Exhibit B
NORTHERN XXXXXXXX LLC
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
LIMITED LIABILITY COMPANY OPERATING AGREEMENT dated as of October 19,
2010 among the undersigned signatories hereto.
W I T N E S S E T H:
WHEREAS, the undersigned have caused a Certificate of Formation to be
filed with the Secretary of State of the State of Nevada for the purpose of
forming a limited liability company under Chapter 86 of the Nevada Revised
Statutes Act and such Certificate of Formation has become effective; and
WHEREAS, the name of such limited liability company is Northern Xxxxxxxx LLC;
and
WHEREAS, the undersigned desire to set forth in this Agreement the terms
and conditions which shall govern the affairs of such limited liability
company;
NOW, THEREFORE, in consideration of the premises, representations and
warranties and the mutual covenants and set forth herein and other good,
valuable and sufficient consideration, the receipt of which is hereby
acknowledged, the undersigned, intending to be legally bound, hereby agree as
follows:
ARTICLE 1
DEFINITIONS; REPRESENTATIONS
1.1 Definitions. As used herein, the following terms shall have the
following meanings:
"Accelerated Capital Call" has the meaning set forth in Section
3.2(c).
"Additional Member" means a Person who is admitted to the Company
as a Member pursuant to Section 7.3.
"Adjusted Capital Account Balance" of a Member means the balance in
such Member's Capital Account (a) increased by any amount such Member is deemed
to be obligated to contribute to the Company pursuant to Treasury Regulation
section 1.704-1(b)(2)(ii)(c), 1.704-2(g)(1) or 1.704-2(i)(5) and (b) reduced by
any allocations or distributions to such Member described in Treasury
Regulation section 1.704-1(b)(2)(ii)(d)(4), (5) or (6).
"Affiliate" means, with respect to any Person, any other Person
that controls, is controlled by or is under common control with, directly or
indirectly, such Person, and, if such Person is a natural person, includes any
member of such Person's immediate family, or, if such Person is an entity,
includes (a) any trustee, general partner, manager, director or executive
officer of, or any Person performing similar functions for, such entity and (b)
any Person with the power directly or indirectly to vote or
direct the voting of more than 50% of the voting shares in such entity, to
elect or appoint a majority of the trustees, directors, general partners or
managers of such entity or to otherwise manage or direct the management of the
business and affairs of such entity, whether by reason of ownership of
securities, contractual rights or otherwise.
"Agreement" means this Limited Liability Company Operating
Agreement.
"Assign" an Ownership Interest means to assign, transfer, sell,
pledge, donate, bequeath, hypothecate, mortgage or otherwise encumber or
dispose of such Ownership Interest by any means, whether voluntarily or
involuntarily and including by merger, by transfer of ownership of an entity
that holds such Ownership Interest, in connection with any Proceeding under any
Law relating to bankruptcy, insolvency or the rights of creditors generally,
and by operation of Law.
"Bankruptcy" of a Person means:
(a) the filing by such Person of a petition commencing a voluntary
Proceeding under any applicable bankruptcy, insolvency or similar Law;
(b) the entry against such Person of an order for relief under any
applicable bankruptcy, insolvency or similar Law, if such order shall not have
been vacated or stayed within 120 days after such entry;
(c) the written admission by such Person of its inability to pay
its debts as they mature or the assignment by such Person of all or
substantially of its assets for the benefit of creditors; or
(d) the appointment of a trustee, receiver or similar
representative to manage or wind up the affairs, or manage or liquidate all or
substantially all of the assets, of such Person.
"Book Value" of any asset of the Company means the adjusted basis
of such assets for federal income tax purposes, except that:
(a) the initial Book Value of any asset contributed by a Member to
the Company will be the Fair Market Value of such asset as of the date of
contribution; and
(b) the Book Values of all assets (including intangible assets
such as goodwill) will be adjusted to equal their respective Fair Market Values
as of the following times:
(i) the acquisition of an additional interest in the Company
by any new or existing Member in exchange for more than a de minimis capital
contribution;
(ii) the distribution by the Company to a Member of more than
a de minimis amount of cash or property as consideration for an interest in the
Company; and
(iii) the liquidation of the Company within the meaning of
Treasury Regulation section 1.704-1(b)(2)(ii)(g).
This definition is intended to comply with the provisions of Treasury
Regulation section 1.704-1(b)(2)(iv) and will be interpreted and applied
consistently therewith.
"Capital Account" of a Member means the account maintained by the
Company for such Member pursuant to Section 3.4.
"Capital Contribution" of a Member means the Fair Market Value of
property contributed by such Member to the capital of the Company.
"Certificate" means the Certificate of Formation of Northern
Xxxxxxxx LLC filed with the Secretary of State of the State of Nevada.
"Claim" means a complaint, allegation, charge, petition, appeal,
demand, notice, filing or claim of any kind that commences, alleges a basis to
commence or threatens to commence any Proceeding by or before any Governmental
Authority or Judicial Authority or that asserts, alleges a basis to assert or
threatens to assert any right, breach, default, violation, noncompliance,
termination, cancellation or other action or omission that could reasonably be
expected to result in a Liability or Loss.
"Code" means the Internal Revenue Code of 1986.
"Company" means the limited liability company formed pursuant to
the Certificate and governed by this Agreement.
"Company Business" has the meaning set forth in Section 2.3.
"Company Expenses" mean expenses, costs, fees and other charges
incurred by the Company. Company Expenses shall include:
(a) costs and expenses incurred in connection with the offices of
the Company;
(b) salaries, bonuses and other compensation and benefits of
employees of the Company;
(c) fees and expenses of consultants, accountants, counsel and
other third-party professionals engaged by the Company;
(d) premiums and fees for insurance coverage maintained with
respect to the Company Business or the Managers, Managing Directors or
employees of the Company;
(e) taxes, fees and governmental charges assessed or levied
against the Company or imposed on property owned or used by the Company;
(f) indemnification payments and expense advancements by the
Company;
(g) royalty expenses of 1% of Net Smelter Returns to Xxx Xxxxxx
with respect to the DWC Property;
(h) royalty expenses of 5% of Net Smelter Returns to Sutro Tunnel
Company with respect to the Sutro Property;
(i) royalty expenses of 5% of Net Smelter Returns, pre-production
rent of $500 per month and post-production rent of $1,000 per month (credited
against royalty payments, if applicable), in each case, with respect to the VCV
Property; and
(j) fees, expenses and costs incurred in connection with the
formation of the Company.
"Company Minimum Gain" means the aggregate amount of gain (of
whatever character), determined for each nonrecourse liability of the Company,
that would be realized by the Company if it disposed of the property subject to
such liability in a taxable transaction in full satisfaction thereof,
determined in accordance with Treasury Regulation section 1.704-2(d).
"Company Nonrecourse Deductions" mean the excess, if any, of the
net increase, if any, in the amount of Company Minimum Gain during a fiscal
year over the aggregate amount of any distributions during that fiscal year of
proceeds of a nonrecourse liability as defined in Treasury Regulation section
1.704-2(c).
"Xxxxxxxx Mining" means Xxxxxxxx Mining Inc., a Nevada corporation.
"Contract" means a written or oral contract, agreement, note, bond,
mortgage, indenture, deed of trust, lease, sublease, license, sublicense,
purchase or sale order, or other commitment, obligation or instrument of any
kind that is legally binding or enforceable under applicable Law.
"DWC" means DWC Resources, Inc., a Nevada corporation.
"DWC Property" means the real property and improvements, and all
patented and unpatented lode mining claims located in Storey County, Nevada as
more particularly described on Exhibit A attached hereto.
"Fair Market Value" of any asset of the Company, any Ownership
Interest or the Company Business means the value thereof determined in
accordance with Article 9.
"Fiscal Year" has the meaning set forth in Section 8.3.
"Force Majeure" has the meaning set forth in Section 6.11(b).
"Governmental Authority" means a government (including any federal,
foreign, state, provincial, city, municipal, cantonal or county government), a
political subdivision thereof and a governmental, administrative, ministerial,
regulatory, central bank, self-regulatory, quasi-governmental, taxing,
executive or legislative department, commission, body, agency, authority or
instrumentality of any thereof.
"Indemnified Action" has the meaning set forth in Section 6.7(a).
"Indemnified Party" has the meaning set forth in Section 6.7(a).
"Information" of a Person (the "Disclosing Party"), in relation to
any other Person (the "Receiving Party"), means all information (whether in
written, electronic, oral or other form and including trade secrets and non-
public, confidential or proprietary information), including information
relating to technology, intellectual property, financing sources, business
opportunities, contact information, ideas, developments, strategies and plans,
developed or acquired by or for such Disclosing Party and all files, books,
records, notes, compilations, analyses, forecasts, studies, reports and other
documents (whether in written or electronic form) prepared by or for such
Disclosing Party or any of its Representatives, to the extent they contain or
reflect any of such information. "Information" of a Disclosing Party, in
relation to a Receiving Party, includes any of such information obtained
through visual inspection of properties or through meetings. "Information"
does not, however, include information which (i) is at the time of receipt by
the Receiving Party or becomes after such time publicly available or in the
public domain, other than as a result of a disclosure by the Receiving Party or
its Representatives which constitutes a breach of this Agreement, (ii) is at
the time of receipt or becomes after such time known on a non-confidential
basis from a source which is not prohibited from disclosing such information by
a contractual, statutory, fiduciary or other obligation or (iii) was or is
developed independent of any information furnished by or for the Disclosing
Party or any of its Representatives. Information will not be deemed to be (i)
so publicly available if it relates to business opportunities or contact
information and was directly or indirectly brought to the attention of the
Receiving Party or any of its Representatives by, for or through the Disclosing
Party or any of its Representatives (unless it is so widely known that a
reasonable individual could not consider it to be valuable confidential
information) or (ii) so known on a non-confidential basis or so independently
developed unless such knowledge or development is clearly demonstrated by dated
written records of a type customarily generated and maintained in the ordinary
course of business.
"Judicial Authority" means a court, arbitrator, special master,
receiver, tribunal or similar body of any kind.
"Law" means a treaty, code, statute, law (including common law of
any Judicial Authority), rule, regulation or ordinance of any kind of any
Governmental Authority.
"Leased Property" means the Sutro Property and the VCV Property.
"Liability" means a liability, duty, responsibility, obligation,
assessment, cost, expense, expenditure, charge, fee, penalty, fine,
contribution, premium or obligation of any kind, whether known or unknown,
asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, or due or to become due.
"Liquidator" has the meaning set forth in Section 10.2(a).
"LLC Act" means Chapter 86 of the Nevada Revised Statutes.
"Loss" means a Liability, shortage, damage, diminution in value,
deficiency or loss of any kind.
"Majority Interest" means one or more Ownership Interests which,
taken together, represent more than 50% of the aggregate of all of the
Ownership Interests as measured by the aggregate value of Members' Capital
Accounts, without regard to any special allocations, bonuses or similar
adjustments of any kind.
"Manager" has the meaning set forth in Section 6.1(a).
"Managing Director" has the meaning set forth in Section 6.1(c).
"Member" means, initially, each of the undersigned (an "Initial
Member") and, at any time thereafter, each of the undersigned and each of the
other Persons who at such time shall have become an Additional Member or a
Substituted Member in accordance herewith, but excluding each of the
undersigned and each of such other Persons who, at such time, shall have ceased
to be a Member in accordance herewith.
