers, directors, employees and Affiliates.
10.9
Construction. In this Agreement, unless the context otherwise
indicates: (a) references to any party to this Agreement shall include the
successors and permitted assigns of that party; and (b) references to this
Agreement shall be construed as references to this Agreement or that provision
of or to any specified provision thereof.
10.10
Table of Contents and Headings. The table of contents and
descriptive section headings contained in this Agreement are convenience
of
reference only and shall not control or effect the meaning or construction
of
any provision of this Agreement.
10.11
Notices. Except as otherwise provided in this Agreement,
whenever it is provided in this Agreement that any notice, demand, request,
consent, approval, declaration or other communication shall or may be given
to
or served upon any of the parties by any other party, or whenever any of
the
parties desires to give or serve upon any other party any communication with
respect to this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and either shall be
delivered in person with receipt acknowledged or sent by registered or
certified-mail, return receipt requested, postage prepaid, or by overnight
mail
or courier, or delivery service or by facsimile and confirmed by facsimile
answer back, addressed as follows:
|
(a)
|
If
to MTM to:
|
|
Montana
Tunnels Mining, Inc.
|
|
|
0000
Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 000
|
|
|
Xxxxxxxxx
Xxxxxxx, Xxxxxxxx 00000
|
|
|
Attn:
R. Xxxxx Xxxxxxx
|
|
|
Telephone:
(000) 000-0000
|
|
|
Facsimile:
(000) 000-0000
|
|
|
with
a copy to:
|
|
|
Xxxxxxx
Xxxxxxxx, Esq.
|
|
|
Xxxxx
Xxxxxx & Xxxxxx LLP
|
|
|
0000
00xx Xxxxxx, Xxxxx 000
|
|
|
Xxxxxx,
Xxxxxxxx 00000
|
|
|
Telephone:
(000) 000-0000
|
|
|
Facsimile:
(000) 000-0000
|
-19-
|
(b)
|
If
to EGI to:
|
|
Elkhorn
Goldfields, Inc.
|
|
|
000
Xxxx Xxxx Xxxxxx
|
|
|
Xxxxx,
Xxxxxxxx 00000
|
|
|
Attn:
Xxx Xxxxxxxx
|
|
|
Telephone:
(000) 000-0000
|
|
|
Facsimile:
(000) 000-0000
|
|
|
with
a copy to:
|
|
|
Xxxxxx
Xxxxxxxxxx, LLP
|
|
|
0000 Xxxxxx
Xxxxxx
|
|
|
Xx Xxxx,
Xxxxx 00000
|
|
|
Attention:
Xxxx X. Xxxxxx
|
|
|
Telephone: (000) 000-0000
|
|
|
Facsimile:
(000) 000-0000
|
or
at
such other address as may be substituted by written notice given as in this
Section 10.11. The furnishing of any notice required under this Agreement
may be waived in writing by the party entitled to receive such notice. Every
notice, demand, request, consent, approval, declaration or other communication
under this Agreement shall be deemed to have been duly given or served on
(i) the date on which personally delivered, with receipt acknowledged,
(ii) the date on which sent by facsimile and confirmed by answer back,
(iii) the next Business Day if delivered by overnight or express mail,
courier or delivery service, or (iv) three Business Days after the same
shall have been deposited in the United States mail, as the case may
be.
10.12
Applicable Law. THIS AGREEMENT SHALL BE GOVERNED AND CONTROLLED
AS TO ITS VALIDITY, ENFORCEMENT, INTERPRETATION, CONSTRUCTION, EFFECT AND
IN ALL
OTHER RESPECTS BY THE LAWS OF THE STATE OF COLORADO (WITHOUT REGARD TO THE
CONFLICTS OF LAWS PROVISIONS THEREOF) APPLICABLE TO CONTRACTS MADE IN THAT
STATE.
10.13
No Partnership. Nothing in this Agreement shall be construed to
create, expressly or by implication, a joint venture, mining partnership,
commercial partnership, or other partnership relationship among the
parties.
10.14
Independent Contractor. MTM shall be deemed for all purposes
under this Agreement to be an independent contractor and not an agent of
EGI.
10.15
Confidentiality. Except as set forth below, each of the parties
agrees to treat all data, reports, records and other information developed
or
made available to it by the other party under this Agreement and applicable
to
the Mill as confidential, and unless either party is required by any law,
rule,
regulation, or order or by rule or regulation of a stock exchange or securities
commission to disclose any of such information, information shall not be
disclosed to any third party without the prior written consent of the
non-disclosing party, which consent shall not be unreasonably withheld or
delayed. Disclosure of information relating to this Agreement or the Mill
may be
made by either party if such information is required to be disclosed to any
federal, state, provincial or local government or appropriate agencies and
departments thereof or if such information is required by law, stock exchange
rule or regulation to be publicly announced. Otherwise, public announcements
or
reports by EGI of information relating to this Agreement or the Property
shall
be made only on the basis of agreed texts upon the prior written consent
of MTM,
which consent shall not be unreasonably withheld or delayed. EGI agrees that
it
will, not less than 2 business days in advance of making public any information
referred to in this Section 10.15, give MTM written notice of the text of
the proposed report and provide MTM with the opportunity to comment on the
form
and content thereof before the same is issued. MTM shall respond within 2
business days after receipt of such notice, or its silence will constitute
a
waiver of objection to the terms of the proposed text.
[balance
of page intentionally left blank]
-20-
IN
WITNESS WHEREOF,
the
parties have executed this Agreement as of the date first above
written.
MONTANA
TUNNELS MINING, INC.
By:
______________________________________
Name: R.
Xxxxx
Xxxxxxx
Title: President
and Chief Executive Officer
ELKHORN
GOLDFIELDS, INC.
By:
______________________________________
Name: Xxxxxxx
Xxxxxx
Title: President
-21-