"Member Nonrecourse Debt" has the meaning set forth in Treasury
Regulation section 1.704-2(b)(4).
"Member Nonrecourse Debt Minimum Gain" means an amount, with
respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that
would result if such Member Nonrecourse Debt were treated as a nonrecourse
liability, determined in accordance with Treasury Regulation section
1.704-2(i).
"Member Nonrecourse Deductions" mean the excess, if any, of the net
increase, if any, in the amount of Member Nonrecourse Debt Minimum Gain
attributable to a Member Nonrecourse Debt during a Fiscal Year over the
aggregate amount of any distributions during such Fiscal Year to the Member
that bears the economic risk of loss for the related Member Nonrecourse Debt to
the extent such distributions are made from the proceeds of such Member
Nonrecourse Debt and are allocable to an increase in Member Nonrecourse Debt
Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Treasury Regulation section 1.704-2(i).
"Membership Period" has the meaning set forth in Section 7.6(b).
"Minerals" has the meaning set forth in Section 6.10(a).
"Minerals Produced" means the bullion or other minerals recovered
from the ore mined out of the ground but untreated and minerals produced from
the milling or reduction of ore to a higher grade produced from the DWC
Property or Leased Property, as applicable, or finished products produced from
any such property.
"Net Income" and "Net Loss" for each Fiscal Year or part thereof
means the Company's taxable income or loss for such Fiscal Year determined in
accordance with Code section 703(a) (and for this purpose, all items of income,
gain, loss or deduction required to be stated separately pursuant to Code
section 703(a)(1) will be included in taxable income or loss), with the
following adjustments:
(a) any income of the Company that is exempt from federal income
tax will be added to such taxable income or loss;
(b) any expenditures of the Company described in Code section
705(a)(2)(B) or treated as such pursuant to Treasury Regulation section
1.704-1(b)(2)(iv)(i) (to the extent such expenditures are not taken into
account in computing the Members' shares of Company Nonrecourse Deductions or
Member Nonrecourse Deductions) will be subtracted from such taxable income or
loss;
(c) gain or loss resulting from any disposition of property of the
Company with respect to which gain or loss is recognized for federal income tax
purposes will be computed with reference to the Book Value of the property
disposed, rather than the adjusted tax basis of such property;
(d) such taxable income or loss will not be deemed to include any
income, gain, loss, deduction or other item thereof allocated pursuant to
Section 5.1(b) (relating to allocations caused by the occurrence of deficit
Adjusted Capital Account Balances or the presence of nonrecourse debt);
(e) if any property of the Company is distributed in kind to any
Member, the difference between its Fair Market Value and its Book Value at the
time of distribution will be treated as Net Income or Net Loss, as the case may
be, recognized by the Company as if it arose from a sale of such property; and
(f) if the value of any assets of the Company are adjusted
pursuant to clause (b) of the definition of Book Value, the difference between
their Fair Market Value and their Book Value at the time will be treated as Net
Income or Net Loss, as the case may be, recognized by the Company as if from a
sale of such assets.
"Net Smelter Returns" shall mean the actual financial proceeds
received from any mint, smelter, refinery, or other purchaser from the sale of
bullion, dore, concentrates or finished products produced from the relevant
property, less the following costs: shipping, all minting, smelter or refinery
costs. In the event smelting or refining are carried out in facilities owned
or controlled, in whole or in part, by Xxxxxxxx Mining, charges, costs and
penalties for such operations shall mean the amount Xxxxxxxx Mining would have
incurred if such operations were carried out at facilities not owned or
controlled by Xxxxxxxx Mining then offering comparable services for comparable
products on prevailing terms.
"Order" means a judgment, writ, decree, directive, decision,
injunction, ruling, award or order (including any consent decree or cease and
desist order) of any kind of any Governmental Authority or Judicial Authority.
"Ownership Interest" of a Member means the legal and beneficial
ownership interest of such Member in the Company, including all of such
Member's rights in and obligations to the Company.
"Person" means an individual, a partnership, a sole proprietorship, a company,
a firm, a corporation, a limited liability company, an association, a joint
stock company, a trust, a joint venture, an unincorporated organization, a
union, a group acting in concert, a Judicial Authority, a Governmental
Authority or any other entity or association of any kind.
"Proceeding" means an action, suit, arbitration, mediation,
litigation, hearing, investigation, inquiry or other proceeding of any kind
involving any Governmental Authority, any Judicial Authority or any other
Person.
"Representatives" of a Person mean controlling persons, trustees,
general partners, managers, directors, officers, employees, representatives,
advisors, attorneys, consultants, accountants and agents of such Person.
"RRA" means the Registration Rights Agreement dated August 31, 2010 among
Xxxxxxxx Mining and the other parties thereto.
"Securities Purchase Agreement" means the Securities Purchase
Agreement dated as of August 31, 2010, among Xxxxxxxx Mining and the other
parties thereto.
"Series A-1 Certificate of Designation" means the 7 1/2% Series A-1
Convertible Preferred Stock Certificate of Designation filed by Xxxxxxxx Mining
with the Secretary of State of Nevada on October 19, 2010.
"Series A-1 Preferred Stock" means Xxxxxxxx Mining's 7 1/2% Series
A-1 Convertible Preferred Stock having the rights, preferences and privileges
set forth in the Series A-1 Certificate of Designation.
"Subsidiary" means, with respect to any Person, any other Person
which, directly or indirectly, is a controlled Affiliate of such Person.
"Substituted Member" means a Person who is admitted to the Company
as a Member pursuant to Section 7.2.
"Sutro Property" means the real property that is the subject of the
Mineral Exploration and Mining Lease Agreement dated January 1, 2008 between
Sutro Tunnel Company and Xxxx X. Xxxxxxxx as more fully described in the lease
attached hereto as Exhibit B.
"VCV Property" means the real property that is the subject of the
Mineral Exploration and Mining Lease Agreement dated January 1, 2008 between
Virginia City Ventures, Inc. and Xxxx X. Xxxxxxxx as more fully described in
the lease attached hereto as Exhibit C.
"Winfield" means Xxxx X. Xxxxxxxx, a resident of the State of
California.
"Yearly Distribution Date" has the meaning set forth in Section
5.2(a)(i).
1.2 Interpretations. Unless otherwise expressly stated in this
Agreement:
(a) the words "hereof", "hereby" and "hereunder," and correlative
words, refer to this Agreement as a whole and not any particular provision;
(b) the words "includes" and "including", and correlative words,
are deemed to be followed by the phrase "without limitation";
(c) the word "written" and the phrase "in writing," and
correlative words and phrases, include e-mail, pdf and facsimile transmissions;
(d) the words "asset" and "property" are synonymous and include
owned, leased and licensed real, personal and intangible property of every
kind, including contractual rights, tort claims, cash, securities and
information;
(e) the masculine, feminine or neuter form of a word includes the
other forms of such word and the singular and plural forms of a word have
correlative meanings;
(f) the word "or" is not exclusive;
(g) the words "will" and "shall" shall be construed to have the
same meaning and effect;
(h) references to any Contract or Order mean such Contract or
Order as amended and, in the case of any Law, mean such Law as amended,
supplemented or modified and any successor Law and, in the case of any
Contract, includes any and all exhibits, annexes, schedules and documents
attached thereto, incorporated therein or constituting a part thereof;
(i) references to an Article, Section, Schedule or Exhibit mean an
Article or Section of, or a Schedule or Exhibit to, this Agreement;
(j) references to "amendments" of a Contract or other document,
and correlative terms, include amendments, modifications, supplements,
novations, waivers, releases, discharges and other changes to such Contract or
document; and
(k) capitalized terms that are correlative to terms defined in
Section 1.1 shall have correlative meanings.
1.3 Representations and Warranties of All Members. Each Member
represents and warrants to the Company and the other Members, as of the date
such Person becomes a Member, as follows:
(a) If it is a Person other than an individual, such Member is
duly organized or formed, validly existing and in good standing under the laws
of its jurisdiction of organization or formation.
(b) Such Member has all power and authority necessary to execute,
deliver and perform his or its obligations under this Agreement and consummate
the transactions contemplated hereby to be consummated by him or it.
(c) If it is a Person other than an individual, the execution and
delivery by it of this Agreement, the performance by it of its obligations
hereunder and the consummation by it of the transactions contemplated hereby to
be consummated by him or it have been duly authorized by all necessary action
required to be taken by it.
(d) This Agreement constitutes the legal, valid and binding
obligation of such Member, enforceable against him or it in accordance with its
terms. The execution and delivery by such Member of this Agreement, the
performance by such Member of his or its obligations hereunder and the
consummation by such Member of the transactions contemplated hereby by him or
it will not conflict with, result in any violation of or constitute a default
under any Contract or Order to which he or it is a party or by which he or it
is bound or, if such Member is a Person other than individual, under its
operating agreement, certificate or articles of formation, by-laws or other
organizational instruments.
(e) No approval, consent, exemption, authorization or license is
required to be obtained from, no notice is required to be given to and no
filing is required to be made with any third party (including, without
limitation, financial institutions and governmental and quasi-governmental
agencies, commissions, boards, bureaus and instrumentalities) by such Member in
order (i) for this Agreement to constitute his or its legal, valid and binding
obligation or (ii) to authorize or permit the consummation by his or it of the
transactions contemplated hereby to be consummated by him or it.
1.4 Representations and Warranties of Xxxxxxxx Mining to each other
Member. Xxxxxxxx Mining hereby makes all of the representations and warranties
set forth in Section 3.1 of the Securities Purchase Agreement mutatis mutandis,
as if such representations and warranties were set forth in this Agreement in
their entirety.
1.5 Representations and Warranties of DWC to each other Member. DWC
hereby represents and warrants to each other Member that (a) it solely owns all
right, title and interest in and to the DWC Property and has not conveyed any
interest or other right in the DWC Property to any other Person or otherwise
subjected, or allowed to be subject, the DWC Property to any liens, easements,
restrictions on use, or other encumbrances, except as set forth on Schedule 1.5
and (b) the transactions contemplated by this Agreement will result in Xxxxxxxx
Mining (on behalf of the Company) having the exclusive rights to mine and
explore the DWC Property, free and clear of any and all liens, easements,
restrictions on use, or other encumbrances, except as set forth on Schedule
1.5.
1.6 Representations and Warranties of Winfield to each other Member.
Winfield hereby represents and warrants to each other Member that (a) he holds
valid and enforceable leasehold interests in the Leased Property, free and
clear of any and all liens and other encumbrances, all of the terms and
conditions of which leasehold interest are set forth in the Mineral Exploration
and Mining Lease Agreements, each dated January 1, 2008, between Sutro Tunnel
Company and Winfield, and Virginia City Ventures, Inc. and Winfield, correct
and complete copies of which, including any amendments, supplements and other
documents relating thereto, are attached as Exhibit B and Exhibit C hereto, (b)
none of Sutro Tunnel Company, Virginia City Ventures, Inc. or Winfield is in
breach of, or default under, the lease agreements pertaining to the Leased
Property and no event or occurrence has occurred that, with or without the
passage of time or the giving or receipt of notice, will result in any breach
of or default under either lease, (c) this Agreement will convey to Xxxxxxxx
Mining (on behalf of the Company) the sole right to use all of the Leased
Property, (d) there are no other restrictions on use by Xxxxxxxx Mining of the
Leased Property and (e) Winfield is permitted to contribute the Leased Property
to the Company pursuant to the terms of his leases of the Leased Property.
ARTICLE 2
FORMATION; GENERAL PROVISIONS
2.1 Formation. The Company has been formed as a limited liability
company under the Certificate pursuant to the LLC Act. When and as required
under the LLC Act, the Manager shall cause the Certificate to be properly
amended.
2.2 Name. The name of the Company is "Northern Xxxxxxxx LLC" or such
other name as may be determined from time to time by the Manager.
2.3 Business. The business of the Company (the "Company Business")
shall be to:
(a) explore, analyze, permit, drill, excavate, produce and sell
gold and silver ore from the DWC Property and the Leased Property;
(b) develop and engage in any and all businesses and activities
which are incidental, ancillary, supplementary or complementary to, or may be
associated with or related to, the businesses described in Section 2.3(a); and
(c) engage in any lawful activity for which a limited liability
company may be formed under the LLC Act as determined by the Manager.
2.4 Powers. The Company shall have the power to:
(a) acquire, own, lease, license, sell and otherwise deal with
real, personal and intangible property of any kind;
(b) hire, engage, compensate, provide benefits to, award interests
in the Company to, discharge and otherwise deal with employees, agents,
consultants, counsel, accountants, advisers, independent contractors, partners,
investors, creditors and other Persons in any manner;
(c) incur, guaranty, pay, satisfy, discharge, defend against,
commence, prosecute, settle and otherwise deal with Liabilities, Losses, Claims
and Proceedings;
(d) prepare, file, publish, acknowledge, execute, deliver,
undertake, perform and terminate Contracts and reports, applications,
registrations, returns and other documents of any kind; and
(e) exercise any and all powers which a limited liability company
may be permitted to exercise under the LLC Act.
2.5 Offices. The principal offices of the Company shall be located at
0000 Xxxxxxxx Xxxx Xxxx, Xxxxxxxx Xxxx, Xxxxxx 00000 and such other locations
as may be determined by the Manager.
2.6 Term. The term of the Company commenced upon the date hereof and
shall continue in perpetuity, unless earlier terminated pursuant to Article 10.
2.7 Ownership of Company Property. Except as otherwise provided in
this Agreement, all property now held or hereafter acquired by the Company
shall be owned by the Company as an entity, and no Member, individually, shall
have any ownership interest therein. Each Member hereby expressly waives the
right to require partition of any Company property or any part thereof.
2.8 No Partnership; No Agency. The Members desire the Company to be
treated as a limited liability company, and not as a partnership, limited
partnership or joint venture of any kind. No Member shall be an agent, partner
or joint venturer of any other Member by virtue of this Agreement or admission
to or membership in the Company, except that a Member may act as an agent of
any other Member for tax purposes pursuant to tax elections duly made.
ARTICLE 3
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
3.1 Initial Capital Contributions. On or promptly after the date
hereof, each of the Initial Members shall contribute either real property
rights or capital stock to the capital of the Company as set forth on Schedule
A opposite its name in consideration for its initial Ownership Interest.
3.2 Additional Capital Contributions.
(a) On each anniversary of this Agreement, up to and including the
thirty-ninth (39th) anniversary of this Agreement, Xxxxxxxx Mining shall make
Capital Contributions to the Company in the amount of Eight-Hundred Sixty-Two
Thousand Five-Hundred and 00/100 Dollars ($862,500.00). Such annual Capital
Contributions shall be made in the form of: (i) subject to the Equity
Conditions (as defined in the Series A-1 Certificate of Designation), in shares
of Series A-1 Preferred Stock; or (ii) if such stock is unavailable, or if the
Equity Conditions have not been satisfied, or if the Company requests the same
(but subject to subsection (b) below), then in the form of cash. Any Member
may contribute additional cash or property to the Company in such amount or
amounts and at such time or times as, but only as, shall have been approved by
the Manager. Except as set forth in this Section 3.2 and Section 3.3, no
Member shall be required to make any Capital Contributions to the Company, cure
any deficit in such Member's Capital Account or lend any cash or property to
the Company.
(b) Notwithstanding anything to the contrary set forth in
subsection (a) above, if the Company desires that a cash payment be made in
lieu of any Series A-1 Preferred Stock, the Company shall notify Xxxxxxxx
Mining no later than six (6) months prior to the date of the next scheduled
Capital Contribution. If Xxxxxxxx Mining's Board of Directors, in good faith
and upon reasonable diligence, concludes that payment in cash would have a
material adverse effect on Xxxxxxxx Mining's cash flow or liquidity, then,
subject to satisfaction of the Equity Conditions, Xxxxxxxx Mining may disregard
such request and such payment shall be made in Series A-1 Preferred Stock, as
set forth in subsection (a) above.
(c) Notwithstanding anything to the contrary set forth in
subsection (a) above, for each 200,000 ounces of gold equivalent validated
after the date hereof through an independent external report (that is, a
National Instrument 43-101 Compliant Mineral Resource Estimate Report or its
successor of qualified resources (at least measured and indicated) and reserves
(probable and proven) on the DWC Property and Leased Property, the Capital
Contributions of Xxxxxxxx Mining shall be automatically accelerated (in reverse
order beginning with the last Capital Contribution due on the thirty-ninth
(39th) anniversary of this Agreement) equal to $5,000,000 ("Accelerated Capital
Call") whereupon the Accelerated Capital Call shall be paid in shares of Series
A-1 Preferred Stock within sixty (60 days) after the date of such occurrence.
Upon the payment of an Accelerated Capital Call, the amount of the aggregate
future Capital Contributions to be made by Xxxxxxxx Mining to the Company shall
be reduced by the difference of $5,000,000 less $862,500 for each such
Accelerated Capital Call.
(d) Any expenditures made by Xxxxxxxx Mining pursuant to its
obligations set forth in Section 6.10(b) and Section 6.10(c), shall be recorded
in Xxxxxxxx Mining's Capital Account as Capital Contributions to the Company.
3.3. Additional Members. Any Person admitted to the Company as an
Additional Member after the date hereof pursuant to Section 7.3 shall
contribute cash and property to the capital of the Company in such amount or
amounts and at such time or times as shall have been specified by the Manager
in connection with such admission.
3.4 Capital Accounts.
(a) A separate Capital Account shall be established for each
Member and maintained in accordance with the provisions of Treasury Regulation
section 1.704-1(b)(2)(iv). Each Member's Capital Account shall be (i)
increased by such Member's Capital Contributions and by such Member's allocable
share of Net Income and items of Company income and gain, (ii) decreased by
such Member's allocable share of Net Loss (calculated in accordance with
Section 5.1 herein) and items of Company loss and deduction and by the amount
of cash and the net Fair Market Value of property distributed by the Company to
such Member and (iii) otherwise adjusted in the manner provided in this
Agreement.
(b) Immediately prior to any distribution of Company assets in
kind, each Member's Capital Account shall be adjusted to reflect the manner in
which the unrealized income, gain, loss or deduction inherent in the assets to
be distributed (and not already reflected in the Members' Capital Accounts)
would be allocated among the Members pursuant to Article 5 if such assets were
sold for Fair Market Value on the date of distribution.
(c) Immediately prior to (i) any contribution of cash or property
to the capital of the Company by a new or existing Member as consideration for
an Ownership Interest in the Company, (ii) any distribution of cash or property
by the Company to a Member in redemption of all or part of such Member's
Ownership Interest or (iii) the liquidation of the Company pursuant to Article
10, each Member's Capital Account shall be adjusted to reflect the manner in
which the unrealized income, gain, loss or deduction inherent in all Company
assets (and not already reflected in the Members' Capital Accounts) would be
allocated among the Members pursuant to Article 5 if such assets were sold for
Fair Market Value on the date of such contribution, distribution or
liquidation.
(d) If any asset is contributed by a Member to the capital of the
Company, the amount credited to such Member's Capital Account for such
contribution will be equal to the Fair Market Value of such asset as of the
date of contribution.
3.5 No Return of Capital; No Interest. No Member will have the right
to the return of all or any part of such Member's Capital Account or Capital
Contribution, to withdraw all or any part of such Member's Capital Account or
Capital Contribution, to require the acquisition of such Member's Capital
Account or Ownership Interest by the Company, to receive interest on such
Member's Capital Account or Capital Contributions or to receive any
distributions or payments of any kind from the Company, except as expressly
provided in this Agreement.
ARTICLE 4
COMPANY EXPENSES
The Company shall be responsible for and shall pay, and shall
reimburse the Members and the Manager for their payment of, Company Expenses.
Company Expenses shall be paid out of funds of the Company and, subject to the
last sentence of this Article 4, shall be paid when and as determined by the
Manager. Notwithstanding anything contained in the preceding two sentences or
the definition of Company Expenses to the contrary, expenses, costs, fees and
other charges incurred for the benefit of the Company by Members, the Manager
or employees shall not constitute Company Expenses to the extent that such
incurrence or related documentation shall be inconsistent with policies or
procedures adopted by the Manager. Promptly after the date hereof, the Company
shall pay or reimburse the Members for their payment of all fees, expenses and
costs incurred on behalf of the Company in connection with the formation of the
Company and, to the extent approved by the Manager, other activities on behalf
of the Company prior to the date hereof.
ARTICLE 5
ALLOCATIONS; DISTRIBUTIONS; LOANS
5.1 Allocations of Net Income and Net Losses.
(a) Subject to Section 5.1(b), the Net Income and Net Losses of
the Company for each Fiscal Year will be allocated to the Members in the
following manner:
(i) Net Income in an amount equal to any distribution made to
DWC pursuant to Section 5.2(b)(i) shall be allocated to DWC as Net Income for
such Fiscal Year;
(ii) Net Income in an amount equal to any distribution made to
Winfield pursuant to Section 5.2(b)(ii) shall be allocated to Winfield as Net
Income for such Fiscal Year; and
(iii) all remaining Net Income or Net Losses of the Company,
as the case may be, for each Fiscal Year shall be allocated to Xxxxxxxx
Mining.
(b) Notwithstanding the general allocation rules set forth in
Section 5.1(a), the following special allocation rules shall apply under the
circumstances described therein.
(i) If in any Fiscal Year a Member unexpectedly receives an
adjustment, allocation or distribution described in Treasury Regulation section
1.704-1(b)(2)(ii)(d)(4), (5) or (6), and such adjustment, allocation or
distribution causes or increases a deficit Adjusted Capital Account Balance for
such Member, then, before any other allocations are made under this Agreement,
such Member shall be allocated items of income and gain (consisting of a pro
rata portion of each item of Company income, including gross income and gain)
in an amount and manner sufficient to eliminate such deficit Adjusted Capital
Account Balance as quickly as possible.
(ii) If there is a net decrease in Company Minimum Gain during
any Fiscal Year, each Member shall be allocated items of income and gain for
such Fiscal Year (and, if necessary, for subsequent Fiscal Years) in proportion
to and to the extent of an amount equal to such Member's share of the net
decrease in Company Minimum Gain, in accordance with Treasury Regulation
section 1.704-2(f) and (g).
(iii) If there is a net decrease in Member Nonrecourse Debt
Minimum Gain attributable to a Member Nonrecourse Debt during any Fiscal Year,
each Member who has a share of the Member Nonrecourse Debt Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Treasury Regulation section 1.704-2(i), will be specially allocated items of
Company income and gain for such Fiscal Year (and, if necessary, subsequent
Fiscal Years) in an amount equal to such Member's share of the net decrease in
Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse
Debt, determined in accordance with Treasury Regulation section 1.704-2(i).
(iv) Member Nonrecourse Deductions for any Fiscal Year shall
be specially allocated to the Member who bears the economic risk of loss with
respect to the Member Nonrecourse Debt to which such Member Nonrecourse
Deductions are attributable in accordance with Treasury Regulation section
1.704-2(i).
(c) The following tax allocations shall be applicable.
(i) Except as set forth in Section 5.1(c)(ii), allocations for
tax purposes of items of income, gain, loss, deduction and credit shall be made
in the same manner as allocations for book purposes.
(ii) In accordance with Code section 704(c) and the Treasury
Regulations thereunder, income, gain, loss and deduction with respect to any
property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and its initial Book Value. The Manager will make such
allocations in accordance with Treasury Regulation section 1.704-3 using the
method selected by the Manager.
(iii) Allocations pursuant to this Section 5.1(c) are solely
for purposes of federal, state and local taxes and will not affect, or in any
way be taken into account in computing, any Member's Capital Account or share
of profits, losses, tax items or distributions pursuant to any other provision
of this Agreement.
(d) Pursuant to Treasury Regulation section 1.752-3(a), Company
nonrecourse liabilities shall be allocated in the following order:
(i) first, to each Member to the extent of its respective
share of Company Minimum Gain; and
(ii) second, to each Member in the amount of any taxable gain
that would be allocated to that Member under Code section 704(c) or in
connection with a revaluation of Company property pursuant to Treasury
Regulation section 1.704-1(b)(2)(iv)(f) or (r), if the Company disposed of (in
a taxable transaction) all Company property subject to one or more nonrecourse
liabilities of the Company in full satisfaction of such liabilities and for no
other consideration; and
(iii) thereafter, to the Members pro rata in proportion to
their respective Capital Accounts.
5.2 Distributions; Record Dates.
(a) To the extent the Company holds Series A-1 Preferred Stock,
and subject to Section 5.3, the Company shall make:
(i) to DWC on the 366th day after the date hereof and on each
anniversary of such date thereafter (each such date a "Yearly Distribution
Date"), a distribution of five hundred (500) shares of Series A-1 Preferred
Stock plus any shares previously retained pursuant to this Section 5.2(a)(i)
and not so distributed; provided, that the Company shall not make such
distribution unless DWC shall deliver written notice to the Company at least
sixty (60) days prior to such Yearly Distribution Date requesting that such
shares be distributed; and
(ii) to Winfield on each Yearly Distribution Date, a
distribution of three hundred sixty two and one half (362.5) shares of Series
A-1 Preferred Stock plus any shares previously retained pursuant to this
Section 5.2(a)(ii) and not so distributed; provided, that the Company shall not
make such distribution unless Winfield shall deliver written notice to the
Company at least sixty (60) days prior to such Yearly Distribution Date
requesting that such shares be distributed.
(b) For as long as the Company shall exist, the Company shall
make:
(i) to DWC (or its permitted Assigns), a distribution of cash
flows as a percentage of the Net Smelter Returns on the Minerals Produced from
the DWC Property, as listed in the following table:
Up to 500,000 Over 500,000
Gold Price / Ounce oz. oz.
---------------------- ------------- ------------
$250.00 or less 1.0% 2.0%
$250.00 to $500.00 1.5% 3.0%
$501.00 to $750.00 2.0% 5.0%
$751.00 or over 3.0% 6.0%
(ii) to Winfield (or his permitted Assigns), a distribution of
cash flows as a percentage of the Net Smelter Returns on the Minerals Produced
from the Sutro Property, as listed in the following table:
Up to 500,000 Over 500,000
Gold Price / Ounce oz. oz.
---------------------- ------------- ------------
$250.00 or less 0.5% 1.0%
$250.00 to $500.00 1.0% 2.0%
$501.00 or over 1.0% 2.0%
(iii) to Xxxxxxxx Mining (or its permitted Assigns), a
distribution of the remaining cash flows on the Minerals Produced from the DWC
Property and the Sutro Property after any distributions made to DWC or Winfield
pursuant to Section 5.2(b)(i) and Section 5.2(b)(ii), and all cash flows on the
Minerals Produced from the VCV Property.
Distributions made pursuant to Section 5.2(b)(i), Section 5.2(b)(ii) or Section
5.2(b)(iii) shall be made no later than thirty (30) days after receipt of
payment from the smelter or other purchaser; provided, that upon request by
DWC, Winfield or Xxxxxxxx Mining, as the case may be (or their respective
Assigns), the Company shall give a written instruction to the smelter, refinery
or other purchaser that such distributions are to be paid directly to DWC,
Winfield or Xxxxxxxx Mining (or their respective Assigns) from the sums payable
to the Company. If any Initial Member shall Assign less than all of its
Ownership Interests to another Person in accordance with this Agreement,
distributions made pursuant to Section 5.2(b)(i), Section 5.2(b)(ii) or Section
5.2(b)(iii) shall be prorated between or among such Initial Members and its
Assign(s) in proportion to the respective Capital Accounts of such Initial
Member and its Assign(s) (or as otherwise agreed to by the Initial Members and
their Assigns). All payments shall be accompanied by a statement explaining the
manner in which the payment was calculated, including a determination of
weights and values of the Minerals Produced.
(c) Except as provided in Section 5.2(b) or Article 10, without the
prior written consent of each Member, the Company shall not be permitted, and
none of the Manager(s), any Managing Director or any other Person shall cause
the Company, to make any distributions of cash or any other property of the
Company to the Members except for distributions in the form of Series A-1
Preferred Stock. To the extent deemed to be necessary or appropriate by the
Manager, the Manager may fix a record date for the determination of Members
entitled to receive any such distribution.
5.3 Limitation upon Distributions. No distribution shall be made by
the Company unless, after the distribution is made, the fair value of the
assets of the Company exceeds the liabilities of the Company, except
liabilities to Members on account of their Capital Contributions, in each case,
as determined by the Manager.
5.4 Loans by Members. Any Member may provide credit of any kind to the
Company so long as (but only so long as) such indebtedness by the Company shall
have been approved by the Manager.
ARTICLE 6
MANAGEMENT OF THE Company
6.1 Manager and Managing Directors.
(a) Subject to Section 6.1(b), Section 6.1(c) and Section 6.1(d),
the Company shall be managed, and the conduct of its affairs, operations and
activities shall be controlled, exclusively by or under the direction of Xxxx
X. Xxxxxxxx (the "Manager") in accordance with this Agreement.
(b) The number of Managers shall be determined by, and only by,
the Members holding a Majority Interest of the Company. The initial number of
Managers shall be 1. A Manager must be an individual, but need not be a Member.
If there is more than one Manager, each Manager shall have no authority as
such, but shall act only as a board. Managers may be elected at any time.
Each Manager shall hold office until his or her such successor is elected and
qualified or until his or her earlier resignation or removal as such. Removal
as such will not affect any rights or obligations of a Manager (i) such as
those under Sections 6.4, 6.6 and 6.7 or (ii) as a Managing Director or a
Member hereunder or under any other Contract, in each case, except as otherwise
expressly provided herein or therein. A Manager may resign as such at any time
by giving written notice to that effect to the Members.
(c) The Manager may delegate the management and conduct of the
Company's day-to-day business affairs, operations and activities to one or more
managing directors (the "Managing Directors"). The number of Managing
Directors shall be determined by, and only by, the Manager. The initial number
of Managing Directors shall be 1. Managing Directors shall be appointed by,
and only by, the Manager. Managing Directors may be appointed at any time.
Each Managing Director shall hold office until his or her such successor is
elected and qualified or until his or her earlier resignation or removal as
such. Any or all Managing Directors (including those set forth in Schedule B)
may be removed as such at any time by, and only by, the Manager. Removal as
such shall not affect any rights or obligations of a Managing Director (i) such
as those under Sections 6.4, 6.6 and 6.7 or (ii) as a Manager or a Member
hereunder or under any other Contract, in each case, except as otherwise
expressly provided herein or therein. A Managing Director may resign as such
at any time by giving written notice to the effect to the Members. The initial
Managing Directors shall be those Persons set forth on Schedule B.
(d) Notwithstanding any provision of this Agreement to the
contrary, so long as Winfield is a Member, none of the Company, any Manager or
any Managing Director may take any of the following actions without the prior
written consent of Winfield:
(i) the sale, transfer, conveyance or other disposition of any
portion of the DWC Property or the Leased Property;
(ii) the distribution of any assets of the Company to any
Member;
(iii) the admission of any Additional Member;
(iv) the issuance of any equity interest in the Company;
(v) the incurrence of any indebtedness other than trade
payables in the ordinary course of business; or
(v) the existence of any lien or other encumbrance on the DWC
Property or the Leased Property.
6.2 Action by Multiple Managers. If there is more than one Manager:
(a) Regular meetings of the Managers shall be held when and as
determined by the Managers. A copy of every resolution fixing or changing the
time or place of regular meetings shall be given to all Managers at least 5
days before the first meeting held pursuant thereto. Any and all business may
be transacted at a regular meeting.
(b) Special meetings of the Managers may be held at any time.
Special meetings may be called by, and only by, (i) a Manager or (ii) Members
holding a Majority Interest. Written notice of the day, hour and place of each
special meeting shall be given to all Managers at least 2 days before the
meeting by the Person or Persons calling such meeting. No business shall be
transacted at any special meeting except the business described in the notice
thereof; provided, however, that, if all of the Managers shall be present, and
shall so agree, any other business may be transacted thereat.
(c) Meetings shall be held at the principal office of the Company
or at such other place as the Managers or the Person or Persons calling such
meetings, as the case may be, may reasonably determine.
(d) The presence of a majority of the Managers then serving at any
duly called meeting of the Managers shall be required in order to constitute a
quorum for the transaction of business thereat. If at any meeting of the
Managers there shall be less than a quorum, a majority of those Managers
present may adjourn such meeting to a different time and place. Any business
which could have been transacted at such meeting may be transacted at the
adjourned meeting so long as written notice of the adjourned meeting shall have
been given to all Managers at least 1 day prior to the adjourned meeting.
(e) No proposed or purported act at any meeting of the Managers
shall have been duly authorized unless authorized (i) at a duly called meeting
at which a quorum is present at either the commencement of such meeting or the
time such authorization is given at such meeting and (ii) by a majority of the
Managers present at such meeting.
(f) Managers may participate in a meeting of the Managers by means
of conference telephone or similar communications equipment by means of which
all Persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meeting.
(g) Any action required or permitted to be taken at any meeting of
the Managers may be taken without a meeting if all Managers consent thereto in
writing.
(h)The Managers shall use good faith reasonable efforts to keep
minutes or other records of their actions, decisions and determinations,
including those relating to matters that may be within or without the scope of
the Company Business, and minutes or other records of actions, decisions and
determinations of the Members.
6.3 Duties of the Manager.
(a) The Manager shall take or cause to be taken all actions as may
be necessary or appropriate for the conduct of the Company Business in
accordance with this Agreement and applicable Laws. The Manager shall act at
all times in good faith and in such manner as he reasonably believes to be in
the best interests of the Company and the Members.
(b) Prior to conducting any business in any jurisdiction, the
Manager shall use reasonable efforts to cause the Company either to comply with
all requirements for the qualification of the Company to conduct business as a
limited liability company in such jurisdiction or to conduct business in such
jurisdiction through other entities or by such other means as the Manager, upon
the advice of counsel, determines to be necessary or appropriate to preserve
the Members' limited liability.
6.4 Reliance. Each Manager and Managing Director shall be fully
protected in relying in good faith upon the records of the Company and upon
information, opinions, reports or statements presented to the Company by any
Manager, Managing Director or employee of the Company (other than such Manager
or Managing Director) or by any other Person as to matters which such Manager
or Managing Director reasonably believes to be within the scope of
responsibility and competence of such Manager, Managing Director, employee or
other Person and whom such Manager or Managing Director reasonably believes to
have been selected with reasonable care by or on behalf of the Company,
including information, opinions, reports or statements as to the value or
amount of Claims, Liabilities, Losses, profits or assets or as to any facts
pertinent to the existence and amount of assets from which distributions to
which Members might properly be paid.
6.5 Managing Director's Authority to Act for the Company. Each
Managing Director shall have the authority inherent in such position, including
the authority to act for and bind the Company (including the authority to
execute and deliver any Contract on behalf of the Company) to the extent (but
only to the extent) that such act is taken in accordance with this Agreement,
except as such authority may be otherwise expanded or limited, generally or in
a specific instance, by the Manager.
6.6 Limitation on Liability. Notwithstanding anything contained herein
to the contrary, no Manager or Managing Director (i) shall be liable,
responsible or accountable in damages or otherwise to the Company or any Member
for any action taken or failure to act (including action or failure to act that
constitutes a breach of this Agreement), except to the extent that such action
or failure to act constitutes gross negligence, bad faith, willful misconduct
or fraud, or (ii) shall have any obligation, responsibility or duty (by virtue
of this Agreement, as a fiduciary to the Company or the Members, or otherwise)
to disclose information, take action or refrain from taking action to the
extent that such disclosure, taking or refraining could reasonably be expected
to violate or breach an obligation, responsibility or duty owed to another
Person. If such an obligation, responsibility or duty to another Person could
reasonably be expected to be materially adverse to the Company or to present a
material conflict of interest with the Company, such Manager or Managing
Director shall disclose it, in reasonable detail, to all of the Managers prior
to the date on which such Manager or Managing Director becomes such or the date
on which such service to such other Person commences, whichever is later.
Thereafter, such Manager or Managing Director shall seek to establish
arrangements satisfactory to the Members in its good faith judgment to minimize
any material adverse consequences to the Company (and, if such obligation,
responsibility or duty relates to a Managing Director who is not an Affiliate
of an Initial Member, the Manager shall have the right to exercise its
authority under Section 6.1(c) to limit or change the duties, responsibilities
and authority of, or to remove, such Managing Director).
6.7 Indemnification of Managers and Managing Directors.
(a) The Company shall indemnify and hold harmless, to the fullest
extent permitted by Law, each Manager and Managing Director (an "Indemnified
Party") for, from and against any and all Liabilities and Losses from any and
all Claims and Proceedings (each, an "Indemnified Action") in which such
Indemnified Party may be involved, or threatened to be involved, as a party, a
witness or otherwise, as a result of such Person's status as a Manager or
Managing Director, regardless of whether such Indemnified Party continued or
continues in such capacity at the time of occurrence, assertion, commencement,
incurrence or payment thereof, or otherwise, and regardless of whether such
Indemnified Action is brought by a third party or a Member or by or in the
right of the Company, so long as the Indemnified Party acted in good faith and
in a manner the Indemnified Party reasonably believed to be in or not opposed
to the best interests of the Company (and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was
unlawful).
(b) The Company shall pay or reimburse, to the fullest extent
permitted by applicable Law, in advance of the final disposition of each
Indemnified Action, all fees, charges, expenses and costs incurred by an
Indemnified Party in connection with any Indemnified Action, when and as
incurred. Such Indemnified Party shall repay all amounts received from the
Company pursuant to this Section 6.7(b) if such Indemnified Party is a
defendant or respondent in such Indemnified Action and it shall ultimately be
determined at the final disposition of such Indemnified Action that such
Indemnified Party is not entitled to be indemnified by the Company hereunder,
unless the relevant Judicial Authority or the disinterested Members shall have
determined that repayment is not warranted under the circumstances. Such
Indemnified Party may request such a determination at any time before, or
within a reasonable time after, such final disposition. The Manager or Members
shall promptly afford the Indemnified Party a reasonable opportunity to be
heard in respect of such determination and shall make such determination in
good faith. If such a request is made, repayment shall not be required until a
decision as to such determination shall have been made.
(c) The Manager may cause the Company to purchase and maintain
insurance or establish other arrangements to protect the Indemnified Parties or
the Company against any Claim, Liability or Loss asserted or incurred by reason
of a Person's status as a Manager or Managing Director, regardless of whether
the Company would have the power to indemnify such Person in respect thereof
under this Section 6.7. The indemnification and expense advancement provided
by this Section 6.7 shall be in addition to, and shall not be a limitation on,
any other rights to which the Indemnified Parties may be entitled under any
Contract, by reason of any determination or vote of the Members or the Manager,
as a matter of Law, or otherwise, and shall inure to the benefit of the
estates, heirs, successors, assigns and legal representatives of the
Indemnified Parties.
6.8 Compensation and Reimbursement of Managers and Managing Directors.
Each Manager and Managing Director shall be entitled to such compensation for
his or her services as such as may determined by the Members holding a Majority
Interest. The Company shall reimburse each Manager and Managing Director for
all out-of-pocket expenses reasonably incurred by him or her in his or her
capacity as such.
6.9 Acceptance by Managers and Managing Directors. Each Manager and
Managing Director agrees, by accepting to undertake the duties and accept the
rights and benefits as such, to observe and bound by the provisions of this
Agreement relating to such capacity as if a party to it.
6.10 Operations.
(a) Other than as provided in Section 6.11, for as long as the
Company shall exist, Xxxxxxxx Mining, on behalf of the Company, shall have the
exclusive right to:
(i) explore, develop and mine all minerals, metals and ores
(collectively, the "Minerals") on or in the DWC Property and the Leased
Property and, perform such exploration, development and mining in any manner
deemed necessary or convenient by Xxxxxxxx Mining, whether by surface,
underground, solution or other mining methods;
(ii) temporarily to store, or permanently to dispose of
minerals, water, waste rock or other materials produced from or near the DWC
Property or the Leased Property;
(iii) to crush, grind, or otherwise prepare for transportation
to an off-site processing facility all Minerals on the DWC Property or the
Leased Property, whether such Minerals were produced from the DWC Property, the
Leased Property or other proximate lands;
(iv) to use, alter, or destroy, consume and deplete so much of
the surface and surface resources of the DWC Property or the Leased Property as
Xxxxxxxx Mining may deem desirable or convenient in connection with its
operations on the DWC Property or the Leased Property. Notwithstanding the
foregoing, Xxxxxxxx Mining shall be responsible for the undertaking and
completing any and all land reclamation resulting from its activities during
the term of this Agreement as required by federal and state law, and county
ordinance; and
(v) exercise such other rights as are reasonably necessary to
accomplish the foregoing.
(b) With respect to the DWC Property, Xxxxxxxx Mining shall expend
not less than $150,000 in the first twelve (12) months following the date
hereof, and at least $150,000 per year during each of the following four (4)
years following the execution of this Agreement. Within thirty (30) days
after the end of each twelve (12) month period, Xxxxxxxx Mining shall deliver
to the Members reasonable supporting documentation showing compliance with
Xxxxxxxx Mining's obligations hereunder.
(c) With respect to the Sutro Property, Xxxxxxxx Mining shall
expend not less than $100,000 in the first twelve (12) months following the
date hereof, and at least $100,000 per year during each of the following five
(5) years following the execution of this Agreement, and not less than $750,000
in the aggregate during the five (5) years following the execution of this
Agreement. Within thirty (30) days after the end of each twelve (12) month
period, Xxxxxxxx Mining shall deliver to the Members reasonable supporting
documentation showing compliance with Xxxxxxxx Mining's obligations hereunder.
(d) Xxxxxxxx Mining agrees to conduct its operations hereunder in
a good and miner-like manner and in compliance with all applicable laws, rules
and regulations of any governmental entity having jurisdiction over such
operations or the DWC Property or the Leased Property including, but not
limited to, mine safety and health, environmental, land-use and zoning and
operational permits and consents.
(e) Xxxxxxxx Mining shall continuously engage in exploration,
development, mining or processing operations upon the DWC Property and the
Leased Property so that at no time will there be any period of 180 consecutive
days in which no exploration, development, mining or processing operations are
conducted on the respective properties (excluding periods of Force Majeure as
defined below).
6.11 Defaults by Xxxxxxxx Mining; Remedies.
(a) If: (i) Xxxxxxxx Mining fails to make any Capital Contribution
pursuant to Section 3.2, and fails to remedy such default within thirty (30)
days following notice from the Company; or (ii) Xxxxxxxx Mining defaults in
fulfilling any other covenant of this Agreement and Xxxxxxxx Mining fails to
remedy such default within sixty (60) days after notice by the Company
specifying the nature of such default (or, if said default cannot be completely
cured or remedied within said sixty (60) day period and Xxxxxxxx Mining shall
not have diligently commenced curing such default within such sixty (60) day
period; or (iii) a Bankruptcy of Xxxxxxxx Mining, and such Bankruptcy shall
continue and remain undischarged or unstayed for an aggregate period of one
hundred twenty (120) days (whether or not consecutive) or shall not be remedied
by Xxxxxxxx Mining within one hundred twenty (120) days; or (iv) Xxxxxxxx
Mining fails to comply with its obligations set forth in Section 8 of the
Series A-1 Certificate of Designation and Xxxxxxxx Mining fails to remedy such
default pursuant to Section 8(c) of the Series A-1 Certificate of Designation
within thirty (30) days after notice by the Company; or (v) Xxxxxxxx Mining
defaults under Section 4.2 of the Securities Purchase Agreement and fails to
remedy such default under the provisions of Section 5.13(b) of the Securities
Purchase Agreement; or (vi) Xxxxxxxx Mining fails to comply with its
obligations under Section 2(a) of the RRA and fails to remedy such default
within thirty (30) days after notice by the Company; or (vii) Xxxxxxxx Mining
fails to comply with its obligations under Section 2(b) of the RRA in that the
Registration Statement (as defined therein) is not declared effective no later
than the one (1) year anniversary of the Closing Date (as defined therein) and
Xxxxxxxx Mining fails to remedy such default within thirty (30) days after
notice by the Company; or (viii) a Change of Control Transaction (as defined in
the Series A-1 Certificate of Designation) occurs; then the same shall
constitute a default by Xxxxxxxx Mining under this Agreement and, if and so
long as such default shall continue uncured or unremedied, the Company shall
have and be entitled to exercise, in its sole discretion, by written notice one
of the remedies set forth below. If the Company's notice of default shall
indicate its election of either remedy set forth in (i) or (ii) of subsection
(b) below and the date for expiration of the applicable cure period, then the
Company's election of the remedy in subsection (b) below shall be effective as
of such date set forth in the default notice (provided, however, that such
default remains uncured or unremedied at such date) and, without any further
action by or notice from the Company, either (x) this Agreement shall terminate
and the Company shall be dissolved in accordance with Article 10 hereof; or (y)
this Agreement shall continue in full force and effect and the remaining
Capital Contributions to be made by Xxxxxxxx Mining shall accelerate and be due
and payable in the form of shares of Series A-1 Preferred Stock to the Company
on such date, as the case may be, as provided by the Company in the notice of
default. Notwithstanding the foregoing, it shall be deemed that Xxxxxxxx
Mining is not in default under the terms of this Agreement by reason of mining
operations or other required activities having been suspended or prevented or
prohibited by Law, by the inability to obtain permits or licenses, by scarcity
or inability to obtain equipment, material, power or fuel, by strike, lockout
or industrial disturbance, by failure of carriers to transport or furnish
facilities for transportation, by operation of any Acts of God (including,
without limitation, lightning, earthquake, fire, storm, flood, washout), by
breakage or accident to machinery or facilities, or by any cause beyond
Xxxxxxxx Mining's control (the foregoing are collectively referred to as "Force
Majeure"); provided, however, that Xxxxxxxx Mining shall exercise reasonable
diligence to resume mining operations.
(b) In case of any such default, the Manager shall have the right
to either: (i) terminate this Agreement and dissolve the Company in accordance
with Article 10 hereof; or (ii) continue this Agreement in full force and
effect and accelerate the remaining Capital Contributions to be made by
Xxxxxxxx Mining in the form of shares of Series A-1 Preferred Stock from such
date until the thirty ninth (39th) anniversary of the execution of this
Agreement. If this Agreement is terminated, Xxxxxxxx Mining may remove all of
its personal property within three (3) months after said termination. The 3-
month period may be extended for periods when inclement weather will not allow
the removal of equipment. All such items not removed within six months shall
become the property of the then holder of the DWC Property or the lessee of the
Leased Property, as applicable.
6.12 Rights of First Refusal; Right to Purchase.
(a) The Company hereby assigns to Xxxxxxxx Mining, subject to the
condition of limitation and termination that no default by Xxxxxxxx Mining
shall have occurred and be continuing under Section 6.11 of this Agreement, (i)
all of its rights under Section 29 of the lease with Sutro Tunnel Company set
forth in Exhibit B and, the Company shall cause the Sutro Tunnel Company to
recognize Xxxxxxxx Mining's right of first refusal with respect to any sale of
the Sutro Property and (ii) all of its rights under Section 13 of the lease
with Virginia City Ventures, Inc. set forth in Exhibit C and, the Company shall
cause Virginia City Ventures, Inc. to recognize Xxxxxxxx Mining's right of
first refusal with respect to any sale of the VCV Property.
(b) Notwithstanding subsection (a) above, if Xxxxxxxx Mining is
unwilling or unable to purchase either Leased Property in connection with the
right of first refusal, or a default by Xxxxxxxx Mining shall have occurred and
be continuing under Section 6.11 of this Agreement, the Company shall have the
right to do so as if the right of first refusal had never been assigned.
(c) In the event the Company proposes to sell the DWC Property or
any patents or lots therein to a bona fide third party, it shall give Xxxxxxxx
Mining written notice of its intention to sell, describing the property, the
parcel number(s), the price and the general terms upon which the Company
proposes to sell the same. Xxxxxxxx Mining shall then have ten (10) days from
receipt of notice sent by registered mail to Xxxxxxxx Mining to agree to
purchase same under substantially the same terms and conditions. If Xxxxxxxx
Mining does not exercise its rights within such ten (10) day period then
Xxxxxxxx Mining shall be deemed to have waived its right of first refusal with
respect to the offer which was the subject of the Company's notice; provided,
that Xxxxxxxx Mining's right of first refusal shall not be deemed waived in
connection with any subsequent offer to purchase the DWC Property received by
the Company or any successor-in-interest to the Company. Notwithstanding the
foregoing if, following Xxxxxxxx Mining's waiver of its right of first refusal
hereunder, the terms of the underlying transaction change in any material
respect, the Company shall, again, send a notice to Xxxxxxxx Mining describing
the modified terms and conditions of the offer and Xxxxxxxx Mining shall have a
right of first refusal with respect to such modified offer.
(d) The Company hereby assigns to Xxxxxxxx Mining, subject to the
condition of limitation and termination that no default by Xxxxxxxx Mining
shall have occurred and be continuing under Section 6.11 of this Agreement, all
of its rights to purchase the VCV Property subject to the terms and conditions
set forth in Section 14 of the lease with Virginia City Ventures, Inc. set
forth in Exhibit C.
6.13 Company Covenants.
(a) Promptly following the execution and delivery of this
Agreement by the parties, Winfield and/or the Company shall furnish to Xxxxxxxx
Mining copies of any and all records, reports, studies, analyses, permits,
approvals, licenses, notices sent to and from Sutro Tunnel Company, Virginia
City Ventures, Inc. and all other documents in Winfield's or the Company's
possession which relate to the Leased Property including, without limitation,
all title abstracts under Section 4 of the leases for each Leased Property, all
current exploration data described in Sections 20 and 22 of the leases for the
Sutro Property and the VCV Property, respectively, and all maps, reports and
other data described in Sections 22 and 24 of the lease for the Sutro Property
and the VCV Property, respectively.
(b) As long as no default by Xxxxxxxx Mining shall have occurred
and be continuing under Section 6.11 of this Agreement, the Company shall not
enter into any amendment or otherwise modify or amend the lease set forth in
Exhibit B without the prior written consent of Xxxxxxxx Mining in its sole
discretion; provided, however, that the foregoing shall not preclude the
Company from extending the term of or reducing its payment obligations under
such lease.
(c) As long as no default by Xxxxxxxx Mining shall have occurred
and be continuing under Section 6.11 of this Agreement, the Company shall not
terminate the lease set forth in Exhibit B in accordance with Sections 17 or
18(a) of such lease, or otherwise, without the prior written consent of
Xxxxxxxx Mining in its sole discretion.
(d) The Company shall furnish to Xxxxxxxx Mining copies of any
notices issued to or received from Sutro Tunnel Company or Virginia City
Ventures, Inc. immediately upon issuing or receiving such notices. Xxxxxxxx
Mining shall have the right, but not the obligation, to cure any default by the
Company under the leases set forth in Exhibit B or Exhibit C, and the Company
shall promptly reimburse Xxxxxxxx Mining for all costs and expenses (including,
without limitation, reasonable attorneys' fees) incurred by Xxxxxxxx Mining in
connection with such cure.
(e) As long as no default by Xxxxxxxx Mining shall have occurred
and be continuing under this Agreement, the Company shall not alienate its
interest or encumber its interests in the leases set forth in Exhibit B or
Exhibit C, the Leased Property or this Agreement or otherwise deal or attempt
to deal with its right, title and interest in the leases set forth in Exhibit B
or Exhibit C, the Leased Property, or this Agreement in any way that is adverse
to Xxxxxxxx Mining's rights under this Agreement.
(f) As long as no default by Xxxxxxxx Mining shall have occurred
and be continuing under Section 6.11 of this Agreement, the Company shall not
do anything or suffer or permit anything to be done that would result in a
default under the leases set forth in Exhibit B or Exhibit C, or permit such
leases to be canceled or terminated.
ARTICLE 7
MEMBERS
7.1 Initial Members; Limited Liability.
(a) The Initial Members shall be those Persons set forth on
Schedule A on the date hereof.
(b) The Members as such will not have any responsibility or
obligation in any way or of any kind for any Liabilities or Losses of the
Company or to make contributions to the Company in excess of their respective
Capital Contributions.
7.2 Assignment of Ownership Interests; Substituted Members. A Member
may Assign all or any part of its Ownership Interest with, but only with, the
approval of each Member. An Assignee will become a Member when, but only when,
the Members shall have approved substitution of such Assignee for the Assigning
Member and the Assignee shall have executed and delivered a joinder agreement
to become a party to this Agreement in form and substance reasonably
satisfactory to the Manager. Any Substituted Member admitted to the Company
will succeed to all rights and be subject to all obligations, including with
respect to Xxxxxxxx Mining the rights and obligations set forth in Section 6.10
hereof, of the Assigning Member with respect to the Ownership Interest
Assigned. Notwithstanding anything contained herein (other than the next
sentence) to the contrary, the Members shall promptly give approval to: (a) the
Assignment of an Ownership Interest to the estates, heirs, legal
representatives and Affiliates of Members to whom such Ownership Interests are
Assigned in connection with the transfer of all or a majority of, or the
restructuring or reorganization of, their businesses or ownership interests or
in connection with tax and estate planning, or by reason of disability or
death; and (b) the admission of any such Assignee as a Substituted Member.
Notwithstanding anything contained herein to the contrary, no Person shall be
admitted as a Substituted Member unless such admission would not result in (i)
a violation of any applicable Law, including applicable securities Laws, or
this Agreement or (ii) a change in the Members' limited liability.
7.3 Admission of Additional Members. One or more Persons may be
admitted as Members with, but only with, the consent of each Member. The terms
of any such admission, including such Person's Capital Contributions, shall be
determined by the Members. Notwithstanding anything contained herein to the
contrary, no Person shall be admitted as an Additional Member unless such
Additional Member shall have executed and delivered a joinder agreement to
become a party to this Agreement in form and substance reasonably satisfactory
to each Member and such admission would not result in (i) a violation of any
applicable Law, including applicable securities Laws, or this Agreement or (ii)
a change in the Members' limited liability.
7.4 No Acquisition of Ownership Interests by the Company. The Company
shall not acquire, by purchase, redemption or otherwise, all or any part of the
Ownership Interest of any Member, without the consent of each Member.
Notwithstanding anything contained herein to the contrary, no Ownership
Interest shall be acquired unless such acquisition would not result in (i) a
violation of any applicable Law, including applicable securities laws, or this
Agreement or (ii) a change in the Members' limited liability.
7.5 Action by the Members.
(a) Meetings of the Members may be held at any time. Meetings of
the Members may be called by, but only by, (i) the Manager, (ii) Members
holding a Majority Interest or (iii) an Initial Member. Written notice of the
day, hour and place of each special meeting shall be given to all Members at
least 2 days before such meeting by the Person or Persons calling such meeting.
To the extent deemed necessary or appropriate by the Manager, the Manager may
fix a record date for the determination of Members entitled to receive such
notice and to act at such meeting and their respective Ownership Interests at
the time of such meeting. The Manager may change the day and time of such
meeting to the extent necessary or appropriate to fix such record date and give
written notice thereof to all Members. No business shall be transacted at any
meeting except business which Members are expressly permitted to take hereunder
and which is described in the notice thereof.
(b) The presence of Members holding a Majority Interest at any
duly called meeting of the Members shall be required in order to constitute a
quorum for the transaction of business thereat. If at any meeting of the
Members there shall be less than a quorum present, a majority of those Members
present may adjourn such meeting to a different time and place. Any business
which could have been transacted at such meeting may be transacted at the
adjourned meeting so long as written notice of the adjourned meeting shall have
been given to all Members at least 1 day prior to the adjourned meeting.
(c) No proposed or purported act at any meeting of the Members
shall have been duly authorized unless authorized (i) at a duly called meeting
at which a quorum is present at either the commencement of such meeting or the
time such authorization is given at such meeting and (ii) by Members holding a
Majority Interest (or such other interest as may be set forth herein).
(d) Members may participate in a meeting of the Members by means
of conference telephone or similar communications equipment by means of which
all Persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meeting.
(e) Any action required or permitted to be taken at any meeting of
the Members may be taken without a meeting if Members holding the requisite
number of Ownership Interests necessary to take such action consent thereto in
writing. Notice of such action shall be given by the Company to the other
Members, but no failure to give or delay in giving such notice, and no defect
in such notice, shall impair or limit the validity of such action.
7.6 Independent Conduct.
(a) Except as provided in Section 6.6 or 7.6(b), each Member and
its Affiliates shall have the right to (i) engage in any and all businesses and
activities of any kind (irrespective of whether such businesses and activities
compete with the businesses and activities of the Company, the other Members or
any of their respective Affiliates), (ii) use, lease and own any and all rights
and properties of any kind, however used, leased or owned and wherever used,
leased or owned, and (iii) receive compensation or profit therefrom for its or
their own account and without in any manner being obligated to disclose or
offer such businesses, activities, rights, properties, compensation or profit
to the Company, the other Members or any of their respective Affiliates.
(b) So long as a Member or any of its Affiliates is a member of
the Company or a Manager or Managing Director (the "Membership Period") and for
2 years thereafter, unless otherwise approved by the Manager, such Member shall
not and shall not permit its Affiliates to, directly or indirectly, either
individually or on behalf of or through any other Person (other than the
Company), (i) solicit or induce, or in any manner attempt to solicit or induce,
any customer of the Company or any Person who during the Membership Period had
been specifically identified as a prospective customer of the Company to become
a customer or client of another Person in respect of any business, transaction
or opportunity within the scope of the Company Business, (ii) solicit or
induce, or in any manner attempt to solicit or induce, any Person who is
employed by, a material agent or representative of or a material service
provider to the Company to terminate such Person's relationship with the
Company, (iii) divert, or in any manner attempt to divert, any Person from
doing business with the Company or pursuing any business opportunity within the
scope of the Company Business with the Company, (iv) induce, or in any manner
attempt to induce, any Person to reduce the business such Person does with the
Company or to cease being a customer of, or maintaining such Person's other
business relationships with, the Company or (v) compete with or take or divert
to itself the Company Business, any material part thereof or any material
opportunity within the scope thereof.
7.7 Confidentiality.
(a) During the Membership Period in relation to a Member and for 2
years thereafter, such Member will keep, and with cause its Affiliates and its
and their Representatives to keep, all Information of the Company, each other
Member and each Affiliate of each other Member confidential and will not
disclose or use, or permit any of its Affiliates or its or their
Representatives to disclose or use, any of such Information in any manner;
provided, however, that such Information may be disclosed to Representatives of
such Member who (i) need to know such Information for the conduct of the
affairs of the Company in accordance with this Agreement (or for the purpose of
assisting such Member to meet or comply with legal requirements (e.g., the
preparation and filing of tax returns)), (ii) are informed in writing by such
Member of the confidential nature and restricted use of such Information and
(iii) agree in writing to observe the terms of this Section 7.7 as if they were
such Member. Such Member will and will cause its Representatives to only make
that number of copies of such Information (whether in written, electronic or
other form) that is necessary for the purpose set forth in clause (i) of the
preceding sentence.
(b) The Company will keep, and will cause its Subsidiaries and its
and their Representatives (including the Managers and the Managing Directors)
to keep, all Information of the Members confidential and will not, and will not
permit its Subsidiaries or its or their Representatives (including the Managers
and the Managing Directors) to, disclose or use such Information in any manner;
provided, however, that such Information may be used by the Company and
disclosed to and used by its Subsidiaries and its and their Representatives who
(i) need to know such Information for the conduct of the Company Business and
the affairs of the Company in accordance with this Agreement and (ii) are
informed by the Company of the confidential nature and restricted use of such
Information.
(c) At any time after such Membership Period, upon written of the
Person to whom Information belongs, such Member will, at its election, either
(i) promptly cause to be destroyed at its expense all of such Information (in
any form other than oral) in the possession of it, its Affiliates or its or
their Representatives (including all copies) and confirm such destruction to
such Person in writing or (ii) promptly cause to be delivered to such Person at
such Member's expense all of such Information (in any form other than oral) in
the possession of it, its Affiliates or its or their Representatives (including
all copies). All of such Information in oral form will continue to be subject
to this Section 7.7; provided, that such Member may retain and use any such
Information as needed by such Member to meet or comply with legal requirements
(e.g., the preparation and filing of tax returns).
(d) If a Person subject to this Section 7.7 becomes required by
Law to disclose any Information of another Person which such Person is required
to keep confidential and not disclose under this Section 7.7, such Person will
as promptly as possible give written notice to that effect to such other
Person. Such other Person, in its sole discretion, shall be entitled to seek a
protective order or other appropriate remedy. If such other Person seeks such
an order or remedy, such Person will, upon request, use all reasonable efforts
to fully cooperate with such other Person. Regardless of whether such
protective order or other remedy is obtained, such Person will furnish only
that portion of such Information which it is legally required to furnish. If
such a protective order or remedy is not obtained, such Person will exercise
best efforts to obtain reliable assurance that confidential treatment will be
accorded such Information. If such a protective order or other remedy is
obtained, such Person will exercise best efforts to obtain reliable assurance
that such Information is furnished in accordance with and subject to such
protective order or remedy. To the extent that such Person is an Affiliate of
a Member or a Representative of a Member or its Affiliates, such Member will
cause them to comply with this Section 7.7(e). To the extent that such Person
or its Representatives furnish Information in accordance with this Section
7.7(d), such furnishing will not constitute a breach of this Section 7.7. The
Company shall provide such assistance as may be reasonably feasible and
necessary to carry out the purposes of this Section 7.7(d).
7.8 Certain Remedies. Each of the parties hereto agrees, on behalf of
itself, its Affiliates and its and their Representatives, that money damages
for a breach of Section 7.6 or 7.7 by it or them is unlikely to be calculable,
that such a breach is likely to cause irreparable harm to the aggrieved Person
and that remedies at law are likely to be inadequate to protect the aggrieved
Person against any actual or threatened breach of Section 7.6 or 7.7.
Accordingly, each of the parties hereto agree, on behalf of itself, its
Affiliates and its and their Representatives, to the granting of injunctive
relief in favor of the aggrieved Person in the event of any such breach or
threatened breach, without proof of actual damages and without the requirement
of posting bond or other security. Such relief shall not be the exclusive
remedy for a breach or threatened breach of Section 7.6 or 7.7, but shall be in
addition to all other rights and remedies available at law, in equity or
otherwise to the aggrieved Person. In the event of litigation relating to
Section 7.6 or 7.7 wherein a court of competent jurisdiction determines in a
final, non-appealable order that Section 7.6 or 7.7 has been breached, then
each of the parties hereto agrees, on behalf of itself, its Affiliate and its
and their Representatives, that the breaching Person will also be liable to the
aggrieved Person for all costs and expenses (including reasonable legal fees
and expenses) incurred in connection with such litigation and all other
litigation related to such breach.
7.9 Obligations and Material Developments. The Members intend to act
in good faith and in close cooperation on all matters relating to this
Agreement and the Company Business. Each Member shall use reasonable and good
faith efforts to promptly inform the Manager of material developments relating
thereto, consult with the Manager as to such developments and act by consensus
with respect to such developments.
7.10 Member Books and Records. Each Member shall maintain (and shall
cause its respective Affiliates to maintain) accurate and complete books and
records, in accordance with generally accepted accounting principles and
practices and otherwise, to the extent necessary to demonstrate compliance with
this Agreement.
7.11 Further Assurances. Each of the parties hereto will (and will
cause its Affiliates and Representatives to) use its respective commercially
reasonable efforts to take or cause to be taken all appropriate actions, do or
cause to be done all things necessary, proper or advisable, and execute such
applications, filings, certificates and other documents to carry out and give
effect to this Agreement.
ARTICLE 8
ACCOUNTS; RETURNS
8.1 Books. The Manager shall use reasonable efforts to cause the
Company to maintain complete and accurate books and records, in accordance with
general accepted accounting principles and practice and otherwise, of all
transactions, operations and activities of the Company and its Subsidiaries.
Each Member shall have the right to inspect the Company's books and records at
any reasonable time.
8.2 Reports and Returns. The Manager shall use reasonable efforts to
cause to be furnished to each Member:
(a) within 90 days after the end of each Fiscal Year, an Internal
Revenue Service Schedule K-1 with respect to such Member (and, within the
applicable period under applicable foreign Law, any similar information
statement with respect to such Member); and
(b) within 120 days after the end of each Fiscal Year, a balance
sheet of the Company as at the end of such Fiscal Year and statements of income
and cash flow of the Company for such Fiscal Year.
8.3 Fiscal Year. The fiscal year of the Company for both financial
reporting and tax purposes shall be the calendar year (the "Fiscal Year").
8.4 Method of Accounting and Reporting. The books and accounts of the
Company shall be maintained using the cash method of accounting for both
financial reporting and tax purposes. The Company shall elect to be treated as
a partnership for federal income tax purposes.
8.5 Tax Returns. The Manager shall use reasonable efforts to cause to
be prepared and filed on a timely basis all foreign, federal, state and local
tax returns and tax information returns required on the part of the Company.
8.6 Bank Accounts. The Manager shall use reasonable efforts to cause
all funds of the Company to be deposited in the name of the Company in an
account or accounts maintained with a bank or banks selected by the Manager.
Checks shall be drawn upon the Company account or accounts only for the
purposes of the Company and must be signed by at least one Managing Director
or, if they exceed $1,000, at least two Managing Directors.
ARTICLE 9
VALUATION OF ASSETS
For purposes of this Agreement, the Fair Market Value of any asset
of the Company, of a Member's Ownership Interest or of the Company Business
shall be determined by agreement of all Members affected thereby or, at the
option of any such Member or if such Members are unable to agree on such value
within a reasonable time, by an independent expert selected by the Manager. If
required to make such a selection, the Manager shall make any such selection
promptly.
ARTICLE 10
DISSOLUTION OF COMPANY
10.1 Dissolution. Subject to the LLC Act, the Company shall be
dissolved upon the earliest to occur of:
(a) the determination, at a duly called and convened meeting of
the Members, of Members holding a Majority Interest to dissolve the Company; or
(b) the sale or distribution by the Company of all or
substantially all of its assets.
Except as otherwise expressly provided under the LLC Act, the withdrawal,
removal, death or incompetency of a Member, the Bankruptcy of a Member, the
reorganization, termination, dissolution or liquidation of a Member, the
distribution or sale by a Member of its Ownership Interest, or the occurrence
of a similar event or transaction will not effect a dissolution of the Company.
10.2 Liquidation.
(a) Upon dissolution and liquidation of the Company pursuant to
Section 10.1, the assets, liabilities, business and affairs of the Company will
be liquidated and wound up in an orderly manner. The Manager shall select a
Person or Persons, any or all of whom may be a Member or a Manager, to serve as
liquidator (individually and collectively, the "Liquidator"). The Liquidator
shall have the same duties, power and authority, and shall be entitled to the
same rights and protections, as those afforded to the Manager and a Managing
Director. Upon appointment of the Liquidator, the Manager shall cease to have
any duties, power or authority and the Manager shall be discharged as such.
(b) Upon dissolution and liquidation of the Company, a final
allocation of all items of income, gain, loss and deduction shall be made in
accordance with Article 5 and all of the Company's assets, or the proceeds
therefrom, shall be distributed or used as follows and in the following order
of priority (which order shall be without prejudice to the liability of the
Company to its creditors):
(i) for the payment of the Company's debts, liabilities and
obligations (including liabilities and obligations to the Manager and Managing
Directors) and the expenses of its liquidation;
(ii) to the setting up of any reserves that the Liquidator may
deem necessary or appropriate for any contingent or unforeseen debts,
liabilities or obligations (including debts, liabilities and obligations to the
Manager and Managing Directors) of the Company; and
(iii) to the Members in accordance with the positive balances
in their respective Capital Accounts (after adjustments under Articles 3 and 5
have been made to such Capital Accounts, until such balances have been reduced
to zero).
10.3 Liability for Return of Capital Contributions. Each Member shall
look solely to the assets of the Company for all distributions by the Company,
including distributions in connection with the dissolution of the Company. No
Member shall have any recourse therefor against any of the other Members, any
Manager, any Managing Director or any of the Representatives of the Company
(other than by reason of a breach of this Agreement or another Contract between
or among any of them and the Company).
ARTICLE 11
AMENDMENTS; WAIVER
11.1 Amendments. No addition to, and no cancellation, renewal,
extension, modification or amendment of, this Agreement shall be binding upon
any party hereto unless such addition, cancellation, renewal, extension,
modification or amendment is set forth in a written instrument which states
that it adds to, amends, cancels, renews, extends or modifies this Agreement
and which is executed and delivered by each party hereto.
11.2 Waivers. No waiver of any provision of this Agreement shall be
binding upon a party hereto unless such waiver is expressly set forth in a
written instrument which is executed and delivered by such party. Such waiver
shall be effective only to the extent specifically set forth in such written
instrument. Neither the exercise (from time to time and at any time) by a
party hereto of, nor the delay or failure (at any time or for any period of
time) to exercise, any right, power or remedy shall constitute a waiver of the
right to exercise, or impair, limit or restrict the exercise of, such right,
power or remedy or any other right, power or remedy at any time and from time
to time thereafter. No waiver of any right, power or remedy or a party hereto
shall be deemed to be a waiver of any other right, power or remedy of such
party or shall, except to the extent so waived, impair, limit or restrict the
exercise of such right, power or remedy.
ARTICLE 12
NOTICES
All notices, requests, demands and other communications required or permitted
to be given pursuant to this Agreement shall be given in writing, shall be
transmitted by personal delivery, by a nationally recognized courier service,
by registered or certified mail, return receipt requested, postage prepaid, by
facsimile, or by email, receipt requested, and shall be addressed as follows:
(a) when the Company is the intended recipient, to the address of
its principal office set forth in Section 2.5; and
(b) when any Member, Manager or Managing Director is the intended
recipient, to its address set forth on Schedule A or B.
The Company, a Member, a Manager or a Managing Director, or any other party
hereto, may designate a new address to which notices, requests, demands and
other communications required or permitted to be given pursuant to this
Agreement shall thereafter be transmitted by giving written notice to that
effect to the Manager. The Manager shall use reasonable efforts to advise all
affected Persons of such change. Each notice, request, demand or other
communication transmitted in the manner described in this Article 12 shall be
deemed to have been given, received and become effective for all purposes at
the time it shall have been (a) delivered to the addressee as indicated by the
receipt (if transmitted by mail or email), the affidavit of the messenger (if
transmitted by personal delivery), the receipt of the courier service (if
transmitted by courier service), or the e-mail receipt, answer back or call
back (if transmitted by e-mail or facsimile) or (b) presented for delivery to
the addressee as so indicated during normal business hours, if such delivery
shall have been refused for any reason.
ARTICLE 13
MISCELLANEOUS
13.1 Publicity. Each party hereto agrees that it shall not and shall
not permit its Affiliates or its or their Representatives to issue any
publicity, release or announcement concerning the execution, delivery,
performance or termination of this Agreement, the provisions hereof or the
transactions contemplated hereby without the prior written consent of the form
and content of such publicity, release or announcement by the Manager;
provided, however, that no such consent shall be required when such publicity,
release or announcement is required by any applicable Law and, provided
further, that, prior to issuing any such required publicity, release or
announcement without such prior written consent, the party hereto issuing or
whose Affiliates or Representatives is issuing such publicity, release or
announcement shall have given reasonable prior notice to the Manager of such
intended issuance and shall have used good faith efforts to take or cause to be
taken into account any comments thereon that it may have.
13.2 Expenses of Members. Except as otherwise provided in this
Agreement, each party hereto agrees to pay or cause its Affiliates to pay all
expenses, fees and costs (including legal, accounting and consulting expenses)
incurred by it or its Affiliates in connection with the transactions
contemplated by this Agreement.
13.3 Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof and cancels
and supersedes all of the previous or contemporaneous agreements,
representations, warranties and understandings (whether oral or written) by,
between or among the parties hereto with respect to the subject matter hereof
(including the Letter of Intent dated August 13, 2008, between GoldSpring, Inc.
and DWC Resources, Inc. and the Letter of Intent dated August 13, 2008, between
GoldSpring, Inc. and Xxxx X. Xxxxxxxx).
13.4 Governing Law; Forum; Jury Trial. THE VALIDITY, INTERPRETATION,
PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF NEVADA (WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW
RULE THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER
THAN THE INTERNAL LAWS OF THE STATE OF NEVADA). EACH PARTY HERETO, ON BEHALF
OF ITSELF, ITS AFFILIATES AND ITS AND THEIR REPRESENTATIVES, AGREES THAT ANY
CLAIM OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE BREACH OR THREATENED
BREACH OF THIS AGREEMENT SHALL BE COMMENCED AND PROSECUTED IN A COURT IN THE
STATE OF NEVADA. EACH PARTY HERETO, ON BEHALF OF ITSELF, ITS AFFILIATES AND
ITS AND THEIR REPRESENTATIVES, CONSENTS AND SUBMITS TO THE NON-EXCLUSIVE
PERSONAL JURISDICTION OF ANY COURT IN THE STATE OF NEVADA IN RESPECT OF ANY
SUCH CLAIM OR PROCEEDING. EACH PARTY HERETO, ON BEHALF OF ITSELF, ITS
AFFILIATES AND ITS AND THEIR REPRESENTATIVES, CONSENTS TO SERVICE OF PROCESS
UPON IT OR THEM WITH RESPECT TO ANY SUCH CLAIM OR PROCEEDING BY REGISTERED
MAIL, RETURN RECEIPT REQUESTED, AND BY ANY OTHER MEANS PERMITTED BY APPLICABLE
LAWS. EACH PARTY HERETO, ON BEHALF OF ITSELF, ITS AFFILIATES AND ITS AND THEIR
REPRESENTATIVES, WAIVES ANY OBJECTION THAT IT OR THEY MAY NOW OR HEREAFTER HAVE
TO THE LAYING OF VENUE OF ANY SUCH CLAIM OR PROCEEDING IN ANY COURT IN THE
STATE OF NEVADA AND ANY CLAIM THAT IT OR THEY MAY NOW OR HEREAFTER HAVE THAT
ANY SUCH CLAIM OR PROCEEDING IN ANY COURT IN THE STATE OF NEVADA HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY HERETO, ON BEHALF OF ITSELF, ITS
AFFILIATES AND ITS AND THEIR REPRESENTATIVES, WAIVES TRIAL BY JURY IN ANY SUCH
CLAIM OR PROCEEDING.
13.5 Binding Effect; Assignment; Third Party Beneficiaries. This
Agreement shall be binding upon the parties hereto and their respective
successors and assigns and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns. Except as expressly
provided in Section 7.2, no party hereto shall assign any of its rights or
delegate any of its duties under this Agreement (by operation of Law or
otherwise) without the prior written consent of each Member, and any purported
assignment of rights or delegation of duties under this Agreement without such
prior written consent, if such consent is required hereby, shall be void. No
such assignment or delegation shall relieve the assignor or delegator of its
obligations hereunder. No Person (including any employee), other than
Indemnified Parties as provided in the next sentence, shall be, or be deemed to
be, a third party beneficiary of this Agreement. Each Indemnified Party is
intended to be a third party beneficiary of Section 6.6.
13.6 Headings; Counterparts.
(a) The headings set forth herein have been inserted for
convenience of reference only, shall not be considered a part of this Agreement
and shall not limit, modify or affect in any way the meaning or interpretation
of this Agreement.
(b) This Agreement may be signed in any number of counterparts,
each of which (when executed and delivered) shall constitute an original
instrument, but all of which together shall constitute one and the same
instrument. It shall not be necessary when making proof of this Agreement to
account for any counterparts other than a sufficient number of counterparts
which, when taken together, contain signatures of all of the parties hereto.
Delivery of a counterpart by facsimile, PDF or similar means shall be as
effective as delivery of an original.
13.7 Severability. If any provision of this Agreement shall hereafter
be held to be invalid, unenforceable or illegal, in whole or in part, in any
jurisdiction under any circumstances for any reason, (a) such provision shall
be reformed to the minimum extent necessary to cause such provision to be
valid, enforceable and legal while preserving the intent of the parties hereto
as expressed in, and the benefits and burdens provided by, this Agreement or
(b) if such provision cannot be so reformed, such provision shall be severed
from this Agreement and an equitable adjustment shall be made to this Agreement
(including addition of necessary further provisions to this Agreement) so as to
give effect to the intent so expressed and the benefits and burdens so
provided. Such holding shall not affect or impair the validity, enforceability
or legality of such provision in any other jurisdiction or under any other
circumstances. Neither such holding nor such reformation nor severance shall
affect or impair the legality, validity or enforceability of any other
provision of this Agreement.
13.8 Interpretation. All parties hereto have participated substantially
in the negotiation and drafting of this Agreement and no ambiguity herein shall
be construed against the draftsman.
13.9 No Consequential Damages. Except for the indemnification
provisions specifically set forth in this Agreement, no party hereto shall be
liable for any special, indirect, incidental, consequential or punitive damages
arising out of any breach of this Agreement, even if informed of the
possibility of such damages in advance.
IN WITNESS WHEREOF, the undersigned has executed this Agreement
effective as of the day and year first above written.
XXXXXXXX MINING, INC.
By: /s/ Xxxxxxx Xx Xxxxxxxx
------------------------------
Name: Xxxxxxx Xx Xxxxxxxx
Title: Chief Executive Officer
DWC RESOURCES, INC.
By: /s/ Xxxx X. Xxxxxxxx
---------------------------
Name: Xxxx X. Xxxxxxxx
Title: Chairman
XXXX X. XXXXXXXX
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------
Xxxx X. Xxxxxxxx
SCHEDULE A
Capital Contribution Table
Member Contribution
------ ------------
DWC Resources, Inc. The property described in Exhibit A. (Fair
Market Value = $20,000,000)
Xxxx X. Xxxxxxxx The rights of the "Lessee" under the Leases
attached hereto as Exhibit B and Exhibit C.
(Fair Market Value = $14,500,000)
Xxxxxxxx Mining, Inc. 862.5 shares of 7 1/2% Series A-1
Convertible Preferred Stock. (Fair Market
Value = $862,500)
SCHEDULE B
Managing Directors
1. Xxxxxxx Xx Xxxxxxxx
